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HomeMy WebLinkAboutAgenda Report - April 18, 2018 H-01TM CITY OF LODI COUNCIL COMMUNICATION AGENDA ITEM H-� AGENDA TITLE: Adopt Resolutions and Authorize Documents and Actions Regarding the Refunding of the Electric System Revenue Certificates of Participation, 2008 Series A (a) Adopt Resolution of the City Council Authorizing Documents and Official Actions Relating to the Refinancing on a Current Basis of an Outstanding Payment Obligation of the City of Lodi Relating to its Electric System and the Issuance and Sale of 2018 Electric System Revenue Refunding Bonds by the Lodi Public Financing Authority, and (b) Adopt Resolution of the Lodi Public Financing Authority Authorizing the Issuance and Sale of 2018 Electric System Revenue Refunding Bonds to Refinance on a Current Basis an Installment Payment Obligation of the City of Lodi 2007, and Approving Related Documents and Official Actions, and (c) Adopt Resolution Authorizing the City Manager to Enter into an Agreement for Legal Services with Jones Hall, a Professional Law Corporation, for Bond Counsel Services in Connection with the Bond Refinancing ($75,000) MEETING DATE: April 18, 2018 PREPARED BY: Deputy City Manager and City Attorney RECOMMENDED ACTION: Adopt resolutions of the City Council and the Lodi Public Financing Authority (the "PFA") approving the refinancing of an outstanding payment obligation related to the Electric System Revenue Certificates of Participation, 2008 Series A (the "2008 COPs"), and the issuance and sale of refunding electric revenue refunding bonds (the "Refunding Bonds") in an amount not to exceed $46.1 million in order to secure market interest savings. Adopt resolution authorizing the City Manager to enter into an agreement for legal services with Jones Hall, a Professional Law Corporation, for bond counsel services in connection with the Refunding Bonds in the amount of $75,000. BACKGROUND INFORMATION: The City previously caused execution and delivery of the 2008 COPs to refinance debt associated with acquisition and construction of improvements to the City's electric utility. Favorable market conditions have reduced prevailing interest rates and made it attractive for the City to refund the 2008 COPs by the issuance and sale of refunding electric revenue bonds by the PFA. The refunding is structured solely to capture interest rate savings for Lodi's ratepayers. It does not extend the repayment term or add new debt. SUMMARY OF DOCUMENTS: In order to complete the refinancing, the City and the PFA are required to approve and execute several key legal documents. The key documents are summarized below. APPROVED: Stephe Sch v bauer../City Manager Adopt Resolutions and Authorize Documents and Actions Regarding the Refunding of the Electric System Revenue Certificates of Participation, 2008 Series A April 18, 2018 Resolutions: The resolutions of the City and the PFA approve the issuance of the proposed Refunding Bonds, the execution of the proposed legal documents, and the distribution of the Official Statement to investors. While the documents are in near -to -final form, the resolutions authorize certain officers of the City and the PFA to make amendments, as necessary. The resolutions specify the maximum principal amount of the Refunding Bonds and the minimum net present value savings that issuance of the Refunding Bonds must achieve. In order to comply with new provisions of California law enacted by Senate Bill 450, the resolutions also include the following information, which represents a good faith estimate by the City's municipal advisor, Fieldman, Rolapp & Associates ("Municipal Advisor"): (i) the true interest cost of the Refunding Bonds, (ii) the finance charge of the Refunding Bonds, which means the sum of all fees and charges paid to third parties, (iii) the amount of proceeds received by the PFA for sale of the Refunding Bonds less the finance charge of the Refunding Bonds and any reserves or capitalized interest paid or funded with proceeds of the Refunding Bonds and (iv) the total payment amount calculated to the final maturity of the Refunding Bonds, which means the sum total of all payments the PFA will make to pay debt service on the Refunding Bonds plus the finance charge of the Refunding Bonds not paid with the proceeds of the Refunding Bonds. Official Statement: The Preliminary Official Statement, approved and signed by the City and PFA, most importantly describes (i) the term of the Refunding Bonds ("THE 2018 BONDS"), (ii) the security for the Refunding Bonds ("SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS"), (iii) the refinancing plan, (iv) the City's Electric System ("THE ELECTRIC SYSTEM", which is the source of repayment for the Refunding Bonds, (v) potential risks to prospective investors ("RISK FACTORS"), (vi) tax status of interest on the Refunding Bonds ("TAX MATTERS") and (vii) economic and demographic characteristics of the City (Appendix A). The Preliminary Official Statement (often referred to as the "POS") is distributed by the underwriter to prospective investors prior to the bond sale so that investors can make informed purchase decisions. The POS is the equivalent of a prospectus in the private sector. The Final Official Statement is sent to purchasers after the terms of the sale are finalized. The distribution of a POS is subject to federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require the POS to include all facts that would be material to an investor considering a purchase of the Refunding Bonds. Material information is information that there is a substantial likelihood that a reasonable investor would consider important in deciding whether to buy or sell bonds. Materiality is determined in the context of all facts and circumstances. The Securities and Exchange Commission (the "SEC"), the agency with regulatory authority over the City and the PFA's compliance with the federal securities laws, has issued guidance as to the duties of the City Council and the PFA's Board of Directors with respect to their approval of the POS. In its "Report of Investigation in the Matter of County of Orange, California as it Relates to the Conduct of the Members of the Board of Supervisors" (Release No. 36761 / January 24, 1996) (the "Release"), the SEC stated that, if a member of the City Council/Board of Directors has knowledge of any facts or circumstances that an investor would want to know about prior to investing in the Refunding Bonds, whether relating to their repayment, tax-exempt status, undisclosed conflicts of interest with interested parties, or otherwise, he or she should endeavor to discover whether such facts are adequately disclosed in the POS. In the Release, the SEC stated that the steps that a member of the City Council/Board of Directors could take include becoming familiar with the POS and questioning staff and consultants about the disclosure of such facts. Continuing Disclosure Agreement: The Continuing Disclosure Agreement, attached as an appendix to the Official Statement, obligates the City to provide updated information to the bond markets 2 Adopt Resolutions and Authorize Documents and Actions Regarding the Refunding of the Electric System Revenue Certificates of Participation, 2008 Series A April 18, 2018 on an ongoing basis. Disclosure is required annually, and on an exceptional basis for certain enumerated events. Bond Purchase Agreemnt: The Bond Purchase Agreement is executed among the City, the PFA and J.P. Morgan Securities LLC (the "Underwriter") on the day of the bond sale. It specifies the actual principal amounts, interest rates, and prices at which the Refunding Bonds will be sold. Within the contract, the Underwriter commits to purchase the Refunding Bonds at closing and the PFA commits to sell the Refunding Bonds at the agreed upon prices and amounts subject to certain closing conditions. Closing conditions generally relate to the execution and validity of all the required documents and the absence of material changes in the nature of the security, etc. Installment Purchase Agreement: The Refunding Bonds will be payable from installment payments made by the City to the PFA under an Installment Purchase Agreement. The scheduled installment payments will be equal in amount to debt service on the Refunding Bonds. The Installment Purchase Agreement documents the key financial obligations of the Electric System, which are consistent with existing obligations of the Electric System under the legal documents for the 2008 COPs. The PFA assigns its right to receive these installment payments to the trustee for the Refunding Bonds pursuant to the Indenture of Trust described below. The Installment Purchase Agreement will specify: • the net revenues of the Electric System specifically pledged to the installment payments (the City is not obligated to make the installment payments from any other City funds); • the uses of the Electric System's gross revenues: briefly, gross revenues are first used to pay operation and maintenance expenses and then to pay the installment payments and any future Electric System debt; • the promise of the City to charge sufficient rates to Electric System customers to pay operation and maintenance expenses, the installment payments and any future debt with a sufficient coverage cushion (the "rate covenant"); and • the terms under which additional Electric System debt can be issued to finance additional capital improvements to the Electric System. Indenture of Trust: The Indenture of Trust is the legal document between the PFA and a corporate bank (as trustee for the bond owners; in this case, MUFG Union Bank, N.A.) that lays out the terms of the Refunding Bonds. It will specify: • the payment dates and maturities of the Refunding Bonds; • the pledge of installment payments to the Refunding Bonds; • the default and remedy provisions (in the event the City failed to make the installment payments under the Installment Purchase Agreement); and • redemption and defeasance provisions, in the event that interest rates allow the City to refinance these bonds in the future. In general, the PFA is a conduit for the installment payments paid by the City to the bond owners. The PFA has no obligation to pay debt service on the Refunding Bonds from any source of funds other than the installment payments made by the City. The source of funds for the installment payments is the Electric System net revenues (i.e., electric system gross revenues remaining after payment of Electric System operations and maintenance expenses). 3 Adopt Resolutions and Authorize Documents and Actions Regarding the Refunding of the Electric System Revenue Certificates of Participation, 2008 Series A April 18, 2018 Escrow Deposit and Trust Agreement: The Escrow Deposit and Trust Agreement is the agreement between the City and the trustee for the 2008 COPs that documents the deposit, investment, and application of funds to refinance the portion of the 2008 COPs that are being refunded. FISCAL IMPACT: FUNDING AVAILABLE: The estimated net present value savings (i.e., after deducting the costs of the refinancing) for this refinancing is approximately $6.3 million for the Electric System. The City's installment payments related to the Refunding Bonds for this refinancing is already provided for in the City's current budget because the City budgeted to pay the installment payments related to the 2008 COPs, although the installment payments related to the Refunding Bonds should be lower than the installment payments related to the 2008 COPs. Andrew Keys Deputy City Manager/Internal Services Director Janice D. Magdich City Attorney Attachments: Draft City Council Resolution and Exhibits Draft Lodi Public Financing Authority Resolution and Exhibits Draft Preliminary Official Statement (incl. Continuing Disclosure Agreement) 4 AGREEMENT FOR LEGAL SERVICES BETWEEN THE CITY OF LODI AND JONES HALL, A PROFESSIONAL LAW CORPORATION, FOR BOND COUNSEL SERVICES IN CONNECTION WITH THE REFINANCING OF CERTAIN OUTSTANDING OBLIGATIONS OF THE CITY This AGREEMENT FOR LEGAL SERVICES is entered into this 18th day of April, 2018, between the CITY OF LODI, A MUNICIPAL CORPORATION (the "Client") and JONES HALL, A PROFESSIONAL LAW CORPORATION, San Francisco, California ("Attorneys"). BACKGROUND: 1. The Client owns and operates facilities and property for the distribution of electricity within the service area of the Client (the "Electric System"). 2. The Client previously entered into an Installment Purchase Contract, dated as of July 1, 2008 with the Lodi Public Improvement Corporation (the "Corporation"), pursuant to which the Client agreed to make certain installment payments in the aggregate principal amount of $60,685,000 (the "2008 Installment Payments"), and caused execution and delivery of Electric System Revenue Certificates of Participation, 2008 Series A (the "2008 Certificates"). The proceeds of the 2008 Certificates were used to (i) refund the then -outstanding $46,760,000 principal amount of Electric System Revenue Certificates of Participation 2002 Series A Variable Rate Certificates (the "2002 Certificates") and (ii) fund certain costs relating to termination of the swap agreement relating to the 2002 Certificates. 3. The proceeds of the 2002 Certificates were used to refund, on an advance basis, the 1999 Series A Current Interest Certificates and the 1999 Series B Capital Appreciation Certificates (together, the "1999 Obligations"), and the proceeds of the 1999 Obligations were used to finance the improvements to the Electric System. 4. Under current economic conditions, it is possible for the Client to refinance on a tax-exempt basis the 2008 Installment Payments and the related 2008 Certificates maturing on and after July 1, 2019 for the purpose of achieving savings for the benefit of the customers of the Electric System. 5. In order to provide funds that are sufficient (along with other available City funds) to refinance the 2008 Installment Payments and cause a current prepayment of the 2008 Certificates, the Client wishes to ask the Lodi Public Financing Authority (the "Authority") to issue its 2018 Electric System Revenue Refunding Bonds (the "Bonds") under the provisions of Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code (the "Bond Law"). 6. In order to accomplish the proposed refunding, the Client requires the services of a nationally recognized bond counsel. AGREEMENT: In consideration of the foregoing and the mutual covenants contained in this Agreement, the Client and Attorneys agree as follows: Section 1. Attorney -Client Relationship. Upon execution of this Agreement, the Client will be Attorneys' client and an attorney-client relationship will exist between Client and Attorneys. Attorneys assume that all other parties will retain such counsel, as they deem necessary and appropriate to represent their interests in this transaction. Attorneys further assume that all other parties understand that in this transaction Attorneys represent only the Client, Attorneys are not counsel to any other party, and Attorneys are not acting as an intermediary among the parties. Attorneys' services as bond counsel are limited to those contracted for in this Agreement; the Clients execution of this Agreement will constitute an acknowledgment of those limitations. Attorneys' representation of the Client will not affect, however, our responsibility to render an objective Bond Opinion. Section 2. Scope of Engagement. Attorneys shall perform all of the following services as bond counsel in connection with the Bonds for the purpose of refinancing the 2008 Installment Payments: a. Consultation and cooperation with Client and Client staff to assist in the formulation of a coordinated financial and legal issuance of the Bonds. b. Preparation of all legal proceedings for the authorization, issuance and delivery of the Bonds; including (a) preparation of a resolution of the governing board of the Client and a resolution of the governing board of the Authority authorizing the issuance and sale of the Bonds and approving related documents and actions, and preparation of a resolution of the Corporation authorizing the proposed refinancing of the 2008 Installment Payments, (b) preparation of all financing documents, including an installment sale agreement and indenture of trust, (c) preparation of all documents required for the closing of the issue, (d) supervising the closing, and (e) preparation of all other proceedings incidental to or in connection with the issuance and sale of the Bonds. c. Advising the Client, from the time Attorneys are hired as Bond Counsel until the Bonds are issued, as to compliance with federal tax law as required to ensure that interest on the Bonds is exempt from federal income taxation. d. Upon completion of proceedings to Attorneys' satisfaction, providing a legal opinion (the "Bond Opinion") approving the validity and enforceability of the proceedings for the authorization, issuance and delivery of the Bonds, and stating that interest on the Bonds is (a) excluded from gross income for purposes of federal income taxes and (b) exempt from California personal income taxation. The Bond Opinion will be addressed to the Client, and may also be addressed to the underwriter of the Bonds and other participants in the financing. e. Review those sections of the official statements or other form of offering or disclosure documents to be disseminated in connection with the sale of the Bonds involving summary descriptions of the Bonds, the legal proceedings leading to the authorization and sale of the Bonds, the legal - 2 - documents under which the Bonds will be issued, and federal tax law and securities law provisions applicable to the Bonds, as to completeness and accuracy. We understand that another law firm will act as disclosure counsel to the Client and (a) will assist in the preparation of the official statement and (b) will advise with respect to compliance with state and federal securities laws. f. Assist the Client in presenting information to bond rating organizations and providers of credit enhancement relating to legal issues affecting the issuance of the Bonds. g• Draft the continuing disclosure undertaking of the Client, if requested. h. Such other and further services as are normally performed by bond counsel in connection with similar financings. Attorneys' Bond Opinion will be delivered by Attorneys on the date the Bonds are exchanged for their purchase price (the Closing ). The Bond Opinion will be based on facts and law existing as of its date, will cover certain matters not directly addressed by such authorities, and will represent Attorneys' judgment as to the proper treatment of the interest on the Bonds for federal income tax purposes. Attorneys' opinion is not binding on the Internal Revenue Service ("IRS") or the courts. Attorneys cannot and will not give any opinion or assurance about the effect of future changes in the Internal Revenue Code of 1986 (the "Code"), the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. Client acknowledges that future legislation, if enacted into law, or clarification of the Code may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent owners of the Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Code may also affect the market price for, or marketability of, the Bonds. Attorneys will express no opinion regarding any pending or proposed federal tax legislation. In rendering the Bond Opinion, Attorneys will rely upon the certified proceedings and other certifications of public officials and other persons furnished to Attorneys without undertaking to verify the same by independent investigation, and Attorneys will assume continuing compliance by the Client with applicable laws relating to the Bonds. Section 3. Excluded Services. Our duties in this engagement are limited to those expressly set forth above in Section 2, except as expressly set forth in a written amendment to this Agreement. Among other things, our duties do not include: a. Except as described in paragraph 2(e) above, assisting in the preparation or review of official statements or any other disclosure documents with respect to the Bonds, or performing an independent investigation to determine the accuracy, completeness or sufficiency of any such document or rendering advice that the official statement or other disclosure document does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. - 3 - b. Preparing requests for tax rulings from the Internal Revenue Service, or "no -action" letters from the Securities and Exchange Commission. c. Preparing blue sky or investment surveys with respect to the Bonds. d. Except as described in paragraph 2(b) above, drafting state constitutional or legislative amendments. e. Pursuing test cases or other litigation, such as contested validation proceedings, except as set forth above. f. Making an investigation or expressing any view as to the creditworthiness of the Client or the Bonds. g. Except as described in paragraph 2(g) above, assisting in the preparation of, or opining on, a continuing disclosure undertaking pertaining to the Bonds or, after Closing, providing advice concerning any actions necessary to assure compliance with any continuing disclosure undertaking. h. After Closing, unless specifically requested to do so by Client, and agreed to by Attorneys, representing the Client in Internal Revenue Service examinations, audits or inquiries, or Securities and Exchange Commission investigations. i. After Closing, unless specifically requested to do so by Client, and agreed to by Attorneys, providing continuing advice to the Client or any other party concerning any actions that need to be taken regarding the Bonds; e.g., actions necessary to assure that interest paid on the Bonds will continue to be excludable from gross income for federal income tax purposes (e.g., our engagement does not include rebate calculations for the Bonds). J. Reviewing or opining on the business terms of, validity, or federal tax consequences of any investment agreement that the Client may choose as an investment vehicle for the proceeds of the Bonds, unless the Client and Attorneys agree on the terms of such review and compensation for such review. k. Reviewing or opining on the business terms of, validity, or federal tax consequences of any derivative financial products, such as an interest rate swap agreement, that the Client may choose to enter into in connection with the issuance of the Bonds, unless the Client and Attorneys agree on the terms of such review and compensation for such review. I. Addressing any other matter not specifically set forth above that is not required to render our Bond Opinion. -4- Section 4. Conflicts; Prospective Consent. Attorneys represent many political subdivisions, investment banking firms and financial advisory firms. It is possible that during the time that Attorneys are representing the Client, one or more of Attorneys present or future clients will have transactions with the Client. It is also possible that Attorneys may be asked to represent, in an unrelated matter, one or more of the entities involved in the issuance of the Bonds. Attorneys do not believe such representation, if it occurs, will adversely affect Attorneys' ability to represent you as provided in this Agreement, either because such matters will be sufficiently different from the issuance of the Bonds so as to make such representations not adverse to our representation of you, or because the potential for such adversity is remote or minor and outweighed by the consideration that it is unlikely that advice given to the other client will be relevant to any aspect of the issuance of the Bonds. Execution of this Agreement will signify the Clients consent to Attorneys' representation of others consistent with the circumstances described in this paragraph. Section 5. Compensation. For the bond counsel services of Attorneys related to the Bonds, the Client will pay Attorneys a fee of $75,000. In addition, the Client shall pay to Attorneys all direct out-of-pocket expenses for travel outside the State of California (if any), messenger and delivery service, photocopying, closing costs, legal publication expenses and other costs and expenses incurred by Attorneys in connection with their services hereunder, provided that the reimbursement for the Bonds will not exceed $2,500. Section 6. Responsibilities of the Client. (a) General. The Client will cooperate with Attorneys and furnish Attorneys with certified copies of all proceedings taken by the Client, or otherwise deemed necessary by Attorneys to render an opinion upon the validity of the proceedings. During the course of this engagement, Attorneys will rely on Client to provide Attorneys with complete and timely information on all developments pertaining to any aspect of the Bonds and their security. Attorneys are not responsible for costs and expenses incurred incidental to the actual issuance and delivery of the Bonds, including the cost of preparing certified copies of proceedings required by Attorneys in connection with the issuance of the Bonds, and printing and publication costs. (b) Federal Tax Law -Related Responsibilities. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. As a condition of Attorneys issuing their opinion, you will be required to make certain representations and covenants to comply with certain restrictions designed to insure that interest on the Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. Attorneys' opinion will assume the accuracy of these representations and compliance with these covenants. Attorneys will not undertake to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. In this regard, Client agrees to familiarize itself with the relevant requirements and restrictions necessary for the Bonds to qualify for exemption from federal income taxation and to exercise due diligence both before and after issuance of the Bonds in complying with these requirements. -5- Section 7. Independent Contractor. Attorneys will act as an independent contractor in performing the services required under this Agreement, and under no circumstances shall Attorneys be considered an agent, partner, or employee of the Client. Section 8. Assignment. Attorneys may not assign their rights or delegate their obligations under this Agreement, in whole or in part, except with the prior written consent of the Client. Section 9. Termination of Agreement. (a) Termination by Client. This Agreement may be terminated at any time by the Client with or without cause upon written notice to Attorneys. (b) Termination by Attorneys. This Agreement may. be terminated by Attorneys upon 15 days' written notice to Client if Client fails to follow written legal advice given by Attorneys. (c) Termination Upon Issuance of the Bonds. This Agreement shall terminate upon the issuance of the Bonds. (d) Consequences of Termination. In the event of termination, all finished and unfinished documents shall at the option of the Client become its property and shall be delivered to the Client by Attorneys. IN WITNESS WHEREOF, the Client and Attorneys have executed this Agreement as of the date first above written. CITY OF LODI, a municipal corporation Steve Schwabauer City Manager JONES HALL, A PROFESSIONAL LAW COLORA ION Christoph-' nch Vice Pre : nt -6- RESOLUTION NO. 2018-70 A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING DOCUMENTS AND OFFICIAL ACTIONS RELATING TO THE REFINANCING ON A CURRENT BASIS OF AN OUTSTANDING INSTALLMENT PAYMENT OBLIGATION OF THE CITY OF LODI RELATING TO ITS ELECTRIC SYSTEM AND THE ISSUANCE AND SALE OF 2018 ELECTRIC SYSTEM REVENUE REFUNDING BONDS BY THE LODI PUBLIC FINANCING AUTHORITY, AND APPROVING AN AMENDMENT TO THE BUDGET RELATED TO FINAL DEBT SERVICE FOR THE BONDS WHEREAS, the City of Lodi (the "City") owns and operates facilities and property for the distribution of electricity within the service area of the City (the "System"); and WHEREAS, the City previously entered into an Installment Purchase Contract, dated as of July 1, 2008 (the "2008 Installment Purchase Contract") with the Lodi Public Improvement Corporation (the "Corporation"), pursuant to which the City agreed to make certain installment payments in the aggregate principal amount of $60,685,000 (the "2008 Installment Payments"), and caused execution and delivery of Electric System Revenue Certificates of Participation, 2008 Series A (the "2008 Certificates"), pursuant to a Trust Agreement, dated as of July 1, 2008 (the "2008 Trust Agreement"), between the Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2008 Trustee"), all for the purpose of (i) currently refunding the then -outstanding $46,760,000 principal amount of Electric System Revenue Certificates of Participation 2002 Series A Variable Rate Certificates (the "2002 Certificates"), (ii) paying costs of delivery of the 2008 Certificates, (iii) funding certain costs relating to termination of the swap agreement relating to the 2002 Certificates, (iv) purchasing a financial guaranty insurance policy for the 2008 Certificates, and (v) funding a reserve fund for the 2008 Certificates; and WHEREAS, the proceeds of the 2002 Certificates were used to refund, on an advance basis, the 1999 Series A Current Interest Certificates and the 1999 Series B Capital Appreciation Certificates (together, the "1999 Obligations"), and the proceeds of the 1999 Obligations were used to finance the Existing Facilities relating to the Electric System; and WHEREAS, under current economic conditions, it is possible for the City to refinance on a tax-exempt basis the 2008 Installment Payments and the related 2008 Certificates maturing on and after July 1, 2019 for the purpose of achieving savings for the benefit of the customers of the System; and WHEREAS, in order to provide funds that are sufficient (along with other available City funds) to refinance the 2008 Installment Payments and cause a current prepayment of the 2008 Certificates, the City wishes to ask the Lodi Public Financing Authority (the "Authority") to issue its 2018 Electric System Revenue Refunding Bonds (the "Bonds") under the provisions of Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code (the "Bond Law"); and WHEREAS, in order to provide revenues which are sufficient to pay debt service on the Bonds, the City proposes to enter into an Installment Purchase Agreement with the Authority; and WHEREAS, the obligations of the City under the proposed Installment Purchase Agreement will be secured by a pledge of and lien on the net revenues of the System; and WHEREAS, in accordance with Government Code Section 5852.1, the City Council has obtained and disclosed the information set forth in Exhibit A hereto; and WHEREAS, the City Council wishes at this time to take action approving such financing transactions and all related documents and actions. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lodi as follows: Section 1. Approval of Refinancing Plan; Authorization of Bonds. The City Council hereby approves the refinancing plan described in the recitals of this Resolution. To that end, the City Council hereby approves the issuance of the Bonds by the Authority under the Bond Law in the aggregate principal amount of not to exceed $46,100,000. Section 2. Approval of Installment Purchase Agreement. The City Council hereby approves the Installment Purchase Agreement between the Authority and the City. The Installment Purchase Agreement is hereby approved in substantially the form on file with the City Clerk together with any changes therein or additions thereto deemed advisable by the Mayor, City Manager, Deputy City Manager, or City Attorney (each, an "Authorized Officer"). An Authorized Officer is hereby authorized and directed for and in the name and on behalf of the City to execute, and the City Clerk is hereby authorized and directed to attest, the final form of the Installment Purchase Agreement, and such execution shall be conclusive evidence of the approval of the final form thereof. Section 3. Approval of Escrow Deposit and Agreement. The City Council hereby approves an Escrow Deposit and Trust Agreement between the City and The Bank of New York Mellon Trust Company, N.A., as escrow bank, providing for the deposit, investment and application of funds to refinance the 2008 Installment Payments and defease and prepay the 2008 Certificates. The Escrow Deposit and Trust Agreement is hereby approved in substantially the form attached hereto as Exhibit B together with any changes therein or additions thereto deemed advisable by an Authorized Officer. An Authorized Officer is hereby authorized and directed for and in the name and on behalf of the City to execute, and the City Clerk is hereby authorized and directed to attest, the final form of the Escrow Deposit and Trust Agreement, and such execution shall be conclusive evidence of the approval of the final form thereof. Section 4. Sale of Bonds; Approval of Bond Purchase Agreement. The City Council hereby approves the negotiated sale of the Bonds by the Authority to J.P. Morgan Securities LLC (the "Underwriter"). The Bonds shall be sold pursuant to the terms and provisions of a Bond Purchase Agreement among the Authority, the City and the Underwriter in substantially the form on file with the City Clerk together with any changes therein or additions thereto deemed advisable by an Authorized Officer. The Bonds shall be sold at such price and shall bear interest at such rates as shall produce a minimum net present value savings to the City of at least 3.0% of the principal component of the 2008 Installment Payments, as such savings shall be verified and conclusively determined by the City's municipal advisor (the "Minimum Savings Requirement"). The Underwriter's discount shall not exceed 0.3%. The final form of the -2- Bond Purchase Agreement shall be executed in the name and on behalf of the City by an Authorized Officer. Section 5. Official Statement; Continuing Disclosure Certificate. The City Council hereby approves and deems final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, the Preliminary Official Statement describing the Bonds in the form attached hereto as Exhibit C, together with such modifications thereof as may be approved by an Authorized Officer. An Authorized Officer is hereby authorized and directed to (a) execute and deliver to the purchaser of the Bonds a certificate deeming the Preliminary Official Statement to be final as of its date within the meaning of such Rule, (b) approve any changes in or additions to cause the Official Statement to be put in final form, and (c) execute the final Official Statement for and in the name and on behalf of the City. The City Council hereby authorizes the distribution of the Preliminary Official Statement and the Final Official Statement by the Underwriter. The City Council hereby approves execution by an Authorized Officer of a Continuing Disclosure Certificate in substantially the form attached as an appendix to the Preliminary Official Statement. Section 6. Budget Amendment. The City Council hereby approves an amendment to the City's 2018-2019 Budget to account for the final amount of the installment payments payable pursuant to the Installment Purchase Agreement and interest and principal payable with respect to the Bonds. Section 7. Official Actions. The Mayor, the City Manager, the Deputy City Manager, the City Clerk, the City Attorney and all other officers of the City are each authorized and directed in the name and on behalf of the City to make any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they or any of them might deem necessary or appropriate in order to consummate any of the transactions contemplated by the agreements and documents approved under this Resolution, including any documentation relating to municipal bond insurance if an Authorized Officer concludes, after consultation with the City's bond counsel, the City's municipal advisor and the Underwriter, that it would be cost-effective to purchase such insurance. Whenever in this Resolution any officer of the City is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in case such officer is absent or unavailable. Section 8. Effective Date. This Resolution shall take effect immediately upon its passage and adoption. Dated: April 18, 2018 -3- I hereby certify that Resolution No. 2018-70 was passed and adopted by the City Council of the City of Lodi in a regular/special joint meeting held April 18, 2018, by the following vote: AYES: COUNCIL MEMBERS — Chandler, Johnson, Mounce, and Mayor Nakanishi NOES: COUNCIL MEMBERS — None ABSENT: COUNCIL MEMBERS — Kuehne ABSTAIN: COUNCIL MEMBERS — None )-y-NPS--Ic.t/u-c.)34) NNIFERn. FERRAIOLO City Clerk 2018-70 -4- EXHIBIT A GOVERNMENT CODE SECTION 5852.1 DISCLOSURE The following information consists of estimates that have been provided by the Underwriter, which has been represented by such party to have been provided in good faith: (A) True Interest Cost of the Bonds: 3.15%. (B) Finance Charge of the Bonds (Sum of all fees paid to third parties): $385,152. (C) Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if any): $47,853,391. (D) Total Payment Amount Through Maturity: 60,933,154. The foregoing estimates constitute good faith estimates only. The principal amount of the Bonds, the true interest cost of the Bonds, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City's financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City. EXHIBIT B FORM OF ESCROW DEPOSIT AND TRUST AGREEMENT Jones Hall, APLC Draft 4/10/18 ESCROW DEPOSIT AND TRUST AGREEMENT Relating to $60,685,000 Electric System Revenue Certificates of Participation, 2008 Series A This ESCROW DEPOSIT AND TRUST AGREEMENT (this "Agreement"), dated as of June 1, 2018, is between the CITY OF LODI, a general law city and municipal corporation organized and existing under the Constitution and laws of the State of California (the "City"), THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association organized and existing under the laws of the United States of America, acting as escrow agent for the 2008 Certificates described below (the "Escrow Agent") and as trustee (the "2008 Trustee") for the 2008 Certificates. BACKGROUND: 1. The City previously entered into an Installment Purchase Contract, dated as of July 1, 2008 (the "2008 Installment Purchase Contract") with the Lodi Public Improvement Corporation (the "Corporation"), pursuant to which the City agreed to make certain installment payments in the aggregate principal amount of $60,685,000 (the "2008 Installment Payments") and caused execution and delivery of Electric System Revenue Certificates of Participation, 2008 Series A (the "2008 Certificates"), pursuant to a Trust Agreement, dated as of July 1, 2008 (the "2008 Trust Agreement"), between the Corporation and the 2008 Trustee, all for the purpose of (i) currently refunding the then -outstanding $46,760,000 principal amount of Electric System Revenue Certificates of Participation 2002 Series A Variable Rate Certificates (the "2002 Certificates"), (ii) paying costs of delivery of the 2008 Certificates, (iii) funding certain costs relating to termination of the swap agreement relating to the 2002 Certificates, (iv) purchasing a financial guaranty insurance policy for the 2008 Certificates, and (v) funding a reserve fund for the 2008 Certificates. 2. The proceeds of the 2002 Certificates were used to refund, on an advance basis, the 1999 Series A Current Interest Certificates and the 1999 Series B Capital Appreciation Certificates (together, the "1999 Obligations"). The proceeds of the 1999 Obligations were used to finance the Existing Facilities relating to the Electric System. 3. In order to take advantage of prevailing bond market conditions, the City wishes to refinance the 2008 Installment Payments maturing on and after July 1, 2019 (the "Refinanced 2008 Installment Payments") for the purpose of achieving savings for the benefit of the customers of the Electric System, and to cause a current prepayment of the related 2008 Certificates (the "Refunded 2008 Certificates"), the City has proposed to sell the Existing Facilities (as defined in the Indenture) to the Lodi Public Financing Authority (the "Authority") and the Authority will sell the Existing Facilities back to the City. 4. In order to refinance the Refinanced 2008 Installment Payments, the Authority proposes to issue and sell its Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds (the "Bonds"), pursuant to an Indenture of Trust, dated as of June 1, 2018 (the "Indenture"). 5. The City wishes to appoint the Escrow Agent for the purpose of establishing an irrevocable escrow fund to be funded, invested, held and administered for the purpose of providing for the payment in full of the Refinanced 2008 Installment Payments and the payment in full of the principal and interest and premium (if any) with respect to the outstanding Refunded 2008 Certificates. 6. As a result of the deposit and investment of funds in accordance with this Agreement, the Refinanced 2008 Installment Payments will be deemed paid and prepaid under Section 3.02 and Section 9.01 of the 2008 Installment Purchase Agreement, and the Refunded 2008 Certificates will be discharged and defeased in accordance with the provisions of Article VIII of the 2008 Trust Agreement and prepaid in accordance with the provisions of Section 2.04 of the 2008 Trust Agreement. AGREEMENT: In consideration of the premises and the material covenants contained herein, the City and The Bank of New York Mellon Trust Company, N.A., as Escrow Agent and 2008 Trustee, hereby agree as follows: SECTION 1. Appointment of Escrow Agent; Establishment of Escrow Fund. The City hereby appoints the Escrow Agent to act as escrow agent for purposes of administering the funds required to defease and prepay the Refunded 2008 Certificates in accordance with the 2008 Trust Agreement. The Escrow Agent is directed to establish an escrow fund (the "Escrow Fund") to be held by the Escrow Agent in trust as an irrevocable escrow securing the payment of the Refinanced 2008 Installment Payments and the Refunded 2008 Certificates as set forth below. All cash and securities in the Escrow Fund are hereby irrevocably pledged as a special fund for the payment of the Refinanced 2008 Installment Payments in accordance with the 2008 Installment Purchase Agreement and the payment of the principal of and interest and premium (if any) with respect to the Refunded 2008 Certificates in accordance with the 2008 Trust Agreement. If at any time the Escrow Agent receives actual knowledge that the cash and securities in the Escrow Fund will not be sufficient to make any payment required by Section 4 in respect of the Refunded 2008 Certificates, the Escrow Agent shall notify the City of such fact and the City shall immediately cure such deficiency from any source of legally available funds. The Escrow Agent has no liability for any such insufficiency. SECTION 2. Deposit and Investment of Amounts in Escrow Fund. On June _, 2018 (the "Closing Date"), the Authority, pursuant to the Indenture, will cause to be transferred to the Escrow Agent for deposit into the Escrow Fund the amount of $ in immediately available funds, to be derived from the proceeds of the Bonds. 2 The Authority will cause to be transferred to the Escrow Agent for deposit into the Escrow Fund the amount of $ In addition, the City hereby directs the 2008 Trustee to transfer to the Escrow Agent for deposit into the Escrow Fund the amount of $ , to be derived from moneys related to the Refunded 2008 Certificates that are available as a result of the defeasance of the Refunded 2008 Certificates. On the Closing Date, the Escrow Agent shall invest $ of the amounts deposited in the Escrow Fund in the federal securities listed on Exhibit A; the federal securities listed on Exhibit A are "Defeasance Securities" as defined in the 2008 Trust Agreement. The Escrow Agent shall hold the remaining $ in cash, uninvested. If the Escrow Agent learns that the Department of the Treasury or the Bureau of Fiscal Service will not, for any reason, accept a subscription of state and local government series securities ("SLGS") that is to be submitted pursuant to this Agreement, the Escrow Agent shall promptly request alternative written investment instructions from the City with respect to funds which were to be invested in SLGS. The City shall promptly deliver such instructions, which shall direct investment in Defeasance Securities that comply with the requirements of Section 8.01(a)(iii) of the 2008 Trust Agreement, along with a verification report and defeasance opinion of bond counsel in form and substance acceptable to Assured Guaranty Municipal Corp., as insurer of the Refunded 2008 Certificates. The Escrow Agent shall follow such instructions and, upon the maturity of any such alternative investment, the Escrow Agent shall hold such funds uninvested and without liability for interest until receipt of further written instructions from the City. In the absence of investment instructions from the City, the Escrow Agent shall not be responsible for the investment of such funds or interest thereon. The Escrow Agent may conclusively rely upon the City's selection of an alternative investment as a determination of the alternative investment's legality and suitability and shall not be liable for any losses related to the alternative investments or for compliance with any yield restriction applicable thereto. SECTION 3. Application of Amounts in Escrow Fund. The Escrow Agent is hereby instructed to withdraw from the Escrow Fund and transfer to the 2008 Trustee an amount required to pay the principal of and interest and prepayment premium (if any) on the Refunded 2008 Certificates, in accordance with the schedule attached as Exhibit B hereto, which payment shall also constitute payment of the Refinanced 2008 Installment Payments. Following the payment and prepayment of the Refinanced 2008 Installment Payments and the Refunded 2008 Certificates in full, the Escrow Agent shall transfer any amounts remaining on deposit in the Escrow Fund to MUFG Union Bank, N.A., as trustee for the Bonds, for deposit in the Bond Fund established under the Indenture, to be applied to pay interest next coming due and payable on the Bonds. SECTION 4. Irrevocable Election to Prepay Refunded 2008 Certificates; Defeasance Notice. The City has irrevocably elected to pay and prepay all of the unpaid Refinanced 2008 Installment Payments and all of the outstanding Refunded 2008 Certificates on the date set forth in Exhibit B, in accordance with the provisions of the 2008 Trust Agreement. Notice of such prepayment, in substantially the form and 3 substance of Exhibit C, has previously been given by the 2008 Trustee in accordance with the provisions of the 2008 Trust Agreement, at the written direction of the City and at the expense of the City. The City further hereby directs the 2008 Trustee to file on the Closing Date the notice attached as Exhibit D on the Municipal Securities Rulemaking Board's EMMA system. The notice attached as Exhibit D constitutes the discharge certificate required by Section 8.01(b)(iv) of the 2008 Trust Agreement. The sole remedy for failure to file such notice on EMMA shall be an action by the holders of the Refunded 2008 Certificates in mandamus for specific performance or similar remedy to compel performance. SECTION 5. Compensation to Escrow Agent. The City shall pay the Escrow Agent full compensation for its services under this Agreement, including out-of-pocket costs such as publication costs, prepayment expenses, legal fees and other costs and expenses relating hereto and, in addition, all fees, costs and expenses relating to the purchase or withdrawal of any securities after the date hereof. Under no circumstances shall amounts deposited in or credited to the Escrow Fund be deemed to be available for said purposes. The Escrow Agent has no lien upon or right of set off against the cash and securities at any time on deposit in the Escrow Fund. SECTION 6. Immunities and Liability of Escrow Agent. The Escrow Agent undertakes to perform only such duties as are expressly set forth in this Agreement and no implied duties, covenants or obligations shall be read into this Agreement against the Escrow Agent. The Escrow Agent shall not have any liability hereunder except to the extent of its negligence or willful misconduct. In no event shall the Escrow Agent be liable for any special, indirect or consequential damages. The Escrow Agent shall not be liable for any Toss from any investment made by it in accordance with the terms of this Agreement. The Escrow Agent may consult with legal counsel of its own choice and the Escrow Agent shall not be liable for any action taken or not taken by it in good faith in reliance upon the opinion or advice of such counsel. The Escrow Agent shall not be liable for the recitals or representations contained in this Agreement and shall not be responsible for the validity of this Agreement, the sufficiency of the Escrow Fund or the moneys and securities to pay the principal, interest and prepayment premium with respect to the Refunded 2008 Certificates. Whenever in the administration of this Agreement the Escrow Agent deems it necessary or desirable that a matter be proved or established prior to taking or not taking any action, such matter may be deemed to be conclusively proved and established by a certificate of an authorized representative of the City and shall be full protection for any action taken or not taken by the Escrow Agent in good faith reliance thereon. The Escrow Agent may conclusively rely as to the truth and accuracy of the statements and correctness of any opinions or calculations provided to it in connection with this Agreement and shall be protected in acting, or refraining from acting, upon any notice, instruction, request, certificate, document, opinion or other writing furnished to the Escrow Agent in connection with this Agreement and believed by the Escrow Agent to be signed by the proper party, and it need not investigate any fact or matter stated therein. 4 None of the provisions of this Agreement shall require the Escrow Agent to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder. The Escrow Agent may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with due care. The Escrow Agent may at any time resign by giving 30 days written notice of resignation to the City. Upon receiving such notice of resignation, the City shall promptly appoint a successor and, upon the acceptance by the successor of such appointment, release the resigning Escrow Agent from its obligations hereunder by written instrument, a copy of which instrument shall be delivered to the resigning Escrow Agent and the successor. If no successor shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor. Any bank, corporation or association into which the Escrow Agent may be merged or converted or with which it may be consolidated, or any bank, corporation or association resulting from any merger, conversion or consolidation to which the Escrow Agent shall be a party, or any bank, corporation or association succeeding to all or substantially all of the corporate trust business of the Escrow Agent shall be the successor of the Escrow Agent hereunder without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto except on the part of any of the parties hereto where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding. The City shall indemnify, defend and hold harmless the Escrow Agent and its officers, directors, employees, representatives and agents, from and against and reimburse the Escrow Agent for any and all claims, obligations, liabilities, losses, damages, actions, suits, judgments, reasonable costs and expenses (including reasonable attorneys' and agents' fees and expenses) of whatever kind or nature regardless of their merit, demanded, asserted or claimed against the Escrow Agent directly or indirectly relating to, or arising from, claims against the Escrow Agent by reason of its participation in the transactions contemplated hereby except to the extent caused by the Escrow Agent's negligence or willful misconduct. The provisions of the foregoing sentence shall survive the termination of this Agreement or the earlier resignation or removal of the Escrow Agent. The Escrow Agent shall have the right to accept and act upon instructions, including funds transfer instructions ("Instructions") given pursuant to this Agreement and delivered using Electronic Means ("Electronic Means" means the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Escrow Agent, or another method or system specified by the Escrow Agent as available for use in connection with its services hereunder); provided, however, that the City shall provide to the Escrow Agent an incumbency certificate listing officers with the authority to provide such Instructions ("Authorized Officers") and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the City, whenever a person is to be added or deleted from the listing. If the City elects to give the Escrow Agent Instructions using Electronic Means and the Escrow 5 Agent in its discretion elects to act upon such Instructions, the Escrow Agent's understanding of such Instructions shall be deemed controlling. The City understands and agrees that the Escrow Agent cannot determine the identity of the actual sender of such Instructions and that the Escrow Agent shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Escrow Agent have been sent by such Authorized Officer. The City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Escrow Agent and that the City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the City. The Escrow Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow Agent's reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The City agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Escrow Agent, including without limitation the risk of the Escrow Agent acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Escrow Agent and that there may be more secure methods of transmitting Instructions than the method(s) selected by the City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Escrow Agent immediately upon learning of any compromise or unauthorized use of the security procedures. SECTION 7. Termination of Agreement. Upon payment in full of the principal of and interest and prepayment premium on the Refunded 2008 Certificates and all fees, expenses and charges of the Escrow Agent as described above, this Agreement shall terminate and the Escrow Agent shall be discharged from any further obligation or responsibility hereunder. SECTION 8. Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 9. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. SECTION 10. Third -Party Beneficiary. Assured Guaranty Municipal Corp., as insurer of the Refunded 2008 Certificates, shall be a third -party beneficiary hereof and this Agreement shall not be amended in any material respect without its prior written consent. [The balance of this page is intentionally left blank.] 6 SECTION 11. Amendments. Subject to Section 10, this Agreement may not be amended except in writing by the parties hereto and with an opinion of nationally recognized bond counsel to the effect that (a) the amendment will not result in loss of the exemption from federal income taxes of interest on any of the 2008 Certificates or the Bonds and (b) such amendment will not have a material adverse effect on the interests of the holders of the 2008 Certificates. THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Agent and as 2008 Trustee By Authorized Officer CITY OF LODI, A MUNICIPAL CORPORATION By: Stephen Schwabauer, City Manager 7 EXHIBIT A ESCROW SECURITIES Type of Purchase Maturity First Int Pmt Par Security Date Date Date Amount Rate A-1 EXHIBIT B ESCROW REQUIREMENTS Interest Principal Total Payment Date Payment Redeemed Payment B-1 EXHIBIT C FORM OF CONDITIONAL NOTICE OF PREPAYMENT $60,685,000 Electric System Revenue Certificates of Participation, 2008 Series A NOTICE IS HEREBY GIVEN, by the City of Lodi (the "City") that there have been called on a conditional basis the outstanding maturities of the captioned certificates of participation (the "Refunded 2008 Certificates") for prepayment on July 1, 2018 (the "Prepayment Date"), at a prepayment price equal to the par amount thereof together with accrued interest thereon to the Prepayment Date, without premium. The Refunded 2008 Certificates consist of the following: Maturity Date Principal Amount July 1 to be Redeemed Interest Rate CUSIP 2019 $2,740,000 5.000% 540240CK2 2020 2,875,000 5.000% 5402400L0 2021 3,020,000 4.250% 540240CM8 2022 3,150,000 5.000% 540240CN6 2023 3,305,000 5.000% 540240CP1 2024 3,470,000 5.000% 540240CQ9 2025 3,645,000 4.500% 540240CR7 2026 3,810,000 5.000% 540240CS5 2027 4,000,000 5.000% 540240CT3 2028 4,200,000 4.750% 540240CU0 2032 18,960,000 5.000% 540240CY2 On the Prepayment Date, there will become due on each of the Refunded 2008 Certificates the prepayment price thereof, with accrued and unpaid interest thereof to July 1, 2018, and after July 1, 2018, interest thereon shall cease to accrue. Any Refunded 2008 Certificate to be prepaid will be deemed prepaid on the Prepayment Date whether or not it is delivered to The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"). The City expects to prepay the Refunded 2008 Certificates on the Prepayment Date with, among other funds, proceeds of those certain Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds (the "Refunding Bonds"), which the City expects to receive on June 12, 2018. The City's ability to prepay the Refunded 2008 Certificates is subject to execution of an indenture of trust and delivery of the Refunding Bonds. In the event such funds are not received by the Prepayment Date, this notice shall be null and void and of no force and effect. The Refunded 2008 Certificates delivered for prepayment shall be returned to the respective owners thereof, and said Refunded 2008 certificates shall remain outstanding as though C-1 this Conditional Notice of Prepayment had not been given. Notice of a failure to receive funds, and cancellation of this prepayment notice, shall be given by the Trustee by first class mail, postage prepaid, to the registered owners of the Refunded 2008 Certificates. Holders of the Bonds are requested to present their Bonds, at the following addresses: First Class/Registered/Certified The Bank of New York Mellon Global Corporate Trust P.O. Box 396 East Syracuse, New York 13057 Express Delivery Only The Bank of New York Mellon Global Corporate Trust 111 Sanders Creek Parkway East Syracuse, New York 13057 By Hand Only The Bank of New York Mellon Global Corporate Trust Corporate Trust Window 101 Barclay Street 1st Floor East New York, New York 10286 Additional information regarding the foregoing actions may be obtained from The Bank of New York Mellon Trust Company, N.A., Corporate Trust Department, Bondholder Relations, telephone number (800) 254-2826. Payment of interest on the Refunded 2008 Certificates shall be made by check or, at the option of any owner of at least $1,000,000 aggregate principal amount of Refunded 2008 Certificates, by wire transfer to a bank account in the United States of America. *Note: The City and the Escrow Agent shall not be responsible for the selection or use of the CUSIP numbers selected, nor is any representation made as to the correctness of the CUSIP numbers indicated in the notice or as printed on any Refunded 2008 Certificate. They are included solely for the convenience of the holders. Dated: , 2018 THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Agent C-2 EXHIBIT D FORM OF NOTICE OF DEFEASANCE $60,685,000 Electric System Revenue Certificates of Participation, 2008 Series A NOTICE IS HEREBY GIVEN, by the City of Lodi (the "City") that the outstanding maturities of the captioned certificates of participation (the "2008 Certificates") have been defeased and discharged under and within the meaning of the Trust Agreement, dated as of July 1, 2008, relating to the 2008 Certificates (the "2008 Trust Agreement"). Funds for the payment of the 2008 Certificates have been deposited with The Bank of New York Mellon Trust Company, N.A., as escrow agent, and the sufficiency of the funds and investments for the purpose of paying the principal of and interest on the 2008 Certificates has been verified by Causey Demgen & Moore P.C., certified public accountants. As a consequence of the foregoing actions and in accordance with the 2008 Trust Agreement, all obligations of The Bank of New York Mellon Trust Company, N.A., as trustee for the 2008 Certificates, the Lodi Public Improvement Corporation and the City with respect to the 2008 Certificates has ceased and terminated, except the obligation to use moneys set aside in escrow as described above and, if necessary, from other legally available funds of the City. The outstanding 2008 Certificates consist of the following: Principal Maturity Date Amount Interest July 1 To be Redeemed Rate CUSIP 2019 $2,740,000 5.000% 5402400K2 2020 2,875,000 5.000% 540240CL0 2021 3,020,000 4.250% 540240CM8 2022 3,150,000 5.000% 540240CN6 2023 3,305,000 5.000% 540240CP1 2024 3,470,000 5.000% 540240CQ9 2025 3,645,000 4.500% 540240CR7 2026 3,810,000 5.000% 540240CS5 2027 4,000,000 5.000% 540240CT3 2028 4,200,000 4.750% 540240CU0 2032 18,960,000 5.000% 540240CY2 D-1 The City has irrevocably elected to prepay all of the outstanding 2008 Certificates on July 1, 2018, at a prepayment price equal to the par amount thereof together with accrued interest thereon to the prepayment date, without premium. Additional information regarding the foregoing actions may be obtained from The Bank of New York Mellon Trust Company, N.A., Corporate Trust Department, Bondholder Relations, telephone number (800) 254-2826. *Note: The City and the Escrow Agent shall not be responsible for the selection or use of the CUSIP numbers selected, nor is any representation made as to the correctness of the CUSIP numbers indicated in the notice or as printed on any Refunded 2008 Certificate. They are included solely for the convenience of the holders. Dated , 2018 THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Agent D-2 EXHIBIT C FORM OF PRELIMINARY OFFICIAL STATEMENT PRELIMINARY OFFICIAL STATEMENT DATED APRIL _, 2018 c NEW ISSUE - FULL BOOK -ENTRY RATINGS: [Moody's]: "" o [Standard & Poor's]: " " ° . See "Ratings". b sm.T In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, c .o subject, however to certain qualifications described herein, under existing law, the interest on the 2018 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax 4) o preference for purposes of the federal alternative minimum tax, although, in the case of tax years beginning >, a prior to January 1, 2018, for the purpose of computing the alternative minimum tax imposed on certain A o corporations, such interest earned by a corporation prior to the end of its tax year in 2018 is taken into o account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is wcl exempt from California personal income taxes. See "TAX MATTERS. " o o $ E N LODI PUBLIC FINANCING AUTHORITY c 2018 ELECTRIC SYSTEM REVENUE REFUNDING BONDS 0 -o TO • o Dated: Date of Delivery Due: September 1, as shown on inside cover Authority for Issuance. The 2018 Electric System Revenue Refunding Bonds (the "2018 Bonds") are being issued by the Lodi Public Financing Authority (the "Authority") under a resolution adopted by the Board E �, of Directors of the Authority on , 2018, and an Indenture of Trust dated as of 1, 2018 (the "Indenture") by and between the Authority and MUFG Union Bank, N.A., as trustee for the 2018 Bonds 0 o (the "Trustee"). See "INTRODUCTION -General." N y Use of Proceeds. The proceeds of the 2018 Bonds will be used to (i) refinance all of the outstanding A' Cl.) $ principal amount of Lodi Public Improvement Corporation Electric System Revenue • y Certificates of Participation, 2008 Series A (the "Refunded Certificates") and the corresponding portion of the related installment payment obligation of the City of Lodi (the "City"); and (ii) pay the costs of issuing the b t� 2018 Bonds. See "THE REFINANCING PLAN." 44" 7 Security for the 2018 Bonds. Under the Indenture, the 2018 Bonds will be payable solely from and o id= secured by Authority Revenues and certain funds and accounts held under the Indenture. Authority Revenues o .... -0 consist primarily of 2018 Installment Payments ("2018 Installment Payments") to be made by the City -o pursuant to an Installment Purchase Agreement dated as of June 1, 2018 (the "2018 Installment Purchase o o Agreement") between the City and the Authority. The obligation of the City to make the 2018 Installment o — ° Payments is a special obligation of the City that is secured by a pledge of, and payable solely from, Net Revenues relating to the City's electric system (the "Electric System"). The general fund of the City is not -, U o liable for, and neither the faith and credit nor the taxing power of the City is pledged to, the payment of the FJ A i 2018 Installment Payments. c e .� The City is authorized under the 2018 Installment Purchase Agreement to incur other obligations payable • ° from Net Revenues on a parity basis with the 2018 Installment Payments and any obligations issued or N U u....b °c incurred by the City, the payment of which constitutes a charge and lien on the Net Revenues and moneys in I.) = the Electric Revenue Fund equal to and on a parity basis with the charge and lien upon the Net Revenues and • b o moneys in the Electric Revenue Fund for the payment of the 2018 Installment Payments ("Parity Obligations"). See "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS" and "THE Y • .