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Agenda Report - March 4, 2020 H-02
AGENDA ITEM HqZ CITY OF LODI COUNCIL COMMUNICATION TM AGENDA TITLE: Adopt Resolutions and Authorize Documents and Actions Regarding the Refunding of a Series of Water Revenue Bonds that was Originally Issued In 2010 (a) Adopt A Resolution of the City Council Authorizing Documents and Official Actions Relating to the Refinancing of an Outstanding Installment Payment Obligation for Water System Improvements and the Issuance by the Lodi Public Financing Authority of Refunding Water Revenue Bonds; and (b) Adopt A Resolution of the Board of Directors of the Lodi Public Financing Authority Authorizing the Issuance and Sale of Refunding Water Revenue Bonds to Refinance the Construction of Water System Improvements, and Approving Related Documents and Official Actions MEETING DATE: March 4, 2020 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 City installment payment obligation related to a series of outstanding water revenue bonds and the issuance and sale of refunding water revenue bonds (the "Refunding Bonds") in an amount not to exceed $31 million in order to secure market interest savings. BACKGROUND INFORMATION: The PFA previously issued two series of bonds (the "2010 Bonds") that are payable from installment payments made by the City from net revenues of the City's water enterprise (the "Water System") as follows: (a) $9,015,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series A (the "2010A Bonds"); and (b) $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) (the "2010B Bonds"). Favorable market conditions have reduced prevailing interest rates and made it attractive for the City to refinance its 2010 installment payment obligation and to cause a refunding of the 2010B Bonds by the issuance and sale by the PFA of refunding water revenue bonds. Under current market conditions, staff does not recommend that the City refund the 2010A Bonds. The 2010B Bonds can be redeemed (or prepaid) on June 1, 2020, without premium. 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 the legal documents summarized below. 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. The documents are in near -final form, and the resolutions authorize certain officers of the City and the PFA to finalize the documents. The resolutions specify the maximum principal amount of the APPROVED: _St�,�Sch'Vvjbauej, City Manager Adopt Resolutions and Authorize Documents and Actions Regarding the Refunding of a Series of Water Revenue Bonds that were Originally Issued In 2010 March 4, 2020 Refunding Bonds ($31 million) and the minimum net present value savings (3%) that issuance of the Refunding Bonds must achieve. In order to comply with California law, the resolutions also include the following information, which represents a good faith estimate by the City's municipal advisor, Fieldman, Rolapp & Associates ("Municipal Advisor"): (a) the true interest cost of the Refunding Bonds; (b) the finance charge of the Refunding Bonds, which means the sum of all fees and charges paid to third parties; (c) 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 (d) the total of all payments that 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. Installment Sale Agreement: The Refunding Bonds will be payable from installment payments made by the City to the PFA under an Installment Sale Agreement. The scheduled installment payments will be equal in amount to debt service on the Refunding Bonds. 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 Sale Agreement documents the key financial obligations of the Water System, which are consistent with existing obligations of the Water System under the legal documents for the 2010 Bonds, including the following: • the source of payment for the City's installment payments: the City is only obligated to use net revenues of the Water System to make the installment payments (the City is not obligated to make the installment payments from any other City funds); • the uses of the Water System's gross revenues: briefly, gross revenues are first used to pay operation and maintenance expenses of the Water System and then to pay the installment payments and any future Water System debt; ■ the promise of the City to charge sufficient rates to Water 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 Water System debt can be issued to finance additional capital improvements to the Water System. The installment payments under the Installment Sale Agreement related to the Refunding Bonds will be payable from net revenues of the Water System on a parity basis with the installment payments related to the 2010A Bonds, which are not being refinanced. 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.). The Indenture of Trust lays out the terms of the Refunding Bonds, including: • the payment dates and maturities of the Refunding Bonds; Adopt Resolutions and Authorize Documents and Actions Regarding the Refunding of a Series of Water Revenue Bonds that were Originally Issued In 2010 March 4, 2020 • the pledge of revenues (comprised only of the installment payments made by the City) to the Refunding Bonds; • the default and remedy provisions (in the event the City failed to make the installment payments under the Installment Sale 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 Water System net revenues (i.e., Water System gross revenues remaining after payment of Water System operations and maintenance expenses). Official Statement: The Preliminary Official Statement, approved and signed by the City and PFA, most importantly describes the following: (a) the term of the Refunding Bonds ("THE 2020 BONDS"); (b) the security for the Refunding Bonds ("SECURITY AND SOURCES OF PAYMENT FOR THE 2020 BONDS"); (c) the refinancing plan; (d) the City's water system ("THE WATER SYSTEM"), which is the source of repayment for the Refunding Bonds; (e) potential risks to prospective investors ("RISK FACTORS"); (f) tax status of interest on the Refunding Bonds ("TAX MATTERS"); and (g) economic and demographic characteristics of the City (Appendix A). The Preliminary Official Statement (often referred to as the "POS") is distributed by the underwriter in this case, (Piper Sandler & Co.) 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, Adopt Resolutions and Authorize Documents and Actions Regarding the Refunding of a Series of Water Revenue Bonds that were Originally Issued In 2010 March 4, 2020 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 Certificate: The Continuing Disclosure Certificate, attached as an appendix to the Official Statement, obligates the City to provide updated information to the bond markets on an ongoing basis. Disclosure is required annually, and on an exceptional basis for certain enumerated events. Bond Purchase Agreement: The Bond Purchase Agreement is executed among the City, the PFA and Piper Sandler & Co. (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. Under the Bond Purchase Agreement, 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 include delivery of the legal documents described above and closing certificates and opinions, and the absence of material changes in the City's Water System and financial condition. Escrow Deposit and Trust Agreement: The Escrow Deposit and Trust Agreement is the agreement between the City and the trustee (The Bank of New York Mellon Trust Company, N.A.) for the 2010B Bonds that documents the deposit, investment, and application of funds (including proceeds of the Refunding Bonds) to redeem (or prepay) the 2010B Bonds on June 1, 2020. FISCAL IMPACT: The estimated net present value savings for this refinancing (i.e., after deducting the costs of the refinancing) is approximately $6.2 million for the Water System (approximately 21 % of the outstanding principal amount of the 2010B Bonds). FUNDING AVAILABLE: The City expects the net revenues of the Water System to be sufficient to pay the proposed installment payments; as a result of the savings generated by the refunding of the 2010B Bonds, the installment payments will be lower in future years than they would have been if the 2010B Bonds remained outstanding. Andrew Keys 17 Deputy City Manager Janic D. Magdich City Attorney Attachments: City Council Resolution and Exhibit Lodi Public Financing Authority Resolution and Exhibit Draft Indenture of Trust Draft Preliminary Official Statement (incl. Continuing Disclosure Certificate) Draft Installment Sale Agreement Draft Escrow Deposit and Trust Agreement Draft Bond Purchase Agreement Draft Opinion of Bond Council (Jones Hall) RESOLUTION NO. 2020-42 A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING DOCUMENTS AND OFFICIAL ACTIONS RELATING TO THE REFINANCING OF AN OUTSTANDING INSTALLMENT PAYMENT OBLIGATION FOR WATER SYSTEM IMPROVEMENTS AND THE ISSUANCE BY THE LODI PUBLIC FINANCING AUTHORITY OF REFUNDING WATER REVENUE BONDS WHEREAS, the City of Lodi (the "City") owns and operates facilities and property for the supply, treatment, and distribution of water within the service area of the City (the "Water System"); and WHEREAS, the Lodi Public Financing Authority (the Authority) is a joint exercise of powers authority that was established by the City and the Industrial Development Authority of the City of Lodi pursuant to a Joint Exercise of Powers Agreement, dated as of July 1, 2010; the Authority was formed for the purpose of assisting the City in the financing of public capital improvements; and WHEREAS, in order to provide funds to finance the acquisition and construction of improvements to the Water System (the 2010 Water Projects"), the City previously caused the Authority to issue the following bonds (collectively, the "2010 Bonds") pursuant to an Indenture of Trust, dated as of October 1, 2010 (the "2010 Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2010 Trustee"): (i) $9,015,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series A ("2010A Bonds"), and (ii) $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) ("2010B Bonds"); and WHEREAS, the 2010 Bonds are payable from installment payments (the "2010 Installment Payments") made by the City to the Authority under an Installment Sale Agreement dated as of October 1, 2010 (the "2010 Installment Sale Agreement"), under which the Authority acquired, constructed and improved the 2010 Water Projects and sold the completed 2010 Water Projects to the City in consideration of the agreement by the City to pay the 