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Agenda Packet - EVWD Board of Directors - 09/28/2010
t"OEast Val ley VVater District 3654 HIGHLAND AVE., SUITE 412, HIGHLAND, CA BOARD MEETING September 28, 2010 3:00 P.M. AGENDA ------------•-------------------------------------------------------- "9n 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 ". --------------------------------------------------------------------- CALL TO ORDER PLEDGE OF ALLEGIANCE 1. Public Comments • EVWD's 2010 Hazard Mitigation Plan Update 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 September 13, 2010 Special Board Meeting Minutes 6. Approval of September 14, 2010 Board Meeting Minutes 7. Resolution 2010.24 — A Resolution of the Board of Directors of the East Valley Water District Notice of Completion executed by the District for base pave trenching, concrete pouring for cross gutter repair, grind and overlay trench on Live Oak Road from Summit Drive to Terrace Drive 8. Resolution 2010.25 — A Resolution of the Board of Directors of the East Valley Water District Notice of Completion executed by the District for pumping equipment repairs, pulling of tube and shaft from column, clean usable column, clean and straighten tube and shaft, wire brushing, swabbing and re- bailing to bottom at Plant 24B located at the Northeast corner of Harrison Street in the City of San Bernardino 9. Accounts Payable Disbursements: Accounts Payable Checks # 225830 through # 225994 which were distributed during the period of September 8, 2010 through September 20, 2010, in the amount of $896,179.04. Payroll and benefit contributions for the period ended September 20, 2010 and included checks and direct deposits, in the amount of $238,147.06 and $6,208.59. Total Disbursement for the period $1,140,534.69. 10. General Manager's Expenses OLD BUSINESS 11. Resolution 2010.26 - A Resolution of the Board of Directors of the East Valley Water District approving the execution and delivery of an installment purchase agreement for the purpose of causing the issuance of approximately $38.000.000 aggregate principal amount of refunding revenue bonds and approving the execution and delivery of certain documents in connection therewith and certain other matters 12. Discussion and possible action regarding Notice of Decision to Appraise Greenspot Road & Bridge Realignment Project (APN: 0297 - 061 -22 & 0297 -0(� 1 -23) NEW BUSINESS 13. Resolution 2010.21 — A Resolution of the Board of Directors of the East Valley Water District in Recognition of Henry L. Sowle's Twenty -Five Years of Service 14. Discussion and possible action regarding a PBS television show highlighting energy and water conservation practices 15. Discussion and possible action regarding the District's 2010 Biennial Notice of Conflict of Interest Codes 16. Discussion and possible action regarding the financial statements for the period ending August 31, 2010 REPORTS 17. General Manager / Staff Reports 18. Consultant Reports 19. Committee Reports • Legislative (Standing) • Community Affairs (Standing) • Policy Committee (Ad -Hoc) 20. Oral comments from Board of Directors MEETINGS 21. Association of The San Bernardino County Special Districts membership meeting hosted by Cucamonga Valley Water District and Chino Basin Water Conservation District, Upland Carnegie Library, October 18, 2010 22, WESTCAS 2010 Fall Conference "Sustainable Water: A Year Later — What's New ? ", Tucson, October 27 -29, 2010 2 CLOSED SESSION 23. CONFERENCE WITH REAL PROPERTY [Government Code Section 54956.8] Property: Party with whom District will negotiate: Party who will be negotiating on behalf of the District: Under Negotiation: 9.5 +/- Acres of Vacant Land APN(s): 1191- 251 -02, 191- 251 -05 and 1191- 251 -06 San Bernardino County, State of California Potential Buyers Robert Martin/Jim Cimino Price and Terms of Payment 24. CONFERENCE WITH LEGAL COUNSEL -- ANTICIPATED LITIGATION Significant exposure to litigation pursuant to Government Code Section 54956.9(b) One Potential Case ANOUNCEMENT OF CLOSED SESSION ACTIONS ADJOURN -----•---------------------------------------------------------------------- Pursuant to Government Code Section 54954.2(a), any request for a disability - related modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above - agendized public meeting should be directed to the District's Administrative Manager at (909) 885 -4900 at least 72 hours prior to said meeting. 3 EAST VALLEY WATER DISTRICT FINANCING AUTHORITY 3654 E. Highland Avenue Suite 12 September 28, 2010 Highland, California 3:00 p.m. AGENDA CALL TO ORDER 1. Public Participation 2. Approval of September 14, 2010 Board meeting minutes. 3. Resolution 2010.04 — A Resolution of the Board of Directors of the East Valley Water District Financing Authority approving the sale of its refunding revenue bonds, series 2010 in the amount of not to exceed $38,000.000; approving the time and place for taking bids, approving the notice inviting bids, approving the preliminary official statement and approving other documents. 4. Adjouni to East Valley Water District board Meeting. Subject to App wai EAST VALLEY WATER DISTRICT September 14, 2010 FINANCING AUTHORITY MINUTES President Wilson called the meeting to order at 3:01 p.m. PRESENT: Directors: LeVesque, Malmberg, Morales, Sturgeon, Wilson ABSENT: None STAFF: Robert Martin, General Manager; Brian Tompkins, Chief Financial Officer; Ron Buchwald, District Engineer; Cecilia Contreras, Administrative Office Specialist LEGAL COUNSEL: Steve Kennedy GUEST (S): Charles Roberts (Highland Community News), Cara Van Dijk (CV Strategies), Erin Gilhuly (CV Strategies), Dr. Katy Henry PUBLIC PARTICIPATION President Wilson declared the public participation section of the meeting open at 3:01 p.m. There being no written or verbal comments, the public participation section was closed. APPROVAL OF AUGUST 24, 2010 BOARD MEETING MINUTES M /S /C (Ndalmberg- Sturgeon) that the Board Meeting Minutes for August 24, 2010 be approved as submitted. RESOLUTION 2010.03 — A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY ADOPTING A CONFLICT OF INTEREST CODE M /S /C (Sturgeon - Levesque) that Resolution 2010.03 be approved. The meeting was adjourned at 3:04 p.m. Robert E. Martin, Secretary George E "Skip" Wilson, President Minutes (9/14110) cntc DEast'Valley Water District Board Memorandurn No. B-39 -2010 From: Robert Martin, General Manager Subject: East Valley Water District Summary and Recommendations Recommendation: Date: September 28, 2010 Approval revised 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 water and sewer rates increases adopted for 2010, 2011 and 2012 were based, in part, on funding the Capital Improvement Program (CIP). Previously, the Board of Directors approved Resolution 2010.02 authorizing the East Valley Water District Financing Authority (Financing Authority), on behalf of the District, to issue up to $24 million in bonds, secured by a pledge of the District's net water system revenues, for the construction of certain water infrastructure projects and to refund the District's outstanding 2001 Certificates of Participation. However, in order to strengthen the District's credit position and to maximize debt service coverage during the term of the new bonds, staff and the District's financial advisors are recommending that the bond issue be revised to incorporate sewer system project(s) and to pledge water and sewer system net revenues as security for the 2010 bond repayments. In addition, the 2006 and 2006 Installment Sale Notes from Municipal Finance will also be refunded as doing so will smooth the District's debt service, and make it easier for the District to absorb the SRF loan debt service for the plant 134 and 150 projects which will begin when those projects are completed. The revised Resolution 2010.26 anticipates issuing up to $38 million in JPA revenue Bonds (Bonds) to fund $16 million in water and sewer system improvements, $5.3 million to refund the outstanding 2001 Certificates of Participation, $8.1 million to refund the 2004 Installment Sale Note, and $5.4 million to refund the 2006 Installment Sale Note. In addition to funds for construction and refunding, issue proceeds will cover capitalized interest on the new money water system projects 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 October or early November. This timeline will enable District to take advantage of historically low long -term interest rates. Improvement Projects Staff has developed a list of water and sewer improvement projects that are anticipated to be implemented over the next three years and funded by proceeds from the Bonds, as follows: __. .- _. .... . _ ....... Project Component Plant 134 Upgrade /Expansion Plant 143 Blending and Air Reduction Tank Plant 150 Design Plant 150 Construction - Local Share - -- . -- _. __ Sixth Street Pipeline Plant 151 to Plant 40 -- -- - - - -- 1-1-1- _ Sixth Street Pipe_ line - Plant 150 to Plant 12 Vine /Union /Live Oak Water Main Replacements Bruce Street Water Main Replacement Plant 40 Boosters Conejo Sewer Main Replacement Total Amount $ 16,000,000 The bond proceeds must be spent within three years from closing of the bond sale. It should be noted that the Plant 134 project has a more urgent, two year deadline (October 2012), and with the bid process having been completed, this project will take priority when bond funds are available. One concern about funding for this project is the state budget impasse and its effect on the timeliness of state funding for the plant 134 project. After consulting with bond counsel, staff is recommending that, to the extent SRF funds are not immediately available, the bond proceeds be utilized as needed to keep that project moving forward with the understanding that as state reimbursements are received they will be restricted for use on the other project components listed above. Structure of Debt Issuance Based on construction costs of $16 million, it is anticipated the par amount would be $35 million, including $19 million for the refunding of the district's current outstanding debt, funding capitalized interest on the new money water system projects through October 1, 2011 and paying for cost of issuance. The Bonds would be issued backed by net water and sewer system revenues, and the refunding of existing debt will provide cash flow savings for the District. The Bonds will be sold in mid to late October 2010 through either a competitive bidding process or negotiated sale, whichever yields the most favorable results for the District under the market conditions that exist at the time of sale. By passing the Resolution, the Board waives the requirement for competitive sale in the Debt Management Policy if it is determined that the negotiated sale is more feasible, and authorizes the General Manager to engage an underwriter to purchase the bonds, and to enter into a purchase agreement for the bonds. Proposed Resolutions and Legal Documents The proposed resolutions will authorize the General Manager to implement the financing process with the revisions discussed under Background above. 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 and sewer systems, revenue requirements, payment timing, maintenance of the operations systems and other such items. The proposed Agreement specifies that net water and sewer system revenues are pledged for debt service, that net 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 and Installment Sale Notes 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 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 Directors 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 or 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. 2010.04 RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY APPROVING THE SALE OF ITS REFUNDING REVENUE BONDS, SERIES 2010 IN THE AMOUNT OF NOT TO EXCEED $38,000,000; APPROVING THE TIME AND PLACE FOR TAKING BIDS, APPROVING THE NOTICE INVITING BIDS, APPROVING THE PRELIMINARY OFFICIAL STATEMENT AND APPROVING OTHER DOCUMENTS 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 and wastewater 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 and wastewater 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 Refunding Revenue Bonds, Series 2010 (the "Bonds ") in the amount of not to exceed $38,000,000 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 October 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 ") and that certain 2004 Installment Sale Agreement (the "2004 Installment Sale Agreement ") and 2006 Installment Sale Agreement (the "2006 Installment Sale Agreement ") (as such terms are defined in the Installment Purchase Agreement) which are to be refinanced with the proceeds of the Bonds pursuant to the Installment Purchase Agreement and tire to be payable from Net Revenues of the District consisting of a portion of Wastewater System Revenues and Water System Revenues as such terms are defined in the Installment Purchase Agreement; and DOCSOC /1417111 v6'022497 -0011 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 WHEREAS, the Authority and Union Bank, N.A., as Trustee, desire to enter into an Indenture of Trust dated as of October 1. 2010 (the "Indenture of -I rust "), to provide for the issuance and security of the Bonds and to provide for the construction of the Protect; and WHEREAS, the Authority will assign to the Trustee, the Installment Payments pursuant to the Indenture of Trust; and WHEREAS, a preliminary official statement with respect to the Bonds (the "Preliminary Official Statement "), has been prepared by Bond Counsel, acting as disclosure counsel; and WHEREAS, there has been presented to this Board of Directors copies of each of the aforementioned documents and certain other documents relating to t he foregoing; NOW, THEREFORE, THE AUTHORITY'S BOARD OF DIRECTORS DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The Board of Directors hereby specifically finds and declares that each of the statements, findings and determinations of the Authority set forth in the above recitals and in the preambles of the documents approved herein are true and correct and that the financing and refinancing of the 2010 Project will result in significant public benefits for the residents of the District. The Board of Directors hereby further finds and determines that (i) there are significant public benefits to the citizens of the District of the type described in Section 6586(a) of the Marks - Roos Local Bond Pooling Act of 1985 (the "Act ") by having the Authority 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 transactions will result in demonstrable savings in effective interest rate to the Authority and significant reductions in effective user charges levied by the District, and (ii) the 2010 Project comprises facilities for the production, storage, transmission or treatment of water or wastewater within the meaning of Section 6586.5(c) of the Act. SECTION 2. (a) The Authority hereby approves the sale of the Bonds 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 Executive Director upon consultation with Fieldman, Rolapp & Associates, the District's Financial Advisor (the '-Financial Advisor "). The Bonk shall be awarded to the bidder who submits the highest responsible bid to be determined in accordance with the Notice of Sale. The Executive Director is hereby delegated the authority to accept the highest responsible bid for the purchase of the Bonds, determined in accordance with the Notice of Sale, so long as the true interest cost thereof does not exceed six and one - quarter percent (6.25%) 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 setting forth identical interest rates and premium, if any, are received for the Bonds, the Executne Director may exercise his own discretion and judgment in making the award and may award the Bonds on a pro rata basis in such denominations as he shall determine. The Executive Director maN in his discretion, reject any and all bids and waive any irregularity or informality in any bid. The Executive Director shall award the 2 DOCSOC/ 14171 1 1 v6/022497 -001 1 Bonds, or reject all bids not later than 26 howl after the expiration of the time prescribed for the receipt of proposals unless such time of award is waived by a successful bidder. (b) Anything to the contrary herein notwithstanding, (1) in the event the General Manager of the District determines, in consultation with the Financial Advisor to the District, that the timely, efficient sale of the Bonds may be better achieved through a negotiated sale to an underwriter, the Bonds shall not be sold pursuant to competitive sale (and provisions herein relating to publication of Notice of Sale and competitive sale shall not apply) but shall be sold by negotiated sale to an underwriter (the "Underwriter ") selected as described below; (2) the Underwriter for the 2010 Bonds shall be selected by the General Manager in consultation with the Financial Advisor to the District, based upon the Financial Advisor's advice regarding the Underwriter or Underwriters which in its judgment will offer the lowest net effective interest rate for the Bonds, and the Underwriter shall be selected from among the ten largest underwriters of water infrastructure bonds in California, as reported by the California Debt Investment and Advisory Commission for any of the past three years; and (3) if the Bonds are sold by negotiated sale, the Executive Director is authorized and directed to enter into a bond purchase agreement with the Underwriter to be prepared by Bond Counsel in consultation with District's general counsel on such commercially reasonable terms within the parameters described in Section 8 below as he determines are necessary or appropriate to provide for the sale of the Bends and the financing of the Project, his or his written designee's execution thereof to be conclusive evidence of the approval thereof. 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 staWd 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 famished to prospective bidders copies of the Preliminary Official Statement and the Notice of Sale. The failure, in w:nole 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. 3 DOCSOC/ 1417111 v6/022497 -001 1 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 Executive Director 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 $38.000,000, 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 $38,000,000 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, Chief Financial Officer 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 cant' out the intent of this Resolution. SECTION 10. The President of the Board of Directors, the Vice President of the Board of Directors, Executive Director, the General Manager of the District, the Secretary, and any other proper officer of the Authority are hereby authorized and directed. jointly and severally, to execute documents approved in Section 9 hereof and any documents related to the defeasance and prepayment of the 2001 Certificates, the 2004 Installment Sale Agreement or the 2006 Installment Sale Agreement and related documents and to do any and all things and to execute and deliver any and all documents necessary or proper for carrying out the transactions contemplated by this Resolution, (including without limitation, revisions to all documents approved by this Resolution, to reflect competitive or negotiated sale of the Bonds, and that either or both the 2004 Installment Sale Agreement or the 2006 Installment Sale Agreement are not being refinanced with the proceeds of the Bonds, if the General Manager determines that refinancing eithe or both such obligations cannot be achieved with present value savings and is not otherwise to the adx antage of the District in financing the balance of the Project. SECTION 11. This Resolution supersedes and replaces in full Resolution No. 2010.02 adopted August 24, 2010. This Resolution shall take effect from and after its date of adoption. ADOPTED, SIGNED AND APPROVED this 28th day of September, 2010. EAST VALLEY WATER DISTRICT FINANCING AUTHORITY President ATTEST: Secretary, East Valley Water District Financing Authority 4 DOCSOC /141711 I v6/022497 -0011 STATE OF CALIFORNIA ) ) ss. COUNTY OF SAN BERNARDINO ) I, , 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 28th day of September, 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: I 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 fill 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 OOCSOai a 1 7 1 i i v6/022497-0011 OFFICIAL NOTICE OF SALE EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Refunding Revenue Bonds Series 2010 Date of Sale: Wednesday, October 13, 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(- ,fieldman.com Joshua Lentz, Assistant Vice President (949) 660 -7320 ilentz(k,)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: w,A,w.fleldman.com/offeriniis.asp Preliminary, subject to change. EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Refunding Revenue Bonds Series 2010 NOTICE IS HEREBY GIVEN that all -or -none bids will 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 REFUNDING REVENUE BONDS SERIES 2010" (herein, the "Bonds "). All electronic bids must be submitted via Parity®, 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, October 13, 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(R) will be accepted at such time and place on October 13, 2010 and each succeeding Business Day thereafter until the earlier of October 28, 2010 or receipt by the District of an acceptable electronic bid for the Bonds. 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 by 5:00 p.m., California time the day prior to the day bids are scheduled to be received, and if the sale 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 only form in denominations of $5,000 and any integral multiple thereof, maturing as shown below 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 "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. Preliminary, subject to change. Page 1 of 14 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 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 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, 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 October 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 and the Wasterwater 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 and Wastewater System, (ii) refund the District's outstanding debt obligations, (iii) fund a portion of the 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 October 28, 2010. MATURITY SCHEDULE. The Bonds will mature, or be 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, alternatively, be subject to mandatory sinking fund redemption in such year. Page 2 of I 1 Maturity Maturity (October 1) Principal Amountttl (October 1) Principal Amount (1) 2011 2026 2012 202; 2013 2028 2014 2029 2015 2030 2016 2031 2017 2032 2018 203:, 2019 2034 2020 2035 2021 2036 2022 203? 2023 2038 2024 2039 2025 2040 01 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. u, 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 fund 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 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 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 bidcler specifies that any maturity of Page 3 of 1 1 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. 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) 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. For 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 Yocea 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 calculating the federal alternative Page 4 of I 1 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 of 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 October 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 charged the California Debt and Investment Advisory Commission fee. QUALIFICATION FOR SALE; BLUE SKY. Compliance with 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 maybe 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 any jurisdiction 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 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. Page 5 of 11 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 6.0 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 September _, 2010 (the 'Preliminary Official Statement ") has been deemed final by the Authority and the District for purposes of Rule I Sc2 -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.fieldman.com /offerings.asu. 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 riot 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 DISC'LOSURE." 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 I I 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 October 13, 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 any 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 submit a bid for the Bonds, provided that if any of the Bonds are bid for, then all of the Bonds must be hid for. MAXIMUM DISCOUNT. No bid will be considered for less than ninety -nine percent (99 %) 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 PARITY conflict with this Notice, the terms of this Notice shall control. For further information about PAWTY'K %, potential bidders may contact the Financial Advisor, Fieldman, Rolapp & Associates at (949) 660 -7300 or PARITY® at (212) 849 -5021. DELIVERY AND PAYMENT. It is estimated that delivery of the Bonds will be made to the Purchaser on or about October 28, 2010. Payment of the purchase price (less the amount of the good faith deposit mentioned below) must be made in funds immediately available to the District. ELECTRONIC BIDS. Electronic Bids via PARITY9 (the "Electronic Bidding System ") will be accepted in accordance with this Notice of Sale until 10:00 a.m. Pacific Daylight Time, October 13, 2010, but no bid will be received after this time. To the extent any instructions or directions set forth in PAWTYC 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 PARITYR at 1359 Broadway, 2°3 Floor. New York, New York 10018, telephone (212) 849 -5021. WARNING REGARDING ELECTRONIC BIDS. I HE 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 ARRANGEMENTS WITH PARITY, THAT Page 7 of 11 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 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. 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 Neils. 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 will 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 alternative 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 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 October 13, 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 withdrawal 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 Dave, 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 October_, 2010. /s/ Robert Martin Executive Director Page 9 of t l EXHIBIT 1 Reoffering Price Certificate EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Refunding Revenue Bonds 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 October 13, 2010, being the date upon which the East Valley Water District Financing Authority (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 (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 11 Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Indenture, dated as of October 1, 2010, by and between Uticn Bank, as Trustee, and the East Valley Water District Financing Authority, authorizing the issuance �f the Bonds. Dated: 2010 as Undenrr e'er M Page 11 of 11 Name, Title EXHIBIT A Maturity Date Principal (October 1 Amount * Stated as a percentage of par. Page 12 of i 1 Interest Reoffering Rate Price EXHIBIT B Attach computations of arbitrage yield under Section 148, Form 803 S -G computations and CDIAC computations Page 13 of I 1 Stradling Yocca Carlson & Routh u Draft of 09120110 PRELIMINARY OFFICIAL STATEMENT DATED , 2010 NEW ISSUE - BOOK - ENTRY ONLY RATINGS: S &P: c � Fitch: ?? In the opinion of Stradling Yocca Carlson & Routh, a Professional Corporation, Bond Counsel. under- existing statutes, regulations, rulingr and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Ofqcial m a Statement, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item cf tax o preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond E u Counsel. interest (and original issue discount) on the Bonds rs exempt from State of California personal income tax. See the caption "TAX EXEMPTION' " t c S * T EAST VALLEY WATER DISTRICT FINANCING AUTHORITY o REFUNDING REVENUE BONDS, SERIES 2010 ° o Dated: Date of Delivery Due: October 1, as shown on inside front rover iO 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 c.Y Depository Trust Company, New York, New York. Individual purchases will be made in denominations of $5,000 and integral multiples thereof and will be o in book -entry form only. Purchasers of the Bonds will not receive certificates representing their beneficial ownership in the Bonds but will receive credit E F balances on the books of their respective nominees. Interest on the Bonds is payable on April 1 and October I of each year, commencing April 1, 2011. `o 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 c through their nominees. y The Bonds are subject to optional redemption and mandatory redemption, all as more fully described herein. u ° The Bonds are being issued to provide funds: (i) to currently refund certain outstanding obligations of the District; (n) to finance certain oimprovements for the District's Water System and Wastewater System; (iii) to fund interest due through and including [October 1, 2011]; and (iv) to pay e o costs incurred in connection with the issuance of the Bonds. EThe Bonds are bung delivered pursuant to the Indenture of Trust, dated as of October 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 OCTOBER 1, 2010, BY AND BETWEEN THE S DISTRICT AND THE AUTHORITY, AND FROM CERTAIN OTHER FUNDS AND ACCOUNTS HELD BY THE TRUSTEE PURSUANT TO THE c INDENTURE. NEITHER THE FULL FAITH AND CREDIT NOR ANY OTHER REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO v E OR AVAILABLE FOR THE PAYMENT OF DEBT SERVICE ON THE BONDS. THE OBLIGATION OF THE AUTHORITY TO MAKE PAYMENTS It- 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 aei m TAXATION. The obligation of the District to make the Installment Payments is a special limited obligation of the District payable solely from Net E Revenues of the District's Water System and Wastewater System, The Installment Payments [may be /are] payable on a parity with the District's obligation E 3 to make payments on S aggregate principal amount of other contracts as more particularly described herein. THE OBLIGATION OF THE DISTRICT TO MAKE INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT p c PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM 01' TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE INSTALLMENT PAYMENTS 1S A SPECIAL LIMITED OBLIGATION OF THE " ` s DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT'S WATER SYSTEM AND WASTEWATER SYSTEM E0. E z 3 REMAINING AFTER PAYING OPERATION AND MAINTENANCE COSTS AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT v OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY ° n H CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. t U 'n O cDOt o THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. 'ie INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN r`a E :_ INFORMED INVESTMENT DECISION. .E o MATURITY SCHEDULE (See inside front cover) o The Bonds are offered when, as and if delivered and received by the Representative, subject to the approval as to the valid and binding r nature of the Indenture by Stradling Yocca Carlson & Routh, a Professional Corporation, Bond Counsel, and certain other conditions. Certain 'La y legal matters will be passed upon for the District and the Authority by Brunick, McE /haney & Beckett, General Counsel and for the Trustee by its o a counsel. It is anticipated that the Bonds will be available for delivery through the facilities of The Depository Trust Company on or about o c z October _ , 2010. 0 3 t c o � � r,: o Dated: , 2010 LIE U 9 9 A � � C N d � N U U � y E � � O Preliminary subject to change. u y L E N Z A L � d DOCSOC/ 1433 300v4/022497 -0011 MATURITY SCHEDULE BASE CUSIP s EAST VALLEY RATER DISTRICT FINANCING AUTHORITY REFUNDING REVENUE BONDS, SERIES 2010 Serial 2010 Bonds Maturity (October I) Principal Amount Interest Rate Yield $ % Term Bonds Due October 1, 20_ — Yield ' %CUSIP CUSIP' CUSIP® is a registered trademark of the American Bankers Association. CapvrigHtCt. I9Q9-21710 Standard & Poor's, A Division of the McGraw -Hill Companies, Inc. All rights resen ed CUSIP° data herein is provided hr Simr$n'd R Door's CUSIP SeMICe Bureau This data is not intended to create a database and does not se, re in any way as a substitute for the CUJT i cc Bureau. CUSIP` numbers are provided for convenience of reference only. None of iht District, the Authority or the Under, rttr one a(v responsibiliN for the accuracy of such numbers. Preliminary, subject to change. DOC SOC/ 1433300v4/022497 -001 1 EAST VALLEY WATER DISTRICT FINANCING AUTHORITY BOARD OF DIRECTORS George E. Wilson, President Kip E. Sturgeon Matt LeVesque Larry Malmberg James Morales, Jr. EAST VALLEY WATER DISTRICT BOARD OF DIRECTORS George E. Wilson, President Kip E. Sturgeon Matt LeVesque Larry Malmberg James Morales, Jr. DISTRICT STAFF Robert E. Martin, General Manager & Chief Engineer Brian W. Tompkins, Chief Financial Officer Ron Buchwald, District Engineer SERVICES General Counsel Brunick, McElhaney & Beckett San Bernardino, California Bond Counsel Stradling Yocca Carlson & Rauth, A Professional Corporation Newport Beach, California Financial Advisor Fieldman, Rolapp & Associates Irvine, California Trustee and Escrow Agent Union Bank, N.A. Los Angeles, California Verification Agent Causey Demgen & Moore Inc. Denver, Colorado DOC SOC/ 1433300v4/022497 -0011 This Official Statement does not constitute an offering of any security other than the original offering of the Bonds of the District. No dealer, broker. salesperson or other person has been authorized by the District or the Authority to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such other information or representations must not be relied upon as having been authorized by the District or the Authority. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers 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 N ithout 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 District 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 respectively and do not purport to be complete stalements of any or all of such provisions. Reference is hereby made to such documents on file with the Distric. 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 RESULTS MAY DIFFER MATERIALLY FROM THE FORECASTS DESCRIBED HEREIN. IN THIS RESPECT, THE WORDS "ESTIMATE," "PROJECT," `ANTICIPATE," "EXPECT," "INTEND," "BELIEVE" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD - LOOKING STATEMENTS. ALL PROJECTIONS, FORECASTS, ASSUMPTIONS, EXPRESSIONS OF OPINIONS, ESTIMATES AND OTHER FORWARD - LOOKING STATEMENTS ARE (EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS SET FORTH IN 'THIS OFFICIAL STATEMENT. THE BONDS HAVE NOT BEEN REGISTERED UNDER ]'III: SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH 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 subject to completion or amendment without notice. These securities may not be sold nor may an offer to buy be 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 be any sale of these securities to any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. IN CONNECTION WITH THE OFFERING OF THE BONDS. THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE. OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITERS MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN 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 UNDERWRITERS. The District maintains a website. However, the information presewted on such website is not part of this Official Statement and should not be relied upon in making an investmer:' decision with respect to the Bonds. DOC SOC/ 1433300v4/022497 -001 1 TABLE OF CONTENTS Page INTRODUCTION.................................................................................................................. ............................... I REFUNDINGPLAN .............................................................................................................. ..............................1 Verification of Mathematical Computations .................................................................... ..............................2 THEPROJECT ....................................................................................................................... ..............................2 ESTIMATED SOURCES AND USES OF FUNDS ............................................................... ..............................3 DEBT SERVICE SCHEDULE SECURITY FOR THE BONDS ............................................... ............................... Installment Payments Payable From Net Revenues ........... ............................... RateCovenant .................................................................... ............................... NoReserve Fund ................................................................ ............................... Parity Bonds and Additional Contracts .............................. ............................... ................7 .........................7 .........................8 .........................9 .........................9 .........................9 EAST VALLEY WATER DISTRICT ................................................................................... .............................10 General............................................................................................................................ .............................10 Govemance and Management ......................................................................................... .............................10 DistrictPowers ................................................................................................................ .............................11 Employees and Employee Benefits ................................................................................ ..............................1 I Defined Benefit Pension Plan .......................................................................................... .............................11 PostretirementBenefits .................................................................................................... .............................12 BudgetProcess ............................................................................................................. ............................... 12 DistrictInsurance ............................................................................................................. .............................12 LandUse ......................................................................................................................... .............................13 OutstandingObligations .................................................................................................. .............................13 OtherObligations ............................................................................................................ .............................13 THE WATER SYSTEM OF THE DISTRICT ....................................................................... .............................14 TheWater System ........................................................................................................... .............................14 Groundwater and Surface Water ..................................................................................... .............................14 SupplementalWater ........................................................................................................ .............................15 TheWater System ........................................................................................................... .............................16 LargestCustomers ........................................................................................................... .............................19 Water System Rates and Charges .................................................................................... .............................19 Future Water System Improvements ............................................................................... .............................20 SeismicConsiderations .................................................................................................... .............................21 Historic Water System Operating Results and Debt Service Coverage ........................... .............................21 Projected Water System Operating Results and Debt Service Coverage ........................ .............................22 THE WASTEWATER SYSTEM OF THE DISTRICT ......................................................... .............................23 i DOCSOC/ 1433300v4/022497 -0011 TABLE OF CONTENTS (continued) Page TheWastewater System ............................................................................................... .............................23 ServiceArea ........................................................... ............................... ..................... .............................24 Historic Wastewater System Connections ..................................................................... .............................24 Historic Wastewater System Usage ................................................................................ .............................25 Historic Wastewater System Semite. Charge Revenues ......................... ....................... .............................25 Largest Wastewater System Custom ers .......................................................................... .............................26 Wastewater System Rates and Charges .......................................................................... .............................26 Wastewater System Collection Procedures .................................................................... .............................28 Future Wastewater System Im provements ..................................................................... .............................28 Projected Wastewater System Connections ..................................................................... .............................29 Projected Wastewater System Usage ............................................................................... .............................29 Projected Wastewater System Service Charge Revenues ............................................... .............................30 6 Historic Wastewater System Operating Results and Debt Service Coverage ................. .............................30 Projected Wastewater System Operating Results and Debt Service Ccweraee ............... .............................31 7 FINANCIAL INFORMATION OF THE DISTRICT ........................................................... .............................31 Historic Operating Results and Debt Service Coverage ........................ ..........:............ .............................31 Projected Operating Results and Debt Service Coverage ............................................... .............................33 CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ............ .............................34 ArticleXIIIB .......................................................... ............................... ....................... .............................34 Proposition21 8 ............................................................................................................. .............................34 FutureInitiatives ..................................................... ............................... ........................ .............................36 THEAUTHORITY ............................................................................................................... .............................36 APPROVALOF LEGAL PROCEEDINGS .......................................................................... .............................36 LITIGATION......................................................................................................................... .............................36 District............................................................................................................................. .............................36 Authority......................................................................................................................... ..............................3 6 TAXEXEMPTION ............................................................................................................... .............................37 Bonds............................................................................................................................. ..............................3 7 CONTINUINGDISCLOSURE .......................................................................................... .............................38 RATINGS......................................................................................................................... ............................... 38 FINANCIALADVISOR ............................................. ............................... ........................ .............................38 UNDERWRITING....................................................... ............................... ........................ .............................39 MISCELLANEOUS.............................................................................................................. .............................40 APPENDIX A - DISTRICT FINANCIAL STATEMENTS ............................................ ............................... A -I APPENDIX B - DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE ..........................B -1 APPENDIX C - FORM OF OPINION OF BOND COUNSEL ............. .... ........ .............................................. C -1 APPENDIX D - INFORMATION CONCERNING DTC ................................................ ............................... D -1 APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICA'''E _ .................. ............................E -1 DOCSOC/ I433300v4/022497 -001 I EAST VALLEY WATER DISTRICT SERVICE AREA MAP DOCS OC/ 1433300v4,'022497 -0011 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 onh by means of the entire Official Statement. Purpose. The Bonds are being issued to provide funds: (i) to currently refund certain outstanding obligations of the District, as described under the caption "REFUNDING PLAN "; (ii) to acquire certain improvements for the District's Water System and Wastewater System. a described under the caption "THE PROJECT "; (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. 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 ocher 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 RE'tiF.NL'ES, WHICH CONSIST OF INSTALLMENT PAYMENTS TO BE MADE BY THE DISTRICT TO i'HE AUTHORITY PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT. The obligation of the District to make Instalhnent Payments is a special limited obligation of the District payable solely from Net Revenues of the District's Water System and Wastewater System remaining after paying Operation and Maintenance Costs. Notwithstanding the foregoing, the District expects to pay Installment Payments primarily from Net Water System Revenues and does not anticipate that Net Wastewater System Revenues will serve as a significant source of moneys used to pay Installment Payments. [Approximately _% of debt service with respect to the Instalhnent Payments is attributable to the Water System and _% to the Wastewater System, although such proportion may change to the extent additional parity indebtedness is entered into]. The Installment Payments are payable on a parity with the District's obligation to make payments on $ aggregate principal amount of other contracts, all as more particularly described herein. See the captions "DEBT SERVICE S( HEDULE" and "EAST VALLEY WATER DISTRICT—Outstanding Obligations." 