-= ELECTRIC SYSTEM." ct 4-, .=- Bond Terms; Book -Entry Only. The 2018 Bonds will bear interest at the rates shown on the inside cover c •2 page, payable semiannually on March 1 and September 1 of each year, commencing on March 1, 2019, and U 49 b will be issued in fully -registered form without coupons in integral multiples of $5,000. The 2018 Bonds will b 5 be issued in book -entry only form, initially registered in the name of Cede & Co., as nominee of The g b . Depository Trust Company, New York, New York ("DTC"). Purchasers of the 2018 Bonds will not receive l).4 C certificates representing their interests in the 2018 Bonds. Payments of the principal of, premium, if any, and ° c N interest on the 2018 Bonds will be made to DTC, which is obligated in turn to remit such principal, premium, 0 .t if any, and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the 2018 .� Bonds. See "THE 2018 BONDS - General." p3-, Redemption. The 2018 Bonds are subject to redemption prior to maturity. See "THE 2018 g BONDS -Redemption." goo A 2 0 ▪ „N a E >, * Preliminary; subject to change. ,= N N • az NEITHER THE 2018 BONDS, NOR THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF OR INTEREST ON THE 2018 BONDS, CONSTITUTES A DEBT OR A LIABILITY OF THE AUTHORITY, THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. THE 2018 BONDS ARE SECURED SOLELY BY THE PLEDGE OF AUTHORITY REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE 2018 BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY. THE AUTHORITY HAS NO TAXING POWER. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE OF 2018 BONDS. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION WITH RESPECT TO THE PURCHASE OF THE 2018 BONDS. The 2018 Bonds are offered when, as and if issued and received by the Underwriter and subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will be passed upon for the City by the City Attorney and Stradling Yocca Carlson & Rauth, a Professional Corporation, Sacramento, California, Disclosure Counsel to the City, for the Authority by the City Attorney, and for the Underwriter by Hawkins Delafield & Wood LLP, Sacramento, California. It is anticipated that the 2018 Bonds will be delivered in book -entry form through the facilities of DTC on or about , 2018. The date of this Official Statement is: J.P. Morgan , 2018. LODI PUBLIC FINANCING AUTHORITY 2018 ELECTRIC SYSTEM REVENUE REFUNDING BONDS MATURITY SCHEDULE (Base CUSIPt: ) Maturity Date Principal Interest (September 1) Amount Rate *Priced to par call date of September 1, 20_. Yield Price CUSIPt CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright© 2018 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the Authority, the City, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers. LODI PUBLIC FINANCING AUTHORITY CITY OF LODI AUTHORITY BOARD/CITY COUNCIL Alan Nakanishi, Mayor/Member JoAnne Mounce, Mayor Pro Tem/Member Bob Johnson, Councilmember/ Member Mark Chandler , Councilmember/ Member Doug Kuehne, Councilmember/ Member AUTHORITY/CITY OFFICIALS Stephen Schwabauer, City Manager/Executive Director Andrew Keys, Deputy City Manager/Treasurer Jennifer M. Ferraiolo, City Clerk/Secretary Janice D. Magdich, City Attorney/Authority Counsel Elizabeth A. Kirkley, Electric Utility Director BOND COUNSEL Jones Hall, A Professional Law Corporation San Francisco, California DISCLOSURE COUNSEL Stradling Yocca Carlson & Rauth, a Professional Corporation Sacramento, California MUNICIPAL ADVISOR Fieldman, Rolapp & Associates, Inc. Irvine, California TRUSTEE MUFG Union Bank, N.A. San Francisco, California ESCROW BANK The Bank of New York Mellon Trust Company, N.A. San Francisco, California VERIFICATION AGENT Causey Demgen & Moore P.C. Denver, Colorado No dealer, broker, salesperson or other person has been authorized by the Authority, the City or the Underwriter to give any information or to make any representations in connection with the offer or sale of the 2018 Bonds other than those contained herein; and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority, the City or the Underwriter. 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 2018 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or owners of the 2018 Bonds. Statements contained in this Official Statement that involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The information set forth herein has been obtained from the Authority and the City and from other sources that the Authority and the City believe to be reliable. The information and expression of opinion herein are subject to change without notice and neither delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the Authority or any other parties described herein since the date hereof. All summaries of the Indenture and 2018 Installment Purchase Agreement or other documents are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. In connection with the offering of the 2018 Bonds, the Underwriter may overallot or effect transactions that stabilize or maintain the market price of such Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the 2018 Bonds to certain dealers and dealer banks and banks acting as agents at prices lower than the public offering prices stated on the cover page hereof and said public offering prices may be changed from time to time by the Underwriter. The 2018 Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption contained in such act. The 2018 Bonds have not been registered or qualified under the securities laws of any state. Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements." Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "budget" or other similar words. Such forward-looking statements include but are not limited to certain statements contained in the information in "THE ELECTRIC SYSTEM" in this Official Statement. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Neither the Authority nor the City plans to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur. The City maintains a website. However, the information presented therein is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the 2018 Bonds. TABLE OF CONTENTS Page INTRODUCTION 1 General 1 Outstanding Obligations; Contractual Obligations of the Electric System 2 Security for the 2018 Bonds 1 Additional Parity Obligations 2 No Reserve Account 2 Rate Covenant 2 Continuing Disclosure 3 Other Matters 3 THE REFINANCING PLAN 3 Estimated Sources and Uses of Funds 5 THE 2018 Bonds 5 General 5 Transfer, Registration and Exchange 5 Redemption 6 Selection of Bonds for Redemption 6 Notice of Redemption; Rescission 6 Effect of Redemption 6 Book -Entry Only System 7 DEBT SERVICE SCHEDULE 7 SECURITY AND SOURCES OF PAYMENT FOR THE 2018 Bonds 7 Pledge of Authority Revenues 8 2018 Installment Payments 8 Defined Terms Error! Bookmark not defined. Pledge of Net Revenues 9 Rate Covenant 10 Application of Revenues 11 No Debt Service Reserve Fund 12 No Other Currently Outstanding Parity Obligations 12 Take -or -Pay Obligations 12 Additional Parity Obligations 13 Subordinate Obligations 14 THE ELECTRIC SYSTEM 14 General 14 History of the Electric System 14 Service Area 15 Governance and Management 15 Employees 16 Insurance 18 Investment Policy 18 Power Supply Resources 18 Purchased Power 19 Joint Powers Agency Resources 20 Renewable Resources 24 Future Power Supply Resources 25 Energy Efficiency and Conservation 26 Interconnections, Transmission and Distribution Facilities 26 Forecast of Capital Expenditures 26 Wholesale Power Trading 27 Rates and Charges 27 Electric System Operations Since Industry Restructuring 28 Customers, Sales, Revenues and Demand 29 Largest Customers 29 Joint Powers Agency Obligations 31 Significant Accounting Policies 32 Condensed Operating Results and Selected Balance Sheet Information 33 RATE REGULATION 35 FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY 35 California Climate Change Policy Developments 35 Environmental Regulation and Permitting Factors 37 Regulatory Impact on the California Energy Market 38 ISO Markets 39 Changing Laws and Requirements ... 39 Other Factors . 40 THE AUTHORITY 40 RISK FACTORS 41 Rate Covenant Not a Guarantee 41 Statutory and Regulatory Impact 41 Earthquake, Flood or Other Natural Disasters 41 No Reserve Account 42 Limited Recourse on Default 42 Effect of Bankruptcy 42 Loss of Tax Exemption 42 Secondary Market 42 CONSTITUTIONAL LIMITATIONS ON TAXES AND FEES 43 Proposition 62 43 Proposition 218 43 Proposition 26 43 Other Initiatives 44 TAX MATTERS 44 LITIGATION 45 APPROVAL OF LEGALITY 46 ii FINANCIAL STATEMENTS 46 RATINGS 46 CONTINUING DISCLOSURE 46 MUNICIPAL ADVISOR 47 UNDERWRITING 47 VERIFICATION OF MATHEMATICAL COMPUTATIONS 47 EXECUTION AND DELIVERY 48 APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E - APPENDIX F - - CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION CONCERNING THE CITY OF LODI A-1 - AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2017 B-1 - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS C-1 - FORM OF OPINION OF BOND COUNSEL D-1 FORM OF CONTINUING DISCLOSURE AGREEMENT E-1 DTC AND THE BOOK -ENTRY ONLY SYSTEM F-1 iii OFFICIAL STATEMENT LODI PUBLIC FINANCING AUTHORITY • 2018 ELECTRIC REVENUE REFUNDING BONDS INTRODUCTION This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement, including the cover page and appendices, and the documents summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The offering to potential investors is made only by means of the entire Official Statement. Capitalized terms used but not defined in this Official Statement have the meanings set forth in the Indenture (as defined below). See "APPENDIX C - Summary of Principal Legal Documents." General The Lodi Public Financing Authority (the "Authority") is issuing its 2018 Electric Revenue Refunding Bonds (the "2018 Bonds") under Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California, commencing with Section 6584 (the "Bond Law"), a resolution adopted by the Board of Directors (the "Board") of the Authority on , 2018 (the "Authority Resolution"), a resolution adopted by the City Council (the "City Council") of the City of Lodi (the "City") on _, 2018 (the "City Resolution"), and an Indenture of Trust (the "Indenture"), dated as of June 1, 2018, by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee"). The 2018 Bonds will be issued in fully registered form, registered in the name of The Depository Trust Company, New York, New York ("DTC"), or its nominee, which will act as securities depository for the 2018 Bonds. Purchasers of the 2018 Bonds will not receive certificates representing the 2018 Bonds that are purchased. See "THE 2018 Bonds - Book -Entry Only System" and "APPENDIX F - DTC AND THE BOOK -ENTRY ONLY SYSTEM." The 2018 Bonds are being issued to provide funds to (i) refinance all of the outstanding $ principal amount of the Lodi Public Improvement Corporation's Electric System Revenue Certificates of Participation, 2008 Series A (such amount being refinanced constituting the "Refunded Certificates") and a related installment payment obligation of the City; and (ii) pay the costs of issuing the 2018 Bonds. Security for the 2018 Bonds Under the Indenture, the 2018 Bonds will be payable solely from and secured by Authority Revenues and certain funds and accounts held under the Indenture. Authority Revenues consist primarily of 2018 Installment Payments ("2018 Installment Payments") to be made by the City pursuant to an Installment Purchase Agreement dated as of June 1, 2018 (the "2018 Installment Purchase Agreement"). The obligation of the City to make the 2018 Installment Payments is a special obligation of the City that is secured by a pledge of and payable solely from Net Revenues (as defined herein) relating to the City's electric system (the "Electric System"). The general fund of the City is not liable for, and neither the faith and credit nor the taxing power of the City is pledged to, the payment of the 2018 Installment Payments. The obligation of the City to make the 2018 Installment Payments does not constitute a debt of the City or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction. Preliminary; subject to change. 1 NEITHER THE 2018 BONDS NOR THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF OR INTEREST ON THE 2018 BONDS CONSTITUTES A DEBT OR A LIABILITY OF THE AUTHORITY, THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL LIMITATION ON INDEBTEDNESS, OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY. THE 2018 BONDS ARE SECURED SOLELY BY THE PLEDGE OF AUTHORITY REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE 2018 BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY. THE AUTHORITY HAS NO TAXING POWER. Outstanding Obligations; Contractual Obligations of the Electric System The Refunded Certificates are the only currently outstanding obligations of the Electric System payable from Net Revenues. In addition, the City has an outstanding loan with F&M Bank in the amount of $1.3 million associated with an LED Streetlight Improvement Project. The annual loan payments will be paid from the Greenhouse Gas Free Allowance proceeds. The City has substantial contractual obligations with respect to the Electric System that are payable prior to the 2018 Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS -Take -or -Pay Obligations." Additional Parity Obligations The City may incur additional obligations payable from and secured by the Net Revenues on parity with the 2018 Installment Payments ("Parity Obligations"). See "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS - Additional Parity Obligations". The 2018 Installment Payments and any future obligations payable from Net Revenues on a parity with the 2018 Installment Payments constitute "Parity Obligations." No Reserve Account No debt service reserve account has been established with respect to the 2018 Bonds. The Authority and the City have reserved the right to establish, fund and replenish from Net Revenues, or obtain any debt service reserve fund surety or guarantee reimbursable from Net Revenues for, debt service reserves for Parity Obligations. Such reserves, if established, will not be available to pay, and Owners of the 2018 Bonds will have no claim or lien on, such reserves and the amounts on deposit herein. Rate Covenant The City covenants in the 2018 Installment Purchase Agreement that it will, to the maximum extent permitted by law, fix, prescribe and collect rates, fees and charges and manage the operation of the Electric System for each Fiscal Year so as to yield (a) Revenues for such Fiscal Year at least equal to the sum of the following for such Fiscal Year: (i) Adjusted Maintenance and Operation Costs; (ii) Adjusted Annual Debt Service with respect to the 2018 Installment Payments and Parity Obligations, and (iii) all other payments required to meet any other obligations of the City which are charges, liens or encumbrances upon or payable from the Electric Revenue Fund, including all amounts owed to any issuer of a surety bond credited to a debt service reserve for Parity Obligations then in effect; and (b) Adjusted Annual Net Revenues for such Fiscal Year equal to at least one hundred twenty percent (120%) of Adjusted Annual Debt Service with respect to the 2018 Installment Payments and Parity 2 Obligations for such Fiscal Year. For purposes of this requirement, "Adjusted Annual Net Revenues" includes the amount of Available Reserves on deposit, or which the City has authorized to be deposited, in the Electric Revenue Fund as of the first day of the relevant Fiscal Year. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS— Rate Covenant". Continuing Disclosure The City has covenanted for the benefit of the Owners and beneficial owners of the 2018 Bonds to provide certain financial information and operating data relating to the City and the Electric System annually, and to provide notices of the occurrence of certain enumerated events. See "CONTINUING DISCLOSURE". Other Matters The summaries of and references to documents, statutes, reports and other instruments referred to in this Official Statement do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by reference to each document, statute, report or instrument. The capitalization of any word not conventionally capitalized or otherwise defined in this Official Statement indicates that such word is defined in a particular agreement or other document and, as used in this Official Statement, has the meaning given it in such agreement or document. See "APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS". THE REFINANCING PLAN The 2018 Bonds are being issued to provide funds to (i) refinance the Refunded Certificates and the corresponding portion of the related installment payment obligation of the City, and (ii) pay the costs of issuing the 2018 Bonds. The Refunded Certificates were executed and delivered for the purpose of (i) refinancing, on a current basis, certain prior obligations payable from revenues of the Electric System (which had been used to finance capital improvements to the Electric System and refund, on an advance basis, certain installment payments that financed improvements to the Electric System), (ii) funding a debt service reserve account for the Refunded Certificates and (iii) paying the costs of execution and delivery of the Refunded Certificates and certain related costs. The Refunded Certificates consist of the amounts set forth in the following table. 3 Electric System Revenue Certificates of Participation, 2008 Series A Outstanding Maturity Date Principal (July 1) Amount Interest Rate Redemption Redemption Price Date CUSIPt 2018 $2,610,000 5.00% 100% Maturity 540240CJ5 2019 2,740,000 5.00 100 July 1, 2018 540240CK2 2020 2,875,000 5.00 100 July 1, 2018 540240CL0 2021 3,020,000 4.25 100 July 1, 2018 540240CM8 2022 3,150,000 5.00 100 July 1, 2018 540240CN6 2023 3,305,000 5.00 100 July 1, 2018 540240CP1 2024 3,470,000 5.00 100 July 1, 2018 540240CQ9 2025 3,645,000 4.50 100 July 1, 2018 540240CR7 2026 3,810,000 5.00 100 July 1, 2018 540240CS5 2027 4,000,000 5.00 100 July 1, 2018 540240CT3 2028 4,200,000 4.75 100 July 1, 2018 540240CU0 2032 18,960,000 5.00 100 July 1, 2018 540240CY2 TOTAL $55,785,000 Upon the execution and delivery of the 2018 Bonds, [[a portion of the proceeds and available moneys from the Refunded Certificates shall be applied to the purchase of certain direct obligations of the United States of America]], which, along with uninvested cash and earnings on the obligations, will satisfy the City's payment obligations with respect to the Refunded Certificates until July 1, 2018 (the "Redemption Date"). These direct obligations and uninvested cash shall be deposited in an escrow account held by The Bank of New York Mellon Trust Company, N.A., as escrow agent for the Refunded Certificates (the "Escrow Agent") under an escrow agreement (the "Escrow Agreement"). The obligations of the United States of America so deposited with the Escrow Agent into the escrow account for the Refunded Certificates will bear interest at such rates and will be scheduled to mature at such times and in such amounts that, when paid in accordance with their terms, together with any other funds held by the Escrow Agent under the Escrow Agreement, will be sufficient to make full and timely payment of the principal of and interest evidenced and represented by the Refunded Certificates prior to the Redemption Date and to pay the prepayment price equal to 100% of the principal amount of the outstanding Refunded Certificates plus interest accrued to the Redemption Date. For information on mathematical verification for the sufficiency of scheduled payments with respect to such obligations of the United States of America and other funds held by the Escrow Agent to make such payments with respect to the Refunded Certificates, see "VERIFICATION OF MATHEMATICAL COMPUTATIONS." Upon such irrevocable deposit with the Escrow Agent and the receipt by the Escrow Agent of irrevocable escrow instructions from the City under the Escrow Agreement, the Refunded Certificates will be defeased and the owners of the Refunded Certificates will no longer be entitled to the benefits of the legal documents under which they were executed and delivered. The amounts held and invested by the Escrow Agent in the Escrow Fund are pledged solely to the payment of the Refunded Certificates. Neither the funds deposited in the Escrow Fund nor the interest on the invested funds will be available for the payment of debt service on the 2018 Bonds. CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Capital IQ. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. The City and the Underwriter do not assume any responsibility for the accuracy of such numbers. 4 ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds relating to the 2018 Bonds are as follows: Sources: Principal Amount Plus Original Issue Premium Less Underwriter's Discount Plus Available Funds Relating to the Refunded Certificates Total Sources Uses: Escrow Fund Costs of Issuance (1) Total Uses [ST Represents funds to be used to pay costs of issuance, which include legal fees, Municipal Advisor fees, printing costs, rating agency fees and other miscellaneous expenses. THE 2018 BONDS General Bond Terms. The 2018 Bonds will be dated their date of delivery and issued in fully registered form without coupons in integral multiples of $5,000. The 2018 Bonds will mature in the amounts and on the dates, and bear interest at the annual rates, set forth on the inside cover page of this Official Statement. Payments of Principal and Interest. Interest on the 2018 Bonds will be payable on March 1 and September 1 in each year, beginning March 1, 2019 (each an "Interest Payment Date"). Principal on the 2018 Bonds will be payable on September 1 in the amounts and in the years set forth on the inside front cover of this Official Statement. While the 2018 Bonds are subject to the book -entry system, the principal, interest and any prepayment premium with respect to the 2018 Bonds will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the 2018 Bonds. See APPENDIX F — "DTC AND THE BOOK -ENTRY ONLY SYSTEM." Interest on the 2018 Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless: a 2018 Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date, a 2018 Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date, or interest on any 2018 Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Principal and premium, if any, with respect to each 2018 Bond is payable upon surrender of such Bond at the Office of the Trustee in San Francisco, California, upon maturity or the earlier redemption thereof. The principal of, premium, if any, and interest on the 2018 Bonds will be payable in lawful money of the United States of America. Interest with respect to the 2018 Bonds will be computed on the basis of a 360 -day year composed of twelve 30 -day months. Transfer, Registration and Exchange See "APPENDIX C - Summary of Principal Legal Documents" for a description of the provisions of the Indenture relating to the transfer, registration and exchange of the 2018 Bonds. 5 Redemption The 2018 Bonds maturing on or before September 1, 20_, are not subject to optional redemption prior to their respective stated maturity dates. The 2018 Bonds maturing on or after September 1, 20, are subject to redemption in whole, or in part at the Written Request of the Authority among maturities on such basis as the Authority may designate and within a maturity as set forth in the Indenture, at the option of the Authority, on any date on or after September 1, 20 , from any available source of funds, at a redemption price equal to 100% of the principal amount of the 2018 Bonds to be redeemed, plus accrued interest to the date of redemption, without premium. Selection of Bonds for Redemption Whenever provision is made in this Indenture for the redemption of less than all of the 2018 Bonds of a single maturity, the Trustee shall select the 2018 Bonds of that maturity to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the Trustee shall treat each 2018 Bond as consisting of separate $5,000 portions and each such portion shall be subject to redemption as if such portion were a separate 2018 Bond. Notice of Redemption; Rescission The Trustee shall mail notice of redemption of the 2018 Bonds by first class mail, postage prepaid, not less than 30 nor more than 60 days before any redemption date, to the respective Owners of any 2018 Bonds designated for redemption at their addresses appearing on the Registration Books and to one or more Securities Depositories and to the Municipal Securities Rulemaking Board. Each notice of redemption shall state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the 2018 Bonds (or alt 2018 Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not all 2018 Bonds within a maturity are called for redemption) 2018 Bond numbers of the 2018 Bonds to be redeemed and the maturity or maturities of the 2018 Bonds to be redeemed, and in the case of 2018 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 2018 Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such 2018 Bonds be then surrendered. Neither the failure to receive any notice nor any defect therein shall affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Notice of redemption of 2018 Bonds shall be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority. The Authority has the right to rescind any notice of the optional redemption of 2018 Bonds by written notice to the Trustee on or prior to the date fixed for redemption. Any notice of optional redemption may provide that it is subject to rescission as described in this paragraph. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the 2018 Bonds then called for redemption, and such cancellation shall not constitute an Event of Default. The Authority and the Trustee have no liability to the 2018 Bond Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under this Section. 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, including any applicable premium, the 2018 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the 2018 Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the 2018 Bonds so called for redemption shall cease to accrue, said 2018 Bonds (or portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and the Owners of 6 said 2018 Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Book -Entry Only System The 2018 Bonds will be issued as fully registered bonds in book -entry only form, registered in the name of Cede & Co. as nominee of DTC, and will be available to ultimate purchasers in the integral multiples of $5,000, under the book -entry system maintained by DTC. While the 2018 Bonds are subject to the book - entry system, the principal, interest and any prepayment premium with respect to a Bond will be paid by the Trustee to DTC, which in turn is obligated to remit such payment to its DTC Participants for subsequent disbursement to Beneficial Owners of the 2018 Bonds. Purchasers of the 2018 Bonds will not receive certificates representing their interests therein, which will be held at DTC. See "APPENDIX F - DTC AND THE BOOK -ENTRY ONLY SYSTEM" for further information regarding DTC and the book -entry system. DEBT SERVICE SCHEDULE The table below shows annual debt service payments on the 2018 Bonds, assuming no optional redemption Year Ending Total September 1 Principal Interest Debt Service Total SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS The principal of and interest on the 2018 Bonds are not a debt of the Authority (except to the limited extent described in this Official Statement) or the City, nor a legal or equitable pledge, charge, lien or 7 encumbrance, upon any of their respective property, or upon any of their income, receipts, or revenues except the Revenues and other amounts pledged under the Indenture. This section provides summaries of the security for the 2018 Bonds and certain provisions of the Indenture and the 2018 Installment Purchase Agreement. See "APPENDIX C - Summary of Principal Legal Documents" for a more complete summary of the Indenture and the 2018 Installment Purchase Agreement. Capitalized terms used but not defined in this section have the meanings given in APPENDIX C. Pledge of Authority Revenues The 2018 Bonds are payable from and secured by a pledge of Authority Revenues and certain funds and accounts established and held by the Trustee under the Indenture. Authority Revenues, as defined in the Indenture, mean (a) all of the 2018 Installment Payments, and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established under the Indenture. THE 2018 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED BY A PLEDGE OF AUTHORITY REVENUES AND CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE INDENTURE. THE AUTHORITY HAS NO TAXING POWER. THE OBLIGATION OF THE CITY TO MAKE 2018 INSTALLMENT PAYMENTS IS PAYABLE SOLELY FROM NET REVENUES RELATING TO THE CITY'S ELECTRIC SYSTEM. NEITHER THE 2018 BONDS NOR THE OBLIGATION OF THE CITY TO MAKE 2018 INSTALLMENT PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE COUNTY, THE STATE OF CALIFORNIA (THE "STATE") OR ANY OF ITS POLITICAL SUBDIVISIONS (INCLUDING ANY MEMBER OF THE AUTHORITY) IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATIONS. 2018 Installment Payments The 2018 Installment Purchase Agreement provides that the City's obligation to make the 2018 Installment Payments from Net Revenues and to perform and observe the other agreements contained therein are absolute and unconditional and are not subject to any defense or any right of set-off, counterclaim or recoupment arising out of any breach by the Authority or the Trustee of any obligation to the City or otherwise with respect to the Electric System, or out of indebtedness or liability at any time owing to the City by the Authority or the Trustee. Until all of the 2018 Installment Payments, all of the Additional Payments and all other amounts coming due and payable under the 2018 Installment Purchase Agreement are fully paid or prepaid, the City (a) will not suspend or discontinue payment of any 2018 Installment Payments, Additional Payments or such other amounts, (b) will perform and observe all other agreements contained in the 2018 Installment Purchase Agreement, and (c) will not terminate the 2018 Installment Purchase Agreement for any cause, including, without limiting the generality of the foregoing, the occurrence of any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction, destruction of or damage to the Electric System, sale of the Electric System, the taking by eminent domain of title to or temporary use of any component of the Electric System, commercial frustration of purpose, any change in tax law or other laws of the United States of America or the State of California or any political subdivision of either thereof or any failure of the Authority or the Trustee to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with the Indenture or the 2018 Installment Purchase Agreement. Pursuant to the Indenture, the Authority transfers, assigns and sets over to the Trustee all of the 2018 Installment Payments and any and all rights, title, interest and privileges it has in, to and under the 2018 Installment Purchase Agreement (other than its rights to expenses and indemnification), including without limitation, the right to collect and receive directly all of the 2018 Installment Payments and the right to enforce the provisions of the 2018 Installment Purchase Agreement. The City consents to such assignment in the 2018 Installment Purchase Agreement and agrees to make payments of the 2018 Installment Payments directly to the 8 Trustee. Under the Indenture, The Trustee is also entitled to and shall, subject to the provisions of the Indenture, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the 2018 Installment Purchase Agreement. The Trustee is entitled to indemnification and expenses before taking such action as provided in the Indenture. The Indenture provides that all of the 2018 Installment Payments received by the Trustee shall be deposited immediately in the Bond Fund. All of the 2018 Installment Payments are to be held in trust by the Trustee for the benefit of the Owners of the 2018 Bonds and shall be disbursed and applied only as provided in the Indenture. Pledge of Net Revenues Pursuant to the 2018 Installment Purchase Agreement, all Net Revenues and all amounts on deposit in the Electric Revenue Fund are irrevocably pledged to the payment of the 2018 Installment Payments, which pledge shall be on a parity with any pledge of Net Revenues or of moneys in the Electric Revenue Fund securing Parity Obligations. The 2018 Installment Purchase Agreement provides that such pledge, together with the pledge of Net Revenues and amounts in the Electric Revenue Fund securing all other Parity Obligations shall, subject to application as permitted in the 2018 Installment Purchase Agreement, constitute a first lien on Net Revenues and amounts on deposit in the Electric Revenue Fund. "Maintenance and Operation Costs" mean the costs paid or incurred by the City for maintaining and operating the Electric System including, but not limited to, (a) all costs of electric energy and power generated or purchased by the City for resale, costs of transmission, fuel supply and water supply in connection with the foregoing, (b) all expenses of management and repair and other expenses necessary to maintain and preserve the Electric System in good repair and working order, (c) all administrative costs of the City that are charged directly or apportioned to the operation of the Electric System, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums (including payments required to be paid into any self- insurance funds not maintained from Revenues), (d) all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the 2018 Installment Purchase Agreement or of any resolution authorizing the execution of the Installment Purchase Agreement or of any resolution authorizing the issuance of any Parity Obligations or of such Parity Obligations, such as compensation, reimbursement and indemnification of the trustee, remarketing agent fees for Parity Obligations, and fees and expenses of Independent Accountants and Independent Engineers; (e) all amounts required to be paid by the City under contracts with a joint powers agency for the purchase of capacity, energy, transmission capability or any other commodity or service in connection with the foregoing, which contract requires payments to be made by the City thereunder to be treated as maintenance and operation costs of the Electric System; (f) all deposits to be made for rebate pursuant to the Tax Certificate and all deposits in comparable accounts established with respect to Parity Obligations required to be deposited pursuant to the proceedings authorizing such Parity Obligations; and (g) any other cost or expense which, in accordance with Generally Accepted Accounting Principles, is to be treated as a cost of operating or maintaining the Electric System; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor, amortization of intangibles and City Transfers. "Net Revenues" means, for any period of time in question, the Revenues during such period less the Maintenance and Operation Costs during such period. "Revenues" means the sum of the following: (i) All gross income and revenue received or receivable by the City from the ownership or operation of the Electric System, including all rates and charges for the Electric Service and the other services and facilities of the Electric System, all proceeds of insurance covering business interruption loss relating to the Electric System and all other income and revenue howsoever derived by the City from the ownership or 9 operation of the Electric System or otherwise arising from the Electric System, including all Payment Agreement Receipts, and all income from the deposit or investment of any money in the Electric Revenue Fund (provided that all Payment Agreement Receipts and all income from the deposit or investment of any money in the Electric Revenue Fund shall be excluded from the definition of "Revenues" for purposes of the provisions under "-Additional Parity Obligations" and "-Rate Covenant"), but excluding (i) proceeds of taxes, and (ii) refundable deposits made to establish credit and advances or contributions in aid of construction and line extension fees; and (ii) GHG Revenues available to pay Annual Debt Service or Maintenance and Operation Costs. "GHG Revenues" means amounts received by the City from the California Air Resources Board pursuant to the State of California's cap -and -trade program. The obligation of the City to make the 2018 Installment Payments is a special obligation of the City payable solely from the Net Revenues relating to the Electric System, and does not constitute a debt of the City or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction. See "Outstanding Parity Obligations" and "Additional Parity Obligations" below. Rate Covenant The 2018 Installment Purchase Agreement provides that the City will at all times, fix, prescribe and collect rates, fees and charges for the services, facilities and electricity of the Electric System during each Fiscal Year which will be at least sufficient to yield: (a) Revenues for such Fiscal Year at least equal to the sum of the following for such Fiscal Year: (i) Maintenance and Operation Costs; (ii) Adjusted Annual Debt Service with respect to the 2018 Installment Payments and Parity Obligations, and (iii) all other payments required to meet any other obligations of the City which are charges, liens or encumbrances upon or payable from the Electric Revenue Fund, including all amounts owed to any issuer of a surety bond credited to a debt service reserve for Parity Obligations then in effect; (b) Adjusted Annual Net Revenues for such Fiscal Year equal to at least one hundred twenty percent (120%) of Adjusted Annual Debt Service with respect to the 2018 Installment Payments and Parity Obligations for such Fiscal Year. For the avoidance of doubt, as used in this section of the Installment Purchase Agreement, the definition of "Adjusted Annual Net Revenues" includes the amount of Available Reserves on deposit, or which the City has authorized to be deposited, in the Electric Revenue Fund as of the first day of the relevant Fiscal Year. "Adjusted Annual Debt Service" means, for any Fiscal Year or any designated twelve-month period in question, the Annual Debt Service for such Fiscal Year or twelve-month period minus the sum of the amount of the Annual Debt Service with respect to Outstanding Parity Obligations to be paid during such Fiscal Year or twelve-month period from the proceeds of Parity Obligations or interest earned thereon (other than interest deposited into the Electric Revenue Fund), all as set forth in a Written Certificate of the City. "Adjusted Annual Net Revenues" means, for any Fiscal Year or any designated twelve-month period in question, the Adjusted Annual Revenues during such Fiscal Year or twelve-month period less Maintenance and Operation Costs during such Fiscal Year or twelve-month period. 10 "Adjusted Annual Revenues" mean, for any Fiscal Year or any designated twelve-month period in question, the Revenues during such Fiscal Year or twelve-month period plus, for the purposes of determining compliance with clause (b) of the Rate Covenant described above, the amount of Available Reserves on deposit, or which the City has authorized to be deposited, in the Electric Revenue Fund as of the first day of such Fiscal Year or twelve month period. "Available Reserves" means, as of any date of calculation, the sum of the following: (i) The amount of unrestricted funds in the Electric Revenue Fund designated as "'Available Reserves" for purposes of the Installment Purchase Agreement by the City and then available to pay Maintenance and Operation Costs and/or Annual Debt Service, which may include any funds which are legally available for deposit in the Electric Revenue Fund. (ii) The amount of unrestricted funds in the Electric Utility Environmental Compliance Fund (or any successor fund) designated as "'Available Reserves" for purposes of the Installment Purchase Agreement by the City and then available to pay Maintenance and Operation Costs and/or Annual Debt Service. For definitions of additional terms used in the 2018 Installment Purchase Agreement and the Indenture, see "APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS— CERTAIN DEFINITIONS". The City may make adjustments from time to time in such fees and charges and may make such classifications thereof as it deems necessary but shall not reduce the rates and charges then in effect unless the Adjusted Annual Revenues and the Adjusted Annual Net Revenues from such reduced rates and charges will at all times be sufficient to meet the requirements of this Section. Application of Revenues In order to carry out and effectuate the obligation of the City contained in the 2018 Installment Purchase Agreement to pay the 2018 Installment Payments, the City agrees and covenants that all Revenues received by it shall be deposited when and as received in the Electric Revenue Fund, which fund has heretofore been established by the City and which fund the City agrees and covenants to maintain separate and apart from other funds of the City so long as any 2018 Installment Payment remains Outstanding under the 2018 Installment Purchase Agreement. All money on deposit in the Electric Revenue Fund shall be applied, transferred and used only as provided below and in the following order of priority with any deficiency in any required deposit to be rectified before making any deposit of a lower priority: (i) To the payment of the Maintenance and Operation Costs then due and payable and the establishment of a reasonable contingency reserve for Maintenance and Operation Costs. (ii) On or before each 2018 Installment Payment Date, a sum equal to the 2018 Installment Payment becoming due and payable on such date shall be transferred to the Bond Fund. On or before each date (other than a 2018 Installment Payment Date) on which a 2018 Installment Payment becomes due and payable, a sum equal to the 2018 Installment Payment becoming due and payable on such date shall be transferred to the Bond Fund. Notwithstanding the foregoing provisions of this subsection (ii), no such deposits to the Bond Fund need be made by the City from the Electric Revenue Fund to the extent the Trustee then holds in the Bond Fund sufficient available funds to pay the 2018 Installment Payment to be paid with such deposit. In addition, on or before each due date therefor under the instruments and proceedings pursuant to which Parity Obligations have been issued or incurred, the sum or sums required to be paid or deposited in a debt service or other payment fund or account with respect to principal, premium, if any, and interest on Parity Obligations (or in the case of Parity Payment Agreements, the scheduled Net Payments due) shall be transferred or paid according to the terms of such instruments or proceedings. All transfers and payments to be made pursuant to 11 this subsection (ii) shall be made without preference or priority, and in the event of any insufficiency of such moneys shall be transferred or paid ratably without any discrimination or preference. (iii) To the extent required by the instruments and proceedings pursuant to which Parity Obligations have been issued or incurred, to any applicable debt service reserve fund or account for any Parity Obligations, the sum or sums, if any, equal to the amount required to be deposited therein in accordance with the terms of such Parity Obligations (other than interest on draws on debt service reserve fund sureties or financial guarantees for such debt service reserves). In the event of any insufficiency of such moneys shall be transferred or paid ratably without any discrimination or preference. (iv) To the extent required by the instruments and proceedings pursuant to which Parity Obligations have been issued or incurred, to the payment when due of any interest then due on amounts drawn under any debt service reserve fund surety or guarantee for any Parity Obligations. All transfers and payments to be made pursuant to this subsection (iv) shall be made without preference or priority, and in the event of any insufficiency of such moneys shall be transferred or paid ratably without any discrimination or preference. [(v) To the payment of any amounts due to the Bond Insurer not provided by (i), (ii), (iii) or (iv) above;] (vi) To the payment when due of any amounts due under a Credit Agreement to the extent not required to be paid as principal or interest pursuant to subsection (ii) above. (vii) To the payment when due of any Termination Payment payable by the City upon the termination of a transaction under a Parity Payment Agreement before its scheduled termination date. (viii) To the payment of any Subordinate Obligations in accordance instruments and proceedings pursuant to which such Subordinate Obligations have been authorized. (ix) To the making of City Transfers. (x) To any other lawful purpose of the City. No Debt Service Reserve Fund No debt service reserve fund is being established in connection with the issuance of the 2018 Bonds. The Authority and the City have reserved the right to establish debt service reserves for Parity Obligations. See "INTRODUCTION -No Reserve Account." 2018 Bonds Only Currently Outstanding Parity Obligations Upon the issuance of the 2018 Bonds and the refunding of the Refunded Certificates, the 2018 Installment Purchase Agreement will be no other outstanding obligations payable from Net Revenues on a parity with the 2018 Bonds. Take -or -Pay Obligations The City has entered into certain power sales contracts for the purchase of energy and certain other agreements for the payment of costs of certain projects in which it is participating, including agreements with the Western Area Power Administration ("Western") and with the joint powers agencies in which it participates, the Transmission Agency of Northern California ("TANC") and the Northern California Power Agency ("NCPA"). The City's obligations under such agreements are payable as Maintenance and Operation Costs prior to the 2018 Installment Payments and any Parity Obligations. Agreements with Western and the joint powers agencies in which the City participates are on a "take -or -pay" basis, which requires payments to 12 be made whether or not projects are completed or operable or whether output from such projects is suspended, interrupted or terminated. The City could enter into additional contracts for the purchase of capacity, energy, transmission capability or any other commodity or service in connection with the foregoing whose obligations constitute Maintenance and Operation Costs of the City, subject to the rate covenant described above. Certain agreements with TANC and NCPA contain "step-up" provisions obligating non -defaulting participants to assume a share of the obligations and rights of a defaulting participant, if any. The City's (and any non - defaulting participant's) maximum step-up under those agreements, however, is 25% of the City's original obligation for the project. The City's participation and share of debt service obligation (without giving effect to any "step up" provisions) for each of the joint powers agency projects in which it participates are shown on the table titled "Outstanding Debt of Joint Powers Agencies" under "THE ELECTRIC SYSTEM—Joint Powers Agency Obligations" herein. For a general description of the City's arrangements with joint powers agencies, see "THE ELECTRIC SYSTEM -Power Supply Resources; Joint Powers Agency Resources. For a general description of the City's agreement with Western, see "THE ELECTRIC SYSTEM -Purchased Power – Western." In addition to the take -or -pay obligations of the City, the City has entered into, and may from time to time enter into in the future, other power and fuel purchase agreements pursuant to which the City may be required to make minimum payments regardless of the amount of power or fuel purchased, or in the event power or fuel is not available in the amounts contemplated by the arrangements Additional Parity Obligations The City is permitted under the 2018 Installment Purchase Agreement to incur Parity Obligations, subject to satisfaction of the following conditions. (a) With respect to a Parity Obligation other than a Parity Payment Agreement or a Credit Agreement: (i) during any twelve (12) consecutive calendar months out of the immediately preceding eighteen (18) calendar month period, the Adjusted Annual Net Revenues were at least equal to one hundred twenty percent (120%) of the Maximum Annual Debt Service for all Outstanding 2018 Installment Payments and all Outstanding Parity Obligations; and (ii) as evidenced by a Certificate of the City or an Engineer' s Report on file with the City, the projected Adjusted Annual Net Revenues during each of the succeeding five (5) complete Fiscal Years beginning with the first Fiscal Year following issuance of the Parity Obligation proposed to be executed in which interest thereon is not capitalized in whole from the proceeds of Parity Obligations, is at least equal to one hundred twenty percent (120%) of the Maximum Annual Debt Service for all Outstanding 2018 Installment Payments and all Outstanding Parity Obligations plus the Parity Obligation proposed to be executed. (b) If the Parity Obligation proposed to be executed is not a Parity Payment Agreement, the proceeds of such Parity Obligation shall be used solely to finance or refinance (including reimbursement to the City of amounts advanced for such costs) one or more additions, betterments, improvements to, or other capital assets of, the Electric System as designated by the City and to pay any incidental costs and expenses related thereto (including the costs of issuance, execution or delivery of such proposed Parity Obligation and the funding of a debt service reserve fund). (c) With respect to any Parity Obligation proposed to be executed which is a Parity Payment Agreement or a Credit Agreement, there shall have been delivered to the City evidence that the incurrence of such Parity Payment Agreement or Credit Agreement will not in and of itself cause a downgrade of the rating issued by the Rating Agencies then rating the 2018 Bonds or any Parity Obligation then outstanding. 13 (d) There shall have been delivered to the City an Opinion of Counsel substantially to the effect that (1) subject to standard exceptions and qualifications, the Parity Obligation is a valid and binding special obligation of the City, and (2) such Parity Obligation has been duly and validly authorized, executed and delivered in accordance herewith. (e) If required by the terms of such Parity Obligation, a separate reserve has been established for such Parity Obligation and that provision has been made to fund such reserve. Notwithstanding the foregoing provisions, neither clause (a) nor clause (b) above shall limit the ability of the City to execute any Parity Obligations at any time to refund any Outstanding 2018 Installment Payments or Outstanding Parity Obligations, in each case which results in a net present value savings to the City, inclusive of all costs of such refunding. Subordinate Obligations The 2018 Installment Purchase Agreement permits the City to incur obligations payable from Net Revenues on a subordinate basis to the 2018 Installment Payments and any future Parity Obligations. There currently are no outstanding subordinate obligations. THE ELECTRIC SYSTEM General The City of Lodi ("Lodi") is a general law city in the State of California incorporated in 1906. The City is located in the San Joaquin Valley of California, 35 miles south of the State capital of Sacramento, and 90 miles east of San Francisco. The City operates under a City Council -Manager form of government and provides the following services: public safety (police, fire and graffiti abatement), public utilities services (electric, water and sewer), transportation services (streets, flood control and transit), leisure, cultural and social services (parks and recreation, library, and community center), and general government services (management, human resources administration, financial administration, building maintenance and equipment maintenance). As of January 1, 2018, the City had an estimated population of 63,791 within an area of approximately 13.98 square miles. See "APPENDIX A – CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION CONCERNING THE CITY." History of the Electric System The City has owned and operated its electric distribution system since 1910. In order to obtain generator resources to serve its customers, the City joined NCPA in 1968. The City participates in several resources developed by NCPA such as geothermal, solar, natural gas, transmission and hydroelectric projects. In 1982, the City signed a power purchase contract with Western. The City also became a member of TANC in 1984 and participates in the California— Oregon Transmission Project (the "COTP"). In addition, NCPA has developed electric dispatch and transmission capabilities that contribute to the City's Electric System services. Ten NCPA members (the City, Alameda, Biggs, Gridley, Healdsburg, Lompoc, Palo Alto, Port of Oakland, Ukiah and Plumas-Sierra, collectively the "Ten NCPA Pool Members"), are part of a power pool operated by NCPA. NCPA balances loads and resources for the Ten NCPA Pool Members pursuant to the Third Amended and Restated NCPA Metered Subsystem Aggregation Agreement to provide the total electric power requirements of the Ten NCPA Pool Members at the lowest reasonable cost consistent with reliability, 14 safety, expedition, prevention of adverse impacts on neighboring utility systems, and all applicable laws and governmental rules, regulations and orders. Service Area The Electric System serves the entire area of the City (approximately 13.98 square miles) and has approximately 131 miles of overhead lines and over 123 miles of underground lines. During the fiscal year ended June 30, 2017, the Electric System served 26,152 customers, comprised of 22,870 residential customers, 3,112 commercial/industrial customers and 170 other customers. Governance and Management The Electric System is operated as a separate enterprise activity within the City government. This structure is essentially the same as for its water and wastewater utility enterprises. The Electric System department is under the direction of the Electric Utility Director who is appointed by the City Manager. The City is governed by a five -member City Council comprised of members. The City is converting to District elections starting in November of 2018 and concluding with the seats open in 2020. Each council member is elected for four years with staggered terms. The current City Council members and the expiration dates of their terms are set forth below. Council Member Title Expiration of Term Alan Nakanishi Mayor December 5, 2018 JoAnne Mounce Mayor Pro Tempore December 2, 2020 Bob Johnson Council Member December 2, 2020 Mark Chandler Council Member December 5, 2018 Doug Kuehne Council Member December 5, 2018 Following are biographies of certain City staff. Stephen Schwabauer, City Manager, was appointed to the position by the City Council on June 5, 2014 after serving five -months as the Interim Manager. He had been City Attorney from 2004 to 2014, and Deputy City Attorney from 2000 to 2004. During his tenure as City Attorney, Steve negotiated the resolution of a multimillion dollar groundwater contamination action and associated financing scheme. Steve also led labor negotiations for much of his tenure as City Attorney and developed significant experience with budget operations and employee relations. Steve earned his Bachelor of Arts degree from U. C. Davis in 1990 and his law degree from U. C. Berkeley in 1994. Andrew Keys, Deputy City Manager/Internal Services Director, has been the City's Deputy City Manager/Internal Services Director since March 27, 2017. As the City's administrative second -in -command, Keys oversees the City's Finance, Budget and Treasury, Information Systems and Human Resources functions. Keys came to the City after a 9 -year career with the City of Elk Grove, California. In Elk Grove, he served in various roles within the finance department, including Analyst, Accounting Manager and Budget Manager, as well as within administration serving as Assistant to the City Manager and Deputy City Manager. Keys began his career in the municipal finance sector with KNN Public Finance where he served for a year as an Analyst after receiving his Bachelor of Arts degree in International Relations from UC Davis in 2006. He later received his Master's degree in Business Administration from Davis in 2013. Elizabeth A. Kirkley, Electric Utility Director. Ms. Kirkley joined the City in June 2010 and has over 18 years of private/public electric utility experience. Ms. Kirkley came to the City after serving as Electric 15 Utility Director of the City of Healdsburg, California for 2 years. Previous industry experience includes serving as an electrical engineer for the City of Ukiah, California, ComEd (Exelon West) in the Chicago area, and Arizona Public Service Company in Phoenix. Ms. Kirkley has a BSEE specializing in Power System Analysis from the University of Illinois in Urbana -Champaign and has completed the Executive MBA coursework from California State University-Stanislaus. Employees As of July 1, 2017, 51 full-time City employees were assigned specifically to the Electric System. Contract/temporary employees are hired as necessary. Substantially all of the non -management Lodi personnel assigned to the Electric System are represented by the International Brotherhood of Electrical Workers, Union 1245 ("IBEW"). The City's contract with IBEW expired on December 31, 2017. Negotiations are ongoing and IBEW workers continue to provide service to the Electric System under the terms of the prior agreement. There have been no strikes or other union work stoppages at the City, including the electric utility department. Retirement benefits to City employees, including those assigned to the Electric System, are provided through the City's participation in the California Public Employees' Retirement System ("CaIPERS"), an agent multiple -employer public employee defined benefit pension plan. Participants are required to contribute a percentage (7% for employees assigned to the electric utility department) of their annual covered salary. The City's contribution rate for current service (normal cost) and the Unfunded Accrued Liability (UAL) payment to make up for shortfalls in the pension system are determined by annual actuarial calculations based on the benefit formula and the number of employees and their respective salary schedules. For the fiscal year ending June 30, 2018, the Citywide contribution to the Ca1PERS miscellaneous plan (of which all Electric System employees are members) was budgeted to be $1,511,420 in Normal Cost and $2,898,420 in UAL. The Normal Cost is based on the City's assumption for payroll expense, and the UAL is set by CaIPERS. For the Electric System's share of such contributions, the budget amount for the Normal Cost share was $393,050 and for the UAL was $755,390. The contribution requirements of plan members and the City are established and may be amended by CaIPERS. Assembly Bill 340,' the Public Employee's Pension Reform Act ("PEPRA"), implemented new benefit formulas and final compensation periods, as well as new contribution requirements for new employees hired on or after January 1, 2013, who meet the definition of a new member under PEPRA. As of February 15, 2018, there are 14 PEPRA members and 37 classic members in the Electric System. As more PEPRA members are hired in the future, the Normal Cost should be reduced. Because the UAL is tied to current shortfalls in the pension system it is not directly impacted by the hiring of PEPRA members. Beginning July I, 2018, Ca1PERS will begin phasing in a reduction in the discount rate (assumed rate of return on investments) used to determine agency contributions. The discount rate is being reduced from 7.5% to 7.0% as follows: Fiscal Year Valuation Date for Required Contribution Discount Rate June 30, 2016 2018-19 7.375% June 30, 2017 2019-20 7.25% June 30, 2018 2020-21 7.00% The impact of each reduction will be phased in over five years, with the full impact realized in the 2024-25 fiscal year. The City anticipates total pension costs approximately doubling as compared to the current fiscal year during this time. To address the issue, the City has adopted a Pension Stabilization Policy ("PSP") and created a Pension Stabilization Fund ("PSF"). As of December 31, 2017, $5,229,493 was set aside in the PSF, an Internal Revenue Service Section 115 (c) trust fund established for the purposes of paying future pension liabilities. The PSP requires 100% of General Fund reserves in excess of the 16% General Fund reserve target be deposited into the PSF, and all other funds invest a proportional share based on the budgeted pension obligations in that fiscal year. Based on this policy, an additional $4,318,481 will be invested into the PSF before the end of fiscal year ending June 30, 2018. The PSP remains in effect until the 16 funded status of the City's two pension plans for Miscellaneous and Safety employees are at a combined 80% funded status when considering the Market Value of Assets at Ca1PERS and in the PSF. As of the June 30, 2016 actuarial report, the funded status for the Miscellaneous Plan was 68.4%, Safety plan was 58.3% and combined plans was 63.4%. As of December 31, 2017, the combined funded status when considering the PSF assets increases to 64.8%. Based on fiscal year ending June 30, 2018 combined normal cost and UAL pension payments, the Electric System is responsible for approximately 11.1% of the total pension liability for the City. Copies of the Ca1PERS annual financial report may be obtained from the CaIPERS Executive Office, 400 Q Street, Sacramento, California 95814. For additional information regarding the City's retirement plans and other post -employment benefits, see Appendix B — "AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2017." In addition, the City provides certain post -employment benefits other than pensions (OPEB) to City employees, including those assigned to the Electric System, who retire from the City and receive a Ca1PERS pension through its participation in the Ca1PERS medical benefits program. The City has two OPEB plans, the more expensive of which is a Sick Leave Conversion benefit that is closed to employees hired after 1994. The closed plan provides monthly compensation in an amount equal to the employer's cost paid for healthcare to the employee at the time of retirement. The second plan is Ca1PERS standard Minimum Contribution Benefit subsidy plan that provides a fixed monthly amount of premium subsidy for retirees. From the January 1, 2014, actuarial valuation to the January 1, 2016 valuation, the Unfunded Actuarial Accrued Liability (UAAL) increased from $16,879,493 to $39,041,375. Approximately $18 million of this change was due to the addition of the implicit subsidy liability as required by Revised Actuarial Standard of Practice No. 6 (ASOP 6) and does not represent an actual increase in the liability. The UAAL is split between the Conversion Benefit, the Ca1PERS Minimum Contribution Benefit and the Implicit Subsidy as follows: Conversion Benefit $8,761,572 CaIPERS Minimum Contribution Benefit $12,348,193 Implicit Subsidy $17,931,610 Total UAAL $39,041,375 ASOP 6 requires disclosure of the implicit subsidy for reports prepared after March of 2015. In Fiscal Year 2016-17, the City invested $1 Million in an OPEB trust fund in order to partially fund the OPEB liability. Prior to that and again in the current Fiscal Year 2017-18, contributions to the OPEB benefit are made on a pay-as-you-go basis. The total amount spent City-wide on pay-as-you-go OPEB benefits in Fiscal Year 2016/17 was $1,573,127, of which $1,288,371 was for the Conversion Benefit. As the City addresses the larger pension problem presented by CaIPERS, pay-as-you-go will remain the strategy going forward. The portion of the plan's assets allocable to the Electric System employees, which is part of the City's liability pool, has not been separately calculated. The Electric System employees represent approximately 13% of employees of the City. The City has engaged a firm to update the actuarial report based upon a January 1, 2018, census date. For additional information relating to the City's retirement and other post -employment obligations, see Note _ to the City's General Purpose Financial Statements for the Year Ended June 30, 2017 included in Appendix B to this Official Statement. Payments to PERS and payments with respect to OPEB benefits constitute Maintenance and Operation Costs of the Electric System. 