2010 Installment Payments; and WHEREAS, under current municipal bond market conditions, it is possible for the City to refinance on a tax-exempt basis the portion of the 2010 Installment Payments attributable to the 2010B Bonds (the "2010B Installment Payments") for the purpose of achieving savings for the benefit of the customers of the Water System, and to cause a redemption of the 2010B Bonds on June 1, 2020; and WHEREAS, the City does not expect to refinance the portion of the 2010 Installment Payments attributable to the 2010A Bonds (the "2010A Installment Payments") or to cause a redemption of the 2010A Bonds; and WHEREAS, in order to provide funds to refinance the 2010B Installment Payments and cause a redemption of the 2010B Bonds, the City wishes to ask the Authority to issue its 2020 Refunding Water Revenue Bonds, Series A (the "Refunding 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 Refunding Bonds, the City proposes to enter into an installment sale agreement (the "Refunding Installment Sale Agreement") with the Authority and to pay installment payments (the "Refunding Installment Payments") in an amount sufficient to pay debt service on the Refunding Bonds; and WHEREAS, the Refunding Installment Payments will be secured by a pledge of and lien on the net revenues of the Water System, on a parity with the pledge of and lien on the net revenues securing the City's obligation under the 2010 Installment Sale Agreement to make the 2010A Installment Payments; and WHEREAS, there has also been submitted to the City Council a form of Preliminary Official Statement in connection with the marketing of the Refunding Bonds and the City Council, with the aid of its staff, has reviewed the Preliminary Official Statement; and WHEREAS, in accordance with Government Code Section 5852.1, the City Council has obtained and wishes to disclose the information set forth in Exhibit A hereto; and WHEREAS, the City Council wishes at this time to take action approving the proposed refinancing 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 Refunding 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 Refunding Bonds by the Authority under the Bond Law in the aggregate principal amount of not to exceed $31,000,000. Section 2. Approval of Refunding Installment Sale Agreement. The City Council hereby approves the Refunding Installment Sale Agreement between the Authority and the City. The Refunding Installment Sale 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, the City Manager, the Deputy City Manager or the 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 Refunding Installment Sale Agreement, and such execution shall be conclusive evidence of the approval of the final form thereof. -2- Section 3. Sale of Refunding Bonds; Approval of Bond Purchase Agreement. The City Council hereby approves the negotiated sale of the Refunding Bonds by the Authority to Piper Sandler Companies (the "Underwriter"). The Refunding Bonds shall be sold upon the terms and conditions set forth in the Bond Purchase Agreement 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 Refunding 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% of the principal component of the 2010B 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 City by an Authorized Officer. Section 4. Official Statement. The City Council hereby approves and deems nearly final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, the Preliminary Official Statement describing the Refunding Bonds in the form on file with the City Clerk, 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 Underwriter a certificate deeming the Preliminary Official Statement to be nearly 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. Section 5. Approval of Escrow Deposit and Trust Agreement. The City Council hereby approves an Escrow Deposit and Trust Agreement between the City and the 2010 Trustee, as escrow bank, providing for the deposit, investment and application of funds to refinance the 2010B Installment Payments and defease and redeem the 2010B Bonds. The Escrow Deposit and Trust 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 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 6. Continuing Disclosure Certificate. 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 7. Approval of Professional Services. The City Council hereby appoints the firm of Jones Hall, A Professional Law Corporation, as bond counsel and disclosure counsel to the City in connection with the issuance of the Refunding Bonds, and an Authorized Officer is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the City Clerk. The City Council hereby appoints the firm of Fieldman, Rolapp & Associates, Inc. as municipal advisor to the City in connection with the issuance of the Refunding Bonds, and an Authorized Officer is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the City Clerk. -3- Section 8. Official Actions. The Authorized Officers 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 9. Effective Date. This Resolution shall take effect immediately upon its passage and adoption. Dated: March 4, 2020 I hereby certify that Resolution No. 2020-42 was passed and adopted by the City Council of the City of Lodi in a regular joint meeting of the Lodi City Council and the Lodi Public Financing Authority, held on March 4, 2020 by the following vote: AYES: COUNCIL MEMBERS — Chandler, Mounce, Nakanishi, and Mayor Kuehne NOES: COUNCIL MEMBERS — None ABSENT: COUNCIL MEMBERS — None ABSTAIN COUNCIL MEMBERS — None PAMELA M. FARRIS Assistant City Clerk 2020-42 -4- EXHIBIT A GOVERNMENT CODE SECTION 5852.1 DISCLOSURE The following information consists of estimates that have been provided by the City's municipal advisor, which has been represented by such party to have been provided in good faith: (A) True Interest Cost of the Refunding Bonds: 2.36%. (B) Finance Charge of the Refunding Bonds (Sum of all fees paid to third parties). $258,337. (C) Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if any): $28,291,138. (D) Total Payment Amount Through Maturity: $36,455,360. The foregoing estimates constitute good faith estimates only based on a refinancing of the 20108 Installment Payments and the 2010B Bonds. The principal amount of the Refunding Bonds, the true interest cost of the Refunding 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 Refunding Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Refunding Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the Refunding 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 Refunding Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City's financing plan (including a refinancing of the 2010A Installment Payments and redemption of the 2010A Bonds), or a combination of such factors. The actual date of sale of the Refunding Bonds and the actual principal amount of Refunding Bonds sold will be determined by the City based on the timing of the need for proceeds of the Refunding Bonds and other factors. The actual interest rates borne by the Refunding Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Refunding 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. -5- RESOLUTION NO. LPFA2020-01 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LODI PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE AND SALE OF REFUNDING WATER REVENUE BONDS TO REFINANCE THE CONSTRUCTION OF WATER SYSTEM IMPROVEMENTS, AND APPROVING RELATED DOCUMENTS AND OFFICIAL ACTIONS WHEREAS, the City of Lodi (the "City") owns and operates facilities and property for the supply, treatment, and distribution of water within the service area of the City (the "Water System"); and WHEREAS, the Lodi Public Financing Authority (the "Authority") is a joint exercise of powers authority that was established by the City and the Industrial Development Authority of the City of Lodi pursuant to a Joint Exercise of Powers Agreement, dated as of July 1, 2010; the Authority was formed for the purpose of assisting the City in the financing of public capital improvements; and WHEREAS, in order to provide funds to finance the acquisition and construction of improvements to the Water System (the "2010 Water Projects"), the City previously caused the Authority to issue the following bonds (collectively, the "2010 Bonds") pursuant to an Indenture of Trust, dated as of October 1, 2010 (the "2010 Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2010 Trustee"): (i) $9,015,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series A ("2010A Bonds"), and (ii) $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) ("2010B Bonds"); and WHEREAS, the 2010 Bonds are payable from installment payments (the "2010 Installment Payments") made by the City to the Authority under an Installment Sale Agreement dated as of October 1, 2010 (the "2010 Installment Sale Agreement"), under which the Authority acquired, constructed and improved the 2010 Water Projects and sold the completed 2010 Water Projects to the City in consideration of the agreement by the City to pay the 2010 Installment Payments; and WHEREAS, under current municipal bond market conditions, it is possible for the City to refinance on a tax-exempt basis the portion of the 2010 Installment Payments attributable to the 2010B Bonds (the "2010B Installment Payments") for the purpose of achieving savings for the benefit of the customers of the Water System, and to cause a redemption of the 2010B Bonds on June 1, 2020; and WHEREAS, the City does not expect to refinance the portion of the 2010 Installment Payments attributable to the 2010A Bonds (the "2010A Installment Payments") or to cause a redemption of the 2010A Bonds; and WHEREAS, in order to provide funds to refinance the 20108 Installment Payments and cause a redemption of the 20108 Bonds, the City has asked the Authority to issue its 2020 Refunding Water Revenue Bonds, Series A (the "Refunding 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 Refunding Bonds, the City proposes to enter into an installment sale agreement (the "Refunding Installment Sale Agreement") with the Authority and to pay installment payments (the "Refunding Installment Payments") in an amount sufficient to pay debt service on the Refunding Bonds; and WHEREAS, the Refunding Installment Payments will be secured by a pledge of and lien on the net revenues of the Water System, on a parity with the pledge of and lien on the net revenues securing the City's obligation under the 2010 Installment Sale Agreement to make the 2010A Installment Payments; and WHEREAS, there has also been submitted to the Board of Directors a form of Preliminary Official Statement in connection with the marketing of the Refunding Bonds and the Board of Directors, with the aid of its staff, has reviewed the Preliminary Official Statement; and WHEREAS, in accordance with Government Code Section 5852.1, the Board of Directors has obtained and wishes to disclose the information set forth in Exhibit A hereto; and WHEREAS, the Board of Directors wishes at this time to take action approving the proposed refinancing 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 Refunding Bonds under the Bond Law in the aggregate principal amount of not to exceed $31,000,000. Section 2. Approval of Related Financing Agreements. The Board of Directors hereby approves each of the following agreements required to implement the refinancing plan to be accomplished by the Refunding Bonds, in substantially the respective forms on file with the Secretary together with any changes therein or additions thereto deemed advisable by the Executive Director or the Treasurer (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 Refunding Bonds will be issued. -2- (b) Installment Sale Agreement between the Authority and the City, under which the City will pay the Refunding Installment Payments to the Authority. (c) Bond Purchase Agreement among the Authority, the City and Piper Sandler Companies, as underwriter (the "Underwriter"), under which the Underwriter agrees to purchase the Refunding Bonds from the Authority. 