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 pa}inents 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 N4 ater System, Wastewater System or any part thereof is operating or operable, or its use is suspended, interfered with, reduced or curtailed or tenninated in whole or in part, and whether or not the 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 AN`' FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM Ol 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 -i- DOC SOC/ 1433300v4/022497 -0011 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 DEI3T LIMITATION OR RESTRICTION. Rate Covenant. The Installment Purchase Agreement will require the District, to the fullest extent pennitted by law, to fix and prescribe, at the commencement of each Fiscal Year, rates and charges for its Water Service which will be at least sufficient to yield during each Fiscal Year Net Water System Revenues equal to 120% of Debt Service for such Fiscal Year allocable to the Water System, and to fix and prescribe, at the commencement of each Fiscal Year, rates and charges for its Wastewater Service which will be at least sufficient to yield during each Fiscal Year Net Wastewater System Revenues equal to 120% of Debt Service for such Fiscal Year allocable to the Wastewater System, all as more particularly described herein under the caption "SECURITY FOR THE BONDS —Rate Covenant." Additional Indebtedness. The Installment Purchase Agreement does not permit the District to make any additional pledge of, or to place any additional lien, on the Net Revenues, 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 payable on a parity with the Installment Payments provided that certain conditions are satisfied as described herein. 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 Installment Payments, or from issuing any bonds or executing contracts the payments under which are payable from Net Revenues subordinate to Parity Bonds or Contracts of the District. See the caption "SECURITY FOR THE BONDS —Parity Bonds and Additional Contracts." Redemption. The Bonds are subject to optional redemption and 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 service to the then unincorporated and agriculturally -based communities of Highland and East Highland. The Service Area is now largely urbanized. Approximately 15 °1,> 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. -ii- DOCSOC/ 1433300v4/022497 -001 I EAST VALLEY WATER DISTRICT FINANCING AUTHORITY REFUNDING REVENUE BONDS, 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 Refunding Revenue Bonds, Series 2010 (the `Bonds "). Descriptions and summaries v' various documents hereinafter set forth do not purport to be comprehensive or definitive, and reference is trade to each document for complete details of all terms and conditions. Al' 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 October 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 October 1, 2010, by and between the District and the Authority. The Bonds are being issued to provide funds: (i) to currently refund certain outstanding obligations of the District, as described under the caption "REFUNDING PLAN": (ii) to finance certain improvements for the District's Water System and Wastewater System, as described under the caption "THE PROJECT "; (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. REFUNDING PLAN General. Depending upon market conditions at the time of pricing of the Bonds, the District intends to refund (1) a portion of the District's outstanding Certificates of Participation (Reservoir Project and Series 1994 Refunding) Series 2001 (the `2001 Certificates "), (2) a portion of [he outstanding installment payments under the Installment Sale Agreement #04- 058 -AF, dated July 13, 2004, by and between the District and Municipal Finance Corporation (the "2004 Installment Sale Agreement ") and (3) a portion of the outstanding installment payments under the Installment Sale Agreement #05- 106 -AF, dated January 10, 2006, by and between the District and Municipal Finance Corporation (the "2006 Installment Sale Agreement," and together with the 2001 Certificates and the 2004 Installment Sale Agreement, the "Refunded Obligations") which are payable from Net Revenues of the Water System of the District on a pant} with the Installment Payments. 2001 Certificates. In relation to the execution and delivery of the 2001 Certificates, the District entered into the Amended and Restated Installment Purchase Agreement, dated as of April 1, 2001, with the East Valley Public Facilities Corporation (the "Corporation ") to refinance certain Water System facilities. The 2001 Certificates were outstanding in the aggregate principal amount of 55,935,000 as of June 30, 2010. A portion of the proceeds from the sale of the Bonds will be used to establish and partially fund an irrevocable escrow to effectuate the defeasance of the 2001 Certificates (the "2001 Escrow Fund "), held by Union Bank, N.A., as escrow bank (the "Escrow Bank ") pursuant to an escrow agreement, dated as of October 1, 2010 by and between the District and the Escrow Bank (the "2001 Fscrow Agreement "). In addition to the * Preliminary, s.bjec( t. change. DOC S OC/ 1433 300v4/022497 -001 1 use of a portion of the proceeds from the sale of the Bonds, all money on deposit, as of the date of delivery of the Bonds, in the fiords and accounts established under the Trust Agreement, dated as of April 1, 2001 (the "2001 Trust Agreement "), by and among the District, the Corporation and Union Bank, N.A. (the "2001 Trustee "), as successor -in- interest to Union Bank of California, N.A. will be transferred by the 2001 Trustee to the Escrow Bank for deposit in the 2001 Escrow Fund. Moneys on deposit in the 2001 Escrow Fund will be invested in direct obligations of, or obligations unconditionally guaranteed by, the United State Government (the "Escrow Securities "), the interest and principal payments from which will secure and provide funds to pay the District's installment purchase payments due under the 2001 Installment Purchase Agreement on and prior to December 1, 2010 and the District's optional prepayment on December 1, 2010 of the remaining installment purchase payments due under the 2001 Installment Purchase Agreement. Said respective moneys will be applied to the principal and interest due with respect to the 2001 Certificates due on and prior to December 1, 2010 and on December 1, 2010 to prepay the outstanding principal of the 2001 Certificates. Establishment of the 2001 Escrow Fund will operate to defease the 2001 Certificates. The registered owners of the 2001 Certificates will remain the owners of an undivided interest in the installment purchase payments due under the 2001 Installment Purchase Agreement. Moneys deposited with the Escrow Bank with respect to the 2001 Escrow Fund are irrevocably pledged to secure, as provided in the 2001 Escrow Agreement, the payments of the installment purchase payments under the 2001 Installment 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 Agreement on December 1, 2010. 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. The District plans to apply a portion of the proceeds of the Certificates to prepay all outstanding amounts under the 2004 Installment Sale Agreement on or about the date of execution and delivery of the Certificates. 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. The District plans to apply a portion of the proceeds of the Certificates to prepay all outstanding amounts under the 2006 Installment Sale Agreement on or about the date of execution and delivery of the Certificates. Verification of Mathematical Computations Upon delivery of the Bonds, the arithmetical accuracy of certain computations included in the schedules provided by the Underwriter on behalf of the District and the Authority 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 Agreements; (ii) forecasted payments of principal and interest with respect to the 2001 Certificates on and prior to their projected maturity and /or redemption dates; and (iii) yields with respect to the Bonds and on the obligations and other securities to be deposited pursuant to the Escrow 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 information and assumptions supplied to the Verification Agent by the Underwriter. The Verification Agent has not made 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 achievability of the forecasted outcome. THE 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 13- -2- DOC SOC/ 1433300v4/022497 -0011 "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 Proiect-- 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 upgrades. expansion, design and construction. improvements to the Water System distribution system, water pipeline replacements and other miscellaneous inrovements (collectively, the "Water System Project'). In addition, the District expects to spend approximately $__ of Certificate proceeds to construct a variety of capital improvements to the District Wastewater System during Fiscal Years 2011 through 2014. These improvements include the replacement of approximately 2,630 linear feet of a 6 -inch and 8 -inch diameter vitrified clay pipe sewer main with new 10 -inch diameter nigh density polyethylene pipe, and other miscellaneous improvements (the "Wastewater System Project,' and together with the Water System Project, the "Project'). The District expects to undenake environmental approvals on individual components of the Water System Project and the Wastewater System 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 November, 2011. 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 and the current refunding of the Refunded Obligations: Sources('): Principal Amount of Bonds Plus/Less Net Original Issue Premium/Discount Transfer from 2001 Certificates Funds and Accounts Total Sources: Usesttt: 2001 Escrow Fund 2004 Escrow Fund 2006 Escrow Fund Acquisition Fund Interest Fund Delivery Cost Fund (2) Total Uses: n Amounts rounded to the nearest dollar. pl Includes certain legal, financing. rating agency and Trustee fees. underwriters' d,,count and printing costs. THE BONDS General Provisions The 2010A 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 p gable upon maturity on the dates set forth on the inside front cover page hereof. Interest on the Bonds wil' be payable on April 1 and October 1 of * Preliminary, subject to change. -3- DOCSOC/ 1433300v4/022497 -001 I each year, commencing April 1, 2011. Interest will be calculated at the rates set forth on the inside front cover page hereof and on :he 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 lawfu:'. 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. The Authority cannot and does not give any assurances that DTC participants or others will distribute payments with respect to the Bonds received by DTC or its nominee as the registered Owner, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will service and act in the manner described in this Official Statement. See Appendix D hereto for additional information concerning DTC. Transfers and Exchanges Upon Termination of Book -Entry Only System In the event the book -entry system described above is discontinued, the Bonds will be printed and delivered as provided in the Indenture. Thereafter, any Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond at the Office of the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. The Trustee is not required to register the transfer of any Bond during the period in which the Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. Whenever any Bond or Bonds is surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver a new Bond or Bonds of authorized denomination or denominations for a like series and aggregate principal amount of the same maturity. The Trustee will require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of Bonds, the Trustee will cancel and destroy the Bonds 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 not 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. T ..e Trustee will require the Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of Bonds, the Trustee will cancel and destroy the Bonds it has received. 0 DOCSOC / 1433300v4/022497 -001 I Redemption Optional Redemption. The Bonds with stated maturities on or after October 1, 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 Ocio')er 1, 20_, at a price equal to the principal amount thereof plus accrued imerest thereon to the date fixed far redemption, without premium. Mandatory Redemption. The Bonds with stated maturities on October 1, 20 arc 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 e, idenced and represented thereby to the date fixed for redemption, without premium, in accordance with the following schedule: Redemption Date Principal (October 1) Amount * Final Maturity. The Bonds are subject to mandatory sinking fund redemption in part on each October I on and after October 1, 20_, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest evidenced and represented thereby to the date fixed for redemption, without premium, in accordance with the following schedule: Redemption Date Principal (October 1) Amount * Final Maturity. 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. -5- DOC SOC/ 1433300v4/022497 -001 1 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 dale 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 sufficien': 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 Ere not so received, the redemption will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. Effect of Redemption Notice of redemption having been duly given as described above under the caption "— Notice of Redemption," and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption will become due and payable, interest on the Bonds so called for redemption will cease to accrue, said Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. The Trustee; will, upon surrender for payment of any of the Bonds to be redeemed on their Redemption Dates, pay such Bonds at the Redemption Price. All Bonds :-edeemed pursuant to the provisions of the Indenture will be canceled upon surrender thereof. -6- DOCSOC/ 1433300v4/022497 -001 I DEBT SERVICE SCHEDULE Set forth below is a schedule of the District's payment obligations with respect to a portion of the Installment Payments and Parity Contract payments for each annual penod ending on June 30 of the years indicated. See the caption "EAST VALLEY WATER DISTRICT— Oritstanding Obligations -Pre- Existing Indebtedness" for further information x ith respect to the Parity Contract Payments. Installment Payments Pm in, Fiscal Year Ending Contract June 30 Principal Interest Payments" 2011 S b 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 Total Parity Contract Payments include the 2001 Installment Payments, 2004 Installment P&ymantc. 2006 Installment Payments, Plant 134 SRF Loan payments and Plant 150 SRF Loan payments described under the caption FAS- %ALLEY WATER DISTRICT— Outstanding Obligations– Pre - Existing Indebtedness. SECURITY FOR THE BONDS 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 0BLIGATION 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 Ol TAXATION. The Authority has assigned substantially all of its right- title and interest in the Installment Purchase Agreement to the Trustee -7- DOC SOC/ 1433300v4/022497 -001 I 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 terns 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 "EAST VALLEY WATER DISTRICT--Outstanding Obligations— Parity Obligations." In order to carry out and effectuate such pledge and lien, the District has agreed and covenanted that all Revenues (as such tern 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 retrain 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. Notwithstanding the pledge of Revenues to the payment of Installment Payments, approximately — % of Debt Service with respect to the Bonds is allocable to the Water System and _% to the Wastewater System, and the District's ability to pay Installment Payments will largely depend on the adequacy of Net Water System Revenues for such purpose. See the caption " -Rate Covenant" below. The District expects to pay Installment Payments primarily from Net Water System Revenues and does not anticipate that Net Wastewater System Revenues will serve as a significant source of moneys used to pay Installment Payments. 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 AND WASTEWATER 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. -g- DOC SOC/ 1433300v4/022497 -001 1 Rate Covenant The Installment Purchase Agreement requires the District, to the fidlest extent permitted by law, to fix and prescribe, at the commencement of each Fiscal Year: (a) 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 Water System Revenues equal to 120% of Debt Service for such Fiscal Year allocable to the Water System; and (b) rates and charges for the Wastewater Service provided by the Wastewater System which will be at least sufficient to yield during each Fiscal Year Net Wastewater System Revenues equal to I20% of Debt Service for such Fiscal Year allocable to the Wastewater System. Initially, approximately _ % of Debt Service with respect to the Bonds is allocable to the Water System and _% to the Wastewater System. Although the District will comply with the foregoing covenant in accordance with the Installment Purchase Agreement, the District expects to pay Installment Payments from Net Water System Revenues and does not anticipate that Net Wastewater System Revenues will serve as a significant source of moneys used to pay installment Payments. 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 will not reduce the rates and charges then in effect unless the Net Water System Revenues or Net Wastewater System Revenues, as appl, cable, from such reduced rates and charges will at all times be sufficient 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 Contracts The District may at any time issue any Parity Bonds or execute any Contract, as the case may be, in accordance with the Installment Purchase Agreement; provided: (a) The Net Revenues of the Water System and the Wastewater System, respectively, for the most recent audited Fiscal Year preceding the date of adoption by the Board of Directors of the District (the "Board ") of the resolution authorizing the issuance of such Parity Bonds or the date of the execution of such Contract, as the case may be, as evidenced by both a calculation prepared by the 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, produces a sum equal to at least I MN of the Debt Service for such Fiscal Year allocable to the Water System and the Wastewater System, respectively; and (b) The Net Revenues of the Water System and the Wastewater System, respectively 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 Bor,ds. as the case may be, including adjustments to give effect as of the first day of such Fiscal Year to increases or decreases in rates and charges for the Water Service and Wastewater Service approved 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 allocable to the Water System and the Wastewater System, respectively; plus the allocable Debt Service which would have accrued 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 of such Fiscal Year plus the Debt Service allocable to the Water System and the Wastewater System, respectively which would have accrued had such Contract been executed or Parity Bonds been issued at the beginning of such Fiscal Year. Notwithstanding the foregoing, (1) 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 -9- DOC SOC/ 1433300v4/022497 -001 I 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 and (2) the State Loan maybe executed and determined and shell constitute a contract for the purposes of the Installment Purchase Agreement and any Parity Bonds or contracts. EAST VALLEY WATER 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 does not own or operate a wastewater treatment plant. Instead, the District 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 -10- DOCSOC/1433300v4/022497 -0011 District Powers The District has broad general powers over the use of water and wastewater collection within District boundaries, including the right of eminent domain and the authority to acquire, control, distribute, store, spread, sink, treat, purify, reclaim, process and salvage any water for beneficial 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 limits, to le.y taxes 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 administration 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- 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 Manager (the "General Manager "), Robert E. Martin. Mr. Martin has served as the District's General Manager since 1990. Before becoming General Manager, Mr. Martin served as the District Engineer for six years. 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 Cali forma. 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 Distnct since June 2006. Prior to his appointment as District Engineer, Mr. Buchwald served as Assistant District Engineer for 4 years. The District has employed Mr. Buchwald since 1999. Before corning to the District. Mr. Buchwald was employed as a civil engineer with a private company for nine years. Mr. Buchwald holds a Bachelor of Science Degree in Civil Engineering and is a Registered Professional Civil Engineer in Califcmia. Defined Benefit Pension Plan The District contributes to the California Public Employees Retirement System ( "CaIPERS "), an agent multiple - employer public employee defined benefit pension plan. CaIPFRS provides retirement and disability benefits, annual cost -of- living adjustments and death benefits to plan members and beneficiaries. CaIPERS 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 statute 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 who 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 a. erage full -time monthly pay rate for the highest 36 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 their account. The District is required to contribute at an actuarially determined rate; the contribution rate for Fiscal Year 2011 is 16.656% of annual covered payroll. Benefit provisions and all other requirements are established by State statute and District ordinance. For the Fiscal Year ended June 30, 2010, the amount contributed by the District on behalf of the employees was $762,700, which was equal to the District's required contribution. The required contribution -11- DOCSOC/ 1433300v4/022497 -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: Ca1PERS 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. Postrefirement 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 -12- DOCSOC/1433300v4/022497 -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 Ca1PERS 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. Postrefirement 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 -12- DOCSOC/1433300v4/022497 -0011 provisions of State Government Code Section 6500 et seq. The Authority is governed by a board consisting of a representative from each member agency. The board controls the operations of the Authority including selection of management and approval of operating budgets. The relatim.ship between the District and the Authority is such that the Authority is not a component unit of the District for financial reporting purposes. The purpose of the Authority is to arrange and administer programs of insurance for the pooling of self - insured losses and to purchase excess insurance coverage. The ^.athority provides joint protection coverage for losses in excess of the member districts' individually specified self- insurance retention levels. Individual claims (and aggregate public liability and property claims) in e�xess of specified levels are covered by excess insurance policies purchased from commercial insurance ca-riers. See Note 10 to Appendix A— "DISTRICT FINANCIAL STATEMENTS" for a description of coverage limits as of June 30, 2009. Land Use Land use within the District is primarily residential with some commercial /industrial, park/landscape and agricultural uses. According to the District. approximately 93.69/6 of the District's metered customers are residential (91.2% single - family and 2.4% multi- family). The District's 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 and therefore account for zero percent of the current metered services. Outstanding Obligations The District has incurred the following obligations that are payable from Net Revenues on a panty with the Installment Payments, not including payments under the 2001 Installment Purchase Agreement, the 2004 Installment Sale Agreement and the 2006 Installment Sale Agreement, which will be prepaid with a portion of the proceeds of the Bonds. See the caption "REFUNDING PLAN." State Revolving Fund Loans. The District expects to enter into two State Revolving Fund Loans for improvements to Plant 134 and Plant 150, respectively, in the beginning of September 2010 (the "State Loans "). The obligation of the District to make payments under the State Loans will be on a parity with the obligation of the District to make payments under the Installment Ptrchase Agreement. [UPDATE FOR TIMING] Other Obligations The County, along with the California Department of Public Health, as part of an agreement to provide a combination of grants and loans to the Arroyo Verde Water Company ("AVWC ") to finance capital improvements to its distribution system, required that the AVWC dissolve and transfer its customers to the District. The District entered into the Arroyo Verde Assessment District Construction Loan (the "Arroyo Verde Loan ") to finance installation of a new distribution system serving the Arroyo Verde customers. The Arroyo Verde Loan was outstanding in the aggregate principal amount o' SI42,004 as of June 30, 2010. The Arroyo Verde is payable from assessments levied by the District. Nr Revenues of the Water System are pledged to repayment of this loan. In 2009, the County Department of Public Health offered funding to assist the District in absorbing the Eastwood Farms Water Users Association ( "EFWUA "), a group of 120 property owners located on the District's southwestern boundary whose water distribution system was in serious disrepair. On September 15, 2010, EFWUA property owners voted to approve the formation of an assessment district to facilitate the replacement of EFWUA's distribution system and add EFWUA property owners as District customers. The District authorized the formation of the assessment district, to be designated the Eastwood Farms Assessment District (the "Assessment District'). on September 15, 2010. -13- DOCSOC/ 1433300v4/022497 -0011 State funding in the amount of $1,322,196 is expected to pay for approximately 87% of the estimated construction costs associated with the replacement of EFWUA's distribution system. The balance of such costs will be paid by assessments on parcels within the Assessment District. No Revenues of the District's Water System or Wastewater System are pledged for repayment of this loan and the proposed assessment for the construction costs do not constitute Water System Revenues. THE WATER SYSTEM OF THE DISTRICT The Water System 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 approximately 36 million gallons per day ( "mgd "). The District's average daily production of water during the Fiscal Years 2006 through 2010 has varied from 19.5 mgd to 24.3 mgd. The water is of high quality and generally does not require treatment. The District also has a surface water treatment plant with a capacity of 4 mgd which will be expanded to 8 mgd (see — "Future Water System Improvements" below). The District takes delivery of flow from the Santa Ana River surface water rights to portions of the flows in the Santa Ana River 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 water 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 Water Project through the San Bernardino Valley Municipal Water District ( "SBVMWD "). During wet years, when 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 water can easily percolate into the Basin and be stored for future use. The amount of groundwater and purchased water varies from year to year based on 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 Basin is estimated to have a total storage capacity of approximately 5,000,000 acre -feet at an average depth of 1,000 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 to serve its customers. The District is not required to obtain a permit for groundwater production. Total maximum daily pumping from the Basin is approximately 29 mgd gallons and is currently sufficient to supply 85% of water demand within the District. 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 sc.rface 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. -14- DOCSOC/ 1433300v4/022497-001 1 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 reatinent 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 battled 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 bome 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 thi, 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 anv 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 v aHety 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 contractually obligated for the benefit of owners of certain of its outstanding obligations, to file certain annual reports, notices of certain material events as defined under Rule 15c2 -12 of the 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 Market Access System for municipal securities disclosures, maintained on the Internet at http: / /emma.msrb.,3rg, . SBVMWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE DISTRICT, THE TRUSTEE OR THE OWNERS OF THE CERTIFICATES TO PROVIDE DISCLOSURE F',]FORMATION TO THE DISTRICT, THE TRUSTEE OR THE OWNERS OF THE CERTIFICATES. SWP reliability has been negatively affected due to the State's inability 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 maximum delivery capability for the SWP is somewhat less than 3.5 million acre -feet. ht most years this amount cannot be delivered due to infrastructure limitations and environmental restrictions. -15- DOC SOC/ 1433300v4/022497 -001 I The Depariment of Water Resources ( "DWR ") faces various challenges in the continued supply of SWP water to the District. A description of these challenges as well as a variety 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 contractually obligated for the benefit of owners of certain of their outstanding obligations, to file certain annual reports, 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, THE TRUSTEE OR THE OWNERS OF THE CERTIFICATES TO PROVIDE SWP INFORMATION TO THE 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 CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO DWR, THE SWP OR SBVMWD. NONE OF DWR OR SBVMWD 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 approximately 28.6 million gallons of water. The District has approximately 21,654 billed water connections as of the date hereof. Water Quality. The District's water meets all current requirements of the Safe Drinking Water Law and the regulations of the California Department of Health and Services (the "Health Department "). Water supplied by the District meets all state and federal standards for safe, potable 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. 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/ Year Surface Water (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) 3473 (77.6) 21,382 20 10") 21,792 (7.2) 0 (100.0) 19,803 ttt Reflects unaudited actual Fiscal Year 2010 results. tzt 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. -16- DOCSOC/ 1433300v4/022497 -001 1 The following table shows a history of billed water connections of the District for the five most recent Fiscal Years: EAST VALLEY WATER DISTRICI Number of Billed Water Connections" Fiscal Year Connections 2010") l A51 2009 21.806 2008 ::1.826 2007 11.899 2006 21.698 "1 Includes connections for both residential and commercial customers. tZl Reflects unaudited actual Fiscal Year 2010 results. Source: District. The following table shows historic sales revenues of the Water System of the District for the five most recent Fiscal Years: EAST VALLEY WATER DISTRICT Actual Sales Revenues0l Fiscal Residential and % Increase/ Year Commercial (Decrease) 201 0121 $14,853,424 (0.12)% 2009 14,870,655 10.61 2008 13,444,479 2.59 2007 13,105,269 11.00 2006 11,807,046 8.77 11 Includes water revenues for both residential and commercial customers. 121 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 protected by the District. EAST VALLEY WATER DISTRICT Projected Water Production Fiscal % Increase/ % Increase/ Year Groundwater (Decrease) SBV2MJ7D (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 -17- DOCSOC/ 1433300v4/022497 -001 1 The following table shows the projected water accounts for the current and next four Fiscal Years as projected by the District. EAST VALLEY WATER DISTRICT Projected Water Connections(') Fiscal Residential and %Increase/ Year Commercial (Decrease) 2011 22,985 0.08% 2012 23,005 0.08 2013 23,025 0.08 2014 23,045 0.08 2015 23,065 0.08 Source: District. 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 -- 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. DOC SOC/ 1433300v4/022497 -0011 Largest Customers The following table sets forth the ten largest customers of the \0'ater 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 Farms(l) Highland Palms Homeowners TOP TEN TOTAL_ TOTAL SYSTEM 0) Mutual water company being taken over by the District. (11 Sales to customers. Source: District. Revenue % of Totap, $ 35:.2`6 3.00% 301280 2.58 185.03 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. MW') These ten customers accounted for approximately 12.02% of total Water System 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 Board has rate setting authority as provided under the Act. The District is not subject to the jurisdiction of, or regulation by, the California Public Utilities Commission. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES" for certain limitations of the rate setting authority of the District Board. The District annually determines the adequacy of the Water System rate structure after full consideration of expected operations, maintenance and capital costs. Water rates are currently $1.20 per 100 cubic feet (which will increase to $1.49 per 100 cubic feet effective October 1, 2010) plus a minimum monthly charge that varies with the size of the metered services as described below. Historically, the District has increased certain water rates. The historic increases in water rates are lured below. -19- DOCSOC/ 1433300v4/022497 -001 1 EAST VALLEY WATER DISTRICT Water Rate History 2005 -2010 "' Effective October 1, 2010 through September 30, 2011. 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 RatesM Agency Elsinore Valley Municipal Water District Western Municipal Water District City of Riverside Cucamonga Valley Water district East Valley Water District (future)(') Loma Linda East Valley Water District (current) Yucaipa Valley Water District West Valley Water District City of Redlands SB Municipal Water District Average t�) As of June 2010. a) Based on 3/4" meter and 26 hcf volume monthly usage (') Based on new rates which will take effect on October 1, 2010. Source: District. Monthly RateM $101.36 68.61 54.24 51.27 50.28 47.71 45.55 45.11 43.52 43.34 40.30 $53.75 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. -20- DOCSOC/ l 433300v4/022497 -0011 Per Rifling Unit Year Rate '/1, )„ l/» 2„ 3„ 4„ 6„ g,. 2005 $1.01 $7.50 $14.00 $29.50 $42.50 574.50 124.00 $241.00 $362.00 2006 1.08 7.50 14.00 29.50 42.50 74.50 124.00 241.00 362.00 2007 1.20 8.40 15.70 33.00 47.60 83.50 124.00 241.00 362.00 2008 1.35 10.45 14.63 18.81 30.30 114.94 146.29 219.44 303.04 2009 1.35 10.45 14.63 18.81 30.30 114.94 146.29 219.44 303.04 2010") 1.49 11.54 17.56 32.49 74.47 137.40 227.30 452.06 721.76 "' Effective October 1, 2010 through September 30, 2011. 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 RatesM Agency Elsinore Valley Municipal Water District Western Municipal Water District City of Riverside Cucamonga Valley Water district East Valley Water District (future)(') Loma Linda East Valley Water District (current) Yucaipa Valley Water District West Valley Water District City of Redlands SB Municipal Water District Average t�) As of June 2010. a) Based on 3/4" meter and 26 hcf volume monthly usage (') Based on new rates which will take effect on October 1, 2010. Source: District. Monthly RateM $101.36 68.61 54.24 51.27 50.28 47.71 45.55 45.11 43.52 43.34 40.30 $53.75 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. -20- DOCSOC/ l 433300v4/022497 -0011 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 cos: of $19.9 million, as a key facility in treating water from lower zone wells, pumping water to higher elevations a here demand is expected to exceed supply, and possibly to take treated xkater 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, Wildotmar and San Andrea< 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. Financial Statements. Copies of the most recent audited financial statements of the District prepared by Rogers, Anderson, Malody & Scott, LLP, San Bernardino, California (the "Auditor ") are attached as Appendix A hereto (the "Financial Statements "). The Auditor's letter concludes that the Financial Statements present fairly, in all material respects. the financial position of the District as of June 30, 2009 and 2008, and the results of its operations, changes in net assets and its cash flows for the 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 Office and State regulations governing special districts. Historic Water System Operating Results and Debt Service Coverage The following table is a summary of operating results of the Water System of the District for the last five Fiscal Years. These results have been derived from the financial statements of the District but exclude certain non -cash items and include certain other adjustments. The table has not been audited by the Auditor. -21- DOC SOC/ 1433300v4/022497 -0011 EAST VALLEY WATER DISTRICT Historic Water System Operating Results & Debt Service Coverage(') Fiscal Year Ending June 30 o) Reflects audited Financial Statements of the District for all Fiscal Years except Fiscal Year 2010, which reflects unaudited actual Fiscal Year 2010 results. 01 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 Water System 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. -22- DOCSOC/1433300v4/022497 -0011 1006 2007 2008 2009 2010 OPERATING REVENUES: Water department $ 12,378,436 $ 13,827,142 $ 14,584,5210) $ 15,720,165(2) $ 15,239,784 OPERATING EXPE14SES: Water department 9.066,049 9.450.039 10.071,445 11.714.659 11.918,537 OPERATING INCOME: $ 3,312,387 $ 4,377,103 $ 4,513,076 $ 4,005,496 $ 3,321,247 NON - OPERATING REVENUES: Interest Income $ 208,893 $ 323,256 $ 316,792 $ 157,610 $ 27,905 Capacity Charges 467,687 516,619 1,102,289 309,704 59,868 Miscellaneous 14.144 106.269 25.093 183.226 Total Non - Operating Revenues $ 690,724 $ 946,144 $ 1,444,174 $ 467,314 $ 270,999 Net Revenues Available $ 4,003,111 $ 5,323,247 $ 5,957,250 $ 4,472,820 $ 3,592,246 DEBT SER V ICE: 1996 Installment Purchase Agreement $ 867,985 $ 870,605 $ 617,455 $ 623,447 $ 631,605 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 -- 476.024 476,024 476.024 476.024 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 $ 944,215 Debt Service COVERAGE 1.66 1.84 2.26 1.69 1.36 o) Reflects audited Financial Statements of the District for all Fiscal Years except Fiscal Year 2010, which reflects unaudited actual Fiscal Year 2010 results. 01 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 Water System 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. -22- DOCSOC/1433300v4/022497 -0011 Projet OPERATING REVENUES. Water department('( OPERATING EXPENSES: Water department (2) FAST VALLEY WATER DISTRICT aed Water System Operating Results & Di Fiscal Year Ending June 30 201101 201211' $ 16,095,000 $ 16,454,808 12,698,09 12.876 202 bt Service Coverage 1(11312' 2014'1) 101511) J F' 666.440 $ 19,273,555 $ 19,855,616 1 3.620.643 14,135.379 14,665,822 OPERATING INCOME: S 3,396,910 $ 3,578,606 S. 4045.797 S 5,138,176 $ 5,189,794 NON - OPERATING REVENUES: Share of 2004 Installment Sale Agreement S 85,651 $ -- S -- $ -- Miscellaneous 167.000 408,810 _ 410,774 412,751 415,779 Total Non - Operating Revenues $ 252,651 $ 408,810 S 410.774 $ 412,751 $ 415,779 Net Revenues Available S 3,649,561 $ 3,987,416 S IA56 571 DEBT SERVICE: 2001 Installment Purchase Agreement $ 920,318 -- 2004 Installment Sale Agreement 381,774 -- -- 2006 Installment Sale Agreement 238,012 -- 2010 Installment Purchase Agreement(') 276,092 -- -- Plant 134 SRF Loan (4) -- -- -' Plant I50 SRF Loan(s) -- -- -- Total Debt Service $ 1,816,195 $ 2,109,775 S 7,h15.775 Net Revenues Available after $ 1,833,365 $ 1,877,641 $ !,840,796 Debt Service COVERAGE 2.01 1.89 1.70 $ 5,550,927 $ 5,605,573 2,638,275 2,622,875 266,000 266,000 $ 2,904,275 $ 2,888,875 $ 2,646,652 $ 2,716,698 1.91 1.94 (1) From adopted Fiscal Year 2011 Budget. 121 Based on Exhibit 1 in Appendix A of Comprehensive Water and Sewer Rate Stud% dated June 1, 2010. (sl Preliminary, subject to change and market conditions based on A+ California Re, enue Utility Scale as of July 8, 2010, with $15 million Project Fund, refinancing of 2001 COPS, capitalized interest funded through October 1, 2011 and principal payments commencing October 1, 2012. ( ^1 Based on proposed annual payments for Plant 134 SRF Loan. (s) Based on proposed annual payments for Plant 150 SRF Loan. Source: District. THE WASTEWATER SYSTEM OF THE DISTRICT The following is a description of the Wastewater System of the District. Approximately %a f the Installment Payments are attributable to the Wastewater System, the District expects to pay _% of the Installment Payments from Net Water System Revenues and does not anticipate that Net Wastewater System Revenues will serve as a significant source of moneys used to pay Installment Payments beyond the allocated percentage described in the preceding sentence. The Wastewater System General. The District's Wastewater System consists of approximately 208 miles of sewer mains. The District has no sewer treatment facilities. Instead, the District's WastCVvater System is served by a network of gravity mains, sewer lift stations and force mains that collect raw sewage and deliver it to main lines leading to a Wastewater treatment plant (the "City Treatment Plant ") operated by the City of San Bernardino (the "City "). Wastewater collected by the District is treated at the City Treatment Plant pursuant to the agreement described below under the caption " —JPA Agreement." -23- DOC SOC/ 1433300v4/022497 -001 1 The Treatment Plant has a capacity of mgd and is operated pursuant to the terms of a National Pollutant Discharge Elimination System ( "NPDES ") permit issued by the State Department of Environmental Protection, Santa Ana Regional Water Quality Control Board (the "Regional Board "). The Regional Board administers NPDES regulations promulgated by the United States Environmental Protection Agency and Division 7 of the State Water Code and regulations thereunder. The City's present NPDES permit for the City Treatment Plant, Waste Discharge Order No. , NPDES Permit No. , became effective in and expires in _ —. The District expects the NPDES permit to be renewed in _. However, there can be no assurance that the NPDES permit will be renewed on similar terms. Wastewater System Revenues consist of system charges and treatment charges. The Wastewater System Revenues collected by the District attributable to wastewater treatment are generally largely offset by payments made by the District to the City for treating wastewater produced by the District's customers. The District's practice has been to cause any changes in the City's wastewater treatment rates to the District to be mimicked by the District's rates charged to customers, although the timing and amount of rate changes by the two entities may vary. The District is required to comply with the notice, hearing and majority protest provisions of Article XIIID of the State Constitution in raising Wastewater System rates and charges and there can be no assurance that the District will be able to raise Wastewater System rates and charges in the future to cover future increases in wastewater treatment costs charged to the District by the City. See the captions "- Wastewater System Rates and Charges" and "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES -- Proposition 218." JPA Agreement. In January 1958, the District, the City of San Bernardino, and the City of Loma Linda entered into a Joint Powers Agreement (the "JPA Agreement ") for the operation and expansion of the City Treatment Plant, which is located in the City of San Bernardino and operated by the City of San Bernardino Water :Department. Under the JPA Agreement, the City is responsible for setting wastewater treatment rates sufficient to operate and maintain the City Treatment Plant and the District agrees to adopt specified rates and collection fees charged to District customers in amounts that are sufficient to discharge District obligations to the City under the JPA Agreement. District payments to the City under the JPA Agreement are made on a monthly basis and constitute Operation and Maintenance Costs of the Wastewater System. Service Area The District's Wastewater System provides sewer system services to the City of Highland, portions of the City of San Bernardino and unincorporated portions of the County of San Bernardino. The District currently provides sewer service to approximately 12,397 residential, commercial and industrial connections within the City of Highland, 6,728 connections within the City of San Bernardino and 208 connections within the County of San Bernardino. Historic Wastewater System Connections The foilow:.ng table shows the number of connections to the Wastewater System for Fiscal Years 2006 through 2010. -24- DOCSOC/1433300v4/022497 -0011 EAST VALLEY WATER DISTRICT Historic Wastewater System Connections Fiscal Year Ending June 30 Residential Commercial 7atal Increase /(Decrease) 2006 18,005 1,160 19,165 -- % 2007 18.085 1,160 ' 9,245 0.42 2008 17,956 1,159 19.115 (0.68) 2009 17,986 1,146 .9,132 1.33 2010 18,203 1,130 9,333 1.05 Source: The District Historic Wastewater System Usage The following table shows the District's share of the volume of v astewater treated by the District for Fiscal Years 2006 through 2010. EAST VALLEY WATER DISTRICT Historic Wastewater System Usage Fiscal Year Ending June 30 Daily Average Flow (mgd) Increase /(Decrease) 2006 7.96 -- % 2007 7.98 0.25 2008 8.00 0.25 2009 7.94 (0.75) 2010 7.85 (1.13) Source: The District Wastewater System usage is affected by a number of factors; including but not limited to the number of connections to the Wastewater System and water usage of customers connected to the Wastewater System. Historic Wastewater System Service Charge Revenues The following table shows service charge revenues of the Wastewater System for Fiscal Years 2006 through 2010. EAST VALLEY WATER DISTRICT Historic VN astewater System Service Charge Revenues Fiscal Year System Charge Increase/ Ended June 30 Revenues (Decrease) 2006 $7,743,654 -- % 2007 8,150,687 5.26 2008 8,614,177 5.69 2009 9,058,679 5.16 2010 9,174,300 1.28 n/ Increases reflect rate increases effective during Fiscal Years 2006 and 2007. a) Decrease reflects the impact of mandatory conservation measures. Source: The District. -25- DOCSOC/ 1433300x4/022497 -001 1 Wastewater System service revenues are affected by a number of factors, including the number of connections to the Wastewater System and Wastewater System rates and charges. See the captions "- Historic Wastewater System Connections" and "— Wastewater System Rates and Charges." Largest Wastewater System Customers The following table shows the largest customers of the Wastewater System as of the Fiscal Year ending June 30, 2010, as determined by annual payments. EAST VALLEY WATER DISTRICT Largest Wastewater System Customers Customer Revenue % of Total San Manuel Band cf Mission Indians $ 317,596 3.46% San Manuel Indian Bingo Casino 183,228 1.99 San Bernardino Courity Unified School District 152,616 1.66 Valencia Lea Mobilehome Park 69,483 0.76 CS Aventerra LP 55,955 0.61 Victoria Village Apartments 53,328 0.58 Highland Palms Homeowners Association 52,812 0.57 Village Lakes Homeowners Association 49,589 0.53 Sunset Ridge Apartments 45,820 0.49 Park Heights Apartnents California LLC 41,788 0.45 Total 11,U2,125 11.13% TOTAL SYSTEM Source: The District. $ 9,187,277 These customers accounted for approximately 11.13% of Wastewater System Revenues and 4.18% of total Revenues in Fiscal Year 2010. See the caption "THE WATER SYSTEM OF THE DISTRICT — Largest Water System Customers" for information with respect to the largest Water System customers of the District. Wastewater System Rates and Charges General. The District is not subject to the jurisdiction of, or regulation by, the California Public Utilities Commission. The District annually determines the adequacy of the Wastewater System rate structure after full consideration of expected operations, maintenance and capital costs. Any increases in Wastewater System service charges are subject to a notice, public hearing and protest process as described under the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES — Proposition 218." The District's Wastewater System is connected to main lines leading to the treatment plant operated by the City. In 1980, for treatment of the District's sewage, the District paid the City an amount equal to 92% of the City's established sewer rate. In 1981, the JPA Agreement was amended. Under the amended JPA Agreement, the City and District agreed to adopt a uniform regional sewer rate. The District is subject to certain covenants with respect to the Bonds which require that, to the fullest extent permitted by law, the District will fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Wastewater Service provided by the Wastewater System which will be at least sufficient to yield during each Fiscal Year Net Wastewater System Revenues equal to 120% of Debt Service for such Fiscal Year allocable to the Wastewater System. See the caption "SECURITY FOR THE BONDS —Rate Covenant." -26- DOC SOC/ 1433300v4/022497 -0011 Wastewater Charges. The current schedule of Wastewater System rates for users of the District's Wastewater System, described below effective October 1, 2010, is set forth below: WASTEWATER CHARGES Residential Area Serriee Rate/Month West of Boulder Avenue East of Boulder Avenue $ 28.93 30.93 The chart below sets forth a comparison of the District's cunem monthly rates and charges for the Wastewater System for a single family residential user to those of nearby communities: Community City of Riverside City of Colton Yucaipa Valley Water District District City of San Bernardino City of Redlands City of Banning Source: District. Monthly Residential Rate $20.55 43.00 30.48 26.09 20.00 19.88 14.86 Residential wastewater customer pay a monthly service charge consisting of a treatment charge and a system charge. Commercial customer are billed a basic flat charge and a volume charge per hundred cubic feet of metered water, depending on the type of business. On July 15, 2010, after the public hearing required under Proposition 218, the Board approved Wastewater System rate increases for Fiscal Years 2011 through 2013. The Rate Plan includes a 10% increase in monthly service charges for residential customers effective October 1. 