17 Insurance The City's boiler and machinery operations (including those parts of the Electric System) are insured by Hartford Steam Boiler for up to $39,986,075 in coverage. The City, including the Electric System, is self- insured for general liability losses for up to $500,000 and has pooled excess coverage through the California Joint Powers Risk Management Authority for up to $40 million per occurrence. The City is self-insured for workers' compensation losses for up to $250,000 and has excess coverage through the Local Agency Workers' Compensation Excess Authority for statutory coverage. Investment Policy The moneys in the Electric Revenue Fund, into which all revenues of the Electric System are initially deposited, are required to be invested in lawful investments, including Permitted Investments, as provided under the Installment Purchase Agreement, subject to the City's Investment Policy described herein. See "APPENDIX D—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein. Pursuant to the Investment Policy, the City strives to maintain a level of investment of all idle funds, less required reserves, as near 100% as possible, through daily and projected cash flow determinations. The City's cash management system is designed to monitor and forecast expenditures and revenue accurately in order to enable the City to invest funds to the fullest extent possible. Idle cash management and investment transactions are the responsibility of the Finance Director/City Treasurer. The Investment Policy, as adopted by the City Council on March 7, 2018, permits investment in the following: U.S. Treasury obligations (bills, notes and bonds); U.S. Government Agency securities and instrumentalities; bankers acceptances; certificates of deposit; negotiable certificates of deposit; commercial paper; California State Local Agency Investment Fund; passbook deposits; mutual funds; medium term notes, obligations of the 50 states and California local agencies, as well as Supranational obligations. The guiding philosophy outlined in the Investment Policy is the Prudent Investor Standard. The Investment Policy also provides that safety is given the highest priority, followed by liquidity and yield. The Investment Policy is reviewed annually but may be changed at any time at the discretion of the City Council (subject to the State of California law provisions relating to authorized investments) and as the California Government Code is amended. There can be no assurance, therefore, that the State of California law and/or the Investment Policy will not be amended in the future to allow for investments which are currently not permitted under such State law or the Investment Policy, or that the objectives of the City with respect to investments will not change. All investments, including the Authorized Investments and those authorized by law from time to time for investments by public agencies, contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held under the Trust Agreement and the Installment Purchase Agreement, or other amounts held by the City, could have a material adverse effect on the City's finances. Power Supply Resources The City does not independently own any generation assets but has an ownership -like entitlement to a percentage of the capacity and energy output and attributes of certain NCPA generation projects, as more fully described below. The City is obligated under these arrangements on a "take -or -pay" basis." See "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS – Take -or -Pay Obligations." The City also obtains power supply resources through contractual arrangements with various entities including Western, Seattle City Light and Recurrent Energy. The following table sets forth information concerning the Electric System's power supply resources and the energy supplied by each during the fiscal year ended June 30, 2017. 18 ELECTRIC SYSTEM POWER SUPPLY RESOURCES For the Fiscal Year Ended June 30, 2017 Source Capacity Available (MW)cn(4) Actual Energy % of (MWh) Total Energy Purchased Power(2): Western 7.2 34,137 7.7% NCPA Geothermal Project 11.5 83,576 19.0 Hydroelectric Project 26.2 95,710 21.7 Combustion Turbine Project No. 1 9.5 1,721 0.4 Capital Facilities, Unit One 19.6 1,836 0.4 Lodi Energy Center 26.6 28,554 6.5 Contracts and Exchanges(3) 37.3 195,483 44.3 Total 137.9 441,017(4) 100.0% Total Capacity and Energy Sold at Wholesale N/A 3,355 Electric System Requirement for Retail Load(5) 128.7 437,662 NCPA annual resource adequacy filings. (2) Entitlements, firm allocations and contract amounts. (3) Includes participation in Astoria 2 Solar Project (Recurrent Energy), Seattle City Light Exchange and purchases procured on behalf of the Electric System through NCPA, including through NCPA's Market Purchase Program. (4) Includes exchanges and line losses. (5) NCPA All Resources Bill. Source: City of Lodi. In the fiscal year ended June 30, 2017, the average cost of power delivered to the Electric System was 8.5 cents per kWh. Purchased Power Western. The City is a party to the Contract for Electric Service Base Resource contract with the Western Area Power Administration (the "Base Resource Contract"), which is set to expire on December 31, 2024, under which the City takes delivery of 0.569% share of the base resource output of the Central Valley Project ("CVP"). The CVP consists of a series of federal hydroelectric facilities located and interconnected in Northern California. The amount of energy delivered to the City under the Base Resource Contract is subject to hydrology variability and water storage levels within the CVP. The Base Resource Contract is structured on a take —or -pay basis. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS — Take -or - Pay Obligations." Base Resource energy is scheduled for delivery to the City by NCPA. For the fiscal year ended June 30, 2017, the average melded cost of delivered power under the Base Resource Contract was approximately $27.04 per MWh. Other Purchases. The City has a 25 MW participation share in the Capacity and Energy Exchange Agreement between NCPA and Seattle City Light (the "SCL Exchange Agreement"), pursuant to which energy is exchanged between the parties based on seasonal requirements. The amount of energy received by the City during fiscal year 2016-17 is reflected in the Contracts and Exchanges figures listed in the table above. Energy received under the SCL Exchange Agreement is transmitted to the City using CAISO transmission. The SCL Exchange is set to expire on May 31, 2018. Other power purchases for fiscal year 2016-17, as reflected in the Contracts and Exchanges figures listed in the table above, are associated with short-term 19 purchases. NCPA transacts and schedules daily and hourly (spot) power purchases and sales to balance and serve the City's native load requirements. Joint Powers Agency Resources NCPA. The City has a 10.37% project participation entitlement share of the North Fork Stanislaus River Hydroelectric Development Project. The City has a 39.5% project participation entitlement share of the Combustion Turbine Project Number Two Steam Injection Gas Turbine Project. The City has a 14.56% project participation entitlement share of the Geothermal Generating Unit 2 Project, and a 6.0% project participation entitlement share of the Geothermal Generating Project Number 3, which are jointly operated as a single project pursuant to the Amended and Restated Geothermal Operating Agreement. The City has a 20.61 % entitlement share in the Geysers Transmission Project, pursuant to which NCPA, on behalf of the City, delivers output from the geothermal generating assets pursuant to the Agreement of Cotenancy in the Castle Rock Junction -Lakeville 230 -kV Transmission Line. The City has a 13.39% project participation entitlement share in the Combustion Turbine Project Number One (exclusive of the portion acquired by the City of Roseville). The City has a 9.5% generation entitlement share in NCPA's Lodi Energy Center Project. See also "Indebtedness; Joint Powers Agency Obligations" below. Following is a brief description of the certain of the NCPA Projects in which the City participates: Hydroelectric Project: The North Fork Stanislaus River Hydroelectric Development Project (the "Hydroelectric Project") consists of (a) three diversion dams, (b) the 246.86 -MW Collierville Powerhouse, (c) the Spicer Meadow Dam with a 6.0 -MW powerhouse, and (d) associated tunnels located essentially on the North Fork Stanislaus River in Alpine, Tuolumne and Calaveras Counties, California, together with required transmission and related facilities. The Hydroelectric Project, with the exception of certain transmission facilities, is owned by the Calaveras County Water District ("Calaveras") and is licensed by FERC, pursuant to a 50 -year License issued in 1982 to Calaveras. Pursuant to the Power Purchase Contract, NCPA (i) is entitled to the electric output, including capacity, of the Hydroelectric Project until February 2032, (ii) managed the construction of the Hydroelectric Project, and (iii) operates the generating and recreational facilities of the Hydroelectric Project. • After the present FERC License for the Hydroelectric Project expires in the year 2032, NCPA has the option to continue to purchase the Hydroelectric Project capacity and energy during a subsequent license renewal period. It is estimated that the price will be significantly less than the comparable alternatives at that time. The purchase option includes all capacity and energy which is surplus to Calaveras' needs for power within the boundaries of Calaveras County. As with any hydroelectric generation project, the operation of the Hydroelectric Project is determined by consideration of its storage capacity, hydrology conditions, and available stream flows and requirements. The Hydroelectric Project has a 104 -year record (1913 to 2017) of storage and stream flows. Based upon the record, the Hydroelectric Project's average production is estimated to be 470 GWh annually. The Hydroelectric Project is optimized together with NCPA's other resources as determined by NCPA, to economically meet the load requirements of the respective Hydroelectric Project Participants, including the City. The load -following characteristics of the Hydroelectric Project gives NCPA a great degree of flexibility in meeting the hourly and daily variations which occur in the Hydroelectric Project Participants' loads. The net Hydroelectric Project generation for the previous ten fiscal years is as follows: 20 Hydroelectric Project Historical Net Generation Fiscal Year Ended June 30 Total Net Generation (GWh) 2008 296 2009 377 2010 533 2011 852 2012 463 2013 268 2014 197 2015 164 2016 397 2017 945 Lodi Energy Center. NCPA owns and operates a natural gas-fired, combined -cycle power generation plant located in the City (the "Lodi Energy Center"). The electric generation components (the "Power Island") of the Lodi Energy Center consists of the following components: (I) one natural gas-fired Siemens STGS- 5000F combustion turbine -generator ("CTG"), with an evaporative cooling system and dry low-NOx combustors to control air emissions; (2) one 3 -pressure heat recovery steam generator ("HMG"), (3) a selective catalytic reduction ("SCR") and carbon monoxide (CO) catalyst to further control NOx and CO emissions, respectively; (4) one Siemens SST-900RH condensing steam turbine generator ("STG"); (5) one natural gas- fired auxiliary boiler; (6) one 7 -cell draft evaporative cooling tower; and (7) associated support equipment. The Lodi Energy Center plant is capable of operating at 302 MW (it has been permitted to operate at this level and it has arranged for the equipment necessary to operate at this level) but is limited to 280 MW of firm capacity under the terms of the transmission interconnection agreement and full output of the unit as available on the transmission system with the ISO and PG&E. PG&E has notified NCPA that PG&E intends to complete reconductoring work on the transmission line limiting the LEC Project Participants' (as defined below) ability to claim the full capacity for resource adequacy requirements from the Lodi Energy Center in 2018 (actual production from the facility has not been significantly affected by this limitation). In 2016, the Lodi Energy Center achieved net generation of 1,077 GWh compared to 1,668 GWh in 2015. The decrease from 2016 to 2015 was due to a return to normal hydroelectric conditions. In 2015, California experienced one of the most significant droughts in California and as a result natural gas plants operated at higher output levels to make up for the loss of hydroelectric generation. In fiscal year ended June 30, 2016, California returned to normal rainfall amounts and the natural gas generation decreased accordingly. Fiscal year ended June 30, 2017, LEC output was 300 GWh compared to the 1,077 GWh for fiscal year ended June 30, 2016. The drop in generation is directly attributable to the increase in PG&E gas transportation costs. NCPA negotiated a special rate for gas transmission for LEC which went into effect fiscal year ending June 30, 2018. LEC has been running as expected since the new rate went into effect. Pursuant to a Lodi Energy Center Power Sales Agreement (the "LEC Power Sales Agreement"), by and among NCPA and (i) the NCPA Member project participants: Biggs, Gridley, Healdsburg, the Coty, Lompoc, Plumas-Sierra, Santa Clara, Ukiah and BART; and (ii) the non-NCPA Member project participants: the City of Azusa, the Modesto Irrigation District, the Power and Water Resources Pooling Authority and the California Department of Water Resources (such entities other than NCPA, collectively the "LEC Project Participants"), NCPA agreed to construct and operate the Lodi Energy Center and has sold the capacity and energy of the Lodi Energy Center to the thirteen LEC Project Participants, in accordance with their respective generation entitlement shares to the capacity and energy of the Lodi Energy Center. Each LEC Project Participant is responsible for the payment of its respective share of the costs of construction of the Lodi Energy Center. 21 The Lodi Energy Center is operated and maintained by NCPA under the general direction of the LEC Project Participants pursuant to the LEC Power Sales Agreement and the Lodi Energy Center Project Management and Operations Agreement among NCPA and the LEC Project Participants. Geothermal Project: NCPA has developed a geothermal project (the "Geothermal Project") located on federal land in certain areas of Sonoma and Lake Counties, California (the "Geysers Area"). In addition to the geothermal leasehold, wells, gathering system and related facilities, the Geothermal Project consists of two electric generating stations (Plant 1 and Plant 2), each with two 55 MW (nameplate rating) turbine generator units utilizing low pressure, low temperature geothermal steam, associated electrical, mechanical and control facilities, a heat dissipation system, a steam gathering system, a transmission tapline and other related facilities. Geothermal steam for the project is derived from the geothermal property, which includes wellpads, access roads, steam wells and reinjection wells. NCPA formed two not-for-profit corporations controlled by its Members to own the generating plants of the Geothermal Project. NCPA manages the Geothermal Project for the corporations and is entitled to all the capacity and energy generated by the Geothermal Project. As noted above, the Geothermal Project consists of two operating electric generating stations (Plant 1 and Plant 2), where Plant 1 contains two 55 MW (nameplate rating) turbine generator units, and Plant 2 contains one 52.73 MW turbine generator unit. Plant 1 and Plant 2 were originally developed and operated as separate projects referred to as "Geothermal Project Number 2" and "Geothermal Project Number 3," respectively. Plant 1 and Plant 2 are now operated together as the Geothermal Project pursuant to the terms of the Amended and Restated Geothermal Operating Agreement. Steam for NCPA's geothermal plants comes from lands in the Geysers Area, which are leased by NCPA from the federal government. NCPA operates these steam -supply areas. Operation of the geothermal plants at high generation levels, together with high steam usage by others in the same area, resulted in a decline in the steam production from the steam wells at a rate greater than expected. As a result, by April 1988, for the purpose of slowing the decline in the steam field capability, NCPA changed its steam field production from base -load to load -following and reduced average annual generation. These changes were effective in reducing the decline in steam production. NCPA entered into agreements with other geothermal operators in the Geysers Area to finance and construct the Southeast Geysers Effluent Pipeline Project, which was completed in September 1997 and began operating soon thereafter. The 26 -mile pipeline collects waste -water from Lake County Sanitation District treatment plants at Clearlake and Middletown and delivers the wastewater to NCPA and the other Geysers steam field operator for injection into the steam field. In 2017, NCPA received approximately 55% of the wastewater for reinjections from this effluent pipeline. NCPA has also implemented and continues to implement various operating strategies and modifications to further reduce the rate of decline in steam production. NCPA has modified all of the steam turbines and the associated steam collection system to enable generation with lower pressure steam and increased conversion efficiencies of the available steam resource. Average annual generation of the Geothermal Project was approximately 103 MW gross ("MWG") for calendar year ("CY") 2017. Based on current operating protocols and forecasted operations, after CY 2017, both the average and peak capacity are expected to continue to decrease, reaching approximately 99.9 MW in calendar year 2018 and 75.4 MW by calendar year 2039. Under terms of the federal geothermal leasehold agreements, which became effective August 1, 1974, the leasehold had a 10 -year primary term with provision for renewal as long thereafter as geothermal steam is produced or utilized, but not longer than 40 years; however, in 2013, NCPA renewed the leasehold. At the expiration of that period, if geothermal steam is still being produced, NCPA has preferential right to renew the leasehold for a second term. The leasehold also requires NCPA to remove its leasehold improvements including the geothermal plants and steam gathering system when and if NCPA abandons the leasehold. These decommissioning costs are currently estimated to total approximately $59.3 million. NCPA has been collecting monies to pay the expected decommissioning 22 costs since 2007 and holds $16.2 million in a reserve for such purpose as of June 30, 2017. Collections towards future decommissioning costs are expected to be approximately $1.8 million for fiscal year 2017-18. Geysers Transmission Project: In order to meet certain obligations required of NCPA to secure transmission and other support services for the Geothermal Project, NCPA has undertaken a geysers transmission project (the "Geysers Transmission Project") with the Geysers Transmission Project participants. The Geysers Transmission Project includes (i) a co -tenancy interest in PG&E's 230 kV line from Castle Rock Junction in Sonoma County to the Lakeville Substation (the "Castle Rock to Lakeville Line"), (ii) additional firm transmission rights in the Castle Rock to Lakeville Line and (iii) the Central Dispatch Facility. Capital Facilities Project: The NCPA Capital Facilities Project, known as Combustion Turbine Project Number Two, currently consists of one power generating station, Unit One, with a design rating of 49.9 MW located in the City. Such power generating station consists of a single natural gas-fired steam injected gas turbine (STIG), generator, and required auxiliary and electrical interconnection systems. Unit One is economically dispatched to meet the project participants' load, depending on the amount of generation available from NCPA's hydroelectric project and prices of alternative electric energy supplies, to meet other NCPA Members' load or to sell power to third parties depending on natural gas prices and electric energy prices. Combustion Turbine Project Number One: The Combustion Turbine Project Number One (the "Combustion Turbine Project") originally consisted of five combustion turbine units, each nominally rated 25 MW, with two units located in each of Roseville and Alameda and one in the City. Sale of the two units located in Roseville to the City of Roseville was effective on September 1, 2010. The Combustion Turbine Project provides capacity that is (i) economically dispatched during the peak load period to the extent permitted by air quality restrictions and (ii) to be used to meet the certain capacity reserve requirements (e.g., resource adequacy requirements). This resource provides the capacity below current spot market prices for capacity but as is typical of this type of technology, the average cost for power per kWh of power delivered to the participants in the Combustion Turbine Project is comparatively expensive. NCPA, on behalf of the project participants of Combustion Turbine Project Number One and of the Capital Facilities Project's Unit One, has entered into a Master Transaction Confirmation that is appended to and made part of a Base Contract for Sale and Purchase of Natural Gas (the "Consolidated Natural Gas Agreement"), effective on October 30, 2012, with EDF Trading North America, LLC ("EDF"). The Consolidated Natural Gas Agreement provides gas supply and management services, including the following: • Supply of spot market gas for the full daily output of Combustion Turbine Project Number One and Unit One of the Capital Facilities Project (approximately 35,136 MMBtu/day); and • Scheduling, nomination, balancing and settlement services for NCPA gas supplies from third parties. NCPA also has entitlement rights to natural gas pipeline capacity of approximately 2,743 MMBtu/day sourced at AECO (Alberta) and sinking at PG&E Citygate (California). The four pipeline segments that are included in the contiguous pipeline entitlement include pipeline contained in the following natural gas systems: NOVA, Foothills, GTN, and CTG. NCPA's natural gas pipeline is managed by Mercuria Energy America, Inc., pursuant to an Asset Management Agreement for Pipeline Transport Capacity dated January 1, 2015. For release of such natural gas pipeline to Mercuria Energy America, Inc., NCPA is paid the value of the unused pipeline capacity by the pipeline manager. 23 In addition, NCPA and EDF entered into an agreement to provide the gas supply and the nomination, imbalance and settlement services for NCPA's Lodi Energy Center, which became effective on September 1, 2016. TANC California – Oregon Transmission Project. The City has executed certain agreements to acquire a participation percentage share of TANC's entitlement of the California -Oregon Transmission Project ("COTP") transfer capability. The City participated in the acquisition of an increased share of transfer capability of the COTP in connection with the acquisition by TANC in April 2008 of the COTP transmission assets of the City of Vernon, California ("Vernon"), one of the original owners of the COTP, which acquisition was financed by TANC through the issuance of additional TANC debt (the "Vernon acquisition debt"). On April 2, 2014, the Lodi City Council approved a 25 -year layoff of the City's 26.7 MW share of COTP transfer capability, effective July 1, 2014, whereby the City and all of the TANC Members who are in the balancing authority area of the California Independent System Operator Corporation ("CAISO") will lay off their interests to certain other COTP participants (i.e., Modesto Irrigation District ("MID"), Turlock Irrigation District ("TID") and Sacramento Municipal Utility District ("SMUD")) (subject to certain rights of the City and the other layoff entities to recall, and certain rights of MID, TID, and/or SMUD to return, up to 50% of their respective shares of the entitlement amount laid off). In exchange for their respective increased right to use of COTP transfer capability, MID and SMUD will pay the City's (and the other layoff entities') current allocated share of COTP costs. This layoff arrangement does not change the City's membership status in TANC and does not relieve the City of its obligations under the TANC Agreement in the event of any default in payment by an acquiring party. See also "Indebtedness; Joint Powers Agency Obligations" below. TAMC Tesla–Midway Transmission Service. TANC and certain TANC Members have arranged for Pacific Gas & Electric Company ("PG&E") to provide TANC and its members with 300 MW of firm bi- directional transmission capacity on its transmission system between its Midway Substation near Buttonwillow, California, and its Tesla Substation near Tracy, California, near the southern physical terminus of the COTP (the "Tesla–Midway Transmission Service") under an agreement known as the South of Tesla (SOT) Principles. The City's share of this Tesla–Midway Transmission Service is 6.21 MW. The City has utilized its full allocation of Tesla–Midway Transmission Service for firm and non-firm power transactions in the past. The City is responsible for 2.07% of TANC's SOT debt service of approximately $53,000 per year. Renewable Resources In addition to current renewable contracts and resources, the City expects to procure, either on its own or through NCPA, additional renewable power resources that satisfy applicable State requirements, the main provisions of which are currently contained in the California Renewable Energy Resources Act ("SBXI 2"), the Clean Energy and Pollution Reduction Act of 2015 ("SB 350"), and the California Global Warming Solutions Act of 2006 (the "GWSA"). See "FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY—California Climate Change Policy Developments" in the front part of this Official Statement. The City's current renewable power resources include geothermal, solar and small hydro. With its existing power resources, participation in a new solar energy project (described below), and historic carryover, the City anticipates meeting its Renewables Portfolio Standard ("RPS") requirements through at least 2021. The Astoria 2 Solar Project, which reached commercial operation on December 9, 2016, is a 75 MW photovoltaic plant developed by Recurrent Energy, located in the southeastern portion of Kern County. The City entered into a power purchase agreement with Recurrent Energy for a 13.3333%, or 10 MW, share of the output of the Astoria 2 Solar Project, which is enough energy to meet approximately 7% of the Electric System's retail load. 24 The contract term for the Astoria 2 Solar Project is 20 years. Energy from this project qualifies as Portfolio Content Category 1 energy under RPS. Combined with existing generation resources and historic carryover, this project will enable the City to meet its RPS obligations through at least 2021. The cost of power from the Astoria 2 Solar Project is fixed at $63/MWh for the 20 -year life of the project. The price is only paid for energy actually delivered. The City does not have any ownership interest in the project and will not incur any capital expenditures related to the project. The Antelope Expansion Phase 1 Solar Facility ("Antelope Expansion Project"), which is expected to reach commercial operation on December 31, 2021, is a 51 MW photovoltaic plant developed by Antelope Expansion 1B, LLC, located in the City of Lancaster, Los Angeles County, California. NCPA, on behalf of the City and other NCPA members, entered into a power purchase agreement with Antelope Expansion 1B, LLC for a 33.78%, or 17 MW, share of the output of the Antelope Expansion Project. The City has a 58.82%, or 10 MW, project participation percentage share of the Antelope Expansion Project. The contract term for the Antelope Expansion Project is 20 years. Energy from this project will qualify as Portfolio Content Category 1 energy under RPS. The output produced from the project will contribute to the City's compliance with RPS obligations beyond the 2020 compliance period. The cost of power from the Antelope Expansion Project is fixed at $39.00/MWh for the 20 -year life of the project. The price is only paid for energy actually delivered. The City does not currently have any ownership interest in the project, and as such will not incur any capital expenditures related to the project. Pursuant to SBXI-2, during Compliance Period 1 (January 1, 2011 to December 31, 2013), an average of 20% of the Electric System's retail sales were required to be procured from eligible renewable energy resources. On June 13, 2017, the City received a compliance determination from the California Energy Commission indicating the City had met the procurement target. The City exceeded the procurement target of 20% for Compliance Period 1, procuring 21.7% of its retail sales from eligible renewable energy resources. During Compliance Period 2 (January 1, 2014 to December 31, 2016) under SBX1-2, the Electric System was required to make reasonable progress each year to ensure it achieved 25% of retail sales from eligible renewable energy resources by December 31, 2016. The City exceeded the RPS target under SBX1-2 for Compliance Period 2. In calendar year 2014, approximately 21.1% of the City's energy portfolio was supplied from eligible renewable resources. In calendar year 2015, approximately 21% of the City's energy portfolio was supplied from eligible renewable resources. In calendar year 2016, approximately 24% of the City's energy portfolio was supplied from eligible renewable resources. During Compliance Period 3 (January 1, 2017 to December 31, 2020), with the adoption by the California Energy Commission ("CEC") of regulations to enforce SBX1-2, the Electric System is required to procure eligible renewable energy resources equal to a total of 27% of its 2017 retail sales, 29% of its 2018 retail sales, 31% of its 2019 retail sales, and 33% of its 2020 retail sales. Based upon preliminary data, the City currently estimates that approximately 30% of the City's energy portfolio was supplied from eligible renewable resources in 2017. The City expects to satisfy the current RPS targets under SBX1-2 for Compliance Period 3 through 2020. Future Power Supply Resources Based upon its current forecasted sales growth, resource mix and market prices, the City believes its annual balance -of -month, day -ahead, and hour -ahead purchases will be less than 25% of total energy requirements for the next two years. The City's interest in multiple NCPA generation projects provides substantial capacity toward covering the City's net short position in the event that market prices rise above the respective unit's cost of production. In addition, due to the long lead time in acquiring certain resources, including renewable resources, the City, through NCPA, continues to consider additional projects that might 25 be included in its resource mix in coordination with NCPA and other NCPA members. On March 21, 2018, the City Council approved a Second Phase Agreement with NCPA to conduct feasibility and planning work associated with the development of one or more photovoltaic solar projects located in Lodi and throughout other NCPA member service territories. If successful, the City anticipates siting approximately 5 MW of solar capacity as part of its distribution system to help meet future RPS requirements and reduce transmission charges. Energy Efficiency and Conservation Since 1998, the City has maintained a public benefits program as required by State law, a component of which is demand-side management (commonly referred to as energy efficiency and conservation). Under this program, the City offers customers rebates to incentivize investment in energy efficient products and improvements, including insulation, replacement windows, improvements to air duct systems, high -efficiency air conditioners, heat pumps, attic and whole -house fans, refrigeration efficiency improvements, EnergyStar appliances, web -enabled smart thermostats, pump/motor/process equipment improvements and lighting retrofits. The City also provides energy education for residential and non-residential customers, including on- site energy audits, and hosts a number of programs to promote energy education and customer outreach. As part of its education and customer outreach efforts, the City provides a school-based energy efficiency education program for 6th grade elementary school students, offers free energy efficiency measures through its direct install program and is a sponsor of the annual NorCal Science Festival. The City utility customers continue to be positively impacted by one or more of the City's public benefits programs, either in the form of a direct utility rebate or via one of its outreach and educational programs. Interconnections, Transmission and Distribution Facilities The Electric System has approximately 131 miles of overhead lines and over 123 miles of underground lines. The Electric System is interconnected with the system of PG&E (three 60 kV lines). The City owns facilities for the distribution of electric power within the city limits of the City, which includes approximately 14 miles of 60 kV power lines, approximately 240 miles of 12 kV distribution lines (approximately 51% of which are underground) and four substations. The Electric System experiences approximately 45.6 minutes of outage time per customer per year. Forecast of Capital Expenditures The City's five-year capital projection for the electric facilities contemplates potential capital expenditures for substation upgrades, streetlight improvements,. ongoing overhead and underground maintenance, and related system reliability projects. The City anticipates funding its capital costs from rate revenues, special development fees and potential additional Parity Obligations. Over the next five years, capital expenditures (not including the project described in the next paragraph) are estimated to cost approximately $16 million. In addition, on March 22, 2018, the California Independent System Operator ("ISO") Board of Directors approved the ISO 2017-2018 Transmission Plan. It includes a project, the Lockeford-Lodi Area 230 kV Development, to solve thermal overload and voltage issues on the 60 -kV network between Pacific Gas and Electric Company's (PG&E) Lockeford Substation and the Electric System's Industrial Substation. The project consists of a double -circuit 230 kV line from the PG&E Lockeford Substation to a new 230/60 kV substation to be built by the City. The estimated in-service date is 2023. The cost to the Electric System is currently estimated to be approximately $30 million, which the City expects to be funded through the issuance of 26 additional Parity Obligations. The project is anticipated to realize a cost savings to the Electric System of approximately $4 million annually by eliminating the low voltage transmission access charge. Wholesale Power Trading For a number of years, the City has used its energy and transmission resources, together with NCPA's power scheduling capabilities, to buy and sell energy in the western North American market. The principal reason for wholesale power trading is to optimize the value of the utility's assets and cost-effectively serve its retail load. NCPA has an Energy Risk Management Policy and Energy Risk Management Regulations in place intended to set up the confines in which the trading operations undertaken on behalf of its members may occur. The objectives set forth in these documents include evaluating the creditworthiness of the counterparties, and monitoring and managing the aggregate credit exposure. The City also adopted a Risk Management and Compliance Program and established an internal Risk Oversight Committee in January 2006 to govern its wholesale market activities. Rates and Charges The City's fiscal year 2016-17 average rate per kWh for residential service was 17.8 cents. The City's fiscal year 2016-17 average rate for commercial and industrial service was 14.3 cents per kWh. The City's fiscal year 2017-18 average rate per kWh for residential service is projected to be 18.5 cents. The City's fiscal year 2017-18 average rate for commercial and industrial service is projected to be 14.9 cents per kWh. The following table presents a recent history of the City's material rate adjustments since 2009. The last base rate increase took effect July 1, 2017. ELECTRIC SYSTEM RATE CHANGES Effective Date Percent Change December 2017 July 2017 November 2016 September 2015 January 2015 July 2013 Elimination of Solar Surcharge Average 2% increase across all rate classes Electric Vehicle rate restructure replacing minimum charge with customer charge; aligning energy charges with residential rates City rate restructure replacing minimum charge with customer charge Residential rate restructure replacing minimum charge with customer charge; reduction to 3 energy tiers; Mobile home park rate restructure replacing minimum charge with customer charge and reducing pad discount; reduction to 3 energy tiers Extended Economic Development rates Average 5% increase across all rate classes Established Electric Vehicle and Industrial Equipment Charging Rates Source: City of Lodi. In addition, the City Council approved an ordinance on March 21, 2018 revising non-residential electric rates as it relates to power factor adjustments. The ordinance takes effect July 1, 2018. The change impacts only approximately 30 large commercial and industrial customers and represents less than a 1% increase to their annual electric charges. Finally, the City is scheduled to conduct a public hearing on April 4th to consider introducing an ordinance extending Economic Development Discounts for commercial and industrial customers. If approved, the ordinance would take effect July 1, 2018 and be available for 5 years. 27 The City Council reviews electric system rates periodically and makes adjustments as necessary. While rate increases are not currently anticipated in the near term, the City annually reviews its financial and capital planning forecasts to determine compliance with Council approved reserve targets. All customers pay rates in accordance with the standard rate tariffs published in the Lodi Municipal Code. The City implemented an Energy Cost Adjustment ("ECA") in August 2007. The purpose of the ECA is to recover market power costs due to the fluctuations in power market conditions and energy sales. The ECA is reviewed monthly and is either increased or decreased as market conditions and energy sales change. The historic, average ECA is listed below. ENERGY COST ADJUSTMENTS For Fiscal Years 2012-13 through 2016-17 Fiscal Year ECA ($/kWh) 2012-13 0.0051 2013-14 0.0082 2014-15 0.0057 2015-16 0.0064 2016-17 0.0056 Electric System Operations Since Industry Restructuring Since the deregulation of the California energy markets, the City has implemented revenue enhancements, cost containment measures and changes in operating procedures to help mitigate financial risks associated with changes in market power costs. These actions include the implementation of an Energy Cost Adjustment (ECA) for all customers. This rate action guarantees coverage of bulk power purchase costs. See "Rates and Charges" above. Consistent with the Risk Management and Compliance Program, the City has established guidelines which provide a time and price triggered tier approach to closing open positions as long as 5 years into the future. The table below illustrates this approach: Month Covered Position As % of Forecasted Load 0 designates current month >60th 60th 50th -Median 25th <25th 1-3 80-85% 85-90% 90% 90% 90% 3+ 80-85% 85% 85-90% 90% 90% 6+ 70-75% 75-80% ' 80-85% 85-90% 90% 9+ 60-65% 65-70% 70-75% 75-80% 80% 12+ months 60-65% 65-70% 70-75% 75-80% 80% The Risk Management and Compliance Program applies to all aspects of the City's wholesale procurement and sales activities, long-term contracting associated with energy supplies, and associated financing related to generation, transmission, transportation, storage, Renewable Energy Credits (RECs), Greenhouse Gas offsets, Resource Adequacy capacity, ancillary services and participation in Joint Powers Agencies. In October 2017 The City Council adopted a Strategic Plan for the Electric System (the "Strategic Plan"). The Strategic Plan identified strengths and weaknesses of the Electric System and will be used to guide staff in the development of action plans and recommendations presented to the City Council for approval. The Strategic Plan will be reviewed during each budget cycle and updated at least every five years. 28 The strengths identified included competitive rates, load and resource diversity, high reliability economy of scale through participation in NCPA, and customer satisfaction. Weaknesses included billing system limitations, complex rates, need for a succession plan, and aging infrastructure. The Strategic Plan also identified potential threats, including unfunded mandate, increased power costs, and cyber/physical threats. The Strategic Plan included strategic areas of focus to address potential weaknesses and threats, and also set forth a number of customer, technology, financial, reliability, workforce and accountability goals. Customers, Sales, Revenues and Demand The number of customers, kWh sales, revenues derived from sales by classification of service and peak demand during the five fiscal years 2012-13 through 2016-17, are listed below. ELECTRIC SYSTEM CUSTOMERS, SALES, REVENUES AND DEMAND" Fiscal Years Ended June 30, 2013 2014 2015 2016 2017 Number of Customers: Residential 22,369 22,547 22,355 22,459 22,870 Commercial 2,902 2,898 3,264 3,296 3,071 Industrial 39 38 40 44 41 Other 246 250 253 213 170 Total 25,556 25,733 25,912 26,012 26,152 Kilowatt Hour (kWh) Sales: Residential 151, 814,834 148,762,783 148,950,428 151,137,940 146,192,111 Commercial 140,733,500 146,176,148 149,380,413 150,522,357 149,882,241 Industrial 131,473,405 130,333,102 128,814,673 125,018,845 118,900,040 Other 11,800,726 12,022,160 11,635,397 10,567,193 10,436,182 Total 435,822,465 437,294,193 438,780,911 437,246,335 425,410,574 Revenues from Sale of Energy (2) Residential $25,377,978 $25,270,075 $25,165,194 $26,525,558 $26,021,916 Commercial 21,816,149 23,127,603 23,780,354 24,693,195 24,432,075 Industrial 14,173,951 14,381,296 14,418,921 14,469,390 13,852,860 Other 1,861,567 1,913,833 1,871,470 1,819,036 1,540,730 Total $63,229,645 $64,692,808 $65,235,939 $67,507,179 $65,847,581 Peak Demand (MW) 123.3 128.7 134.0 124.3 128.7 (1) Columns may not add to totals due to rounding. (2) Excludes revenues from California Energy Commission Tax. Sources: City of Lodi, comprehensive annual financial statements and Customer Information System reports. The Electric System currently has approximately 500 net energy metering systems within its service territory, totaling 3.8 megawatts of combined capacity. The City does not permit net energy metering aggregation (NEMA) within the Electric System's service territory. Largest Customers The table below shows the type of business of each of the top ten customers of the Electric System by energy sales. 29 30 Top Ten Customers Fiscal Year ending June 30, 2017 Business Tyne Revenue % of Total Food/Beverage $ 3,878,944 5.9% Education 2,756,923 4.2 Government 2,739,567 4.2 Plastics Pipe 2,489,317 3.8 Healthcare 2,389,087 3.6 Canning 2,353,681 3.6 Industrial Instruments 1,781,742 2.7 Grocery Store 1,336,611 2.0 Plastics Film/Sheet 1,218,287 1.9 Manufacturing 1,085,140 1.6 Total Top Ten $ 22,029,305 33.5% Source: City of Lodi. Joint Powers Agency Obligations The following table shows the City's participation and share of debt service obligation (without giving effect to any "step up" provisions) for each of such joint powers agency projects in which it participates. Such agreements are on a "take -or -pay" basis and are payable as Maintenance and Operation Costs of the Electric System. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS — Take - or -Pay Obligations." Certain of these agreements contain "step up" provisions obligating the City to pay a share of the obligations of a defaulting participant. ELECTRIC SYSTEM OUTSTANDING DEBT OF JOINT POWERS AGENCIES (Dollar Amounts in Millions) (As of June 30, 2017) Lodi's Share of Outstanding Lodi's Outstanding Debt"/ Participation(2) Debt") NCPA Geothermal Project Three $ 32.8 10.28% $ 3.4 Hydroelectric Project 343.8 10.60(3) 36.4 Capital Facilities Project 37.4 39.50 14.8 Lodi Energy Center, Issue One 233.4 17.03 39.7 TOTAL 647.4 100.00% 94.3 (t) Source: NCPA. Outstanding debt does not include unamortized premium/discount. Excludes the City's participation share of TANC COTP entitlement which has been assigned to other TANC members. See "Joint Powers Agency Resources — TANC California -Oregon Transmission Project." (2) Participation obligation is subject to increase upon default of another participant. Such increase shall not exceed, without the written consent of a non -defaulting participant, an accumulated maximum of 25% of such non - defaulting participant's original participation. (3) The City's actual payments represent approximately 10.64% of outstanding debt service as a result of credit to non -participating members with respect to portion of debt obligation. Source: City of Lodi. 31 The City estimates its payment obligations for debt service on its joint powers agency debt obligations aggregated approximately $7.65 million for the fiscal year ended June 30, 2017 and will aggregate approximately $7.99 million for the fiscal year ending June 30, 2018. It should be noted that these amounts do not include any COTP amount as the City's share of the debt was laid off effective July 1, 2014. A portion of the joint powers agency debt obligations are variable rate debt, liquidity support for which is provided through liquidity arrangements with banks. Unreimbursed draws under liquidity arrangements supporting joint powers agency variable rate debt obligations bear interest at a maximum rate substantially in excess of the current interest rates on such obligations. Moreover, in certain circumstances, the failure to reimburse draws on the liquidity agreements may result in the acceleration of scheduled payment of the principal of such variable rate joint powers agency obligations. In connection with certain of such joint power agency obligations, the respective joint powers agency has entered into interest rate swap agreements relating thereto for the purposes of substantially fixing the interest cost with respect thereto. There is no guarantee that the floating rate payable to the respective joint powers agency pursuant to each of the interest rate swap agreements relating thereto will match the variable interest rate on the associated variable rate joint powers agency debt obligations to which the respective interest rate swap agreement relates at all times or at any time. Under certain circumstances, the swap providers may be obligated to make payments to the applicable joint powers agency under their respective interest rate swap agreement that is less than the interest due on the associated variable rate joint powers agency debt obligations to which such interest rate swap agreement relates. In such event, such insufficiency will be payable as a debt service obligation from the obligated joint powers agency members (a corresponding amount of which proportionate to its debt service obligations to such joint powers agency could be due from the City). In addition, under certain circumstances, each of the swap agreements is subject to early termination, in which event the joint powers agency could be obligated to make a substantial payment to the applicable swap provider (a corresponding amount of which proportionate to its debt service obligations to such joint powers agency could be due from the City). For a description of the "take -or pay" nature of City's obligations with respect to the foregoing, see "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS -Take -or -Pay Obligations." Significant Accounting Policies The City's most recent CAFR for the fiscal year ended June 30, 2017 was audited by Macias, Gini & O'Connell, LLP, Sacramento, California, in accordance with generally accepted auditing standards, and contains opinions that the financial statements present fairly the financial position of the various funds maintained by the City. The reports include certain notes to the financial statements which may not be fully described below. Such notes constitute an integral part of the audited financial statements. Copies of these reports are available on request from the City of Lodi, Finance Department, 310 West Elm Street, Lodi, California 95240. Governmental accounting systems are organized and operated on a fund basis. A fund is defined as an independent fiscal and accounting entity with a self balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein. Funds are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. The electric system is accounted for as an enterprise fund. Enterprise funds are used to account for operations (i) that are financed and operated in a manner similar to private business enterprises (where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges) or (ii) where the governing body has decided that periodic determination of revenues earned, expenses incurred and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. The accounting policies of the City conform to generally accepted accounting principles (GAAP) as applicable to governments. 32 Condensed Operating Results The following table sets forth summaries of operating results of the Electric System for the five fiscal years 2012-13 through 2016-17. The information for the fiscal years ended June 30, 2013 through June 30, 2017 was prepared by the City on the basis of its audited financial statements for such years. ELECTRIC SYSTEM SUMMARY OF OPERATING RESULTS AND SELECTED BALANCE SHEET INFORMATION(1) ($ in 000s) OPERATING REVENUES: Rate Revenue ECA Revenue Other Revenue Total Operating Revenues Fiscal Year ended June 30, 2013 2014 2015 2016 $ 61,888 $ 1,341 745 2017 61,837 $ 63,370 $ 65,265 $ 64,114 2,856 1,867 2,242 1,734 2,451 1,895 2,933 1,967 63,974 $ 67,144 $ 67,132 $ 70,440 $ 67,815 OPERATING EXPENSES: Purchased Power $ 39,191 $ Non -Power Costs(2) 12,018 37,303 $ 38,512 $ 37,788 $ 35,650 13,046 13,604 13,417 16,609 Total Operating Expenses $ 51,209 $ 50,349 $ 52,116 51,205 $ 52,259 NET REVENUE AVAILABLE FOR DEBT SERVICE $12,765 Debt Service Debt Service Coverage Ratio(') Remaining Revenue After Debt Service OTHER REVENUES (EXPENSES): Greenhouse gas allowance Payments in Lieu of Taxes Net Cash Flow Before Capital Expenditure ENDING RESERVES(3) (2) (3) $16,795 $15,016 $19,235 $15,556 $8,414 $8,356 $8,318 $8,289 $5,288 1.52 2.01 1.81 2.32 2.94 $4,351 $8,439 $6,698 $10,946 $10,268 2,018 453 2,323 1,571 2,370 (6,977) (6,977) (7,033) (7,082) (7,131) $(608) $1,915 $1,988 $5,435 $5,507 $26,642 Figures shown are calculated in accordance with the documents pursuant to which the City's outstanding electric system revenue obligations were issued, which may or may not be on the same basis as Generally Accepted Accounting Principles. See "Indebtedness; Joint Powers Agency Obligations." Non -power costs include costs of services provided by other departments and does not include depreciation and amortization expense. Includes reserve funds held locally and available at NCPA. The City used a portion of these funds to pay debt service with respect to the Refunded Bonds which reduced the balance as of such date to approximately $22.7 million. Source: City of Lodi. 33 Projected Operating Results The estimated projected operating results for the Electric System for Fiscal Year 2017-18 through Fiscal Year 2021-22 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 Electric System based upon the City's 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 City, 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. Beginning Reserves(t) Operating Revenues: Rate Revenue ECA Revenue Other Revenue(2) Total Operating Revenues Operating Expenses: Purchased Power Non -Power Costs(3) Total Operating Expenses Net Revenue Available for Debt Service Debt Service 2008 COPs 2018 Refunding Bonds Total Debt Service Debt Service Coverage Ratio Remaining Revenue After Debt Service Other Revenues (Expenses): Greenhouse Gas Allowance Impact Fees Payment in Lieu of Taxes PERS Stabilization Contribution Net Cash Flow Before Capital Expenditures Capital Funded from Rates 17/18 18/19 Est. Budget $ 26,642,227 $ 63,937,970 5,445,500 3,146,090 $ 72,529,560 $ 41,377,460 15,892.170 $ 57,269,630 $ 15,259,930 $ 5,297,840 $ ,297,840 2.88 $ 9,962,090 $ 769,500 $ 143,470 $ (7,158,850) $ (540,516) $ 3,175,694 $ 27,191,421 $ 65,160,780 4,547,370 2,696,450 $ 72,404,600 19/20 20/21 21/22 Forecast Forecast Forecast $ 25,278,669 $ 26,019,752 $ 25,592,301 $ 65,486,584 5,866,899 $ 2,523,000 $ 73,876,483 $ 65,814,017 6,700,084 $ 2,513,000 $ 75,027,101 $ 66,143,087 7,530,049 $ 2,883,000 $ 76,556,136 $ 40,699,940 $ 42,200,234 $ 43,215,085 $ 44,227,626 17,675,780 18,024.871 18,490,635 18,944,202 $ 58,375,720 $ 60,225,105 $ 61,705,720 $ 63,171,827 $ 14,028,880 $ 13,651,378 $ 13,321,381 $ 13,384,309 $ 3,978,938 $ - 1,486,804 $ 3,849,450 $ 5,465,742 $ 3,849,450 2.57 3.55 $ $ 4,285,900 $ 4,285,900 3.11 $ 4,269.250 $ 4,269,250 3.14 $ 8,563,138 $ 9,801,928 $ 9,035,481 $ 9,115,059 $ 781,670 $ 178,820 $ (7,197,380) $ $ 2,326,248 $ 796,916 $ 100,000 $ (7,247,762) $ $ 3,451,083 $ 645,564 $ 100,000 $ (7,298,496) $ $ 2,482,549 5 91,801 $ 100,000 $ (7,349,585) $ 1,957,274 $ 2,626,500 $ 4,239,000 $ 2,710,000 $ 2,910,000 $ 3,820,000 Ending Reserves: $ 27,191,421 $ 25,278,669 $ 26,019,752 $ 25,592,301 $ 23,729,575 Note: Assumes no rate adjustments (I) Includes local cash and cash held at NCPA in General Operating Reserve (GOR) (2) (3) Includes Greenhouse Gas Allowance revenue estimated to pay eligible Operating Expenses Includes loan repayment for LED Streetlight Project 34 RATE REGULATION The City sets rates, fees and charges for electric service. The authority of the City to impose and collect rates and charges for electric power and energy sold and delivered is not subject to the general regulatory jurisdiction of the California Public Utilities Commission (the "CPUC"), and currently neither the CPUC nor any other regulatory authority of the State of California nor FERC approves such rates and charges. It is possible that future legislative and/or regulatory changes could subject the rates and/or service area of the City to the jurisdiction of the CPUC or to other limitations or requirements. See also "CONSTITUTIONAL LIMITATIONS ON TAXES AND FEES" for a discussion of certain voter -approved constitutional measures affecting the imposition of fees and charges by governmental agencies in the State. FERC potentially could assert jurisdiction over rates of licensees of hydroelectric projects and customers of such licensees under Part I of the Federal Power Act, although it as a practical matter has not exercised or sought to exercise such jurisdiction to modify rates that would legitimately be charged. Even if it did assert such jurisdiction, the City's hydroelectric resources currently constitute less than 10% of total City power resources. Under sections 210, 211, 211A, and 212 of the Federal Power Act, FERC has the authority, under certain circumstances and pursuant to certain procedures, to order certain utilities (municipal, distribution cooperative or otherwise) to provide transmission access to others at FERC -approved rates. See "OTHER FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY." The CEC is authorized to evaluate rate policies for electric energy as related to the goals of the Energy Resources Conservation and Development Act and to make recommendations to the Governor, the Legislature and publicly owned electric utilities. FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY The following regulatory programs affect the Electric System and the electric utility industry and should be considered when evaluating the Electric System and considering an investment in the 2018 Bonds. The City cannot predict at this time whether any additional legislation or rules will be enacted which will affect the Electric System's operations, and if such laws or rules are enacted, what the costs to the Electric System might be in the future because of such action. California Climate Change Policy Developments State regulatory agencies such as the California Air Resources Board ("CARB") and the CEC are pursuing a number of regulatory programs designed to reduce greenhouse gas ("GHG") emissions and encourage or mandate renewable energy generation. The following is a summary of certain programs. See also "Environmental Regulation and Permitting Factors" below. GHG Regulations. In September 2006, then -Governor Schwarzenegger signed into law the California Global Warming Solutions Act of 2006 or AB 32 (the "Global Warming Solutions Act"). This law requires a cut in GHG emissions from within the State by 2020 in order to reduce such emissions back to 1990 levels, ,which represents a reduction of approximately 25% Statewide. In September 2016, Governor Brown signed into law an amendment to the Global Warming Solutions Act, or SB 32, that requires a cut in GHG emissions from within the State by 2030 in order to reduce such emissions to 40% below 1990 levels. CARB implemented the Global Warming Solutions Act through regulations (the "Cap -and -Trade Regulations") that imposed aggregate emissions limitations on the electricity generation industry in California and allocates the aggregate emissions limit through the distribution of allowances, or emission credits. 35 The Cap -and -Trade Regulations require all regulated entities to obtain and submit to CARB compliance instruments (allowances and/or offsets) with respect to GHG emissions relating to its State generation activities, as well as for imported electricity from dedicated out-of-state resources. In addition, NCPA may indirectly bear compliance costs for independent generators that must purchase allowances for their generation. The City receives administrative allocations of allowances for some of their expected GHG emissions. Entities that emit GHGs at levels above those for which they receive administrative allocations, if any, must purchase the additional allowances they require at the CARB auctions or from other covered entities with surplus allowances. In July 2017, CARB adopted amendments to the Cap -and -Trade Regulations, which included revised allowance allocations to electrical distribution utilities from 2021 to 2030. The City is expected to receive more than $20 million in proceeds from the sale of these allowances, which will substantially minimize the impact from CARB's compliance requirements. In July 2017, CARB issued Board Resolution 17-21, which directs CARB staff to consider requiring all electric distribution utilities to consign all administratively allocated allowances to auction. Currently, the investor-owned utilities are required to consign their allowances to CARB's auctions, as well as Publicly - owned utilities ("POUs") whose generation accesses the California Independent System Operator ("ISO") Balancing Authority. POUs served by non -ISO Balancing Authorities have the option of placing their allowances to their compliance account to cover emissions from their generating stations and/or consigning a portion of allowances to CARB's auctions. In July 2017, Governor Brown signed into law AB 398 to extend the state's Cap -and -Trade Regulation from 2021 to 2030. The bill cleared both houses with a 2/3 supermajority vote, which protects the legislation from certain legal challenges. Under AB 398, CARB is directed to address the following: establish a price ceiling, offer nontradeable allowances at two price containment points below the price ceiling, transfer current vintages allowances unsold for more than 24 months to the allowance price containment reserve, evaluate and address allowance over allocation concerns, set industry assistance factors for allowance allocation, and establish allowance banking rules. AB 398 was passed in conjunction with two companion bills: AB 617, which strengthens the monitoring of criteria air pollutants and toxic air contaminants in local communities, and ACA 1, which establishes the Greenhouse Gas Reduction Reserve Fund. CARB expects to initiate a public rulemaking process in early 2018 to amend the Cap -and -Trade Regulation to reflect the requirements of AB 398. GHG Emissions Performance Standard and Financial Commitment Limits. Pursuant to SB 1368 (Chapter 598, Statutes of 2006), the CEC adopted a GHG emissions performance standard ("EPS") for electric generating facilities of 1,100 pounds of CO2 per MWh for "covered procurements" by POUs. SB 1368 also prohibits POUs from making any "long-term financial commitment" in connection with "baseload generation" that does not satisfy the EPS. Generally, a "long term financial commitment" is any new or renewed power purchase agreement with a term of five years or more, the purchase of an interest in a new power plant or any investment, other than routine maintenance, in an existing power plant that extends the life of the plant by more than five years or results in an increase in its rated capacity. "Baseload generation" means a power plant that is intended to operate at an annualized capacity factor of 60 percent or more. 2030 GHG Emissions Targets. SB 350 requires CARB, in consultation with the CPUC and the CEC, to establish 2030 GHG emission targets for each electric utility in the state. CARB will establish a process for setting such targets in early 2018. At present, these targets are non-binding, and primarily intended to help the state measure progress toward the 2030 statewide goal outlined in SB 32. The targets, however, are expected to be an input to the development of the Integrated Resource Plans that are required of the State's 16 largest POUs, which include the four largest NCPA member systems (Santa Clara, Roseville, Redding, and Palo Alto). 