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 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 Refunding Bonds. The Board of Directors hereby approves the negotiated sale of the Refunding Bonds to the Underwriter. The Refunding Bonds shall be sold upon the terms and conditions set forth in the Bond Purchase Agreement which is approved under Section 2. The Board of Directors hereby delegates to an Authorized Officer the authority to accept an offer from the Underwriter to purchase the Refunding Bonds, provided that the Refunding 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% of the principal component of the 2010B Installment Payments, as such savings shall be verified and conclusively determined by the City's municipal advisor (the "Minimum Savings Requirement"). The maximum amount of Underwriter's discount on the sale of the Refunding Bonds shall not exceed 0.3% of the par amount of the Refunding Bonds. 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 nearly final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, the Preliminary Official Statement describing the Refunding 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 Underwriter a certificate deeming the Preliminary Official Statement to be nearly 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 and all other officers of the Authority are each authorized and directed, acting alone, in the name and on behalf of the Authority to make any and all assignments, certificates, requisitions, agreements (including an escrow deposit and trust agreement), 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 financial 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 -3- 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. Dated: March 4, 2020 I hereby certify that Resolution No. LPFA2020-01 was passed and adopted by the Board of Directors of the Lodi Public Financing Authority in a regular joint meeting of the Lodi Public Financing Authority and Lodi City Council held on March 4, 2020 by the following vote: AYES: BOARD MEMBERS — Chandler, Mounce, Nakanishi, and Mayor Kuehne NOES: BOARD MEMBERS — None ABSENT: BOARD MEMBERS — None ABSTAIN BOARD MEMBERS — None PAMELA M. FARRIS Secretary LPFA2020-01 -4- EXHIBIT A GOVERNMENT CODE SECTION 5852.1 DISCLOSURE The following information consists of estimates that have been provided by the City's municipal advisor, which has been represented by such party to have been provided in good faith: (A) True Interest Cost of the Refunding Bonds: 2.36%. (B) Finance Charge of the Refunding Bonds (Sum of all fees paid to third parties) $258,337. (C) Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if any): $28,291,138. (D) Total Payment Amount Through Maturity: $36,455,360. The foregoing estimates constitute good faith estimates only based on a refinancing of the 2010B Installment Payments and the 2010B Bonds. The principal amount of the Refunding Bonds, the true interest cost of the Refunding 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 Refunding Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Refunding Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the Refunding 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 Refunding Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City's financing plan (including a refinancing of the 2010A Installment Payments and redemption of the 2010A Bonds), or a combination of such factors. The actual date of sale of the Refunding Bonds and the actual principal amount of Refunding Bonds sold will be determined by the City based on the timing of the need for proceeds of the Refunding Bonds and other factors. The actual interest rates borne by the Refunding Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Refunding Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the Authority. -5- INDENTURE OF TRUST Dated as of April 1, 2020 between MUFG UNION BANK, N.A., as Trustee and the LODI PUBLIC FINANCING AUTHORITY Authorizing the Issuance of Lodi Public Financing Authority 2020 Refunding Water Revenue Bonds, Series A 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.............................................................. 4 SECTION 2.02. Terms of the Bonds................................................................... 4 SECTION 2.03. Transfer and Exchange of Bonds .............................................. 6 SECTION 2.04. Book -Entry System................................................................... 6 SECTION 2.05. Registration Books.................................................................... 8 SECTION 2.06. Form and Execution of Bonds ................................................... 8 SECTION 2.07. Bonds Mutilated, Lost, Destroyed or Stolen ............................... 8 SECTION 2.08. CUSIP Numbers....................................................................... 9 ARTICLE III Issuance of Bonds; Application of Proceeds SECTION 3.01. Issuance of the Bonds............................................................... 9 SECTION 3.02. Application of Proceeds of Sale of the Bonds ............................ 9 SECTION 3.03. Establishment and Application of Costs of Issuance Fund .......10 SECTION 3.04. Validity of Bonds......................................................................10 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............................................11 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..............................................13 SECTION 5.03. Interest Account.......................................................................13 SECTION 5.04. Principal Account.....................................................................13 SECTION5.05. 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................................................................._..15 SECTION 6.02. Extension of Payment of Bonds...............................................15 SECTION 6.03, Against Encumbrances............................................................16 SECTION 6.04. Power to Issue Bonds and Make Pledge and Assignment ........ 16 SECTION 6.05. Accounting Records.................................................................16 SECTION 6.06. Limitation on Additional Obligations.........................................16 SECTION 6.07. Tax Covenants.........................................................................16 SECTION 6.08. Reserved.................................................................................17 SECTION 6.09. Waiver of Laws........................................................................17 SECTION 6.10. Further Assurances..................................................................17 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................................................30 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................................................................32 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 SECTION11.07. 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 SECTION 11.16. U.S.A. Patriot Act.....................................................................34 APPENDIX A DEFINITIONS APPENDIX B FORM OF BOND INDENTURE OF TRUST This INDENTURE OF TRUST (this "Indenture"), dated for convenience as of April 1, 2020, 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 supply, treatment and distribution of water within the service area of the City (the "Water System"). 2. The Authority is a joint exercise of powers authority that was established by the City and the Industrial Development Authority of the City of Lodi pursuant to a Joint Exercise of Powers Agreement, dated as of July 1, 2010. The Authority was formed for the purpose of assisting the City in the financing of public capital improvements. 3. In order to provide funds to finance the acquisition and construction of improvements to the Water System (the "2010 Water Projects"), the City previously caused the Authority to issue the following bonds (collectively, the "2010 Bonds") pursuant to an Indenture of Trust, dated as of October 1, 2010 (the "2010 Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2010 Trustee"): (i) $9,015,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series A ("2010A Bonds") and (ii) $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) ("2010B Bonds"). 4. The 2010 Bonds are payable from installment payments (the "2010 Installment Payments") made by the City to the Authority under an Installment Sale Agreement dated as of October 1, 2010 (the "2010 Installment Sale Agreement"), under which the Authority acquired, constructed and improved the 2010 Water Projects and sold the completed 2010 Water Projects to the City in consideration of the agreement by the City to pay the 2010 Installment Payments. 