2010 through September 30, 2011, a 4% increase in monthly service charges for residential customers effective October 1, 2011 through September 30, 2012 and a 4% increase in monthly service charges for residential customers effective October 1, 2012. The Rate Plan remains in place as of the date hereon. There is no assurance that the Board will not repeal or modify such rate increases in the future or that the District's ratepayers will not approve an initiative to repeal or modify any increase in wastewater service rates and charges approved by the Board. -27- DOC SOC/ 1433300v4/022497 -001 1 SELECTED WASTEWATER SYSTEM RATES EAST VALLEY WATER DISTRICT Commercial Wastewater System Volume Charges['] Current Customer Type Charges Multi Family (4 or more units) $1.41 Commercial Retail 2.36 Restaurants/Lounges 2.46 Laundromats 1.76 Dry Cleaners 2.36 Schools /Churches 1.16 Offices/Motels 1.96 Convalescent Homes 1.41 Hotels 2.46 Auto Repair /Service Stations 1.76 Commercial customers pay a fixed charge of $5.28 per month in addition to the monthly volume charge. Source: The District. Wastewater System Collection Procedures Billings for wastewater services provided are collected on a monthly basis. Write -offs for monthly wastewater service occur once a year. In June 2009, write -offs were approximately $1,200 while in June 2010, write -offs were approximately $3,200. Future Wastewater System Improvements The District is currently inspecting and assessing all 208 miles of its wastewater collection lines in accordance with California State Water Resources Control Board order no. 2006 -0003. Once the pipelines have been assessed, those lines that are at the most risk of sewer spills or seepage that can contaminate surface or ground waters will need to be repaired and replaced. Preliminary estimates of the costs to repair or replace, in the next five to ten years, those mains that are found to be cracked or undersized range from $7 to $17 million. The District anticipates financing these costs through Wastewater System operating revenues and reserves. See the caption "— Projected Wastewater System Operating Results and Debt Service Coverage" -28- DOC SOC/ 1433300v4/022497 -0011 Projected Wastewater System Connections The following table shows the number of connections to the Wastewater System projected by the District for Fiscal Year 2011 and the next four Fiscal Years. Source: The District. Projected Wastewater System Usage The District currently estimates that Wastewater System usage for Fiscal Year 2010 and the next four Fiscal Years will be as follows: EAST VALLEY WATER DISTRICT Projected Wastewater System Usage Fiscal Year Ending June 30 Daily Average Flom, (mgd) Increase/(Decrease) 2011 7.85 % 2012 7.94 I.1 2013 8.01 0.9 2014 8.02 0.1 2015 8.04 0.2 Source: The District. Wastewater System usage will be affected by a number of factors, including connections to the Wastewater System and water usage by Wastewater System customers. See the caption "— Projected Wastewater System Connections" above. -29- DOCSOC/ 1433 300v4/022497 -0011 EAST VALLEY WATER DISTRICT Projected Wastewater System Connections Fiscal Year Ending June 30 Residential Commercial Total Increase/(Decrease) 2011 18,215 1,133 19,351 0.09% 2012 18.232 1,137 19,369 0.09 2013 18,247 1,142 19,389 0.10 2014 18,262 1,148 19,410 0.11 2015 18,277 1,155 19A,2 0.11 Source: The District. Projected Wastewater System Usage The District currently estimates that Wastewater System usage for Fiscal Year 2010 and the next four Fiscal Years will be as follows: EAST VALLEY WATER DISTRICT Projected Wastewater System Usage Fiscal Year Ending June 30 Daily Average Flom, (mgd) Increase/(Decrease) 2011 7.85 % 2012 7.94 I.1 2013 8.01 0.9 2014 8.02 0.1 2015 8.04 0.2 Source: The District. Wastewater System usage will be affected by a number of factors, including connections to the Wastewater System and water usage by Wastewater System customers. See the caption "— Projected Wastewater System Connections" above. -29- DOCSOC/ 1433 300v4/022497 -0011 Projected Wastewater System Service Charge Revenues The following table shows service charge revenues of the Wastewater System projected by the District for Fiscal Year 201.1 and the next four Fiscal Years. The projected wastewater service charge revenues reflect rate increases approved by the Board on July 15, 2010. See the caption "— Wastewater System Rates and Charges" EAST VALLEY WATER DISTRICT Projected Wastewater System Service Charge Revenues Fiscal Year Ending June 30 2011 2012 2.013 2.014 2.015 Source. The District. Service Charge Revenues $ 9,567,100 9,625,702 10,151,552 11,058,266 11,286,325 Historic Wastewater System Operating Results and Debt Service Coverage Increase /(Decrease) 4.13% 0.06 5.46 8.20 2.06 The following table is a summary of operating results of the Wastewater System of the District for Fiscal Years 2006 through 2010. These results have been derived from the District's financial statements, but exclude certain receipts which are not included as Revenues under the Installment Purchase Agreement and certain non -cash items and include certain other adjustments. EAST VALLEY WATER DISTRICT Historic Wastewater System Operating Results & Debt Service Coverage(i) Fiscal Year Ending June 30 OPERATING REVENUESI2t Total Operating Revenues OPERATION AND MAINTENANCE COSTS(" Total Operation ant Maintenance Costs NET OPERATING REVENUES NON OPERATING REVENUES Share of 2004 Installment Sale Agreement Miscellaneous Total Non Operating Revenues NET REVENUES FOR DEBT SERVICE DEBT SERVICE Total Debt Service NET REVENUES 2006 1007 1008 2009 2010 $ 7,743,654 $ 8,150,687 $ 8,614,177 $ 9,058,679 $ 9,187,277 S 7,321,782 $ 7,483,935 $ 7,602,992 $ 8,012,747 $ 8,761,234 $ 421,872 $ 666,752 $ 1,011,185 $ 1,045,932 S 426,043 262.956 830.980 236.678 140.923 34,343 262,956 830,980 236,678 140,923 34,343 $ 684,828 $ 1,497,732 S 1,247,863 $ 1,186,855 $ 460,386 $ 684,828 $ 1,497,732 $ 1,247,863 $ 1,186,855 $ 460,386 NET REVENUES AVAILABLE FOR OTHER $ 684,828 $ 1,497,732 $ 1,247,863 $ 1,186,855 $ 460,386 PURPOSES nl Reflects audited Financial Statements of the District for all Fiscal Years except Fiscal Year 2010, which reflects unaudited actual Fiscal Year 2010 results. t't Includes gain on disposal of assets, miscellaneous revenues, capacity charges and other contributions. (') Operation and Maintenance costs do not include depreciation and amortization. Source: District. -30- DOCSOC/1433300v4/022497 -0011 Projected Wastewater System Operating Results and Debt Service Col erage The District's estimated projected operating results for the Wa�tel+'ater System for Fiscal Years 2011 through 2015 are set forth below, reflecting certain significant assumptions concerning future events and circumstances. The financial forecast represents the District's estimate of projected financial results based upon a variety of assumptions, including the assumptions set forth in the footnotes to the chart set forth below. All of such assumptions are material in the development of the District's financial projections, and variations in the assumptions may produce substantially different financial results. Actual operating results achieved during the projection period may vary from those presented in the forecast and such variations may be material. EAST VALLEY WATER DISTRICT Projected Wastewater System Operating Results & Debt Service Coverage Fiscal Year Ending June 30 201111, 20120' 1013 '' 2014121 2015'2) OPERATING REVENUES Total Operating Revenues S 9,567,100 $ 9,625,702 S 10.151.552 $ 11,058,266 S 11,286,325 OPERATION AND MAINTENANCE COSTS Total Operations and Maintenance Costs S 9,004,346 S 9,057,300 S 6.121.300 S 9,186,700 S 9,253,700 NET OPERATING REVENUES S 562,754 $ 568,402 S 1130.252 S 1,871,566 $ 1,032,625 NON - OPERATING REVENUES Share of 2004 Installment Sale Agreement $ -- $ -- S' — $ -- S -- Miscellaneous 15,000 223,543 _ _ 224A74 225,412 227.017 Total Non - operating Revenues S 15,000 $ 223,543 $ 124.474 $ 225,412 $ 227,017 NET REVENUES FOR DEBT SERVICE S 577,754 S 791,945 S 1.254,726 $ 2,096,978 $ 2,259,642 DEBT SERVICE 2010 Installment Purchase Agreement(" S 11.367 S 200900 S_ _2Q900 S 271,200 S 212.325 TOTAL DEBT SERVICE S 11,367 S 200,900 S 200,900 S 271,200 $ 212,325 NET REVENUES AVAILABLE FOR OTHER PURPOSES S 566,38 � $,— L05.3.K6 1.879.77 $ 2.047.317 DEBT SERVICE COVERAGE 50.83 3.94 6.25 9.65 10.65 111 Based on adopted budget for Fiscal Year 2011 (2) Operating Revenues, Operations and Maintenance Costs and Non - Operating Re, -eoues based on Exhibit I in Appendix A of Comprehensive Water and Sewer Rate Study dated June I, 2010. (?) Preliminary, subject to change based on pm ate placement financing over fi\ e veats a- 2.95%. Source: District. FINANCIAL INFORMATION OF THE DISTRICT Historic Operating Results and Debt Service Coverage The following table is a summary of operating results of the District for Fiscal Years 2006 through 2010. These results have been derived from the District's financial statements but exclude certain receipts which are not included as Revenues under the Installment Purchase Agreement and certain non -cash items and include certain other adjustments. -31- DOC SOC/ 1433300v4/022497 -001 1 OPERATING REVENUES: Total Water Operating Results Total Sewer Operating Results Total Operating Revenues OPERATION AND MAINTENANCE COSTS: Total Water Operation and Maintenance Costs Total Sewer Operation and Ma ntenance Costs Total Operation and Maintenance Costs NET OPERATING REVENUES: NON OPERATING REVENUES: Water Miscellaneous Sewer Miscellaneous Total Non Operating Revenues NET REVENUES FOR DEBT SERVICE: DEBT SERVICE: 1996 Installment Purchase Agreement 2001 Installment Purchase P.greement 2004 Installment Sale Agreement 2006 Installment Sale Agreement Total Debt Service EAST VALLEY WATER DISTRICT Historic Operating Results Fiscal Year Ending June 30(') 2006 2007 2008 2009 2010 S 12,378,436 $ 13,827,142 $ 14,584,521 S 15,720,165 $ 15,239,784 7.743,654 8.150,687 8.614,177 9,058,679 9.187,2 77 $ 20,122,090 $ 21,977,829 S 23,198,698 S 24,778,844 S 24,427,061 S 9,066,049 $ 9,450,039 S 10,071,445 $ 11,714,659 $ 11,918,537 7.321,782 7,483,935 7,602,992 8.012 747 8.761.234 $ 16,387,831 S 16,933,974 S 17,674,437 S 19,727,406 $ 20,679,771 $ 3,734,259 $ 5,043,855 $ 5,524,261 S 5,051,438 $ 3,747,290 $ 690,724 $ 946,144 $ 1,444,174 S 467,314 $ 270,999 262.956 830.980 236.678 140.923 34.343 $ 953,680 $ 1,777,124 $ 1,680,852 $ 608,237 $ 305,342 S 4,687,939 $ 6,820,979 S 7,205,113 $ 5,659,675 $ 4,052,632 S 867,985 $ 870,605 $ 617,455 $ 623,447 $ 631,605 1,038,979 1,036,460 1,037,773 1,037,810 1,036,573 503,829 503,829 503,829 503,829 503,829 -- 476,024 476,024 476.024 476,024 $ 2,410,793 $ 2,886,918 $ 2,635,081 $ 2,641,110 $ 2,648,031 NET REVENUES AVAILABLE AFTER DEBT SERVICE: $ 2,277,146 $ 3,934,061 $ 4,570,032 $ 3,018,565 $ 1,404,601 DEBT SERVICE COVERAGE: 1.94 2.36 2.73 2.14 1.53 Reflects audited Financial Statement of the District for all Fiscal Years except Fiscal Year 2010, which reflects unaudited actual Fiscal Year 2010 results. Source: The District. -32- DOC SOC/ 1433300v4/022497 -0011 Projected Operating Results and Debt Service Coverage The estimated projected operating results for the District for Fiscal Years 2011 through 2015, reflecting certain significant assumptions concerning future events and circumstances, are set forth below. The financial forecast represents the District's estimate of projected financial results based on a variety of assumptions, including the assumptions set forth in the footnotes to the chart set forth below. All of such assumptions are material in the development of the District's financial projections, and variations in the assumptions may produce substantially different financial results. Actual operating results achieved during the projection period may vary from those presented in the forecast and such %ariauons may be material. EAST VALLEY WATER DISTRICT' Projected Operating Results Fiscal Year Ending June 30 OPERATING REVENUES: Total Water Operating Results Total Sewer Operating Results Total Operating Revenues OPERATION AND MAINTENANCE COSTS: Total Wate Operation and Maintenance Costs Total Sewer Operation and Maintenance Costs Total Operation and Maintenance Costs NET OPERATING REVENUES NON OPERATING REVENUES: Water Miscellaneous Sewer Miscellaneous Total Non Operating Revenues NET REVENUES FOR DEBT SERVICE: DEBT SERVICE: 2001 htstallment Purchase Agreement 2004 Installment Sale Agreement 2006 Installment Sale Agreement 2010 Installment Purchase AgreementO1 Plant 134 SRF Loan (4) Plant 150 SRF Loan�r� Total Debt Service NET REVENUES AVAILABLE AFTER DEBT SERVICE: 20111.. 201111 :07 -7 201401 20151.. S 16,095,000 S 16,454,808 b 17,665,440 S 19,273,555 $ 19,855,616 9,567,100 9 625.702 10.1.`1 852 11,058266 11.286 325 S 25,662,100 $ 26,080,510 S -T6 7,992 $ 30331,821 S 31,141,941 S 12,698,090 S 12,876,202 S 13 620,643 S 14,135,379 S 14,665,822 9,004,34 9,057300 9-123,10 121y00 9 186 700 9.253.700 S 21.702,436 S 21,933,502 S :2,-,4L943 $ 23,322,079 $ 23,919,522 S 3,959,664 S 4,147,008 $ 5.17 %6.049 $ 7,009,742 $ 7,222,419 $ 15,000 $ 223,543 $ 224,474 $ 225,412 S 227,017 167 000 408.810 _410.774 412.751 415,779 S 182,000 S 632,353 S 6'5248 S 638,163 $ 642,796 S 4,141,664 S 4,779,361 S 5'11.297 S 7,647,905 $ 7,865,215 S 920,318 $ 381,774 238,012 - 287459 2,310,675 $ 1,827,563 S 2,310.675 S 2,314,101 S 2468,686 S - S - S 2.88.225 2,828,100 2,849,675 266,000 266,000 S 2.1:8225 S 3,094,100 S 3,115,675 5 2,173,072 S 4,553,805 $ 4,749,540 DEBT SERVICE COVERAGE: 2.27 2.07 2 01 2.47 2.52 0) Based on adopted budget for 20 10-1 1. (2) Operating Revenues, Operation and Maintenance Costs and Non Operating Revenues based on Exhibit 1 and in Appendix A of Comprehensive Water and Sewer Rate Study dated June 1, 2010. (3) Preliminary, subject to change and market conditions based on A+ California Revenuz Culiry Scale as of July 8, 2010, with $15 million Project Fund, refinancing of the 2001 COPa, capitalized interest funded through Octohr 1. 2011 and principal payments commencing October 1, 2012. 141 Based cn proposed annual payments for Plant 134 SRF Loan. ") Based on proposed annual payments fa Plant 150 SRF loan. Source: The District. -33- DOC SOC/ 1433300v4/022497 -0011 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 State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and population. The "base year" for establishing such appropriation limit is the 1978 -1979 State fiscal year and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of an entity may also be made if: (a) the financial responsibility for a service is transferred to another public entity or to a private entity; (b) the financial source for the provision of services is transferred from taxes to other revenues; or (c) the voters of the entity approve a change in the limit for a period of time not to exceed four years. Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions and refunds of taxes. "Proceeds of taxes " include, but are not limited to, all tax revenues and the proceeds to an entity of government from: (i) regulatory licenses, user charges, and user fees (but only to the extent 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 in 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 and Wastewater 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 X1111). 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 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 -34- DOC SOC/ 1433300v4/022497 -0011 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 X1111). 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 -'an is 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 consumption of the service, not property ownership. The Supreme Court stated in Bighorn- Desert View Water Agency v. Verjil, 39 Cal. 4th 205 (2006) (the "Bighorn Case "), however, that fees for ongoing water service through an existing connection were property- related fees and charges. The Supreme Court specifically disapproved the holding in Howard Janis Taxpayers Association v. Cm of Los Angeles that metered water rates are not subject to Proposition 218. The District has complied with the notice and public hearing requirements of Article XIIID in determining whether to change Water Stistem and Wastewater System rates and charges since 1996. Article XIIIC. Article XIIIC provides that the initiative power may not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect local taxes, assessments, fees and charges is applicable to all local governments. Article XIIIC does not define the terms "local tax," "assessment," "fee" or `charge," so it was unclear whether the definitions set forth in Article X11ID referred to above are applicable to Article XIIIC. Moreover, the provisions of Article XIIIC are not expressly limited to local taxes, assessments, fees and charges imposed after November 6, 1996. On July 24, 2006, the Supreme Court held in the Bighorn 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 initiative to reduce fees and charges could override statutory rate setting obligations. In any event, the District does not believe that Article X111C grants to the voters within the District the power to repeal or reduce rates and charges for the Water Service or Wastewater in a manner which would be inconsistent with the contractual obligations of the District. However, there 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 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) will be the sole registered owner of the Bonds and the rights and remedies of the Bond Owners will be exercised through the procedures of DTC. 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, fraudulent conveyance and other similar laws affecting creditors' rights, to the application of equitable principles if equitable remedies are sought, and to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State. The various opinions of counsel to be delivered with respect to such documents, including the opinion of Bond Counsel (the form of which is attached as Appendix C). will be similarly qualified. -35- DOC S OC/ 1433300v4/022497 -0011 Future Initiatives Articles XIIIB, XIIIC and XIIID were adopted as a measure that qualified for the ballot pursuant to California's initiative process. From time to time other initiatives could be proposed and adopted affecting the District's revenues or ability to increase revenues. THE AUTHORITY The Authority is 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 (the "JPA Agreement "), and under the Constitution and laws of 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 the 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 Authority is responsible for repayment of the obligations of the other. The members of the Board of Directors of the Authority are the members of the Board of Directors of the District. APPROVAL OF LEGAL PROCEEDINGS The legality and enforceability of the Indenture and certain other legal matters are subject to the approval of Bond Counsel. The form of such legal opinion is attached as Appendix C to this Official Statement. Certai:t 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. 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. -36- DOC SOC/ 1433300v4/022497 -0011 TAX EXEMPTION Bonds In the opinion of 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 an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and 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 of such corporations. The difference between the issue price of a Bond (the first price n 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 increase the Bond Owner's basis in the Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the grays income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State personal income tax. Bond 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 certifications made by the Authority and others and is subject to the condition that the Authority complies with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that interest rand original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Authority has covenanted to comply with all such requirements. The amount by which a Bond Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Bond Owner's basis in the applicable Bond (and the amount of tax - exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their ov n 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. 1, is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar municipal obligations). No assurance can be given that in the course of an audit. as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their market value. It is possible that subsequent to the issuance of the Bonds there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state or local law) that affect the federal, -37- DOC SOC/ 1433300v4/022497 -0011 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 will not occur. Bond Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture, the Installment Purchase Agreement and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel 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 taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth. Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the Authority continues to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix C. 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 by 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: / /emma.msrb.oig /. The specific nature of the information to be contained in the Annual Report and the notice of material events is set forth in Appendix F,— "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. -38- DOCSOC/ 1433300x4/022497 -001 1 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 September _ . 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 terns 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 Underwriters. The Underwriters may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer hanks, banks acting as agents and others at prices lower than said public offering prices. -39- DOC SOC/ 1433300v4/022497 -001 1 MISCELLANEOUS Insofar as any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of such statements made will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the Owners of the Bonds. The execution and delivery of this Official Statement have been duly authorized by the District. EAST VALLEY WATER DISTRICT FINANCING AUTHORITY 10 Executive Director EAST VALLEY WATER DISTRICT IN General Manager -40- DOCSOC / 1433300v4/022497 -0017 APPENDIX B DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE [TO COME] B -1 DOCSOC/ 1433300v4/022497 -001 I APPENDIX C FORM OF OPINION OF BOND COL NSEI. Upon issuance of the Bonds, S'tradling Yocca Carlson & Routh. a Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantiall} die (ollotving 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 Bond 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 Refunding Revenue Bonds, Series 2010 (the "Bonds "). The Bonds have been issued by the Authority pursuant to the terms of the Indenture of Trust, dated as of October 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') le the Authority pursuant to an Installment Purchase Agreement, dated as of October 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 io 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 A 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 _tem 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 suc h corporations. 4. Interest on the Bonds is exempt from State of California personal income tax. C -1 DOC SOC/ 1433 300v4/022497 -001 1 5. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of the same series and maturity is to be sold to the public) and the stated 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 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 increase the Bond Owner's basis in the Bond. In the opinion of Bond Counsel, 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 the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. 6. The amount by which a Bond Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Internal Revenue Code of 1986, as amended (the "Code "); such amortizable bond premium reduces the Bond Owner's basis in the applicable Bond (and the amount of tax - exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The opinions 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 Authority and others and are subject to the condition that the AiAhority complies with all requirements of the Code that must be satisfied subsequent to issuance of the Bonds to assure that interest on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Authority has covenanted to comply with all such requirements. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to the Bonds if any such action is taken or omitted based upon the opinion or advice of counsel other than ourselves. Other than expressly stated herein, we express no other opinion regarding tax consequences with respect to the Bonds. The opinions expressed herein are based upon our analysis and interpretation of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the rights and obligations under the Indenture and the Bonds are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and similar laws affecting creditors' rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State of California. Respectfully submitted, C -2 DOCSOC/ 1433300v4/022497 -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 be!;cre to be reliable, but neither the Authority, the District nor the Underwriters take any responsibility for th, completeness or accuracy thereof. The following description of the procedures and record keeping with r c p ct to beneficial ownership interests in the Bonds, payment ofprincipal, premium, if any, accreted value, it ani 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 Participant 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 narn: 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 Nett 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 : ompany 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.dtce.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 o' 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 a, 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 ,yitem 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. Dl C 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 DOC SOC/ 1433 3000/022497-0011 such Bonds are credited, which may or may not be the Beneficial Owners, The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant. to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and followed by a book -entry credit of tendered Bonds to the Trustee's DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The Authority may decide to discontinue use of the system of book -entry only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK -ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL. OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. D -2 DOCSOC/ 143330ov4/022497 -001 1 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 S -_ East Valley Water District Financing Authority Refunding Revenue Bonds, Series 2010 (the `Bonds ") Th B e onds are being issued pursuant to an Indenture of Trust, dated as of October 1, 2010 (the "Indenture "), by and among the East Valley Water District Financing Authority (the "Authority ") and Union Bank, N.A., as trustee ithe "Trustee ") and are secured by Installment Payments payable by the District to the Authority pursuant to an Installment Purchase Agreement, dated as of October 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 Repon 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. Participatine 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 tern "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 Reports. (a) The District shall provide not later than January i 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/ 1433300v4/022497 -001 1 which is consistent with the requirements of Section 4 of this Disclosure Certificate, which Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross- reference other information as provided in Section 4 of this 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 prescribed by the Municipal Securities Rulemaking Board. 4. Content of Annual Reports. The Annual Report shall contain 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 apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District's audited 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 statements shall be filed in the same manner 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 the 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 DISTRICT— 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 Water System Operating Results of Debt Service Coverage" on page — of the Official Statement. (e) An update of the information in the following tables under the caption entitled "THE WASTEWATER SYSTEM OF THE DISTRICT" in the Official Statement: (i) "EAST VALLEY WATER DISTRICT — Historic Wastewater System Connections" on page — of the Official Statement. (ii) "EAST VALLEY WATER DISTRICT— Historic System Service Charge Revenues" on page __ of the Official Statement. (iii) "EAST VALLEY WATER DISTRICT— Largest Wastewater System Customers" on page — of the Official Statement. (iv) "EAST VALLEY WATER DISTRICT— Historic Wastewater System Operating Results" on page — of the Official Statement. E -2 DOCSOC/1433300v4/022497 -0011 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 Board; 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 Di,tnct shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the B on. k. if material: 1. principal and interest payment delinquenci,: a. 2. non - payment related defaults. 3. unscheduled draws on the credit enhancements reflecting financial difficulties. 4. unscheduled draws on the debt service reserves reflecting financial difficulties. 5. substitution of the credit or liquidity proN tders 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 app. icable 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 o all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice c` 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. E -3 DOC SOC/ 1433300v4/022497 -001 I 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 tiny 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 °hey shall have first delivered to the District satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the District shall have refused to comply therewith within a reasonable lime. 11. Beneficiaries. This Disclosure Certificate shall inure solely to 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: E -4 DOC SOC/ I433300v4/022497 -001 1 General Manager INDENTURE OF TRUST Dated as of October 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 REFUNDING REVENUE BONDS SERIES 2010 DOCSOC/ 14335260, 022497 -0011 TABLE OF CONTENTS ARTICLE I DEFINITIONS: CONTENT OF CERTIFICATES AND OPINIONS Section 1.01. Definitions .......... ............................... Section 1.02. Content of Certificates and Opinions. Section 1.03. Interpretation ....... ............................... ARTICLE II THE BONDS f04% .................... ..............................3 ..................... ..............................9 ........................ .............................10 Section 2.01. Authorization of Bonds ............................................................ .............................10 .............................17 Section 2.02. Terms of the Bonds ................................................................. .............................11 .............................18 Section2.03. Transfer of Bonds .................................................................... .............................12 .............................18 Section2.04. Exchange of Bonds ............... ............................... .................. .............................12 .............................19 Section 2.05. Registration Books ................................................................... .............................12 .............................19 Section 2.06. Form and Execution of Bonds ............................. .................. .............................12 Section 2.07. Bonds Mutilated, Lost, Destroyed or Stol en ............................ .............................13 Section2.08. Book Entry System ................................................................. .............................14 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 ...... .............................17 Section3.04. Validity of Bonds .................................................................... .............................17 ARTICLE IV REDEMPTION OF BONDS Section 4.01. Terms of Redemption .............................................................. .............................17 Section 4.02. Selection of Bonds for Redemption ........................................ .............................18 Section 4.03. Notice of Redemption .............................................................. .............................18 Section 4.04. Partial Redemption of Bonds ................................................... .............................19 Section 4.05. Effect of Redemption ............................................................... .............................19 ARTICLE V REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST Section 5.01. Pledge and Assignment; Revenue Fund. . ............ ... ............................................ 19 Section 5.02. Allocation of Authority Revenues .......................................... .............................20 Section 5.03. Application of Interest Account ............................................... .............................21 Section 5.04. Application of Principal Account ............................................ .............................21 i DOC SOC/ 1433526v3/022497 -0011 TABLE OF CONTENTS (continued) E Section 5.05. Application of Redemption Fund ............................................. .............................21 Section5.06. Investments .............................................................................. .............................21 Section5.07. Rebate Funds ............................................................................ .............................22 Section 5.08. Application of Funds and Accounts When No Bonds are Outstanding ................23 ARTICLE VI PARTICULAR COVENANTS Section6.01. Punctual Payment .................................................................... .............................24 Section 7.02. Section 6.02. Extension of Payment of Bonds ............................................... .............................24 Application of Authority Revenues and Other Funds After Default ...... Section 6.03. Against Encumbrances ............................................................. .............................24 Section 7.05. Section 6.04. Power to Issue Bonds and Make Pledge and Assignment ....... .............................24 Suit by Owners ......................................................... ............................... Section 6.05. Accounting Records and Financial Statements ........................ .............................24 Section 7.08. Section6.06. Tax Covenants ......................................................................... .............................25 No Waiver of Default ............................................... ............................... Section 6.07. Payments Under Installment Purchase Agreement .................. .............................25 Section 6.08. Waiver of Laws ........................................................................ .............................26 Section 6.09. Further Assurances .................................................................. .............................26 Section6.10. Eminent Domain ...................................................................... .............................26 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 ................. ............................... Section 7.06. Suit by Owners ......................................................... ............................... Section 7.07. Absolute Obligation of the Authority ...................... ............................... Section 7.08. Remedies Not Excl usive .......................................... ............................... Section 7.09. No Waiver of Default ............................................... ............................... ARTICLE VIII THE TRUSTEE .......... 26 ..........27 ..........27 ..........28 ..........28 ..........29 ..........29 ..........29 .......... 29 Section 8.01. Duties, Immunities and Liabilities of Trustee .......................... .............................30 Section 8.02. Merger or Consol idation .......................................................... .............................31 Section 8.03. Liability of Trustee .................................................................. .............................31 Section 8.04. Right to Rely on Documents .................................................... .............................34 Section 8.05. Preservation and Inspection of Documents .............................. .............................34 Section 8.06. Compensation and Indemnification ......................................... .............................34 ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE ii DOCSOC/ 14335260/022497 -0011 TABLE OF CONTENTS (continued) •,.. Section 9.01. Amendments Permitted ........................................................... .............................34 Successor Is Deemed Included in All References to Predecessor ........................38 Section 9.02. Effect of Supplemental Indenture .......................................... .............................36 Section 9.03. Endorsement of Bonds; Preparation of New Bonds ................ .............................36 Destructionof Bonds ............................................................... .............................39 Section 9.04. Amendment of Particular Bonds ............................................ .............................36 ARTICLE X DEFEASANCE Section 10.01. Discharge of Indenture ............................................................ .............................36 Successor Is Deemed Included in All References to Predecessor ........................38 Section 10.02. Discharge of Liability on Bonds .......................... .................. .............................37 Section 10.03. Deposit of Money or Securities with Trustee ......................... .............................37 Destructionof Bonds ............................................................... .............................39 Section 10.04. Payment of Bonds After Discharge of Indenture .................... .............................38 Section 11.01. Section 11.02. Section 11.03. Section 11.04. Section 11.05. Section 11.06. Section 11.07. Section 11.08. Section 11.09. Section ILI0. Section 11.11. Section 11.12. Section 11.13. Section 11.14. Section 11.15. Section 11.16. Signatures ARTICLE XI MISCELLANEOUS Liability of Authority Limited to Authority Revenues ............ .............................38 Successor Is Deemed Included in All References to Predecessor ........................38 Limitation of Rights to Parties and Bond Owner.. .................. .............................39 Waiver of Notice; Requirement of Mailed Notice., .............................................. 39 Destructionof Bonds ............................................................... .............................39 Severability of Invalid Provisions ............................................ .............................39 Notices..................................................................................... .............................39 Evidence of Rights of Bond Owners ....................................... .............................39 DisqualifiedBonds .................................................................. .............................40 Money Held for Particular Bonds ............................................ .............................40 Fundsand Accounts ................................................................. .............................40 Waiver of Personal Liability ................................................... .............................40 Execution in Several Counterparts ........................................... .............................41 CUSIPNumbers ...................................................................... .............................41 Choiceof Law ......................................................................... .............................41 Noticeto Rating Agencies ....................................................... .............................41 Exhibit A Form of Bond DOCSOC/ 1433526v3/022497 -001 1 ................................................... ............................... S -1 ... ............................... ................... ............................A -1 iii INDENTURE OF TRUST THE INDENTURE OF TRUST, made and entered into as of October 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 2004 Installment Sale Agreement and the 2006 Installment Sale Agreement (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 and wastewater systems (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 SOC/ 1433526x3/022497 -0011 the Prior Project and to finance the 2.010 Project will have demonstrable savings in effective interest rate, bond preparation, bond underwriting or bond issuance costs: and WHEREAS, in order to provide for the authentication and deli% cry of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the payment of the principal thereof and interest and premium. if any, thereon, the Authority has authorized the execution and delivery of the Indenture; 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 obligations of the Authority, and to constitute the Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Indenture have been in all respects duly authorized; NOW, THEREFORE, 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 the 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 all the covenants and conditions therein and herein set forth, does hereby assign and pledge unto. and grant a security interest in, the following (the "Trust Estate ") to the Trustee, and its successors in trust and assigns forever, for the securing of the performance of the obligations of the Authority to the Bond Owners hereinafter set forth: GRANTING CLAUSE FIRST All right, title and interest of the Authority in and to the Authority 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. he Government 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 do any and all things which the Authority is or may become entitled to do thereunder, subject to the terms 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 or transferred as and for additional security hereunder to the Trustee by the Authority or by anyone on its behalf, or with its written consent, and to hold and apply the same, subject to the terms hereof. GRANTING CLAUSE THIRD 2 DOC SOC/ 1433526v3/022497 -001 1 All of the rights, title, and interest of the Authority in the Installment Purchase Agreement, including all righ':s 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/ 14335260/022497 -0011 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, and under the Constitution and laws of the State of California. Authority Revenues. The tenn "Authority Revenues" means: (a) all Installment Payments received by the Authority or the Trustee pursuant to or with respect to the Installment Purchase Agreement; and (b) all interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder. Authorized Representative. The term "Authorized Represertative" 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 Authority by a Certificate of the Authority signed by its President. Vice President, Secretary. Director of Finance 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 Code. Bond Year. The term "Bond Year" means the period beginning on the date of issuance of the Bonds and ending on October 1, 2011, and each successive one year or, during the last period prior to maturity, shorter period thereafter until there are no Outstanding Bonds. Bonds. The term "Bonds" means the Refunding Revenue Bonds, Series 2010 issued by the Authority and at any time Outstanding pursuant to this Indenture. Business Da v. 