36 Energy Procurement and Efficiency Reporting. SB 1037, signed by then Governor Schwarzenegger in September 2005, requires that each POU, including the Project Participants, prior to procuring new energy generation resources, first acquire all available energy efficiency, demand reduction, and renewable resources that are cost effective, reliable and feasible. SB 1037 also requires each POU to report annually to its customers and to the CEC its investment in energy efficiency and demand reduction programs. The City is in compliance with such reporting requirements. Further, Assembly Bill 2021 ("AB 2021"), signed by then Governor Schwarzenegger on September 29, 2006, requires that POUs establish, report, and explain the basis of the annual energy efficiency and demand reduction targets by June 1, 2007 and every three years thereafter for a ten-year horizon. Assembly Bill 2227 extended the reporting timeframe from three to four years. Pursuant to the foregoing provisions the City set a total target of 14,965 megawatt hours of electric energy savings from 2018 to 2027, or an average annual target of 0.34 percent of total projected energy sales during this period. The information obtained from the POUs is being used by the CEC to present progress made by the State to double energy efficiency savings in electricity and natural gas final end uses by 2030, to the extent doing so is cost effective, feasible, and does not adversely impact public health and safety, as prescribed in SB 350. California Renewable Portfolio Standard. California's legislature and executive branch have been active in promoting increasingly stringent renewable energy procurement requirements since 2002. Early efforts established a standard of 20% of renewable electricity generation by 2017. Since then, both legislative and executive branch initiatives have raised that standard in multiple phases. On April 12, 2011, Governor Brown signed into law the California Renewable Energy Resources Act, or SBX 1-2. SBX 1-2 established procurement targets for three compliance periods to be implemented by the procurement plan: 20% of the utility's retail sales were to be procured from eligible renewable energy resources by December 1, 2013; 25% by December 31, 2016; and 33% by December 31, 2020. In October 2015, Governor Brown signed into law SB 350, which requires the City to make reasonable progress each year to ensure it achieves 40% of retail sales from eligible renewable energy resources by December 31, 2024, 45% of retail sales from eligible renewable energy resources by December 31, 2027, and 50% of retail sales from eligible renewable energy resources by December 31, 2030. Renewable Energy Policy Development. The State Legislature is considering the development of a Clean Energy Standard for electric utilities, which will require California to meet 100% of its procurement requirements with zero carbon resources by 2045. SB 100 is the vehicle for this effort and will be debated further during the 2018 legislative session. The outcome could have a material impact on the Electric System operations. Environmental Regulation and Permitting Factors General. Numerous environmental laws and regulations affect the Electric System's facilities and operations for which the City is a project participant. The City monitors its compliance with laws and regulations and reviews its remediation obligations on an ongoing basis. The following topics highlight some of the major environmental compliance issues affecting the Electric System: Regulatory Actions Under the Clean Air Act. The United States Environmental Protection Agency (the "EPA") regulates GHG emissions under existing law by imposing monitoring and reporting requirements, and through its permitting programs. Like other air pollutants, GHGs are regulated under the Clean Air Act through the Prevention of Significant Deterioration ("PSD") Permit Program and the Title V Permit Program. A PSD permit is required before commencement of construction of new major stationary sources or major modifications of a major stationary source and requires best available control technologies (`SACT") to control emissions at a facility. Title V permits are operating permits for major sources that consolidate all Clean Air Act requirements (arising, for example, under the Acid Rain, New Source Performance Standards, 37 National Emission Standards for Hazardous Air Pollutants, and/or PSD programs) into a single document and the permit process provides for review of the documents by the EPA, state agencies and the public. GHGs from major natural gas-fired facilities are regulated under both permitting programs through performance standards imposing efficiency and emissions standards. On October 23, 2015, the EPA published the Clean Power Plan and final regulations for (1) carbon pollution standards for new, modified, and reconstructed power plans, and (2) carbon pollution emission guidelines for existing electricity utility generating units. The total national emissions reduction goal under the Clean Power Plan targets an average of a 32 percent reduction from 2005 levels by 2030, with incremental interim goals for the years from 2022 through 2029. The Clean Power Plan allows states multiple options for measuring reductions and establishes different reduction goals depending upon the regulatory program set forth in the state plan. The Clean Power Plan is being challenged in the United States Circuit Court of Appeals for the District of Columbia. The United States Supreme Court stayed implementation of the Clean Power Plan on February 9, 2016 for a period of time until the D.C. Circuit renders a decision and the Supreme Court concludes any proceedings brought before it. Due to the stay, states were not required to submit initial plans by the original September 2016 deadline. The D.C. Circuit has continued to hold the case in abeyance and has been requiring EPA to submit 30 -day status updates. On October 16, 2017, the Federal Register published EPA's proposal to repeal the Clean Power Plan, under the premise that it exceeds EPA's statutory authority under Section III of the Clean Air Act. On December 28, 2017, the Federal Register published an Advanced Notice of Proposed Rulemaking to consider proposing a new GHG emission limit rule from existing generating units. Under the new version of the proposed rule, EPA will have to determine whether to set a common efficiency standard for the coal fleet or write guidance for states to set their own standards for individual plants based on age and technology. If the effort moves down this path, the City would likely be unaffected by this proceeding since its focus is on coal. Regulatory Impact on the California Energy Market Any electricity sales or purchases the City (or NCPA on behalf of the City) makes in the wholesale energy markets operated by the ISO are subject to the ISO tariff, which is a FERC jurisdictional tariff. ISO's tariff includes rules governing how sellers may bid electricity (i.e., offer for sale) into the energy markets and rules governing market power mitigation of sellers. ISO regularly proposes changes to its tariff, subject to FERC approval. Additionally, FERC can, and does, order changes to ISO's tariff if FERC (on its own initiative or prompted by a complaint) determines that ISO's tariff is unjust, unreasonable, or unduly discriminatory. Such regulatory changes can impact prices for electricity and capacity. During portions of 2000 and 2001, shortly after ISO's energy markets were first established, wholesale electricity prices were highly volatile and subject to market manipulation. That market dysfunction resulted in deterioration of credit ratings of many market participants and the bankruptcy of Pacific Gas & Electric Company. ISO's energy markets have since been redesigned, and Congress has established mechanisms for policing wholesale markets. Price volatility has since decreased compared to the 2000-2001 period. In addition to regulatory changes, electricity prices in the State depend on a variety of factors that affect the supply and demand for electric energy in the western United States. These factors include, but are not limited to, the adequacy of generation resources to meet peak demands, the availability and cost of renewable energy, the impact of climate and other clean energy related legislation and regulations, fuel costs and availability, weather effects on customer demand, transmission congestion, the strength of the economy in the State and surrounding states and levels of hydroelectric generation within the region (including the Pacific Northwest). 38 The City is unable to predict future reforms to the electric utility industry or the impact on such entities of recent reforms and proposals. ISO Markets The ISO markets are subject to continued change in response to FERC orders, the increased integration of intermittent renewable resources, changing environmental constraints, the ongoing efforts to combat market manipulation and evolving reliability requirements. California ISO Tariff changes related to these and other issues are currently under discussion in California ISO stakeholder processes and in ongoing FERC proceedings. In most cases, these proposals are not sufficiently final in order to determine their likely impact on the Electric System. However, the following issues may have significant impacts on the Electric System or electric utilities generally: Increased Integration of Renewables. As part of the effort to integrate increased levels of intermittent renewable resources into the grid, the ISO has proposed an array of changes to existing markets and to the resource adequacy structure that assures that sufficient resources are available to the markets. These proposals could affect the value of energy sold and purchases in the wholesale markets. Resource Adequacy Requirements. Resource adequacy requirements apply to the Electric System to ensure that market participants have contracted for sufficient amounts of the right types of capacity to be available in the markets. To the extent that a load serving entity ("LSE") fails to procure sufficient capacity resources to meet its loads, it is subject to.payment of ISO procurement costs of replacement capacity. To the extent that a shortfall cannot be attributed to a specific LSE, the costs will be spread as part of market uplift charges. These risks apply in the same manner to all LSEs. Due to the increased integration of renewables, discussed above, the ISO is contemplating what could be significant changes to the resource adequacy framework, with the potential for impacts on market participant costs. It is still too early to assess the potential impacts on the City. Although it does not appear that ISO is considering proposing a centralized capacity market at this time, proposals from others are occasionally made. Transmission Access Charge Review. The ISO has undertaken a review of its Transmission Access Charge, with a view to potentially changing the methodology used for allocating transmission costs. Although it is too early to predict what the impacts might be on market participants, any change of this nature has the potential to affect the Electric System. Extension of Day Ahead Markets to Energy Imbalance Market. ISO has announced its intention to propose changes to the Energy Imbalance Market (`BIM") structure that would extend the ISO's day ahead market into the EIM, rather than leaving it as only a real time market. While these proposals have not yet been published, much less analyzed, such a change has the impact to affect prices paid in the ISO markets. Changing Laws and Requirements On both the state and federal levels, legislation is introduced frequently that would have the effect of further regulating environmental impacts relating to energy, including the generation of energy using conventional and unconventional technologies. Issues raised in recent legislative proposals have included implementation of energy efficiency and renewable energy standards, addressing transmission planning, siting and cost allocation to support the construction of renewable energy facilities, cyber -security legislation that would allow FERC to issue interim measures to protect critical electric infrastructure, a federal cap -and -trade program to reduce GHG emissions, and renewable energy incentives that could provide grants and credits to municipal utilities to invest in renewable energy infrastructure. It is possible that the 115th Congress (2017-18) and the California Legislature (2017-18 session) will pass legislation addressing similar issues. 39 The City is unable to predict at this time whether any of these or other legislative proposals will be enacted into law and, if so, the impact they may have on the operations and finances of such entities or on the electric utility industry in general. Other Factors The electric utility industry in general has been, or in the future may be, affected by a number of other factors which could impact the financial condition and competitiveness of many electric utilities and the level of utilization of generating and transmission facilities. In addition to the factors discussed above, such factors include, among others, (a) effects of compliance with rapidly changing environmental, safety, licensing, regulatory and legislative requirements other than those described above (including those affecting nuclear power plants or potential new energy storage requirements), (b) changes resulting from conservation and demand-side management programs on the timing and use of electric energy, (c) effects on the integration and reliability of power supply from the increased usage of renewables, (d) changes resulting from a national energy policy, (e) effects of competition from other electric utilities (including increased competition resulting from a movement to allow direct access or from mergers, acquisitions, and "strategic alliances" of competing electric and natural gas utilities and from competitors transmitting less expensive electricity from much greater distances over an interconnected system) and new methods of, and new facilities for, producing low-cost electricity, (f) the repeal of certain federal statutes that would have the effect of increasing the competitiveness of many IOUs, (g) increased competition from independent power producers and marketers, brokers and federal power marketing agencies, (h) "self -generation" or "distributed generation" (such as microturbines, fuel cells and solar installations) by industrial and commercial customers and others, (i) issues relating to the ability to issue tax-exempt obligations, including severe restrictions on the ability to sell to nongovernmental entities electricity from generation projects and transmission service from transmission line projects financed with outstanding tax-exempt obligations, (j) effects of inflation on the operating and maintenance costs of an electric utility and its facilities, (k) changes from projected future load requirements, (1) increases in costs and uncertain availability of capital, (m) shifts in the availability and relative costs of different fuels (including the cost of natural gas and nuclear fuel), (n) sudden and dramatic increases in the price of energy purchased on the open market that may occur in times of high peak demand in an area of the country experiencing such high peak demand, such as has occurred in the past in California, (o) inadequate risk management procedures and practices with respect to, among other things, the purchase and sale of energy and transmission capacity, (p) other legislative changes, voter initiatives, referenda and statewide propositions, (q) effects of the changes in the economy, population and demand of customers within a utility's service area, (r) effects of possible manipulation of the electric markets, (s) acts of terrorism or cyber -terrorism, (t) natural disasters or other physical calamities, including, but not limited to, earthquakes and floods and (u) changes to the climate. Any of these factors (as well as other factors) could have an adverse effect on the financial condition of any given electric utility and likely will affect individual utilities in different ways. The City is unable to predict what impact such factors will have on the business operations and financial condition of the Electric System, but the impact could be significant. This Official Statement includes a brief discussion of certain of these factors. This discussion does not purport to be comprehensive or definitive, and these matters are subject to change subsequent to the date hereof. Extensive information on the electric utility industry is available from the legislative and regulatory bodies and other sources in the public domain, and potential purchasers of the 2018 Bonds should obtain and review such information. THE AUTHORITY The Authority was created in July 2010 by a joint exercise of powers agreement, which was entered into between the City and Industrial Development Authority of the City ("IDA"), pursuant to the provisions of the Act. Under the Joint Exercise of Powers Agreement, the Authority is a public entity, separate from the City and the IDA. The debts, liabilities and obligations of the Authority are not debts, liabilities and obligations of either the City or the IDA. The Authority is administered by a governing board consisting of the members of the Lodi City Council. 40 RISK FACTORS The following factors, which represent certain risk factors, should be considered along with all other information in this Official Statement by potential investors in evaluating the 2018 Bonds. The following is not intended to be an exhaustive list and there can be no assurance made that other risk factors do not currently exist or will not become evident at any future time. Rate Covenant Not a Guarantee The ability of the City to make the 2018 Installment Payments and thereby pay the principal of and interest on the 2018 Bonds depends on the ability of the City to generate Net Revenues in the levels required by the 2018 Installment Purchase Agreement. Although, as more particularly described herein, the City expects that sufficient revenues will be generated through the imposition and collection of impact fees, service fees and other Revenues described herein, there is no assurance that such imposition of impact fees, service fees, or other Revenues will result in the generation of Net Revenues in the amounts required by the 2018 Installment Purchase Agreement. As a result, the City's covenant does not constitute a guarantee that sufficient Net Revenues will be available to make debt service payments on the 2018 Bonds. Statutory and Regulatory Impact Laws and regulations governing the operation of the Electric System are enacted and promulgated by government agencies on the federal, state and local levels. Compliance with these laws and regulations may be extremely costly, and, as more stringent standards are developed to protect the environment, these costs will likely increase. See "FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY." Claims against the City for violations of regulations with respect to its facilities and services could be significant. Such claims are payable from assets of the Electric System or from other legally available sources. Although the City has covenanted in the 2018 Installment Purchase Agreement to fix, prescribe and collect rates, fees and charges during each Fiscal Year at specified levels, no assurance can be given that the cost of compliance with such laws and regulations will not materially adversely affect the ability of the City to generate Net Revenues in the amounts required by the 2018 Installment Purchase Agreement and to pay the 2018 Installment Payments. Certain potential increasing regulatory standards could materially increase the cost to the City of providing electric services. Earthquake, Flood or Other Natural Disasters The occurrence of an earthquake, flood or other natural disaster which resulted in the temporary or permanent closure of major components of the Electric System or resulted in significantly increased costs could materially adversely affect the ability of the City to operate the Electric System or to generate Net Revenues at the levels required by the 2018 Installment Purchase Agreement. Flood. Based on flood risk evaluations prepared by the Federal Emergency Management Agency (FEMA) for the City and San Joaquin County, effective October 19, 2009, flood hazards are a constraint to development only in two areas of the City: the area immediately adjacent to the Mokelumne River along the City's northern boundary, and the area around the White Slough Facility. These areas lie within Zone AE, meaning that they are subject to a 1% annual (100 -year) flood. Flooding depths in this area are generally greater than three feet. Most of the City lies within Zone X, which describes lands subject to the 0.2% annual (500 -year) flood zone or that lie within the 100 -year flood zone, but with flooding depths less than one foot. 41 No Reserve Account No debt service reserve account has been established with respect to the 2018 Bonds. The Authority and the City have reserved the right to establish debt service reserves for Parity Obligations. See "INTRODUCTION -No Reserve Account." Limited Recourse on Default Failure by the City to make the 2018 Installment Payments, when due, constitutes an event of default under the 2018 Installment Purchase Agreement and the Authority is permitted to pursue remedies at law or in equity to enforce the City's obligation to make the 2018 Installment Payments. [Although the Trustee, as assignee of the Authority, has the right to accelerate the total unpaid principal component of the 2018 Installment Payments, there is no assurance that the City will have sufficient Net Revenues to pay the principal component of the 2018 Installment Payments upon acceleration.] Effect of Bankruptcy In addition to the limitations on remedies contained in the 2018 Installment Purchase Agreement and the Indenture, the rights and obligations under the 2018 Bonds, the 2018 Installment Purchase Agreement and the Indenture may be subject to the following: the United States Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the Owners of the 2018 Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights and may otherwise have material adverse consequences. The opinion of Bond Counsel notes that the rights of the owners of the 2018 Bonds and the enforceability of the 2018 Bonds and the Indenture are limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally, and by equitable principles, whether considered at law or in equity. Loss of Tax Exemption The City has covenanted in the 2018 Installment Purchase Agreement, and the Authority has covenanted in the Indenture, that each will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from gross income of interest or the 2018 Bonds under Section 103 of the Internal Revenue Code of 1986. In the event either the City or the Authority fails to comply with the foregoing tax covenant, interest or the 2018 Bonds may be includable in the gross income of the Owners thereof for federal tax purposes retroactive to the date of issuance of the 2018 Bonds. See "TAX MATTERS". Secondary Market There can be no guarantee that there will be a secondary market for the 2018 Bonds or, if a secondary market exists, that any 2018 Bonds can be sold for any particular price. Prices of bond issues for which a market is being made will depend upon then -prevailing circumstances. Such prices could be substantially different from the original purchase price. No assurance can be given that the market price for the 2018 Bonds will not be affected by the introduction or enactment of any future legislation (including without limitation amendments to the Internal Revenue Code), or changes in interpretation of the Internal Revenue 42 Code, or any action of the Internal Revenue Service, including but not limited to the publication of proposed or final regulations, the issuance of rulings, the selection of the 2018 Bonds for audit examination, or the course or result of any Internal Revenue Service audit or examination of the 2018 Bonds or obligations that present similar tax issues as the 2018 Bonds. CONSTITUTIONAL LIMITATIONS ON TAXES AND FEES Proposition 62 A statutory initiative ("Proposition 62") was adopted by the voters voting in the State of California at the November 4, 1986 General Election which (1) requires that any tax for general governmental purposes imposed by local governmental entities be approved by resolution or ordinance adopted by two-thirds vote of the governmental agency's legislative body and by a majority of the electorate of the governmental entity, (2) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters within that jurisdiction, (3) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (4) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA, (5) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities and (6) requires that any tax imposed by a local governmental entity on or after March 1, 1985 be ratified by a majority vote of the electorate within two years of the adoption of the initiative or be terminated by November 15, 1988. Proposition 218 Proposition 218, a State ballot initiative known as the "Right to Vote on Taxes Act," was approved by the voters of the State of California on November 5, 1996. Proposition 218 added Articles XIIIC and XIIID to the State Constitution. Article XIIIC imposes a majority voter approval requirement on local governments (including the City) with respect to taxes for general purposes, and a two-thirds voter approval requirement with respect to taxes for special purposes. Article XIIID creates additional requirements for the imposition by most local governments of general taxes, special taxes, assessments and "property -related" fees and charges. Article XIIID explicitly exempts fees for the provision of electric service from the provisions of such article. Article XIIIC expressly extends the people's initiative power to the reduction or repeal of local taxes, assessments, and fees and charges imposed prior to its effective date (November 1996). The California Supreme Court held in Bighorn -Desert View Water Agency v. Verjil, 39 Ca1.4th 205 (2006) that, under Article XIIIC, local voters by initiative may reduce a public agency's water rates and delivery charges, as those are property -related fees or charges within the meaning of Article XIIID, and noted that the initiative power described in Article XIIIC may extend to a broader category of fees and charges than the property -related fees and charges governed by Article XIIID. Moreover, in the case of Bock v. City Council of Lompoc, 109 Cal.App.3d 43 (1980), the Court of Appeal determined that an electric rate ordinance was not subject to the same constitutional restrictions that are applied to the use of the initiative process for tax measures so as to render it an improper subject of the initiative process. Thus, electric service charges (which are expressly exempted from the provisions of Article XIIID) may be subject to the initiative provisions of Article XIIIC, thereby subjecting such fees and charges to reduction by the electorate. However, the City believes that even if the electric rates of the City are subject to the initiative power, the electorate of the City would be precluded from reducing electric rates and charges in a manner adversely affecting the payment of the 2018 Bonds by virtue of the "impairments clause" of the United States and California Constitutions. Proposition 26 The California electorate adopted Proposition 26 at the November 2, 2010 election, amending Article XIIIC of the California Constitution. Proposition 26 was designed to supplement tax limitations California voters adopted when they approved Proposition 13 in 1978 and Proposition 218 in 1996. Proposition 26 43 applies by its terms to any levy, charge or exaction imposed, increased or extended by a local government on or after November 3, 2010. Proposition 26 deems any such levy, charge or fee to be a "tax," requiring voter approval unless it comes within one of the listed exceptions or further exceptions recognized by the courts. Proposition 26 expressly excludes from its definition of a "tax," among other things, a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product. Proposition 26 is subject to interpretation by California courts. Other Initiatives Articles XIIIC and XIIID and Propositions 62 and 26 were adopted as measures that qualified for the ballot pursuant to California's initiative process. From time to time, including presently, other initiatives have been, and could be, proposed, and if qualified for the ballot and approved by voters, could affect the City's revenues or operations. Neither the nature and impact of these measures nor the likelihood of qualification for ballot or passage can be anticipated by the City. TAX MATTERS Federal Tax Status In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the 2018 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax, although, in the case of tax years beginning prior to January 1, 2018, for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest earned by a corporation prior to the end of its tax year in 2018 is taken into account in determining certain income and earnings. The opinions set forth in the preceding paragraph are subject to the condition that the Authority and the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Tax Code") relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the 2018 Bonds. The Authority and the City have made certain representations and covenants in order to comply with each such requirement. Inaccuracy of those representations, or failure to comply with certain of those covenants, may cause the inclusion of such interest in gross income for federal income tax purposes, which may be retroactive to the date of issuance of the 2018 Bonds. Tax Treatment of Original Issue Discount and Premium If the initial offering price to the public at which a 2018 Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes "original issue discount" for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public at which a 2018 Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes "original issue premium" for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium is disregarded. Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the 2018 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2018 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2018 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of 44 purchasers of the 2018 Bonds who purchase the 2018 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2018 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2018 Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such 2018 Bonds under federal individual alternative minimum taxes. Under the Tax Code, original issue premium is amortized on an annual basis over the term of the 2018 Bond (said term being the shorter of the 2018 Bond's maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the 2018 Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a 2018 Bond is amortized each year over the term to maturity of the 2018 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized 2018 Bond premium is not deductible for federal income tax purposes. Owners of premium 2018 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2018 Bonds. California Tax Status In the further opinion of Bond Counsel, interest on the 2018 Bonds is exempt from California personal income taxes. Other Tax Considerations Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2018 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2018 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment. The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 2018 Bonds, or as to the consequences of owning or receiving interest on the 2018 Bonds, as of any future date. Prospective purchasers of the 2018 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Owners of the 2018 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2018 Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2018 Bonds, the ownership, sale or disposition of the 2018 Bonds, or the amount, accrual or receipt of interest on the 2018 Bonds. LITIGATION To the knowledge of the City, there is no controversy or litigation of any nature now pending or threatened restraining or enjoining the execution and delivery of the 2018 Bonds, the Indenture, the 2018 Installment Purchase Agreement or in any way contesting or affecting the validity of the 2018 Bonds or any proceedings of the City or the Authority taken with respect to the execution and delivery thereof. 45 APPROVAL OF LEGALITY The 2018 Bonds are offered when, as and if issued and received by the Underwriter and subject to the approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters will be passed upon for the City and the Authority by the City Attorney. Certain legal matters will be passed upon for the City by its Disclosure Counsel, Stradling Yocca Carlson & Rauth, a Professional Corporation, Sacramento, California and for the Underwriter by Hawkins Delafield & Wood LLP, Sacramento, California. Payment of the fees and expenses of Bond Counsel and Underwriter's Counsel is contingent upon execution and delivery of the 2018 Bonds. FINANCIAL STATEMENTS Macias Gini & O'Connell LLP, Certified Public Accountants (the "Auditor"), audited the financial statements of the City for the Fiscal Year ended June 30, 2017. The Auditor's examination was made in accordance with generally accepted auditing standards and Governmental Auditing Standards, issued by the Comptroller General of the United States. See "APPENDIX B — Audited Financial Statements of the City for Fiscal Year Ended June 30, 2017." The City has not requested nor did the City obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post -audit review of the financial condition or operations of the City and has not participated in the preparation of, or reviewed, this Official Statement. RATINGS Moody's Investors Service and Fitch Ratings are expected to assign the 2018 Bonds the long-term ratings of "" and "," respectively. The ratings reflect only the respective views of the rating agencies, and any explanation of the significance of such ratings may be obtained only from such rating agencies. There is no assurance that the ratings will remain in effect for any given period of time or that they will not be revised downward or withdrawn entirely by such rating agencies, or either of them, if, in their respective judgments, circumstances so warrant. The City undertakes no responsibility to oppose any such revisions or withdrawal. Any downward revision or withdrawal of any rating may have an adverse effect on the market price of the 2018 Bonds. CONTINUING DISCLOSURE The City will covenant for the benefit of owners of the 2018 Bonds to provide certain financial information and operating data relating to the City by not later than 9 months after the end of each fiscal year of the City (currently June 30th), commencing with the report for the 2017-18 Fiscal Year (the "Annual Report"), and to provide notices of the occurrence of certain enumerated events. Such reports are required to be filed with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system ("EMMA"). The specific nature of the information to be contained in the Annual Report or the notices of enumerated events is described in "APPENDIX D— Form of Continuing Disclosure Agreement," attached to this Official Statement. These covenants have been made in order to assist the underwriter of the 2018 Bonds in complying with Securities Exchange Commission Rule 15c2 12(b)(5). The City has entered into a number of continuing disclosure undertakings in connection with City obligations, including obligations payable from the City's General Fund, as well as obligations payable from the revenues relating to the City's electric, wastewater and water utilities. During the past five years, the City has prepared continuing disclosure reports pursuant to these undertakings. For Fiscal Year 2015, the financial 46 and operating data to be filed as part of the City's continuing disclosure annual report in connection with certain of the City's obligations, including in connection with NCPA bonds and the City's direct electric system obligations, was not filed until approximately 9 to 14 days after the date required for certain of such filings. For Fiscal Year 2013, the City's annual continuing disclosure filing, when filed in January 2014, was approximately 27 days after the date required for one issue of the City Electric System obligations. The City's Fiscal Year 2013 and Fiscal Year 2015 annual reports when filed were also not properly associated on EMMA with the CUSIPs for all applicable issues of other City of Lodi obligations. In addition, in 2013 and 2014, on several occasions, the City failed to make "significant event" filings with respect to changes in the ratings of bond insurers of certain Electric System and other City of Lodi obligations, as well as upgrades of the underlying ratings. The City filed a self-report under the Securities and Exchange Commission's Municipalities Continuing Disclosure Cooperation ("MCDC") initiative regarding statements made in certain of the City's previous official statements concerning the City's compliance with its continuing disclosure requirements. [[The City has adopted a disclosure policy intended to assure future compliance with the City's continuing disclosure requirements. ]] MUNICIPAL ADVISOR Fieldman, Rolapp & Associates, Inc. (the "Municipal Advisor") has assisted the City with various matters relating to the planning, structuring and delivery of the 2018 Bonds. The Municipal Advisor is a financial advisory firm and is not engaged in the business of underwriting or distributing municipal securities or other public securities. The Municipal Advisor assumes no responsibility for the accuracy, completeness or fairness of this Official Statement. The Municipal Advisor will receive compensation from the City contingent upon the sale and delivery of the 2018 Bonds. UNDERWRITING The Underwriter has agreed, subject to certain conditions, to purchase the 2018 Bonds at a price of $ (consisting of the aggregate principal amount of the Series 2018 Bonds less an Underwriter's discount of $ and plus net original issue premium of $ ). The Purchase Contract for the 2018 Bonds provides that the Underwriter will purchase all the 2018 Bonds, if any are purchased. The 2018 Bonds may be offered and sold by the Underwriter to certain dealers and others at prices lower than the public offering price stated on the inside cover page of this Official Statement, and such public offering price may be changed, from time to time, by the Underwriter. The following paragraph has been provided by the Underwriter for inclusion in the Official Statement: J.P. Morgan Securities LLC ("JPMS"), one of the underwriters of the Series 2018 Bonds, has entered into negotiated dealer agreements (each, a "Dealer Agreement") with each of Charles Schwab & Co., Inc. ("CS&Co.") and LPL Financial LLC ("LPL") for the retail distribution of certain securities offerings at the original issue prices. Pursuant to each Dealer Agreement (if applicable to this transaction), each of CS&Co. and LPL will purchase Series 2018 Bonds from JPMS at the original issue price less a negotiated portion of the selling concession applicable to any Series 2018 Bonds that such firm sells. VERIFICATION OF MATHEMATICAL COMPUTATIONS Upon delivery of the 2018 Bonds, , independent certified public accountants, will deliver a report stating that the firm has verified the mathematical accuracy of certain computations relating to the adequacy of the amounts deposited pursuant to the Escrow Agreement to pay the applicable redemption price of and accrued interest on, the Refunded Certificates on their respective payment and redemption dates. 47 EXECUTION AND DELIVERY The execution and delivery of this Official Statement have been authorized by the Board of Directors of the Authority and the City Council of the City. LODI PUBLIC FINANCING AUTHORITY By: Executive Director CITY OF LODI By: City Manager 48 APPENDIX A CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION CONCERNING THE CITY OF LODI The City is located in the County of San Joaquin (the "County") between Stockton and Sacramento, and adjacent to U.S. Highway 99, approximately 90 miles east of San Francisco. The City was incorporated as a General Law City on December 6, 1906. The City operates under a City Council -Manager form of government and provides the following services: public safety (police, fire and graffiti abatement), public utilities services (electric, water and sewer), transportation services (streets, flood control and transit), leisure, cultural and social services (parks and recreation, library, and community center), and general government services (management, human resources administration, financial administration, building maintenance and equipment maintenance). A five-year history of assessed valuations in Lodi is as follows: CITY OF LODI ASSESSED VALUATIONS For Fiscal Years 2012-13 through 2016-17 (Dollar Amounts in Thousands) Net Fiscal Personal Less Assessed Year Land Improvements Property Total Exemptions Value 2012-13 $1,227,969 $3,445,328 $300,290 $4,973,587 $327,783 $4,645,804 2013-14 $1,364,401 $3,443,266 $321,741 $5,129,408 $324,439 $4,804,969 2014-15 $1,469,347 $3,610,391 $338,312 $5,418,050 $326,833 $5,091,217 2015-16 $1,601,581 $3,736,867 $309,861 $5,648,309 $331,562 $5,316,747 2016-17 $1,711,208 $3,854,604 $294,457 $5,860,269 $334,485 $5,525,784 Source: San Joaquin County Auditor -Controller's Office. A-1 The following chart indicates the growth in the population of the City of Lodi, the County of San Joaquin and the State of California since 1970. CITY OF LODI, COUNTY OF SAN JOAQUIN, STATE OF CALIFORNIA POPULATION ESTIMATES (1970-2010 as of April 1; 2011-2017 as of January 1) City of Lodi County of San Joaquin State of California 1970 28,691 291,073 19,971,069 1980 34,850 343,500 23,668,562 1990 51,900 477,700 29,760,021 2000 57,011 563,598 33,873,653 2010 62,134 685,306 37,253,956 2011 62,519 691,818 37,536,835 2012 62,678 698,412 37,881,357 2013 62,747 704,727 38,238,492 2014 62,922 712,046 38,572,211 2015 63,143 723,985 38,915,880 2016 63,396 735,677 39,189,035 2017 64,058 746,868 39,523,613 Source: U.S. Bureau of Census and California State Department of Finance. Employment. The following table contains certain information concerning employment in the City and State. CITY OF LODI UNEMPLOYMENT STATISTICS City of Lodi County of San State of Joaquin California 2008 7.80% 10.40% 7.30% 2009 11.40 14.90 11.20 2010 15.60 16.50 12.20 2011 15.30 16.20 11.70 2012 13.50 14.40 10.40 2013 11.60 12.30 8.90 2014 9.90 10.50 7.50 2015 8.30 8.90 6.20 2016 7.60 8.10 5.50 2017 6.76 7.20 4.80 2018* 7.10 7.05 4.55 * As of February 2018 Source: U.S. Bureau of Labor Statistics. Major Employers. There are several manufacturing plants in the community producing a wide variety of products: cereals, food mixes, wines, rubber products, steel framing and industrial shelving, foundry items, recreational vehicle components, electronic substrates, and plastic piping and injection molded products. In addition, Lodi has a number of small businesses located within the City. The main businesses in Lodi, however, are food processes and plastics. A-2 The largest employers in Lodi as of June 30, 2017 are as follows: Employer CITY OF LODI LARGEST EMPLOYERS Business Number of Employees Lodi Unified School District Education 3,026 Pacific Coast Producers Canning 1,630 Lodi Health Hospital Healthcare 1,384 Blue Shield Healthcare 858 Walmart Retail 487 TreeHouse Specialty Food 485 City of Lodi Government 393 Farmers & Merchants Bank Banking 335 Costco Retail 237 Target Retail 142 Source: City of Lodi. Building Permit Activity. The following table shows the value of building permits issued in the City between 2008 and 2015. CITY OF LODI BUILDING PERMIT VALUATION for Fiscal Years Ended June 30, 2011 through 2015 2011 2012 2013 2014 2015 Residential Valuation Single Family $1,204,695 $1,526,810 $4,402,870 $5,587,759 $10,483,842 Multifamily 0 0 0 0 0 TOTAL $1,204,695 $1,526,810 $4,402,870 $5,587,759 $10,483,842 New Dwelling Units Single Family Multiple Family TOTAL Source: City of Lodi. 8 6 17 21 37 0 0 0 0 0 8 6 17 21 37 Taxable Sales. The following table indicates taxable transactions in the City by type of business during the calendar years 2010 through 2014. A-3 CITY OF LODI TAXABLE TRANSACTIONS BY TYPE OF BUSINESS for Calendar Years 2012 through 2016 (in Thousands of Dollars) Retail and Food Services Motor Vehicle & Parts Dealers Home Furn. & Appliances Bldg. Mat. & Garden Equip. & Supplies Food & Beverage Stores Service Stations Apparel Stores General Merchandise Food Services & Drinking Places Other Retail Stores Retail and Food Services Total All Other Outlets TOTAL ALL OUTLETS Source: California State Board of Equalization. 2012 2013 2014 $ 90,980 12,645 67,512 45,769 103,454 21,495 187,708 85,677 50,300 $ 665,538 140 223 $ 805,762 $ 97,091 14,057 81,299 47,400 104,893 23,016 192,894 91,752 48,896 $ 701,339 169,983 2015 2016 $ 118,874 $ 142,283 $ 154,630 18,261 16,490 17,470 82,587 87,464 93,722 49,195 49,395 48,171 104,399 87,529 82,310 23,790 25,208 30,074 190,493 164,697 175,325 99,122 109,078 119,727 50,471 55.607 58,149 $ 737,192 $ 737,753 $ 779,583 174,489 172.135 168,05 $ 871,322 $ 911,681 $ 909,889 $ 947,638 Education. The Lodi Unified School District provides K-12 and special education programs. The area also is served by several private and parochial schools. The University of the Pacific, San Joaquin Delta Community College, California State University-Stanislaus/Turlock/Stockton Center, and the University of San Francisco satellite center are all within a 20 -minute drive of Lodi. The University of California -Davis, California State University -Sacramento and the University of Southern California satellite center are within an hour's drive from Lodi. Transportation. Lodi is served by Interstate highway 5 and State highways 12 and 99 and is located on the main line of the Union Pacific Railroad. Lodi has Amtrak passenger rail service and local, regional and national bus service. A deep -water seaport and airport with commercial passenger travel are located approximately 15 miles south. A-4 APPENDIX B AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2017 B-1 APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS C-1 APPENDIX D FORM OF OPINION OF BOND COUNSEL D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT E-1 CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Lodi, a municipal corporation (the "City") in connection with the issuance of the $ Lodi Public Financing Authority (the "Authority") 2018 Electric System Revenue Refunding Bonds (the "2018 Bonds"). The 2018 Bonds will be issued pursuant to an Indenture of Trust dated as of June 1, 2018 (the "Indenture") by and between the Authority and MUFG Union Bank, N.A., as trustee for the 2018 Bonds (the "Trustee"). In connection therewith the City covenants and agrees as follows: SECTION 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the 2018 Bonds and in order to assist the Participating Underwriter in complying with SEC (hereinafter defined) Rule 15c2 -12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth above and in the Trust Agreement, 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" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Beneficial Owner" shall mean any person which 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). "EMMA System" shall mean the MSRB's Electronic Municipal Market Access system, or such other electronic system designated by the MSRB. "Listed Event" shall mean any of the events listed in Section 5(a) and 5(b) of this Disclosure Certificate. "MSRB" means the Municipal Securities Rulemaking Board. "Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Effective July 1, 2010, the Repository approved by the Securities and Exchange Commission is the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access ("EMMA") site. "Rule" shall mean Rule 15c2 -12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time. "SEC" shall mean the United States Securities and Exchange Commission. "State" shall mean the State of California. "Participating Underwriter" shall mean the original Underwriter of the 2018 Bonds required to comply with the Rule in connection with offering of the 2018 Bonds. SECTION 3. Provision of Annual Reports. (a) The City shall, not later than the last day of the seventh month after the end of the City's Fiscal Year (presently June 30), commencing with the report for the 2017-18 Fiscal Year, provide to the Repository, in an electronic format and accompanied by identifying information all as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The 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; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the City's Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). (b) If the City is unable to provide to the Repository an Annual Report by the date required in subsection (a), the City shall send to the Municipal Securities Rulemaking Board and to the Repository a notice in substantially the form attached hereto as Exhibit A. SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or include by reference the following: (a) The audited financial statements of the City for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board; provided, that if the City'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) An annual updating (to reflect the most recently completed fiscal year) of the information of the type set forth in the following tables of the Official Statement for the 2018 Bonds, dated , 2018: 1. "Electric System Power Supply Resources" 2. "Electric System Customers, Sales, Revenues And Demand" 3. "Condensed Operating Results" Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to the MSRB. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the 2018 Bonds in a timely manner not more than ten (10) business days after the event: 2 1. Principal and interest payment delinquencies; 2. Unscheduled draws on debt service reserves reflecting financial difficulties; 3. Unscheduled draws on credit enhancements reflecting financial difficulties; 4. Substitution of credit or liquidity providers, or their failure to perform; 5. Issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB); 6. Tender offers; 7, Defeasances; 8. Rating changes; or 9. Bankruptcy, insolvency, receivership or similar event of the obligated person. Note: for the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the 2018 Bonds, if material: 1. Unless described in Section 5(a)(5), adverse tax opinions or other material notices or determinations by the Internal Revenue Service with respect to the tax status of the 2018 Bonds or other material events affecting the tax status of the 2018 Bonds; 2. Modifications to rights of Bond holders; 3. Optional, unscheduled or contingent Bonds calls; 4. Release, substitution, or sale of property securing repayment of the 2018 Bonds; 5. Non-payment related defaults; 3 6. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; or 7. Appointment of a successor or additional trustee or the change of name of a trustee. (c) Whenever the City obtains knowledge of the occurrence of a Listed Event described in subsection (b), the City shall determine if such event would be material under applicable federal securities laws. (d) If the City determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the City shall file a notice of such occurrence with EMMA in a timely manner not more than ten (10) business days after the event. SECTION 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate (a) upon the legal defeasance, prior redemption or payment in full of all of the 2018 Bonds, or (b) if, in the opinion of nationally recognized bond counsel, the City ceases to be an "obligated person" (within the meaning of the Rule) with respect to the 2018 Bonds or the 2018 Bonds otherwise cease to be subject to the requirements of the Rule. If such termination occurs prior to the final maturity of the 2018 Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5. SECTION 7. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived; provided, that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5, it may only be made inconnection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the 2018 Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the 2018 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) The amendment or waiver either (i) is approved by the Holders of the 2018 Bonds in the same manner as provided in the Trust Agreement for amendments to the Trust Agreement with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the 2018 Bonds. In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the 4 case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 8. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City 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 Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 9. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, any Participating Underwriter or any Holder or Beneficial Owner of the 2018 Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure 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 City to comply with this Disclosure Certificate shall be an action to compel performance hereunder. [The reminder of this page is intentionally left blank.] 5 SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Participating Underwriters and the Holders and Beneficial Owners from time to time of the 2018 Bonds, and shall create no rights in any other person or entity. Date: June , 2018. CITY OF LODI, a municipal corporation 13v Stephen Schwabauer, City Manager 6 EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligated Person: CITY OF LODI Name of Issue: $ Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds Date of Issuance: June , 2018 NOTICE IS HEREBY GIVEN that the City of Lodi has not provided an Annual Report with respect to the above-named Bonds as required by the 2018 Installment Purchase Agreement executed and entered into as of June 1, 2018, by and between the City of Lodi (the "City") and the Lodi Public Financing Authority. The City anticipates that the Annual Report will be filed by Dated: CITY OF LODI, a municipal corporation By A-1 APPENDIX F DTC AND THE BOOK -ENTRY ONLY SYSTEM The information in this Appendix C regarding DTC and its book -entry system has been obtained from DTC's website, for use in securities offering documents, and the City takes no responsibility for the accuracy or completeness thereof or for the absence of material changes in such information after the date hereof. The Depository Trust Company ("DTC"), New York, New York, acts as securities depository for the 2018 Bonds. The 2018 Bonds were issued as fully—registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully -registered bond certificate was issued for each maturity of each series of the 2018 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book - entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of the 2018 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2018 Bonds on DTC's records. The ownership interest of each actual purchaser of each 2018 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2018 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2018 Bonds, except in the event that use of the book -entry system for the 2018 Bonds is discontinued. F-1 To facilitate subsequent transfers, all 2018 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 2018 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2018 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 2018 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 2018 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2018 Bonds, such as redemptions, tenders, defaults and proposed amendments to the 2018 Bond documents. For example, Beneficial Owners of 2018 Bonds may wish to ascertain that the nominee holding the 2018 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 the notices be provided directly to them. While the 2018 Bonds are in the book -entry -only system, redemption notices will be sent to DTC. If less than all of the 2018 Bonds of a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2018 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 City 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 the 2018 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the 2018 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 City or the Trustee on the 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 City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City 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. DTC may discontinue providing its services as depository with respect to the 2018 Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, certificates representing the 2018 Bonds are required to be printed and delivered. F-2 The City may decide to discontinue use of the system of book -entry -only transfers through DTC (or a successor securities depository). In that event, certificates representing the 2018 Bonds will be printed and delivered to DTC. F-3 RESOLUTION NO. LPFA2018-01 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LODI PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE AND SALE OF 2018 ELECTRIC SYSTEM REVENUE REFUNDING BONDS TO REFINANCE ON A CURRENT BASIS AN INSTALLMENT PAYMENT OBLIGATION OF THE CITY OF LODI, AND APPROVING RELATED DOCUMENTS AND OFFICIAL ACTIONS WHEREAS, the City of Lodi (the "City") owns and operates facilities and property for the distribution of electricity within the service area of the City (the "System"); and WHEREAS, the City previously entered into an Installment Purchase Contract, dated as of July 1, 2008 (the "2008 Installment Purchase Contract") with the Lodi Public Improvement Corporation (the "Corporation"), pursuant to which the City agreed to make certain installment payments in the aggregate principal amount of $60,685,000 (the "2008 Installment Payments"), and caused execution and delivery of Electric System Revenue Certificates of Participation, 2008 Series A (the "2008 Certificates"), pursuant to a Trust Agreement, dated as of July 1, 2008 (the "2008 Trust Agreement"), between the Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2008 Trustee"), all for the purpose of (i) currently refunding the then - outstanding $46,760,000 principal amount of Electric System Revenue Certificates of Participation 2002 Series A Variable Rate Certificates (the "2002 Certificates"), (ii) paying costs of delivery of the 2008 Certificates, (iii) funding certain costs relating to termination of the swap agreement relating to the 2002 Certificates, (iv) purchasing a financial guaranty insurance policy for the 2008 Certificates, and (v) funding a reserve fund for the 2008 Certificates; and WHEREAS, the proceeds of the 2002 Certificates were used to refund, on an advance basis, the 1999 Series A Current Interest Certificates and the 1999 Series B Capital Appreciation Certificates (together, the "1999 Obligations"), and the proceeds of the 1999 Obligations were used to finance the Existing Facilities relating to the Electric System; and WHEREAS, under current economic conditions, it is possible for the City to refinance on a tax-exempt basis the 2008 Installment Payments and the related 2008 Certificates maturing on and after July 1, 2019 for the purpose of achieving savings for the benefit of the customers of the System; and WHEREAS, in order to provide funds that are sufficient (along with other available City funds) to refinance the 2008 Installment Payments and cause a prepayment of the 2008 Certificates, the City wishes to ask the Lodi Public Financing Authority (the "Authority") to issue its 2018 Electric System Revenue Refunding Bonds (the "Bonds") under the provisions of Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code (the "Bond Law"); and WHEREAS, in order to provide revenues that are sufficient to pay debt service on the Bonds, the City proposes to enter into an Installment Purchase Agreement with the Authority; and WHEREAS, the obligations of the City under the proposed Installment Purchase Agreement will be secured by a pledge of and lien on the net revenues of the System; and WHEREAS, the Authority proposes to sell the Bonds on a negotiated basis to J.P. Morgan Securities LLC (the "Underwriter"); and WHEREAS, in accordance with Government Code Section 5852.1, the Board of Directors has obtained and disclosed the information set forth in Exhibit A hereto; and WHEREAS, the Board of Directors of the Authority wishes at this time to take action approving such financing transactions and all related documents and actions; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Lodi Public Financing Authority as follows: Section 1. Approval of Refinancing Plan; Authorization of Bonds. The Board of Directors hereby approves the refinancing plan described in the recitals of this Resolution. To that end, the Board of Directors hereby authorizes the issuance of the Bonds under the Bond Law in the aggregate principal amount of not to exceed $46,100,000. Section 2. Approval of Related Financing Agreements. The Board of Directors hereby approves each of the following agreements required to implement the financing plan to be accomplished by the Bonds, in substantially the respective forms attached hereto together with any changes therein or additions thereto deemed advisable by the Chair, the Executive Director, the Treasurer or the General Counsel (each, an "Authorized Officer"), and the execution thereof by an Authorized Officer shall be conclusive evidence of the approval of any such changes or additions. (a) Indenture of Trust between the Authority and MUFG Union Bank, N.A., as trustee, prescribing the terms and conditions upon which the Bonds will be issued. The form of the Indenture of Trust is attached to this Resolution as Exhibit B. (b) Installment Purchase Agreement between the Authority and the City, under which the City agrees to make semiannual installment payments. The form of the Installment Purchase Agreement is attached to this Resolution as Exhibit C. (c) Bond Purchase Agreement among the Authority, the City and the Underwriter, under which the Underwriter agrees to purchase the Bonds from the Authority. The form of the Bond Purchase Agreement is attached to this Resolution as Exhibit D. An Authorized Officer is hereby authorized and directed for and in the name and on behalf of the Authority to execute, and the Secretary is hereby authorized and -2- directed to attest the final form of each of the foregoing agreements, and such execution shall be conclusive evidence of the approval of the final form thereof. Section 3. Sale of Bonds. The Board of Directors hereby approves the negotiated sale of the Bonds to the Underwriter. The Bonds shall be sold upon the terms and conditions set forth in the Bond Purchase Agreement that is approved under Section 2. The Bonds shall be sold at such price and shall bear interest at such rates as shall produce a minimum net present value savings to the City of at least 3.0% of the principal component of the 2008 Installment Payments, as such savings shall be verified and conclusively determined by the City's municipal advisor (the "Minimum Savings Requirement"). The Underwriter's discount shall not exceed 0.3%. The final form of the Bond Purchase Agreement shall be executed in the name and on behalf of the Authority by an Authorized Officer. Section 4. Official Statement. The Board of Directors hereby approves and deems final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, the Preliminary Official Statement describing the Bonds in the form on file with the Secretary, together with such modifications thereof as may be approved by an Authorized Officer. An Authorized Officer is hereby authorized and directed to (a) execute and deliver to the purchaser of the Bonds a certificate deeming the Preliminary Official Statement to be final as of its date within the meaning of such Rule, (b) approve any changes in or additions to cause the Official Statement to be put in final form, and (c) execute the Final Official Statement for and in the name and on behalf of the Authority. The Board of Directors hereby authorizes the distribution of the Preliminary Official Statement and the Final Official Statement by the Underwriter. Section 5. Official Actions. The Authorized Officers, the Secretary and all other officers of the Authority are each authorized and directed in the name and on behalf of the Authority to make any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they or any of them might deem necessary or appropriate in order to consummate any of the transactions contemplated by the agreements and documents approved under this Resolution, including any documentation relating to municipal bond insurance if an Authorized Officer concludes, after consultation with the Authority's bond counsel, the Authority's municipal advisor and the Underwriter, that it would be cost-effective to purchase such insurance. Whenever in this Resolution any officer of the Authority is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer is absent or unavailable. Section 6. Effective Date. This Resolution shall take effect immediately upon its passage and adoption. -3- I hereby certify that Resolution No. LPFA2018-01 was passed and adopted by the Board of Directors of the Lodi Public Financing Authority in a regular meeting held April 18, 2018, by the following vote: AYES: BOARD MEMBERS — Chandler, Johnson, Mounce, and Chairperson Nakanishi NOES: BOARD MEMBERS — None ABSENT: BOARD MEMBERS — Kuehne ABSTAIN: BOARD MEMBERS — None ecretary 46,4 lrbd ?ft.R A NIFERFERRAIOLO -4- EXHIBIT A GOVERNMENT CODE SECTION 5852.1 DISCLOSURE The following information consists of estimates that have been provided by the Underwriter, which has been represented by such party to have been provided in good faith: (A) True Interest Cost of the Bonds: 3.15%. (B) Finance Charge of the Bonds (Sum of all fees paid to third parties): $385,152. (C) Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if any): $47,853,391. (D) Total Payment Amount Through Maturity: $60,933,154. The foregoing estimates constitute good faith estimates only. The principal amount of the Bonds, the true interest cost of the Bonds, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City's financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City. EXHIBIT B FORM OF INDENTURE OF TRUST Jones Hall, APLC Draft 4/10/18 OPEN ITEMS: Necessity of reserve requirement and bond insurance INDENTURE OF TRUST Dated as of June 1, 2018 between MUFG UNION BANK, N.A., as Trustee and the LODI PUBLIC FINANCING AUTHORITY Authorizing the Issuance of $ Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds TABLE OF CONTENTS ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION SECTION 1.01. Definitions 3 SECTION 1.02. Authorization 3 SECTION 1.03. Interpretation 3 ARTICLE II The Bonds SECTION 2.01. Authorization of Bonds 3 SECTION 2.02. Terms of the Bonds 4 SECTION 2.03. Transfer and Exchange of Bonds 5 SECTION 2.04. Book -Entry System 5 SECTION 2.05. Registration Books 7 SECTION 2.06. Form and Execution of Bonds 7 SECTION 2.07. Bonds Mutilated, Lost, Destroyed or Stolen 8 ARTICLE III Issuance of Bonds; Application of Proceeds SECTION 3.01. Issuance of the Bonds 8 SECTION 3.02. Application of Proceeds of Sale of the Bonds 8 SECTION 3.03. Establishment and Application of Costs of Issuance Fund 9 SECTION 3.04. Validity of Bonds 9 ARTICLE IV Redemption of Bonds SECTION 4.01. Terms of Redemption 10 SECTION 4.02. Selection of Bonds for Redemption 10 SECTION 4.03. Notice of Redemption; Rescission 10 SECTION 4.04. Partial Redemption of Bonds 11 SECTION 4.05. Effect of Redemption 11 ARTICLE V Authority Revenues; Funds and Accounts; Payment of Principal and Interest SECTION 5.01. Security for the Bonds; Bond Fund 12 SECTION 5.02. Allocation of Authority Revenues 12 SECTION 5.03. Interest Account 13 SECTION 5.04. Principal Account 13 SECTION 5.05. Reserved 13 SECTION 5.06. Application of Redemption Fund 13 SECTION 5.07. Investments 13 SECTION 5.08. Valuation and Disposition of Investments 14 ARTICLE VI Covenants of the Authority SECTION 6.01. Punctual Payment SECTION 6.02. Extension of Payment of Bonds SECTION 6.03. Against Encumbrances SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment SECTION 6.05. Accounting Records Limitation on Additional Obligations Tax Covenants Reserved Waiver of Laws Further Assurances ...15 15 15 16 16 16 16 17 17 17 SECTION 6.06. SECTION 6.07. SECTION 6.08. SECTION 6.09. SECTION 6.10. ARTICLE VII Events of Default and Remedies SECTION 7.01 Events of Default 17 SECTION 7.02- Remedies Upon Event of Default 18 SECTION 7.03. Application of Authority Revenues Other Funds After Default 19 SECTION 7.04. Trustee to Represent Bond Owners 19 SECTION 7.05. Limitation on Bond Owners' Right to Sue 20 SECTION 7.06. Absolute Obligation of Authority 20 SECTION 7.07. Termination of Proceedings 20 SECTION 7.08. Remedies Not Exclusive 21 SECTION 7.09. No Waiver of Default 21 SECTION 7.10- Notice to Bond Owners of Default 21 ARTICLE VIII The Trustee SECTION 8.01. Appointment of Trustee 21 SECTION 8.02. Acceptance of Trusts; Removal and Resignation of Trustee 21 SECTION 8.03. Merger or Consolidation 23 SECTION 8.04. Liability of Trustee 23 SECTION 8.05. Right to Rely on Documents 26 SECTION 8.06. Preservation and Inspection of Documents 26 SECTION 8.07. Compensation and Indemnification 26 ARTICLE IX Modification or Amendment Hereof SECTION 9.01. Amendments Permitted 27 SECTION 9.02. Effect of Supplemental Indenture 28 SECTION 9.03. Endorsement of Bonds; Preparation of New Bonds , 28 SECTION 9.04. Amendment of Particular Bonds 29 ARTICLE X Defeasance SECTION 10.01. Discharge of Indenture 29 SECTION 10.02. Discharge of Liability on Bonds 29 SECTION 10.03. Deposit of Money or Securities with Trustee 30 SECTION 10.04. Unclaimed Funds 31 ARTICLE XI Miscellaneous SECTION 11.01. Liability of Authority Limited to Authority Revenues 31 SECTION 11.02. Limitation of Rights to Parties and Bond Owners 31 SECTION 11.03. Funds and Accounts 31 SECTION 11.04. Waiver of Notice; Requirement of Mailed Notice 32 SECTION 11.05. Destruction of Bonds 32 SECTION 11.06. Severability of Invalid Provisions 32 SECTION 11.07. Notices 32 SECTION 11.08. Evidence of Rights of Bond Owners 33 SECTION 11.09. Disqualified Bonds 33 SECTION 11.10. Money Held for Particular Bonds 34 SECTION 11.11. Waiver of Personal Liability 34 SECTION 11.12. Successor Is Deemed Included in All References to Predecessor 34 SECTION 11.13. Execution in Several Counterparts 34 SECTION 11.14. Payment on Non -Business Day 34 SECTION 11.15. Governing Law 34 -n- APPENDIX A DEFINITIONS APPENDIX B FORM OF BOND INDENTURE OF TRUST This INDENTURE OF TRUST (this "Indenture"), dated for convenience as of June 1, 2018, is between the LODI PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the State of California (the "Authority"), and MUFG UNION BANK, N.A., a national banking association organized and existing under the laws of the United States of America, with a corporate trust office in San Francisco, California, being qualified to accept and administer the trusts hereby created (the "Trustee"). BACKGROUND: 1. The City owns and operates facilities and property for the distribution of electricity within the service area of the City (the "Electric System"). 