5. Pursuant to Section 7.2 of the 2010 Installment Sale Agreement, the City has the right to prepay all or a portion of the 2010 Installment Payments on any date on or after the Installment Payment Date (as defined in the 2010 Installment Sale Agreement) relating to the June 1, 2020 Interest Payment Date (as defined in the 2010 Installment Sale Agreement) on the 2010 Bonds. 6. Pursuant to Section 7.1 of the 2010 Installment Sale Agreement, the City may secure the payment of the 2010 Installment Payments, in whole or in part, by irrevocably -1- depositing with the Trustee an amount of cash which, invested in whole or in part in non -callable Federal Securities (as defined in the 2010 Indenture), in the opinion of an Independent Accountant (as defined in the Indenture), together with interest to accrue thereon and together with any cash which is deposited and not invested, will be fully sufficient to pay all such 2010 Installment Payments when due on any optional prepayment date. If the City makes a security deposit under Section 7.2 for all or a portion of the 2010 Installment Payments, all obligations of the City under the 2010 Installment Sale Agreement, and the pledge of Net Revenues (as defined in the 2010 Installment Sale Agreement) and all other security provided in the 2010 Installment Sale Agreement for such 2010 Installment Payments will cease and terminate, except the obligation of the City to make such 2010 Installment Payments from the security deposit. 7. The 2010 Bonds maturing on or after June 1, 2021 are subject to optional redemption, in whole or in part, on any date on or after June 1, 2020, at a redemption price equal to 100% of the principal amount of the 2010 Bonds to be redeemed, plus accrued interest to the redemption date, without premium. 8. Under Article X of the 2010 Indenture, the Authority may discharge its liability with respect to the 2010 Bonds by depositing money or non -callable Federal Securities (as defined in the 2010 Indenture) with the 2010 Trustee which, in the opinion of an Independent Accountant (as defined in the 2010 Indenture), will be sufficient to pay the principal, interest and premium (if any) on such 2010 Bonds when due for optional redemption. 9. Under current municipal bond market conditions, it is possible for the City to refinance on a tax-exempt basis the portion of the 2010 Installment Payments attributable to the 2010B Bonds (the "2010B Installment Payments") and to cause a redemption of the 2010B Bonds for the purpose of achieving savings for the benefit of the customers of the Water System. 10. The City is not refinancing the portion of the 2010 Installment Payments attributable to the 2010A Bonds (the "2010A Installment Payments") or causing a redemption of the 2010A Bonds. 11. In order to accomplish the refinancing described above, the Authority and the City have entered into an Installment Sale Agreement dated as of April 1, 2020 (the "Installment Sale Agreement"), under which the City will sell the 2010 Water Projects to the Authority and the Authority will sell the 2010 Water Projects to the City in consideration of the agreement by the City to pay the purchase price thereof in semiannual installment payments, in each case subject to the continuing obligation of the City to make to the 2010A Installment Payments under the 2010 Installment Sale Agreement. 12. For the purpose of obtaining funds to refinance the 2010B Installment Payments and to cause the redemption of the 2010B Bonds, the Authority has authorized the issuance of its Lodi Public Financing Authority 2020 Refunding Water Revenue Bonds, Series A 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"). -2- 13. 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. 14. 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 GREEMENT: 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: 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. Capitalized terms in this Indenture and not otherwise defined in this Section 1.01 have the respective meanings given them in Section 1.1 of the Installment Sale Agreement. 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. -3- (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 2020 Refunding Water Revenue Bonds, Series A" in the aggregate principal amount of $ under the Bond Law for the purposes of providing funds to refinance the 2010B Installment Payments and cause the redemption of the 2010B Bonds. The Bonds are authorized and issued under, and are subject to the terms of, this Indenture and the Bond Law. 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 June 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 June 1 Amount Rate -4- 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 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. ��5- 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 require the Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. 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 require the Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. 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. With respect to Bonds the ownership of which shall be registered in the name of the Nominee, the Authority and the Trustee has 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 has 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 M 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. 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 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 -7- 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. 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 in accordance with its then customary procedures 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. In 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. SECTION 2.08. CUSIP Numbers. The Authority in issuing the Bonds may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Owners; provided that the Trustee shall have no liability for any defect in the "CUSIP" numbers as they appear on any Bond, notice or elsewhere, and, provided further that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Bonds or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Bonds, and any such redemption shall not be affected by any defect in or omission of such numbers. The Authority will promptly notify the Trustee in writing of any change in the "CUSIP" numbers. 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 t } plus a net 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. (b) The Trustee will transfer the amount of $ , constituting the remainder of such proceeds, to the 2010 Trustee for deposit into the Escrow Fund established under the Escrow Agreement. The Trustee shall use the following wire instructions to transfer such proceeds to the 2010 Trustee: m [BNY wire instructions to come] 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 November 1, 2020, 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 SECTION 4.01. Terms of Redemption. (a) Optional Redemption. The Bonds maturing on or before June 1, , are not subject to optional redemption prior to their respective stated maturity dates. The Bonds maturing on or after June 1, , 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 June 1, , 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, (a) -10- for any period in which the Bonds are not held by a Depository, 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 and (b) so long as the Bonds are held by a Depository, the Depository shall select the Bonds of that maturity or series in accordance with its rules and procedures. 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. The Authority may send a redemption notice stating that the redemption is conditional upon the Authority receiving sufficient funds to pay the redemption price on the proposed 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 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 -11- (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. ARTICLE V AUTHORITY REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST SECTION 5.01. Security for the Bonds; Bond Fund. (a) Pled - e 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 Sale Agreement (excepting only the Authority's rights under Sections 4.8, 5.2 and 6.4 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 Sale 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 Sale Agreement to be deposited in the Redemption Fund shall be promptly deposited in such -12- 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 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, amounts in 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 -13- 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 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. 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, taxes, fees or other charges arising from any investments, reinvestments or liquidation of 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. -14- (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 September 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 Trustee shall not be liable or responsible for any loss resulting from any such Permitted Investment. (d) For purposes of this Section 5.09, 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. -15- 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 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 -16- 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 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 4.8(e) of the Installment Sale 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 -17- within such 30 -day period, such failure shall not constitute an Event of Default if the Authority institutes corrective action within 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 Sale Agreement. SECTION 7.02. Remedies Upon Event of Default. (a) Only as long as Section 6.2(a) is an available remedy under the Installment Sale 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, claims, 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 satisfactory to it 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 -18- 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 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; 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; and 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 -19- 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 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 Sale 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 satisfactory to it against the costs, claims, 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 (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Owners), or to enforce any right under the Bonds, this Indenture, the Installment Sale 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 -20- 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. 