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 anv other state in which the Office of the Trustee is located, are closed; or (ii) a day on which the New York Stock Exchange is not closed. Certificate Direction Request 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 Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by Section 1.02, each such instrument shall include the statements provided for in Section 1.02. Closing Date. The term "Closing Date" means the date on which the Bonds are delivered to the original purchaser thereof. Code. The term "Code" means the Internal Revenue Code of 1986, as amended. Costs of Issuance. The term "Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the Authority and related to the authorization, issuance, sale and delivery of the Bonds, including but not limited to costs of preparation and reproduction of documents, printing expenses, filing and recording fees, initial fees and charges of the Trustee and counsel to the Trustee, legal fees and charges, fees and disbursements of consultants and professionals, rating agency fees. title insurance premiums, letter of credit fees and bond insurance 4 DOCSOC/ 1433526x3/022497 -0011 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 ]ssuance Fund. The term "Costs of Issuance Fund" means the fund by that name established pursuant to Section 3.03. Denository 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 A.areement. The term "Escrow Agreement" means the Escrow Agreement by an among District 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 term "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 1 of each year and ending on the next succeeding June 30, both dates inclusive, or any other twelve month period hereafter selected and designated as the official fiscal year period of the Authority. 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 October 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. Installment Purchase Agreement. The term "Installment Purchase Agreement' means the Installment Purchase Agreement, dated as of October 1, 2010, by and between the Authority and the District, as amended from time to time. DOCS OC/ 1433526v3i022497 -001 1 Interest Account. The term `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" means April 1 and October 1, of each year commencing April 1, 2011, Investment Agreement. The term "Investment Agreement' means an investment agreement supported by appropriate opinions of counsel, provided that the guarantor thereof is rated at least "AA" and "Aa" by S &P and Moody's. respectively. and as further described in the definition of "Permitted Investments." 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. 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 Depository serves as depository for such book entry bonds, as originally executed or as it may be supplemented or revised or replaced by a letter from the Authority and the Trustee delivered to and accepted by the Depository. Moody's. The term " Moody's" means Moody's Investors Service, Inc. or any successor thereto. Nominee. The term "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.08 hereof. Office. The term "Office" means with respect to the Trustee, the principal corporate trust office of the Trustee at 120 South San Pedro Street, 4`h Floor, Los Angeles, California 90012, Attention: Corporate Trust Division, or at such other or additional offices as may be specified in writing by the Trustee to the Authority, except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term means the office or agency of the Trustee at which, at any particular time, its corporate trust agency business shall 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 the Authority. If and to the extent required by the provisions of Section 1.02, each Opinion of Counsel shall include the statements provided for in Section 1.02. Outstanding. The term "Outstanding," when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 11.09) all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under the Indenture except: (i) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (ii) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with Section 10.02, including Bonds (or portions thereof) described in Section 11.10; 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. DOC SOC/ 1433526v3 /022497 -001 I 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 "Aaa" by the applicable Rating Agency issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years; (3) U.S. dollar denominated deposit accounts, 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 -] +" by S &P and "P -1" 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 -f +" 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. Rating. The term "Rating" means any currently effective rating on the Bonds issued by a Rating Agency. 7 DOCSOC/ I433526v3/022497 -0011 Rating Agencies. The term "Rating Agencies' means S &P and Fitch Ratings, Inc. Rebate Fund. The term "Rebate Fund" means the fund by that name established pursuant to Section 5.07. Record Date. The term "Record Date" means, with respect to any Interest Payment Date, the fifteenth (15th) day of the calendar month preceding such Interest Pavment 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 Obligatioi-C means the 2001 Installment Purchase Agreement, the 2004 Installment Sale Agreement and the 2006 Installment Sale Agreement. Registration Books. The term "Registration Books" means the records maintained by the Trustee for the registration of ownership and registration of transfer of the Bonds pursuant to Section 2.05. Responsible Officer of the Trustee. The term "Responsible Officer of the Trustee" means any officer within the corporate trust division (or any successor group or department of the Trustee) including any vice president, assistant vice president, assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, with responsibility for the administration of the Indenture. Revenue Fund. The term "Revenue Fund" means the fund by that name established pursuant to Section 5.01(c). S &P. The term "S&P" means Standard & Poor's Corporation, 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 of the Securities and Exchange Commission, such other addresses and /or such other securities depositories as the Authority may designate in a Request of the Authority deliver to the Trustee. State. The term "State' means the State of California. Supplemental Indenture. The term "Supplemental Indenture" means any indenture hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or DOCSOC/ 1433526v3/022497 -001 1 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, as applicable, 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. 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. 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. Valuation Date. "Valuation Date" means the fifth Business Day preceding the date of redemption. 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 DOCSOC/1433526v3/022497 -0011 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 such certificate or statement may be based, as aforesaid, is erroneous. 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 such 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 all of the matters required to be certified under any provision of the Indenture, but different officers, counsel or Accountants may certify to different matters, respectively. Section 1.03. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to include the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference. do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. (c) All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of the Indenture; the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to the Indenture as a whole and not to any particular Article, Section or subdivision hereof. ARTICLE II THE BONDS Section 2.01. 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 Refunding Revenue Bonds, Series 2010 " in the aggregate principal amount of $[Bond Amount]. The Indenture constitutes a continuing agreement with the Owners from time to t:.me of the Bonds to secure the full 10 DOC SOC/ 1433526v3/022497 -0011 payment of the principal of and interest and premium (if any) on all the Bonds, subject to the covenants, provisions and conditions herein contained. Section 2.02. Terms of the Bonds. The Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The Bonds shall mature on October 1 in each of the years and in the amounts set forth below and shall bear interest on each Interest Payment Date at the rates set forth below: Afaturity Date (October I) Principal Amount Interest Rate 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2029 2035 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 11 DOCSOC /l 433526v3/022497 -0011 interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Interest on the Bonds shall be calculated on the basis of a 360 day year composed of twelve 30 day months. Section 2.03. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond at the Office of the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. The Trustee shall not be required to register the transfer of any Bond during the period in which the Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. Whenever any Bond or Bonds shall be surrendered for transfer.. the Authority shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds of authorized denomination or denominations for a like series and aggregate principal amount of the same maturity. The Trustee shall require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of Bonds, the Trustee will cancel and destroy the Bonds 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 denominations of the same series and maturity. The Trustee shall not be required to exchange any Bond during the period in which the Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. The Trustee shall require the Bond Owner requesting such exchange to pay any tax or other governmental charge 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 or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which shall upon reasonable notice and at reasonable times be open to inspection during regular business hours by the Authority, the District and the Owners; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as 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 or impressed on the Bonds. The Bonds shall then be delivered to the Trustee for authentication by it. In case any of the officers who shall have signed or attested any of the Bonds shall cease to be such officer or officers of the Authority before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee, or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and 12 DOCSOC/ 1433526v3/022497 -001 I issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though those who signed and attested the same had continued to be such officers of the Authority, and 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 of the Authority although at the nominal date of such Bonds any such person shall not have been such officer of the Authority. Only such of the Bonds as shall bear thereon a certificate of authentication substantially in the forms set forth in Exhibit A hereto, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of the Indenture, and such certificate of or on behalf of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of the Indenture. Section 2.07. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor, series and authorized denomination in exchange and substitution for the Bonds so mutilated, but only upon surrender to the 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 riot 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. 13 DOC SOC/ 1433526v3/022497 -0011 Section 2.08. Book Entry Svstem. (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, 'h(:n the Authority shall cause the delivery of a separate single fully registered bond (which may be tyl)eNN ritten) 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 Nvith 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 Participanl or any other person, of any amount of principal of, premium, if any, or interest on book entry Bonds. The Authority and the Trustee may treat and consider the person in whose name each book entry Bond is registered in the Bond Registration Books as the absolute Owner of such book entry Bond for the purpose of payment of principal of, premium and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective Owner, as shown in the Bond Registration Books, or his respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Authority's obligations with respect to payment of principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the Bond Registration Books, shall receive a Bond evidencing the obligation to make payments of principal of, premium, if any, and interest on the Bonds. Upon delivery by the Depository to the Authority and the Trustee, of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in the Indenture shall refer to such nominee of the Depository. (b) Delivery of Letter of Representations. In order to qualify the book entry Bonds for the Depository's book entry system, the Authority 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 entry 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 will be in compliance with all representations of the Trustee in such Letter of Representations. In addition to the execution and delivery of a Letter of Representations, the Authority and the 'Trustee shall take such other actions, 14 DOCS OC/ 1433526v3/022497 -0011 not inconsistent with the Indenture, as are reasonably necessary to qualify book entry Bonds for the Depository's book entry program. (C) Selection of Depositor. In the event that: (i) the Depository determines not to continue to act as securities depository for book entry Bonds; or (ii) the Authority determines that continuation of the book entry system is not in the best interest of the beneficial owners of the Bonds or the Authority, then the Authority will discontinue the book entry system with the Depository. If the Authority determines to replace the Depository with another qualified securities depository, the Authority shall prepare or direct the preparation of a new single, separate, fully registered Bond for each of the maturity dates of such book entry Bonds, registered in the name of such successor or substitute qualified securities depository or its Nominee as provided in subsection (e) hereof. If the Authority fails to identify another qualified securities depository to replace the Depository, then the Bonds shall no longer be restricted to being registered in such Bond Registration Books in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Bonds shall designate, in accordance with the provisions of Sections 2.03 and 2.04 hereof. (d) Payments To Depository. Notwithstanding any other 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 be made and given, respectively to the Nominee, as provided in the Letter of Representations or as otherwise instructed by the Depository and agreed to by the Trustee notwithstanding any inconsistent provisions herein. (e) Transfer of Bonds to Substitute Dqpository. (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 detelnunation 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 15 DOCSOC/1433526v3/022497 -0011 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 responsibilit\ for transmitting payments to, communicating with, notifying, or otherwise dealing with any beneficial owners of the Bonds. Neither the Authority nor the Trustee shall have any responsibility or obligation, legal or otherwise, to any such beneficial owners or to any other parry, including DTC or its successor (or Substitute Depository or its successor), except to the Owner of any Bonds, and the Trustee may rely conclusively on its records as to the identity of the Owners of the Bonds. 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 proceeds received from the sale of the Bonds shall be deposited in trust with the Trustee, who shell apply such proceeds as follows pursuant to a Written Order of the Authority: (a) The Trustee shall transfer to the Escrow Agent the amount of $ from the proceeds of the Bonds for deposit in the Escrow Fund created with respect thereto pursuant to the 2001 Certificates. (b) The Trustee shall transfer to the obligee with respect to the 2004 Installment Sale Agreement the amount of $ from the proceeds of the Bonds for application to the prepayment in full of the 2004 Installment Sale Agreement. 16 DOC SOC/ 1 433526x3/022497 -0011 (c) The Trustee shall transfer to the obligee with respect to the 2006 Installment Sale Agreement the amount of $ from the proceeds of the Bonds for application to the prepayment in full of the 2006 Installment Sale Agreement. (d) The Trustee shall deposit the amount of $ from the proceeds of the Bonds in the Costs of Issuance Fund. (e) The Trustee shall transfer the amount of $ from the proceeds of the Bonds to the District for deposit by the District into the Acquisition 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 obligation was incurred, that such payment is proper charge against said fund and that payment for such charge has not previously been made. On the six month anniversary of the issuance of the Bonds, or upon the earlier Request of the Authority, all amounts remaining in the Costs of Issuance Fund shall be transferred by the Trustee to the Authority for deposit in the Interest Account. Investment earnings on amounts on deposit in the Cost of Issuance Fund shall be applied in accordance with Section 5.06 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 by any proceedings taken by the Authority, the District or the Trustee with respect to or in connection with the Installment Purchase Agreement. The recital contained in the Bonds that the same are issued pursuant to the Constitution and laws of the State shall be conclusive evidence of the validity and of compliance with the provisions of law in their issuance. ARTICLE IV REDEMPTION OF BONDS Section 4.01. Terms of Redemption. (a) The Bonds with stated maturities on or after October 1, 2021, shall be subject to redemption prier 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 elate fixed for redemption, without premium, in accordance with the following schedule: 17 DOC SOC/ 1433526v3/022497 -001 1 Redemption Date Principal (October 1) Amount C2 * Final Maturity. (c) The Bonds 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 1) Amount E3 * 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 IV DOC SOC/ 1433526x3/022497 -0011 redeemed by giving the individual number of each Bond or by stating that all Bonds between two stated numbers, troth 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 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 shall cease to accrue, and shall require that such Bonds be then surrendered to the Trustee. Neither the failure to receive such notice nor any defect in the notice or the mailing thereof 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 Authority. 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 any, and interest on such Bonds to be redeemed and that, if such moneys shall not have been so received, said notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption shall not be made, and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. Section 4.04. Partial Redemption of Bonds. Upon surrender of any Bond redeemed in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered and of the same series, interest rate; and maturity. Section 4.05. Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. The Trustee shall, upon surrender for payment of any cf 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 ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST Section 5.01. Pledge and Assignment; Revenue Fund. 19 DOC SOC/ 1433526v3/022497 -0011 (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 pursuant to the Indenture (except the Rebate Fund) are hereby irrevocably pledged to secure the payment of the principal of and interest, and the premium, if any, on the Bonds in accordance with their terms and the provisions of the Indenture 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 recoui se. 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. With respect to any Parity Bonds m Contracts, the Trustee shall also transfer to the applicable trustee for deposit in any applicable interest account, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other interest in accordance with the provisions of the indenture, resolution or contract relating thereto. (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 '717 DOCSOC/ 1433526v3/022497 -0011 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. With respect to any Parity Bonds or Contracts, the Trustee shall also transfer to the applicable trustee for deposit in any applicable principal account, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other principal in accordance with the provisions of the indenture, resolution or contract relating thereto. Section 5.03. Application of Interest Account. All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or accelerated prior to maturity pursuant to the Indenture). Section 5.04. Application of Principal Account. All amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds at maturity, mandatory sinking fund redemption, purchase or acceleration; provided, however, that at any time prior to selection for redemption of any such Bonds, upon written direction of the Authority, the Trustee shall apply such amounts to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be directed pursuant to a Request of the Authority, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. Section 5.05. Application of Redemption Fund. There is hereby established with the Trustee 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 redemption of any such Bonds, upon written direction of the Authority, the Trustee shall apply such amounts to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be directed pursuant to a Request of the Authority, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. Section 5.06. Investments. All moneys in any of the funds or accounts 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, however, that any such investment shall be made by The Trustee only if, prior to the date on which such investment is to be made, the Trustee shall have received a written direction from the District specifying a specific money market fund and, if no such written direction from the District is so received, the Trustee shall hold such moneys uninvested. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder shall be deposited in the Interest Account unless otherwise provided in the 21 DOCSOC/ 14335260/022497 -0011 Indenture. For purposes of acquiring any investments hereunder, the Trustee may commingle funds (other than the Rebate Fund) held by it hereunder upon the Request of the Authority. The Trustee may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liabiljTV f'or losses arising from any investments made pursuant to this Section 5.06. The Authority acknowledges that to the extent that regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority the right to receive brokerage confirmations of security transactions as they occur, the Authority specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Authority periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. 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 vah.rations 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 Funds. (a) Establishment. The Trustee shall establish a separate fund 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 Certificates. 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 Certificates 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 Certificates; and (.ii) 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. 0) Annual Computation. Within 55 days of the end of each Bond Year (as such term is defined in the Tax Certificates), 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, ii applicable, in the Tax Certificate 22 DOC SOC/ 1433526x3/022497 -0011 (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 1:o Section 148(0(4)(C)(vii) of the Code (the "1'h% 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 subsection (a). In the event that immediately following the transfer required by the previous sentence, the amolmt 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 Trustee shall withdraw the excess from the Rebate Pand and then credit the excess to the Revenue Fund. (iii) Payment to the Treasury. The Trustee shall pay, as directed by Request of the Authority, to the United States Treasury, out of amounts in the Rebate Fund: (A) Not later than 60 days after the end of: (X) the fifth Bond Year; and (Y) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year; and (B) Not later than 60 days after the payment of all the Bonds, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(0 of the Code and Section 1.148 -3 of the Treasury Regulations. In the event that, prior to the time of any payment required to be made from the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when such payment is due, the Authority shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received 1Tom any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a) shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form [8038 -T] (prepared by the Authority), or shall be made in such other manner as provided under the Code. (b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund after redemption and payment of the Bonds and the payments described in subsection (a) above being made may be withdrawn by the Authority and utilized in any manner by the Authority. (c) Survival of Defeasance. Notwithstanding anything in this Section to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance or payment in full of the Bonds. Section 5.08. Application of Funds and Accounts When No Bonds are Outstandine. On the date on which all Bonds shall be retired hereunder or provision made therefor pursuant to Article X 23 DOCSOC/ 14335260/022497 -0011 and after payment of all amounts due the Trustee hereunder, all moneys then on deposit in any of the funds or accounts (other than the Rebate Fund) established with the'Trustee pursuant to the Indenture shall be withdrawn by the Trustee and paid to the Authority for distribution in accordance with the Installment Purchase Agreement. A ARTICLE VI PARTICULAR COVENANTS Section 6.01. Punctual Payment. The Authority shall punctually pay or cause to be paid the principal and interest to become due in respect of all the Bonds, in strict conformity with the terms of the Bonds and of the Indenture, according to the true intent and meaning thereof, but only out of Authority Revenues and other assets pledged for such payment as provided in the Indenture. 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 :nt(, 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 �N homsoever. 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 24 DOC SOC/ 1433526v3/022497 -0011 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 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 Activity. 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; (b) Arbitrage. The Authority will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code; (c) Federal Guarantee. The Authority will make no use of the proceeds of the Bonds or take or omit to take any 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 will 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 any action or refrain from taking any action that would cause either the Bonds to be considered "hedge bonds" within the meaning of Section 149(8) of the Code unless the Authority takes all necessary action to assure compliance with the require;,,nents of Section 149(g) of the Code to maintain the exclusion from gross income of interest on the Bonds for federal income tax purposes; and (0 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 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 Authority from causing the Trustee to issue revenue bonds other than the Bonds or to execute and deliver contracts payable on a parity with the Bonds, 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 pursuant to the Installment Purchase 25 DOCSOC/1433526v3/022497 -0011 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 consent only if (a) such amendment, modification or termination will not materially adversely affect the nterests of the Bond Owners; or (b) the Trustee first obtains the written consent of the Owners of � majority in aggregate principal amount of the Bonds then Outstanding to such amendment, modification or termination. Section 6.08. Waiver of Laws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of. any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in the Indenture or in the Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Authority to the extent permitted by law. Section 6.09. Further Assurances. The Authority will make, execute and deliver any and all such further indentures, instruments and assurances as may be r; asonably 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. 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. 26 DOCSOC/ 1433526v3/022497 -0011 (d) The Authority shall file a petition or answer seeking arrangement or reorganization cinder 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 and shall be immediately due and payable, anything in the Indenture or in the Bonds contained to the contrary notwithstanding. Nothing contained in the Indenture shall permit or require the Trustee or the Authority to accelerate payments due under the Installment Purchase Agreement if the District, which is a party to such Installment Purchase Agreement, is not in default of its obligation thereunder. Any such declaration is subject to the condition that if, at any time after such declaration and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Authority or the District shall deposit with the Trustee a sum sufficient to pay all the principal of and installments of interest on the Bonds payment of which is overdue, with interest on such overdue principal at the rate borne by the respective Bonds to the extent permitted by law, and the reasonable charges and expenses of the Trustee, and any and all other Events of Default known to the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then, and in every such case the Trustee shall on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences and waive such Event of Default; but no such rescission and annulment shall extend to or 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 the 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 payment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Indenture; (ii) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment 27 DOC S OC/ 1433526v3/022497 -001 I 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 a- maturity or by acceleration or redemption, with interest on the overdue principal at the rate of eigh? percent (8 %) per annum, and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference; and 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, bi, 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 Truste- to its reasonable satisfaction to direct the method of conduct in all remedial proceedings taken b,: the Trustee hereunder, provided that such direction shall not be otherwise than in accordance "With law and the provisions of the 28 DOCSOC/ 1433526x3/022497 -001 1 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 an), 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 Trastee 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. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of the Indenture or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, the Indenture, the Installment Purchase Agreement, the Joint Exercise of Powers Agreement or other applicably: law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of the Indenture. Section 7.07. Absolute Obligation of the Authoritv. Nothing in this Section 7.07 or in any other provision of' the Indenture or in the Bonds contained shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the respective Owners of the Bonds at their respective dates of maturity, or upon call for redemption, as herein provided, but only out of the Authority Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds. Section 7.08. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Section 7.09. No Waiver of Default. No delay or omission of the Trustee or of any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein. 29 DOCSOC/ 1433526v3/0224 97 -001 1 ARTICLE VIII THE TRUSTEE Section 8.01. Duties Immunities and Liabilities of Trustee. (a) The Trustee shall, prior to an Event of Default, and after the curing of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in the Indenture and no implied covenants or duties shall be read into the Indenture against the Trustee. The Trustee shall, during: the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Authority may remove the Trustee at any time, unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with subsection (e) of this Section, or shall become incapable of acting; or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee 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, ne,, ertheless 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 30 DOCSOC /t 433526v3/022497 -0011 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 shalt 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 accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section. Section 8.02. Merger or Consolidation. Any trust company, banking association or bank into which the Trustee may be merged or converted or with which it may be consolidated or any trust company, banking association or bank resulting from any merger, conversion or consolidation to which it shall be a party or any trust company, banking association or bank to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such trust company, banking association or bank shall be eligible under subsection (e) of Section 8.01, shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. Section 8.03. Liability of Trustee. (a} The recitals of facts herein and in the Bonds 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 of 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 respective duties or obligations herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bond Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. (b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. 31 DOC S OC/ 14335260/022497 -0011 (c) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority (or such other percentage provided for herein) in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture. (d) The Trustee shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by the Indenture. (e) The Trustee shall not be deemed to have knowledge of any Default or Event of Default hereunder or under the Installment Purchase Agreement or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default hereunder or under the Installment Purchase Agreement unless and until a Responsible Officer of the Trustee shall have actual knowledge of such event or the Trustee shall have been notified in writing, in accordance with Section 11.07, of such event by the Authority or the Owners of not less than twenty five percent (25 %) of the Bonds then Outstanding. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or ohservance 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 anv 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. 32 DOC SOC/ 1 433 526v3/022497 -001 I (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. (rn) 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 certificate listing persons designated to give such instructions or directions and containing specimen signatures of suc:a designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Authority elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its dis,3retion elects to act upon such instructions, the Trustee's understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Authority agrees to assume all risks arising out 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 interception and misuse by third parties. (n) The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. (o) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it hereby at the request, order or direction of any 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 incurred 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 other than its negligence or willful misconduct. (q) The Trustee shall have no responsibility or liability with respect to any information, statements or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds. 33 DOCSOC/ 1433526x3/022497 -0011 r Section 8.04. Right to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, requisition, request, consent, order, cer.ificate, 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 part y or parties. The Trustee may consult with counsel, who may be counsel of or to the Authority, n °.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 accorclance therewith. The Trustee may treat the Owners of the Bonds appearin.- in the Trustee's Registration Books as the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any notice to the contrary. Whenever in the administration of the trusts imposed upon it by the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter ('unless other evidence in respect thereof 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 prop i lions of the Indenture in reliance upon such Certificate, Request or Requisition, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it may deem reasonable. Section 8.05. Preservation and Inspection of Documents. All documents 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. 34 DOC SOC/ 1433526v3/022497 -001 1 (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 the Indenture on such Authority Revenues and other assets except as permitted herein, without the consent of the Owners of all of the Bonds then Outstanding. It shall not be necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Authority and the Trustee of any Supplemental Indenture pursuant to this subsection (a), the Trustee shall mail a notice, setting forth in general terms the substance of such Supplemental Indenture, to each Rating Agency and the Owners of the Bonds at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. (b) The Indenture and the rights and obligations of the Authority, the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority and the Trustee may enter into without the consent of any Bond Owners, if the Trustee shall receive an opinion of Bond Counsel to the effect that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners of the Outstanding Bonds, including, without limitation, for any one or more of the following purposes: (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 surrender any right or power herein reserved to or conferred upon the Authority; (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Indenture, or in regard to matters or questions arising under the Indenture, as the Authority may deem necessary or desirable; (3) to modify, amend or supplement the Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereunder in effect, and to add such other terms conditions and provisions as may be permitted by said act or similar federal statute; and (4) to modify, amend or supplement the Indenture in such manner as to cause interest on the Bonds to remain excludable from gross income under the Code. 35 DOCSOC/ 1433526x3/022497 -0011 (c) The Trustee may in its discretion, but shall not be obligated to, enter into any such Supplemental Indenture authorized by subsections (a) or (b) of this Section which materially adversely affects the Trustee's own rights, duties or immunities under the Indenture or otherwise. (d) Prior to the Trustee entering into any Supplemental Indenture hereunder, there shall be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of the Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion of interest on the Bonds from federal income taxation and from state income taxation. Section 9.02. Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this Article, the Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the Authority, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced thereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes. Section 9.03. Endorsement of Bonds• Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the Trustee so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority 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 36 DOCSOC /] 433526v3/022497 -0011 (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 lndenture which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption to the Authority. Section 10.02. Discharge of Liability on Bonds. Upon the deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Outstanding Bonds are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in Article IV or provisions satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the Authority in respect of such Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject however, to the provisions of Section 10.04. The Authority may at any time surrender to the Trustee for cancellation by it any Bonds previously issued and delivered, which the Authority may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. Section 10.03. Deposit of Money or Securities with Trustee. Whenever in the Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds and accounts established pursuant to the Indenture and shall be: (a) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been g.iven 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 Trustee, 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 redeemed, as such principal, interest and premium, if any, become due, provided that in the case of Bonds which are to be redeemed prior to 37 DOC SOC/ 14335260/022497 -0011 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 giNing of such notice; provided, in each case, that: (i) the Trustee shall have been irrevocably instructed (by the terms of the Indenture or by Request of the .Authority) to apply such money tc the payment of such principal, interest and premium, if any, with respect to such Bonds; and (ii) the Authority shall have delivered to the Trustee an opinion of Bond Counsel addressed to the Authority and the Trustee to the effect that such Bonds have been discharged in accordance with the Indenture (which opinion may rely upon and assume the accuracy of the Accountant's opinion referred m 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) :,ears after the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in the Indenture), if such moneys were so held at such date, or two (2) years after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall be repaid to the Authority free from the trusts created by the Indenture upon 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 vet 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. M DOC SOC/ 1433526v3/022497 -001 I 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 exclu3ive 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. Section 11.05. Destruction of Bonds. Whenever in the Indenture provision is made for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee shall destroy such Bonds as may be allowed by law, and deliver a certificate of such destruction to the Authority. Section 11.06. Severability of Invalid Provisions. If any one or more of the provisions contained in the Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in the Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of the Indenture, and the Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority hereby declares that it would have entered into the Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of the Indenture may be held illegal, invalid or unenforceable. Section 11.07. Notices. Any notice to or demand upon the Authority or the Trustee shall be deemed to have been sufficiently given or served for all purposes by being sent by telex or by being deposited, first class mail, postage prepaid, in a post office letter box, addressed, as the case may be, to the Authority, c/o East Valley Water District, 3654 East Highland Avenue, Suite 18, Highland, CA 93246, Attention: General Manager (or such other address as may have been filed in writing by the Authority with the Trustee), or to the Trustee at its Office by first class mail. Notwithstanding the foregoing provisions of this Section 11.07, the Trustee shall not be deemed to have received, and shall not be liable for failing to act upon the contents of, any notice unless and until the Trustee actually receives such notice. Section 11.08. Evidence of Rights of Bond Owners. Any request, consent or other instrument required or permitted by the Indenture to be signed and executed by Bond Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Bond Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of Bonds transferable by delivery, shall be sufficient for any purpose of the Indenture and shall be conclusive in favor of the Trustee and the Authority if made in the manner provided in this Section. 39 DOCSOC/ 1433526x3/022497 -0011 The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly swom to before such notary public or other officer. The Ownership of Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon. Section 11.09. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under the Indenture, Bonds which are 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 11.10. Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular Bonds (or portions of Bonds in the case 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 11.11. 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 IL 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 40 DOCSOC/ 1433526v3/022497 -001 I any such member, officer, agent, employee, consultant or attorney from the performance of any official duty provided by law or by the Indenture. Section 11.13. Execution in Several Counterparts. The Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. Section 11.14. CUSIP Numbers. Neither the Trustee nor the Authority shall be liable for any defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the Bondholders and that neither the Authority nor the Trustee shall be liable for any inaccuracies in such numbers. Section 11.15. Choice of Law. THE INDENTURE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. Section 11.16. Notice to Rating Agencies. The Trustee shall provide any rating agency rating the Bonds with written notice of each amendment to the Indenture and a copy thereof at least 15 days in advance of its execution. 