2. The City previously entered into an Installment Purchase Contract, dated as of July 1, 2008 (the "2008 Installment Purchase Contract") with the Lodi Public Improvement Corporation (the "Corporation"), pursuant to which the City agreed to make certain installment payments in the aggregate principal amount of $60,685,000 (the "2008 installment Payments"), and caused execution and delivery of Electric System Revenue Certificates of Participation, 2008 Series A (the "2008 Certificates"), pursuant to a Trust Agreement, dated as of July 1, 2008 (the "2008 Trust Agreement"), between the Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2008 Trustee"), all for the purpose of (i) currently refunding the then - outstanding $46,760,000 principal amount of Electric System Revenue Certificates of Participation 2002 Series A Variable Rate Certificates (the "2002 Certificates"), (ii) paying costs of delivery of the 2008 Certificates, (iii) funding certain costs relating to termination of the swap agreement relating to the 2002 Certificates, (iv) purchasing a financial guaranty insurance policy for the 2008 Certificates, and (v) funding a reserve fund for the 2008 Certificates. 3. The proceeds of the 2002 Certificates were used to refund, on an advance basis, the 1999 Series A Current Interest Certificates and the 1999 Series B Capital Appreciation Certificates (together, the "1999 Obligations"). The proceeds of the 1999 Obligations were used to finance the Existing Facilities relating to the Electric System. 4. Pursuant to Section 3.02 of the 2008 Installment Purchase Contract, the City has the right to prepay all or any part of the 2008 Installment Payments. Pursuant to Section 2.04 of the 2008 Trust Agreement, the 2008 Certificates with a maturity date of July 1, 2019 and thereafter are subject to prepayment from prepayments of 2008 Installment Payments made at the option of the City on and after July 1, 2018, at a prepayment price equal to the principal amount of the 2008 Certificates to be prepaid plus accrued but unpaid interest thereon to the prepayment date, without premium. 5. Under current economic conditions, it is possible for the City to refinance on a tax-exempt basis the 2008 Installment Payments and the related 2008 Certificates maturing on and after July 1, 2019 for the purpose of achieving savings for the benefit of the customers of the Electric System. 6. Pursuant to Section 9.01 of the 2008 Installment Purchase Contract, all obligations of the City with respect to 2008 Installment Payments shall cease and -1- terminate (except for the obligation to make payment from deposited funds and Defeasance Securities (as defined in the 2008 Trust Agreement) as provided in Article VIII of the 2008 Trust Agreement) when the 2008 Certificates have been paid or deemed paid in accordance with Article VIII of the 2008 Trust Agreement. 7. The Authority has been formed for the purpose of assisting the City in the financing and refinancing of public capital improvements, and in order to accomplish the refinancing described in the previous paragraph, the Authority and the City have entered into an Installment Purchase Agreement dated as of June 1, 2018 (the "Installment Purchase Agreement"), under which the City will sell the Existing Facilities to the Authority and the Authority will sell the Existing Facilities to the City in consideration of the agreement by the City to pay the purchase price thereof in semiannual installment payments. 8. For the purpose of obtaining funds that are sufficient (along with other available City funds) to refinance the 2008 Installment Payments, the Authority has authorized the issuance of its Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds in the aggregate principal amount of $ (the "Bonds") under this Indenture and under the provisions of Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code (the "Bond Law"). 9. In order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and to secure the payment of the principal thereof, premium (if any) and interest thereon, the Authority has authorized the execution and delivery of this Indenture. 10. The Authority has found and determines, and hereby affirms, 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 this 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 this Indenture have been in all respects duly authorized. AGREEMENT: In order to secure the payment of the principal of and the interest and redemption premium (if any) on all the Outstanding Bonds under this Indenture according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable considerations, the receipt of which is hereby acknowledged, the Authority and the Trustee do hereby covenant and agree with one another, for the benefit of the respective Owners from time to time of the Bonds, as follows: -2- ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION SECTION 1.01. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms defined in Appendix A attached to this Indenture have the respective meanings specified in that Appendix when used in this Indenture. SECTION 1.02. Authorization. Each of the parties hereby represents and warrants that it has full legal authority and is duly empowered to enter into this Indenture, and has taken all actions necessary to authorize the execution hereof by the officers and persons signing it. 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 this Indenture; the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to this 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 has reviewed all proceedings heretofore taken and has found, as a result of such review, and hereby finds and determines that all things, conditions and acts required by law to exist, happen or be performed precedent to and in connection with the issuance of the Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and the Authority is now duly empowered, under each and every requirement of law, to issue the Bonds in the manner and form provided in this Indenture. The Authority hereby authorizes the issuance of a series of Bonds, designated the "Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds" in the aggregate principal amount of $ under the Bond Law for the purposes of providing funds to refinance the 2008 Installment Payments and refund the 2008 Certificates. The Bonds are authorized and issued under, and are subject to the terms of, this Indenture and the Bond Law. -3- SECTION 2.02. Terms of the Bonds. (a) Payment Provisions. The Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof, so long as no Bond has more than one maturity date. The Bonds shall mature on September 1 in each of the years and in the amounts, and bear interest (calculated on the basis of a 360 -day year of twelve 30 -day months) at the rates, as follows: Maturity Date Principal Interest (September 1) Amount Rate $ Interest on the Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless: (a) a Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it will bear interest from such Interest Payment Date, (b) a Bond is authenticated on or before the first Record Date, in which event interest thereon will be payable from the Closing Date, or (c) interest on any Bond is in default as of the date of authentication thereof, in which event interest thereon will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest is payable on each Interest Payment Date to the persons in whose names the ownership of the Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest on any Bond which is not punctually paid or duly provided for on any Interest Payment Date is payable to the person in whose name the ownership of such Bond is registered on the Registration Books at the close of business on a special record date -4- for the payment of such defaulted interest to be fixed by the Trustee, notice of which is given to such Owner by first-class mail not less than 10 days prior to such special record date. The Trustee will pay interest on the Bonds by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owners of the Bonds at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. At the written request of the Owner of Bonds in an aggregate principal amount of at least $1,000,000, which written request is on file with the Trustee as of any Record Date, the Trustee will pay interest on such Bonds on each succeeding Interest Payment Date by wire transfer in immediately available funds to such account of a financial institution within the United States of America as specified in such written request, which written request will remain in effect until rescinded in writing by the Owner. The Trustee will pay principal of the Bonds in lawful money of the United States of America by check of the Trustee upon presentation and surrender thereof at the Office of the Trustee. SECTION 2.03. Transfer and Exchange of Bonds. (a) Transfer. Any Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by a duly authorized attorney of such person, upon surrender of such Bond to the Trustee at its Office for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. The Trustee shall collect any tax or other governmental charge on the transfer of any Bonds under this Section 2.03. Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and deliver to the transferee a new Bond or Bonds of like series, interest rate, maturity and aggregate principal amount. The Authority shall pay the cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer of Bonds. (b) Exchange. The Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Bonds of other authorized denominations and of the same series, interest rate and maturity. The Trustee shall collect any tax or other governmental charge on the exchange of any Bonds under this subsection (b). The Authority shall pay the cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any exchange of Bonds. (c) Limitations. The Trustee may refuse to transfer or exchange, under the provisions of this Section 2.03, any Bonds selected by the Trustee for redemption under Article IV, or any Bonds during the period established by the Trustee for the selection of Bonds for redemption. SECTION 2.04. Book -Entry System. (a) Original Delivery. The Bonds will be initially delivered in the form of a separate single fully registered bond (which may be typewritten) for each maturity of the Bonds. Upon initial delivery, the Trustee shall register the ownership of each Bond on the Registration Books in the name of the Nominee. Except as provided in subsection (c), the ownership of all of the Outstanding Bonds shall be registered in the name of the Nominee on the Registration Books. -5- With respect to Bonds the ownership of which shall be registered in the name of the Nominee, the Authority and the Trustee have no responsibility or obligation to any Depository System Participant or to any person on behalf of which the Nominee holds an interest in the Bonds. Without limiting the generality of the immediately preceding sentence, the Authority and the Trustee have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee or any Depository System Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Depository System Participant or any other person, other than a Bond Owner as shown in the Registration Books, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository of the beneficial interests in the Bonds to be redeemed if the Authority elects to redeem the Bonds in part, (iv) the payment to any Depository System Participant or any other person, other than a Bond Owner as shown in the Registration Books, of any amount with respect to principal, premium, if any, or interest on the Bonds or (v) any consent given or other action taken by the Depository as Owner of the Bonds. The Authority and the Trustee may treat and consider the person in whose name each Bond is registered as the absolute owner of such Bond for the purpose of payment of principal of and premium, if any, 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 of ownership of such Bond, and for all other purposes whatsoever. The Trustee shall pay the principal of and the interest and premium, if any, on the Bonds only to the respective Owners or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to payment of principal of and interest and premium, if any, on the Bonds to the extent of the sum or sums so paid. No person other than a Bond Owner shall receive a Bond evidencing the obligation of the Authority to make payments of principal, interest and premium, if any, under this Indenture. Upon delivery by the Depository to the Authority of written notice to the effect that the Depository has determined to substitute a new Nominee in its place, and subject to the provisions herein with respect to Record Dates, such new nominee shall become the Nominee hereunder for all purposes; and upon receipt of such a notice the Authority shall promptly deliver a copy of the same to the Trustee. (b) Representation Letter. In order to qualify the Bonds for the Depository's book -entry system, the Authority shall execute and deliver to such Depository a letter representing such matters as shall be necessary to so qualify the Bonds. The execution and delivery of such letter shall not in any way limit the provisions of subsection (a) above or in any other way impose upon the Authority or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Bond Owners. Upon the written acceptance by the Trustee, the Trustee shall agree to take all action reasonably necessary for all representations of the Trustee in such letter with respect to the Trustee to at all times be complied with. In addition to the execution and delivery of such letter, the Authority may take any other actions, not inconsistent with this Indenture, to qualify the Bonds for the Depository's book -entry program. (c) Transfers Outside Book -Entry System. If either (i) the Depository determines not to continue to act as Depository for the Bonds, or (ii) the Authority determines to terminate the Depository as such, then the Authority shall thereupon discontinue the book -entry system with such Depository. In such event, the Depository shall cooperate with the Authority and the Trustee in the issuance of replacement Bonds by providing the Trustee with a list showing the interests of the Depository System Participants in the Bonds, and by surrendering the Bonds, registered in the name of the Nominee, to the Trustee on or before the date such replacement Bonds are to be -6- issued. The Depository, by accepting delivery of the Bonds, agrees to be bound by the provisions of this subsection (c). If, prior to the termination of the Depository acting as such, the Authority fails to identify another Securities Depository to replace the Depository, then the Bonds shall no longer be required to be registered in the Registration Books in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging Bonds shall designate, in accordance with the provisions hereof. If the Authority determines that it is in the best interests of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the Authority may notify the Depository System Participants of the availability of such certificated Bonds through the Depository. In such event, the Trustee will issue, transfer and exchange Bonds as required by the Depository and others in appropriate amounts; and whenever the Depository requests, the Trustee and the Authority shall cooperate with the Depository in taking appropriate action (i) to make available one or more separate certificates evidencing the Bonds to any Depository System Participant having Bonds credited to its account with the Depository, or (ii) to arrange for another Securities Depository to maintain custody of a single certificate evidencing such Bonds, all at the Authority's expense. (d) Payments to the Nominee. Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal of and interest and premium, if any, on such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the letter described in subsection (b) of this Section or as otherwise instructed by the Depository. 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 as agreed to by the Trustee, be open to inspection during regular business hours by the Authority; 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. SECTION 2.06. Form and Execution of Bonds. The Bonds, the form of Trustee's certificate of authentication, and the form of assignment to appear thereon, are set forth in Appendix B attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Indenture. The Chair of the Authority shall execute, and the Secretary of the Authority shall attest each Bond. Either or both of such signatures may be made manually or may be affixed by facsimile thereof. If any officer whose signature appears on any Bond ceases to be such officer before the Closing Date, such signature will nevertheless be as effective as if the officer had remained in office until the Closing Date. Any Bond may be signed and attested on behalf of the Authority by such persons as at the actual date of the execution of such Bond are the proper officers of the Authority, duly authorized to execute debt instruments on behalf of the Authority, although on the date of such Bond any such person was not an officer of the Authority. -7- Only those Bonds bearing a certificate of authentication in the form set forth in Appendix B, manually executed and dated by the Trustee, are valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee is conclusive evidence that such Bonds have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture. SECTION 2.07. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond is mutilated, the Authority, at the expense of the Owner of such Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. The Trustee shall cancel every mutilated Bond surrendered to it and deliver such mutilated Bond to, or upon the order of, the Authority. If any Bond is lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory and if indemnity satisfactory to the Trustee is 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 in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Trustee may require payment of a sum not exceeding the actual cost of preparing each new Bond issued under this Section and of the expenses which may be incurred by the Trustee in connection therewith. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen will 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 equally and proportionately entitled to the benefits of this Indenture with all other Bonds issued under this Indenture. Notwithstanding any other provision of this Section 2.07, in lieu of delivering a new Bond for which principal has become due for a Bond which has been mutilated, lost, destroyed or stolen, the Trustee may make payment of such Bond in accordance with its terms upon receipt of indemnity satisfactory to the Trustee. ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS SECTION 3.01. Issuance of the Bonds. At any time after the execution of this Indenture, the Authority may execute and the Trustee shall authenticate and, upon the Written Request of the Authority, deliver the Bonds to the Original Purchaser. SECTION 3.02. Application of Proceeds of Sale of the Bonds. Upon the receipt of payment for the Bonds on the Closing Date, in the amount of $ representing the aggregate principal amount ($ ), plus an original issue premium of $ , less an underwriter's discount of $ , the Trustee shall deposit the proceeds of sale thereof into the Bond Proceeds Fund, which shall be established and held by the Trustee in trust, and such amount shall be applied as follows: (a) The Trustee will deposit the amount of $ in the Costs of Issuance Fund. -8- (b) The Trustee will transfer the amount of $ constituting the remainder of such proceeds, to the Escrow Bank for deposit into the Escrow Fund established under the Escrow Agreement. After moneys in the Bond Proceeds Fund have been applied as described above, the Trustee shall close the Bond Proceeds Fund. 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" into which the Trustee shall deposit a portion of the proceeds of sale of the Bonds under Section 3.02. The Trustee shall disburse amounts in the Costs of Issuance Fund from time to time to pay the Costs of Issuance of the Bonds upon submission of a Written Requisition 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 and that such payment is a proper charge against said fund. The Trustee may conclusively rely on the representations and certifications set forth in such Written Requisitions and shall be fully protected in relying thereon. All such payments shall be made by check or wire transfer in accordance with payment instructions contained in the Written Requisition or in any invoice attached thereto, and the Trustee has no duty or obligation to authenticate such payment instructions or the authorization thereof. On 1, 2018, or upon the earlier Written Request of the Authority, the Trustee shall transfer all amounts remaining in the Costs of Issuance Fund to the Interest Account, and the Trustee shall thereupon close the Costs of Issuance Fund. SECTION 3.04. Validity of Bonds. The recital contained in the Bonds that the same are issued under the Constitution and laws of the State of California shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance. ARTICLE IV REDEMPTION OF BONDS -9- SECTION 4.01. Terms of Redemption.' (a) Optional Redemption. The Bonds maturing on or before September 1, 20_, are not subject to optional redemption prior to their respective stated maturity dates. The Bonds maturing on or after September 1, 20_, are subject to redemption in whole, or in part at the Written Request of the Authority among maturities on such basis as the Authority may designate and within a maturity as set forth in Section 4.02, at the option of the Authority, on any date on or after September 1, 20_, from any available source of funds, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus accrued interest to the date of redemption, without premium. (b) Notice of Optional Redemption to the Trustee. The Authority shall give the Trustee written notice of its intention to redeem Bonds under subsection (a), and the manner of selecting such Bonds for redemption from among the maturities thereof, at least 45 days prior to the redemption date. SECTION 4.02. Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of the Bonds of a single maturity, the Trustee shall select the Bonds of that maturity to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the Trustee shall treat each Bond as consisting of separate $5,000 portions and each such portion shall be subject to redemption as if such portion were a separate Bond. SECTION 4.03. Notice of Redemption; Rescission. The Trustee shall mail notice of redemption of the Bonds by first class mail, postage prepaid, not less than 30 nor more than 60 days before any redemption date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Registration Books and to one or more Securities Depositories and to the Municipal Securities Rulemaking Board. Each notice of redemption shall state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the Bonds (or all Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not all Bonds within a maturity are called for redemption) Bond numbers of the Bonds to be redeemed and the maturity or maturities of the Bonds to be redeemed, 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 the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered. Neither the failure to receive any notice nor any defect therein shall affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Notice of redemption of Bonds shall be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority. Any notice of an optional redemption may state that redemption is conditioned on funds being available on the selected redemption date. The Authority has the right to rescind any notice of the redemption of Bonds under Section 4.01(a) by written notice to the Trustee on or prior to the date fixed for 1 Sinking fund mandatory redemption to be added if required. -10- redemption. Any notice of a redemption pursuant to Section 4.01(a) may provide that it is subject to rescission as described in this paragraph. Any notice of redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation shall not constitute an Event of Default. The Authority and the Trustee have no liability to the Bond Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent under this Section. SECTION 4.04. Partial Redemption of Bonds. Upon surrender of any Bonds 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. 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, including any applicable premium, 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 this Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. All Bonds redeemed under the provisions of this Article shall be canceled by the Trustee upon surrender thereof and destroyed in accordance with the retention policy of the Trustee then in effect. -11- ARTICLE V AUTHORITY REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST SECTION 5.01. Security for the Bonds; Bond Fund. (a) Pledge of Authority Revenues and Other Amounts. Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, all of the Authority Revenues and all amounts (including proceeds of the sale of the Bonds) held in any fund or account established under this Indenture are hereby pledged to secure the payment of the principal of and interest and premium (if any) on the Bonds in accordance with their terms and the provisions of this Indenture. Said pledge constitutes a lien on and security interest in the Authority Revenues and such amounts and shall attach, be perfected and be valid and binding from and after the Closing Date, without the need for any physical delivery thereof or further act. (b) Assignment to Trustee. The Authority hereby irrevocably transfers, assigns and sets over to the Trustee, without recourse to the Authority, all of its rights in the Installment Purchase Agreement (excepting only the Authority's rights under Section 10.11 thereof), including but not limited to all of the Authority's rights to receive and collect all of the Installment Payments. The Trustee is entitled to collect and receive all of the Installment Payments, and any Installment Payments collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee is also entitled to and shall, subject to the provisions of Article VIII, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Installment Purchase Agreement. (c) Deposit of Authority Revenues in Bond Fund. All Authority Revenues shall be promptly deposited by the Trustee upon receipt thereof in a special fund designated as the "Bond Fund" which the Trustee shall establish, maintain and hold in trust; except that all moneys received by the Trustee and required hereunder or under the Installment Purchase Agreement to be deposited in the Redemption Fund shall be promptly deposited in such funds. All Authority Revenues deposited with the Trustee shall be held, disbursed, allocated and applied by the Trustee only as provided in this Indenture. Any surplus remaining in the Bond Fund, after payment in full of (i) the principal of and interest on the Bonds or provision therefore under Article X, and (ii) any applicable fees and expenses to the Trustee, shall be withdrawn by the Trustee and remitted to the City. SECTION 5.02. Allocation of Authority Revenues. On or before each Interest Payment Date, the Trustee shall transfer from the Bond Fund and deposit into the following respective accounts (each of which the Trustee shall establish and maintain within the Bond Fund), the following amounts in the following order of priority: (a) Deposit to interest Account. The Trustee shall deposit in the Interest Account an amount required to cause the aggregate -12- amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such Interest Payment Date on all Bonds then Outstanding. (b) Deposit to Principal Account. The Trustee shall deposit in the Principal Account an amount 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 Interest Payment Date. SECTION 5.03. 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 comes due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity). SECTION 5.04. 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 their respective maturity dates. SECTION 5.05. Reserved. SECTION 5.06. Application of Redemption Fund. Upon the determination by the Authority to redeem any Bonds under Section 4.01(a), the Trustee shall establish and maintain the "Redemption Fund", into which the Trustee shall deposit a portion of the Authority Revenues received, in accordance with a Written Request of the Authority, and which shall be used and withdrawn by the Trustee solely for the purpose of paying the principal and premium (if any) of the Bonds to be redeemed under Section 4.01(a). At any time prior to the selection of Bonds for redemption, the Trustee may apply such amounts to the purchase of Bonds at public or private sale, 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 under a Written Request of the Authority, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. The Trustee is entitled to conclusively rely on any Written Request of the Authority received under this Section 5.06, and is fully protected in relying thereon. SECTION 5.07. Investments. Except as otherwise set forth in this Indenture, moneys in any of the funds or accounts established with the Trustee under this Indenture shall be invested by the Trustee solely in Permitted Investments. Such investments shall be directed by the Authority under a Written Request of the Authority filed with the Trustee at least two Business Days in advance of the making of such investments. In the absence of any such directions from the Authority, the Trustee shall invest any such moneys in Permitted Investments designated in paragraph (c) of the definition, 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 directions from the Authority specifying a specific money market fund and, if no such directions from the Authority is so received, the Trustee shall hold such moneys uninvested. The Trustee shall notify the Authority in writing within five business days if it is holding any moneys uninvested. Permitted Investments purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. To the extent Permitted Investments are registrable, such Permitted Investments must be registered in the name of the Trustee. -13- All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder shall be retained in such fund or account. For purposes of acquiring any investments hereunder, the Trustee may commingle funds held by it hereunder. The Trustee or any of its affiliates may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made under this Section 5.07. The Trustee may make any investments hereunder through its own bond or investment department or trust investment department, or those of its parent or any affiliate. The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee hereunder. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with any one or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for any third person or is dealing as a principal for its own account. The Trustee shall furnish the Authority periodic cash transaction statements which include detail for all investment transactions effected by the Trustee or brokers selected by the Authority. Upon the Authority's election, such statements will be delivered via the Trustee's Online Trust and Custody service and upon electing such service, paper statements will be provided only upon request. The Authority waives the right to receive brokerage confirmations of security transactions effected by the Trustee as they occur, to the extent permitted by law. The Authority further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker. SECTION 5.08. Valuation and Disposition of Investments. (a) Except as otherwise provided in subsection (b) of this Section, the Authority covenants that all investments of amounts deposited in any fund or account created by or under this Indenture, or otherwise containing gross proceeds of the Bonds (within the meaning of Section 148 of the Tax Code) shall be acquired, disposed of and valued at the Fair Market Value thereof as such term is defined in subsection (d) below. The Trustee shall have no duty in connection with the determination of Fair Market Value other than to follow the investment directions of the Authority in any Written Request of the Authority. (b) Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code; provided that the Authority shall inform the Trustee which funds are subject to a yield restriction. (c) Except as provided in the preceding subsection (b), for the purpose of determining the amount in any fund or account established hereunder, the value of Permitted Investments credited to such fund shall be valued by the Trustee at least annually on or before June 15. The Trustee may sell or present for redemption, any Permitted Investment so purchased by the Trustee whenever it shall be necessary in order to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such Permitted Investment is credited, and the -14- Trustee shall not be liable or responsible for any Toss resulting from any such Permitted Investment. (d) For purposes of this Section 5.08, the term "Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Tax Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, or (iii) the investment is a United States Treasury Security -- State and Local Government Series which is acquired in accordance with applicable regulations of the United States Bureau of Public Debt. (e) To the extent of any valuations made by the Trustee hereunder, the Trustee may utilize and rely upon computerized securities pricing services that may be available to it, including those available through its regular accounting system. ARTICLE VI COVENANTS OF THE AUTHORITY SECTION 6.01. Punctual Payment. The Authority shall punctually pay or cause to be paid the principal of and interest and premium (if any) on all the Bonds in strict conformity with the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof, but only out of the Authority Revenues and other amounts pledged for such payment as provided in this 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 this Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which have not been so extended. Nothing in this Section 6.02 limits the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance does not constitute an extension of maturity of the Bonds. SECTION 6.03. Against Encumbrances. The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Authority Revenues and other assets pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by this Indenture. Subject to this limitation, the Authority expressly reserves the right to enter into one or -15- more other indentures for any of its corporate purposes, 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 under law to issue the Bonds and to enter into this Indenture and to pledge and assign the Authority Revenues and other amounts purported to be pledged and assigned, respectively, under this Indenture in the manner and to the extent provided in this Indenture. The Bonds and the provisions of this 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 this Indenture against all claims and demands of all persons whomsoever. SECTION 6.05. Accounting Records. 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 and all funds and accounts established under this Indenture. The Trustee shall make such books of record and account available for inspection by the Authority and the City, during business hours, upon reasonable notice, and under reasonable circumstances. SECTION 6.06. Limitation on Additional Obligations. The Authority covenants that no additional bonds, notes or other indebtedness shall be issued or incurred which are payable out of the Authority Revenues. SECTION 6.07. Tax Covenants. (a) Private Business Use Limitation. The Authority shall assure that the proceeds of the Bonds are not used in a manner which would cause the Bonds to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code. (b) Federal Guarantee Prohibition. The Authority shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Tax Code. (c) No Arbitrage. The Authority shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds or of any other obligations which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused the Bonds to be "arbitrage bonds" within the meaning of Section 148(a) of the Tax Code. (d) Maintenance of Tax Exemption. The Authority shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date. -16- (e) Rebate of Excess Investment Earnintls to United States. The Authority shall calculate or cause to be calculated all amounts of excess investment earnings which are required to be rebated to the United States of America under Section 148(f) of the Tax Code, at the times and in the manner required under the Tax Code. The Authority shall pay when due an amount equal to excess investment earnings to the United States of America in such amounts, at such times and in such manner as may be required under the Tax Code, such payments to be made from any amounts provided by the City for that purpose under Section 7.03(e) of the Installment Purchase Agreement. The Authority shall keep or cause to be kept, and retain or cause to be retained for a period of six years following the retirement of the Bonds, records of the determinations made under this subsection (e). SECTION 6.08. Reserved. SECTION 6.09. 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 this 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 6.10. Further Assurances. The Authority will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Indenture. ARTICLE VII EVENTS OF DEFAULT AND REMEDIES SECTION 7.01. Events of Default. The following events constitute Events of Default hereunder: (a) Failure to pay any installment of the principal of any Bonds when due, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise. (b) Failure to pay any installment of interest on the Bonds when due. (c) Failure by the Authority to observe and perform any of the other covenants, agreements or conditions on its part contained in this Indenture or in the Bonds, if such failure has continued for a period of 30 days after written notice thereof, specifying such failure and requiring the same to be remedied, has been given to the Authority by the Trustee; provided, however, if in the reasonable opinion of the Authority the failure stated in the notice can be corrected, but not within such 30 -day period, such failure shall not constitute an Event of Default if the Authority institutes corrective action within -17- such 30 -day period and thereafter diligently and in good faith cures the failure in a reasonable period of time. (d) The commencement by the Authority of a voluntary case under Title 11 of the United States Code or any substitute or successor statute. (e) The occurrence and continuation of an event of default under and as defined in the Installment Purchase Agreement. SECTION 7.02. Remedies Upon Event of Default. (a) Only as long as Section 8.02 is an available remedy under the Installment Purchase Agreement, if any Event of Default occurs, 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 a majority in aggregate principal amount of the Bonds at the time Outstanding shall, in each case, upon receipt of indemnification satisfactory to Trustee against the costs, expenses and liabilities to be incurred in connection with such action, upon notice in writing to the Authority, 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 this Indenture or in the Bonds contained to the contrary notwithstanding. (b) The Trustee may, subject to the receipt of indemnity as provided herein: (i) by mandamus or other action or proceeding or suit at law or in equity enforce its rights against the Authority, or any board member, officer or employee thereof, and compel the Authority or any such board member, officer or employee to perform and carry out its or his or her duties under applicable law and the agreements and covenants contained herein required to be performed by it or him; (ii) by suit in equity enjoin any acts or things which are unlawful or violate the rights of the Trustee or the owners of the Bonds hereunder; (iii) intervene in judicial proceedings that affect the Bonds or the security therefor or hereunder; or (iv) by suit in equity upon the happening of an Event of Default require the Authority and its officers and employees to account as the trustee of an express trust. (c) Except with respect to an Event of Default under Section 7.01(d) above, 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 deposits 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 fees, charges and expenses (including those of its legal counsel, including the allocated costs of internal attorneys) 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) have been made good or cured to the -18- satisfaction of the Trustee or provision deemed by the Trustee to be adequate has been made therefor, then, and in every such case, the Trustee, may, 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 occurs and is continuing, all Authority Revenues and any other funds then held or thereafter received by the Trustee under any of the provisions of this Indenture shall be applied by the Trustee in the following order of priority: (a) To the payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its legal counsel including outside counsel and the allocated costs of internal attorneys) incurred in and about the performance of its powers and duties under this Indenture; (b) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of this Indenture, as follows: 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 at maturity or by acceleration or redemption, with interest on the overdue principal at the rate borne by the respective Bonds (to the extent permitted by law), 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. SECTION 7.04. Trustee to Represent Bond Owners. The Trustee is hereby irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, this Indenture and applicable provisions of any law. All rights of action under this 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 -19- 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 this Indenture. SECTION 7.05. Limitation on Bond Owners' Right to Sue. Notwithstanding any other provision hereof, no Owner of any Bonds has 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 this Indenture, the Installment Purchase Agreement or any other applicable law with respect to such Bonds, unless (a) such Owner has given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding have requested the Trustee in writing to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) such Owner or Owners have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee has failed to comply with such request for a period of 60 days after such written request has been received by, and said tender of indemnity has been made to, the Trustee; and (e) no direction inconsistent with such written request has been given to the Trustee during such 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 this Indenture or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, this Indenture, the Installment Purchase Agreement or other applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of this Indenture. SECTION 7.06. Absolute Obligation of Authority. Nothing in Section 7.06 or in any other provision of this Indenture or in the Bonds contained affects or impairs the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest and premium (if any) on the Bonds to the respective Owners of the Bonds at their respective dates of maturity, or upon acceleration or 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 7.07. Termination of Proceedings. In case any proceedings taken by the Trustee or by any one or more Bond Owners on account of any Event of Default have been discontinued or abandoned for any reason or have been determined adversely to the Trustee or the Bond Owners, then in every such case the Authority, the Trustee and the Bond Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the Authority, the Trustee and the Bond Owners shall continue as though no such proceedings had been taken. -20- SECTION 7.08. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or 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 any Owner of the Bonds to exercise any right or power arising upon the occurrence of any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or an acquiescence therein; and every power and remedy given by this Indenture to the Trustee or to the Owners of the Bonds may be exercised from time to time and as often as may be deemed expedient by the Trustee or the Bond Owners. SECTION 7.10. Notice to Bond Owners of Default. Immediately upon obtaining actual knowledge of the occurrence of an Event of Default, but in no event later than five Business Days after obtaining actual knowledge of such occurrence, the Trustee shall promptly give written notice thereof by first class mail, postage prepaid, to the Owner of each Outstanding Bond, unless such Event of Default has been cured before the giving of such notice; provided, however that except in the case of an Event of Default described in Sections 7.01(a) or 7.01(b), the Trustee may elect not to give such notice to the Bond Owners if and so long as the Trustee in good faith determines that it is in the best interests of the Bond Owners not to give such notice. ARTICLE VIII THE TRUSTEE SECTION 8.01. Appointment of Trustee. MUFG Union Bank, N.A., is hereby appointed Trustee by the Authority for the purpose of receiving all moneys required to be deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. The Authority will maintain a Trustee which is qualified under the provisions of the foregoing provisions of this Article VIII so long as any Bonds are Outstanding. SECTION 8.02. Acceptance of Trusts; Removal and Resignation of Trustee. The Trustee hereby accepts the express trusts imposed upon it by this Indenture, and agrees to perform said trusts, but only upon and subject to the following express terms and conditions: (a) The Trustee shall, prior to an Event of Default, and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in this Indenture and no implied duties or covenants shall be read into this Indenture against the Trustee. In case an Event of Default has occurred (which has not been cured) the Trustee shall exercise such of the rights and powers vested in it by the Trust Agreement, 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. -21- (b) The Authority may remove the Trustee at any time, unless an Event of Default has occurred and is then continuing, and shall remove the Trustee (a) if at any time requested to do so by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or (b) if at any time the Trustee ceases to be eligible in accordance with Section 8.02, or becomes incapable of acting, or is adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property is appointed, or any public officer takes control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. Any such removal shall be made upon at least 30 days' prior written notice to the Trustee. (c) The Trustee may at any time resign by giving written notice of such resignation to the Authority and the City, and by giving the Bond Owners notice of such resignation by mail at the addresses shown on the Registration Books. (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. In the event of the removal or resignation of the Trustee under subsections (b) or (c), respectively, the Authority shall promptly appoint a successor Trustee. If no successor Trustee has been appointed and accepted appointment within 45 days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture, must signify its acceptance of such appointment by executing and delivering to the Authority and to its predecessor Trustee a written acceptance thereof, and after payment by the Authority of all unpaid fees and expenses of the predecessor Trustee, 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. At the Written Request of the Authority or the request of the successor Trustee, such predecessor Trustee shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the Authority shall promptly 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 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 this Indenture shall be a corporation or association organized and doing business under the laws of any state or the United States of America or the District of Columbia, shall be authorized under such laws to exercise corporate trust powers, shall have (or, in the case of a corporation or -22- association that is a member of a bank holding company system, the related bank holding company has) a combined capital and surplus of at least $50,000,000, and shall be subject to supervision or examination by a federal or state agency, so long as any Bonds are Outstanding. If such corporation or association publishes a report of condition at least annually under law or to the requirements of any supervising or examining agency above referred to, then for the purpose of this subsection (e), the combined capital and surplus of such corporation or association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If the Trustee at any time ceases to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section. (f) Notwithstanding any other provision of this Indenture, the Trustee may be removed at any time for any breach of the trust set forth herein. SECTION 8.03. Merger or Consolidation. Any national banking association, bank, federal savings association, or trust company into which the Trustee may be merged or converted or with which it may be consolidated or any national banking association, bank, federal savings association, or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any national banking association, bank, federal savings association, or trust company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such national banking association, bank, federal savings association, or trust company shall be eligible under subsection (e) of Section 8.02 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 8.04. 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 this Indenture, the Bonds or the Installment Purchase Agreement, nor shall the Trustee incur any responsibility in respect thereof, other than as expressly stated herein in connection with the respective duties or obligations of Trustee 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. 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 is not liable for any error of judgment made by a responsible officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (c) The Trustee is not liable with respect to any action taken or omitted to be taken by it in accordance with the direction of the Owners of a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and -23- place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture or assigned to it hereunder. (d) The Trustee is not liable for any action taken by it and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. (e) The Trustee shall not be deemed to have knowledge of any Event of Default hereunder, or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default hereunder unless and until it shall have actual knowledge thereof, or a corporate trust officer shall have received written notice thereof at its Office from the City, the Authority or the Owners of at least 25% in aggregate principal amount of the Outstanding Bonds. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the Authority or the City of any of the terms, conditions, covenants or agreements herein, under the Installment Purchase Agreement or the Bonds or of any of the documents executed in connection with the Bonds, or as to the existence of a default or an Event of Default or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default. The Trustee is not responsible for the validity, effectiveness or priority of any collateral given to or held by it. Without limiting the generality of the foregoing, the Trustee shall not be required to ascertain or inquire as to the performance or observance by the City or the Authority of the terms, conditions, covenants or agreements set forth in the Installment Purchase Agreement, other than the covenants of the City to make Installment Payments to the Trustee when due and to file with the Trustee when due, such reports and certifications as the City is required to file with the Trustee thereunder. (f) No provision of this Indenture requires the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. (g) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents, receivers or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent, receiver or attorney appointed with due care by it hereunder. (h) The Trustee has no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of the Bond Owners under this Indenture, unless such Owners have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities (including but not limited to fees and expenses of its attorneys) 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. (i) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to the provisions of Section 8.02(a), this Section 8.04 and Section 8.05, and shall be applicable to the assignment of any rights to the Trustee hereunder. -24- (j) The Trustee is not accountable to anyone for the subsequent use or application of any moneys which are released or withdrawn in accordance with the provisions hereof. (k) The Trustee makes no representation or warranty, expressed or implied as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose for the use contemplated by the Authority or the City of the Project. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Installment Purchase Agreement or this Indenture for the existence, furnishing or use of the Project. (I) The Trustee has 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. (m) The Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture sent by unsecured e-mail (provided, that for purposes of this Agreement, an e-mail does not constitute a notice, request or other communication hereunder but rather the portable document format or similar attachment attached to such e-mail shall constitute a notice, request or other communication hereunder), 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 such 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 or the City elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion 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 and the City agree 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 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 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. -25- SECTION 8.05. Right to Rely on Documents. The Trustee shall be protected and shall incur no liability in acting or refraining from acting in reliance upon any notice, resolution, request, consent, order, certificate, report, opinion, bonds or other paper or document believed by them to be genuine and to have been signed or presented by the proper party or parties. The Trustee is under no duty to make any investigation or inquiry as to any statements contained or matter referred to in any paper or document but may accept and conclusively rely upon the same as conclusive evidence of the truth and accuracy of any such statement or matter and shall be fully protected in relying thereon. The Trustee may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Trustee may treat the Owners of the Bonds appearing in the 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 this Indenture the Trustee deems 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 Written Certificate, Written Request or Written Requisition of the Authority or the City, and such Written Certificate, Written Request or Written Requisition shall be full warrant to the Trustee for any action taken or suffered under the provisions of this Indenture in reliance upon such Written Certificate, Written Request or Written Requisition, and the Trustee shall be fully protected in relying thereon, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may deem reasonable. SECTION 8.06. Preservation and Inspection of Documents. All documents received, by the Trustee under the provisions of this Indenture shall be retained in its respective possession and in accordance with its retention policy then in effect and shall, upon reasonable notice to Trustee, be subject to the inspection of the Authority, the City and any Bond Owner, and their agents and representatives duly authorized in writing, during business hours and under reasonable conditions as agreed to by the Trustee. SECTION 8.07. Compensation and Indemnification. The Authority shall pay to the Trustee from time to time, on demand, the compensation for all services rendered under this Indenture and also all reasonable expenses, advances (including any interest on advances), charges, legal (including outside counsel and the allocated costs of internal attorneys) and consulting fees and other disbursements, incurred in and about the performance of its powers and duties under this Indenture. The Authority shall indemnify the Trustee, its officers, directors, employees and agents against any cost, loss, liability or expense whatsoever (including but not limited to fees and expenses of its attorneys) incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust and this 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 hereunder or under the Installment Purchase Agreement. As security for the performance of the obligations of the Authority under this Section 8.07, the Trustee shall -26- have a lien prior to the lien of the Bonds upon all property and funds held or collected by the Trustee as such. The rights of the Trustee and the obligations of the Authority under this Section 8.07 shall survive the resignation or removal of the Trustee or the discharge of the Bonds and this Indenture and the Installment Purchase Agreement. ARTICLE IX MODIFICATION OR AMENDMENT HEREOF SECTION 9.01. Amendments Permitted. (a) Amendments With Owner Consent. This 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 Supplemental Indenture, which the Authority and the Trustee may enter into when the written consents of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding are filed with the Trustee. No such modification or amendment may (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof 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 effect any such modification or amendment, or permit the creation of any lien on the Authority Revenues and other assets pledged under this Indenture prior to or on a parity with the lien created by this Indenture except as permitted herein, or deprive the Owners of the Bonds of the lien created by this Indenture on such Authority Revenues and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all of the Bonds then Outstanding. It is not necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it is sufficient if such consent approves the substance thereof. (b) Amendments Without Owner Consent. This Indenture and the rights and obligations of the Authority, of 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 has been furnished an opinion of counsel that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners of the Bonds, including, without limitation, for any one or more of the following purposes: (i) to add to the covenants and agreements of the Authority in this Indenture contained, 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; (ii) to cure any ambiguity, inconsistency or omission, or to cure or correct any defective provision, contained in this Indenture, or in regard to matters or questions arising under this Indenture, as the Authority deems necessary or desirable, provided that such -27- modification or amendment does not materially adversely affect the interests of the Bond Owners, in the opinion of Bond Counsel filed with the Trustee; (iii) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; and (iv) to modify, amend or supplement this Indenture in such manner as to assure that the interest on the Bonds remains excluded from gross income under the Tax Code. (c) Limitation. The Trustee is not obligated to enter into any Supplemental Indenture authorized by subsections (a) or (b) of this Section 9.01 which materially adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. (d) Bond Counsel Opinion Requirement. Prior to the Trustee entering into any Supplemental Indenture hereunder, the Authority shall deliver to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of this 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 gross income for purposes of federal income taxes. (e) Notice of Amendments. The Authority shall deliver or cause to be delivered a draft of any Supplemental Indenture to each rating agency which then maintains a rating on the Bonds, at least 10 days prior to the effective date of such Supplemental Indenture under this Section 9.01. SECTION 9.02. Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture under this Article IX, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Authority, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder 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 this 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 under this Article may, and if the Authority so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and presentation of his Bonds for the purpose at the Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority, to any modification or amendment 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 -28- 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 IX do not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by such Owner. ARTICLE X DEFEASANCE SECTION 10.01. Discharge of Indenture. Any or all of the Outstanding 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 premium (if any) on such 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 such Bonds; or (c) by delivering all of such Bonds to the Trustee for cancellation. If the Authority also pays or causes to be paid all other sums payable hereunder by the Authority, then and in that case, at the election of the Authority (evidenced by a Written Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to discharge all such indebtedness and this Indenture), and notwithstanding that any of such Bonds shall not have been surrendered for payment, this Indenture and the pledge of Authority Revenues and other assets made under this Indenture with respect to such Bonds and all covenants, agreements and other obligations of the Authority under this Indenture with respect to such Bonds shall cease, terminate, become void and be completely discharged and satisfied, subject to Section 10.02. In such event, upon the Written 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 to the Authority all moneys or securities or other property held by it under this Indenture which are not required for the payment of any of such Bonds not theretofore surrendered for such payment. The Trustee is entitled to conclusively rely on any such Written Certificate or Written Request and, in each case, is fully protected in relying thereon. 