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. Promptly upon a responsible officer of the Trustee 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, howeverthat 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 -21- 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 person would exercise or use under the circumstances in the conduct of his or her own affairs. (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 this 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, at the expense of the Authority, 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 (including attorneys' 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. -22- (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 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 promptly 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 Sale 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. -23- (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 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 reasonable judgment 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 a responsible officer of the Trustee shall have actual knowledge thereof, or a responsible 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 Sale 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 Sale 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 satisfactory to it against the costs, claims, 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 or implied power, right or remedy conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such power, right or remedy. -24- (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. (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, punitive or consequential damages in connection with or arising from the Installment Sale Agreement or this Indenture for the existence, furnishing or use of the Project. (1) 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 reasonable judgment 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, claims, 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 -25- 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. (o) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other person employed to act hereunder. 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 of its selection 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 reasonable judgment 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 expenses, advances (including any interest on advances), charges, legal (including attorneys' fees and expenses) and consulting fees and other disbursements mutually agreed upon in writing, incurred in and about the performance of its powers and duties under this Indenture. -26- The Authority shall indemnify the Trustee, its officers, directors, employees and agents against any and all cost, claim, 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 Sale Agreement. As security for the performance of the obligations of the Authority under this Section 8.07, the Trustee shall 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 Sale 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 -27- 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 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 Counsei Opinion Re uirement. 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. Notices of proposed amendments to Owners of the Bonds and rating agencies shall be prepared by the Authority. 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 -28- 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 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 -29- 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 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 -30- 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; 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, -31- 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 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 in accordance with its then customary procedures and 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, provided that any direction to disburse amounts held by the Trustee must be sent by electronic transmission via the Trustee's online service, facsimile or other secured manner acceptable to the Trustee. The Authority, the City or the Trustee may, by written notice to the other parties, -32- from time to time modify the address or number to which communications are to be given hereunder. If to the Authority City of Lodi or the City: P.O. Box 3006 Lodi, California 95241-1910 Attention: City Manager Fax: 209-333-6807 Email: citymanager@lodi.gov If to the Trustee: MUFG Union Bank, N.A. 350 California St., 17th Floor San Francisco, California 94104 Attention: Corporate Trust Department Fax: 415-273-2492 Email: SFCT@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 -33- 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 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. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture and signature pages for all purposes. 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. SECTION 11.16. U. S.A. Patriot Act. The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity -34- that establishes a relationship or opens an account with the Trustee. The parties to the Indenture agree that they will provide the Trustee with such information as it may request in order for the Trustee to satisfy the requirements of the U.S.A. Patriot Act. [Remainder of page intentionally left blank.] -35- 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 its Secretary, 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: Secretary Approved as to Form: NIC MAGOICH Clay Attorney LODI PUBLIC FINANCING AUTHORITY Executive Director MUFG UNION BANK, N.A., as Trustee M -36- Authorized Officer APPENDIX A DEFINITIONS "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 Executive Director, Treasurer, Secretary or any other person designated as an Authorized Representative of the Authority by a Written Certificate of the Authority signed by its Executive Director, General Counsel or Treasurer and filed with the City and the Trustee; and (b) with respect to the City, its Mayor, City Manager, chief financial officer, City Attorney or any other person designated as an Authorized Representative of the City by a Written Certificate of the City signed by its City Manager or chief financial officer and filed with the Authority and the Trustee. "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 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 June 2 in one calendar year to June 1 of the succeeding calendar year, both dates inclusive; except that the first Bond Year commences on the Closing Date and extends to and including June 1, 2020. "Bonds" means the $ aggregate principal amount of Lodi Public Financing Authority 2020 Refunding Water Revenue Bonds, Series A 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. "Closing Date" means the date of delivery of the Bonds to the Original Purchaser - A -1 "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. "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. "City" means the City of Lodi, a municipal corporation organized and existing under the laws of the State of California. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. "Escrow Agreement" means the Escrow Deposit and Trust Agreement, dated as of April 1, 2020, by and between the City and The Bank of New York Mellon Trust Company, N.A., as escrow bank. "Event of Default" means any of the events specified in Section 7.01. "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. "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. "Interest Account" means the account by that name established and held by the Trustee in the Bond Fund under Section 5.02. A-2 "Installment Sale Agreement" means the Installment Sale Agreement dated as of April 1, 2020, between the City and the Authority, together with any duly authorized and executed amendments thereto. "Installment Payments" means all payments required to be paid by the City on any date under Section 4.4 of the Installment Sale Agreement, including any amounts payable upon delinquent installments and including any prepayment thereof under Sections 7.2 of the Installment Sale Agreement. "Interest Payment Date" means each June 1 and December 1, commencing June 1, 2020, so long as any Bonds remain unpaid. "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 Piper Sandler Companies, as the original purchaser of the Bonds upon their delivery by the Trustee on the Closing Date. "Outstanding", 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 paid pursuant to the last paragraph of Section 2.07 and (d) 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. "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. "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 A-3 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) excluding those with 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 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) 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. (g) 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. A-4 (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. "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. "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. "S&P" means Standard & Poor's, a division of the McGraw Hill Companies, of New York, New York, its successors and assigns. "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 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. "Term" means, when used with respect to the Installment Sale Agreement, the time during which the Installment Sale Agreement is in effect, as provided in Section 4.1 thereof. "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. "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-5 APPENDIX B BONDFORM NO. R - UNITED STATES OF AMERICA STATE OF CALIFORNIA LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BOND, INTEREST RATE REGISTERED OWNER: SERIES A MATURITY DATE June 1, PRINCIPAL AMOUNT *** CEDE & CO- ORIGINAL ISSUE DATE , 2020 CUSIP: *** 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 November 15, 2020, 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 June 1 and December 1 in each year, commencing June 1, 2020 (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 B -1 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 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 2020 Refunding Water Revenue Bonds, Series A" (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 April 1, 2020, between the Authority and the Trustee (the "Indenture") and a resolution of the Authority adopted on , 2020, 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 June 1, , are not subject to optional redemption prior to their respective stated maturity dates. The Bonds maturing on or after June 1, , 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 June 1, , 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 water supply, treatment and distribution system of the City (the "Water 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 Sale Agreement dated as of April 1, 2020, between the Authority and the City (the "Installment Sale 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. MA 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 Series A 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. 