41 DOCSOC/ 1433526v3 /022497 -001 I 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 By: Its: President of the Board UNION BANK, N.A.. as Trustee By: Its: Authorized Officer S -1 DOC SOC/ 1394495/200048 -0001 DOC SOC/ 1433526v3/022497 -0011 No. EXHIBIT A FORM OF BOND UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE INDENTURE) TO THE BOND REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. UNITED STATES OF AMERICA STATE OF CALIFORNIA EAST VALLEY WATER DISTRICT FINANCING AUTHORITY REFUNDING REVENUE BOND SERIES 2010 INTEREST RATE MATURITY DATE ORIGINAL ISSUE 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 cluly organized and existing under the laws of the State of California (the "Authority "), for value received, hereby promises to pay to the Registered Owner specified above or registered assigns (the "Registered Owner "), on the Maturity Date specified above (subject to any right of prior redemption hereinafter provided for), the Principal Amount specified above, in lawful money of the United States of America, and to pay interest thereon in like lawful money from the interest payment date next preceding the date of authentication of this Bond (unless: (i) this Bond is authenticated after the fifteenth day of the calendar month preceding an interest payment date, whether or not such day is a business day, and on or before the following interest payment date, in which event it shall bear interest from such interest payment date; or (ii) this Bond is authenticated on or before March 15, 2011, in which event it shall bear interest from the Original Issue Date identified above; provided, however, that if as of the date of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the interest payment date to which interest has previously been paid or made available for payment on this Bond), at the Interest Rate per annum specified above, payable semiannually on April I and October 1 in each year, commencing April 1, 2011, calculated on the basis of a 360 day year composed of twelve 30 day months. Principal hereof A -1 DOC SOC/ 1433526x3/022497 -0011 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 ($1,000,000) or more in principal amount, such payment may, at such registered owner's option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such registered owner prior to the fifteenth (15th) day of the month preceding such interest payment date). This Bond is not a debt of the members of the Authority- the State of California, or any of its political subdivisions (other than the Authority), and neither the members of the Authority or said State, nor any of its political subdivisions (other than the Authoritv), is liable hereon, nor in any event shall this Bond be payable out of any funds or properties of the Authority other than the Authority Revenues (as such term is defined in the Indenture of Trust. dated as of October 1, 2010 (the "Indenture "), by and between the Authority and the Trustee) and other moneys pledged therefor under the Indenture. The obligation of the District to make payments in accordance with the Installment Purchase Agreement is a limited obligation of the District as set forth in the Installment Purchase Agreement (as such terms are defined in the Indenrure) and the District shall have no liability or obligation in connection herewith except with respect to such Installment Payments to be made pursuant to the Installment Purchase Agreement. The Bonds do not constitute an indebtedness of the Authority in contravention of any constitutional or statutory debt limitation or restriction. This Bond is one of a duly authorized issue of bonds of the .Authority designated as the "East Valley Water District Financing Authority Refunding Revenue Bonds Series 2010 " (the "Bonds "), of an aggregate principal amount of Dollars ($[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 i mmunities 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 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 the ,Authority or the Trustee, and A -2 DOC SOC/ 1433526v3/022497 -0011 any other amount on deposit in certain funds and accounts created under the Indenture. As and to the extent set forth in the Indenture, all of the Authority Revenues are exclusively and irrevocably pledged in accordance with the terms hereof and the provisions of the Indenture, to the payment of the principal of and interest and premium (if any) on the Bonds. The Indenture and the rights and obligations of the Authority and the Owners of the Bonds and the Trustee may be modified or amended from time to time and at any time with the written consent of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding, exclusive of Bonds disqualified as set forth in the Indenture, in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment shall: (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the owner of each Bond so affected; or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to affect any such modification or amendment, or pennit the creation of any lien on the Authority Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as permitted in the Indenture, or deprive the Owners of the Bonds of the lien created by the Indenture on such Authority Revenues and other assets, except as expressly provided in the Indenture, without the consent of the Owners of all of the Bonds then Outstanding. The Indenture and the rights and obligations of the Authority, of the Trustee and the Owners of the Bonds may also be modified or amended for certain purposes described more fully in the Indenture at any time in the manner, to the extent and upon the terms provided in the Indenture by a supplemental indenture, which the Authority and the Trustee may enter into without the consent of any Bond Owners, if the Trustee shall receive an opinion of Bond Counsel to the effect that the provisions of such supplemental indenture will not materially adversely affect the interests of the Owners of the Outstanding Bonds. The Bonds with stated maturities on or after 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 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 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. A -3 DOCSOC/ 1433526x3/022497 -001 1 The Bonds with stated maturities on October 1, 20 are subject to mandatory sinking fund redemption in part (by lot) on each October I on and after October ' , 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 1) Amount * Final Maturity. 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 ta3:es 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 O�Nner 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. A -4 DOC SOC/ 1433526v3/022497 -001 1 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. IN WITNESS WHEREOF, the Authority has caused this Bond to be executed in its name and on its behalf with the manual or facsimile signature of its President and attested to by the manual or facsimile signature of its Secretary, all as of this I" day of October, 2010. Attest: Secretary of the Board Dated: EAST VALLEY WATER DISTRICT FINANCING AUTHORITY By: Its: President of the Board [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION TO APPEAR ON BONDS] This is one of the Bonds described in the within - mentioned Indenture. UNION BANK, N.A., as Trustee Bv: Its: Authorized Signatory A -5 DOC SOC/ 1433526v3/022497 -001 I [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 r ithin 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. ME DOCSOC / 1433526v3/022497 -0011 INSTALLMENT PURCHASE AGREEMENT by and between EAST VALLEY WATER DISTRICT and EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Dated as of October 1, 2010 Relating to SlBond Amountl EAST VALLEY WATER DISTRICT FINANCING AUTHORITY REFUNDING REVENUE BONDS, SERIES 2010 DOCSOC/ 1433507v3/022497 -001 I INSTALLMENT PURCHASE AGREEMENT This INSTALLMENT PURCHASE AGREEMENT, made and entered into as of October 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 refinance certain facilities within its Water System and Wastewater System described in Exhibit B -1 hereto (the "Prior Project') and to finance the acquisition and construction of certain improvements, betterments. renovations and expansions of facilities within its Water System and Wastewater System described in Exhibit B -2 hereto (the "2010 Project," and together with the Prior Project, the "Project'); and 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 the 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 is authorized by Division 12 of the Water Code of the State of California (the "Law "), including but not limited to Sections 31041. 31042 and 31135, to finance and refinance the acquisition and construction of property for its Water System and Wastewater System; and WHEREAS, the District and the Authority have duly authorized the execution of the Installment Purchase Agreement; and WHEREAS, all acts, conditions and things required by lain 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 perforated 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: DOCSOC/ I433507v3/022497 -0011 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 terms defined herein. Unless the context otherwise requires, all capitalized terms used herein and not defined herein shall have the meanings ascribed thereto in the Indenture. Accountant's Report. The term "Accountant's Report" means a report signed by an Independent Certified Public Accountant. Acquisition Fund. The term "Acquisition Fund" means the fund by that name created pursuant to Section 3.6 hereof. 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, and under the Constitution and laws of the State. Continuin>> Disclosure Certificate. The term "Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate, dated the Closing Date, executed by the District, as amended or supplemented from time 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 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 the State Loan; but excluding contracts entered into for operation and maintenance of the Water System or Wastewater System. Date of O ern ation. The term "Date of Operation" means, with respect to any uncompleted component Panty 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 accruing during such period on all outstanding Panty Bonds, 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; (3) those portions of the principal amount of all outstanding term Parity Bonds required to be prepaid or paid in such period; and DOCSOC/ 1433507v3/022497.0011 (4) those portions of the Parity Installment Payments required to be made during such period, (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, be assumed to bear interest at a fixed rate equal to the higher of. (i) the then current variable interest rate borne by such Parity Bonds or Contracts plus 1 %; and (ii) the highest variable rate borne over the preceding twenty four (24) 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; provided further that if any series or issue of such Parity Bonds or Contracts have twenty -five percent (25 %) or more of the aggregate principal amount of such series or issue due in any one year, Debt Service shall be determined for the period of determination as if the principal of and interest on such series or issue of such Parity Bonds or Contracts were being paid from the date of incurrence thereof in substantially equal annual amounts over a period of twenty -five (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 respect 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 or 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 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 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. 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. Event of Default. The term "Event of Default" means an event described in Section 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. General Manager. The term "General Manager" means the General Manager of the District, or any other person designated by the General Manager to act on behalf of the General Manager. DOC SOC/ 1433507v3/022497 -001 I Indenture. The term "Indenture" means the Indenture of Trust, dated as of October 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. Indenende!nt 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. I of the American Institute of Certified Public Accountants. Indenende+nt 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. Initial Rating Requirement. The term "Initial Rating Requirement" means a long -term debt rating of "A-" or better by S &P and "A3" or better by Moody's. 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 October 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 herewith. Interest Payment Date. The term "Interest Payment Date" means April 1 and October 1 of each year commencing April 1, 2011. Joint Exercise of Powers Aareement. 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. Law. The term "Law" means the County Water District Law of the State (being Division 12 of the Water Code of the State of California, as amended), and all laws amendatory thereof or supplemental thereto. Minimum Rating Requirement. The term "Minimum Rating Requirement" means a long -term debt rating of "BBB" by S &P or `Baa2" by Moody's. Net Proceeds. The term "Net Proceeds" means, when used with respect to any casualty insurance or condemnation award, the proceeds from such insurance or condemnation award remaining after payment of all expenses (including attorneys fees) incurred in the collection of such proceeds. 4 DOC SOC/ 14335070/022497-0011 Net Revenues. The term "Net Revenues" means, for and Fiscal Year. the Revenues for such Fiscal Year less the Operation and Maintenance Costs for such Fisca' Year. Net Wastewater System Revenues. The term "Net Wastewater System Revenues" means for any Fiscal Year, the Wastewater System Revenues for such Fiscal Year less the Operation and Maintenance Costs allocable to the Wastewater System. Net Water System Revenues. The term "Net Water System Revenues" means for any Fiscal Year, the Water System Revenues for such Fiscal Year less the Operation and Maintenance Costs allocable to the Water System. Operation and Maintenance Costs. The term "Operation and Maintenance Costs" means: (i) costs spent or incurred for maintenance and operation of the Water System and Wastewater System calculated in accordance 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 and Wastewater System in good repair and working order, and including administrative costs of the District that are charged directly or apportioned to the Water System and Wastewater System, including but not limited to salaries and wages of employees, payments to the Public Employees Retirement System, overhead, insurance, taxes (if any), fees of auditors, accountants, attorneys, 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 the Installment Purchase 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), and all costs of wastewater treatment 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. Paired Obligations. The term "Paired Obligations" means any Parity Bond or Contract (or portion thereof) designated as Paired Obligations in the resolution, indenture or other document authorizing the issuance or execution and delivery thereof, which are simultaneously issued or executed and 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, are reasonably expected .o result in a fixed interest rate obligation of the Authority for the term of such Parity Bond or Contract, as certified by an Independent Financial Consultant in writing, and which comply v, ith the provisions of Section 10.16 hereof. 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 he paid by the District under and pursuant to any Contract. 5 DOCSOC/ 1433507v3/022497 -0011 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. Parity Protect. The term "Parity Project" means any additions, betterments, extensions or improvements to the District's Water System or Wastewater 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. Prior Proms. 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. The term "Project" means the Prior Project and the 2010 Project. 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. Revenue Fund. The term "Revenue Fund" means the Sewer Fund and the Water Fund of the District, together with other accounts created in the future and designated by action of the Board of Directors of the District as a part of the Revenue Fund by that name established pursuant to Section 5.2 hereunder. Revenues. The term "Revenues" means: (i) Water System Revenues; (ii) Wastewater System Revenues; and (iii) other revenues received by the District including, without limiting the generality of the foregoing: (1) all amounts received by the District as its share of the 1% ad valorem property tax not allocated to the Water System Revenues or the Wastewater System Revenues, if any; plus (2) the earnings on and income derived from the investment of the amounts described in clause (1) hereof and the general unrestricted funds of the District; but excluding in all cases: (A) customer deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the District; (B) any proceeds of taxes or benefit assessments restricted by law to be used by -the District to pay obligations of the District other than Parity Bonds or Contracts. State Loan,. The term "State Loan" means [proposed] Loan Contract No. , Local Match Loan No. _ , dated 2010 by and between the District and the State Water Resources Control Board, and all exhibits and attachments thereto, as originally executed and as it may from, time to time be amended in accordance therewith. [DISCUSS] Subordinate Obligations. The term "Subordinate Obligations" means all contracts or bonds 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. 2010 Proie.ct. The term "2010 Project" means the financing of the Water System distribution and treatment facilities and the Wastewater System facilities described as the "2010 Project" in Exhibit B -2 hereto. 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. DOC SOC/ 1433507v3/022497 -0011 2004 Installment Sale Agreement. The term "2004 Installment Sale Agreement" means the Installment Sale Agreement #04- 058 -AF, dated July 13, 2004, b,r 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. Wastewater Service. The term "Wastewater Service" means the wastewater treatment service made available or provided by the Wastewater System. Wastewater System. The tern "Wastewater System" means the whole and each and every part of the wastewater treatment of the District, including the portion thereof existing on the date hereof, and including all additions, betterments, extensions and improvements to such wastewater treatment system or any part thereof hereafter acquired or constructed. Wastewater System Revenues. The term "Wastewater System Revenues" means all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the Wastewater System, including, without limiting the generality of the foregoing: (i) all income, rents, rates, fees, charges, business interruption insurance proceeds or other moneys derived by the District from the fumishing of wastewater treatment, provision of other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Wastewater System; plus (ii) the facility capacity charges or similar charges related to the Wastewater System; plus (iii) for any Fiscal Year, the amount of 1% ad valorem property tax allocated by the Board of Directors of the District to the Wastewater System Revenues, if and to the extent received by the District; plus (iv) the earnings on and income derived from the investment of the amounts described in clauses (i), (ii) and (iii) hereof; but excluding in all cases customer deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the District, and excluding any proceeds of taxes or benefit assessments restricted by law to be used by the District to pay obligations of the District other than Parity Bonds or Contracts. Water Service. The term "Water Service" means the water distribution service and if applicable, recycled 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 recycled water system. and including the portion thereof existing on the date hereof, and including all additions, betterments, extensions and improvements to such water system, any recycled water system or any part thereof hereafter acquired or constructed. 7 DOC SOC/ 1433507x3/022497 -0011 Water Sy tern Revenues. The tern "Water System Revenues" means all income, rents, rates, fees, charges anc'.. other moneys derived from the ownership or operation of the Water System, including, without limiting the generality of the foregoing: (i) all income, rents, rates, fees, charges, business interruption insurance proceeds or other moneys derived by the District from the sale, furnishing and supplying of water, recycled water or other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Water System; plus (ii) the proceeds of any stand -by or water availability charges; plus (iii) the facility capacity charges or similar charges related to the Water System; plus (iv) for any Fiscal Year, the amount of 1% ad valorem property tax allocated by the Board of Directors of the District to the Water System Revenues, if and to the extent received by the District; plus (v) all income, rents, rates, fees, charges, business interruption insurance proceeds or other moneys derived by the District from the recreation facilities which are operational; plus (vi) the earnings on and income derived from the investment of the amounts described in clauses (i), (ii), (iii), (iv) and (v) hereof, but excluding in all cases customer deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the District, and excluding any proceeds of taxes or benefit assessments restricted by law to be used by the District to pay obligations of the District other than Panty Bonds or Contracts. 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 its General Manager or by the Secretary of its Board of Directors or by any two persons (whether or not olTicers 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. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1. Representations by the District. The District makes the following representations: (a) The District is a county water district duly organized and existing under and pursuant to the laws of the State. DOC SOC/ 14335070/022497-0011 (b) The District has full legal right, power and authority to enter into the Installment Purchase Agreement and carry out its obligations hereunder, to carry out and consummate all other transactions contemplated by the Installment Purchase 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 authorized the execution, delivery and due performance of the Installment Purchase 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, other than interest paid with respect to Installment Payments securing the 201 OB Bonds, under the terms of the Installment Purchase Agreement being included in the gross income of the Bond Owners or their assigns for purposes of federal or State 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 and refinance the acquisition of the Project in the manner provided for in the Installment Purchase Agreement. Section 2.2. Representations and Warranties by the Authority. The Authority makes the following representations and wan-anties: (a) The Authority is a public body duly organized and existing under the Joint Exercise of Powers Agreement, and under the Constitution and laws of the State, and has full legal right, power and authority to enter into the Installment Purchase Agreement and to carry out and consummate all transactions contemplated by the Installment Purchase Agreement and by proper action has duly authorized the execution and delivery and due performance of the Installment Purchase Agreement. (b) The execution and delivery of the Installment Purchase Agreement and the consummation of the transactions herein contemplated will not violate any provision of law, any order of any court or other agency of government, or any indenture, material agreement or other instrument to which the Authority is now a party or by which it or any of its properties or assets is bound, or be in conflict with, result in a breach of or constitute a default (with due notice or the passage of time or both) under any such indenture, agreement or other instrument, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority. (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 the terms of the Installment Purchase Agreement being included in the gross income of the Bond Owners or their assigns for purposes of federal or State income taxation. ARTICLE III SALE AND PURCHASE OF THE PROJECT Section 3.1. Sale and Purchase of the Project. In consideration for the Authority's assistance in refinancing the Prior 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 9 DOC SOC/ 1433507v3/022497 -001 I 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. Section 31. Purchase and Sale of the Proiect. 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 the Installment Purchase Agreement. Section 3.3. 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. Such vesting shall occur without funber 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 assure such vesting. Title to each portion of the 2010 Project shall vest in the District immediately upon acquisition or construction thereof, without further action of the Authority or the District. Section 3.4. Acquisition and Construction of the 2010 Project. The Authority hereby agrees to cause the 2010 Project to be constructed, acquired and installed by the District as its agent. 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 it 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. Section 3.5. Changes to the Proiect. The District may substitute other improvements for those listed as components of the Prior Project and the 2010 Project in Exhibits BB =1 and BB2, respectively, 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 substituted and the improvements to District facilities they replace in the Prior Project or the 2010 Project, as applicable; and (b) stating that the estimated costs of construction, acquisition and installation of the substituted improvements are not less than such costs for the improvements previously planned. Section 3.6. Acquisition Fund. There is hereby established with the District a special fund designated the "Acquisition Fund." The District shall deposit proceeds of the 2010 Bonds in the Acquisition Fund. The moneys in the Acquisition Fund shall be held by the District in trust and moneys therein shall be applied to the payment of the costs of acquisition and construction of the 2010 Project and of expenses incidental thereto. Before any payment is made from the Acquisition Fund by the Chief Financial Officer of the District, the General Manager of the District shall cause to be filed with the Chief Financial Officer 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 Chief Financial Officer of the District will pay the amount set forth in such Written Requisition as directed by the terms thereof. The Chief Financial Officer 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 payment of, any of the moneys to be so paid, which has not been released or will not be released simultaneously with such payment. 10 DOCS OC/ 1433507v3/022497 -0011 When the 2010 Project shall have been constructed and acquired 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 such costs of acquisition and incidental expenses have been detemrined and paid (or that all of such costs and expenses have been paid less specified claims which are subject to dispute and for which a retention in the Acquisition Fund is to be maintained in the full amount of such claims until such dispute is resolved), shall be delivered to the Chief Financial Officer of the District and the Trustee by the District. Upon the receipt of such statement, the Chief Financial Officer of the District shall transfer any remaining balance in the Acquisition Fund not needed for Acquisition Fund purposes (but less the amount of any such retention which amount shall be certified to the Chief Financial Officer of the District by the District) to the Revenue Fund. ARTICLE 1V INSTALLMENT 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 by the District as and constitute interest paid with respect to the principal amount of the District's obligations 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 principal in the amounts and on the Installment Payment Dates as set forth in Exhibit A hereto. 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, Wastewater 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 DOC SOC/ 1433507v3/022497 -0011 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; subject, however, to the pledge thereon securing Pre - Existing Indebtedness now in existence. The Revenues shall not be used for any other purpose while any of the Installment Payments remain unpaid; provided that out of the Revenues there may be apportioned such sums for such purposes as are expressly permitted herein. This pledge, together with the pledge created by all other Contracts and Parity Bonds, shall constitute a lien on Revenues and, subject to application of Revenues and all amounts on deposit in the Revenue Fund 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 of the Indenture. Section 51. 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 the Installment Purchase Agreement. The District shall, from the moneys in the Revenue Fund, pay all Operation and Maintenance Costs (including amounts reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs, the payment of which is not then immediately required) as such Operation and Maintenance Costs become due and payable. Thereafter all remaining 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 each of such funds shall be held in trust and shall be applied, used and withdrawn only for the purposes set 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 Installment Payment Date. The District shall also, from the moneys in the Revenue Fund, transfer to the applicable trustee or payee for deposit in the respective payment fund, without preference, or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other Debt Service in accordance with the provisions of 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, transfer to the Trustee for deposit to the applicable trustee for such reserve funds and/or accounts, if any, as may have been established in connection with Parity Bonds or Contracts, 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. 12 DOCSOC / 1433507 v3 /022497 -001 1 (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 but 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 Water System Revenues and Net Wastewater System Revenues, respectively for the most recent audited Fiscal Year preceding the (late 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 the case may be, as evidenced, b" 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 twenty percent (120 %) of the Debt Service allocable to the Water System and Wastewater System, respectively for such Fiscal Year; and (b) The Net Water System Revenues and Net Wastewater System Revenues, respectively 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 increases or decreases in rates and charges for the Water Service and Wastewater Service approved and in effect as of the date of calculat ±on, as evidenced by a calculation prepared by the District, shall have produced a sum equal to at least one hundred twenty percent (120 %) of the Debt Service for such Fiscal Year allocable to the Water System and Wastewater System, respectively plus the Debt Service allocable to the Water System and Wastewater System, respectively which would have accrued 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 of such Fiscal Year, plus the Debt Service allocable to the Water System and Wastewater System, respectively which would have accrued had such Contract been executed or Parity Bonds been issued at the beginning of such Fiscal Year. Notwithstanding the foregoing, (1) 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 and (2) the State Loan may be executed and delivered .and shall constitute a Contract for the purposes of this Agreement and any further Parity Bonds or Contracts. Section 5.4. Subordinate Obligations. Notwithstanding any other provision of the Installment Purchase 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 the Installment Purchase 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. 13 DOCSOC/1433507v3/022497 -001 i Section 5.5. 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 Agreements. 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 temiinate the Installment Purchase Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Project, commerc:,al frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either or any failure of the Authority to observe or perform any agreement, condition, covenant or term contained herein required to be observed and performed by it, whether express or implied, or any duty, liability or obligation arising out of or connected herewith or the insolvency, or deemed insolvency, or bankruptcy or liquidation of the Authority or any force majeure, including acts of God, tempest, storm, earthquake, war, rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, strikes, industrial disputes, lock outs, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities. It is expressly understood and agreed by and among the parties to the Installment Purchase Agreement that, subject to Section 10.7 hereof, each of the agreements, conditions, covenants and terms contained in the Installment Purchase 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 underlhe 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 outstanding 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 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 Parity Bonds as permitted herein or incur evidences of indebtedness or incur other obligations for any lawful purpose which are payable from and secured by a pledge of lien on Revenues on any 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 Water System or Wastewater 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 or Wastewater 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 Wastewater System, or any material or equipment which has become worn out, may be sold if such sale will riot 14 DOCS OC/ 1433507v3/022497 -0011 impair the ability of the District to pay 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 or Wastewater 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 System or Wastewater System exercising any remedy which would deprive the District of or otherwise interfere with its right to own and operate such portion of the Water System or Wastewater System. 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 will not, to the extent permitted by law and within the scope of its powers, permit any other public or private agency, corporation, district or political subdivision or any person whomsoever to acquire, construct, maintain or operate within the District any water or wastewater system competitn e with the Water System or Wastewater System. Notwithstanding the foregoing, the District may permit competitive systems where it determines that provision of Water Service or Wastewater Service is either geographically, technically or economically prohibitive or where provision of such services is more readily obtained from another provider of such services. Section 6.5. Tax Covenants. Notwithstanding any other provision of the Installment Purchase Agreement, absent an opinion of Bond Counsel that the exclusion from gross income of interest with respect to the Bonds will not be adversely affected for federal income tax purposes, the District 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 Activity. The District will not take or omit to take 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; (b) Arbitrage. The District will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take or omit to take any action which would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code; (c) Federal Guarantee. The District will make no use of the proceeds of the Bonds or take or omit to take and action that would cause the Bends to be "federally guaranteed" within the meaning of Section 149(b) of the Code; (d) Information Reporting. The District 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 Bonds pursuant to Section 103(a) of the Code; (e) Hedge Bonds. The District will make no use of the proceeds of the Bonds or any other amounts or property, regardless of the source, or take am- action or refrain from taking any action that would cause the Bonds to be considered "hedge bonds" within the meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(8) of the Code to maintain the exclusion from gross income of interest on the Bonds for federal income tax purposes; and 15 DOCSOC/ 1433507v3/022497-0011 (f) Miscellaneous. The District will take no action, or omit to take any action, inconsistent with the expectations stated in any Tax Certificate executed with respect to the 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 from issuing Parity Bonds or executing and delivering Contracts, the interest with respect to which has been determined by Bond Counsel to be subject to federal income taxation. Section 6.6. Maintenance and Operation of the Water System and Wastewater System. The District will maintain and preserve the Water System and Wastewater System in good repair and working order at all times and will operate the Water System and Wastewater System in an efficient and economical manner and will pay all Operation 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 become 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 lien of the Installment Payments or which might impair the security of the Installment Payments. Section 6.8. Compliance with Contracts. The District will neither 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 Payments; and the District will comply with, keep, observe and perform all agreements, conditions, covenants and terms, express or implied, required to be performed by it contained in all other contracts affecting or involving the Water System or Wastewater System, to the extent that the District is a party thereto. Section 6.9. Insurance. (a) The District will procure and maintain or cause to be procured and maintained insurance on the Water System and Wastewater System with responsible insurers in such amounts and against such risks (including damage to or destruction of the Water System and Wastewater System) as are usually covered in connection with water and wastewater systems similar to the Water System and Wastewater System so long as such insurance is available from reputable insurance companies. In the event of any damage to or destruction of the Water System or Wastewater System caused by the perils covered by such insurance, the Net Proceeds thereof shall be applied to the reconstruction, repair or replacement of the damaged or destroyed portion of the Water System or Wastewater System, respectively. The District shall begin such reconstruction, repair or replacement promptly after such damage or destruction shall occur, and shall continue and properly complete such reconstruction, repair or replacement as expeditiously as possible, and shall pay out of such Net Proceeds all costs and expenses in connection with such reconstruction, repair or replacement so that the same shall be completed and the Water System and Wastewater System shall be free and clear of all claims and liens. 16 DOCSOC/ 14335070/1022497-0011 If such Net Proceeds exceed the costs of such reconstruction, repair or replacement portion of the Water System or Wastewater System, respectively, and/or the cost of the construction of additions, betterments, extensions or improvements to the Water System or Wastewater System, respectively, then the excess Net Proceeds shall 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 Paritv 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, repair or replace the damaged or destroyed portion of the Water System or Wastewater System, and/or not to construct other additions, betterments, extensions or improvements to the Water System or Wastewater System; and thereupon such Net Proceeds shall be applied to the prepayment of Installment Payments as provided in Article N'lI and to the retirement of such Parity Bonds and Contracts. (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 water and wastewater systems similar to the Water System and Wastewater 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 water and wastewater systems similar to the Water System and Wastewater System and is, in the opinion of an accredited actuary, actuarially sound. All policies of insurance required to be maintained herein shall provide that the Authority and the Trustee shall be given thirty (30) days written notice of any intended cancellation thereof or reduction of coverage provided thereby. Section 6.10. 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 A uthority and the Trustee annually within two hundred seventy (270) days after the close of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2010) 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. 17 DOCSOC/ 1433507v3/022497 -0011 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 lawfiilly imposed upon the Water System, Wastewater 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, Wastewater 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, at the commencement of each Fiscal Year, 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 Water System Revenues equal to one hundred twenty percent (120 %) of Debt Service for such Fiscal Year allocable to the Water System. (b) To the fullest extent permitted by law, the District shall fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Wastewater Service provided by the Wastewater System which will be at least sufficient to yield during each Fiscal Year Net Wastewater System Revenues equal to one hundred twenty percent (120 %) of Debt Service for such Fiscal Year allocable to the Wastewater System. (c) 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 Water System Revenues or Net Wastewater System Revenues, as applicable, from such reduced rates and charges will at all times be sufficient to meet the requirements of this Section. Section 6.14. Collection of Rates and Charges. The District will have in effect at all times by -laws, rules and regulations requiring each customer to pay the rates and charges applicable to the Water Service and Wastewater 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 or Wastewater System shall be taken by eminent domain proceedings, the Net Proceeds thereof shall 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, suffered or to be suffered by the District by reason of such eminent domain proceedings; (ii) a general description of the additions, betterments, extensions or improvements to the Water System or Wastewater System proposed to be acquired and constructed by the District from such Net Proceeds; and (iii) an estimate 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 the estimated loss of annual Net Revenues resulting from such eminent domain proceedings so that the ability of the District to meet its obligations hereunder will not be substantially impaired (which 18 DOCSOC/ 1433507x3/022497 -0011 determination 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 accordance 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 \'et 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 e mount 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 will not voluntarily consent to or permit any rescission of, nor will it consent to any amendment to or otherwise take any action under or in connection with any contracts previously or hereafter entered into if such rescission or amendment would in any manner impair or adversely affect the ability of the District to pay Installment Payments. Section 6.18. Continump 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 the Installment Purchase Agreement, failure of the District to comply with the Continuing Disclosure Certificate shall not be considered an Event of Default; however, any Owner of Bonds or Beneficial 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 this Section, `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. ARTICLE VII PREPAYMENT OF INSTALLMENT PAYMENTS Section 7.1. Prepayment. (a) The District may prepay the Installment Payments maturing on or after the Installment Payment Date preceding October 1, as a whole or in part, or as otherwise selected by the District, on any date on or after the Installment Payment Date preceding October 1 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 19 DOCSOC/ 1433507v3/022497 -0011 (b) 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, 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 Installment Payments will be made, 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 CORPORATION 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; (b) if default shall be made by the District in the performance of any of the other agreements or covenants required herein or in any Contract or Parity Bond to be performed by it, and such default shall have continued for a period of thirty (30) days after the District shall have been given notice in writing of such default by the Authority; (el if the District 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 District 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 District or of the whole 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 such 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 Payments and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, anything contained herein to the contrary notwithstanding. Immediately upon a declaration of acceleration, interest will cease to accrue. This subsection however, is subject to the condition that if at any time after the entire principal amount of the unpaid 20 DOCSOC/ 1 4335070/022497-0011 Installment Payments and the accrued interest thereon shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered the District shall deposit with the Authority a sum sufficient to pay the unpaid principal amount of the Installment Payments and/or the unpaid payment 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 ainount 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 satisfaction of the Authority or provision deemed by the Authority to be adequate shall have been made therefor, then and in every such case the Authority by written notice to the District, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. Section 8.2. Application of Funds Upon Acceleration. Upon 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 of the fees, costs and expenses of the Trustee, including reasonable fees and disbursements of its counsel, pursuant to Section 7.03 of the Indenture; Second, to the payment of the fees, costs and expenses of the Authority, including reasonable fees and disbursements of its counsel; Third, to the payment of the Operation and Maintenance Costs; and Fourth, 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 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 Wastewater Svstem or other assets of the District, 21 DOC SOC/ 1433507v3/022497 -001 I and no default hereunder shall result in the loss of the Project, the Water System or Wastewater 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 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. If any remedial action is discontinued or abandoned, the Trustee and Bond Owners shall be restored to their former positions. ARTICLE IX DISCHARGE OF OBLIGATIONS Section 9.1. Discharge of Oblieations. When: (a) all or any portion of the Installment Payments shall have become due and payable in accordance herewith or a written notice of the District to prepay 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 Permitted Investments, issued by the United States of America and described in clause (A) of the definition thereof, the principal of and interest on which when due will provide money sufficient to pay all principal, prepayment premium, 22 DOCSOC/ 1433507v3/ 022497 -0011 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 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 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 Installment Payments). In such event, upon request of the District. the Trustee shall 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 the 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 hereto 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 to be held by the Trustee in trust for the payment of the Installment Payments and shall be applied by the Trustee to the payment of the Installment Payments of the District. 