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 Bonds are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been -29- 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. Notwithstanding anything to the contrary in this Article X, in the event of defeasance of all Outstanding Bonds, such defeasance will not operate to discharge any of the following: (a) the obligation of the Trustee to transfer and exchange Bonds hereunder, (b) the obligation of the Authority to pay or cause to be paid to the Owners of such Bonds, from the amounts so deposited with the Trustee, all sums due thereon, and (c) the obligations of the Authority to compensate and indemnify the Trustee under Section 8.07. The Authority may at any time surrender to the Trustee, for cancellation by Trustee, 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 this 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 under this 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 given as provided in Article IV or provision 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, premium, if any, and all unpaid interest thereon to the redemption date; or (b) non -callable Federal Securities, the principal of and interest on which when due will, in the written opinion of an Independent Accountant filed with the City, the Authority and the Trustee, provide money sufficient to pay the principal of and interest and premium (if any) on the Bonds to be paid or redeemed, as such principal, interest and premium become due, provided that in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee has been made for the giving of such notice; -30- provided, in each case, that (i) the Trustee shall have been irrevocably instructed (by the terms of this Indenture or by Written Request of the Authority) to apply such money to the payment of such principal, interest and premium (if any) with respect to such Bonds, and (ii) the Authority shall have delivered to the Trustee an opinion of Bond Counsel to the effect that such Bonds have been discharged in accordance with this Indenture (which opinion may rely upon and assume the accuracy of the Independent Accountant's opinion referred to above). The Trustee shall be entitled to conclusively rely on such Written Request or opinion and shall be fully protected, in each case, in relying thereon. SECTION 10.04. Unclaimed Funds. Notwithstanding any provisions of this 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 years after the principal of all of the Bonds has become due and payable (whether at maturity or acceleration as provided in this Indenture), if such moneys were so held at such date, or two 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 this Indenture, 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 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 this Indenture or in the Bonds contained, the Authority is not required to advance any moneys derived from any source other than the Authority Revenues and other assets pledged under this Indenture for any of the purposes in this Indenture mentioned, whether for the payment of the principal of or interest on the Bonds or for any other purpose of this Indenture. Nevertheless, the Authority may, but is not required to, advance for any of the purposes hereof any funds of the Authority which may be made available to it for such purposes. SECTION 11.02. Limitation of Rights to Parties and Bond Owners. Nothing in this 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 City and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the City and the Owners of the Bonds. SECTION 11.03. Funds and Accounts. Any fund or account required by this 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 -31- 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. The Trustee may establish such funds and accounts as it deems necessary or appropriate to perform its obligations under this Indenture. SECTION 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in this 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 this Indenture any notice is required to be given by mail, such requirement may 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 this 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 this 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 this Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, and this 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 this 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 this Indenture may be held illegal, invalid or unenforceable. SECTION 11.07. Notices. All notices or communications to be given under this Indenture shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be effective either (a) upon transmission by facsimile transmission or other form of telecommunication, (b) 48 hours after deposit in the United States mail, postage prepaid, or (c) in the case of personal delivery to any person, including overnight mail and courier, upon actual receipt. The Authority, the City or the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. -32- If to the Authority or the City: If to the Trustee: City of Lodi 221 West Pine Street P.O. Box 333-6700 Lodi, California 95241-1910 Attention: City Manager MUFG Union Bank, N.A. 350 California Street 17th Floor San Francisco, CA 94104 Attention: Corporate Trust Fax: 415-273-2492 Email: Administration-CorporateTrust@unionbank.com SECTION 11.08. Evidence of Rights of Bond Owners. Any request, consent or other instrument required or permitted by this 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 this Indenture and shall be conclusive in favor of the Trustee and the Authority if made in the manner provided in this Section 11.08. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon. SECTION 11.09. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are known by the Trustee to be owned or held by or for the account of the Authority or the City, 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 the City 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 the City or any other obligor on the Bonds. In case of a dispute as to such right, the Trustee shall be entitled -33- to rely upon the advice of counsel in any decision by Trustee and shall be fully protected in relying thereon. Upon request, the Authority and the City shall specify to the Trustee those Bonds disqualified under this Section 11.09 and the Trustee may conclusively rely upon such certificate. SECTION 11.10. Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, premium, if any, or principal due on any date with respect to particular Bonds (or portions of Bonds in the case of 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 but without any liability for interest thereon. SECTION 11.11. Waiver of Personal Liability. No member, officer, agent or employee of the Authority shall be individually or personally liable for the payment of the principal of or interest or premium (if any) on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by this Indenture. SECTION 11.12. Successor Is Deemed Included in All References to Predecessor. Whenever in this Indenture either the Authority, the City 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 this Indenture contained by or on behalf of the Authority, the City or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. SECTION 11.13. Execution in Several Counterparts. This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. SECTION 11.14. Payment on Non -Business Day. In the event any payment is required to be made hereunder on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and with the same effect as if made on such preceding non -Business Day. SECTION 11.15. Governing Law. This Indenture shall be governed by and construed in accordance with the laws of the State of California. -34- IN WITNESS WHEREOF, the LODI PUBLIC FINANCING AUTHORITY has caused this Indenture to be signed in its name by its Executive Director and attested to by the City Clerk, and MUFG UNION BANK, N.A., in token of its acceptance of the trusts created hereunder, has caused this Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the day and year first above written. Attest: Jennifer M. Ferraiolo, City Clerk Approved as to form: Janice D. Magdich, City Attorney LODI PUBLIC FINANCING AUTHORITY By Stephen Schwabauer, Executive Director MUFG UNION BANK, N.A., as Trustee By Authorized Officer -35- APPENDIX A DEFINITIONS "Adjusted Annual Debt Service" means, for any Fiscal Year or any designated twelve-month period in question, the Annual Debt Service for such Fiscal Year or twelve-month period minus the sum of the amount of the Annual Debt Service with respect to Outstanding Parity Obligations to be paid during such Fiscal Year or twelve- month period from the proceeds of Parity Obligations or interest earned thereon (other than interest deposited into the Electric Revenue Fund), all as set forth in a Written Certificate of the City. "Adjusted Annual Net Revenues" means, for any Fiscal Year or any designated twelve-month period in question, the Adjusted Annual Revenues during such Fiscal Year or twelve-month period less the Maintenance and Operation Costs during such Fiscal Year or twelve-month period. "Adjusted Annual Revenues" mean, for any Fiscal Year or any designated twelve-month period in question, the Revenues during such Fiscal Year or twelve-month period plus (i) GHG Revenues during such Fiscal Year or twelve-month period, (ii) for the purposes of determining compliance with Section 7.13(b) of the Installment Purchase Agreement only, the amount of Available Reserves on deposit, or which the City has authorized to be deposited, in the Electric Revenue Fund as of the first day of such Fiscal Year or twelve-month period and (iii) for the purposes of determining compliance with Section 7.13(b) of the Installment Purchase Agreement only, the amount of Available Reserves on deposit in the Electric Utility Environmental Compliance Fund (or a successor fund) as of the first day of such Fiscal Year or twelve- month period. "Annual Budget" means, for each Fiscal Year, the budget for the Electric System for such Fiscal Year prepared by the City pursuant to Section 7.07 of the Installment Purchase Agreement. "Annual Debt Service" means, for any Fiscal Year or any designated twelve- month period in question, (i) with respect to the Installment Payments, the required payments scheduled to be made with respect to all Outstanding Installment Payments in such Fiscal Year or twelve-month period, provided that for the purpose of determining the Reserve Requirement, compliance with Section 7.13 of the Installment Purchase Agreement, and the conditions for the execution of Parity Obligations, clauses (C) and (D) below shall apply if any Payment Agreement is in effect with respect to any Outstanding Installment Payments; or (ii) with respect to Parity Obligations, the required payments scheduled to be made with respect to all Outstanding Parity Obligations in such Fiscal Year or twelve-month period provided, that for the purposes of determining compliance with Section 7.13 of the Installment Purchase Agreement and conditions for the execution of Parity Obligations: (A) Generally. Except as otherwise provided by subparagraph (B) with respect to Variable Interest Rate Parity Obligations, by subparagraph (C) with respect to Parity Obligations as to which a Payment Agreement is in force, and by subparagraph (D) with respect to certain Parity Payment Agreements, interest on any Parity Obligation shall be calculated based on the actual amount of interest that is payable under that Parity Obligation; A-1 (B) Interest on Variable Interest Rate Parity Obligations. The amount of interest deemed to be payable on any Variable Interest Rate Parity Obligation shall be calculated on the assumption that the interest rate on that Parity Obligation would be equal to the Assumed RBI -based Rate; (C) Interest on Installment Payments or Parity Obligations with Respect to Which a Payment Agreement is in Force. The amount of interest deemed to be payable on any Payment Agreement or Parity Obligations with respect to which a Payment Agreement is in force shall, so long as the Qualified Counterparty thereto is not in default thereunder, be based on the net economic effect on the City expected to be produced by the terms of such Payment Agreement or Parity Obligation and such Payment Agreement, including but not limited to the effects that (i) any such Parity Obligation which would, but for such Payment Agreement, be treated as an obligation bearing interest at a Variable Interest Rate instead shall be treated as an obligation bearing interest at a fixed interest rate, and (ii) any such Payment Agreement or Parity Obligation which would, but for such Payment Agreement, be treated as an obligation bearing interest at a fixed interest rate instead shall be treated as an obligation bearing interest at a Variable Interest Rate; and accordingly, the amount of interest deemed to be payable on any Payment Agreement or Parity Obligation with respect to which a Payment Agreement is in force shall, so long as the Qualified Counterparty thereto is not in default thereunder, be an amount equal to the amount of interest that would be payable at the rate or rates stated in such Payment Agreement or Parity Obligation plus the Payment Agreement Payments minus the Payment Agreement Receipts, and for the purpose of calculating Payment Agreement Receipts and Payment Agreement Payments under such Payment Agreement, the following assumptions shall be made: (1) Counterparty Obligated to pay Actual Variable Interest Rate on Variable Interest Rate Parity Obligations. If the Payment Agreement obligates a Qualified Counterparty to make payments to the City based on the actual Variable Interest Rate on a Parity Obligation that would, but for the Payment Agreement, be treated as a Variable Interest Rate Parity Obligation and obligates the City to make payments to the Qualified Counterparty based on a fixed rate, payments by the City to the Qualified Counterparty shall be assumed to be made at the fixed rate specified by the Payment Agreement and payments by the Qualified Counterparty to the City shall be assumed to be made at the actual Variable Interest Rate on such Parity ,Obligation, without regard to the occurrence of any event that, under the provisions of the Payment Agreement, would permit the Qualified Counterparty to make payments on any basis other than the actual Variable Interest Rate on such Parity Obligation, and such Parity Obligation shall set forth a debt service schedule based on that assumption; (2) Variable Interest Rate Parity Obligations and Payment Agreements Having the Same Variable Interest Rate Component. If both a Payment Agreement and the related Parity Obligation that would, but for the Payment Agreement, be treated as a Variable Interest Rate Parity Obligation include a variable interest rate payment component that is required to be calculated on the same basis (including, without limitation, A-2 on the basis of the same variable interest rate index), it shall be assumed that the variable interest rate payment component payable pursuant to the Payment Agreement is equal in amount to the variable interest rate component payable on such Parity Obligation; (3) Variable Interest Rate Parity Obligations and Payment Agreements Having Different Variable Interest Rate Components. If a Payment Agreement obligates either the City or the Qualified Counterparty to make payments of a variable interest rate component on a basis that is different (including, without limitation, on a different variable interest rate index) from the basis that is required to be used to calculate interest on the Parity Obligation that would, but for the Payment Agreement, be treated as a Variable Interest Rate Parity Obligation, it shall be assumed: (a) City Obligated to Make Payments Based on Variable Interest Rate Index. If payments by the City under the Payment Agreement are based on a variable interest rate index and payments by the Qualified Counterparty are based on a fixed interest rate, payments by the City to the Qualified Counterparty will be based upon an interest rate equal to the Assumed RBI - based Rate, and payments by the Qualified Counterparty to the City will be based on the fixed rate specified by the Payment Agreement; and (b) City Obligated to Make Payments Based on Fixed Interest Rate. If payments by the City under the Payment Agreement are based on a fixed interest rate and payments by the Qualified Counterparty are based on a variable interest rate index, payments by the City to the Qualified Counterparty will be based on an interest rate equal to the rate that is one hundred percent (100%) of the fixed interest rate specified by the Payment Agreement to be paid by the City, and payments by the Qualified Counterparty to the City will be based on a rate equal to the Assumed RBI -based Rate as the variable interest rate deemed to apply to the Variable Interest Rate Parity Obligation. (4) Certain Payment Agreements May be Disregarded. Notwithstanding the provisions of subparagraphs (C)(1), (2) and (3) of this definition, the City shall not be required to (but may at its option) take into account as set forth in subparagraph (C) of this definition (for the purpose of determining Annual Debt Service) the effects of any Payment Agreement that has a remaining term of ten (10) years or Tess; (D) Debt Service on Parity Payment Agreements. No interest shall be taken into account with respect to a Parity Payment Agreement for any period during which Payment Agreement Payments on that Parity Payment Agreement are taken into account in determining Annual Debt Service on a related Parity Obligation under subparagraph (C) of this definition; provided, that for any period during which Payment Agreement Payments are not taken into account in calculating Annual Debt Service on any Parity Obligation because the Parity A-3 Payment Agreement is not then related to any other Parity Obligation, interest on that Parity Payment Agreement shall be taken into account by assuming: (1) City Obligated to Make Payments Based on Fixed Interest Rate. If the City is obligated to make Payment Agreement Payments based on a fixed interest rate and the Qualified Counterparty is obligated to make payments based on a variable interest rate index, payments by the City will be based on the specified fixed rate, and payments by the Qualified Counterparty will be based on a rate equal to the average rate determined by the variable interest rate index specified by the Payment Agreement during the calendar quarter preceding the calendar quarter in which the calculation is made; and (2) City Obligated to Make Payments Based on Variable Interest Rate Index. If the City is obligated to make Payment Agreement Payments based on a variable interest rate index and the Qualified Counterparty is obligated to make payments based on a fixed interest rate, payments by the City will be based on an interest rate equal to the average rate determined by the variable interest rate index specified by the Payment Agreement during the calendar quarter preceding the calendar quarter in which the calculation is made, and the Qualified Counterparty will make payments based on the fixed rate specified by the Parity Payment Agreement; and (3) Certain Payment Agreements May be Disregarded. Notwithstanding the provisions of subparagraphs (D)(1) and (2) of this definition, the City shall not be required to (but may at its option) take into account (for the purpose of determining Annual Debt Service) the effects of any Payment Agreement that has a remaining term of ten (10) years or Tess; (E) Balloon Parity Obligations. For purposes of calculating Annual Debt Service on any Balloon Parity Obligations, it shall be assumed that the principal of those Balloon Parity Obligations shall be amortized in amounts which produce, together with interest thereon at a rate equal to the Assumed RBI - based Rate, equal annual installments of principal and interest over a term of thirty (30) years from the date of issuance. "Assumed RBI -based Rate" means, as of any date of calculation, an assumed interest rate equal to ninety percent (90%) of the average RBI during the twelve (12) calendar months immediately preceding the month in which the calculation is made. "Authority" means the Lodi Public Financing Authority, a joint exercise of powers authority duly organized and existing under the laws of the State of California. "Authority Revenues" means: (a) all of the Installment Payments, and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established under this Indenture. "Authorized Representative" means: (a) with respect to the Authority, its Chair, Executive Director, Treasurer, or Secretary, or any other person designated as an Authorized Representative of the Authority by a Written Certificate of the Authority A-4 signed by its Chair, Executive Director, Treasurer, or Secretary and filed with the City and the Trustee; and (b) with respect to the City, its Mayor, City Manager, Deputy City Manager, City Attorney, or any other person designated as an Authorized Representative of the City by a Written Certificate of the City signed by its Mayor, City Manager, Deputy City Manager, City Attorney and filed with the Authority and the Trustee. "Available Reserves" means, as of any date of calculation, the sum of the following: (i) The amount of unrestricted funds in the Electric Revenue Fund designated as "Available Reserves" for purposes of the Installment Purchase Agreement by the City and then available to pay Maintenance and Operation Costs and/or Annual Debt Service, which may include any funds which are legally available for deposit in the Electric Revenue Fund; and (ii) The amount of unrestricted funds in the Electric Utility Environmental Compliance Fund (or any successor fund) designated as "Available Reserves" for purposes of the Installment Purchase Agreement by the City and then available to pay Maintenance and Operation Costs and/or Annual Debt Service. "Balloon Parity Obligation" means any Parity Obligation described as such in such Parity Obligation. "Bond Counsel" means (a) Jones Hall, A Professional Law Corporation, or (b) any other attorney or firm of attorneys appointed by or acceptable to the City or the Authority of nationally -recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code. "Bond Fund" means the fund by that name established and held by the Trustee under Section 5.01. ["Bond Insurance Policy" means the issued by the Bond Insurer insuring the payment when due of the principal of and interest on the Bonds as provided therein.] ["Bond Insurer" means , as issuer of the Bond Insurance Policy or any successor or assign.] "Bond Law" means the provisions of Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code, as in effect on the Closing Date or as thereafter amended in accordance with its terms. "Bond Proceeds Fund" means the fund established and held by the Trustee pursuant to Section 3.02. "Bond Year" means each twelve-month period extending from September 2 in one calendar year to September 1 of the succeeding calendar year, both dates A-5 inclusive; except that the first Bond Year commences on the Closing Date and extends to and including September 1, 2018. "Bonds" means the $ aggregate principal amount of Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds authorized by and at any time Outstanding under this Indenture. "Business Day" means a day (other than a Saturday or a Sunday) on which banks are not required or authorized to remain closed in the City in which the Office of the Trustee is located. "City" means the City of Lodi, a municipal corporation organized and existing under the laws of the State of California. "City Transfers" means any payments from Revenues to the City for payments - in -lieu of taxes, transfers to the General Fund or similar payments but shall not include any item constituting a Maintenance and Operation Cost. "Closing Date" means the date of delivery of the Bonds to the Original Purchaser. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement, dated as of June 1, 2018, between the City and with respect to the Bonds. "Costs of Issuance" means all items of expense directly or indirectly payable by or reimbursable to the City or the Authority relating to the authorization, issuance, sale and delivery of the Bonds, including but not limited to: printing expenses; rating agency fees; filing and recording fees; initial fees, expenses and charges of the Trustee and its counsel, including the Trustee's first annual administrative fee; fees, charges and disbursements of attorneys, financial advisors, accounting firms, consultants and other professionals; fees and charges for preparation, execution and safekeeping of the Bonds; and any other cost, charge or fee in connection with the original issuance of the Bonds. "Costs of Issuance Fund" means the fund by that name established and held by the Trustee under Section 3.03. "Credit Agreement" means an agreement to reimburse a bank, bond insurance company or other provider of credit enhancement for the payment of the Installment Payments or Parity Obligations for amounts drawn under such credit enhancement and the interest thereon. "Depository" means (a) initially, DTC, and (b) any other Securities Depositories acting as Depository under Section 2.04. "Depository System Participant" means any participant in the Depository's book - entry system. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. A-6 "Electric Revenue Fund" means the Electric Utility Fund (or any successor fund) previously established by the City. "Electric Service" means the services, commodities, and products furnished, made available, or provided by the Electric System. "Escrow Agent" means The Bank of New York Mellon Trust Company, N.A., as escrow agent under the Escrow Agreement. "Escrow Agreement" means the Escrow Deposit and Trust Agreement, dated as of June 1, 2018, by and between the City and the Escrow Agent. "Event of Default" means any of the events specified in Section 7.01. "Existing Facilities" means the additions, betterments, modifications and improvements to the Electric System generally described in Exhibit 1 to the Installment Purchase Agreement. "Federal Securities" means: (a) any direct 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), the payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America; and (b) any obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. "Fiscal Year" means any twelve-month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve-month period selected and designated by the City as its official fiscal year period. "Fitch" means Fitch Ratings and its successors and assigns. "GHG Revenues" means amounts received by the City from the California Air Resources Board pursuant to the State of California's cap -and -trade program. "Generally Accepted Accounting Principles" means the uniform accounting and reporting procedures set forth in publications of the American Institute of Certified Public Accountants or its successor, or by any other generally accepted authority on such procedures selected by the Authority or City, and includes, as applicable, the standards set forth by the Governmental Accounting Standards Board or its successor. "Indenture" means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture under the provisions hereof. "Independent Accountant" means any certified public accountant or firm of certified public accountants appointed and paid by the Authority or the City, and who, or each of whom (a) is in fact independent and not under domination of the Authority or the City; (b) does not have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not connected with the Authority or the City as an officer or employee of the Authority or the City, but who may be regularly retained to make annual or other audits of the books of or reports to the Authority or the City. A-7 "Independent Engineer" means any registered engineer or firm of registered engineers of national reputation generally recognized to be well qualified in engineering matters relating to public electric utility systems, appointed and paid by the City, and who or each of whom (a) is in fact independent and not under the domination of the Authority or City; (b) does not have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not connected with the Authority or the City as an officer or employee of the Authority or the City but who may be regularly retained to make reports to the Authority or the City. "Installment Payment Date" means, with respect to any Interest Payment Date, the date five Business Days preceding such Interest Payment Date. "Installment Payments" means all payments required to be paid by the City on any date under Section 3.01 of the Installment Purchase Agreement, including any amounts payable upon delinquent installments and including any prepayment thereof under Section 9.02 of the Installment Purchase Agreement. "Installment Purchase Agreement" means the Installment Purchase Agreement dated as of June 1, 2018, between the City and the Authority, together with any duly authorized and executed amendments thereto. "Interest Account" means the account by that name established and held by the Trustee in the Bond Fund under Section 5.02. "Interest Payment Date" means each March 1 and September 1, commencing September 1, 2018, so long as any Bonds remain unpaid. "Maintenance and Operation Costs" mean the costs paid or incurred by the City for maintaining and operating the Electric System including, but not limited to, (a) all costs of electric energy and power generated or purchased by the City for resale, costs of transmission, fuel supply and water supply in connection with the foregoing, (b) all expenses of management and repair and other expenses necessary to maintain and preserve the Electric System in good repair and working order, (c) all administrative costs of the City that are charged directly or apportioned to the operation of the Electric System, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums (including payments required to be paid into any self-insurance funds not maintained from Revenues), (d) all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms hereof or of any resolution authorizing the execution of the Installment Purchase Agreement or of any resolution authorizing the issuance of any Parity Obligations or of such Parity Obligations, such as compensation, reimbursement and indemnification of the trustee, remarketing agent fees for Parity Obligations, and fees and expenses of Independent Accountants and Independent Engineers; (e) all amounts required to be paid by the City under contracts with a joint powers agency for the purchase of capacity, energy, transmission capability or any other commodity or service in connection with the foregoing, which contract requires payments to be made by the City thereunder to be treated as maintenance and operation costs of the Electric System; (f) all deposits to be made for rebate pursuant to the Tax Certificate and all deposits in comparable accounts established with respect to Parity Obligations required to be deposited pursuant to the proceedings authorizing such Parity Obligations; and (g) any other cost or expense which, in accordance with Generally Accepted Accounting Principles, is to be treated as A-8 a cost of operating or maintaining the Electric System; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor, amortization of intangibles and City Transfers. "Maximum Annual Debt Service" means, with respect to any Fiscal Year or any other period of twelve consecutive months, the greatest Annual Debt Service payable during such Fiscal Year or other period, as applicable, on the Outstanding Installment Payments and any Outstanding Parity Obligations or Parity Obligations then being issued. "Moody's" means Moody's Investors Service, its successors and assigns. "Net Payments" means the scheduled net payments to be made by the City pursuant to a Payment Agreement. "Net Revenues" means, for any period of time in question, the Revenues during such period less the Maintenance and Operation Costs during such period. "Nominee" means (a) initially, Cede & Co. as nominee of DTC, and (b) any other nominee of the Depository designated under Section 2.04(a). "Office" means the corporate trust office of the Trustee in San Francisco, California, or such other or additional offices as the Trustee may designate in writing to the Corporation from time to time as the corporate trust office for purposes of this Indenture; 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 corporation trust agency business is conducted. "Original Purchaser" means J.P. Morgan Securities LLC, as the original purchaser of the Bonds upon their delivery by the Trustee on the Closing Date. "Outstanding" means, (i) when used as of any particular time with reference to Bonds, means all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under this Indenture except: (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) 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 11.09; and (c) 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 under this Indenture, (ii) when used as of any particular time with reference to Installment Payments, all Installment Payments which have not been paid or otherwise satisfied as provided in Article IX of the Installment Purchase Agreement, and (iii) when used as of any particular time with reference to Parity Obligations means all Parity Obligations which have not been paid or otherwise satisfied as provided in the proceedings and instruments pursuant to which such Parity Obligations have been issued or incurred. For purposes of Section 6.01 and Section 7.13 of the Installment Purchase Agreement only, (i) Parity Payment Agreements related to other Parity Obligations which are included in determining Annual Debt Service on such other Parity Obligations, and (ii) Credit Agreements as to which no amounts have been drawn which have not been reimbursed by the City shall not be considered Outstanding for purposes of the Installment Purchase Agreement. A-9 "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. "Parity Obligations" means all obligations hereafter issued or incurred by the City, the payment of which constitutes a charge and lien on the Net Revenues and moneys in the Electric Revenue Fund equal to and on a parity basis with the charge and lien upon the Net Revenues and moneys in the Electric Revenue Fund for the payment of the Installment Payments. "Parity Payment Agreement" means a Payment Agreement that is a Parity Obligation. "Payment Agreement" means a written agreement for the purpose of managing or reducing the City's exposure to fluctuations in interest rates or for any other interest rate, investment, cash flow, asset or liability managing purposes, entered into either on a current or forward basis by the City and a Qualified Counterparty in connection with, or incidental to, the entering into of any Parity Obligation, that provides for an exchange of payments based on interest rates, ceilings or floors on such payments, options on such payments, or any combination thereof or any similar device. "Payment Agreement Payments" means the amounts required to be paid periodically by the City to the Qualified Counterparty pursuant to a Payment Agreement. "Payment Agreement Receipts" means the amounts required to be paid periodically by the Qualified Counterparty to the City pursuant to a Payment Agreement. "Permitted Investments" means any of the following which at the time of investment are determined by the Authority to be legal investments under the laws of the State of California for the moneys proposed to be invested therein (provided that the Trustee shall be entitled to rely conclusively upon any such determination by the Authority): (a) Federal Securities. (b) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any federal agencies whose obligations are backed by the full faith and credit of the United States of America. (c) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and which are rated in the highest short-term rating category by S&P (such funds may include funds for which the Trustee, its affiliates, parent or subsidiaries provide investment advisory or other management services) but excluding funds with a floating net asset value. (d) Certificates of deposit (including those of the Trustee, its parent and its affiliates) secured at all times by collateral described in (a) or (b) above, which have a maturity not greater than one year from the date of investment and which are issued by commercial banks, savings and loan associations or mutual savings banks whose short-term obligations are rated A or better by S&P, which collateral A-'10 must be held by a third party and provided that the Trustee must have a perfected first security interest in such collateral. (e) Certificates of deposit, savings accounts, deposit accounts or money market deposits (including those of the Trustee and its affiliates) which are fully insured by the Federal Deposit Insurance Corporation or secured at all times by collateral described in (a) or (b) above. (f) (g) Investment agreements with a financial institution the long-term debt or claims paying ability of which, or in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor or the institution is rated AA or better from S&P, by the terms of which the Trustee is permitted to withdraw the invested funds if the rating from S&P falls below AA. A repurchase agreement with any bank or trust company organized under the laws of any state of the United States or any national banking association (including the Trustee) having a minimum permanent capital of one hundred million dollars ($100,000,000) or government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York, which agreement has a term of no more than thirty (30) days and is secured by any one or more of the securities and obligations described in clauses (a) or (b) above, which shall have a market value (inclusive of accrued interest and valued at least weekly) equal to one hundred four percent (104%) of the amount of cash transferred by the Trustee to the bank, trust company, national banking association or bond dealer and at a level such that such repurchase agreement shall have a rating that is equal to or greater than the rating on the Bonds; such securities shall be lodged with the Trustee or other fiduciary, as custodian for the Trustee, by the bank, trust company, national banking association or bond dealer executing such repurchase agreement, and the entity executing each such repurchase agreement required to be so secured shall furnish the Trustee with an undertaking satisfactory to it that the aggregate market value of all such obligations securing each such repurchase agreement (as valued at least weekly) will be an amount equal to such required level and the Trustee shall be entitled to rely on each such undertaking. (h) The Local Agency Investment Fund which is administered by the California Treasurer for the investment of funds belonging to local agencies within the State of California, provided for investment of funds held by the Trustee, the Trustee is entitled to make investments and withdrawals in its own name as Trustee. "Principal Account" means the account by that name established and held by the Trustee in the Bond Fund under Section 5.02. A-11 "Qualified Counterparty" means a party (other than the City) who is the other party to a Payment Agreement and (1) (a) whose senior debt obligations are rated in one of the three highest rating categories of each of the Rating Agencies then rating the Bonds or any Parity Obligations (without regard to any gradations within a rating category), or (b) whose obligations under the Payment Agreement are guaranteed for the entire term of the Payment Agreement by a bond insurer or other institution which has been or whose debt service obligations have been assigned a credit rating in one of the three highest rating categories of each of the Rating Agencies then rating the Bonds or any Parity Obligations (without regard to any gradations within a rating category), and (2) who is otherwise qualified to act as the other party to a Payment Agreement with the City under any applicable laws. "Rating Agencies" means S&P and Moody's and their respective successors or assigns, or any other nationally recognized securities rating agency or agencies rating the Bonds or any Outstanding Parity Obligations at the Written Request of the City. "RBI" means the Bond Buyer Revenue Bond Index or comparable index of long- term municipal obligations chosen by the City, or, if no comparable index can be obtained, eighty percent (80%) of the LIBOR Index Rate. "Record Date" means, with respect to any Interest Payment Date, the 15th calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day. "Registration Books" means the records maintained by the Trustee under Section 2.05 for the registration and transfer of ownership of the Bonds. 2["Reserve Requirement" means with respect to the Bonds, as of any date of determination, the least of (a) ten percent (10%) of the initial offering price to the public of the Bonds as determined under the Code, or (b) the greatest Annual Debt Service with respect to the Installment Payments in any Fiscal Year during the period commencing with the Fiscal Year in which the determination is being made and terminating with the last Fiscal Year in which any Installment Payment is due, or (c) one hundred twenty-five percent (125%) of the sum of the Annual Debt Service with respect to the Installment Payments for all Fiscal Years during the period commencing with the Fiscal Year in which such calculation is made (or if appropriate, the first full Fiscal Year following the execution and delivery of the Bonds) and terminating with the last Fiscal Year in which any Installment Payment is due, divided by the number of such Fiscal Years, all as computed and determined by the City and specified in writing to the Trustee.] "Revenues" mean all gross income and revenue received or receivable by the City from the ownership or operation of the Electric System, including all rates and charges for the Electric Service and the other services and facilities of the Electric System, all proceeds of insurance covering business interruption loss relating to the Electric System and all other income and revenue howsoever derived by the City from the ownership or operation of the Electric System or otherwise arising from the Electric System, including all Payment Agreement Receipts, and all income from the deposit or investment of any money in the Electric Revenue Fund (provided that all Payment 2 To be deleted throughout if not required. A-12 Agreement Receipts and all income from the deposit or investment of any money in the Electric Revenue Fund shall be excluded from the definition of "Revenues" for purposes of Section 6.01(a) and Section 7.13 of the Installment Purchase Agreement), but excluding (i) proceeds of taxes and (ii) refundable deposits made to establish credit and advances or contributions in aid of construction and line extension fees. "S&P" means Standard & Poor's, a division of the McGraw Hill Companies, of New York, New York, its successors and assigns. "Securities Depositories" means DTC; 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 designates in written notice filed with the Trustee. "Subordinate Obligations" means obligations of the City authorized and executed by the City under applicable law, the payments under and pursuant to which are payable from Net Revenues, subject and subordinate to the payment of the Installment Payments hereunder and to the payment of Parity Obligations. Such obligations may be payable from any fund established for the purpose of paying debt service on such Subordinate Obligations. "Supplemental Indenture" means any indenture hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending this Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. "Tax Certificate" means the Certificate as to Arbitrage and Certificate Regarding Use of Proceeds, concerning certain matters pertaining to the use and investment of proceeds of the Bonds, executed and delivered by the Authority on the date of delivery of the Bonds, including any and all exhibits attached thereto. "Tax Code" means the Internal Revenue Code of 1986 in effect on the Closing Date or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the Closing Date, together with applicable temporary and final regulations promulgated, and applicable official public guidance published, under said Code. "Termination Payments" means the amount, if any, payable by the City pursuant to a Payment Agreement as the result of the termination of such Payment Agreement prior to its scheduled expiration date. "Trustee" means MUFG Union Bank, N.A., a national banking association organized and existing under the laws of the United States of America, or its successor or successors, as Trustee hereunder as provided in Article VIII. "Variable Interest Rate" means any variable interest rate or rates to be paid under any Parity Obligations, the method of computing which variable interest rate shall be as specified in the applicable Parity Obligation, which Parity Obligation shall also specify either (i) the payment period or periods or time or manner of determining such period or periods or time for which each value of such variable interest rate shall remain in effect, and (ii) the time or times based upon which any change in such variable interest rate shall become effective, and which variable interest rate may, without A-13 limitation, be based on the interest rate on certain bonds or may be based on interest rate, currency, commodity or other indices. "Variable Interest Rate Parity Obligations" means, for any period of time, all in accordance with the definition of "Annual Debt Service", any Parity Obligations that bear a Variable Interest Rate during such period, except that (i) Parity Obligations shall not be treated as Variable Interest Rate Parity Obligations if the net economic effect of interest rates on particular payments of the Parity Obligations and interest rates on other payments of the same Parity Obligations, as set forth in such Parity Obligations, or the net economic effect of a Payment Agreement with respect to particular Parity Obligations, in either case, is to produce obligations that bear interest at a fixed interest rate, and (ii) Installment Payments and Parity Obligations with respect to which a Payment Agreement is in force shall be treated as Variable Interest Rate Parity Obligations if the net economic effect of the Payment Agreement is to produce obligations that bear interest at a Variable Interest Rate. "Written Certificate," "Written Request" and "Written Requisition" of the Authority or the City mean, respectively, a written certificate, request or requisition signed in the name of the Authority or the City 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. A-14 APPENDIX B BOND FORM NO. R- ***$ UNITED STATES OF AMERICA STATE OF CALIFORNIA LODI PUBLIC FINANCING AUTHORITY 2018 ELECTRIC SYSTEM REVENUE REFUNDING BOND *** INTEREST RATE: MATURITY DATE: ORIGINAL ISSUE DATE: CUSIP September 1, , 2018 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: *** The LODI PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority duly organized and existing under the laws of the State of California (the "Authority"), for value received, hereby promises to pay to the Registered Owner specified above or registered assigns (the "Registered Owner"), on the Maturity Date specified, 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 (as hereinafter defined) next preceding the date of authentication of this Bond unless (i) this Bond is authenticated on or before an Interest Payment Date and after the close of business on the 15th day of the month preceding such interest payment date, in which event it shall bear interest from such Interest Payment Date, or (ii) this Bond is authenticated on or before August 15, 2018, in which event it shall bear interest from the Original Issue Date specified above; provided, however, that if at the time 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 March 1 and September 1 in each year, commencing September 1, 2018 (the "Interest Payment Dates"), calculated on the basis of a 360 -day year composed of twelve 30 -day months. Principal hereof is payable upon presentation and surrender hereof at the corporate trust office of MUFG UNION BANK, N.A., as trustee (the "Trustee"), in San Francisco, California, or such other place as designated by the Trustee (the "Trust Office"). Interest hereon is payable by check of the Trustee mailed on the applicable Interest Payment Date to the Registered Owner hereof at the Registered Owner's B-1 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 (a "Record Date"), or, upon written request filed with the Trustee as of such Record Date by a registered owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account in the United States designated by such registered owner in such written request. This Bond is not a debt of the City of Lodi (the "City"), the County of San Joaquin, the State of California, or any of its political subdivisions, and neither the City, said County, said State, nor any of its political subdivisions, 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. This Bond is one of a duly authorized issue of bonds of the Authority designated as the "Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds" (the "Bonds"), in an aggregate principal amount of $ all of like tenor and date (except for such variation, if any, as may be required to designate varying numbers, maturities or interest rates) and all issued under the provisions of Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Bond Law"), and under an Indenture of Trust dated as of 1, 2018, between the Authority and the Trustee (the "Indenture") and a resolution of the Authority adopted on . 2018, 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 security for the Bonds, and the rights thereunder of the owners of the Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of the Authority thereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and agrees. The Bonds maturing on or before September 1, 20_, are not subject to optional redemption prior to their respective stated maturity dates. The Bonds maturing on or after September 1, 20_, are subject to redemption in whole, or in part at the Written Request of the Authority among maturities on such basis as the Authority may designate and within a maturity as set forth in the Indenture, at the option of the Authority, on any date on or after September 1, 20_, from any available source of funds, at a redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus accrued interest to the date of redemption, without premium. The Bonds have been issued by the Authority to refinance an installment payment obligation incurred by the City to finance improvements to the electric distribution system of the City (the "Electric System"). The Bonds are special obligations of the Authority which are payable from and secured by a charge and lien on the Authority Revenues as defined in the Indenture, consisting principally of installment payments made by the City under an Installment Purchase Agreement dated as of 1, 2018, between the Authority and the City (the "Installment Purchase Agreement"). 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 of the Indenture to the payment of the principal of and interest and premium (if any) on the Bonds. B-2 The rights and obligations of the Authority and the owners of the Bonds may be modified or amended at any time in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment shall 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. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Trust Office, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon registration of such transfer, a new Bond or Bonds, of authorized denomination or denominations, for the same aggregate principal amount and of the same maturity will be issued to the transferee in exchange herefor. This Bond may be exchanged at the Trust Office for of the same tenor, aggregate principal amount, interest rate and maturity, of other authorized denominations. The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. Unless this Bond is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC") to the Authority or the Trustee for registration of transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. It is hereby certified by the Authority 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 Bond Law 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 prescribed by 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 is not entitled to any benefit under the Indenture or valid or obligatory for any purpose until the certificate of authentication hereon endorsed has been manually signed by the Trustee. B-3 IN WITNESS WHEREOF, the Lodi Public Financing Authority has caused this Bond to be executed in its name and on its behalf with the facsimile signature of its Chair and attested to by the facsimile signature of its Secretary, all as of the Original Issue Date specified above. LODI PUBLIC FINANCING AUTHORITY By: Chair Attest: Dated: Secretary CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within -mentioned Indenture. MUFG UNION BANK, N.A., as Trustee By: Authorized Signatory ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto whose address and social security or other tax identifying number is , the within -mentioned Bond and 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. hereby irrevocably Dated Signature Guaranteed Note: Signature guarantee shall be made by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee. B-4 Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. B-5 EXHIBIT C FORM OF INSTALLMENT PURCHASE AGREEMENT Jones Hall, APLC Draft 4/10/18 OPEN ITEMS: Necessity of reserve requirement and bond insurance. INSTALLMENT PURCHASE AGREEMENT by and between the CITY OF LODI, and the LODI PUBLIC FINANCING AUTHORITY Dated as of June 1, 2018 Relating to 2018 Electric System Revenue Refunding Bonds TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS; RULES OF INTERPRETATION SECTION 1.01. Definitions 3 ARTICLE II. REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.01. Purchase of Existing Facilities by Authority 3 SECTION 2.02. Sale of the Bonds 3 SECTION 2.03. Investment of Moneys in Funds Created Under Indenture 3 ARTICLE III. INSTALLMENT PAYMENTS AND PREPAYMENTS SECTION 3.01. Installment Payments 3 SECTION 3.02. Effect of Prepayment 4 SECTION 3.03. Prepayments and Bond Insurance. 4 ARTICLE IV. ELECTRIC SYSTEM REVENUES; FUNDS SECTION 4.01. Pledge of Net Revenues and Electric Revenue Fund 4 SECTION 4.02. Escrow Fund Error! Bookmark not defined. SECTION 4.03. Investments 6 ARTICLE V. BOND INSURANCE POLICY ARTICLE VI. PARITY OBLIGATIONS AND SUBORDINATE OBLIGATIONS SECTION 6.01. Conditions for the Execution of Parity Obligations 7 SECTION 6.02. Interest Rate Exchange Agreements 8 SECTION 6.03. Subordinate Obligations 8 ARTICLE VII. COVENANTS OF THE CITY SECTION 7.01. Compliance with Contract 8 SECTION 7.02. Distribution of Net Revenues 9 SECTION 7.03. Tax Covenants 9 SECTION 7.04. Against Encumbrances 10 SECTION 7.05. Sale or Other Disposition of Property 10 SECTION 7.06. Eminent Domain and Insurance Proceeds 1Q SECTION 7.07. Maintenance and Operation of the Electric System; Budgets 10 SECTION 7.08. Compliance with Contracts for use of the Electric System 10 SECTION 7.09. Insurance 11 SECTION 7.10. Accounting Records; Financial Statements and Other Reports 11 SECTION 7.11. Protection of Security and Rights of the Authority 12 SECTION 7.12. Payment of Taxes and Compliance with Governmental Regulations 12 -i- SECTION 7.13. Amount of Rates and Charges 12 SECTION 7.14. Collection of Rates and Charges 12 SECTION 7.15. Further Assurances 13 SECTION 7.16. Continuing Disclosure 13 SECTION 7.17. City Obligations to pay the Trustee 13 ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES SECTION 8.01. Events of Default 13 SECTION 8.02 Remedies on Default 14 SECTION 8.03. Non -Waiver 14 SECTION 8.04. Remedies Not Exclusive 15 SECTION 8.05. Application of Net Revenues Upon Acceleration 15 ARTICLE IX. DISCHARGE OF OBLIGATIONS SECTION 9.01. Security Deposit 16 SECTION 9.02. Optional Prepayment 16 SECTION 9.03. Accounting and Discharge Instruments 17 ARTICLE X. MISCELLANEOUS SECTION 10.01. Payment Liability of City Limited 17 SECTION 10.02. Amendments 17 SECTION 10.03. Assignment of Contract 18 SECTION 10.04. Benefits of Contracts Limited to Parties 18 SECTION 10.05. Successor is Deemed Included in all References to Predecessor 18 SECTION 10.06. Waiver of Personal Liability 18 SECTION 10.07. Article and Section Heading. Gender and References 19 SECTION 10.08. Partial Invalidity 19 SECTION 10.09. Net Contract 19 SECTION 10.10. California Law 19 SECTION 10.11. Indemnification 19 SECTION 10.12. Funds 20 SECTION 10.13. Notices 20 SECTION 10.14. Effective Date 20 SECTION 10.15. Execution in Counterpart 20 APPENDIX A EXHIBIT 1 SCHEDULE OF INSTALLMENT PAYMENTS AS OF DELIVERY DATE DESCRIPTION OF EXISTING FACILITIES -u- INSTALLMENT PURCHASE AGREEMENT This INSTALLMENT PURCHASE AGREEMENT made and entered into as of June 1, 2018 (this "Installment Purchase Agreement"), by and between the CITY OF LODI, a municipal corporation duly organized and existing under and by virtue of the laws of the State of California (the "City"), and the LODI PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the State of California (the "Authority"), WITNESSETH: WHEREAS, the City owns and operates facilities and property for the distribution of electricity within the service area of the City (the "Electric System") to furnish its inhabitants with light and power; and WHEREAS, the City previously entered into an Installment Purchase Contract, dated as of July 1, 2008 (the "2008 Installment Purchase Contract") with the Lodi Public Improvement Corporation (the "Corporation"), pursuant to which the City agreed to make certain installment payments in the aggregate principal amount of $60,685,000 (the "2008 Installment Payments"), and caused execution and delivery of Electric System Revenue Certificates of Participation, 2008 Series A (the "2008 Certificates"), pursuant to a Trust Agreement, dated as of July 1, 2008 (the "2008 Trust Agreement"), between the Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2008 Trustee"), all for the purpose of (i) currently refunding the then - outstanding $46,760,000 principal amount of Electric System Revenue Certificates of Participation 2002 Series A Variable Rate Certificates (the "2002 Certificates"), (ii) paying costs of delivery of the 2008 Certificates, (iii) funding certain costs relating to termination of the swap agreement relating to the 2002 Certificates, (iv) purchasing a financial guaranty insurance policy for the 2008 Certificates, and (v) funding a reserve fund for the 2008 Certificates; and WHEREAS, the proceeds of the 2002 Certificates were used to refund, on an advance basis, the 1999 Series A Current Interest Certificates and the 1999 Series B Capital Appreciation Certificates (together, the 1999 Obligations"). The proceeds of the 1999 Obligations were used to finance the Existing Facilities relating to the Electric System; and WHEREAS, pursuant to Section 3.02 of the 2008 Installment Purchase Contract, the City has the right to prepay the 2008 Installment Payments. Pursuant to Section 2.04 of the 2008 Trust Agreement, the 2008 Certificates with a maturity date of July 1, 2019 and thereafter are subject to prepayment from prepayments of 2008 Installment Payments made at the option of the City on and after July 1, 2018, at a prepayment price equal to the principal amount of the 2008 Certificates to be prepaid plus accrued but unpaid interest thereon to the prepayment date, without premium; and WHEREAS, the City proposes to refinance the City' s obligations to make the 2008 Installment Payments and the related 2008 Certificates maturing on and after July 1, 2019 for the purpose of achieving savings for the benefit of the customers of the Electric System; and WHEREAS, pursuant to Section 9.01 of the 2008 Installment Purchase Contract, all obligations of the City with respect to the 2008 Installment Payments shall cease and terminate (except for the obligation to make payment from deposited funds and Defeasance Securities (as defined in the 2008 Trust Agreement) as provided in Article VIII of the 2008 Trust Agreement) when the 2008 Certificates have been paid or deemed paid in accordance with Article VIII of the 2008 Trust Agreement; and WHEREAS, the Authority has been formed for the purpose of assisting the City in the financing and refinancing of public capital improvements; and WHEREAS, the Authority has agreed to assist the City by acquiring the Existing Facilities as herein provided and selling the Existing Facilities to the City on the terms and conditions set forth herein; and WHEREAS, the Authority will raise funds that are sufficient (along with other available City funds) for the payment and prepayment of the 2008 Installment Payments and, as a result, the defeasance and prepayment of the 2008 Certificates, by issuing its Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds in the aggregate principal amount of $ (the "Bonds") under an Indenture of Trust dated as of June 1, 2018 (the "indenture"), between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee"); and WHEREAS, the Bonds are payable from revenues consisting primarily of Installment Payments payable by the City hereunder; and WHEREAS, in the City's obligation to make the Installment Payments is secured by a pledge of and lien on the Net Revenues (as defined in the Indenture) of the Electric System; and WHEREAS, the City and the Authority have duly authorized the execution of this Installment Purchase Agreement; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Installment Purchase Agreement do exist, have happened and have been performed in regular and due time, 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 HEREBY AGREE AS FOLLOWS: -2- ARTICLE I DEFINITIONS; RULES OF INTERPRETATION SECTION 1.01. Definitions. Unless the context otherwise requires, capitalized terms used in this Installment Purchase Agreement 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 given such terms in the Indenture, such definitions to be equally applicable to both the singular and plural forms of any of the defined terms. ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.01. Purchase of Existing Facilities by Authority. In consideration of the application of the proceeds of the Bonds as provided in Section 3.02 of the Indenture, the City hereby sells, assigns, and transfers to the Authority, and the Authority hereby purchases from the City, all of the City's right, title and interest in the Existing Facilities. In consideration of the agreement of the City to make the Installment Payments as provided in Section 3.01 hereof, the Authority hereby sells, assigns, and transfers to the City, and the City hereby purchases from the Authority, all of the Authority's right, title and interest in the Existing Facilities. SECTION 2.02. Sale of the Bonds. In order to provide funds for the refunding of the 2008 Certificates, the Authority, as soon as practicable after the execution of this Installment Purchase Agreement, will cause the sale and delivery of the Bonds to the Original Purchaser thereof and pay the proceeds thereof to Trustee who shall deposit the proceeds of such sale received by the Trustee as provided in Section 3.02 of the Indenture. SECTION 2.03. Investment of Moneys in Funds Created Under Indenture. Any moneys held as a part of the Bond Fund or any other fund created pursuant to the Indenture shall be invested or reinvested by Trustee as provided in Section 5.07 of the Indenture. The City approves and agrees with the investment provisions of the Indenture. The City acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority or the City the right to receive brokerage confirmations of security transactions as they occur, the City specifically waives receipt of such confirmations to the extent permitted by law. ARTICLE III INSTALLMENT PAYMENTS AND PREPAYMENTS; SECTION 3.01. Installment Payments. The City shall, subject to any rights of prepayment provided in Section 9.02 hereof and the exercise of any remedies under -3- Article VIII hereof, pay the Authority the Installment Payments at the times and in the amounts set forth in Schedule A hereto as the purchase price for the Existing Facilities. The obligation of the City to pay the Installment Payments is, subject to Section 10.01 hereof, absolute and unconditional, and until such time as the Installment Payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to Article IX hereof), the City will not discontinue or suspend any Installment Payments required to be paid by it under this section when due, whether or not the Electric System or any part thereof (including the Existing Facilities) is operating or operable, or its use is suspended, interfered with, reduced, curtailed or terminated in whole or in part, and such Installment Payments shall not be subject to reduction whether by offset, abatement or otherwise and shall not be conditional upon the performance or nonperformance by any party to any agreement or for any other cause whatsoever. SECTION 3.02. Effect of Prepayment. If the City prepays all remaining Installment Payments in full under Section 9.02, the City's obligations under this Installment Purchase Agreement will thereupon cease and terminate, including but not limited to the City's obligation to pay Installment Payments therefor under Section 3.01; provided, however, that the City's obligations to compensate and indemnify the Trustee under Section 10.11 will survive such prepayment. If the City prepays the Installment Payments in part but not in whole under Section 9.02, the principal component of each succeeding Installment Payment will be reduced as provided in such Section, and the interest component of each remaining Installment Payment will be reduced by the aggregate corresponding amount of interest which would otherwise be payable with respect to the Bonds thereby redeemed under the applicable provisions of Section 4.01 of the Indenture. [SECTION 3.03. Prepayments and Bond Insurance. In the event that a draw is made on the Bond Insurance Policy, the City shall not make any prepayments of Installment Payments pursuant to Section 9.02 hereof unless all amounts owed by the City to the Bond Insurer have been paid in full pursuant to the terms of the Bond Insurance Policy.] ARTICLE IV ELECTRIC SYSTEM REVENUES; FUNDS SECTION 4.01. Pledge of Net Revenues and Electric Revenue Fund. (a) Subject to the application thereof on the terms and conditions and for the purposes herein provided, all Net Revenues of the Electric System and all moneys on deposit in the Electric Revenue Fund are hereby irrevocably pledged to the payment of the Installment Payments and the compensation and indemnification payable to the Trustee pursuant to Section 7.17, which pledge shall be on a parity with any pledge of Net Revenues or of moneys in the Electric Revenue Fund securing Parity Obligations as to which the provisions of Section 6.01 hereof have been satisfied. This pledge shall constitute a first pledge of and charge and lien upon the Net Revenues of the Electric System and moneys in the Electric Revenue Fund for the payment of amounts due with respect to the Installment Payments and all Parity Obligations in accordance with the terms hereof and thereof. -4- The general fund of the City is not liable for, and neither the faith and credit nor the taxing power of the City is pledged to, the payment of the Installment Payments. (b) In order to carry out and effectuate the obligation of the City contained herein to pay the Installment Payments, the City agrees and covenants that all Revenues received by it shall be deposited when and as received in the Electric Revenue Fund which fund has heretofore been established by the City and which fund the City agrees and covenants to maintain separate and apart from other funds of the City so long as any Installment Payment remains Outstanding hereunder. All money on deposit in the Electric Revenue Fund shall be applied, transferred and used only as provided below and in the following order of priority with any deficiency in any required deposit to be rectified before making any deposit of a lower priority: (i) To the payment of the Maintenance and Operation Costs then due and payable and the establishment of a reasonable contingency reserve for Maintenance and Operation Costs. (ii) On or before each Installment Payment Date, a sum equal to the Installment Payment becoming due and payable on such date shall be transferred to the Bond Fund. On or before each date (other than an Installment Payment Date) on which an Installment Payment becomes due and payable hereunder (whether by prepayment pursuant to Section 9.02, acceleration pursuant to Section 8.02 or otherwise), a sum equal to the Installment Payment becoming due and payable on such date shall be transferred to the Bond Fund. Notwithstanding the foregoing provisions of this subsection (ii), no such deposits to the Bond Fund need be made by the City from the Electric Revenue Fund to the extent the Trustee then holds in the Bond Fund sufficient available funds to pay the Installment Payment to be paid with such deposit. In addition, on or before each due date therefor under the instruments and proceedings pursuant to which Parity Obligations have been issued or incurred, the sum or sums required to be paid or deposited in a debt service or other payment fund or account with respect to principal, premium, if any, and interest on Parity Obligations (or in the case of Parity Payment Agreements, the scheduled Net Payments due) shall be transferred or paid according to the terms of such instruments or proceedings. All transfers and payments to be made pursuant to this subsection (ii) shall be made without preference or priority, and in the event of any insufficiency of such moneys shall be transferred or paid ratably without any discrimination or preference. [(iii) On each Interest Payment Date, that sum, if any, necessary to restore the Reserve Fund to an amount equal to the Reserve Fund Requirement. In addition,] To the extent required by the instruments and proceedings pursuant to which Parity Obligations have been issued or incurred, to any applicable debt service reserve fund or account for any Parity Obligations for which a separate reserve has been established in accordance with Section 6.01(e), the sum or sums, if any, equal to the amount required to be deposited therein in accordance with the terms of such Parity Obligations (other than interest on draws on debt service reserve fund sureties or financial guarantees for such debt service reserves). All transfers and payments to be made pursuant to this subsection (iii) shall be made without preference or priority, and in the event of any insufficiency of such moneys shall be transferred or paid ratably without any discrimination or preference.] -5- (iv) To the extent required by the instruments and proceedings pursuant to which Parity Obligations have been issued or incurred, to the payment when due of any interest then due on amounts drawn under any debt service reserve fund surety or guarantee for any Parity Obligations for which a separate debt service reserve has been established pursuant to Section 6.01 (e). All transfers and payments to be made pursuant to this subsection (iv) shall be made without preference or priority, and in the event of any insufficiency of such moneys shall be transferred or paid ratably without any discrimination or preference. [(v) To the payment of any amounts due to the Bond Insurer not provided by (i), (ii), (iii) or (iv) above;] (vi) To the payment when due of any amounts due under a Credit Agreement to the extent not required to be paid as principal or interest pursuant to subsection (ii) above. (vii) To the payment when due of any Termination Payment payable by the City upon the termination of a transaction under a Parity Payment Agreement before its scheduled termination date. (viii)To the payment of any Subordinate Obligations in accordance instruments and proceedings pursuant to which such Subordinate Obligations have been authorized. (ix) To the making of City Transfers. (x) To any other lawful purpose of the City. SECTION 4.02. Investments. Any moneys held in the Electric Revenue Fund shall be invested in any lawful investment, including by not limited to any Permitted Investments, which will, as nearly as practicable, mature on or before the dates when such moneys are anticipated to be needed for disbursement hereunder. All investment earnings from moneys or deposits in the Electric Revenue Fund shall be credited in such fund and applied only to the purposes permitted for such fund. The City may commingle any of the moneys in Electric Revenue Fund with the moneys held in other funds or accounts (except for moneys held in any rebate fund, which shall be held separately) for investment purposes only; provided however, that all moneys in the Electric Revenue Fund shall be accounted for separately notwithstanding such commingling. '[ARTICLE V BOND INSURANCE POLICY] 1 To be added in consultation with Insurer if insurance will be obtained. -6- ARTICLE VI PARITY OBLIGATIONS AND SUBORDINATE OBLIGATIONS SECTION 6.01. Conditions for the Execution of Parity Obligations. The City may at any time execute and deliver any Parity Obligation, the payment of which is payable from and secured by a lien and charge on the Net Revenues and amounts in the Electric Revenue Fund on a parity with payment of the Installment Payments and the lien and charge on Net Revenues and amounts in the Electric Revenue Fund securing the Installment Payments provided: (a) With respect to a Parity Obligation other than a Parity Payment Agreement or a Credit Agreement: (i) during any twelve (12) consecutive calendar months out of the immediately preceding eighteen (18) calendar month period, the Adjusted Annual Net Revenues were at least equal to one hundred twenty percent (120%) of the Maximum Annual Debt Service for all Outstanding Installment Payments and all Outstanding Parity Obligations; and (ii) as evidenced by a Certificate of the City or an Engineer' s Report on file with the City, the projected Adjusted Annual Net Revenues during each of the succeeding five (5) complete Fiscal Years beginning with the first Fiscal Year following issuance of the Parity Obligation proposed to be executed in which interest thereon is not capitalized in whole from the proceeds of Parity Obligations, is at least equal to one hundred twenty percent (120%) of the Maximum Annual Debt Service for all Outstanding Installment Payments and all Outstanding Parity Obligations plus the Parity Obligation proposed to be executed. (b) If the Parity Obligation proposed to be executed is not a Parity Payment Agreement, the proceeds of such Parity Obligation shall be used solely to finance or refinance (including reimbursement to the City of amounts advanced for such costs) one or more additions, betterments, improvements to, or other capital assets of, the Electric System as designated by the City and to pay any incidental costs and expenses related thereto (including the costs of issuance, execution or delivery of such proposed Parity Obligation and the funding of a debt service reserve fund). (c) With respect to any Parity Obligation proposed to be executed which is a Parity Payment Agreement or a Credit Agreement, there shall have been delivered to the City evidence that the incurrence of such Parity Payment Agreement or Credit Agreement will not in and of itself cause a downgrade of the rating issued by the Rating Agencies then rating the Bonds or any Parity Obligation then outstanding. (d) There shall have been delivered to the City an Opinion of Counsel substantially to the effect that (1) subject to standard exceptions and qualifications, the Parity Obligation is a valid and binding special obligation of the City, and (2) such Parity Obligation has been duly and validly authorized, executed and delivered in accordance herewith. -7- (e) If required by the terms of such Parity Obligation, a separate reserve has been established for such Parity Obligation and that provision has been made to fund such reserve. Notwithstanding the foregoing provisions, neither clause (a) nor clause (b) above shall limit the ability of the City to execute any Parity Obligations at any time to refund any Outstanding Installment Payments or Outstanding Parity Obligations, in each case which results in a net present value savings to the City, inclusive of all costs of such refunding. SECTION 6.02. Interest Rate Exchange Agreements. Each interest rate exchange agreement, including each Parity Payment Agreement (each an "Interest Rate Exchange Agreement") entered into by the City shall meet the conditions set forth in this Section. The Interest Rate Exchange Agreement (i) must be entered into to manage interest costs related to, or a hedge against (a) assets then held, or (b) debt then outstanding, or (c) debt reasonably expected to be issued within the next twelve (12) months, and (ii) shall not contain any leverage element or multiplier component greater than 1.0x unless there is a matching hedge arrangement which effectively off -sets the exposure from any such element or component. So long as the Bond Insurance Policy remains in effect and the Bond Insurer is not in default of its obligations thereunder, the City shall not terminate an Interest Rate Exchange Agreement unless it demonstrates to the satisfaction of the Bond Insurer prior to the payment of any such termination amount that such payment will not cause the City to be in default under this Installment Purchase Agreement, including but not limited to, any monetary obligations hereunder. All counterparties or guarantors to the Interest Rate Exchange Agreement must have a rating of at least "A-" or "A3" by S&P and Moody's. If the counterparty or guarantor's rating falls below "A-" or "A3" by either S&P or Moody's, the counterparty or guarantor shall execute a credit support annex to the Interest Rate Exchange Agreement, which credit support annex shall be acceptable to the Bond Insurer. If the counterparty or the guarantor's long term unsecured rating falls below "Baal" or "BBB+" by either Moody's or S&P, a replacement counterparty or guarantor, acceptable to the Bond Insurer, shall be required. SECTION 6.03. Subordinate Obligations. The City may incur Subordinate Obligations without meeting any of the tests set forth in Section 6.01. ARTICLE VII COVENANTS OF THE CITY SECTION 7.01. Compliance with Installment Purchase Agreement. The City will punctually pay the Installment Payments in strict conformity with the terms hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, and will not terminate this Installment Purchase Agreement or fail to make any payment required by this 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 all or a portion of the Electric System, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either or any failure of the Authority to observe or perform any agreement, condition, covenant or term contained in this -8- Installment Purchase Agreement required to be observed and performed by it, whether express or implied, or any duty, liability or obligation arising out of or connected with this Installment Purchase Agreement 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, lockouts, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities. SECTION 7.02. Distribution of Net Revenues for Debt Service. The City hereby covenants that it will distribute Net Revenues available for Outstanding Installment Payments and debt service on all Outstanding Parity Obligations on a pro rata basis without regard to whether each such Parity Obligation has a funded debt service reserve or a surety bond or other similar funding instrument. SECTION 7.03. Tax Covenants. (a) Private Business Use Limitation. The City shall assure that the proceeds of the Bonds are not used in a manner which would cause the Bonds to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code. (b) Federa[ Guarantee Prohibition. The City may not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Tax Code. (c) No Arbitrage. The City may not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds or of any other obligations which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date, would have caused the Bonds to be "arbitrage bonds" within the meaning of Section 148(a) of the Tax Code. (d) Maintenance of Tax Exemption. The City shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date. (e) Rebate of Excess Investment Earnings to United States. The City shall calculate or cause to be calculated the excess investment earnings in all respects at the times and in the manner required under the Tax Code. The City shall pay the full amount of excess investment earnings to the United States of America in such amounts, at such times and in such manner as may be required under the Tax Code. Such payments shall be made by the City from any source of legally available funds of the City. The City shall keep or cause to be kept and retain or cause to be retained for a period of six years following the retirement of the Bonds, records of the determinations made under this subsection (e). In order to provide for the administration of this subsection (e), the City may provide for the employment of independent attorneys, accountants and consultants compensated on such reasonable basis as the City may deem appropriate. The Trustee has no duty or obligation to monitor or enforce compliance by the City of any of the requirements under this subsection (e). -9- SECTION 7.04. Against Encumbrances. The City will pay or cause to be paid when due all sums of money that may become due or purporting to be due for any labor, services, materials, supplies or equipment furnished, or alleged to have been furnished, to or for the City in, upon, about or relating to the Electric System and will keep the Electric System free of any and all liens against any portion of the Electric System. In the event any such lien attaches to or is filed against any portion of the Electric System, the City will cause each such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that if the City desires to contest any such lien it may do so if contesting such lien will not materially impair operation of the Electric System. If any such lien shall be reduced to final judgment and such judgment or any process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and such stay thereafter expires, the City will forthwith pay or cause to be paid and discharged such judgment. The City will, to the maximum extent permitted by law, indemnify and hold the Authority harmless from, and defend it against, any claim, demand, loss, damage, liability or expense (including attorneys' fees) as a result of any such lien or claim of lien against any portion of the Electric System. SECTION 7.05. Sale or Other Disposition of Property. The City will not sell, transfer or otherwise dispose of any of the works, plant, properties, facilities or other part or rights of the Electric System or any real or personal property comprising a part of the Electric System if such sale, transfer or disposition would cause the City to be unable to satisfy the requirements of Section 7.13 hereof. SECTION 7.06. Eminent Domain and Insurance Proceeds. If all or any part of the Electric System shall be taken by eminent domain proceedings, or if the City receives any insurance proceeds resulting from a casualty loss to the Electric System, the Net Proceeds thereof, at the option of the City, shall be applied either to the proportional prepayment of Outstanding Installment Payments hereunder and Outstanding Parity Obligations or shall be used to substitute other components for the condemned or destroyed components of the Electric System. SECTION 7.07. Maintenance and Operation of the Electric System; Budgets. The City will maintain and preserve the Electric System in good repair and working order at all times and will operate the Electric System in an efficient and economical manner and will pay all Maintenance and Operation Costs as they become due and payable. On or before July 1 of each Fiscal Year, the City Council of the City shall adopt a budget for the Electric System for such Fiscal Year setting forth the estimated Maintenance and Operation Costs for such Fiscal Year and all Installment Payments required to be made hereunder and all payments coming due in such Fiscal Year with respect to Parity Obligations and Subordinate Obligations. If requested, the City will file with the Authority and the Bond Insurer, not later than October 1 of each year, a cover letter, signed by an authorized officer of the City stating that all Installment Payments required by this Installment Purchase Agreement have been included in the Annual Budget for the then current Fiscal Year. The Annual Budget may be amended at any time during any Fiscal Year and such amended budget shall be filed by the City with the Authority and the Bond Insurer. SECTION 7.08. Compliance with Contracts for use of the Electric System. The City will comply with, keep, observe and perform all agreements, conditions, covenants and terms, express or implied, required to be performed by it contained in all contracts -10- for the use of the Electric System and all other contracts affecting or involving the Electric System to the extent that the City is a party thereto. SECTION 7.09. Insurance. The City shall maintain insurance covering risks (including, without limitation, property and casualty, general liability and public officials errors and omissions) with respect to the Electric System in amounts as customarily maintained by electric utilities of similar size and conducting similar operations as the City. All insurers must be rated at least "A" by A.M. Best or S&P. Any policy of insurance required under this Section 7.09 may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. If requested, the City shall file evidence of all insurance policies maintained under this Section at least annually with the Authority and the Trustee. SECTION 7.10. Accounting Records; Financial Statements and Other Reports. (a) The City will keep appropriate accounting records in which complete and correct entries shall be made of all transactions relating to the Electric System which records shall be available for inspection by the Authority and the Bond Insurer at reasonable hours and under reasonable conditions. (b) The City will prepare and file with the Authority and the Bond Insurer annually within two hundred ten (210) days after the close of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2018): (i) financial statements of the City for such Fiscal Year prepared in accordance with Generally Accepted Accounting Principles, together with an Accountant's Report thereon; and (ii) a detailed report as to all insurance policies maintained and self- insurance programs maintained by the City with respect to the Electric System as of the close of such Fiscal Year, including the names of the insurers which have issued the policies and the amounts thereof and the property or risks covered thereby. (iii) prior to issuing additional Parity Obligations, any disclosure document or financing agreement pertaining to such additional Parity Obligations, which disclosure document or financing agreement shall include, without limitation, the applicable maturity schedule, interest rate or rates, redemption and security provisions pertaining to any such additional Parity Obligations; (iv) immediate notice of any draw on the Reserve Fund; (v) within thirty (30) days following any judgment or administrative ruling that may have a material adverse effect on the financial position of the Electric System notice of such judgment or administrative ruling; and (vi) copies of all continuing disclosure filings with national recognized municipal securities repositories with respect to the City. -11- SECTION 7.11. Protection of Security and Rights of the Authority. The City will preserve and protect the security of the Installment Payments under this Installment Purchase Agreement and the rights of the Authority to the Installment Payments under this Installment Purchase Agreement and will warrant and defend such rights against all claims and demands of all persons. SECTION 7.12. Payment of Taxes and Compliance with Governmental Regulations. The City will pay and discharge all taxes, assessments and other governmental charges which may hereafter be lawfully imposed upon the Electric System or any part thereof when the same shall become due. The City will duly observe and conform with all valid regulations and requirements of any governmental authority relative to the operation of the Electric System or any part thereof, but the City shall not be required to comply with any regulations or requirements so long as the validity or application thereof shall be contested in good faith and contesting such validity or application will not materially impair the operations or financial condition of the Electric System. SECTION 7.13. Amount of Rates and Charges. The City will at all times fix, prescribe and collect rates and charges for the services, facilities and electricity of the Electric System during each Fiscal Year which will be at least sufficient to yield: (a) Adjusted Annual Revenues for such Fiscal Year at least equal to the sum of the following for such Fiscal Year: (i) Maintenance and Operation Costs; (ii) Adjusted Annual Debt Service with respect to the Installment Payments and Parity Obligations, and (iii) all other payments required to meet any other obligations of the City which are charges, liens or encumbrances upon or payable from the Electric Revenue Fund, including all amounts owed to any issuer of a surety bond credited to a debt service reserve for Parity Obligations then in effect; (b) Adjusted Annual Net Revenues for such Fiscal Year equal to at least one hundred twenty percent (120%) of Adjusted Annual Debt Service with respect to the Installment Payments and Parity Obligations for such Fiscal Year. For the avoidance of doubt, as used in this Section 7.13(b) but not for other purposes of this Installment Purchase Agreement, the definition of "Adjusted Annual Net Revenues" includes (i) the amount of Available Reserves on deposit, or which the City has authorized to be deposited, in the Electric Revenue Fund as of the first day of the relevant Fiscal Year and (ii) the amount of Available Reserves on deposit in the Electric Utility Environmental Compliance Fund (or successor fund) as of the first day of the relevant Fiscal year. The City may make adjustments from time to time in such fees and charges and may make such classifications thereof as it deems necessary but shall not reduce the rates and charges then in effect unless the Revenues and the Adjusted Annual Net Revenues from such reduced rates and charges will at all times be sufficient to meet the requirements of this Section. SECTION 7.14. Collection of Rates and Charges. The City will have in effect at all times rules and regulations requiring each consumer or customer located on any -12- premises connected with the Electric System to pay the rates and charges applicable to the Electric Service provided to such premises and providing for the billing thereof and for a due date and a delinquency date for each bill. The City will not permit any part of the Electric System or any facility thereof to be used or taken advantage of free of charge by any corporation, firm or person, or by any public agency (including the United States of America, the State of California and any city, county, district, political subdivision, public corporation or agency of any thereof). Nothing herein shall prevent the City, in its sole and exclusive discretion, from permitting other parties from selling electricity to retail customers within the service area of the Electric System; provided, however, that permitting such sales shall not relieve the City of its obligations hereunder. SECTION 7.15. Further Assurances. The City will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Installment Purchase Agreement and for the better assuring and confirming unto the Authority of the rights and benefits provided to it in this Installment Purchase Agreement. SECTION 7.16. Continuing Disclosure. The City hereby covenants and agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure Agreement. Notwithstanding any other provision of this Installment Purchase Agreement, failure of the City to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default hereunder and the Authority shall have no right to accelerate amounts due hereunder as a result thereof; provided, however, that the Bond Insurer or any Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City or the Trustee, as the case may be, to comply with its obligations in this Section and the Continuing Disclosure Agreement. SECTION 7.17. City Obligations to Pay the Trustee. The City agrees to pay all amounts payable to the Trustee pursuant to Section 8.07 of the Indenture. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES SECTION 8.01. Events of Default. The following events constitute Events of Default hereunder: (a) Failure by the City to pay any Installment Payment when due and payable hereunder or any Parity Obligation when and as the same shall become due and payable. (b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in the preceding clause (a), for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority or the Trustee; provided, however, that if the City notifies the Authority and the Trustee that in its reasonable opinion the failure stated in the notice can be corrected, but not within such 30 -day period, such failure will not constitute an event of default hereunder if the -13- City commences to cure such failure within such 30 day period and thereafter diligently and in good faith cures the failure in a reasonable period of time. (c) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar acts which may hereafter be enacted. (d) The occurrence of any event of default under and as defined with respect to any Parity Obligation. SECTION 8.02. Remedies on Default. If an Event of Default occurs and is continuing, the Trustee as assignee of the Authority has the right, at its option and without any further demand or notice, to take any one or more of the following actions: (a) Only as long as it is an available remedy under and as defined with respect to all Parity Obligations, declare all principal components of the unpaid Installment Payments, together with accrued interest thereon from the immediately preceding Installment Payment Date on which payment was made, to be immediately due and payable, whereupon the same shall immediately become due and payable. The Trustee shall rescind and annul such declaration and its consequences if, before any judgment or decree for the payment of the moneys due has been obtained or entered, (i) the City deposits with the Trustee a sum sufficient to pay all principal components of the Installment Payments coming due prior to such declaration and all matured interest components (if any) of the Installment Payments, and (ii) the City pays the reasonable expenses of the Trustee (including any fees and expenses of its attorneys), and (iii) any and all other defaults known to the Trustee (other than in the payment of the principal and interest components of the Installment Payments due and payable solely by reason of such declaration) have been made good. No such rescission and annulment will extend to or shall affect any subsequent default or impair or exhaust any right or power consequent thereon. (b) Take whatever action at law or in equity may appear necessary or desirable to collect the Installment Payments then due or thereafter to become due during the Term of this Installment Payment Agreement, or enforce performance and observance of any obligation, agreement or covenant of the City under this Installment Payment Agreement. (c) As a matter of right, in connection with the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and the Bond Owners hereunder, cause the appointment of a receiver or receivers of the Net Revenues and other amounts pledged hereunder, with such powers as the court making such appointment may confer. SECTION 8.03. Other Remedies. Nothing in this Article or in any other provision hereof shall affect or impair the obligation of the City, which is absolute and unconditional, to pay the Installment Payments from the Net Revenues and amounts in the Electric Revenue Fund available for such payment in accordance herewith at the -14- respective due dates or upon acceleration or prepayment, 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 in this Installment Purchase Agreement. 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 law or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Authority. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Authority, the City and the Authority shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. SECTION 8.04. Non -Waiver. No remedy herein conferred upon or reserved to the Authority or the Bond Insurer, is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by law. SECTION 8.05. Application of Net Revenues Upon Acceleration. All Net Revenues available upon the date of the declaration of acceleration by the Authority as provided in Section 8.02 above and all Net Revenues thereafter received shall be applied in the following order: First, to the payment of the fees, costs and expenses of the Authority and the Trustee, if any, in carrying out the provisions of this Article, including reasonable compensation to their agents, accountants and counsel. Second, to the payment of the interest component of Installment Payments then due and payable and the interest then due and payable with respect to unpaid Parity Obligations (including the interest component of Net Payments due under Parity Payment Agreements); provided that, if the amount available shall not be sufficient to pay in full all the amounts due with respect to such interest component of Installment Payments and interest on Parity Obligations (including Net Payments), then to the payment thereof ratably, according to the interest due, without any discrimination or preference. Third, to the payment of the principal component of Installment Payments then due and payable, the principal amount of the Parity Obligations which has become due and payable, whether on the original due date or upon acceleration (other than Parity Payment Agreements), and the principal component of Net Payments due under Parity Payment Agreements; provided that, if the amount available shall not be sufficient to pay in full all the amounts due with respect to the Installment Payments, the Parity Obligations, and the Net Payments due under Parity Payment Agreements, then to the payment thereof ratably, according to the principal and Net Payments due, without any discrimination or preference. -15- Fourth, to the payment of amounts due to the Bond Insurer and the bond insurance for any Parity Obligations not provided for in First, Second, and Third above. Fifth, to Termination Payments required under any Parity Payment Agreement that are secured by a pledge of Net Revenues on a parity with the payments under paragraph Third above, to the extent and in the manner provided by the terms of such Parity Payment Agreement. ARTICLE IX DISCHARGE OF OBLIGATIONS SECTION 9.01. Security Deposit. Notwithstanding any other provision hereof, the City may on any date secure the payment of Installment Payments, in whole or in part, by irrevocably depositing with the Trustee an amount of cash which, together with other available amounts, is either: (a) sufficient to pay all such Installment Payments, including the principal and interest components thereof, when due under Section 3.01, or (b) invested in whole or in part in non -callable Federal Securities in such amount as will, in the opinion of an Independent Accountant (which opinion is addressed and delivered to the Trustee), together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay all such Installment Payments when due under Section 3.01 or when due on any optional prepayment date under Section 9.02, as the City instructs at the time of said deposit. If the City makes a security deposit under this Section for the payment of all remaining Installment Payments, all obligations of the City hereunder, and the pledge of Net Revenues and all other security provided by this Installment Purchase Agreement for said obligations, will thereupon cease and terminate, excepting only the obligation of the City to make, or cause to be made, all Installment Payments from the security deposit. The security deposit will be deemed to be and will constitute a special fund for the payment of the Installment Payments in accordance with the provisions hereof. SECTION 9.02. Optional Prepayment. The City may exercise its option to prepay the principal components of the Installment Payments in whole or in part on any date on or after the Installment Payment Date relating to the 1, 20_ Interest Payment Date. The City may exercise such option by payment of a prepayment price equal to the sum of (a) the aggregate principal components of the Installment Payments to be prepaid, (b) the interest component of the Installment Payment required to be paid on or accrued to such date, and (c) the premium (if any) then required to be paid upon the corresponding redemption of the Bonds under Article IV of the Indenture. The Trustee shall deposit the prepayment price in the Redemption Fund to be applied to the redemption of Bonds under Section 4.01(a) of the Indenture. If the City prepays the Installment Payments in part but not in whole, the principal components will be prepaid -16- among such maturities and in such integral multiples of $5,000 as the City designates in written notice to the Trustee. The City shall give the Trustee written notice of its intention to exercise its option in sufficient time to enable the Trustee to give notice of redemption as required by the Indenture. The Installment Payments will otherwise be subject to prepayment in the amounts and at the times necessary to provide for redemption of the Bonds as set forth in the Indenture. SECTION 9.03. Accounting and Discharge Instruments. After the payment, or provision for the payment as provided in Section 9.01 or Section 9.02, of all Installment Payments and payment in full of all fees and expenses of the Authority, the Bond Insurer and the Trustee, the Authority, upon request of the City, shall cause an accounting for such period or periods as may be requested by the City to be prepared and filed with the City and the Authority shall execute and deliver to the City all such instruments as may be necessary or desirable to evidence such total discharge and satisfaction of this Installment Purchase Agreement. ARTICLE X MISCELLANEOUS SECTION 10.01. Payment Liability of City Limited. Notwithstanding anything contained herein, the City shall not be required to advance any moneys derived from any source of income other than the Net Revenues and amounts in the Electric Revenue Fund for the payment of the Installment Payments or for the performance of any agreements or covenants required to be performed by it contained herein. The City may, however, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the City for such purpose. The obligation of the City to make the Installment Payments is a special obligation of the City payable solely from the Net Revenues and amounts in the Electric Revenue Fund as provided herein. The general fund of the City is not liable, and neither the faith and credit nor the taxing power of the City is pledged for the payment of the Installment Payments or the performance or satisfaction of any other obligations of the City hereunder. SECTION 10.02. Amendments. The Authority and the City may at any time amend or modify any of the provisions of this Agreement, but only: (a) with the prior written consent of the Owners of a majority in aggregate principal amount of the Outstanding Bonds; or (b) without the consent of the Trustee or any of the Bond Owners, but only if such amendment or modification is for any one or more of the following purposes: (i) to add to the covenants and agreements of the City contained in this Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the City; -17- (ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein, to conform to the original intention of the City and the Authority; (iii) to modify, amend or supplement this Agreement in such manner as to assure that the interest on the Bonds remains excluded from gross income under the Tax Code; and (iv) in any other respect whatsoever as the Authority and the City deem necessary or desirable, if in the opinion of Bond Counsel such modifications or amendments do not materially adversely affect the interests of the Owners of the Bonds. No such modification or amendment may (a) extend or have the effect of extending any Installment Payment Date or reducing any Installment Payment or any premium payable upon the prepayment thereof, without the express consent of the Owners of the affected Bonds, or (b) modify any of the rights or obligations of the Trustee without its written assent thereto. SECTION 10.03. Assignment of Installment Purchase Agreement. The City hereby acknowledges that the Authority, for good and valuable consideration, has transferred, assigned and sent over to the Trustee, pursuant to the provisions of the Indenture, all of the Installment Payments and any and all rights and privileges it has hereunder with respect to the Installment Payments and references herein to the Authority's rights with respect to the Installment Payments (but not the obligations of the Authority hereunder, it being understood that the Trustee shall not assume any responsibility for any duties or covenants or warranties of the Authority hereunder) shall be construed to be references to the Trustee. SECTION 10.04. Benefits of Contracts Limited to Parties. Nothing contained in this Installment Purchase Agreement, expressed or implied, is intended to give to any person other than the Authority, the Trustee (with respect to its rights pursuant to Sections 4.01(b) and 10.12 hereof and as the assignee of the Authority's rights hereunder), the City, or the Bond Insurer (so long as the Bond Insurer is not in default under a Bond Insurance Policy) any right, remedy or claim under or pursuant thereto, and any agreement or covenant required herein to be performed by or on behalf of the Authority (and the Trustee, as the assignee of the Authority's rights hereunder) or the City shall be for the sole and exclusive benefit of the other party. SECTION 10.05. Successor is Deemed Included in all References to Predecessor. Whenever either the Authority or the City 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 Authority or the City, and all agreements and covenants required hereby to be performed by or on behalf of the Authority or the City shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. SECTION 10.06. Waiver of Personal Liability. No officer or employee of the City shall be individually or personally liable for the payment of the Installment Payments or the performance or satisfaction of any other obligation of the City hereunder, but nothing contained herein shall relieve any officer or employee of the City from the performance -18- of any official duty provided by any applicable provisions of law or by the terms of this Installment Purchase Agreement. SECTION 10.07. Article and Section Heading, 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," "Exhibits" and other subdivisions or clauses are to the corresponding articles, sections, exhibits, subdivisions or clauses hereof; and the words "hereby," "herein," "hereof," "hereto," "herewith" and other words of similar import refer to this Installment Purchase Agreement as a whole and not to any particular article, section, exhibit, subdivision or clause hereof. SECTION 10.08. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the Authority or the City 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 Authority and the City hereby declare that they would have executed this Installment Purchase Agreement, and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof irrespective of the fact that anyone 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. SECTION 10.09. Net Contract. This Installment Purchase Agreement shall be deemed and construed to be a net contract, and the City shall pay absolutely net during the term hereof the Installment Payments and all other payments required under this Installment Purchase Agreement, free of any deductions and without abatement, diminution or set-off whatsoever. SECTION 10.10. California Law. This Installment Purchase Agreement shall be construed and governed in accordance with the laws of the State of California. SECTION 10.11. Indemnification. The City shall, to the full extent then permitted by law, indemnify, protect, hold harmless, save and keep harmless the Authority, the Bond Insurer and the Trustee and their directors, officers and employees from and against any and all liability, obligations, losses, claims and damages whatsoever, regardless of the cause thereof, and expenses in connection therewith, including, without limitation, counsel fees and expenses, penalties and interest arising out of or as the result of (i) the entering into of this Installment Purchase Agreement, the use of any of the Existing Facilities or any accident in connection with the operation, use, condition or possession of any of the Existing Facilities or any portion thereof resulting in damage to property or injury to or death to any person including, without limitation, any claim alleging latent and other defects, whether or not discoverable by the City or the Authority, (ii) any claim for patent, trademark or copyright infringement, (iii) any claim arising out of strict liability in tort, (iv) without negligence or willful misconduct, the Trustee's acceptance or administration of the trust under the Indenture, or the exercise or performance of any of its powers or duties thereunder or hereunder; or (v) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made, in -19- light of the circumstances under which they were made, not misleading in any official statement or other offering circular utilized in connection with the sale of any Bonds executed and delivered under the Indenture. The indemnification arising under this Section shall continue in full force and effect notwithstanding the full payment of all obligations hereunder or the termination of the other provisions hereof for any reason. The City agrees not to withhold or abate any portion of the Installment Payments required pursuant hereto by reason of any defects, malfunctions, breakdowns or infirmities of any of the Existing Facilities; The City and the Authority mutually agree to promptly give notice to each other of any claim or liability hereby indemnified against following either's learning thereof. The rights to indemnification from the City hereunder shall survive the termination hereof or the resignation or removal of the Trustee. SECTION 10.12. Funds. Any fund required to be established and maintained herein by the City may be established and maintained in the accounting records of the City either as an account or a fund and may, for the purpose of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund; but all such records with respect to any such fund shall at all times be maintained in accordance with sound accounting practice. SECTION 10.13. Notices. All notices, certificates or other communications hereunder shall be deemed sufficiently given upon actual receipt thereof when received by the City, the Authority, the Trustee, the Bond Insurer, [and the Rating Agencies,] as the case may be, at the respective address provided pursuant to Section 11.07 of the Indenture or, if mailed by first class mail, postage prepaid, addressed to the appropriate address provided pursuant to Section 11.07 of the Indenture, six Business Days after deposit in the United States mail. Unless otherwise requested by the City, the Authority, the Trustee, the Bond Insurer, or a Rating Agency, any notice required to be given hereunder in writing may be given by any form of telephonic or electronic transmission capable of making a written record. Each such party shall file with the Trustee information appropriate to receiving such form of telephonic or electronic transmission. Any of the parties noted above may, by notice given hereunder, designate any different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 10.14. Effective Date. This Installment Purchase Agreement shall become effective upon its execution and delivery, and, except as otherwise specifically provided with respect to particular terms hereof, shall terminate when the Installment Payments provided herein shall have been fully paid (or provision for the payment thereof shall have been made pursuant to Article IX hereof). SECTION 10.15. Execution in Counterpart. This 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. [Remainder of Page Intentionally Left Blank] -20- IN WITNESS WHEREOF, the parties hereto have executed and attested this Installment Purchase Agreement by their respective officers thereunto duly authorized, as of the day and year first written above. ATTEST: By Jennifer M. Ferraiolo, City Clerk APPROVED AS TO FORM: By Janice D. Magdich, City Attorney CITY OF LODI, A MUNICIPAL CORPORATION By Stephen Schwabauer, City Manager LODI PUBLIC FINANCING AUTHORITY By Stephen Schwabauer, Executive Director -21- SCHEDULE A SCHEDULE OF INSTALLMENT PAYMENTS AS OF DELIVERY DATE Installment Payment Date Principal Component Interest Component Total Payment $ $ $ A-1 EXHIBIT 1 DESCRIPTION OF EXISTING FACILITIES The Existing Facilities consist of the following generally described improvements, facilities and extensions of the Electric System: • Distribution system improvements including new/enhanced overhead and underground electric plant such as vaults, conductor, poles, protective devices, etc.; • Metering system improvements including new meters and ancillary meter devices, meter reading equipment, etc.; • Transmission system improvements such as new circuits, conductor poles, protective devices, etc.; • Substation system improvements including new/rehabilitated plant, equipment replacement and upgrades, transformer overhauls, etc.; • Vehicle and rolling stock acquisition including trucks, cars, cranes, trailers, polesetting equipment, wire pulling equipment, vacuum units, etc.; • Communications equipment including fiber optics, remote terminal units, radio systems and device, etc.; • Building/structure improvements including property acquisition, lighting, HVAC, furniture, workspace enhancements, etc.; and/or • Technology enhancements including new computer hardware/ software systems, system test and repair devices, etc. EXH 1-1 EXHIBIT D FORM OF BOND PURCHASE AGREEMENT LODI PUBLIC FINANCING AUTHORITY 2018 ELECTRIC SYSTEM REVENUE REFUNDING BONDS BOND PURCHASE AGREEMENT Board of Directors Lodi Public Financing Authority Lodi, California City Council City of Lodi Lodi, California Ladies and Gentlemen: , 2018 The undersigned, J.P. Morgan Securities LLC (the "Underwriter"), relating to the Authority's $ 2018 Electric System Revenue Refunding Bonds (the "2018 Bonds"), hereby offers to enter into this Bond Purchase Agreement (the "Purchase Agreement") with you, the Lodi Public Financing Authority (the "Authority") and you, the City of Lodi (the "City"), which, upon the Authority's and the City's acceptance of this offer, will be binding upon the Authority, the City and the Underwriter. This offer is made subject to acceptance by each of you prior to 11:59 P.M., California time, on the date hereof. If this offer is not so accepted, this offer will be subject to withdrawal by the Underwriter upon notice delivered to you at any time prior to acceptance. Upon acceptance, this Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding upon the Authority, the City and the Underwriter. All capitalized terms used herein not otherwise defined herein shall have the respective meanings ascribed thereto in the Official Statement and the Indenture (each, as herein defined). 1. Purchase, Sale and Delivery of the 2018 Bonds. (a) Subject to the terms and conditions and in reliance upon 'the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase and the Authority agrees to sell and deliver to the Underwriter all (but not less than all) of the 2018 Bonds. (b) The 2018 Bonds shall be issued pursuant to the Marks Roos Local Bond Pooling Act of 1985, consisting of Article 4, Chapter 5, Division 7, Title 1 of the Government Code of the State of California (commencing with Section 6584 (the "Act") and an Indenture of Trust (the "Indenture"), dated as of , 2018, by and between the Authority and MUFG Union Bank, as trustee (the "Trustee"). The 2018 Bonds shall be dated the Closing Date (as hereinafter defined). The 2018 Bonds shall have the maturities and bear interest at the rates per annum and at the prices and yields and shall be subject to redemption as shown on Exhibit A hereto. The 2018 Bonds are subject to 1 2999445.3 042414 AGMT redemption prior to maturity as set forth in the Official Statement. The 2018 Bonds shall be substantially in the form described in, and shall be issued and secured under, the provisions of the Indenture. The 2018 Bonds are special, limited obligations of the Authority payable solely from and secured by Authority Revenues and certain funds and accounts held under the Indenture. Authority Revenues consist primarily of installment payments ("Installment Payments") to be made by the City pursuant to an Installment Purchase Agreement dated as of , 2018 (the "Installment Purchase Agreement"). The obligation of the City to make the Installment Payments is a special obligation of the City that is secured by a pledge of and payable solely from Net Revenues relating to the City's electric system. The 2018 Bonds are being issued to provide funds to (i) refinance $ principal amount of City of Lodi (the "City") Electric System Revenue Certificates of Participation, 2008 Series A (such amount refinanced constituting the "Refunded Certificates") and the corresponding portion of the related installment payment obligation of the City; and (ii) pay the costs of issuing the 2018 Bonds. (c) The aggregate purchase price for the 2018 Bonds will be $ (consisting of the aggregate principal amount of the 2018 Bonds less an Underwriter's discount of $ and plus [net] original issue premium of $ ). (d) At 8:00 A.M., California time, on , 2018, or at such other time or on such other date as we mutually agree upon (the "Closing Date"), the Authority and the City will, subject to the terms and conditions hereof, cause to be delivered to the Underwriter, at a location or locations to be designated by the Underwriter in New York, New York, the 2018 Bonds (delivered through the book entry system of The Depository Trust Company), duly executed, and at the offices of Jones Hall, A Professional Law Corporation, San Francisco, California, or at such other place as shall have been mutually agreed upon by the Authority and the Underwriter, and the other documents mentioned herein. The Underwriter will accept such delivery and pay the Purchase Price in immediately available funds (such delivery and payment being herein referred to as the "Closing") to the order of the Trustee. (e) The Underwriter agrees to make a bona fide public offering of the 2018 Bonds at the initial offering prices set forth in the Official Statement (as hereinafter defined), which prices may be changed from time to time by the Underwriter after such offering. (0 The City will undertake, pursuant to a Continuing Disclosure Certificate, dated as of the Closing Date (the "Continuing Disclosure Certificate") to provide certain annual financial information and notices of the occurrence of certain events. A description of this undertaking is set forth in the Preliminary Official Statement (as hereinafter defined) and will also be set forth in the Official Statement. Except as described in the Official Statement, the City has not failed to comply in the last five years in all material respects with any previous undertakings with regard to Rule 15c2-12 (as defined below) to provide annual reports or notices of material events. (g) The City and the Authority acknowledge and agree that (i) the purchase and sale of the Bonds pursuant to this Purchase Agreement is an arm's-length 2 2999445.3 042414 AGMT commercial transaction among the City, the Authority and the Underwriter, (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as a principal and is not acting as the agent or fiduciary of the City or the Authority, (iii) the Underwriter has not assumed any advisory or fiduciary responsibilities in favor of the City and the Authority with respect to the offering contemplated hereby or the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the City and the Authority on other matters) and the Underwriter has no obligation to the City and the Authority with respect to the offering contemplated hereby except the obligations expressly set forth in this Purchase Agreement and (iv) the City and the Authority have consulted their own legal, financial and other advisors to the extent they have deemed appropriate. 2. Use and Preparation of Official Statement. The Authority and the City hereby ratify, confirm and approve of the use and distribution by the Underwriter prior to the date hereof of the Preliminary Official Statement dated , 2018 relating to the 2018 Bonds (which, together with all appendices thereto, is referred to herein as the "Preliminary Official Statement"). The Authority and the City have deemed final the Preliminary Official Statement as of its date for purposes of Rule 15c2-12 promulgated by the Securities Exchange Act of 1934 ("Rule 15c2-12"), as amended, except for the omission of such information as is specified in Rule 15c2 -12(b)(1). The Authority and the City hereby agree to deliver or cause to be delivered to the Underwriter, within seven (7) business days of the date hereof, conformed copies of the final Official Statement, dated the date hereof (which shall be in the form of the Preliminary Official Statement with only the addition of information previously permitted to have been omitted by Rule 15c2-12) and any amendments or supplements to such Official Statement as have been approved by the Authority, the City and the Underwriter (the "Official Statement") in sufficient quantity to enable the Underwriter to comply with the rules of the Securities and Exchange Commission and the Municipal Securities Rulemaking Board. The Authority and the City hereby approve of the use and distribution by the Underwriter of the Official Statement in connection with the offer and sale of the 2018 Bonds. At the time of or prior to the Closing Date, the Underwriter shall file a copy of the Official Statement with the Municipal Securities Rulemaking Board. 3. Representations, Warranties and Agreements of the Authority. The Authority hereby represents, warrants and agrees with the Underwriter as follows: (a) The Authority is, and will be on the Closing Date, a joint powers entity of the State of California organized and operating pursuant to the laws of the State of California with the full power and authority to issue the 2018 Bonds pursuant to the Act, to execute and deliver the Official Statement and to enter into this Purchase Agreement, the Indenture, and the Installment Purchase Agreement; (b) By all necessary official action of the Authority prior to or concurrently with the acceptance hereof, the Authority has duly approved, ratified and confirmed the distribution of the Preliminary Official Statement and the execution, delivery and distribution of the Official Statement, and has duly authorized and approved the 3 2999445.3 042414 AGMT execution and delivery of, and the performance by the Authority of the obligations on its part contained in the Indenture, the Installment Purchase Agreement and this Purchase Agreement and the consummation by it of all other transactions contemplated by the Official Statement, the Indenture, the Installment Purchase Agreement and this Purchase Agreement; (c) The Authority is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation to which it is subject or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is a party or to which the Authority or any of its property or assets is otherwise subject, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or event of default in any material respect under any such instrument; and the issuance of the 2018 Bonds and the execution and delivery of the Indenture, the Installment Purchase Agreement, this Purchase Agreement and the Official Statement, and compliance with the provisions on the Authority's part contained herein and therein, will not in any material respect conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is a party or is otherwise subject, nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument; (d) To the best knowledge of the Authority after reasonable investigation, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or threatened against the Authority in any material respect affecting the existence of the Authority or the titles of its officers to their respective offices or affecting or seeking to prohibit, restrain or enjoin the issuance, sale or delivery of the 2018 Bonds or contesting or affecting, as to the Authority, the validity or enforceability of the 2018 Bonds, the Installment Purchase Agreement, the Indenture or this Purchase Agreement or contesting the powers of the Authority or its authority to enter into, adopt or perform its obligations under any of the foregoing, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or any amendment or supplement thereto, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Indenture, the Installment Purchase Agreement or this Purchase Agreement; (e) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the Authority of its obligations in connection with the issuance of the 2018 Bonds under the Indenture have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws 4 2999445.3 042414 AGMT of any state in connection with the offering and sale of the 2018 Bonds; and all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the Authority of its obligations under the Indenture, the Installment Purchase Agreement or this Purchase Agreement have been duly obtained; (f) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the 2018 Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the 2018 Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualification in effect so long as required for distribution of the 2018 Bonds; provided, that in no event shall the Authority be required to take any action which would subject it to service of process in any jurisdiction in which it is not now so subject; (g) As of the date thereof and hereof, the Preliminary Official Statement (except for the omission of such information as is specified in Rule 15c2 -12(b)(1)) did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein relating to the Authority, in the light of the circumstances under which they were made, not misleading (excluding therefrom information about DTC or the book -entry only system contained in the Preliminary Official Statement); (h) As of the date thereof and at all times subsequent thereto to and including the date which is 25 days following the End of the Underwriting Period (as such term is hereinafter defined) for the 2018 Bonds, the Official Statement did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, relating to the Authority in the light of the circumstances under which they were made, not misleading; (i) If between the date hereof and the date which is 25 days after the End of the Underwriting Period for the 2018 Bonds, an event occurs which might or would cause the information contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Authority will notify the Underwriter, and, if in the opinion of the Authority, the Underwriter or its counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Authority will forthwith prepare and furnish to the Underwriter (at the expense of the Authority) a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to counsel for the Underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements 5 2999445.3 042414 AGMT therein, in the light of the circumstances under which they were made, not misleading. For the purposes of this subsection, between the date hereof and the date which is 25 days after the End of the Underwriting Period for the 2018 Bonds, the Authority will furnish such information with respect to itself as the Underwriter may from time to time reasonably request; (j) If the information contained in the Official Statement is amended or supplemented pursuant to paragraph (i) hereof, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date which is 25 days after the End of the Underwriting Period for the 2018 Bonds, the portions of the Official Statement so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (k) After the Closing up to and including the date which is 25 days after the End of the Underwriting Period for the 2018 Bonds, the Authority will not participate in the issuance of any amendment of or supplement to the Official Statement to which, after being furnished with a copy, the Underwriter shall reasonably object in writing or which shall be disapproved by counsel for the Underwriter; (1) As used herein and for the purposes of the foregoing, the term "End of the Underwriting Period" for the 2018 Bonds shall mean the earlier of (i) the Closing Date, unless the Authority and the City shall have been notified in writing to the contrary by the Underwriter on or prior to the Closing Date, or (ii) the date on which the End of the Underwriting Period for the 2018 Bonds has occurred under Rule 15c2-12; provided, that the Authority and the City may treat as the End of the Underwriting Period for the 2018 Bonds the date specified as such in a notice from the Underwriter stating the date which is the End of the Underwriting Period; (m) The Authority will apply, or cause the application of, the proceeds of the 2018 Bonds in accordance with the Installment Purchase Agreement and the Indenture; and (n) Any certificate signed by any authorized official of the Authority, and delivered to the Underwriter in connection with the execution and delivery of the 2018 Bonds, shall be deemed a representation and warranty by the Authority to the Underwriter as to the statements made therein. 