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 B-3 and attested to by the facsimile signature of its Secretary, all as of the Original Issue Date specified above. Attest: Dated LODI PUBLIC FINANCING AUTHORITY M Secretary Chair CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within -mentioned Indenture. MUFG UNION BANK, N.A., as Trustee By: ASSIGNMENT Authorized Signatory 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 hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: Note: 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. -0 o o— N N m N n o o � c w o E `: N N N 7 •� N U C O O N U N +- a�'i aci E aci E m C U EO W ?m m c 0 c � o ,E a CL o- =3 E w 0 0 >' (D o � � L N o ri c 7 U O N C f0 N •U c E o N U y � U N o c 0 U l6 3 C C N O L U U C E r 0 3 Ecoc `o c 0 C C .0 — a 7 a a� •, N 'a) N C _ C N N .— EZ y N N •- E U O O N 0 `° N 0 O o E Y m � O N o E t a) Hwn PRELIMINARY OFFICIAL STATEMENT DATED .2020 NEW ISSUE - FULL BOOK -ENTRY RATING: S&P: " See "Rating". In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the 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. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "TAX MATTERS. " Dated: Date of Delivery $22,400,000" LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A Due: June 1, as shown on inside cover Authority forlssuance. The 2020 Refunding Water Revenue Bonds, Series A (the "2020 Bonds") are being issued by the Lodi Public Financing Authority (the "Authority") under a resolution adopted by the Board of Directors of the Authority on 2020, and an Indenture of Trust dated as of April 1, 2020 (the "Indenture") by and between the Authority and MUFG Union Bank, N.A., as trustee for the 2020 Bonds (the "Trustee"). See "INTRODUCTION — General." Use of Proceeds. The proceeds of the 2020 Bonds will be used to (i) redeem all of the outstanding $29,650,000 principal amount of Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (the "Refunded Bonds") 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 2020 Bonds. See "THE REFINANCING PLAN." Security for the 2020 Bonds. Under the Indenture, the 2020 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 2020 Installment Payments ("2020 Installment Payments") to be made by the City pursuant to an Installment Sale Agreement dated as of April 1, 2020 (the "2020 Installment Sale Agreement") between the City and the Authority. The obligation of the City to make the 2020 Installment Payments is a special obligation of the City that is secured by a pledge of, and payable from, Net Revenues relating to the City's water system (the 'Water System") and moneys on deposit in the Water System Fund. 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 2020 Installment Payments. The City is authorized under the 2020 Installment Sale Agreement to incur other obligations payable from Net Revenues on a parity basis with the 2020 Installment Payments and any obligations issued or incurred by the City, the payment of which constitutes a charge and lien on the Net Revenues and moneys in the Water System Fund equal to and on a parity basis with the charge and lien upon the Net Revenues and moneys in the Water System Fund for the payment of the 2020 Installment Payments ("Parity Obligations"). See "SECURITY AND SOURCES OF PAYMENT FOR THE 2020 BONDS" and "THE WATER SYSTEM." Bond Terms; Book -Entry Only. The 2020 Bonds will bear interest at the rates shown on the inside cover page, payable semiannually on June 1 and December 1 of each year, commencing on June 1, 2020, and will be issued in fully -registered form without coupons in integral multiples of $5,000. The 2020 Bonds will be issued in book -entry only form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Purchasers of the 2020 Bonds will not receive certificates representing their interests in the 2020 Bonds. Payments of the principal of, premium, if any, and interest on the 2020 Bonds will be made to DTC, which is obligated in turn to remit such principal, premium, if any, and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the 2020 Bonds. See "THE 2020 BONDS — General." Redemption. The 2020 Bonds are subject to redemption prior to maturity. See "THE 2020 BONDS — Redemption." NEITHER THE 2020 BONDS, NOR THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF OR INTEREST ON THE 2020 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 2020 BONDS ARE SECURED SOLELY BY THE PLEDGE OF AUTHORITY REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE 2020 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 2020 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 2020 BONDS. The 2020 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 Jones Hall, A Professional Law Corporation, San Francisco, California, Disclosure Counsel to the City, for the Authority by the City Attorney, and for the Underwriter by Kutak Rock LLP, Los Angeles, California. It is anticipated that the 2020 Bonds will be delivered in book -entry form through the facilities of DTC on or about 2020. [Piper Sandler Logo] The date of this Official Statement is: 12020. Preliminary; subject to change. LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A MATURITY SCHEDULE (Base CUSIP: ) Maturity Date Principal Interest (June 1) Amount Rate Yield Price CUSIPt *Priced to par call date of June 1, 20_ t 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© 2020 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 Doug Kuehne, Mayor/Member Alan Nakanishi, Mayor Pro Tem/Member Bob Johnson, Councilmember/ Member JoAnne Mounce, Councilmember/ Member Mark Chandler, Councilmember/ Member AUTHORITY/CITY OFFICIALS Stephen Schwabauer, City Manager/Executive Director Andrew Keys, Deputy City Manager/Treasurer Janice D. Magdich, City Attorney/Authority Counsel Charles Swimley, Public Works Director BOND AND DISCLOSURE COUNSEL Jones Hall, A Professional Law Corporation San Francisco, 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 GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations with respect to the 2020 Bonds other than as contained in this Official Statement, and if given or made, such other information or representation must not be relied upon as having been authorized. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the 2020 Bonds will, under any circumstances, create any implication that there has been no change in the affairs of the City, the Authority, or any other parties described in this Official Statement. Use of this Official Statement. This Official Statement is submitted in connection with the sale of the 2020 Bonds referred to in this Official Statement and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract with the purchasers of the 2020 Bonds. Preparation of this Official Statement. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Document References and Summaries. All references to and summaries of the Indenture, the Installment Sale Agreement, or other documents contained in this Official Statement are subject to the provisions of those documents and do not purport to be complete statements of those documents. Bonds are Exempt from Securities Laws Registration. The issuance and sale of the 2020 Bonds have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"), in reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a)(2) of the Securities Act and Section 3(a)(12) of the Securities Exchange Act. Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the 2020 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 2020 Bonds to certain dealers and others at prices lower than the public offering prices set forth on the cover page hereof and said public offering prices may be changed from time to time by the Underwriter. Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 21 E of the Securities Exchange Act and Section 27A of the Securities Act. Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate," "budget' or other similar words. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. NEITHER THE CITY NOR THE AUTHORITY PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD- LOOKING STATEMENTS IF OR WHEN THEIR EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR. Website. The City maintains a website; however, the information presented on the website is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the 2020 Bonds. TABLE OF CONTENTS Page INTRODUCTION........................................................................................................................ 4 General........................................................................................................................... 4 Security for the 2020 Bonds............................................................................................ 5 Outstanding Parity Obligations........................................................................................ 5 Additional Parity Obligations........................................................................................... 5 NoReserve Account....................................................................................................... 5 RateCovenant................................................................................................................ 6 TheWater System.......................................................................................................... 6 OtherMatters................................................................................................................ 