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 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 ava,lahle 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. 23 DOC SOC/ 1433507v3/022497 -0011 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. 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 appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof, and words of any gender shall be deemed and construed to include all genders. All references herein to "Articles," "Sections" and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof, and the words "hereby ", "herein," "hereof," "hereto," "herewith" and other words of similar import refer to the Installment Purchase Agreement as a whole and not to any particular article, section, subdivision or clause hereof. Section 10.7. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the 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 from 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 the Installment Purchase Agreement, and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. 24 DOCSOC/ 1433507x3/022497 -0011 Section 10.8. Assignment. The Installment Purchase Agreement and any rights hereunder may be assigned by the Authority. as a whole or in part, without the necessity of obtaining the prior consent of the District. Section 10.9. Net Contract. The Installment Purchase Agreement shall be deemed and construed to be a net contract, and the District shall pay absolutel` 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 WITH 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 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, Suite 18 Highland, CA 93246 Attention: President Section 10.12. Effective Date. The Installment Purchase Agreement shall become effective upon its execution and delivery, and shall terminate when the Purchase Price shall have been fully paid (or provision for the payment thereof shall have been made to the written satisfaction of the Authority). Section 10.13. Execution in Counterparts. The Installment Purchase Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. Section 10.14. Indemnification of Authority. The District hereby agrees to indemnify and hold harmless the Authority if and to the extent permitted bl, 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. 25 DOC S OC/ 1433 507x3/022497 -001 I Section 10. 15. Amendments Permitted (a) The Installment Purchase Agreement and the rights and obligations of the Authority, the District, the Owners of the 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 Bonds then Outstanding, exclusive of Bonds disqualified as provided in the Indenture, 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 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 Revenues and other assets except as permitted herein. without the consent of the Owners of all of the Bonds then Outstanding. (b) The Installment Purchase Agreement and the rights and obligations of the Authority, the District and of the Owners of the 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 Bonds, if the Trustee shall receive an opinion of Bond Counsel to the effect that the provisions of such amendment shall not materially adversely affect the interests of the Owners of the Outstanding Bonds, including, without limitation, for any one or more of the following purposes: (1) to add to the covenants and agreements of the Authority or the District contained in the Installment Purchase 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 Bonds; (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Indenture, or in regard to matters or questions arising under the Installment Purchase Agreement, as the Authority and the District may deem necessary or desirable; (3) to make such other amendments or modifications as may be in the best interests of the Owners of the Bonds; and (4) to make any amendments or supplements necessary or appropriate to preserve or protect the exclusion of interest with respect to the 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 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: 26 DOCSOC/ 1 433507x3/022497 -0011 (a) A Paired Obligation Provider shall initially have 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 ol' such Paired Obligation shall be deemed to be equal to the irrevocable fixed interest rate attributable thereto 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 Requirement 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 received from the Paired Obligation Provider. 27 DOCSOC/ 14335070/022497 -0011 IN WITNESS WHEREOF, the parties hereto have executed and attested the Installment Purchase Agreement by their officers thereunto duly authorized as of the day and year first written above. EAST VALLEY WATER DISTRICT By: Its: President of the Board Attest: Secretary of the Board EAST VALLEY WATER DISTRICT FINANCING AUTHORITY Bv: Its: President of the Board Attest: Secretary of the Board S -1 DOC SOC/ 1433507v3/022497 -0011 EXHIBIT A PURCHASE PRICE 1. The principal amount of payments to be made by the District hereunder is $[Bond Amount]. 2. The installment payments of principal and interest are payable in the amounts and on the Installment Payment Dates as follows: Amount Attributable to Installment Payment Date Principal 3/26/2011 9/26/2011 3/26/2012 9/26/2012 3/26/2013 9/26/2013 3/26/2014 9/26/2014 3/26/2015 9/26/2015 3/26/2016 9/26/2016 3/26/2017 9/26/2017 3/26/2018 9/26/2018 3/26/2019 9/26/2019 3/26/2020 9/26/2020 3/26/2021 9/26/2021 3/26/2022 9/26/2022 3/26/2023 9/26/2023 3/26/2024 9/26/2024 3/26/2025 9/26/2025 3/26/2026 9/26/2026 3/26/2027 9/26/2027 3/26/2028 9/26/2028 3/26/2029 9/26/2029 3/26/2030 9/26/2030 3/26/2031 9/26/2031 3/26/2032 A -1 DOC SOC/ 1433507v3/022497 -0011 Amount Attributable to Interest Total Amount Attributable to Amount Attributable to Installment PavmentDate Principal Interest Total 9/26/2032 3/26/2033 9/26/2033 3/26/2034 9/26/2034 3/26/2035 9/26/2035 3/26/2036 9/26/2036 3/26/2037 9/26/2037 3/26/2038 9/26/2038 3/26/2039 9/26/2011 3/26/2011 TOTAL A -2 DOC SOC/ 1433507 v3 /022497 -001 1 EXHIBIT B -1 PRIOR PROJECT The Prior Project comprises the following described improvements to the Water System and Wastewater System. Financing Component 2001 Installment Purchase Agreement Water System Improvements 2004 Installment Purchase Agreement District Headquarters Site 20061nstallment Purchase Agreement Water System Improvements 1995 Bonds B -1 -1 DOCSOC/ 1433507v3/022497 -0011 EXHIBIT B -2 2010 PROJECT The 2010 Project comprises the following described improvements to the Water System and Wastewater System. Price Wastewater B -2 -1 DOC SOC/ 1433507v3/022497 -00 1 1 EXHIBIT C FORM OF REQUISITION FOR DISBURSEMENT FROM ACQUISITION FUND EAST VALLEY WATER DISTRICT FINANCING AUTHORITY REFUNDING REVENUE BONDS. SERII[S 2010 REQUISITION NO. _ FOR DISBURSEMENT FROM ACQUISITION FUND The undersigned hereby states and certifies: (i) that the undersigned is the duly appointed, qualified and acting General Manager of the 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 "), anc as such, is familiar with the facts herein certified and is authorized to certify the same; (ii) that, pursuant to Section 3.6 of that certain Installment Purchase Agreement, dated as of October 1, 2010, by and between the District and the East \ alley Water District Financing Authority, the undersigned hereby requests the Chief Financial Officer of the District to disburse this date the following amounts from the .Acquisition Fund established under the Indenture, to the payees designated on the attached Exhibit 1; (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 Environmental Quality Act, as amended (Division 13 of the California Public Resources Code). prior to the expenditure of such amount for the purpose set forth on the attached Exhibit 1 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 1, which has not been released or will not be released simultaneously with the payment of such obligation. other than materialmen's or mechanics' liens accruing by mere operation of law. Dated: EAST VALLEY WATER DISTRICT By: Its: C -1 DOCS OC/ 1433507v3/022497 -001 I General Manager EXHIBIT I ACQUISITION FUND DISBURSEMENTS Item Payee Name and Purpose of Amount from Number Address Obligation Acquisition Fund C -2 DOCSOC/ 14335070/022497 -0011 Total ARTICLE I DEFINITIONS SectionI.I. Definitions ................................................................................... ..............................2 12 Section 5.2. ARTICLE II Section 5.3. REPRESENTATIONS AND WARRANTIES Section 2.1. Representations by the District ................................................. ..............................8 Section 2.2. Representations and Warranties by the Authority ....................... ..............................9 Section5.6. ARTICLE III SALE AND PURCHASE OF THE PROJECT Section 3.1. Sale and Purchase of the Project ................................................. ..............................9 Section 3.2. Purchase and Sale of the Project ................................................. .............................10 Section3.3. Title ............................................................................................ .............................10 Section 3.4. Acquisition and Construction of the 2010 Project ...................... .............................10 Section 3.5. Changes to the Project ................................................................. .............................10 Section3.6. Acquisition Fund ......................................................................... .............................10 ARTICLE IV INSTALLMENT PAYMENTS Section4.1. Purchase Price ............................................................................ .............................11 Section 4.2. Installment Payments ................................................................. .............................11 ARTICLE V SECURITY Section 5.1. Pledge of Revenues .................................................................. ............................... 12 Section 5.2. Allocation of Revenues .............................................................. .............................12 Section 5.3. Additional Contracts and Parity Bonds .................. ................... .............................13 Section 5.4. Subordinate Obl igations .......... ............................... ................... .............................13 Section 5.5. No Senior Obl igations ................................................................ .............................13 Section5.6. Investments ............................................................................... .............................14 ARTICLE VI COVENANTS OF THE DISTRICT Section 6.1. Compliance with Installment Purchase Agreement and Ancillary Agreements................................................................................ .............................14 Section 6.2. Against Encumbrances ............................................................... .............................14 i DOCSOC/ 1433507v3/022497 -0011 Section 6.3. Against Sale or Other Disposition of Property ........................... .............................14 Section 6.4. Against Competitive Facilities .................................................... .............................15 Section6.5. Tax Covenants .......................................................................... ............................... 15 Section 6.6. Maintenance and Operation of the Water System and Wastewater System ............16 Section6.7. Payment of Claims ...................................................................... .............................16 Section 6.8. Compliance with Contracts ......................................................... .............................16 Section6.9. I nsurance ..................................................................................... .............................16 Section 6.10. Accounting Records; Financial Statements and Other Reports .. .............................17 Section 6.11. Protection of Security and Rights of the Authority ................... ............................... 17 Section 6.12. Payment of Taxes and Compliance with Governmental Regulations ......................18 Section 6.13. .Amount of Rates and Charges .................................................... .............................18 Section 6.14. Collection of Rates and Charges ................................................. .............................18 Section 6.15. Eminent Domain Proceeds ........................................................ ............................... 18 Section 6.16. .Further Assurances .................................................................... ............................... 19 Section 6.17. .Enforcement of Contracts ........................................................... .............................19 Section 6.18. Continuing Discl osure ................................................................. .............................19 ARTICLE VII PREPAYMENT OF INSTALLMENT PAYMENTS Section7.1. Prepayment ............................................................................... ............................... 19 Section 7.2. ]Method of Prepayment ................................................................ .............................20 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION Section 8.1. 13vents of Default and Acceleration of Maturities ...................... .............................20 Section 8.2. Application of Funds Upon Acceleration ................................... .............................21 Section 8.3. Other Remedies of the Authority ................................................ .............................21 Section8.4. Non- Waiver ................................................................................. .............................22 Section 8.5. Remedies Not Exclusive ........................................................... ............................... 22 ARTICLE IX DISCHARGE OF OBLIGATIONS Section 9.1. Discharge of Obligations .......................................................... ............................... 22 ARTICLE X MISCELLANEOUS Section 10.1. Liability of District Limited to Revenues ................................... .............................23 Section 10.2. Benefits of Installment Purchase Agreement Limited to Parties .............................23 Section 10.3. Successor Is Deemed Included in all References to Predecessor ............................24 Section 10.4. Compensation and Indemnification of Trustee ........................... .............................24 Section 10.5. Waiver of Personal Liability ....................................................... .............................24 ii DOC SOC/ 1433507x3/022497 -001 1 Section 10.6. Article and Section Headings, Gender and References .............. .............................24 A -1 Section10.7. Partial Invalidity ......................................................................... .............................24 B -1 -1 Section10.8. Assignment ............................................................................... .............................25 B -2 -1 Section10.9. Net Contract ............................................................................... .............................25 Section10.10. California Law ........................................................................... .............................25 C -1 Section10.11. Notices ...................................... ............................... ................. .............................25 Section10.12. Effective Date ........................... ............................... ................. .............................25 Section 10.13. Execution in Counterparts ......... ............................... ................. .............................25 Section 10.14. Indemnification of Authority ... ............................... ................. .............................25 Section 10.15. Amendments Permitted ............. ............................... ................. .............................26 Section 10.16. Paired Obligation Provider Guidelines ...................................... .............................26 Signatures.................................................................................................. ............................... S -1 EXHIBIT PURCHASE PRICE .............................................. ... ............................................... A -1 EXHIBITB -1 PRIOR PROJ ECT ............................................... . .... ........................................... B -1 -1 EXHIBITB -2 2010 PROJECT ............................................. ...... ....... ............ .............................. B -2 -1 EXHIBIT C FORM OF REQUISITION FOR DISBURSEMENI FROM ACQUISITIONFUND ................................... ...... ............ ....................................... C -1 iii DOCS OC/ 1433507v3/022497 -0011 S b to eqtrqval EAST VALLEY WATER DISTRICT SPECIAL MEETING September 13, 2010 MINUTES President Wilson called the Special Meeting to order at 2:45 p.m. Vice President LeVesque led the flag salute. PRESENT: Directors: LeVesque, Malmberg, Morales, Sturgeon, Wilson ABSENT: Directors: None STAFF: Robert Martin, General Manager; Brian Tompkins, Chief Financial Officer; Cecilia Contreras, Administrative Office Specialist; Justine Hendricksen, Administrative Manager LEGAL COLNSEL: Steve Kennedy GUEST(s): Charles Roberts (Highland Community News), Dr. Bill Mathis (Mathis Group) PUBLIC PARTICIPATION President Wilson declared the public participation section of the meeting open at 2:45 p.m. There being no written or verbal comments the public participation section was closed. DISCUSSION AND POSSIBLE ACTION REGARDING THE DISTRICT'S STRATEGIC PLANNING President Wilson stated that sometime in the near future he would like to review the Board Norms. The Board discussed the District's Mission Statement in great detail; the Board suggested revising the statement to include "sanitary sewer service" and would like to include bullet points following the statement. Dr. Mathis discussed high performance Boards and guidelines for EVWD. Special Meeting Minutes 09 /13 /10iph The Board discussed the planning of a strategic plan in great detail including: • Why it's important to have a Strategic Plan • Commitment for the future • Providing a safe and reliable water supply • Leadership, best practices, cost effectiveness • Communications • Political and regional influence • Customer service Dr. Mathis discussed the importance of developing a strategic plan and will work with the Board on the implementation process. E"I L1101W`I The meeting was adjourned at 5:16 p.m. ADJOURN Robert E. Martin, Secretary George E. Wilson, President 2 Spmal Meeting Minutes. 09/13/10 kph Subject to Approval EAST VALLEY WATER DISTRICT September 14, 2010 REGULAR BOARD MEETING MINUTES The meeting was called to order at 3:00 p.m. by President Wilson. Dr. Katy Henry led the flag salute. PRESENT: Directors: LeVesque, Malmberg, Morales, Sturgeon, Wilson ABSENT: None STAFF: Robert Martin, General Manager; Brian Tompkins, Chief Financial Officer; Ron Buchwald, District Engineer; Cecilia Contreras, Administrative Office Specialist LEGAL COUNSEL: Steve Kennedy GUEST (S): Charles Roberts (Highland Community News), Cara Van Dijk (CV Strategies), Erin Gilhuly (CV Strategies), Dr. Katy Henry APPROVAL OF AGENDA M /S /C (Sturgeon - Levesque) that the September 14, 2010 agenda be approved as submitted. PUBLIC PARTICIPATION President Wilson declared the public participation section of the meeting open at 3:00 p.m. There being no written or verbal comments, the public participation section was closed. ADJOURN TO EAST VALLEY WATER DISTRICT FINANCING AUTHORITY AT 3:01 P.M. RECONVENE TO EAST VALLEY WATER DISTRICT REGULAR BOARD MEETING AT 3:04 P.M. APPROVAL OF AUGUST 24, 2010 BOARD MEETING MINUTES M/S /C Qvtalmberg- Sturgeon) that the Board Meeting Minutes for August 24, 2010 be approved as submitted. (Minutes 09/14/10) cmc 1 RESOLUTION 2010.19 — A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT NOTICE OF COMPLETION EXECUTED BY THE DISTRICT FOR INSTALLATION OF APPROXIMATLEY 1,100 LF OF 8" DIP WATER MAIN, 6 NEW WATER SERVICES AND 1 NEW FIRE HYDRANT WITH 2 TIE -INS ON LIVE OAK ROAD FROM SUMMIT DRIVE TO TERRACE DRIVE M/S /C (Malmberg- Sturgeon) that Resolution 2010.19 be approved. DISBURSEMENTS M/S /C (Malmberg- Sturgeon) that General Fund Disbursements #225575 through #225829 which were distributed during the period of August 16. 2010 through September 7, 2010, in the amount of $1,512,070.38 and Payroll and benefit contributions for the period ended September 7, 2010 and included checks and direct deposits, in the amount of $277,118.88 and $6,583.29 be approved. Total Disbursements for the period of $1,795,772.55 are approved. DISCUSSION REGARDING THE DISTRICT'S FALL FACILITIES TOUR The General Manager discussed possible dates for the upcoming fall tour; the Fall Tour was scheduled for October 29h, 2010. RESOLUTION 2010.20 — A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT DOCUMENTING INTER -FUND BORROWING AND REPAYMENTS M/S /C (Malmberg- Morales) that Resolution 2010.20 be approved. REVIEW AND ACCEPT FINANCIAL STATEMENTS FOR THE PERIOD ENDING JULY 31, 2010 Mr. Tompkins reviewed the financial statements for the period ending July 31, 2010. M/S /C (Morales- LeVesque) to accept the financial statements for the period ending July 31, 2010. DIRECTORS' FEES AND EXPENSES FOR AUGUST 2010 M/S /C (Levesque- Malmberg) that the Director's fees and expenses for August 2010 be approved as submitted. GENERAL MANAGER / STAFF REPORT The General Manager stated that Plant 24 Well B will be flushed over the next few days and the excess water will be filtered into the park lawn; that lie received a call from the Los (Minutes 09 /14/10) cmc 2 Angeles office Corp of Engineers regarding his opinion of the possibility that extra funds from the Water Quality study be reprogrammed to other projects; after speaking with the District's lobbyist, he stated that it will be better to keep the funds in the Water Quality project. Mr. Tompkins stated that he received a quote regarding a -bills and will continue to move forward with his research. CONSULTANT REPORTS Ms Van Dijk, CV Strategies, reported that the press releases regarding Eastwood Farms Assessment District have been posted in the Highland Community News and in the San Bernardino Sun; that they will be preparing a Customer Satisfaction Survey and employee outreach. COMMITTEE REPORTS a. Legislative Committee — Director Morales stated that the committee is working on a narrative with the Districts representative on legislative actions; the General Manager discussed that Senator Feinstein would like to be kept informed of the progress that the Joint Task Force is making with the Santa Ana Sucker Fish b. Community Affairs — Director Sturgeon stated that the committee is working on a Strategic Plan for monies being spent on Public Outreach. c. Policy Committee — Director Morales stated that the committee will be getting together at the end of the month. ORAL COMMENTS FROM BOARD OF DIRECTORS Director Malmberg stated the he will not be able to attend the next Board Meeting. Director Sturgeon requested to be removed from the Legislative Committee. President Wilson appointed himself to take Director Sturgeons place on the Legislative Committee Director Morales requested that a change be made on the District's website in regards to the Perchlorate Contamination statement to better explain the reasons behind it. LETTER OF APPRECIATION TO THE DISTRICT FROM RITA SCHMIDT SUDMAN (WATER EDUCATION FOUNDATION) Information only. WATER EDUCATION FOUNDATION "SAN JOAQUIN RIVER RESTORATION TOUR ", RAMADA INN, FRESNO, OCTOBER 13-14,2010 (Minutes 09/14/10) cme 3 Information only. The Board took a break at 3:50 p.m. The Board returned to session at 3:58 p.m. CLOSED SESSION The Board entered in Closed Session at 3:58 p.m. as provided in the California Open Meeting Law, Government Code Section 54945.9(a), to discuss those items listed on the agenda. ADJOURN TO REGULAR SESSION President Wilson declared that the meeting adjourn to regular session. ANNOUNCEMENT OF CLOSED SESSION ACTIONS The Board returned to session at 4:04 p.m. The items listed on the agenda were discussed in closed session with no reportable action being taken. ADJOURN The meeting was adjourned at 4:04 p.m. until the next Board Meeting Robert E. Martin, Secretary George E "Skip" Wilson, President (Minutes 09 /14/10) cmc 4 EXHIBIT "A" RESOLUTION 2010.24 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT NOTICE OF COMPLETION BE IT HEREBY RESOLVED, by the Board of Directors of the East Valley Water District, as follows: WHEREAS, based upon the certificate of completion executed by the District for base pave trenching totaling 7,469 square feet. Concrete pouring for cross gutter repair totaling 36 square feet. Grind and overlay trench totaling 8,955 square feet, on Live Oak Road from Summit Drive to Terrace Drive NOW, THEREFORE, BE IT RESOLVED that the Board of Directors hereby determine that said contract is completed and the President and Secretary are hereby authorized to execute a Notice of Completion on behalf of the District, and the Secretary is hereby authorized and directed to record said Notice of Completion in the office of the County Recorder, County of San Bernardino, State of California. The foregoing resolution was duly adopted at a meeting of the Board of Directors of the East Valley Water District upon motion duly made, seconded and carried on September 28, 2010. Ayes: Noes: Absent: Attest: W2342 dm 09/22/10 EAST VALLEY WATER DISTRICT George E. Wilson, Board President Robert E. Martin, Board Secretary (Seal) RECORDING REQUESTED B" Manly Dursh EVWD AND WHEN RECORDED l TO Name East Valley Water District PO Box 3027 Street San Bernardino, CA 92413 Address Ann: Engmeanng Department W2312 CMa Slate FEE EXEMPT PURSUANT TO GOVERNMENT CODE SECTION 6103 BPALE ABOVE THIS LINE FOR RECORDER'S USE NOTICE OF COMPLETION Notice pursuant to Civil Code Section 3093 sue oe fled within 10 days after completan. (See reverse aloe for Complete requirements.) Notice s hereby given Met. 1. The undersigned isomer or corporate clhcer of the owner of He interest or estate stated below in the property hereinafter describe: 2. The hilt came of the owner d East Vii W w, District 3. The full address of the ovide, APQ&zA4Z7 San Barrel CA 92413 n Bernardino CoOmy. A. The minus of Me Interest or estate of the Owner s, in fee. None (XOtherthe, fee. mike'I1 Ne' and men In, Oanee -woloser uneer rent. M IxnCMN,'or Watt') 5. The NII names end NII atltlresses of ell persons. d any, Mm hoe title with the undersigned as pint extents or as tenants in common are NAME ADDRESS L�Awma) imm'I' iaagdpp�I'FflGC7II 11^1F9RCiG]�IGIICi�[LFFkL51• 6. A cope of improvement m the propeoy heretuher dncrlbed wee completed on SntomWt f 3. 2010 The mirk done was: Ban osve trench tote ino r ri r fin feet. Grind and overlay demon witilmm B 855 6,4.1 feet, n ter In n k R n Thrace and Summd Dr, 7. The name of Me contractor, d any, for sun work of improvement was Fo l Pawn, Inc. A gust 25, 2010 (11 no WnVaCOr ter—. almorovement i5a mica, nm'h. dale M COnead) S. The property on which rind work of Improvement was, complete Win the city of Highland County of San Bernardino , State of California, and is described m tollows: On Live Oak Road from Summit Drive to I hice Drive. All iiiorl: comalideff ", in Me public riam_of-asy tight, in Otstrict service No APN numbers avaiaete 9. The Street address of Wald Vi certy M None (1' no street address has hit difficulty ansir mart. 'nona ) Date: Sesembar2a 2010 VNIM1cdmn for Individual Omer Sgralua of ..r Qodr%Ne dl(W, Of at Gcoed in ah d h2 w his palm eorge E. 'Skip- Mixon, Board Pra laknt East Vauw water pamd VERIFICATION I, the undemigne, say: I am Me Boeftl Secretery the declarant of the foregoing CPaadent .f •.' Manager or, 'A partner of. "Owner of. Cf.) notice of completion; I have read said not ce Or completion and know the contents Hereof, the same is true, of my knowledge. I declare under penalty of pequry that the forepanp Is tine and domain. Execute on September 28 _ _ 2010 at H ahland California (Date of N,rmure I (Day . are arphad ) (Personal apMtura or Ma kgMd" wino la awaannp than she contents 0 Me Mhce of ccrosJNion we Wa.) ROM" E. Mahn. Board S¢ntary Old Valley Witter Dig. EXHIBIT "A" RESOLUTION 2010.25 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT NOTICE OF COMPLETION BE IT HEREBY RESOLVED, by the Board of Directors of the East Valley Water District, as follows: WHEREAS, based upon the certificate of completion executed by the District for pumping equipment repairs included pulling of tube and shaft from column, clean usable column, clean and straighten tube and shaft. Wire brushing, swabbing and re- bailing to bottom at Plant 24B located Northeast corner of Harrison Street in the City of San Bernardino. NOW, THEREFORE, BE IT RESOLVED that the Board of Directors hereby determine that said contract is completed and the President and Secretary Eire hereby authorized to execute a Notice of Completion on behalf of the District, and the Secretary is hereby authorized and directed to record said Notice of Completion in the office of the County Recorder, County of San Bernardino, State of California. The foregoing resolution was duly adopted at a meeting of the Board of Directors of the East Valley Water District upon motion duly made, seconded and carried on September 28, 2010. Ayes: Noes: Absent: Attest: W2501dm 09/22/10 EAST VALLEY WATER DISTRICT George E. Wilson, Board President Robert rz. Martin, Board Secretary (Seal) RECORDING REQUESTED BY ] Martha Duran - EVWD ] AND WHEN RECORDED MAIL TO ] Name East Valley Water District ] PO Box 3427 Street San Bernardino, CA 92,111 j Address Attn: Engineering Department ] W 2501 ] City & State ] FEE EXEMPT PURSUANT TO GOVERNMENT CODE SECTION 6103 SPACE ABOVE THIS LINE FOR RECORDER'S USE NOTICE OF COMPLETION Notice pursuant to Civil Code Section 3093, must be filed within 10 days after completion, (See reverse side for Complete requirements.) Notice is hereby given that: 1. The undersigned is owner or corporate officer of the owner of the interest or estate stated below in the property hereinafter described: 2. The full name of the owner is East Valley Water District 3. The full address of the owner is P.O. Box 3427, San Bernartlino, CA 92413 San Bernardino County 4. The nature of the interest or estate of the owner is, in fee. None (If other than fee, strike 'in fee' and insert, for example,'pur&aser antler contract of purchase, 'or lessee ) 5. The full names and full addresses of all persons, if any, who hold title with the undersigned as joint tenants or as tenants in common are: NAME ADDRESS East Valley Water District A County District 3654 Hiahland Ave Suite 18 Hiahland CA 92346 6. A work of improvement on the property hereinafter described was completed on September 13 2010. The work done was: Well 24B- Pumpina Eouipment repairs included Pulling of tube and shaft from column clean usable column, clean and straighten tube and shaft Wire brushing swabbing and re- bailing to bottom also setup and startup 7. The name of the contractor, if any, for such work of improvement was Tri County Pump Company August 23, 2010 (if no contractor for work of improvement as a whole, insert 'none' (Date of Contract) 8. The property on which said work of improvement was completed is in the city of San Bernardino County of San Bernardino . State of California. and is described as follows: Tract Arrowhead Junction - 138 Ft. E of SW corner Lot 3 BLK -17 Assessors Mao Book 0272 Page 24. Records of San Bernardino County . APN, 0272 - 241 -01. 9. The street address of said property is None (If no street atltlress has been difficulty assigned inset, "none'.) Date: September 28. 2010 Verification for Individual Owner Signature of owner or corporate officer of owner named in paragraph 2 or his agent George E. "Skip" Wilson, Board President East Valley Vlater District VERIFICATION I, the undersigned, say: I am the Board Secretary the declarant of the foregoing ('President of ",' Manager of 'A partner of", "Owner of. Etc.) notice of completion: I have read said notice of completion and know the contents thereoh, the same is true of my knowledge. I declare under penalty of perjury that the foregoing is true and correct. Executed on September 28 2010, at Hiohlard California. (Date of signature) (City. where signed.) (Personal signature of the individual who is swearing that the contents of the notice of compleLon are true.) Robert E. Martin, Board Secretary East Valley Vr ate' District East Valley Water District Board Memorandum From: Brian W. Tompkins / Chief Financial Officgy�� Subject : Disbursements. �/ Recommandation: Approve the attached list of accounts payable checks and payroll issued during the period September 8, 2010 through September 20, 2010. Date:SEPTEMBER 28, 2010 Background: Accounts payable checks are shown on the attached listing and include numbers 225830 to 225994 for A total of $896,179.04. The source of funds for this amount is as follows: Unrestricted Funds $896,179.04 Payroll and benefit contributions paid for this period totaled $238,147.06. Director payroll paid for this period totaled $6208.59. 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N Z E Z IA a N N Q .= w N N D a) N Q .0 E CY) Q .V w 0 0 m O N m 0 >_ _ > v > a) a) > m m cc c° 3 d o 0 0 is (n o - d U U w F- H w W w a O D U 2 U 0 0 0 o O o O O O O O 0 0 0 o 0 0 0 0 0 o 0 N N N N N N N �V N N N _O O Q 4) O B O O I (O (O N (O O O O O O O O O (O O r O O O O O O t- O to O (O N N r- 0 0 0 0 (O (O N (D O O N N N O O 0 N - m 0) r N N 0) m O) IT a 0) N r� 0) 0) m O )- O r O N N O n O r r O O O O n n O N E O .- r O to o r > UO UO U00 VO VOO VOO NQO VOO V000 VO Co O OD v N m OD rn O W N N O N O 0) N 0) m m 0) < in a) 0) O 0) N > 0) N 0) N 0) r W Q) a) 0) a) 0) m m 0) (D r 0) m m 0) N N N 0) O 0) V i Um Lm '0 W m L °m �rn °m �m °m LO m ^ L') m m m m rn L m N Nr N r r N n N(, N� N N N N N tooEast Valley Water District Board Memorandum From: Brian W. Tompkins / Chief Financial Office,;- Subject: General Manager's Expenses. ` Recommendation: Approve the attached list of payments and reimbursements for General Manager expenses during the period September 8, 2010 through September 20, 2010. Background: Date: SEPTEMBER 28, 2010 Business and Travel expenses incurred by the General Manager and paid during the reporting period stipulated above totaled $82.68. A summary of theses expenses by authorized payment methods follows: American Express — R Martin American Express — J Hendricksen CalCard — R Martin 82.68 CalCard — J Hendricksen CalCard — E Bateman / C Contreras Direct Reimbursement Total 82.68 RESOLUTION NO. 2010.26 RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT APPROVING THE EXECUTION AND DELIVERY OF AN INSTALLMENT PURCHASE AGREEMENT FOR THE PURPOSE OF CAUSING THE ISSUANCE OF APPROXIMATELY $38,000,000 AGGREGATE PRINCIPAL AMOUNT OF REFUNDING REVENUE BONDS AND APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH AND CERTAIN OTHER MATTERS 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 (i) in 2001 pursuant to certain certificates of participation evidencing an interest in District payments under an installment purchase agreement (the "2001 Certificates "); (ii) in 2004 pursuant to an installment sale agreement (the "2004 Installment Sale Agreement "); and (iii) in 2006 pursuant to an installment sale agreement (the "2006 Installment Sale Agreement ") and to undertake the financing of the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its water system and wastewater 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 October 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 and wastewater 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 October 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, 2004 Installment Sale Agreement and 2006 Installment Sale Agreement; and DOCSOG 14171 19v7/022497 -001 I WHEREAS, a preliminary official statement with respcct to the Certificates (the "Preliminary Official Statement"). has been prepared by the Distric� and Stradling Yocca Carlson & Rauth, a Professional Corporation. as bond and disclosure counsel and WHEREAS, the District desires to execute and deliver a Continuing Disclosure Certificate to be dated the closing date of the Bonds; and WHEREAS, the District desires to enter into an Escrow Agreement (the "Escrow Agreement ") to be dated as of October I, 2010 providing for the prepayment and defeasance of the 2001 Certificates and the related 2001 installment purchase agreement and may enter into substantially similar Escrow Agreements providing for the prepayment of the 2004 Installment Sale Agreement and the 2006 Installment Sale Agreement on the first a\ ailable call date; and WHEREAS, there has been presented to this Board of Directors 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 set 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 residents 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 Local 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 the 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/Negotiated Sale. The District hereby approves 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 filc kith 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 I inancial Advisor (the "Financial Advisor ") or by negotiated sale in accordance with the terms of die Authority resolution authorizing the issuance of the Bonds, of even date herewith. If by competitive sale, the Bonds shall be awarded to the bidder who submits the highest responsible bid to be determined in accordance with the Notice of Sale and the Authority board resolution authorizing issuance and ;alc of the Bonds. If the Bonds are sold by negotiated sale, the General Manager is authorized and directed to enter into a bond purchase agreement with the Underwriter to he prepared by Bond Counsel in consultation with District's general counsel on such commercially reasonable terms within the parameters described in Section 8 below as he determines are necessary or appropriate to provide for the sale of the Bonds and the financing of the Project, his or his �N ritten designee's execution thereof to be conclusive evidence of the approval thereof. and any pro isions of the District's Debt Management Policies to the contrary are hereby waived. 2 DOC SOC/ 14171190/022497-0011 SECTION 3. Notice of Sale. Subject to Section 2, 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 California 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 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 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 Sectn ities 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 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 Agreements. 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 one or more 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 agreements, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 8. Continuine 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. 3 DOCSOC/ 14171190/022497-0011 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 deliver- of the Bonds, the delivery of the Installment Purchase Agreement_ the Escrow Agreements, the Continuing Disclosure Certificate, the Preliminary Official Statement and the final Official Statement land the bond purchase agreement referenced in Section 2 hereof, if applicable) and otherwise effectuate the purposes of this Resolution (including without limitation (1) execution of any documents or certificates relating to (a) the prepayment of the 2004 Installment Sale Agreement and the 2006 Installment Sale Agreement, and (b) the allocation of installment payments between the water system and the wastewater system in accordance with the application of. the proceeds of the Bonds, and (2) revisions to all documents approved by this Resolution to reflect that either or both the 2003 Installment Sale Agreement or the 2006 Installment Sale Agreement are not being refinanced with the proceeds of the Bonds, if the General Manager determines that refinancing either or both such obligations cannot be achieved with present value savings and is not otherwise to the advantage of the District in financing the balance of the Project), and (3) revisions to any documents approved by thi!+ Resolution to reflect negotiated sale of the Bonds to an underwriter, to the extent applicable in accordance with Section 2 hereof, and such actions previously taken by such officers are hereby ratified and confirmed. SECTION 10. Effect. This Resolution supersedes and replaces in full Resolution No. 2010.18 adopted August 24, 2010. This Resolution shall take effect immediately. 4 DOC SOC/ 1 4171 19x7/022497 -001 I SECTION 11. Recitals. Each of the foregoing recitals are true and correct. PASSED AND ADOPTED THIS 28TH DAY OF SEPTEMBER, 2010 President of the Board of Directors of East Valley Water District (SEAL) ATTEST: Secretary of the Board of Directors of of East Valley Water District DOCSOC/ 1417119v7 /022497 -0011 STATE OF CALIFORNIA ) ) ss. COUNTY OF SAN BERNARDINO ) I, , Secretary of the Board of Directors of East Valley Water District, DO HEREBY CERTIFY that the foregoing resolution xras duly adopted by the Board of Directors of said District at a regular meeting of said Board of Directors held on the 28th day of September, 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) 6 DOCSOC /14171]9v7/022497-001 1 STATE OF CALIFORNIA ) ) ss. COUNTY OF SAN BERNARMNO ) 11 , Secretary of the Board of Directors of the East Valley Water District, do hereby certify that the above and foregoing is a full, true and correct copy of Resolution No. , of said Board, and that the same has not been amended or repealed. DATED: 2010 Secretary of the Board of Directors of East Valley Water District (SEAL) DOCSOC/ 14171190/022497-0011 Stradling Yocca Carlson & Rauth Draft of 917110 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 October 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 East Valley Water District Financing Authority (the "Authority ") to issue $ aggregate principal amount of water revenue bonds (the "2010 Bonds "), secured by installment purchase payments to be made by the Issuer to the Authority pursuant to an Installment Purchase Agreement, dated as of October 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; DOCSOC/ 1425750v4/022497 -0011 NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Issuer and the Escrow Bank agree as follows: SECTION 1. Deposit of Moneys. (a) As used herein, the term "Investment Securities" means the Investment Securities set forth in Schedule B hereto which constitute direct noncallable nonprepayable 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 Refunded Certificates to be held in irrevocable escrow by the Escrow Bank separate and apart from other funds of the Issuer, the Corporation, the Escrow Bank and the 2001 Trustee in a fund hereby created and established and to be known as the "Escrow Fund ". and to be applied solely as provided in this Agreement. Such moneys are at least equal to an amount sufficient to purchase the principal amount of Investment Securities set forth in Schedule B hereto; and the aggregate principal amount of Investment Securities described in Schedule B hereto, together with all interest due or to become due on such Investment Securities, and $ of cash will be sufficient to pa} when due (i) the principal and interest with respect to the Refunded Certificates due on and prier to December 1, 2010 and the prepayment price of the Refunded Certificates set forth in the 2001 Trust 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 October, 2010 relating to the Investment Securities, and the opinion of Stradling Yocca Carlson & Rauth, dated October, 2010, and relating to this Agreement with respect to the fact that the 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 Installment 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 1 and agrees: (a) immediately to invest S of the monies described in Section I(a) hereof in the Investment Securities set forth in Schedule B hereto and to deposit such Investment Securities in the Escrow Fund; and (b) to make the payments required under Section 31a1 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 Securities set forth in Schedule B hereof and the investment income and earnings thereon are paid, the Escrow Bank shall, no later than the respective Interest Payment Dates (as defined in the 2001 Trustee Agreement), transfer from the Escrow Fund to the 2001 Trustee for the Refunded Certificates amounts sufficient to pay (i) prior to and on December 1, 2010 the principal and interest evidenced by the Refunded Certificates, and (ii) on December 1, 2010, the prepayment price of such certificates (as described in Schedule E attached 2 DOCSOC/ 1425750v4/022497 -001 1 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 1 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 f;1 DOCSOC/ 1425750x4/022497 -0011 Escrow Bank in accordance with the provisions of this Agreement: provided, however, that the Issuer shall not be required to indemnify the Escrow Bank against the Escrow Bank's own negligence or willful misconduct or the negligent or willful misconduct of the Escrow Bank's respective successors, assigns, agents and employees or the breach by the Escrow Bank of the terms of this Agreement. In no event shall the Issuer or the Escrow Bank be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this section. The indemnities contained in this section shall survive the termination of this Agreement. SECTION 7. Responsibilities of the Escrow Bank. The Escrow Bank and its respective successors, assigns, agents and sen ants shall not be held to any personal 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 securities deposited therein, the purchase of the Investment Securities, the retention of the InNeslmenl 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 moneys or obligations by the Escrow Bank in accordance with the provisions of this Agreement or b% reason of any non - negligent act, non - negligent omission or non - negligent error of the Escrow Bank made in good faith in the conduct of its duties. The recitals of fact contained in the "Whereas" clauses herein shall be taken as the statements of the Issuer and the Corporation and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes no representation 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 be liable in connection with the performance of its duties under this Agreement except for its ox n 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 such counsel shall have full and complete authorization and protection with respect to any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Bank shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or 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 Escrow Bank shall have the power to sell, transfer, request the redemption or otherwise dispose of some nr 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 Agreement. The foregoing may be effected only if: (i) the substitution of Substitute Investment Securities 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 unqualified opinion of nationally recognized municipal bond attorneys to the effect that such disposition 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 4 DOC SOC/ 1425750v4/022497 -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 arty one or more of the following purposes: (i) to cure any ambiguity or formal defect or omission in th s 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. 