4. Representations, Warranties and Agreements of the City. The City hereby represents, warrants and agrees with the Underwriter as follows: (a) The City is, and will be on the Closing Date, a municipal corporation and general law city duly organized and existing under the Constitution and laws of the State of California (the "State") with the full power and authority to execute and deliver the Official Statement and to enter into this Purchase Agreement, the Continuing Disclosure 6 2999445.3 042414 AGMT Certificate, the Installment Purchase Agreement and the Escrow Deposit and Trust Agreement, dated as of , 2018 (the "Escrow Agreement"), between the City and The Bank of New York Mellon Trust Company, N.A., as escrow agent for the Refunded Certificates (the "Escrow Agent"); (b) By all necessary official action of the City prior to or concurrently with the acceptance hereof, the City has duly approved, ratified and confirmed the distribution of the Preliminary Official Statement and the execution, delivery and distribution of the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations on its part contained in, the Continuing Disclosure Certificate, the Installment Purchase Agreement, the Escrow Agreement and this Purchase Agreement and the consummation by it of all other transactions contemplated by the Official Statement, the Continuing Disclosure Certificate, the Installment Purchase Agreement, the Escrow Agreement and this Purchase Agreement; (c) The City is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation to which it is subject or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or to which the City or any of its property or assets is otherwise subject, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or event of default in any material respect under any such instrument; and the execution and delivery of the Continuing Disclosure Certificate, the Installment Purchase Agreement, this Purchase Agreement, the Escrow Agreement and the Official Statement, and compliance with the provisions on the City's part contained herein and therein, will not in any material respect conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject, nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the City under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument; (d) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, pending or, to the best knowledge of the City after reasonable investigation, threatened against the City in any material respect affecting the existence of the City or the titles of its officers to their respective offices or contesting or affecting, as to the City, the validity or enforceability of the Continuing Disclosure Certificate, the Installment Purchase Agreement, the Escrow Agreement or this Purchase Agreement or contesting the powers of the City or its authority to enter into, adopt or perform its obligations under any of the foregoing, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or any amendment or supplement thereto, wherein an unfavorable decision, ruling or finding would materially adversely affect the 7 2999445.3 042414 AGMT validity or enforceability of the Continuing Disclosure Certificate, the Installment Purchase Agreement, the Escrow Agreement or this Purchase Agreement; (e) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by the City of its obligations in connection with the issuance of the 2018 Bonds have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the 2018 Bonds; and all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by the City of its obligations under the Continuing Disclosure Certificate, the Installment Purchase Agreement, the Escrow Agreement or this Purchase Agreement have been duly obtained (including to the extent required, any governmental permits and approvals); (f) The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the 2018 Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate; and (ii) to determine the eligibility of the 2018 Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualification in effect so long as required for distribution of the 2018 Bonds; provided, that in no event shall the City be required to take any action which would subject it to service of process in any jurisdiction in which it is not now so subj ect; (g) As of the date thereof and hereof, the Preliminary Official Statement (except for the omission of such information as is specified in Rule 15c2 -12(b)(1)) did not (excluding therefrom information about DTC or the book -entry only system contained in the Preliminary Official Statement), contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (h) As of the date thereof and at all times subsequent thereto, to and including the date which is 25 days following the End of the Underwriting Period for the 2018 Bonds, the Official Statement (excluding therefrom information about DTC or the book - entry only system contained in the Official Statement), did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (i) If between the date hereof and the date which is 25 days after the End of the Underwriting Period for the 2018 Bonds, an event occurs which might or would cause 8 2999445.3 042414 AGMT the information contained in the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the City will notify the Underwriter, and, if in the opinion of the City, the Underwriter or its counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will forthwith prepare and furnish to the Underwriter (at the expense of the City) a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to counsel for the Underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. For the purposes of this subsection, between the date hereof and the date which is 25 days after the End of the Underwriting Period for the 2018 Bonds, the City will furnish such information with respect to itself as the Underwriter may from time to time reasonably request; (j) If the information contained in the Official Statement is amended or supplemented pursuant to paragraph (i) hereof, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date which is 25 days after the End of the Underwriting Period for the 2018 Bonds, the portions of the Official Statement so supplemented or amended (excluding therefrom information about DTC or the book -entry only system), will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (k) After the Closing up to and including the date which is 25 days after the End of the Underwriting Period for the 2018 Bonds, the City will not participate in the issuance of any amendment of or supplement to the Official Statement to which, after being furnished with a copy, the Underwriter shall reasonably object in writing or which shall be disapproved by counsel for the Underwriter; (1) The Audited Financial Statements of the City for the Fiscal Year ended June 30, 2017, as contained in Appendix B to the Official Statement, fairly and accurately present the financial condition of the Electric System as of such date and there has not been, nor does the City anticipate that there will be, any adverse change of a material nature in the financial position, results of operations or condition, financial or otherwise, of the Electric System; (m) Since June 30, 2017, except as referred to in or as contemplated by the Official Statement, with respect to its Electric System, the City has not incurred any financial liabilities, direct or contingent, or entered into any transactions and there has not been any adverse change in the condition, financial or physical, of the Electric System, in any case that would materially and adversely affect the ability of the City to meet its obligations under the Installment Purchase Agreement; 9 2999445.3 042414 AGMT (n) Between the date of this Purchase Agreement and the Closing Date, except as described in the Official Statement, the City will not, without the prior written consent of the Underwriter, offer or issue any bonds, notes or other obligations for borrowed money, or incur any material liabilities direct or contingent, payable from Electric System Revenues (as defined in the Indenture), nor does the City reasonably anticipate that there will be any adverse change of a material nature in the financial position, results of operations or condition, financial or otherwise, of the City; and (o) Any certificate signed by any authorized official of the City, and delivered to the Underwriter in connection with the execution and delivery of the 2018 Bonds, shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein. 5. Conditions to the Obligations of the Underwriter. The Underwriter hereby enters into this Purchase Agreement in reliance upon the representations and warranties of the Authority and the City contained herein and the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Authority and the City of their obligations both on and as of the date hereof and as of the Closing Date. Accordingly, the Underwriter's obligations under this Purchase Agreement to purchase, to accept delivery of and to pay for the 2018 Bonds shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties of the Authority and the City contained herein as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the officers and other officials of the Authority and the City made in any certificate or other document furnished pursuant to the provisions hereof, to the performance by the Authority and the City of their respective obligations to be performed hereunder and under such documents and instruments at or prior to the Closing Date, and also shall be subject to the following additional conditions: (a) The Underwriter shall receive, within seven (7) business days of the date hereof, copies of the Official Statement (including all information previously permitted to have been omitted by Rule 15c2-12 and any amendments or supplements as have been approved by the Underwriter), in such reasonable quantity as the Underwriter shall have requested; (b) The representations and warranties of the Authority and the City contained herein shall be true and correct on the date hereof and on the Closing Date, as if made on and at the Closing; (c) At the Closing, the Indenture, the Installment Purchase Agreement, the Continuing Disclosure Certificate, the Escrow Agreement and this Purchase Agreement shall have been duly authorized, executed and delivered by the respective parties thereto, and the Official Statement shall have been duly authorized, executed and delivered by the Authority and the City, all in substantially the forms heretofore submitted to the Underwriter, with only such changes as shall have been agreed to in writing by the Underwriter, and shall be in full force and effect; and there shall be in full force and effect such resolution or resolutions of the Board of Directors of the Authority and the City Council of the City as, in the opinion of Jones Hall, A Professional Law 10 2999445.3 042414 AGMT Corporation, Bond Counsel to the Authority ("Bond Counsel"), shall be necessary or appropriate in connection with the transactions contemplated hereby; (d) Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth in the Official Statement, of the 2018 Bonds shall not have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the Authority and the City terminating the obligation of the Underwriter to accept delivery of and make any payment for the 2018 Bonds), by reason of any of the following: (1) an amendment to the Constitution of the United States or the State of California shall have been passed or legislation shall have been introduced in or enacted by the Congress of the United States or the legislature of any state having jurisdiction of the subject matter or legislation pending in the Congress of the United States shall have been amended or legislation shall have been recommended to the Congress of the United States or to any state having jurisdiction of the subject matter or otherwise endorsed for passage (by press release, other form of notice or otherwise) by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or legislation shall have been proposed for consideration by either such Committee by any member thereof or presented as an option for consideration by either such Committee by the staff of such Committee or by the staff of the Joint Committee on Taxation of the Congress of the United States, or legislation shall have been favorably reported for passage to either House of the Congress of the United States by a Committee of such House to which such legislation has been referred for consideration, or a decision shall have been rendered by a court of the United States or of the State of California or the Tax Court of the United States, or a ruling shall have been made or a regulation or temporary regulation shall have been proposed or made or any other release or announcement shall have been made by the Treasury Department of the United States, the Internal Revenue Service or other federal or State of California authority, with respect to federal or State of California taxation upon revenues or other income of the general character to be derived by the Authority or upon interest received on obligations of the general character of the 2018 Bonds which, in the reasonable judgment of the Underwriter, may have the purpose or effect, directly or indirectly, of affecting the tax status of the Authority, its property or income, its securities (including the 2018 Bonds) or the interest thereon, or any tax exemption granted or authorized by State of California legislation or, in the reasonable judgment of the Underwriter, materially and adversely affecting the market for the 2018 Bonds or the market price generally of obligations of the general character of the 2018 Bonds; (2) legislation enacted, introduced in the Congress or recommended for passage by the President of the United States, or a decision rendered by a court established under Article III of the Constitution of the United States or by the Tax 11 2999445.3 042414 AGMT Court of the United States, or an order, ruling, regulation (final, temporary or proposed) or official statement issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter shall have been made or issued to the effect that obligations of the general character of the 2018 Bonds, or the 2018 Bonds, including any or all underlying arrangements, are not exempt from registration under the Securities Act of 1933, as amended, or that the Indenture is not exempt from qualification under the Trust Indenture Act of 1939, as amended; (3) the declaration of war or engagement or significant escalation in major military hostilities by the United States or the occurrence of any other national emergency or calamity relating to the effective operation of the government of, or the financial community in, the United States; (4) the declaration of a general banking moratorium by federal, New York or California authorities, or the general suspension of trading on any national securities exchange; (5) the imposition by the New York Stock Exchange or other national securities exchange, or any governmental authority, of any material restrictions not now in force with respect to the 2018 Bonds or obligations of the general character of the 2018 Bonds or securities generally, or the material increase of any such restrictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; (6) an order, decree or injunction of any court of competent jurisdiction, or order, ruling, regulation or official statement by the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, issued or made to the effect that the issuance, offering or sale of obligations of the general character of the 2018 Bonds, or the issuance, offering or sale of the 2018 Bonds, including any or all underlying obligations, as contemplated hereby or by the Official Statement, is or would be in violation of the federal securities laws as amended and then in effect; (7) the withdrawal or downgrading or placement on "credit watch" or "negative outlook" of any rating of the 2018 Bonds by a national rating agency; or (8) any event occurring, or information becoming known which, in the judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (e) At or prior to the Closing Date, the Underwriter shall have received the following documents, in each case satisfactory in form and substance to the Underwriter: 12 2999445.3 042414 AGMT (1) The Preliminary Official Statement, the Official Statement and each supplement or amendment, if any, thereto, executed on behalf of the Authority and the City; (2) Copies of the Indenture, the Installment Purchase Agreement, this Purchase Agreement, the Escrow Agreement and the Continuing Disclosure Certificate, each duly executed and delivered by the respective parties thereto; (3) The approving opinion of Bond Counsel, dated the Closing Date and addressed to the Authority, in substantially the form attached to the Official Statement as Appendix D thereto, and a letter of such counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such opinion may be relied upon by the Underwriter to the same extent as if such opinion were addressed to it; (4) The supplemental opinion of Bond Counsel, dated the Closing Date and addressed to the Underwriter, in substantially the form attached hereto as Exhibit B; (5) The opinion of Authority Counsel, dated the Closing Date and addressed to the Underwriter, in substantially the form attached hereto as Exhibit C; (6) The opinion of the City Attorney, dated the Closing Date and addressed to the Underwriter, in substantially the form attached hereto as Exhibit D; (7) The opinion of counsel to the Trustee, dated the Closing Date and addressed to the Authority, the City and the Underwriter, to the effect that (i) the Trustee has duly authorized, executed and delivered the Indenture; and (ii) the Indenture constitutes a legally valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms, except that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws in effect from time to time affecting the rights of creditors generally and except to the extent that the enforceability thereof may be limited by the application of general principles of equity; (8) The opinion of counsel to the Escrow Agent, dated the Closing Date and addressed to the Authority, the City and the Underwriter, to the effect that (i) the Escrow Agent has duly authorized, executed and delivered the Escrow Agreement; and (ii) the Escrow Agreement constitutes a legally valid and binding obligation of the Escrow Agent, enforceable against the Escrow Agent in accordance with its terms, except that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws in effect from time to time affecting the rights of creditors generally and except to the extent that the enforceability thereof may be limited by the application of general principles of equity; 13 2999445.3 042414 AGMT (9) A certificate or certificates, dated the Closing Date, signed by a duly authorized official of the Authority satisfactory to the Underwriter, in form and substance satisfactory to the Underwriter, to the effect that (i) the representations and warranties of the Authority contained in this Purchase Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) there is no action, suit, proceeding, inquiry or investigation pending or to the best knowledge of such official after reasonable investigation, threatened (a) to restrain or enjoin the execution, sale or delivery of any of the 2018 Bonds, (b) in any way affecting the validity of the 2018 Bonds, this Purchase Agreement, the Indenture, the Escrow Agreement or the Installment Purchase Agreement, or (c) in any way contesting the existence or powers of the Authority; nor to the best knowledge of such official after reasonable investigation is there any basis for any such action, suit, proceeding, inquiry or investigation wherein an unfavorable decision, ruling or finding would make invalid or materially adversely affect the authorization, execution, delivery or performance by the Authority of the foregoing and (iii) no event affecting the Authority has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing Date any statement or information contained in the Official Statement relating to the Authority or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein relating to the Authority not misleading in any material respect; (10) A certificate or certificates, dated the Closing Date, signed by a duly authorized official of the City satisfactory to the Underwriter, in form and substance satisfactory to the Underwriter, to the effect that (i) the representations and warranties of the City contained in this Purchase Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) there is no action, suit, proceeding, inquiry or investigation pending or, to the best knowledge of such official, threatened (a) to restrain or enjoin payments under the Installment Purchase Agreement, (b) in any way contesting or affecting the validity of the Continuing Disclosure Certificate, this Purchase Agreement, the Escrow Agreement or the Installment Purchase Agreement, or (c) in any way contesting the existence or powers of the City; nor to the best knowledge of such official after reasonable investigation, is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would make invalid or materially adversely affect the authorization, execution, delivery or performance by the City of the foregoing; (iii) no event has occurred since the date of the Official Statement (excluding therefrom information about DTC or the book -entry only system contained in the Official Statement) which either makes untrue or incorrect in any material respect as of the Closing Date any statement or information contained in the Official Statement or is not reflected in the Official Statement but should be reflected therein in order to make the statements and information therein not misleading in any material respect; and (iv) since June 30, 2017, except as referred to in or as contemplated by the Official Statement, with respect to the Electric System, the City has not incurred any financial liabilities, 14 2999445.3 042414 AGMT direct or contingent, or entered into any transactions and there has not been any adverse change in the condition, financial or physical, of the Electric System, in any case that would materially and adversely affect the ability of the City to meet its obligations under the Installment Purchase Agreement; (11) A certificate, dated the Closing Date, signed by a duly authorized official of the Trustee, satisfactory in form and substance to the Underwriter, to the effect that: (i) the Trustee is a national banking association organized and existing under and by virtue of the laws of the United States of America; having the full power and being qualified to enter into and perform its duties under the Indenture; (ii) the Trustee is duly authorized to enter into the Indenture; (iii) the execution and delivery of the Indenture and compliance with the provisions on the Trustee's part contained therein, will not conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Trustee is a party or is otherwise subject (except that no representation, warranty or agreement is made with respect to any federal or state securities or Blue Sky laws or regulations), nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets held by the Trustee pursuant to the lien created by the Indenture under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the Indenture; (iv) it has not been served with any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, nor is any such action, to the best of such official's knowledge after reasonable investigation, threatened against the Trustee, as such but not in its individual capacity, affecting the existence of the Trustee, or the titles of its officers to their respective offices, or seeking to prohibit, restrain or enjoin the collection of the funds to be applied to pay the principal, premium, if any, and interest with respect to the 2018 Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Indenture, or contesting the powers of the Trustee or its authority to enter into, adopt or perform its obligations under any of the foregoing, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Indenture; and (v) subject to the provisions of the Indenture and applicable law, the Trustee will apply the proceeds from the 2018 Bonds to the purposes specified in the Indenture; (12) A certificate, dated the Closing Date, signed by a duly authorized official of the Escrow Agent, satisfactory in form and substance to the Underwriter, to the effect that: (i) the Escrow Agent is a national banking association organized and existing under and by virtue of the laws of the United States of America; having the full power and being qualified to enter into and perform its duties under the Escrow Agreement; (ii) the Escrow Agent is duly authorized to enter into the Escrow Agreement; (iii) the execution and delivery of the Escrow Agreement and compliance with the provisions on the Escrow 15 2999445.3 042414 AGMT Agent's part contained therein, will not conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, Escrow Agreement, bond, note, resolution, agreement or other instrument to which the Escrow Agent is a party or is otherwise subject (except that no representation, warranty or agreement is made with respect to any federal or state securities or Blue Sky laws or regulations), nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets held by the Escrow Agent pursuant to the lien created by the Escrow Agreement under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the Escrow Agreement; and (iv) it has not been served with any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, nor is any such action, to the best of such official's knowledge after reasonable investigation, threatened against the Escrow Agent, as such but not in its individual capacity, affecting the existence of the Escrow Agent, or the titles of its officers to their respective offices, or the pledge of the Escrow Agreement, or in any way contesting or affecting the validity or enforceability of the Escrow Agreement, or contesting the powers of the Escrow Agent or its authority to enter into, adopt or perform its obligations under any of the foregoing, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Escrow Agreement; (13) A certified copy of the general resolution of the Trustee authorizing the execution and delivery of the Indenture; (14) A certified copy of the general resolution of the Escrow Agent authorizing the execution and delivery of the Escrow Agreement; (15) Certified copies of the resolution of the Authority authorizing the execution and delivery of the Indenture, the Installment Purchase Agreement, this Purchase Agreement and the Official Statement; (16) Certified copies of the resolutions of the City authorizing the execution and delivery of the Installment Purchase Agreement, the Continuing Disclosure Certificate, this Purchase Agreement, the Escrow Agreement and the Official Statement; (17) A Tax Certificate with respect to the 2018 Bonds, together with Form 8038-G, in form satisfactory to Bond Counsel, signed by an appropriate officer of the City and the Authority; (18) Evidence that the ratings on the 2018 Bonds as set forth in the Official Statement are in full force and effect as of the Closing Date; 16 2999445.3 042414 AGMT (19) A letter of Disclosure Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that, without having undertaken to determine independently, and without assuming any responsibility for, the accuracy, completeness or fairness of any of the statements contained in the Preliminary Official Statement or the Official Statement nor making any representation regarding independent verification of the accuracy, completeness or fairness of any of the statements contained in the Preliminary Official Statement or the Official Statement, such counsel advises that no information has come to the attention of the attorneys in the firm representing the Authority and the City as Disclosure Counsel which would lead them to believe that the Preliminary Official Statement or the Official Statement, as of their respective dates (except for information relating to any financial, statistical or economic data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, any of the Appendices to the Official Statement, or any information about book -entry or DTC, included therein, as to which no opinion or view need be expressed; and, with respect to the Preliminary Official Statement, information permitted to be omitted under Rule 15c2-12) or the Official Statement, as of the date of the Closing (except as aforesaid), contained or contains, any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (20) An opinion of Underwriter's Counsel, dated the Closing Date and addressed to the Underwriter, in their capacity as counsel to the Underwriter in connection with the purchase by the Underwriter of the 2018 Bonds, in form and substance satisfactory to the Underwriter; which shall contain a statement to the effect that, without having undertaken to determine independently, and without assuming any responsibility for, the accuracy, completeness or fairness of any of the statements contained in the Preliminary Official Statement or the Official Statement nor making any representation regarding independent verification of the accuracy, completeness or fairness of any of the statements contained in the Preliminary Official Statement or the Official Statement, such counsel advises that no information has come to the attention of the attorneys in the firm representing the Underwriter in connection with their purchase of the 2018 Bonds which would lead them to believe that the Preliminary Official Statement or the Official Statement, as of their respective dates (except for information relating to any financial, statistical or economic data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, any of the Appendices to the Official Statement, or any information about book -entry or DTC, included therein, as to which no opinion or view need be expressed; and, with respect to the Preliminary Official Statement, information permitted to be omitted under Rule 15c2-12) or the Official Statement, as of the date of the Closing (except as aforesaid), contained or contains, any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and 17 2999445.3 042414 AGMT (21) Such additional legal opinions, certificates, proceedings, instruments, insurance policies or evidences thereof and other documents as the Underwriter or Bond Counsel may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the representations of the Authority and the City herein and of the statements and information contained in the Official Statement, and the due performance or satisfaction by the Authority and the City at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the Authority and the City in connection with the transactions contemplated hereby and by the Indenture and the Installment Purchase Agreement. If the Authority and the City shall be unable to satisfy the conditions to the Underwriter's obligations contained in this Purchase Agreement or if the Underwriter's obligations shall be terminated for any reason permitted herein, all obligations of the Underwriter hereunder may be terminated by the Underwriter at, or at any time prior to, the Closing Date by written notice to the Authority and the City and neither the Underwriter nor the Authority or the City shall have any further obligations hereunder. 6. Public Offering Price. With respect to the issue price of the 2018 Bonds: (a) The Underwriter agrees to assist the Authority and the City in establishing the issue price of the 2018 Bonds and shall execute and deliver to the Authority and the City at Closing an "issue price" or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit E, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Authority, the City and Bond Counsel, to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the 2018 Bonds. (b) [Except as otherwise set forth in Schedule I attached hereto,] [T][t]the Authority and the City will treat the first price at which 10% of each maturity of the 2018 Bonds (the "10% test") is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Bond Purchase Agreement, the Underwriter shall report to the Authority and the City the price or prices at which the Underwriter has sold to the public each maturity of 2018 Bonds. If at that time the 10% test has not been satisfied as to any maturity of the 2018 Bonds, the Underwriter agrees to promptly report to the Authority and the City the prices at which 2018 Bonds of that maturity have been sold by the Underwriter to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the 2018 Bonds of that maturity or until all 2018 Bonds of that maturity have been sold to the public. (c) [The Underwriter confirms that it has offered the 2018 Bonds to the public on or before the date of this Bond Purchase Agreement at the offering price or prices (the "initial offering price"), or at the corresponding yield or yields, set forth in Schedule I attached hereto, except as otherwise set forth therein. Schedule I also sets forth, as of the 18 2999445 3 042414 AGMT date of this Bond Purchase Agreement, the maturities, if any, of the 2018 Bonds for which the 10% test has not been satisfied and for which the Authority and the City and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Authority and the City to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the "hold -the - offering -price rule"). So long as the hold -the -offering -price rule remains applicable to any maturity of the 2018 Bonds, the Underwriter will neither offer nor sell unsold 2018 Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following: (1) the close of the fifth (5th) business day after the sale date; or (2) the date on which the Underwriter has sold at least 10% of that maturity of the 2018 Bonds to the public at a price that is no higher than the initial offering price to the public. The Underwriter shall promptly advise the Authority and the City when the Underwriter has sold 10% of that maturity of the 2018 Bonds to the public at a price that is no higher than the initial offering price to the public, if that occurs prior to the close of the fifth (5th) business day after the sale date. The Authority and the City acknowledge that, in making the representation set forth in this subsection, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the 2018 Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the hold -the - offering -price rule, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that an Underwriter is a party to a retail distribution agreement that was employed in connection with the initial sale of the 2018 Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the hold -the -offering -price rule, as set forth in the retail distribution agreement and the related pricing wires. The Authority and the City further acknowledge that each Underwriter shall be solely liable for its failure to comply with its agreement regarding the hold -the -offering -price rule and that no Underwriter shall be liable for the failure of any other Underwriter, or of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a retail distribution agreement, to comply with its corresponding agreement regarding the hold -the -offering -price rule as applicable to the 2018 Bonds.] (d) The Underwriter confirms that: (1) any agreement among underwriters, any selling group agreement and each retail distribution agreement (to which the Underwriter is a party) relating to the initial sale of the 2018 Bonds to the public, together with the related pricing wires, contains or will contain language obligating each Underwriter, each dealer who is a member of the selling group, and each broker- dealer that is a party to such retail distribution agreement, as applicable, to (A) 19 2999445.3 042414 AGMT report the prices at which it sells to the public the unsold 2018 Bonds of each maturity allotted to it until it is notified by the Underwriter that either the 10% test has been satisfied as to the 2018 Bonds of that maturity or all 2018 Bonds of that maturity have been sold to the public and (B) comply with the hold -the -offering - price rule, if applicable, in each case if and for so long as directed by the Underwriter and as set forth in the related pricing wires, and (2) any agreement among underwriters relating to the initial sale of the 2018 Bonds to the public, together with the related pricing wires, contains or will contain language obligating each Underwriter that is a party to a retail distribution agreement to be employed in connection with the initial sale of the 2018 Bonds to the public to require each broker-dealer that is a party to such retail distribution agreement to (A) report the prices at which it sells to the public the unsold 2018 Bonds of each maturity allotted to it until it is notified by the Underwriter or the Underwriter that either the 10% test has been satisfied as to the 2018 Bonds of that maturity or all 2018 Bonds of that maturity have been sold to the public and (B) comply with the hold -the -offering -price rule, if applicable, in each case if and for so long as directed by the Underwriter or the Underwriter and as set forth in the related pricing wires. (e) The Underwriter acknowledges that sales of any 2018 Bonds to any person that is a related party to an Underwriter shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: (1) "public" means any person other than an underwriter or a related party, (2) "underwriter" means (A) any person that agrees pursuant to a written contract with the Authority and the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the 2018 Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the 2018 Bonds to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the 2018 Bonds to the public), (3) a purchaser of any of the 2018 Bonds is a "related party" to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and 20 2999445.3 042414 AGMT (4) "sale date" means the date of execution of this Bond Purchase Agreement by all parties. 7. Expenses. All expenses and costs incident to the authorization, issuance, delivery and sale of the 2018 Bonds to the Underwriter, including the costs of printing of the 2018 Bonds, the Preliminary Official Statement and the Official Statement, the cost of duplicating the Indenture, the Installment Purchase Agreement, the Continuing Disclosure Certificate, the fees of accountants, financial advisors, consultants and rating agencies, the initial fee of the Trustee and its counsel in connection with the issuance of the 2018 Bonds, the fees and expenses of Bond Counsel, shall be paid from the proceeds of the 2018 Bonds. In addition, the fees of counsel to the Underwriter in the amount of $22, 500 shall be paid from the proceeds of the 2018 Bonds. In the event that the 2018 Bonds for any reason are not issued, or to the extent proceeds of the 2018 Bonds are insufficient or unavailable therefor, any fees, costs and expenses owed by the Authority or the City, which otherwise would have been paid from the proceeds of the 2018 Bonds, shall be paid by the Authority or the City. All out of pocket expenses of the Underwriter, including traveling and other expenses, the California Debt and Investment Advisory Commission fee and the fees and expenses of Underwriter's Counsel (in excess of the amount paid from the proceeds of the 2018 Bonds) shall be paid by the Underwriter. 8. Notices. Any notice or other communication to be given under this Purchase Agreement may be given by delivering the same in writing to the respective parties at the following address: Underwriter: J.P. Morgan Securities LLC 1415 L Street, Suite 650 Sacramento, CA 95814 Attention: Juan Fernandez Authority: Lodi Public Financing Authority c/o the City of Lodi 221 West Pine Street Lodi, CA 95241-1910 Attention: City Manager City: City of Lodi 221 West Pine Street Lodi, CA 95241-1910 Attention: City Manager 21 2999445.3 042414 AGMT 9. Survival of Representations and Warranties. The representations and warranties of the Authority and the City set forth in or made pursuant to this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of this Purchase Agreement and regardless of any investigations or statements as to the results thereof made by or on behalf of the Underwriter and regardless of delivery of and payment for the 2018 Bonds. 10. Effectiveness and Counterpart Signatures. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by duly authorized officers of the Authority and the City and shall be valid and enforceable as of the time of such acceptance. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 11. Parties in Interest. This Purchase Agreement is made solely for the benefit of the Authority, the City and the Underwriter (including the successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. 12. Heading. The headings of the sections of this Purchase Agreement are inserted for convenience only and shall not be deemed to b e a part hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 22 2999445.3 042414 AGMT 13. Governing Law. This Purchase Agreement shall be construed in accordance with the laws of the State of California. Approved as to form: By: Janice D. Magdich, City Attorney Very truly yours, J.P. MORGAN SECURITIES LLC By: Authorized Signatory ACCEPTED: LODI PUBLIC FINANCING AUTHORITY By: Stephen Schwabauer, City Manager CITY OF LODI, A MUNICIPAL CORPORATION By: 23 Stephen Schwabauer, City Manager 2999445.3 042414 AGMT EXHIBIT A MATURITY SCHEDULE $ Series 2018 Serial Bonds Maturity Date Principal Interest (September 1) Amount Rate Yield Price *Priced to par call date of September 1, 20_. Redemption Optional Redemption. The 2018 Bonds maturing on or before September 1, 20_, are not subject to optional redemption prior to their respective stated maturity dates. The 2018 Bonds maturing on or after September 1, 20_, are subject to redemption in whole, or in part at the Written Request of the Authority among maturities on such basis as the Authority may designate and within a maturity as set forth in the Indenture, at the option of the Authority, on any date on or after September 1, 20_, from any available source of funds, at a redemption price equal to 100% of the principal amount of the 2018 Bonds to be redeemed, plus accrued interest to the date of redemption, without premium. A-1 2999445.3 042414 AGMT EXHIBIT B FORM OF SUPPLEMENTAL OPINION OF BOND COUNSEL City of Lodi Lodi Public Financing Authority 221 West Pine Street P.O. Box 333-6700 Lodi, California 95241-1910 J.P. Morgan Securities LLC 560 Mission St., Suite 2400 San Francisco, California $ Lodi Public Financing Authority 2018 Electric System Revenue Refunding Bonds Ladies and Gentlemen: We have acted as bond counsel to the Lodi Public Financing Authority (the "Authority") in connection with the issuance by the Authority of the above -referenced bonds (the "Bonds"), pursuant to Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the "Bond Law") and an Indenture of Trust (the "Indenture"), dated as of 2018, by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee"). Capitalized terms not defined herein shall have those meanings assigned to them in the Bond Purchase Agreement, dated , 2018 (the "Purchase Agreement"), among J.P. Morgan Securities LLC (the "Underwriter"), the Authority and the City of Lodi (the "City"). The Bonds are secured primarily by installment payments to be made by the City under an Installment Purchase Agreement, dated as of , 2018 (the "Installment Purchase Agreement"), by and between the Authority and the City. We have examined the Bond Law and such certified proceedings and other papers as we deem necessary to render this opinion. This letter is being delivered in our capacity as bond counsel to the Authority and not as counsel to any other addressee hereof As to questions of fact material to our opinion, we have relied upon representations of the Authority and the City contained in the Indenture, the Installment Purchase Agreement, and the certified proceedings and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The Authority has duly and validly executed the Purchase Agreement, and the Purchase Agreement constitutes the legal, valid and binding agreement of the Authority, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally, and by equitable principles, whether considered at law or in equity. B-1 2999445.3 042414 AGMT 2. The statements contained in the Official Statement on the cover page and under the captions "INTRODUCTION," "THE 2018 BONDS" (other than information relating to DTC and its book -entry only system, as to which no opinion is expressed)," "SECURITY AND SOURCES OF PAYMENT FOR THE 2018 BONDS," "TAX MATTERS," and in Appendices C and D thereto, insofar as such statements purport to summarize certain provisions of the Bonds, the Indenture, the Installment Purchase Agreement, or to state legal conclusions and the opinion of Bond Counsel regarding the tax-exempt nature of the Bonds, present a fair and accurate summary of the provisions thereof. 3. The Bonds are exempt from registration under the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended. This opinion is rendered solely for your benefit in connection with issuance of the Bonds and may not be relied upon, used, circulated, quoted or referred to, nor any copies hereof be delivered to, any other person without our prior written approval. We disclaim any obligation to supplement this letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in the law that may hereafter occur, and our engagement with respect to this matter has terminated as of the date hereof. B-2 Respectfully submitted, A Professional Law Corporation 2999445.3 042414 AGMT EXHIBIT C OPINION OF AUTHORITY COUNSEL ADDRESSED TO THE UNDERWRITER [DATE OF DELIVERY] J.P. Morgan Securities LLC San Francisco, California Lodi Public Financing Authority $ 2018 Electric System Revenue Refunding Bonds Dear Ladies and Gentlemen: I am [ ], counsel to the Lodi Public Financing Authority (the "Authority") a joint exercise of powers entity organized and existing pursuant to the provisions of Title 1, Division 7, Chapter 5 of the Government Code of the State of California. This opinion is rendered in connection with the issuance of the above -referenced bonds (the "Bonds"). The Bonds are being issued pursuant to an Indenture of Trust (the "Indenture"), dated as of , 2018, by and between the Authority and MUFG Union Bank, as trustee (the "Trustee"). The Bonds were sold to J.P. Morgan Securities LLC (the "Underwriter"), pursuant to a Bond Purchase Agreement, dated , 2018 (the "Purchase Agreement"), among the Underwriter, the City of Lodi (the "City") and the Authority. This letter is being delivered in my capacity as counsel to the Authority and not as counsel to the Underwriter. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture, or, if not defined in the Indenture, in the Purchase Agreement. In rendering this opinion, I have examined the following documents: (i) The Indenture; (ii) The Installment Purchase Agreement, dated as of . 2018 (the "Installment Purchase Agreement") between the City and the Authority; (iii) The Purchase Agreement; and (iv) The Official Statement (the "Official Statement") dated , 2018, relating to the Bonds. In addition, I have examined such other documents and instruments, including certificates of public officials, and have made such investigations of law and of fact as I have deemed necessary or appropriate for the purpose of rendering the opinions set forth herein. Based on the foregoing, I am of the opinion that: The Authority is a joint exercise of powers entity duly organized under the laws of the State of California. C-1 2999445.3 042414 AGMT Resolution No. 2018- (the "Resolution") approving and authorizing the issuance of the 2018 Bonds and the execution and delivery of the Indenture, the Installment Purchase Agreement, the Purchase Agreement and the Official Statement was duly adopted by the Authority at a regular meeting of the Board of Directors of the Authority held on 2018, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout. There is no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, public board or body pending (with service of process having been accomplished) or, to my current actual knowledge after reasonable investigation, threatened against or affecting the Authority in any way contesting or affecting the validity of the Bonds, the Indenture, the Installment Purchase Agreement or the Purchase Agreement or the sources of payment for the Bonds. The issuance of the Bonds and the execution and delivery of the Indenture, the Installment Purchase Agreement, the Purchase Agreement and the Official Statement by the Authority, the adoption of the Resolution, and compliance by the Authority with the provisions of the foregoing, as appropriate, under the circumstances contemplated thereby, does not and will not in any material respect conflict with or constitute on the part of the Authority a breach or default under any agreement or other instrument to which the Authority is a party (and of which I have current actual knowledge after reasonable investigation) or by which it is bound (and of which I have current actual knowledge after reasonable investigation) or any existing law, regulation, court order or consent decree to which the Authority is subject. The Official Statement and the Bonds have been duly authorized, executed and delivered by the Authority, and the Indenture, the Installment Purchase Agreement and the Purchase Agreement have been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and delivery by the other parties thereto, the Indenture, the Installment Purchase Agreement and the Purchase Agreement constitute legal, valid and binding agreements of the Authority, enforceable in accordance with their respective terms, subject in each case to laws relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles; provided, that the enforceability of the foregoing agreements may be subject or limited by the unenforceability under certain circumstances of provisions imposing penalties, forfeitures or late payment charges upon delinquency in payment or the occurrence of a default, and no opinion is expressed as to any indemnification provisions contained therein. Except as described in the Official Statement, no authorization, approval, consent or other order of the State of California or any other governmental authority or agency within the State of California having jurisdiction over the Authority is required for the valid authorization, execution, delivery and performance by the Authority of the Bonds, the Indenture, the Installment Purchase Agreement, the Official Statement or the Purchase Agreement or for the adoption of the Resolution which has not been obtained; provided, that no opinion is expressed with respect to qualification under Blue Sky or other state securities laws. Sincerely, C-2 2999445.3 042414 AGMT C-3 2999445.3 042414 AGMT EXHIBIT D OPINION OF THE CITY ATTORNEY [DATE OF DELIVERY] J.P. Morgan Securities LLC San Francisco, California Lodi Public Financing Authority $ 2018 Electric System Revenue Refunding Bonds Dear Ladies and Gentlemen: I am City Attorney to the City of Lodi (the "City"), a municipal corporation and general law city duly organized and existing under the Constitution and laws of the State of California (the "State"). This opinion is rendered in connection with the issuance of the above -referenced bonds (the "Bonds"). The Bonds are being issued pursuant to an Indenture of Trust (the "Indenture"), dated as of , 2018, by and between the Lodi Public Financing Authority (the "Authority") and MUFG Union Bank, as trustee (the "Trustee"). The Bonds were sold to J.P. Morgan Securities LLC (the "Underwriter"), pursuant to a Bond Purchase Agreement, dated , 2018 (the "Purchase Agreement"), among the Underwriter, the City of Lodi (the "City") and the Authority. This letter is being delivered in my capacity as counsel to the City and not as counsel to the Underwriter. In rendering this opinion, I have examined the following documents: (i) an Installment Purchase Agreement, dated as of , 2018 (the "Installment Purchase Agreement") between the City and the Authority; (ii) the Purchase Agreement; (iii) the Escrow Agreement; (iv) the Official Statement (the "Official Statement") dated , 2018, relating to the Bonds; and (v) the Continuing Disclosure Certificate (the "Continuing Disclosure Certificate"), dated as of the date hereof, relating to the Bonds. In addition, I have examined such other documents and instruments, including certificates of public officials, and have made such investigations of law and of fact as I have deemed necessary or appropriate for the purpose of rendering the opinions set forth herein. Based on the foregoing, I am of the opinion that: The City is a municipal corporation and general law city duly organized under the laws of the State of California. Resolution No. 2018- (the "Resolution") approving and authorizing the issuance of the 2018 Bonds and the execution and delivery of the Installment Purchase Agreement, the Purchase Agreement, the Continuing Disclosure Certificate, Escrow Agreement and the Official Statement was duly adopted by the City at a meeting of the City Council of the City held on , 2018, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout. D-1 2999445.3 042414 AGMT There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body pending (with service of process having been accomplished) or, to my current actual knowledge after reasonable investigation, threatened against or affecting the City's financial condition or operation or in any way contesting or affecting the validity of the Installment Purchase Agreement, the Purchase Agreement or the Continuing Disclosure Certificate or the sources of payment for the Bonds. The execution and delivery of the Installment Purchase Agreement, the Purchase Agreement, the Escrow Agreement, the Continuing Disclosure Certificate and the Official Statement by the City, the adoption of the Resolution, and compliance by the City with the provisions of the foregoing, as appropriate, under the circumstances contemplated thereby, does not and will not in any material respect conflict with or constitute on the part of the City a breach or default under any agreement or other instrument to which the City is a party (and of which I have current actual knowledge after reasonable investigation) or by which it is bound (and of which I have current actual knowledge after reasonable investigation) or any existing law, regulation, court order or consent decree to which the City is subject. The Official Statement has been duly authorized, executed and delivered by the City, and the Installment Purchase Agreement, the Purchase Agreement, the Escrow Agreement and the Continuing Disclosure Certificate have been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the other parties thereto, the Installment Purchase Agreement, the Purchase Agreement and the Continuing Disclosure Certificate constitute legal, valid and binding agreements of the City, enforceable in accordance with their respective terms, subject in each case to laws relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles; provided, that the enforceability of the foregoing agreements may be subject or limited by the unenforceability under certain circumstances of provisions imposing penalties, forfeitures or late payment charges upon delinquency in payment or the occurrence of a default, and no opinion is expressed as to any indemnification provisions contained therein. Except as described in the Official Statement, no authorization, approval, consent or other order of the State of California or any other governmental authority or agency within the State of California having jurisdiction over the City is required for the valid authorization, execution, delivery and performance by the City of the Installment Purchase Agreement, the Official Statement, the Purchase Agreement, the Escrow Agreement or the Continuing Disclosure Certificate or for the adoption of the Resolution which has not been obtained; provided, that no opinion is expressed with respect to qualification under Blue Sky or other state securities laws. Under the laws of the State of California, and subject to the requirements of Proposition 218, the City has the authority to fix and collect charges for electricity utility service and is not presently subject to the regulatory jurisdiction of any state, regional or local governmental regulatory authority in connection with fixing and collecting such charges. The Net Revenues (as defined in the Official Statement) are free and clear of and from any and all liens and encumbrances other than as set forth in the Official Statement. D-2 2999445.3 042414 AGMT I am not passing upon and have not undertaken to determine independently or to verify the accuracy or completeness of the statements contained in the Official Statement and I am, therefore, unable to make any representation to you in that regard. However, based on my ongoing role as City Attorney and my participation in conferences with representatives of the City, the City's Financial Advisor, and others, during which conferences the content of the Official Statement and related matters were discussed, and, in reliance thereon and on certain documents reviewed by me and on the documents, letters, certificates and opinions described above and my understanding of applicable law, I advise you as a matter of fact, but not opinion, that no information has come to my attention which caused me to believe that the Official Statement as of its date contained, or as of the date hereof contains, any untrue statement of a material fact or as of its date omitted, or as of the date hereof omits, to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (excluding any CUSIP numbers, financial, accounting, statistical, economic, engineering or demographic data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, the Appendices thereto, and information regarding DTC and its book- entry only system contained in the Official Statement, as to which no opinion is expressed). Sincerely, City Attorney By: D-3 2999445.3 042414 AGMT EXHIBIT E Purchaser's Certificate: IT IS HEREBY CERTIFIED by the undersigned on behalf of J.P. Morgan Securities LLC (the "Purchaser"), as the underwriters for the Lodi Public Financing Authority, 2018 Electric System Revenue Refunding Bonds (the "Bonds"): 1. We acknowledge receipt of the Bonds in the aggregate principal amount of $ , bearing interest, maturing, being in such denominations and having such terms and provisions as provided in the Indenture and the Bond Purchase Agreement. 2. A bona fide public offering was made for all of the Bonds on the Sale Date at the initial public offering prices shown on the inside cover page of the Official Statement for the Bonds. Those Prices are the Prices at which the Bonds were initially offered to the Public on or before the Sale Date. A copy of the pricing wire or similar documentation supporting this certification is attached as Exhibit 2. For the purposes of this certificate: Capitalized terms not otherwise defined herein shall have the meanings set forth in the Bond Purchase Agreement (the "Bond Purchase Agreement"), dated , 2018, among the Purchaser, the Lodi Public Financing Authority and the City of Lodi. "Maturity" means each group of bonds with the same terms which matures on the same date and bears interest at the same rate. "Price" means, if a yield is shown on the inside cover page of the Official Statement for any maturity, the dollar price that produces that yield. "Public" means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an underwriter or a related party. "Sale Date" means the date the Purchaser's offer to purchase the Bonds in the Bond Purchase Agreement was accepted on behalf of the Issuer. "Substantial amount" is 10% or more of each maturity. "Underwriter" means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). 3. With respect to the Bonds maturing on and , the first Price at which a Substantial Amount of such Bonds were sold to the Public is the Price shown on the inside cover page of the Official Statement and on Exhibit 1. E-1 2999445.3 042414 AGMT 4. With respect to the remaining Maturities of the Bonds, as set forth in the Bond Purchase Agreement, the Underwriter[s] [has] [have] agreed in writing that, for each such Maturity of the Bonds, [it][they] would neither offer nor sell any of the Bonds of such Maturity to any person at a Price that is higher than the initial public offering price for such Maturity during the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date or (ii) the date on which the Underwriter[s] [has][have] sold a Substantial Amount of such Maturity of the Bonds to the Public at a Price that is no higher than the initial public offering price for such Maturity. [No Underwriter has] [The Underwriter has not] offered or sold any such remaining Maturity of the Bonds at a Price that is higher than the respective initial public offering price for that Maturity of the Bonds during the offering period applicable to that Maturity described in the preceding sentence. 5. The Issuer and its counsel may rely on these certifications in concluding that the Bonds meet certain requirements of the Internal Revenue Code of 1986 as amended (the "Code"), relating to tax-exempt bonds; however, nothing herein represents our interpretation of any law and we are not providing any interpretations of law or regulations in executing and delivering this certificate." DATED as of , 2018. J.P. Morgan Securities LLC, as Underwriter By: Title: E-2 2999445.3 042414 AGMT Exhibit 1 (Offering Prices of Bonds) E-3 2999445.3 042414 AGMT Exhibit 2 (Copy of Pricing Wire or Similar Documentation) E-4 2999445.3 042414 AGMT [Schedule 1] S-1 2999445.3 042414 AGMT RESOLUTION NO. 2018-71 A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING THE CITY MANAGER TO EXECUTE AN AGREEMENT FOR LEGAL SERVICES WITH JONES HALL, A PROFESSIONAL LAW CORPORATION, OF SAN FRANCISCO, FOR BOND COUNSEL SERVICES IN CONNECTION WITH THE REFINANCING OF CERTAIN OUTSTANDING OBLIGATIONS OF THE CITY WHEREAS, City previously entered into an Installment Purchase Contract, dated as of July 1, 2008 with the Lodi Public Improvement Corporation (the "Corporation"), pursuant to which the Client agreed to make certain installment payments in the aggregate principal amount of $60,685,000 (the "2008 Installment Payments"), and caused execution and delivery of Electric System Revenue Certificates of Participation, 2008 Series A (the "2008 Certificates"). The proceeds of the 2008 Certificates were used to (i) refund the then -outstanding $46,760,000 principal amount of Electric System Revenue Certificates of Participation 2002 Series A Variable Rate Certificates (the "2002 Certificates") and (ii) fund certain costs relating to termination of the swap agreement relating to the 2002 Certificates; and WHEREAS, the proceeds of the 2002 Certificates were used to refund, on an advance basis, the 1999 Series A Current Interest Certificates and the 1999 Series B Capital Appreciation Certificates (together, the "1999 Obligations"), and the proceeds of the 1999 Obligations were used to finance the improvements to the Electric System; and WHEREAS, under current economic conditions, it is possible for the City to refinance on a tax-exempt basis the 2008 Installment Payments and the related 2008 Certificates maturing on and after July 1, 2019 for the purpose of achieving savings for the benefit of the customers of the Electric System; and WHEREAS, in order to provide funds that are sufficient (along with other available City funds) to refinance the 2008 Installment Payments and cause a current prepayment of the 2008 Certificates, the City wishes to ask the Lodi Public Financing Authority (the "Authority") to issue its 2018 Electric System Revenue Refunding Bonds (the "Bonds") under the provisions of Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code (the "Bond Law"); and WHEREAS, in order to accomplish the proposed refunding, the City requires the services of a nationally recognized bond counsel; and WHEREAS, staff recommends authorizing the City Manager to execute an Agreement for Professional Services with Jones Hall, a Professional Law Corporation, of San Francisco, for bond counsel services in connection with the refinancing of certain outstanding obligations of the City as set forth above. NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby authorize the City Manager to execute an Agreement for Professional Services with Jones Hall, of San Francisco, California, for bond counsel services in connection with the refinancing of certain outstanding obligations on the City as set forth above, in the amount of $75,000. Dated: April 18, 2018 I hereby certify that Resolution No. 2018-71 was passed and adopted by the City Council of the City of Lodi in a regular meeting held April 18, 2018, by the following vote: AYES: COUNCIL MEMBERS — Chandler, Johnson, Mounce, and Mayor Nakanishi NOES: COUNCIL MEMBERS — None ABSENT: COUNCIL MEMBERS — Kuehne ABSTAIN: COUNCIL MEMBERS — None 1/h- :011ALL-t,ra NIFERri►. FERRAIOLO City Clerk 2018-71