6 THE REFINANCING PLAN........................................................................................................ 7 ESTIMATED SOURCES AND USES OF FUNDS...................................................................... 9 THE 2020 BONDS.................................................................................................................... 10 General...................................................................................................................... 10 Transfer, Registration and Exchange............................................................................ 10 Redemption.................................................................................................................. 10 Selection of Bonds for Redemption............................................................................... 11 Notice of Redemption; Rescission................................................................................. 11 Effectof Redemption..................................................................................................... 11 Book -Entry Only System............................................................................................... 12 DEBT SERVICE SCHEDULE................................................................................................... 13 SECURITY AND SOURCES OF PAYMENT FOR THE 2020 Bonds ......................................... 14 Pledge of Authority Revenues....................................................................................... 14 2020 Installment Payments........................................................................................... 14 Pledge of Net Revenues............................................................................................... 15 RateCovenant............................................................................................................... 16 Rate Stabilization Fund.................................................................................................. 17 Application of Revenues............................................................................................... 18 No Debt Service Reserve Fund..................................................................................... 18 Outstanding Parity Obligations................................................... 18 Additional Parity Obligations......................................................................................... 18 Subordinate Obligations............................................................................................... 19 THE WATER SYSTEM............................................................................................................. 20 General.......................................................................................................................... 20 Governance and Management...................................................................................... 20 Employees.................................................................................................................... 21 Water System Facilities.................................................................................................. 21 Service Area and Customers........................................................................................ 23 Rate Consultant's Report.............................................................................................. 24 WaterRates and Charges............................................................................................. 25 Capital Improvement Plan............................................................................................. 28 Fund Balance Policies................................................................................................... 28 Certain Environmental Conditions...................................................._............................ 29 FinancialStatements..................................................................................................... 30 Historical and Projected Operating Results................................................................... 30 RetirementPlan............................................................................................................ 34 THEAUTHORITY..................................................................................................................... 36 RISKFACTORS....................................................................................................................... 36 Rate Covenant Not a Guarantee................................................................................... 36 LimitedObligations....................................................................................................... 36 No Reserve Account.....................................................................................................36 ParityDebt.................................................................................................................... 37 Demandand Usage...................................................................................................... 37 Statutory and Regulatory Impact................................................................................... 37 Earthquake, Flood, Wildfire or Other Natural Disasters.. ............................................... 38 California Drought Conditions ............................................... 38 Potential Impact of Climate Change.............................................................................. 39 Cybersecurity............................................................................................................... 40 Rate Consultant's Report.............................................................................................. 40 RemediationCosts.........................................................................................................41 Limited Recourse on Default......................................................................................... 41 Effectof Bankruptcy...................................................................................................... 41 Lossof Tax Exemption.................................................................................................. 41 Articles XIIIC and XIIID of the California Constitution.................................................... 42 SecondaryMarket......................................................................................................... 44 TAXMATTERS........................................................................................................................ 46 LITIGATION............................................................................................................................. 47 APPROVALOF LEGALITY...................................................................................................... 47 FINANCIAL STATEMENTS....................................................................................................._48 RATING...................................................................................................................................... 48 CONTINUING DISCLOSURE...................................................................................................48 MUNICIPALADVISOR............................................................................................................. 49 UNDERWRITING..................................................................................................................... 49 VERIFICATION OF MATHEMATICAL COMPUTATIONS........................................................ 49 EXECUTIONAND DELIVERY.................................................................................................. 50 APPENDIX A - GENERAL INFORMATION ABOUT THE CITY OF LODI AND SAN JOAQUIN COUNTY..................................................................................................................A-1 APPENDIX B - AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019............................................................................................ B-1 APPENDIX C - RATE CONSULTANT'S REPORT...............................................................................0-1 APPENDIX D - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS..................................................... C-1 APPENDIX E - FORM OF OPINION OF BOND COUNSEL..................................................................D-1 APPENDIX F - FORM OF CONTINUING DISCLOSURE CERTIFICATE .............................................. E-1 APPENDIX G - DTC AND THE BOOK -ENTRY ONLY SYSTEM......................................................,... F-1 OFFICIAL STATEMENT $22,400,000" LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A 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 D — Summary of Principal Legal Documents." General The Lodi Public Financing Authority (the "Authority") is issuing its 2020 Refunding Water Revenue Bonds, Series A (the "2020 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 LavV'), a resolution adopted by the Board of Directors (the "Board") of the Authority on . 2020 (the "Authority Resolution"), a resolution adopted by the City Council (the "City Council") of the City of Lodi (the "City") on . 2020 (the "City Resolution"), and an Indenture of Trust (the "Indenture"), dated as of April 1, 2020, by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee"). The 2020 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 2020 Bonds. Purchasers of the 2020 Bonds will not receive certificates representing the 2020 Bonds that are purchased. See "THE 2020 Bonds — Book -Entry Only System" and "APPENDIX G — DTC AND THE BOOK -ENTRY ONLY SYSTEM." The 2020 Bonds are being issued to provide funds to (i) redeem all of the outstanding $29,650,000 principal amount of the Lodi Public Financing Authority's 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds - Direct Payment) (such amount being redeemed constituting the "Refunded Bonds") and a related installment payment obligation of the City; and (ii) pay the costs of issuing the 2020 Bonds. The City is not refinancing the portion of its installment payment obligation attributable to the Lodi Public Financing Authority's 2010 Water Revenue Bonds, Series A (the "2010A Bonds") or causing a redemption of the 2010A Bonds. The Refunded Bonds and the 2010A Bonds are referred to herein as the "2010 Bonds." See "THE REFINANCING PLAN." " Preliminary; subject to change. 