5 DOCSOC/ 1425750v4/022497 -001 1 SECTION 12. Compensation. The Escrow Bank shall receive its reasonable fees and expenses as previously agreed to; provided, however, that under no circumstances shall the Escrow Bank be entitled to any lien nor will it assert a lien whatsoever on :nty moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered by the Escrow Bank under this Agreement. SECTION 13. Resignation or Removal of Trustee as EscrmN Bank. (a) The Escrow Bank may resign by giving notice in "riling 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 Bernardino, and in a daily newspaper of general circulation in the Borough of Manhattan, Issuer and State of New York. The Escrow Bank may be removed (1) by (i) filing with the Issuer of an instrument or instruments executed b. the holders of at least 51% in aggregate principal amount of the Refunded Certificates then remaining unpaid, (ii) the publishing of such notice at least 60 days prior to the effective date of said re noN 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 (iii) the delivery of a copy of the instruments filed with the Issuer to the Escrow Bank or (2) by a court of competent jurisdiction for failure to act in accordance with the provisions of this Agreement upon application by the Issuer or the holders of 5% in aggregate principal amount of the Refunded Certificates 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 be appointed by the Issuer. Notice of such appointment shall be published in accordance with the requirements more specifically set forth in clause (1) (ii) of subsection (a) of this Section. Within one year after a vacancy, the holders of a majority in principal amount of the Refunded Certificates then remaining unpaid may, by an instrument or instruments filed with the Issuer, appoint a successor Fscrow Bank who shall supersede any Escrow Bank theretofore appointed by the Issuer. If no successor Escrow Bank is appointed by the Issuer or the holders of such Refunded Certificates then remaining unpaid, within 45 days after any such resignation or removal, the holder of any such Refunded Certificate or any retiring Escrow Bank may apply to a court of competent jurisdiction for the appointment of a successor Escrow Bank. The responsibilities of the Escrow Bank under this Escrow Agreement will not be discharged until a new Escrow Bank is appointed and until the cash and investments held under this Escrow Agreement are transferred to the new Escrow Bank. SECTION 14. Severability. if any one or more of the col enants or agreements provided in this Agreement on the part of the Issuer or the Escrow Bank to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. 6 DOCS OC/ 1425750v4/022497 -001 1 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. DOCSOC/ 1425750v4/022497 -0011 IN WITNESS WHEREOF. the parties hereto have caused this Agreement to be executed by their duly authorized officers and their seals to be hereunder affixed and attested as of the day and year first written above. (SEAL) Attest: General Manager /Board Secretary EAST VALLEY WATER DISTRICT In President UNION BANK, N. a.., as Escrow Bank M Authorized Officer S -I DOCSOC/ 1425750v4/022497 -001 I SCHEDULE A Refunded Certificates Maturity Date (December I) Principal Coupon 2010 $ 785,000 4.250% 2011 790,000 4.250 2012 820,000 4.400 2013 855,000 4.500 2014 900,0()0 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/ 1425750v4/022497 -001 1 SCHEDULE B "Investment Securities" are defined to be. and shall be. as fcllows: Type Coupon: Maturity Date Par Amount B -1 DOCS OC/ 1425750v4/022497 -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 prig: and the interest evidenced by said Refunded Certificates outstanding as such become due or are subject to prepayment. EAST VALLEY WATER DISTRICT M Authorized Representative C -1 DOC SOC/ I425750v4/022497 -001 I Receipt acknowledged and consented to: UNION BANK, N.A., as Trustee m Authorized Representative C -2 DOC SOC/ 1425750v4/022497 -001 I 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 October, 2010. EAST VALLEY WATER DISTRICT UNION BANK, N.A., as Trustee X -1 DOC SOC/1425750v4/022497 -001 I EXHIBIT Y NOTICE OF REFUNDING OF $12,000,000 Certificates of Participation (Resertioir 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 Refunded Certificates that (i) there has been deposited with Union Bank, N.A.. as Escrow Bank, moneys and investment 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 Corporation and Union Bank, N.A., as trustee thereunder, the principal of and the interest on which when due will provide moneys which, together with such other moneys deposited with the Escrow Bank, shall he ufficient 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 (b) 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 %; (it) the Escrow 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 of the Trust Agreement. Dated this _ day of October, 2010. EAST VALLEY WATER DISTRICT UNION BANK, N.A., as Trustee Y -1 DOCSOC/ 1425750v4/022497 -001 1 SCHEDULE E ESCROW FUND CASHFLOW Cash Receipts from SLGS Purchased with Purchased with Certificate Debt Service Debt Service Dates Proceeds Funds Requirements E -1 DOCSOC/ 1425750v4/022497 -001 I Ending Balance 111 L Inc. 1987 g �OF HI�Ny� September 15, 2010 The City has contracted with Kevin Donahue, MAI, to appraise your property. You will be contacted to arrange an appointment to inspect your property. He will give reasonable notice of the date and time of the inspection so you or your representative may accompany him if you wish to do so. If you would like to contact Mr. Donahue, please call him at (949) 951 -5263. Pursuant to statutory requirements, the enclosed brochure entitled "Handbook on Acquisition" contains information pertaining to the property acquisition process, of which not all provisions may apply to you. If you have any questions that are not addressed in this pamphlet, please contact Erick Gutierrez, of Overland, Pacific & Cutler, Inc., the City's acquisition consultant at (951) 683 -2353. Sincerely, l Dennis Barton Assistant Public Works Director Enclosures Mr. Robert Martin General Manager Easi( Valley Water District 27215 Base Line 1155 Del Rosa Avenue Highland, CA 92346 San Bernardino, CA 92410 (909) 864 -6861 FAX (909) 862 -3180 www.ci.highland.ca.us Regarding: Notice of Decision to Appraise Greenspot Road & Bridge Realignment Project City Council APN: 0297 - 061 -22 & 0297- 061 -23 Mayor Penny Lisburn Dear Mr. Martin: Mayor Pro-Tenn Ross B. Jones The City of Highland ( "City') is proceeding with its plans to construct a capital improvement project known as the Greenspot Road & Bridge Realignment Larry Mccallon Project. The project will realign Greenspot Road and replace the existing two - Jody Scot[ John P. Timmer lane iron truss bridge over the Santa Ana River. The project will consist of approximately 3,500 feet of new roadway and replacement of the bridge to provide a four -lane roadway. The new bridge will be built about 200 feet west of City Manager Joseph A. Hughes the existing bridge structure. The City has determined that a portion of your property referenced above and located along Greenspot Road, in Highland, California, is needed to facilitate the construction of the project. The City has contracted with Kevin Donahue, MAI, to appraise your property. You will be contacted to arrange an appointment to inspect your property. He will give reasonable notice of the date and time of the inspection so you or your representative may accompany him if you wish to do so. If you would like to contact Mr. Donahue, please call him at (949) 951 -5263. Pursuant to statutory requirements, the enclosed brochure entitled "Handbook on Acquisition" contains information pertaining to the property acquisition process, of which not all provisions may apply to you. If you have any questions that are not addressed in this pamphlet, please contact Erick Gutierrez, of Overland, Pacific & Cutler, Inc., the City's acquisition consultant at (951) 683 -2353. Sincerely, l Dennis Barton Assistant Public Works Director Enclosures CITY OF HIGHLAND HANDBOOK ON ACQUISITION FOR GREENSPOT ROAD & BRIDGE REALIGNMENT PROJECT Dear Property Owner: Our State and Federal Constitutions recognize the need for public agencies to acquire private property for public use. The Uniform Relocation Assistance and Real Property Acquisitions Policies Act of 1970 (Uniform Act), or similar State Legislation and eminent domain law of the State of Califomia authorize acquisition of private property for public use and ensure that owners of real property to be acquired are treated fairly and consistently. Occasionally, in the building of transportation system improvements by a public agency, real estate (real property) must be acquired to enable construction of the needed facilities. This informational brochure describes many of the important facts about public acquisition of real property under State and Federal law of which you should be aware. It is not intended to give a complete statement of all state or federal laws and regulations pertaining to the acquisition of your property for a public use, technical legal definitions or any form of legal advice. In the event the City of Highland decides to proceed with this project and acquisition of your property, you will be contacted by a City representative. TABLE OF CONTENTS PAGE WHAT RIGHT DOES THE CITY HAVE TO ACQUIRE MY PROPERTY? 1 WHO MAKES THE DECISION TO BUY MY PROPERTY? 1 HOW WILL THE CITY DETERMINE HOW MUCH TO OFFER ME FOR MY PROPERTY? 1 WHAT IS FAIR MARKET VALUE? 1 HOW DOES AN APPRAISER DETERMINE THE FAIR MARKET VALUE OF MY PROPERTY? 2 WILL I HAVE A CHANCE TO TALK TO THE APPRAISER? 2 CAN I HIRE MY" OWN APPRAISER AND WILL I BE REIMBURSED FOR THE COST? 0) HOW SOON WILL THE CITY GIVE ME A WRITTEN PURCHASE OFFER? 3 WHAT IS IN THE CITY'S STATEMENT OF THE BASIS FOR ITS DETERMINATION OF JUST COMPENSATION? 3 MUST I ACCEPT THE CITY'S INITIAL OFFER? 4 MAY I HAVE SOMEONE REPRESENT ME DURING NEGOTIATIONS? 4 IF I AGREE TO ACCEPT THE CITY'S OFFER, HOW SOON WILL I BE PAID? 4 WHAT HAPPENS IF I DO NOT AGREE TO THE FINAL PURCHASE OFFER? 4 WHAT HAPPENS IF THE CITY CONDEMNS MY PROPERTY? 4 WHAT IS AN ORDER OF POSSESSION? w WHAT CAN I DO IF I AM NOT SATISFIED WITH THE COURT'S DETERMINATION? 5 WILL I HAVE TO PAY ANY SETTLEMENT COSTS? 5 MAY I KEEP ANY OF THE BUILDINGS OR OTHER IMPROVEMENTS ON MY PROPERTY? 0 CAN THE CITY TAKE ONLY A PART OF MY PROPERTY? 6 WILL I HAVE TO PAY RENT TO THE CITY AFTER MY PROPERTY IS ACQUIRED? 6 f:Lf]:WIT010 913 L1111120coluf I AM A VETERAN, HOW ABOUT MY GI LOAN? 7 WHAT IS TITLE II OF THE UNIFORM ACT? 7 MY PROPERTY IS WORTH MORE NOW THAN WHEN I BOUGHT IT. MUST I PAY CAPITAL GAINS TAX ON THE INCREASE" 7 IS IT POSSIBLE TO DONATE PROPERTY TO THE CITY? 7 WHAT IF I HAVE OTHER QUESTIONS ABOUT THE PROCESS? 8 WHAT RIGHT DOES THE CITY HAVE TO ACQUIRE MY PROPERTY? Every public agency has certain powers which are necessary for it to operate effectively. For example, States have the power to levy taxes and the power to maintain order. Another power is the power to acquire private property for public purposes. This is known as the power of eminent domain. The rights of each of us are protected by the Fifth and Fourteenth Amendments of the U.S. Constitution and by State Constitutions and eminent domain laws which guarantee that if a public agency takes private property it must pay "just compensation" to the owner. Further, under the Uniform Relocation Assistance and Real Property Acquisitions Policy Act of 1970 (Uniform Act), the owner has additional protections, some of which are explained in this brochure. WHO MAKES THE DECISION TO BUY MY PROPERTY? The decision to acquire a specific property for a public project usually involves many persons and many decisions. The final decision to proceed with the project is made by the City after a thorough review which includes public hearings to obtain the views of interested citizens. If you have any questions about the project or the selection of your property for acquisition, you should contact a representative of the City. HOW WILL THE CITY DETERMINE HOW MUCH TO OFFER ME FOR MY PROPERTY? Before making you an offer, the City will obtain an appraisal of your property. The appraisal will be done by a qualified real property appraiser who is familiar with local property values. The appraiser will inspect your property and state his professional opinion of its current fair market value in an appraisal report. After the appraiser has completed his work, a review appraiser will recheck the wort: to assure that the estimate is fair and the work conforms with professional appraisal standards. The City is required to offer you "just compensation" for your property. This amount cannot be less than the fair market value of your property, as determined by the City on the basis of its approved appraisal. WHAT IS FAIR MARKET VALUE? Fair market value; is sometimes defined as that amount of money which would probably be paid for a property in a sale between a willing seller, who does not have to sell, and a willing buyer, who does not have to buy. The fair market value of a property is generally considered to be "just compensation." Fair market value does not take into account intangible elements such as sentimental value or any other "special" value that your property may have for you as an individual. HOW DOES AN APPRAISER DETERMINE THE FAIR 'MARKET VALUE OF MY PROPERTY? Each parcel or real property is different and therefore no single formula can be devised to appraise all properties. Among the factors an appraiser typically considers in estimating the value of real property are: • How it compares with similar properties in the area that have been sold recently. • How much it would cost to reproduce the buildings and other structures, less any depreciation. • How much rental income it could produce. • With regard to easements the Fair Market Value is determined by the difference in the value of the land to its owner before the imposition of the easement and the value after imposition of the easement. WILL I HAVE A CHANCE TO TALK TO THE APPRAISER? YES. You must be contacted and given the opportunity to accompany the appraiser on the inspection of your property. You may then inform the appraiser of any special features which you believe may add to the value of your property. It is in your best interest to provide the appraiser with all the useful information you can in order to insure that nothing of allowable value will be overlooked. If you are unable to meet with the appraiser, you may wish to have a person who is familiar with your property represent you. CAN I HIRE MY OWN APPRAISER AND WILL I BE REIMBURSED FOR THE COST? YES. Should you elect to have an independent appraisal conducted in addition to the appraisal conducted by the City, you are entitled to be reimbursed for the reasonable costs of the appraisal, up to $5,000. In order to receive any reimbursement, the appraiser you chose must be licensed with the Office of Real Estate Appraisers (OREA) and in accord with the Uniform Standards of Professional Appraisal Practice. For information regarding licensed appraisers, please visit the OREA at htW: / /www.orea.ca.gov /. Appraisals such as the one being obtained by the City are very specialized appraisals. It is imperative that the appraiser you chose be familiar with this particular type of appraisal. In an effort to assist you in retaining an appraiser that is qualified and familiar with this type of assignment, please contact the City's acquisition consultant, Overland, Pacific & Cutler, Inc., for a list of appraisers in your area that meet these criteria. 2 Please be aware; this list is not inclusive of all qualified appraisers in your area. Furthermore, you are not obligated to choose any of the appraisers listed. This list is merely included to assist you in your search should you elect to do hire an independent appraiser. Once you have chosen an appraiser, it is requested that you submit your reimbursement request in writing to the City's acquisition consultant, Overland, Pacific & Cutler, Inc., at 2280 Market Street, Suite 340„ Riverside, CA 92501 within 90 days of the earliest of the following dates: (1) the date the selected appraiser requests payment from you for the appraisal; or (2) the date upon which you, or someone on your behalf, remits full payment to the selected appraiser for the appraisal. Copies of the contract (if a contract is made), appraisal report, and invoice for completed work by the appraiser must be provided to the City concurrent with submission of the appraisal cost reimbursement request. The cost must be reasonable and justifiable. HOW SOON WILL THE CITY GIVE ME A WRITTEN PURCHASE OFFER? The timing of a purchase offer depends on the following factors: 1. The amount of work required to appraise your property, 2. The availability of funding; and 3. Possible project delays caused by factors outside the control of the City. Typically, where items two and three above are not involved, you can expect a written purchase offer within 60 drays of completion of the appraisal. The appraisal of a single family residence takes approximately three weeks to complete from the date the property is inspected. A business or industrial property, on the other hand, can take several months to complete due to the much greater complexity involved. The City must give you a written offer to acquire your property for the full amount determined to be just compensation, and it must do so promptly. Along with the offer you will receive a written statement explaining the basis for the determination of just compensation. No negotiations can take place before you receive this statement and the written purchase offer. WHAT IS IN THE CITY'S STATEMENT OF THE BASIS FOR ITS DETERMINATION OF JUST COMPENSATION? The City's "statement of the basis for its determination of just compensation" must be provided to you with the writl:en purchase offer. Among other things, this statement must include: • An accurate description of the property to be acquired. • A list of the improvements covered by the offer. • The amount of the offer. • An indication that the offer does not reflect any relocation payments or other relocation assistance which you may receive under other regulations. • The recognized definition of the term "fair market value" or the equivalent term. 3 MUST I ACCEPT THE CITY'S INITIAL OFFER? NO. You are entitled to present your evidence as to the amount k1ou believe is the value of your property and to make suggestions for changing the terms and conditions of the offer. The City must make reasonable efforts to consider and respond to your evidence and suggestions. When fully justified by the available evidence of value, an adjustment in the offer may be made. MAY I HAVE SOMEONE REPRESENT ME DURING NEGOTIATIONS? YES. If you would like an attorney or anyone else to represent you during negotiations, please so inform the City in writing. However, there are no provisions for the City to pay the costs of any such representation. IF I AGREE TO ACCEPT THE CITY'S OFFER, HOW SOON WILL I BE PAID? If you reach a voluntary agreement to sell your property and your ownership (title) is clear, payment will be made at a mutually acceptable time. Generally, this should be possible within 30 to 60 days after you sign a purchase contract. If the title evidence obtained by the City indicates that further action is necessary to show that your ownership is clear, you may be able to hasten the payment by helping the City to obtain the necessary proof. (Title evidence is a legal record of ownership of the property. It identifies the owners of record and lists the restrictive deed covenants and recorded mortgages, liens and other instruments affecting your ownership of the property.) WHAT HAPPENS IF I DO NOT AGREE TO THE FINAL PURCHASE OFFER BY THE CITY? If you are unable to reach a voluntary agreement through negotiations, the City may file a suit in court to acquire your property through an eminent domain proceeding. Eminent domain proceedings are often referred to as condemnations. If your property is to be acquired by condemnation and you would like it done promptly, the City must file the condemnation suit without unreasonable delay. WHAT HAPPENS IF THE CITY CONDEMNS MY PROPERTY? You will be notified of the action and given 15 days to respond following a notice of public hearing with the City's governing body to determine the need and necessity for the project. After the hearing, assuming need and necessity have been substantiated, the City will file a condemnation suit. During the condemnation proceeding, you will be provided an opportunity to introduce your evidence as to the value of your property. Of course, the City null have the same right. After hearing the evidence of all parties, the court will determine the amount of just compensation. M To help you in presenting your case in a condemnation proceeding, you may wish to consider employing an attorney and an appraiser. However, the costs of these professional services and other costs which you incur in presenting your case to the court are your responsibility. WHAT IS AN ORDER OF POSSESSION? An order of possession is a process within a condemnation action which allows the City to have the use of your :property prior to a negotiated settlement or an award of just compensation in court. This procedure is used typically only where the use of your property is necessary to accomplish timely construction of the project for which your property is required. To obtain an order of possession, the City must deposit with the court (or in an escrow account) an amount not less than its appraisal of the fair market value of the property. Ordinarily, the owner or lessees are then permitted to withdraw their share of this amount, LESS any amounts necessary to pay off any mortgage or other liens on the property and sums necessary to resolve any special ownership problems. Early withdrawal of your share of the money will not affect your right to seek additional compensation for your property. It is recommended that you have the help of an attorney if you intend to do this. Should the negotiated settlement or court award exceed the amount deposited by the City, you will be paid the difference plus any interest that may be provided by State law. WHAT CAN 11110 IF I AM NOT SATISFIED WITH THE COURT'S DETERMINATION? If you are not satisfied with the court judgment, you may file an appeal with the appropriate Appellate Court for the area where your property is located. The City may also file an appeal if it believes the amount of the judgment is too high. WILL I HAVE TO PAY ANY SETTLEMENT COSTS? You will be responsible for the payment of the balance on any mortgage on your property. Also, if your ownership is not clear, you may have to pay the cost of clearing it. You will not be responsible for the reasonable and necessary costs of: • Typical legal and other services required to complete the sale, recording fees, transfer taxes and any similar expenses which are incidental to transfer ownership to the City. • Penalty costs and other charges necessary to permit prepayment of an earlier recorded mortgage on the property which was entered into in good faith. • Real property taxes covering the period after the City acquires your property. The City will identify these items in a Settlement Cost Statement to be given to you at the time of settlement or soon after the court award of compensation, if the property is acquired by condemnation. Ordinarily, if you have paid any of these expenses yourself, you will be repaid at G that time. If you later discover other costs for which you should be repaid, you should request repayment from the City within six months after the acquisition. The City will assist you in filing a claim for these costs. Finally, if ),on believe that you were not properly repaid, you may appeal first to the City, and if not satisfied. then to the courts. MAY I KEEP ANY OF THE BUILDINGS OR OTHER IMPROVEMENTS ON MY PROPERTY? Sometimes improvements on a property are not required by the City. This might include such items as a fireplace mantel, your favorite shrubbery, or even an entire house. If you wish to keep any improvements, please let your Acquisition Agent know as soon as possible. If you do arrange to keep any improvement(s), the City will deduct its salvage value from the purchase price you would otherwise receive. (The salvage value of an item is its probable selling price if offered for sale on the condition that the buyer will remove it at his own expense.) If you arrange to keep any real property improvement (such as a fireplace mantel or a shrub), you will not be entitled to receive a relocation payment for the cost of moving it to a new location. CAN THE CITY TAKE ONLY A PART OF MY PROPERTY? YES. But, if the purchase of only a part of your property reduces the value of the remaining part(s), you must be paid for the loss in value. Also, if any remaining part would have little or no utility or value to you, the City must offer to buy that remaining part from you. WILL I HAVE TO PAY RENT TO THE CITY AFTER MY PROPERTY IS ACQUIRED? If you remain in the property after acquisition, you will be required to pay a fair rent to the City. Generally, such rent will not be more than that charged as rent for the use of a property similar to yours in a similar area. HOW SOON MUST I MOVE? Every reasonable effort will be made to give you ample time to relocate after the acquisition of your property. In most cases, a mutually satisfactory arrangement can be worked out. Except in an unusual instance where there is an urgent need for your property for construction, you cannot be required to move from your residence or to move your business or farm operation without at least 90 days advance written notice of the date by which your move is required. If you reach a voluntary agreement to sell your property, you cannot be required to move before you receive the agreed purchase price. In the case of a condemnation, you cannot be required to move before the estimated fair market value of the property has been deposited with the court (or into escrow) so that you can withdraw your share. If you are being displaced from your residence, decent, safe and sanitary replacement housing must be available: before you can be required to move. I AM A VETERAN, HOW ABOUT MY GI LOAN? After your GI home mortgage loan has been repaid, you will be permitted to obtain another GI loan to purchase another property. Check on such arrangements with your nearest VA office. WHAT IS TITLE II OF THE UNIFORM ACT? Title II (Uniform Relocation Assistance) of the Uniform Act specifies certain relocation payments and other assistance which the City must provide to families, individuals, businesses, farms and nonprofit organizations when they are displaced. The City must furnish you with a full explanation of the relocation benefits to which you may be entitled. If you have any questions about these benefits, or your right to receive them, please contact the Relocation Advisor. In order for the City to fulfill its relocation obligations to you, you must keep the City informed of your plans. MY PROPERTY IS WORTH MORE NOW THAN WHEN I BOUGHT IT. MUST I PAY CAPITAL GAINS TAX ON THE INCREASE? In most cases when the City acquires real property, the property owner may postpone the payment of Federal capital gains taxes on any profit from the sale if the profit is reinvested in similar property within a certain replacement period. To take advantage of this right, you should file the details in a statement with your Federal income tax return for the tax year in which you realize the gains. Internal Revenue Service (IRS) Publication 549, "Condemnations of Private Property for Public Use," is available from the IRS. It explains how the Federal income tax would apply to a gain or loss resulting from the condemnation of real property or its sale under the threat of condemnation for public purposes. If you have any questions about the IRS rules, you should discuss your particular circumstances with your personal tax advisor or your local IRS office. IS IT POSSIBLE TO DONATE PROPERTY TO THE CITY? YES. However, prior to accepting any donation of real property, the City must inform the owner in writing of the amount it believes to be just compensation for the property. The property owner must indicate in writing that, although he understands that he cannot be required to sell his property for less than just compensation, he voluntarily agrees to do so. 7 WHAT IF I HAVE OTHER QUESTIONS ABOUT THE PROCESS? Contact either the City or the Acquisition Consultant retained by the City. A representative will answer your questions and provide any needed additional infonrnalion. GREENSPOT ROAD & BRIDGE REALIGNMENT PROJECT TITLE VI PACKAGE The project proposed by the City of Highland will be receiving federal financial assistance. Pursuant to Title VI of the Civil Rights Act of 1964, no person in the United States shall, on the grounds of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance. Other statutes provide protection against discrimination on the basis of sex, age or disability. The enclosed Title VI Package is being provided for your information to further explain your rights. The Package includes the following documents: ■ Title VI Booklet ■ Title VI of the 1964 Civil Rights Act and Related Statutes ■ The U.S. Department of Commerce of the Census, Language Identification Flashcard ■ Right of Way Title VI Survey Form with Self- Addressed Stamped Envelope a Right of Way Title VI Discrimination Complaint Form It is requested the Right of Way Title VI Survey form be completed and returned in the self - addressed stamped envelope. If you read or speak a language different than English, please write your name and address on the top of the page and check the appropriate box on the Language Identification Flashcard; or, if you believe you have been subjected to discrimination, please fill out the Right of Way Title VI Discrimination Complaint form and return to the following: Dennis Barton Assistant Public Works Director City of Highland 27215 Base Line Highland, CA 92346 O LU o C 3 Jkm ^ % . _ 2 ! ] f ■ ? ± > 9 $ © « a k.■ t u f # 6 m m§ k$ 00 U. / E2 � 2 ƒ \ / 00 � -i �0 \© 0 §0 32)ƒƒ § |[7 � ■\® i aeat& o » &q «|& ®7 I�R\£ ® } \7 Q��aq • E:E Boa <a �e /)J §5 co \8\ eg E 7 = o }s - \ ƒz u�« %ƒ ■ ;§yg �0 (5@\\\ \\ _ (» Vvo _wg �o 307)6 ( bn&}/ � 0'9 0 w nz r i 2 \a 3 \ � k C) 3I \\)\ 222 §5 co \8\ eg E 7 = o }s - \ ƒz u�« %ƒ ■ ;§yg �0 (5@\\\ \\ _ (» Vvo _wg �o 307)6 ( bn&}/ � 0'9 0 w nz \ §a /\\ � o,2 o2)3 / / i 3 \ \ � 222 rq %A0 o� ©rs oSE)±3 \ §a /\\ � o,2 o2)3 / / Q W _N H N W O D Q 3 N. W H a 2 J o w vr � r � E to C Q L r d 'E '.- p E a c ms c 6°o u A E ' E •° Z eA O A c P m w o r c c 3 �? r go V d A i, v a o °' v 3 cy -0 C O_ W o o ° O i ° LU u •c N A C O Q9 0 ro N O Q •O t a C N 'O a' L d •`_-' W O F {_ N .• C+ C :c u `o >� •u C C N N C O w N u 0 C ii N b o "u m A o 1 'E ti a o o y u 9i v m o g o a W c W yy _ b• p i' ' n O V A} F t L � J Z y O "V F O W C E U O °' .-T. _ c m Z .Q Y a L W 7 E EA a O li v E c G O W N A O � C�¢¢ � °. ,� ye� T .L O T„ u O v o In V V 3 G. v Q A S ? C W R N vpi V �- Q d T� Cy 'C N O y i± (J A it ro Vi io r d CL 3 A y vo o c .v o ,E a E ,c Cc c w v oos c % v �—� E E ' O v d b c a o w yAy `o �c 9ccc{ i Pa 3 -ro u V_ .O (tl ✓I L4 C i. � � 7 � 4 �c � N T � _ . u YO C C'. t > V A E .L z c E N g c O S 4? a Lo o R d >. R C A G O F u �QOJ! �Ly yy G N V— •� V a`> V Ol N m w u N Ql N M L s a L ro b v A E !z C u A L X 0 0 (5 104 u � •u fJ � O u Q� S o 4 C O �N r O d Q �s N V d a+ F.. 3 N C a c R u � � c � R L u s: '- R o E c � E L C N O C E R � = s � U � O � � n N � d O c 0 Q .0 „ o ts 3 L n E A C L u Ob o' h o t U woo, N +Si JE p 3 ai O u +l'gi• 1- u O v l� N W 6 3 N C a c R u � � c � R L u s: '- R o E c � E L C N O C E R � = s � U � O � � n N � d O c 0 Q .0 „ o m O � N u o E 0 0 O c L v_ m _O Lt CL m.E v C'u = m v E - c c E 0.2 ' °E� 3 b L n E A C O u Ob Ou o toD F woo, v >Ecd Q O u +l'gi• 1- u v v N N W C C b o = v w O a a g > 7 L u v V .E a ry u u o > y e u p w 0 E O u.5 W i=ob O Ila m O � N u o E 0 0 O c L v_ m _O Lt CL m.E v C'u = m v E - c c E 0.2 ' °E� ryC C U R c .c m O `^ c o' c O 0 O O O A c �v £ E � � C v v 3 V C L p A L O 00 V FAQ C M � •II � "O v NtL L L V y •� � O V � C i H O r p E O � a va u OQ Q O u +l'gi• c v a a g V v e La SF• O Ila ryC C U R c .c m O `^ c o' c O 0 O O O A c �v £ E � � C v v 3 V C L p A L O 00 V FAQ C M � •II � "O v NtL L L V y •� � O V � C i H O r p E O � a va TITLE VI OF THE 1964 CIVIL RIGHTS ACT AND RELATED STATUTES Page 1 of NONDISCRIMINATION STATUTES Title VI of the 1964 Civil Rights Act, 42 U.S.C. 2000, provides in Section 601 that: "No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance." (PROHIBITS DISCRIMINATION IN IMPACTS, SERVICES, AND BENEFITS OF, ACCESS TO, PARTICIPATION IN, AND TREATMENT LINDER A FEDERAL -AID RECIPIENT'S PROGRAMS OR ACTIVITIES) The Age Discrimination Act of 1975, as amended 42 U.S.C. 6101, provides: "No person in the United States shall, on the basis of age, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance." (PROHIBITS DISCRIMINATION BASED ON AGE) The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, 42 U.S.C. 4601, provides: "For the fair and equitable treatment of persons displaced as direct result of programs or projects undertaken by a Federal agency or with Federal financial assistance." (PROVIDES FOR FAIR TREATMENT OF PERSONS DISPLACED BY FEDERAL AND FEDERAL -AID PROGRAMS AND PROJECTS) The Federal -aid Highway Act, 49 U.S.C. 306 Outlines the responsibilities of the U.S. Department of Transportation and, at (c) outlines the Secretary's authority to decide whether a recipient has not compiled with applicable Civil Rights statutes or regulations, requires the Secretary to provide notice of the violation, and requires necessary action to ensure compliance. The 1973 Federal -aid Highway Act, 23 U.S.C. 324, provides: "No person shall on the ground of sex be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal assistance under this Title or carried on under this title." (PROHIBITS DISCRIMINATION ON THE BASIS OF SEX) • The Civil Rights Restoration Act of 1987, P.L. 100 -209, provides: Clarification of the original intent of Congress in Title VI of the 1964 Civil Rights Act, Title D( of the Education Amendments of 1972, the Age Discrimination Act of 1975, and Section 504 of the Rehabilitation Act of 1973. (RESTORES THE BROAD, INSTITUTION -WIDE SCOPE AND COVERAGE OF THE NON - DISCRIMINATION STATUTES TO INCLUDE ALL PROGRAMS AND ACTIVITIES OF FEDERAL -AID RECIPIENTS, SUB - RECIPIENTS AND CONTRACTORS, WHETHER SUCH PROGRAMS AND ACTIVITIES ARE FEDERALLY ASSISTED OR NCTI • The Uniform Relocation Act Amendments of 1987, P.L. 101 -246, provides: "For fair, uniform, and equitable treatment of all affected persons; ... (and) minimizing the adverse impact of displacement ... (to maintain)...the economic and social well -being of communities; and ... to establish a lead agency and allow for State certification and implementation." (UPDATED THE 1970 ACT AND CLARIFIED THE INTENT OF CONGRESS IN PROGRAMS AND PROJECTS WHICH CAUSE DISPLACEMENT) TITLE VI OF THE 1964 CIVIL RIGHTS ACT AND RELATED STATUTES Payee oft • The Americans with Disabilities Act, P.L. 101 -336, provides: "No qualified individual with a disability shall, by reason of such disability, be excluded from the participation in, be denied benefits of, or be subjected to discrimination by a department, agency, special purpose district, or other instrumentality of a State or a local government." (PROVIDED ENFORCEABLE STANDARDS TO ADDRESS DISCRIMINATION AGAINST PEOPLE WITH DISABILITIES) The Civil Rights Act of 1991, in part, amended Section 1981 of 42 U.S.C. by adding two new sections that provided: "(b) For the purposes of this section, the term `make and enforce contracts' includes the making, performance, modification, and termination of contracts and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship. (c) The rights protected by this section are protected against impairment by non - governmental discrimination and impairment under color of State law." Title VIII of the 1968 Civil Rights Act, 42 U.S.C. 3601, provides that: "(I) It shall be unlawful ... to refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny a dwelling to any person because of race, color, religion or national origin." (PROHIBITS DISCRIMINATION IN THE SALE OR RENTAL OF HOUSING — HUD is the primary interest agency, but FHWA and States under Title VI are responsible for preventing discrimination in the function of Right -of -Way) The National Environmental Policy Act of 1969,42 U.S.C. 4321 Requires the consideration of alternatives, including the "no- build" alternative, consideration of social, environmental and economic impacts, public involvement, and use of a systematic interdisciplinary approach at each decision making stage of Federal -aid project development. • Title IX of the Education Amendments of 1972 Makes financial assistance available to institutions of higher education to: (1) strengthen, improve and, where necessary, expand the quality of graduate and professional programs leading to an advanced degree; (2) establish, strengthen, and improve programs designed to prepare graduate and professional students for public service; and (3) assist in strengthening undergraduate programs of instruction in certain instances. • Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. 790, provides that: "(N)o qualified handicapped person shall, solely by reason of his handicap, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity that receives or benefits from Federal financial assistance." (PROHIBITS DISCRIMINATION BASED ON PHYSICAL OR MENTAL HANDICAP) Source: U.S. Department of Transportation Federal Highway Administration Title VI Handbook Title VI Nondiscrimination in the Federal -Aid Highway Program FHWA Publication No. FHWA- HCR -06 -006 ❑ Kruis dit vakje aan als a Nederlands kunt iezen of spreken. ❑ h� „1eR, r 65,.N tiZ;,,,r k �np6.F �wnwttn,nn,.r, Mark this box if you rend of speak English. 6136 ivnun,J' 4 ..d” 641 4w.t6p6S,: ❑ ...1 ; y �...�1c I� ��., � yl �..t.:....,e ..tl, �s"�v �j""9' � ,j -l;ly FI '- DS-3309 11 R nFPARTMENT nE CnMMPRCR ❑ -�t -gofti -fTS Zl �Z 7 v7 nT T7F Pli n I✓7 I ❑ :T, iigt'S�UFFFSFSo iUSgfiFi13 tf8tiF1lISfi1ftS1 i2i `i ❑ Motka i kahhon ya yangin Cmtfingnu' manaitai pat untungnu' kumentos Chamorro. ❑ �III�'��;�L'4�'�'3C- �Cl)1'1�jC; 137��`JlL'�iF.� ❑ �f1:�1%IPE3e�,r;c��hX�ni��)Z • aiis��Jlf;jk � - -- ❑ 07na6te ovaj kvadratiC ako 6itate ili sovorite hn•atski jezik. ❑ Z8krtnete tuto kolonku, pokud ctete a hovoi Fte 6esky ❑ Kruis dit vakje aan als a Nederlands kunt iezen of spreken. Mark this box if you rend of speak English. ❑ ...1 ; y �...�1c I� ��., � yl �..t.:....,e ..tl, �s"�v �j""9' � ,j -l;ly FI '- DS-3309 11 R nFPARTMENT nE CnMMPRCR f. m o nic' m0 54tiniu ldmLMbulen U.S. CENSUS BUREAU 1. Arabic 2. Armenian 3. Bengali 4. Cambodian 5. Chamorro 6. Simplified Chinese 7.Traditional Chinese 8.Croatian 9. Czech 10. Dutch 11. English 12. Farsi :CO her ici si vous lisez ou parlez le frangais. J Kreuzen Sic diesel Kiistchen an, wenn Sic Deutsch lesen oder sprechen. £r)µCKaOTE auTd To naaiato av StapaZeTE 11 µtXaTE EXXgvttca. J Make kazye sa a si on Ii oswa ou pale kreyt l ayisyen. J 3i'r1i 3TTLf � � ziT qip Ff�i'c1' �? cT7 � �fi tf'C '�' — 3'>'ifF I Kos lub voj no yog koj paub twin thigh hail ]us Hmoob. Jclbljc meg czt a kockdt, ha megerii vagy besz@li a magyar nyclvet. Markaam daytoy nga kahon no makabasa wcnno makasaoka iti Ilocano. Ma -chi questa casella se legge o parla italiano. ❑ 8``oo�GOII.�II�J. oo' o�+�-0ol�.c_c..ICEP171�z<t�*�L�o a } -r --i oi� ouf i 7 1 L } na Ltd} '- o —o o � } o i I F I z n rj h J %mnlr�ulaQ »�u gauiwp�t:�lU�mw���a•ia. Pro.emy o zamnezenie Lego kwadratu, jeieli postuguje sig Pan /Pani jgzykiem polskim. DEPARTMENT OF COMMERCE U.S. CENSUS BUREAU 13. French 14. German 15. Greek 16. Haitian Creole 17. Hindi 18. Hmong 19. Hungarian 20. Ilocano 21. Italian 22. Japanese 23. Korean 24. Laotian 25. Polish ❑ es [e quadrado .sc voce IE ou fala portugu6s. ❑ jnsemna {i accasta c5sut5 dad citili sau vorbiti ronlaneste. ITOMCThTe 3TOT KBaRpeTMK, CCJIM HM III- IT3eTe I1JM rOBOpV "e n0- PyCCKN, 06enex<MTe OBaj KBappaTMh yKOnMKO 4NraTe MnM rOBOpMT( cpncKtl je3MK. ❑ Oznacte tento ntvorcek, ak viete chat alebo hovurif po slovensky Marque esta casilla si ]cc o habla espanol. ❑ Markahan itong kumidrada kung kayo ay mamnong magbasa o :r:ipalita ng Tagalog. ❑ 1Nmin' spawns. wtluvn�ri 'Iri'ludnuta3n�.Im1iT'Inu. ❑ Maaka'i he puha ni kapau 'oku ke lau pe lea fakatonga. ❑ BiAN&I,TC 1110 )(AiTMIKy, RXIUO Bli 441TRCTC a6o roRopMitt yKp ^.;HCLKDIO T10BOK1. ❑ - ❑ Xin danh dau vaO 6 nay neu quy vi bict doe vi not du'oc Viet Ngt?. ❑ v >� >x uwn iv�x v.v»7 rx � +ix 7vuvp ova u» + +sx� �� DR -3309 U 5. U[YARIMENI OF CQMMERCE 5u umlu mtl6m CENSUS BUREAU U.S. CENSUS BUREAU 26. Portuguese 27. Romanian 28. Russian 29. Serbian 30. Slovak 31. Spanish 32.Tagalog 33. Thai 34.Tongan 35. Ukranian 36. Urdu 37 Vietnamese 38.Yiddish TITLE VI SURVEY PERSONAL INFORMATION NOTICE Pursuant to the Federal Privacy Act (P.L. 93 -579) and the Information Practices Act of 1977 (Civil Code Sections 1798, et seq.), notice; is hereby given for the request of personal information by this form. The requested personal information is voluntary. The principal purpose of the voluntary information is to facilitate the processing of this form. The failure to provide all or any part of the requested information may delay processing of this form. No disclosure of personal information will be made unless permissible under Article 6, Section 1798.24 of the IPA of 1977. Each individual has the right upon request and proper identification, to inspect all personal information in any record maintained on the individual by an identifying particular. Direct any inquiries on information maintenance to your IPA Office. Expenditure Authorization (EA) NON - DISCRIMINATION All persons affected by State transportation projects are requested to provide information with regard to race, color, national origin, sex, disability, age or income status. Please check the items below which best describe you and return this form in the enclosed envelope. The famishing of this information is voluntary. Head of household: Age: Race/Ethnicity: ❑ Male ❑ Under 40 ❑ White ❑ Black • Hispanic • Asian Language spoken, if other than English: ❑ Female ❑ 41 -65 • American Tribe • Pacific islander ❑ Other Specify: _ ❑ Over 65 Are you or any member of your household suffering any physical disability or medical condition? ❑ Yes ❑ No Are you a low- income family? ❑ Yes ❑ No Enclosure TITLE VI DISCRIMINATION COMPLAINT PERSONAL INFORMATION NOTICE Pursuant to the Federal Privacy Act (P.L 93579) and the Information Practices Act of 1977 (Civil Code savors 1798 . et seq ), rates is hereby given for the request of personal information by this form. The requested personal rformetlon is voluntary The principal purpose of the v inlary Information is to facilitate the processlrq of this form The failure to provide all or any part of the requested Information may delay processing of this form. No dsclosve cf personal Information will be made unless permissible under Article 6. Section 179824 of the IPA of 1977. Each mdrvldual has the right upon request and proper 1peoo`caeon, to inspect all personal information In any record maintained on the individual by an identifying particular Direct any inquires on mformaton maintenance to your IPA Cffce Dist Co Rte Mailing Post BASIS OF DISCRIMINATION ❑ RACE ❑ COLOR ❑ NATIONAL ORIGIN ❑ SEX ❑ Diability ❑ Lew- Income ❑ Non - English Speaker Provide date(s) and place of alleged discrimination Describe the nature of the action, decision, or conditions of the alleged discrimination (Attach Extra Page. If Necessary) Name of individuals (if Known) responsible for the action, decision or condition of alleged discrimination Provide supporting information known to complainant in support of his/her allegation Identify possible witnesses whom the complainant believes can provide factual information about this allegation State STATEMENT OF INFORMATION NOTE: THIS FORM IS NEEDED IN ORDER TO ELIMINATE JUDGMENTS AND LIENS AGAINST PEOPLE WITH SIMILAR NAMES THE STREET ADDRESS of the property In this transaction is: (IF NONE LEAVE BLANK) ADDRESS CITY IMPROVEMENTS: ❑ SINGLE RESIDENCE ❑ MULTIPLE RESIDENCE ❑ COMMERCIAL OCCUPIED BY: ❑ OWNER ❑ TENANTS ANY CONSTRUCTION OR IMPROVEMENTS WITHIN THE LAST 6 MONTHS? ❑ YES ❑ NO IF YES, STATE NATURE WORK DONE: PARTY PARTY2 FIRST MIDDLE LAST FIRST MIDDLE LAST FORMER LAST NAME(S), IF ANY FORMER LAST NAME(S), IF ANY BIRTHPLACE BIRTH DATE BIRTHPLACE &RTH DATE SOCIAL SECURITY NUMBER DRIVER'S LICENSE NO. SOCIAL SECURITY NUMBER DRNER'S LICENSE NO. I ❑ AM SINGLE ❑ AM MARRIED ❑ HAVE A DOMESTIC PARTNER 1 ❑ AM SINGLE ❑ AM MARRIED ❑ HAVE A DOMESTIC PARTNER NAME OF CURRENT SPOUSE OR DOM, PARTNER (It Mher than Party 2): NAME OF CURRENT SPOUSE OR DOM PARTNER (If other then Party t): NAME OF FORMER SPOUSE/DOM PARTNER: OF NONE, WRITE'NONEJ: NAME OF FFRI ER SPOUSE/DOM. PARTNER: (IF NONE, WRITE 14011E-); MARRIAGE OR DOMESTIC PARTNERSHIP BETWEEN PART /ES 1 AND 2 ARE PARTIES 1 & 2: MARRIED? DOMESTIC PARTNERS? DATE OF MARRIAGE/DOM. PARTNERSHIP: PARTY 1. OCCUPATIONS FOR LAST 10 YEARS PRESENT OCCUPATION FIRM NAME ADDRESS NO. OF YEARS PRIOR OCCUPATION FIRM NAME ADDRESS N0. OF YEARS PARTY I - RESIDENCES FOR LAST 10 YEARS NUMBER AND STREET CITY and STATE FROM TO PARTY2. OCCUPATIONS FOR LAST 10 YEARS PRESENT OCCUPATION FIRM NAME gODRESS NO. OF YEARS PRIOR OOCUPA I IUN FIRM NAME ACDRESS ^IO. OF "E' PS PARTY 2 - RESIDENCES FOR LAST 10 YEARS ;11 sane as Party 1, write 'same") NUMBER AND STREET CITY and STATE FROM TO ,I DATE SIGNATURES REV. 6/1N6 HOME PHONE BUSINESS PHONE RESOLUTION 2010.21 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT IN RECOGNITION OF HENRYL. SOWLE'S TWENTY -FIVE YEARS OF SERVICE BE IT HEREBY RESOLVED, by the Board of Directors of the East Valley Water District as follows: WHEREAS; HENRYL. SOWLE has been employed by the East Valley Water District since July 22, 198.5, and WHEREAS, HENRY L. SOWLE has in those twenty -five years, performed in an outstanding and honorable capacity in the position of Water Service Worker / Welder, Water Service Worker III, and Lead Water Service Worker / Welder, and WHEREAS; the said HENRYL. SOWLE has been dedicated and conscientious, and has displayed a high sense of duty, sincere interest and personal competence in the performance of his duties which have been for the benefit of all staff members and customers of the East Valley Water District, and WHEREAS, the said HENRY L. SOWLE in serving the District for twenty -five years has, through his untiring efforts, personal growth, and cooperation with staff and customers, contributed greatly to the successfrtl operation of the East Valley Water District. NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors of the East Valley Water District, and each of them on behalfofthe Board, staffand citizens of the District, hereby express to HENRYL. SOWLE their sincere appreciation for his twenty -five years of dedicated service. BE IT FURTHER RESOLVED, that this Resolution be placed in the minutes of the East Valley Water District and the original of this Resolution be signed by all members of the Board of Directors and presented to HENRYL. SOWLE, after being suitably framed. )ATED: September MX TT S. LEVESQ i President �r J S MO S, JR., Director Attest: ROBERT E. TIN, Board Secretary Page I of 1 From: Sent: Monday, September 20, 2010 11:48 AM To: Subject: FW: Sustaining Our Society Joint Funding Alternative Justine — please copy this message and add it to our next agenda under new business. Thanks, Bob From: [ Sent: Monday, September 20, 2010 11:40 AM To: Subject: Sustaining Our Society Joint Funding Alternative From: Sent: Monday, September 20, 2010 11:22 AM To: Subject: Sustaining Our Society Joint Funding Alternative Dear BTAC, At last week's BTAC meeting, a presentation was made by Imran Farooq regarding a PBS television show he is helping to produce that will highlight Her and water conservation practices. See the attached flyer. The concept of a water agency joint funding alternative was sugges ed to cover the $25,000 estimated cost for the portion of the program dedicated to water conservation practices. There was general agreement by those in attendance that a cooperative funding alternative was preferred. One such alternative discussed by the BTAC that our Board may consider is to provide matching funds for funding commitments made by BTAC members. Under this scenario, the Valley District Board would match each contribution dollar for dollar, up to $12,500. If your agency is willing to cooperate in the funding of this program, please let me know by Wednesday, September 29tH Thanks, Douglas Headrick, PE General Manager San Bernardino Valley Municipal Water District 909- 387 -9226 (office) 909 - 266 -4004 (mobile) 909 - 387 -9247 (fax) douglash@sbvmwd.com 9/20/2010 S , _ C] S Executive Producers: Imran Farooq & Shapour'Daneshmand Network: KVCR— Regional PBS affiliate covering Eastern Los Angeles County, Inland Empire, Northern Orange County and Desert Cities Production by: Shapour Daneshmand and Decoupage Film & Video. LLC Length: One Hour Date of Release: Production is expected to be completed by the end of 2010 and will air shortly thereafter Participating Organizations: San Bernardino Public Employees Associatior, West Valley Water District, Raymond Realty Group, Universal Property Services, San Bernardino Workforce Development Center, Bland Solar Group, Neighborhood Housing Services— Inland Empire, US Green Building Council — Inland Empire, Uncommon Good Requested Funding: Founding Partner ($25.000) • Receive acknowledgement as one of the initial benefactors of the project on any media and press recognitions • This show is an educational platform to promote sustainability in energy and water conservation. This theme will be present throughout the show and include references to specific water programs /projects in the San Bernardino County region. • Most prominent logo placement at the beginning and end credits of the show • Most prominent logo placement on the TV show website (�vww.sustainingoursociety.com) SOS is a TV show that features a community stabilization initiative that is currently being developed as a model within the 62 n' Assembly District (Rialto, San Bernardino, Fontana, Colton). The show features private partnerships in the community to create jobs amidst the housing crisis and provide a platform for a sustainable future. The promotion of energy and water efficient /conservation will be an educational component for the viewing audience. The show will highlight specific measures that every household can make to be more efficient in their use of water and energy. Format of the show: The show will feature 3 qualified families that will be getting an opportunity to buy a foreclosed property that has been abandoned in the community. Each family has its own inspiring story and the property has a background related to code enforcement violations etc. in the community also. The property will be energy efficiency rehabilitated and incorporate water -wise landscaping to promote conservation. The sustainable measures on these foreclosure properties will be an example on how a problem in the community can be transformed into an educational model for other households to replicate. There will be about 15 minutes of the show dedicated to this rehabilitation process where Municipal can suggest specific water conservation programs or topics to directly promote. The principles of sustainability extend to hiring local vendors that are unemployed and promoting qualified home ownership to stabilize communities. OWOE-astValley Water District Board Memorandum No. B-41 -2010 Date: September 28, 2010 From: Staff /Legal Counsel Subject : 2010 Biennial Notice for Conflict of Interest Codes Background: "The District received the attached correspondence from the County of San Bernardino regarding the 2010 Biennial Notice for Conflict of Interest Codes. This matter was referred by Staff to the District's legal counsel for review and recommendation as to whether any amendments are necessary to the District's current Conflict of Interest Code, which was adopted by the Board on December 9, 2008, pursuant to Resolution No. 2008.26 (copy attached). It appears that, since adoption of Resolution No. 2008.26, the reportable gift limitation of $390 that is set forth in Section 600.E. of the District's Conflict of Interest Code has been increased by the FPPC to $420. However, by operation of the express provisions of Section 1 of Resolution No. 2008.26, all subsequent amendments to State regulations are already automatically incorporated into the District's Conflict of Interest Code by reference. Additionally, no changes to the District's organizational structure have occurred since the Board's adoption of Resolution No. 2008.26 and Staff is not recommending any changes to the Designated Positions and Disclosure Categories set forth in Exhibit "B" thereof. Therefore, Staff would be comfortable in responding back to the County with a statement indicating that no amendment to the District's Conflict of Interest Code is required at this time. However, if the Board wishes review this matter further or circulate it to a committee for evaluation and recommendation, then staff is also prepared to notify the County that an amendment is required and begin the internal administrative process necessary for preparing a revised Conflict of Interest Code (which would hardwire the new $420 gift limitation directly into Section 600.E. thereof and include any other changes deemed necessary by the Board) for adoption and filing with the County by the deadline of December 30, 2010." f cw;Nrra. SAN E[0.NAMIXO t� GREGORY C. DEVEREAUX County Administrative Officer June 10, 2010 COUNTY OF SAN BERNARDINO Clerk of the Board of Supers isors County Government Center t85 North Arrowhead Avenue, Second Fl,mr San Bernardino, CA 92415 -0130 www.sbcounry.govicob (909) 387 -3841 Fax (909) 387 -4554 SUBJECT: 2010 Biennial Notice for Conflict of Interest Codes Dear Sir or Madam: Y ' u, ' ._ 2010 -,17 It V-!der District The Political Reform Act requires every local government agency to review its conflict of interest code biennially. No later than October 1 of each even- numbered year, each agency must submit to the County Board of Supervisors a notice indicating whether or not an amendment is necessary. To assist you in making that determination, please review the enclosed "How to Review a Conflict of Interest Code" and "How to Amend a Conflict of Interest Code" documents. The enclosed "2010 Local Agency Biennial Notice" form must be returned to the Board of Supervisors, via the Clerk of the Board, no later than October 1, 2010. If amendments to an agency's conflict of interest code are necessary, the amended code must be forwarded to the Board for approval within 90 days of filing the biennial notice. For example, if your agency files its notice on October 1, 2010, indicating that an amendment is necessary, the amendment is due to the Board of Supervisors by December 30, 2010. An agency's amended code is not effective until it has been approved by the Board of Supervisors. Our County Counsel has advised that amended code information must include either of the following: • A copy of the resolution adopted by your governing body showing that these Conflict of Interest Code changes were approved, or • A copy of the minutes from the board meeting where the Conflict of Interest changes were discussed and approved The Fair Political Practices Commission (FPPC) offers free seminars on how to amend a conflict of interest code. To register for a seminar, call the FPPC at (866) ASK -FPPC, and press 4. Information is also available on the FPPC's website at www.fppc.ca.gov. If you have any questions, please contact me at (909) 387 -4265. Sincerely, Becky Griffin Board Services Supervisor enclosures BOA OF SUPERVISORS Brad Mitzelfell ....... __.. _ - ....... .... FiCo District Paul Biane. ...... .... Second District Neil Deny . ...... ...... Third Distract Gary C. Ovin ...... ...... Fourth District Josie Gonzales ..... .......... ....... ......... .. Fifth District Y ' u, ' ._ 2010 -,17 It V-!der District The Political Reform Act requires every local government agency to review its conflict of interest code biennially. No later than October 1 of each even- numbered year, each agency must submit to the County Board of Supervisors a notice indicating whether or not an amendment is necessary. To assist you in making that determination, please review the enclosed "How to Review a Conflict of Interest Code" and "How to Amend a Conflict of Interest Code" documents. The enclosed "2010 Local Agency Biennial Notice" form must be returned to the Board of Supervisors, via the Clerk of the Board, no later than October 1, 2010. If amendments to an agency's conflict of interest code are necessary, the amended code must be forwarded to the Board for approval within 90 days of filing the biennial notice. For example, if your agency files its notice on October 1, 2010, indicating that an amendment is necessary, the amendment is due to the Board of Supervisors by December 30, 2010. An agency's amended code is not effective until it has been approved by the Board of Supervisors. Our County Counsel has advised that amended code information must include either of the following: • A copy of the resolution adopted by your governing body showing that these Conflict of Interest Code changes were approved, or • A copy of the minutes from the board meeting where the Conflict of Interest changes were discussed and approved The Fair Political Practices Commission (FPPC) offers free seminars on how to amend a conflict of interest code. To register for a seminar, call the FPPC at (866) ASK -FPPC, and press 4. Information is also available on the FPPC's website at www.fppc.ca.gov. If you have any questions, please contact me at (909) 387 -4265. Sincerely, Becky Griffin Board Services Supervisor enclosures 2010 Local Agency Biennial Notice Name of Mailing Contact Person:_ Office Phone No: E -m Fax Accurate disclosure is essential to monitor whether officials have conflicts of interest and to help ensure public trust in government. This agency has reviewed its conflict -of- interest code and has determined that (Check one box): ❑ An amendment is required. The following amendments are necessary: (Mark all that apply.) O Include new positions (including consultants) that must be designated. • Delete positions that manage public investments from the list of designated positions. • Revise disclosure categories. O Revise the titles of existing positions. • Delete titles of positions that have been abolished. • Other (describe) ❑ No amendment is required. Verification The agency's code accurately designates all positions that make or participate in the making of governmental decisions; the disclosure categories assigned to those positions accurately require the disclosure of all investments, business positions, interests in real property, and sources of income that may foreseeably be affected materially by the decisions made by those holding the designated positions; and the code includes all othe, provisions required by Government Code Section 87302. Signature of Chief Executive Officer Date Complete this notice regardless of how recently your code was approved or amended. Please return this notice no later than October 1, 2010, to: San Bernardino County Clerk of the Board of Supervisors 385 N. Arrowhead Ave., 2nd Floor San Bernardino, CA 92415 -0130 California Fair Political Practices Commission www.fppc.ca.gov /866- ASK -FPPC 612010 How to Review a Conflict -of- Interest Code' Who is a Designated Employee? Designate these Positions: High level positions that have authority to vote or a matter, appoint a person, obligate or commit his or her agency to a course of action, or enter into any contractual agreement on behalf of his or he, agency. Mid -Level positions that have authority to negotiate decisions on behalf of the agency, without significant substantive review or Employees that advise or make recommendations to the decision -maker by conducting research or an investigation, preparing or presenting a report, analysis or opinion that requires the exercise of judgment on the part of the employee and the employee is attempting to influence the decision A designated employee is an officer, employee, member, or consultant of an agency Who Should Not be whose position is designated in the code because the position entails the making or Designated? participation in the making of governmental decisions that may foreseeably have a material effect on his or her financial interest. (Government Code Section 82019.) Check Duty Statements Review Disclosure Categories Do Not Designate these Positions • Board of Supervisors • Chief Administrative Officers • District Attorneys • County Counsels • County Treasurers • Planning Commissioners • City Council Members • Mayors • City Managers • City Attorneys • City Treasurers • Other city, county, and local agency public officials who manage public investments • Solely clerical, ministerial, or manual positions • Unsalaried members of boards or commissions that are solely advisory Review: First, eliminate positions outlined above that are not designated employees. Second, evaluate the remaining employees, committees, officers, or consultants. Top level management personnel are normally broad policy makers and should be designated. Beyond that, read duty statements and talk to supervisors. Each position should be analyzed to determine if it makes decisions. Be sure all positions that have authority to authorize contracts are designated. Next, review the disclosure categories. Employees should only disclose economic interests that relate to their job. Do not assign the same disclosure to every position as jobs are different. The disclosure category assignments must adequately differentiate between positions. Contact other counties for examples and guidance. The FPPC also posts model disclosure categories on its website. ' This information sheet should not be used to determine whether an agency is required to adopt a conflict -of- interest code. Contact the FPPC for assistance in making that determination. California Fair Political Practices Commission Page 1 of 1 www.fppc.ca.gov /866- ASK -FPPC 6/2010 How to Amend a Conflict -of- Interest Code The following are the FPPC's guidelines of the steps necessary to amend a conflict -of- interest code. Additional information may be required depending on the specific amendment. The FPPC's website, www.ft)pc.ca.gov, has available all of the necessary forms and documents to prepare an amendment. When the code reviewing body is a City Council or Board of Supervisors, contact the local code reviewing body concerning their code amendment procedures. Non - Substantive Amendments 1. Provide a letter or memorandum describing the positions that have been deleted or renamed. 2. Include a copy of the entire code showing the changes in strikeout/underscore format. 3. Include a declaration by the chief executive officer. Substantive Amendments 1. Prepare the proposed amendment using strikeout/underscore format. 2. Prepare a Notice of Intention and conduct a public comment period. Multi- county agencies must have a 45 -day comment period. Other local agencies must follow the city's or county's requirements. Provide a copy of the notice to: a. Member:; of the public and to each employee affected by the proposed amendment. b. Multi- county agencies should also forward the notice to the FPPC. 3. Submit to the code reviewing body the proposed code amendment in strikeout/underscore format. Mul':i- county agencies must provide the following: a. A declaration by the Chief Executive Officer b. A summary of any hearing, including the names and addresses of any participants c. Copies of all written comments d. Written justification for all changes e. The most current organizational chart of the agency f. Job descriptions of all positions being added or whose disclosure category is being changed g. Minutes of the last two agency board meetings, if applicable. Example strikeout/underscore format III. MAINTENANCE DIVISION 1. Maintenance Superintendent ...... ..............................2 2 Maintenance Supervisor .....................2 2. bast. Mai:_.____.._ c..__:_.__,, __ ............................2 3. Senior Equipment Technician .... ..............................3 3 sen'tee„T_.h_:_i.._ 3 • The Public Works Office became the Maintenance Division. • The Asst. Maintenance Superintendent was reclassified to Maintenance Supervisor. • The Equipment Services Technician position has been deleted. California Fair Polit cal Practices Commission Page 1 of 1 www.fppc.ca.gov /866 - ASK -FPPC 6/2010 RESOLUTION NO. 2008.26 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE EAST VALLEY WATER DISTRICT ADOPTING A CONFLICT OF INTEREST CODE WHEREAS; the East Valiey Water District ( "the District ") ',s a county water district organized and operating pursuant to California Water Code Section. 36000 et seq., and a local government agency subject to the requirements of the Political Refcmn Act of 1974 ( "the Act"), California Government Code Section 81000 et seq.; WHEREAS, Section 87300 of the Act requires all local gov emment agencies to adopt and promulgate conflict of interest codes pursuant to the provisions of the Act; WHEREAS, the Fair Political Practices Commission ( "-he FPPC ") has adopted a regulation, 2 Cal. Code of Regs. Section 18730, which contains the terms of a standard conflict of interest code which can be incorporated by reference, and which may he amended by the FPPC after public notice and hearings to conform to amendments in the Act: ant WHEREAS, the District desires to comply with its staiwon requirements under the Act and to provide a method to ensure that :ts Conflict of Interest Code is c urrent and consistent with the prevailing provisions of the Act and the regulations of the FPPC. NOW, THEREFORE, BE IT RESOLVED by the Board o' Directors of the East Valley Water District as follows: Section 1. The terms of 2 Cal. Code of Regs. Section 18730, and any amendments to it duly adopted by the FPPC, are hereby incorporate:: herein by this reference and. along with the attached Appendix in which members and employees are designated and disclosure categories are set forth, shall constitute the District' s Conflict of interest Code. In the event of any inconsistency between the attached Appendix and the prevailing provisions of the Act and/or the applicable regulations of the FPPC. the Act and the FPPC regulations shall control. Section 2. Designated officials shall file statements of economic ir.tec est with the District which will then be made available to the public 'Cr inspection and reproducnc n L: pop. receipt of the statements from the District's Board of Directors and General Manager. the of the District shall make and retain a copy and forward the original of said statements to the C:oanty Clerk of the County of San Bernardino. Statements for al: other designated officials %,:i:' be retained by the District Secretary. Section 3. This Resolution supersedes Resolution No. 2006.19 adopted by the District' s Board of Directors on October 24, 2006, and shall take effect immediately upon its adoption. ADOPTED this 9 "' day of December, 2008. AYES: Directors: Goodin, LeVesque, Sturgeon, Wilson NOES: None ABSTAIN: None ABSENT: Director: Morales Donald D. Goodin President, Board of Directors ATTEST: Robert E. Martin Secretary, Board of Directors APPENDIX CONFLICT OF INTEREST AND DISCLOSURE CODE SECTION 100. Adoption of Code. The East Valley Water District (the District) in the County of San Bemardino hereby adopts this Conflict of Interest and Disclosure Code (Code). The provisions of this Code are additional to Government Code Section 87100 and other laws pertaining to conlicts of interest. Except as otherwise indicated, the definitions of said Act and regulation, adopted pursuant thereto are incorporated herein and this Code shall be interpreted in a manner consistent therewith. SECTION 200. Designated Positions. The positions listed on Exhibit B are designated positions. Pers:ins holding those positions are deemed to participate in the making of decisions which may fo- eseeaHy have a material effect on a financial interest. SECTION 300. Economic Disclosure Statements. Designated positions are assigned to one or more of the disclosure categories set forth on Exhibit A. Each person holding a designated position shall file a statement disclosing his/her interest in investments, business positions; real property, and income, designated as reportable under the category to which his/her position is assigned on Exhibit B. SECTION 400 Place and Time of Filing. A. Persons holding designated positions which are added to the District' s Code shall file an initial statement within 30 days after the effective date of -.he Code. B. Persons appointed, promoted, or transferred to designated positions shall file an assuming office statement with the District within 30 days after assain,ing the position. C. Annual statements shall ne filed with the District b� \pril I" by all persons holding designated positions. Such statements shall cover the pet Dd of the preceding calendar year or from the date of the Iasi statement filed. D. Leaving office statements shall be filed with the District within 30 days of leaving a designated position. Such statements shall cover the pericc from the closing date of the last statement filed to the date of leaving the position. E. An individual who resigns a designated position within 12 months following initial appointment or within 30 days of the date of a notice mailed by the filing officer of the individuals filing obligation, whichever is earlier, is not deemed to assume or leave office, provided that during the period between appointment and resignation, the individual does not make, participate in making, or use the position to influence any decision of the District, or receive, or become entitled to receive, any form of payment by virtue of being appointed to the position. Within 30 days of the date of a notice mailed by the filing officer, the individual shall do both of the following: (1) File a written resignation with the appointing power. (2) File a written statement with the filing officer signed under the penalty of perjury stating that the individual, during the period between appointment and resignation, did not make, participate in the making or use the position to influence any decision of the District or receive, or become entitled to receive, any form of payment by virtue of being appointed to the position. SECTION 500. Contents of Economic Disclosure Statements. Statements shall be made on forms supplied by the District, and shall contain the following information. A. When an investment, or an interest in real property, is required to be reported, the statement shall contain: (1) A statement of the nature of the investment or interest; (2) The name of the business entity in which each investment is held, and a general description of the business activity in which the business is engaged; (3) The address or other precise location and the use of the real property; (4) F. statement whether the fair market value of the investment or interest in real property equals or exceeds two thousand dollars ($2,000) but does not exceed ten t:ousand dollars ($10,000), whether it exceeds ten thousand dollars ($10,000) but does not exceed one hundred thousand dollars ($100,000), whether it exceeds one hundred thousand dollars ($100,000) but does not exceed one million dollars ($1,000,000) or whether it exceeds one million dollars ($1,000,000); and (5) If any otherwise reportable investment or interest in real property was partially or wholly acquired or disposed of during the period covered by the statement, the date of acquisition or disposal shall be reported. 1) B. When income is required to be reported, the statement shay: contain: (1) The name and address of each source of income aggregating five hundred dollars ($500) or more in value, or fifty dollars ($50) or more in value if the income was a gift, and a general description of the business activ:`y, if any of each source; (2) A statement whether the aggregate value of income frcm each source, or in the case of a loan. the highest amount owed to each source. was at least five hundred dollars ($500) but did not exceed one thousand dollars (S 1 . �V"). whether it was in excess of one thousand dollars ($1,000) but not greater than ten thousand dollars ($10,000), whether it was greater than ten thousand dollars (S 0.000) but not greater than one hundred thousand dollars ($100,000), or whether it was greater than one hundred thousand dollars (S 100,000); (3) A description of the consideration, if any, for whic:'i the income was received; (4) In the case of a gift. the amount or value and the date on which the gift was received and the name, address, and business activity, if am . of the intermediary or agent and the actual donor: (5) In case of a loan. the annual interest rate and security, if any, given for the loan; and (6) The first report filed by a person holding a designated position shall disclose any reportable investments, interests in real properh, business positions, and income received during the previous 12 months. C. When the filers pro rata share of income to a business entity or trust, including income to a sole proprietorship, is required to be reported, the statement shall contain: (1) The name, address, and a general description of the business activity of the business entity; and (2) The name of every person from whom the business entity received payments if the filers pro rata share of gross receipts from such persons was equal to or greater than ten thousand dollars ($10,000) during a calendar year. D. When business positions are required to be reported.:hc statement shall contain: (1) The name, address, and a eeneral description of :he business entity; (2) The filers job title or position; and 3 (3) A statement whether the position was held throughout the entire reporting period and the dates the position was commenced or terminated, if not held during the entire reporting period. SECTION 600. Disqualification. Persons holding designated positions shall disqualify themselves from making or participating in the making or in any way attempting to use their official position to influence a governmental decision when it is reasonably foreseeable that the decision will have a material financial effect, distinguishable f-om its effect on the public generally, on: A. The financial status of the person holding a designated position or that of his or her spouse or dependent children; B. Any business entity located in, doing business in, owning real property in, or planning to do business in the jurisdiction of the person holding a designated position, in which said person, or his or her spouse or dependent child, has a reportable investment of $2,000 or more; C. Any real property located in the jurisdiction of the person holding a designated position and said person, or his or her spouse or dependent child, has a reportable interest of $2,000 or more in that real estate; D. Any person, business entity, or nonprofit entity located in, doing business in, owning real property in, or planning to do business in, the jurisdiction of the person holding a designated position, from which said person or his or her spouse has received reportable income, other than loans by a commercial lending institution in the regular course of business, aggregating five hundred fifty dollars ($500) or more in value within twelve months prior to the time the decision is made; E. Any person, business entity, or nonprofit entity from which the person holding a designated position has received a reportable gift aggregating three hundred ninety dollars ($390) or more in value within twelve months prior to the time the decision is made; and F. Any business entity, other than a nonprofit organization, in which the person holding a designated position is a director, officer, partner, trustee, employee, or holds any position of management. SECTION 700. Adoption by Incorporation. Adoption by incorporation by reference of the terms of this code along with the designation of employees and the formulation of disclosure categories in the Exhibits referred to above constitute the adoption ar.d promulgation of a Conflict of Interest and Disclosure Code. a CONFLICT OF INTEREST AND DISCLOSURE CODE Exhibit A CATEGORYI Persons in this category shall disclose all interest in real properr- within the jurisdiction. Real property shall be deemed to be within the jurisdiction if the proptrry or any part of it is located within or not more than two miles outside the boundaries of the jurisdiction or within two miles of any land owned or used by the District. CATEGORY2 Persons in this category shall disclose all investments and business pcsitions. The Political Reform Act defines investment as follows: Investment means any financial interest in or security issued by a business entity, including but not limited to common stock, preferred stock, rights, wat7ants, options, debt instruments, and any partnership or other ownership interest owned directly, indirectly, or beneficially by the public official. or other filer, or his or her immediate fami;v, if the business entity or any parent, subsidiary, or otherwise related business entity has at,, interest in real property in the jurisdiction, or does business or plans to do business in the j rrisdiction, or has done business within the jurisdiction at any time during the two years prior to the time any statement or other action is required under this title. No asset shall be deemed an investment unless its fair market value equals or exceeds two thousand dollars ( +2,000). The term Ainvestment@ does not include a time or demand deposit in a financial institution, shares in a credit union, any insurance policy, interest in a diversified mutual fund registered with the Securities and Exchange Commission under the Investment Company Act of 1940 or a common trust fund which is created pursuant to Section 1564 of the Financial Code, or any bond or other debt instrument issued by any government or government agent} . Investments of an individual include a pro rata share of investments of any business ent } . mutual fund, or trust in which the individual or immediate family owns, directly. indirecth, or beneficially, a 10- percent interest or greater. According to the Political Reform .Act, a business position is a po >ition of director, officer, partner, trustee, employee, or any position of management in any orgaruzation or enterprise operated for profit, including but not limited to a proprietorship, partnership. 5rm, business trust, joint venture. syndicate. corporation or association. CATEGORY3 Persons in this category shall disclose all income and business positions. The Political Reform Act defines income as follows: Income raeans a payment received, including but not limited to any salary, wage, advance, dividend, interest, rent, proceeds from any sale, gift, including any gift of food or beverage, loan, forgiveness or payment of indebtedness received by the filer, reimbursement for expenses, per diem, or contribution to an insurance or pension program paid by any person other than an employer, and including any community property interest in the income of a spouse. Income also includes any outstanding loans. Income of an individual also includes a pro rata share of any business entity or trust in which the individual or spouse owns, directly, indirectly or beneficially, a 10- percent interest or greater. CATEGORY Persons in this category shall disclose all business positions, investments in, or income (including gifts and loans) received from business entities that manufacture, provide or sell service and/or supplies of a type utilized by the District and associated with the job assignment of designated positions assigned to this disclosure category. CATEGORYS Consultants who are not employed as full -time staff members of the District shall nonetheless be included as a designated employee and subject to the disclosure requirements herein. However, those consultants whose positions are marked with an asterisk ( *) in Exhibit B of this Code, or any other consultants which may be hired, may not be required to fully comply with the disclosure requirements herein where the range of duties which they are hired to perform is limited in scope. Such determination shall be made in writing by the General Manager of the District and shall include a description of -:he consultant's duties and, based upon that description, a statement of the extent of the consultants disclosure requirements, if any. This determination is a public record and shall be retained for public inspection in the same manner and location as this Code. I CONFLICT OF INTEREST AND DISCLOSURE CODE DESIGNATED POSITIONS Director General Manager District Engineer Assistant District Engineer Controller / Chief Financial Officer Administrative Manager Water Service Superintendent Water Production Superintendent Consultant" Exhibit B DISCLOSURE CATEGORIES 1 -3 1 -3 1 -3 1 -3 1 -3 4 4 4 5 #koEastValley V\Iater District Board Memorandum No. B-40 -2010 From: Brian Tompkins, Chief Financial Officer Date: September 28, 2010 Subject: Financial Statements for the month ended August 31, 2010 Recommendation: Accept and file the attached financial report Balance Sheet Total Assets increased by $24,048 in August. The small increase in assets overall is a result of additions to construction in progress and cash restricted for debt service, offset by a decrease in liquid assets. Liquid assets, cash, declined as the District had to cover semi- annual payments cn the 2004 and 2006 IPA loans of $620,000. Total liabilities decreased by $512,757 due to the principal portion of the 2004 and 2006 loan payments mentioned above. During August, the current assets to current liabilities ratio (Current ratio) grew from 1.27:1 to 1.28:1 and the liquidity indicator of Unrestricted Cash and Investments compared to Current Liabilities remained the same at 81% coverage. Revenue & Expenses Statement Operatinq Revenue Water sales in August were $61,876 under budget. In terms of volume, sales were down 1.5% from July to 972,166 HCF, and are down 118,925 HCF, or 12.2 %, compared to August 2009. Compared to two years ago, August 2008 and pre- economic downturn, sales are down 171,969 HCF or 15.0 %. Other operating revenues were $9,994 under budget for a combined operating revenue shortfall of $71,870. Year to date, operating revenues are $168,554 under budget. Operating Expenses Operating Expenses were $119,629 below budget in August. Source of Supply, Pumping and Water Treatment were all under budget due primarily to lower than expected maintenance costs. August is the second of three months that will show Wastewater Treatment costs higher than the related revenues due to the fact that the District is now remitting to the City of San Bernardino, revenues calculated at their new rates while the District will continue to bill customers at the old treatment rates until October 15`. As projected, the difference is approximately $30,000. Transmission and Distribution costs through August are slightly over budget. Lower than expected labor costs are being transferred to construction projects while projects are on hold until bond proceeds are available. Capital Projects Capital expenditures during August included purchase of 29 licenses for Office 2007/2010 and installation of fiberglass insulation in the roof of the garage. There was also $69,178 spent of the CIP during August, primarily on Eastwood Farms, GIS implementation, and the plant 134 design. Additional long -term projects have been added to the Capital Improvement Program and they are reflected in the Source of Supply and Transmission and Distribution sections of the CIP summary. Staff will continue to review the Water Master Plan, Sewer Master Plan when available, and other capital planning documents, and to add projects and their justifications to the comprehensive Capital Improvement Program. East Valley Water District Balance Sheet - Unaudited August 31, 2010 ASSETS UTILITY PLANT - at cost: Utility Plant in Service - water department $125,111,420 Utility Plant in Service - sewer department 30,796,260 155,907,680 Less: Accumulated Depreciation (48,381,429) 107,526,251 Construction in Progress 5,410,928 112,937,179 RESTRICTED ASSETS: Customer / Construction Deposits 1,817,569 COP Debt Service Funds - Trust Accts 656,493 2,474,062 CURRENT ASSETS: Cash and Investments 8,056,701 Less: Restricted Cash and Investments 2,474,062 5,582,639 Accounts Receivable (net of allowance) 1,609,952 Other Receivables (net of allowance) 337,901 Inventory 983,182 Prepaid Expenses 236,515 8,750,189 OTHER ASSETS AND DEFERRED COSTS (Net of Amortization): Deferred financing charges 140,557 140,557 TOTAL ASSETS 124,301,987 Balance Sheet Page 1 East Valley Water District Balance Sheet - Unaudited August 31, 2010 LIABILITIES AND EQUITY LONG -TERM DEBT: Certificates of Participation due after one year $5,180,260 Installment Payment Obligations 12,337,419 DWR Loan 131,861 Less: Deferred amount on refunding of COPS (198,138) Accrued interest payable 17,451,402 CURRENT LIABILITIES: Accounts payable 2,132,594 Accrued payroll and benefits 1,393,663 Customer service deposits 1,641,869 Construction deposits 175,700 Accrued interest payable 29,361 Long Term Debt - amounts due within one year 1,431,725 6,804,912 TOTAL LIABILITIES 24,256,314 EQUITY: Contributed Capital: Invested in Utility Plant 39,202,028 Other Contributed Capital 3,699,778 Retained Earnings: Reserved for water bond funds 6,475 Reserved for emergencies 2,170,000 Reserved for Unemployment Insurance 16,450 Unreserved 53,991,406 Net Income for current year 959,536 TOTAL EQUITY 100,045,673 TOTAL LIABILITIES AND EQUITY 124,301,987 Balance Sheet Page 2 d w 'O (0 C V d F 3 N D co r a N K W 3 Maw W N IM N � Q � Q W LL_ C E d W V N O mM OOQJOOf°0 N 0(n0000 S0 °O 1°O pNm NO)t`O>NO 171076 OM�mN t0 IOm 7610 C) Q! mmNOm QY') zol Q O) 0 0 0 0 0 0 0 0 O OQCJ m 000 M n mmonQ r> n m�,l�Nm m n N4tIJONN p N r 0 QOI fJ (9mN00 m rnvamrn0000 10mctOTnlh O Q Ih N c O) mN4>O m min 0 0 0 0 0 0 O O °o °o °o °o s °o ° 0 0 0 0 0 0 o o° N °o °o °o °O oo ° N 0 0 0 0 0 °o N °0 00 °8 °o °0 00 8 76 O °o m °o O C C QOCJ (p0 N N)D Nn(7N Qm(om-N m f M V) 17 Q N nVIOCO N(y(O h 'Q �p (y NOOnOh mmtOONtO N�� N O Q N 1+I 0)000 mO 't7NN ^OK 40 q T m N O O m O mM OOQJOOf°0 N 0(n0000 S0 °O 1°O pNm NO)t`O>NO 171076 OM�mN t0 IOm 7610 C) Q! mmNOm QY') zol Q O) 0 0 0 0 0 0 0 0 O OQCJ m 000 M n mmonQ r> n m�,l�Nm m n N4tIJONN p N r 0 QOI fJ (9mN00 m rnvamrn0000 10mctOTnlh O Q Ih N c O) mN4>O m min O mQC)mmn n m C> O — i m�Q °� °f4i 000o00000 mm� 8i oo n m M- o Q m 0 N O Q (d .- Q .: ad co n m N O N C) 0 N � N Q1t)N(OON OO O Q Y>17 760) N N O) m r En M C 00 S' O co W +i m rn 76 76 m m E m� mt C. c a a y o� 76 r c C' U`sS °)476° C7wda!'mLU�S Z N y p d C C C 1t7 y$ U11 •E76_• N N y33oiininCi�a 0 N N o O O O N O O O N Np pO O O O 10000000 N ° 00 Omtpp m ONSOOON IOm m0(7M 0010 n O N' NNOQ O W��1m0NN O N10nmNn OO OOQ Om O mQ�mNtOm ($11�00V Q O O n m�Q °� °f4i ("n mm� 8i 10 O)�N�npl fnO mm�mm m N NQ pmj nOmmNO m mm �NfG yp (7 r i0 m Cl pq� C> O pN 1n�00004000 N 40aNNOma h�Nn O°iVA m 00 00 0 0 0 0 0 N 0 N n O O m Q O O O O m O Q n N p nOm 7 10 q m C E N N a r� my y pa ? 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O O O m d -ca f N^ n O O m m m O m M O N a z r N n E c y 4 L C U, > > ° m W d w m w o = Z a O ° 1O w> = omm° U LU CZ, Fd d m °r c 80 Z >NLL Wgcdv E a °c 'fin -wi W x° w W. W sE> c 8 . vi '� a 2 a XI�o ='QE�nv Lu C) w E p X Q a c °' V1 O E C¢ V y a `� �'� m ¢ y x U O; c v n c I `a w F y u 2 Z .E ;0 C dog"' =a ° owe 5°'o a w j mm d= O U X d N�- G a a 3 o u( m 3 m a 0 V f ZK- W Uu WO ¢ Z :, d m W IL E U) dVi C d x W 7 C d K EAST VALLEY WATER DISTRICT CAPITAL IMPROVEMENT PROGRAM INCLUDING CAPITAL BUDGET FOR FISCAL YEAR 2010 -2011 Updated through August 2010 Page 1 EAST VALLEY WATER DISTRICT Capital Improvement Program Updated Through August 2010 Page 2 Prior Current (Memo) Projects- By Type Years Year 2010 -11 2011.12 Actual Actual Budget Year 2 Source of Supply Plant 150 Wells - - Lower Zone Wells (2) - - Sunrise Ranch Wells (4) - Total Source of Supply Projects - - Treatment Facilities Plant 134 - Upgrade Technology 1,758,011 57.015 10,547,500 5,175,500 Plant 150 - Lower Zn Perch Treat. PI - Phase 1 1,825,125 6,378 1,200,000 7,890,000 Plant 150 - Lower Zn Perch Treat. PI - Phase 2 - - - - Plant 152 - Inter. Zone Perch Treat. Plant 1,1t - - - Total Treatment Projects 4,7 63,393 11,747,500 13,065,500 Pumping Facilities Plant 9 - Rehab Forebay and Booster Station 50,000 Plant 40 - Inter to Upper Zone Transfer , 300,000 Plant 127 - Lower to Inter Zone Transfer - - - Plant 12 - Replace Boosters / Well - 500,000 Plant 134 - Upper to Canal Zone Transfer - Plant 39 - Inter to Upper Zone Transfer - Plant 25 - Inter to Upper Zone Transfer - - Plant 143 - Inter to Upper Zone Transfer - 1,000,000 - Total Pumping Projects 2,096 1,350,000 500,000 Wastewater Collection System Sewer System Studies / Planning 142,662 6,542 50,000 250,000 Sewer Main Lining - - 200,000 450,000 Conejo Main Replacement 112,889 465 1,040,000 - Total Wastewater Collection Projects 255,551 7,007 1,290,000 700,000 Page 2 .,.2012.13 {iiJb�.11 2013.14 2014 -15 2015.16 Beyond Project Year 3 Year 4 Year 5 Year 6 Year 6 Totals - 1,925,000 1,925,000 - 3,300,000 3,300,000 4,400,000 4,400,000 T— - 9,625,000 9,625,000 - - 6,990,526 10, 750,000 1,075,000 21,546,503 - - 5,050,000 2,850,000 - 7,900,000 - - - 19,160,000 20,316,774 10,750,000 1,075,000 5,050,000 2,850,000 19,160,000 56,753,803 250,000 - 250,000 2,096 300,000 300,000 500,000 - 1,000,000 520,000 780,000 - 1,300,000 - - 2,200,000 2,200,000 400,000 - 400,000 - - - 2,900,000 2,900,000 1,270,000 300,000 780,OOOT 2,600,000 2,900,000 8,352,096 - - - 399,204 450,000 450,000 450,000 450,000 1,800,000 4,050,000 450,000 4:0,000 450,000 450,000 1,800,000 4,562,558 Page 3 EAST VALLEY WATER DISTRICT Capital Improvement Program Updated Through August 2010 Page 4 Prior Current (Memo) L% Projects- By Type Years Year 2010 -11 2011 -12 Actual Actual Budget Year 2 Transmission & Distribution System 6th St 20" Pipeline - Plants 11 & 12 to 150 - - - 510,000 Live Oak Main Replacement 9,943 125.899 70,000 - Harlan Lane Main Replacement 7,957 - 90,000 70,000 Cunningham / Hillview / Crest / Bruce - - 450,000 - 6th St 30" Pipeline - Plant 151 to Plant 40 - 650 100,000 3,815,000 6th St 30" Pipeline - PI 40 to PI 143 - - - - 9th St 12" Pipeline - Del Rosa to Sterling - - - - AMR Meter Replacement Program - 9,088 200,000 300,000 Plant 59 Recoating - - - 300,000 Plant 143 - 10mg Inter Zone Storage - - 1,050,000 - Reservoir- Greenspot Rd S Curve - - - Reservoir -Seven Oaks Dam Rd - - - Relocation of Facilities for Other Agencies 226,320 6.355 100,000 Eastwood Farms Assessment District 112,529 32 827 2,211,399 - Total Trans & Distribution Projects 356,749 174,819 4,271,399 4,995,000 General Projects GIS Implementation 457,750 51,320 160,000 100,000 Headquarters Building 9,165,776 - - - Total General Projects 9,623,526 51,320 160,000 100,000 Miscellaneous / Developer Projects Developer Water Facilities (Reimb by Fees) 1,968,784 (22,935) Developer Sewer Facilities (Reimb by Fees) 771,444 Water Conf / Solar Challenge 10,000 Plant 120 Rehab 38,431 Regional Treatment Plant 4,902 Demo Del Rosa Headquarters Bldg Seven Oaks Dam (SAR ) Discharge 8,087 Page 4 + 2012.13 2013 -14 2014 -15 2015 -16 Beyond Project Year 3 Year 4 Year 5 Year 6 Year 6 Totals 510,000 135,842 77,957 2,060,000 - - 5,875,650 1,300,000 1,000,000 - 5,400,000 7,700,000 - - 700,000 700,000 300,000 300,000 - 909,088 - - 300,000 - 10,700,000 10,700,000 10, 700, 000 10, 700, 000 - 10,700,000 10,700,000 232,675 - - 145,356 3,660,000 1,300,000 700,000 37,500,000 48,686,569 - - - - 609,070 10,000,000 19,165,776 10,000,000 19, 774,846 I® 1,945,849 771,444 10,000 38,431 4,902 Page 5 EAST VALLEY WATER DISTRICT 2010 -11 Operating Budget Capitalized Labor and Benefits Construction Projects - Labor Plant 134 Upgrade / Expansion Current Year BUDI3ET CATEGORY Month To Date GIS Implementation 9,776 Supervision and Labor Live Oak Main Replacement 12,251 General And Administrative Eastwood Farms 6,266 Administration Facilities Relocation 4,022 Finance Developer Projects 2,482 Warehouse Sewer Repalcement Conejo 465 IT Well Rehabs 232 Fleet Services Jobs closed in prior fiscal year Engineering 17,785 31,728 Benefits Credit 14,854 28,245 Sub Total General & Admin 32,639 59,973 Source of Supply 309 309 Pumping 149 548 Water Treatment Transmission and Distribution 7,815 16,966 Customer Service Sewage Collection Meter Shop 40,912 77,796 Construction Projects - Labor Plant 134 Upgrade / Expansion 3,910 5,224 Plant 150 1,508 2,262 GIS Implementation 9,776 18,083 Live Oak Main Replacement 12,251 24,898 Eastwood Farms 6,266 11,446 Facilities Relocation 4,022 6,355 Developer Projects 2,482 4,780 Sewer Repalcement Conejo 465 465 Well Rehabs 232 935 Jobs closed in prior fiscal year 3,348 40,912 77,796 Page 1 Cucamonga Valley Water District and Chino Basin Water Conservation District will be hosting the October 18th, 2010 Membership Meeting at the Upland Carnegie Library 450 N. Euclid Avenue, Upland, CA 91768 (909) 931 -4100 The social hour will begin at 6:00 PM with a call to order at 6:45 PM, Dinner: Buffet w /Mixed Green Salad, Salt Roasted Sirloin w /Cabernet reduction, Grilled Chicken w /Herb Rosemary Marinade, garlic mashed potatoes, English peas & carrots, Mixed Berry Cheesecake, Tropical Iced Tea and coffee Program: Kyle Packham, Legislative Director at CSDA, will present an overview / tour of the CSDA's website, and address the hot legislative initiatives. Cost: $35.00 /person RSVP to Beth Barry no later than October 11th: bethb @cvwdwater.com or at (909) 483 -7302 Make checks payable to ASBCSD, ATTN: Renee Latu ASBCSD P.O. Box 1757 San Bernardino, CA 92405 District/Associate: Attendee (s): Reminder: There is a $2 surcharge for reservations made after the deadline date, as well as for coming to dinner with no reservations. You will also be billed for the dinner if your cancellation is not received prior to the deadline. Directions: From westbound 10 free way: Exit Euclid 4 turn left on S Euclid and proceed for .9 miles, then turn left onto East D Street. The library will be on your left (actual address is 450 N Euclid Ave but front of building is on D) 1'r All, St F I'll 7 AV,r 51 V, l"jj LO V, IlAI, 11,� IMI. i a J Lli h t -iL V k , i— h" U PIZ Aj� Mt N0.51 9 cl 7-11W Ll L L,l Nuns! 14 • lull o li k. 7 Not 5-L WESTCAS 2olo FALL CONF]:RENCE "Sustainable Water: A Year Later— What's New ?" S+ 0 WESTCAS Administrative Services 1810 Wynthrop Manor Drive Marietta, GA 30064 westcasCa mindspring.com "rw.westcas.org ,70-424-8111 N Sa rt r rt �Y a 0 n FL W A� P+ O� 0 M a Z O oq� W ao � O O w o N 0 • µ� tit � 4 _�y n Rtyn T rt tir a+�z z2: am CM M m o" t tl 3oP1 r ° m "^ M ' m F w° m °- m 7' A EL o ff Can „-S,' o ` ° v. Zo R N F o' o N 05 c o .w. 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