4 Security for the 2020 Bonds Under the Indenture, the 2020 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 2020 Installment Payments ("2020 Installment Payments") to be made by the City pursuant to an Installment Sale Agreement dated as of April 1, 2020 (the "2020 Installment Sale Agreement"). The obligation of the City to make the 2020 Installment Payments is a special obligation of the City that is secured by a pledge of and payable from Net Revenues (as defined herein) relating to the City's water system (the "Water System") and moneys on deposit in the Water System Fund. 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 2020 Installment Payments. The obligation of the City to make the 2020 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. NEITHER THE 2020 BONDS NOR THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF OR INTEREST ON THE 2020 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 2020 BONDS ARE SECURED SOLELY BY THE PLEDGE OF AUTHORITY REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE 2020 BONDS ARE NOT SECURED BY A PLEDGE OF THE TAXING POWER OF THE CITY. THE AUTHORITY HAS NO TAXING POWER. Outstanding Parity Obligations The 2020 Installment Payments are on parity with the City's installment payment obligation attributable to the 2010A Bonds, which are not being refunded by the 2020 Bonds and will remain outstanding. Additional Parity Obligations The City may incur additional obligations payable from and secured by the Net Revenues on parity with the 2020 Installment Payments ("Parity Obligations"). See "SECURITY AND SOURCES OF PAYMENT FOR THE 2020 BONDS — Additional Parity Obligations". The 2020 Installment Payments and any future obligations payable from Net Revenues on a parity with the 2020 Installment Payments constitute "Parity Obligations." No Reserve Account No debt service reserve account has been established with respect to the 2020 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 2020 Bonds will have no claim or lien on, such reserves and the amounts on deposit herein. Rate Covenant The City covenants in the 2020 Installment Sale Agreement that it will fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Water System during each fiscal year that are sufficient to satisfy specific obligations of the Water System and provide certain coverage on the debt service payable with respect to the 2020 Installment Payments and any Parity Obligations becoming due and payable in such fiscal year. See "SECURITY FOR THE 2020 BONDS — Rate Covenant." The Water System The Water System consists of approximately 240 miles of water pipes ranging in diameter from two to 30 inches, 28 groundwater wells, a surface water treatment plant, and three storage facilities. The distribution system currently serves over 26,500 residential, commercial, and industrial customers, covering substantially all of the population of the City. 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 D — SUMMARY OF PRINCIPAL LEGAL DOCUMENTS." A THE REFINANCING PLAN The 2020 Bonds are being issued to provide funds to (i) refinance the Refunded Bonds and the corresponding portion of the related installment payment obligation of the City, and (ii) pay the costs of issuing the 2020 Bonds. The Refunded Bonds, together with the 2010A Bonds, were issued for the purpose of (i) financing the acquisition and construction of improvements to the Water System (the "2010 Water Projects"), (ii) funding a deposit in debt service reserve account for the 2010 Bonds, and (iii) paying the costs of issuance of the 2010 Bonds and certain related costs. The Refunded Bonds consist of the amounts set forth in the following table. 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds - Direct Payment) * Term Bond Upon the execution and delivery of the 2020 Bonds, a portion of the proceeds and available moneys from the Refunded Bonds 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 Bonds until June 1, 2020 (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 Bonds (the "Escrow Agent") under an escrow deposit and trust 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 Bonds 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 Bonds prior to the Redemption Date and to pay the prepayment price equal to 100% of the principal amount of the outstanding Refunded Bonds 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 Bonds, see t 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. 7 Outstanding Maturity Date Principal Redemption Redemption (June 1) Amount Interest Rate Price Date CUSIPt 2022 $1,075,000 5.014% 100% June 1, 2020 540257AL6 2023 1,115, 000 5.214 100 June 1, 2020 540257AM4 2024 1,150,000 5.414 100 June 1, 2020 540257AN2 2025 1,190,000 5.614 100 June 1, 2020 540257AP7 2030* 6,705,000 6.387 100 June 1, 2020 540257AQ5 2040* 18,415,000 6.637 100 June 1, 2020 540257AR3 TOTAL $29,650,000 * Term Bond Upon the execution and delivery of the 2020 Bonds, a portion of the proceeds and available moneys from the Refunded Bonds 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 Bonds until June 1, 2020 (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 Bonds (the "Escrow Agent") under an escrow deposit and trust 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 Bonds 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 Bonds prior to the Redemption Date and to pay the prepayment price equal to 100% of the principal amount of the outstanding Refunded Bonds 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 Bonds, see t 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. 7 "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 Bonds will be defeased and the owners of the Refunded Bonds 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 Bonds. 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 2020 Bonds. 11 ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds relating to the 2020 Bonds are as follows: Sources: Principal Amount $ [Plus/Less] Original Issue [Premium/Discount] Less Underwriter's Discount Plus Available Funds Relating to the Refunded Bonds Total Sources $ Uses: Deposit to Escrow Fund $ Costs of Issuance Total Uses $ (') 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. �i THE 2020 BONDS This section provides summaries of the 2020 Bonds and certain provisions of the Indenture. See APPENDIX D for a more complete summary of the Indenture. Capitalized terms used but not defined in this section have the meanings given in APPENDIX D. General Bond Terms. The 2020 Bonds will be dated their date of delivery and issued in fully registered form without coupons in integral multiples of $5,000. The 2020 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 2020 Bonds will be payable on June 1 and December 1 in each year, beginning December 1, 2020 (each an "Interest Payment Date"). Principal on the 2020 Bonds will be payable on June 1 in the amounts and in the years set forth on the inside front cover of this Official Statement. While the 2020 Bonds are subject to the book -entry system, the principal, interest and any prepayment premium with respect to the 2020 Bonds will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the 2020 Bonds. See APPENDIX G — "DTC AND THE BOOK -ENTRY ONLY SYSTEM." Interest on the 2020 Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless: a 2020 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 2020 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 2020 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 2020 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 2020 Bonds will be payable in lawful money of the United States of America. Interest with respect to the 2020 Bonds will be computed on the basis of a 360 -day year composed of twelve 30 -day months. Transfer, Registration and Exchange See "APPENDIX D — Summary of Principal Legal Documents" for a description of the provisions of the Indenture relating to the transfer, registration and exchange of the 2020 Bonds. Redemption The 2020 Bonds maturing on or before June 1, 20_, are not subject to optional redemption prior to their respective stated maturity dates. The 2020 Bonds maturing on or after June 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 June 1, 20_, from any 10 available source of funds, at a redemption price equal to 100% of the principal amount of the 2020 Bonds to be redeemed, plus accrued interest to the date of redemption, without premium. Selection of Bonds for Redemption Whenever provision is made in the Indenture for the redemption of less than all of the 2020 Bonds of a single maturity,(a) for any period in which the 2020 Bonds are not held by a Depository, the Trustee shall select the 2020 Bonds of that maturity to be redeemed by lot in any manner which -the Trustee in its sole discretion deems appropriate and (b) so long as the 2020 Bonds are held by a Depository, the Depository shall select the 2020 Bonds of that maturity or series in accordance with its rules and procedures. For purposes of such selection, the Trustee shall treat each 2020 Bond as consisting of separate $5,000 portions and each such portion shall be subject to redemption as if such portion were a separate 2020 Bond. Notice of Redemption; Rescission The Trustee shall mail notice of redemption of the 2020 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 2020 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 2020 Bonds (or all 2020 Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not all 2020 Bonds within a maturity are called for redemption) 2020 Bond numbers of the 2020 Bonds to be redeemed and the maturity or maturities of the 2020 Bonds to be redeemed, and in the case of 2020 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 2020 Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such 2020 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 2020 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 2020 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 2020 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 2020 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. 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 2020 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the 2020 Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the 2020 Bonds so 11 called for redemption shall cease to accrue, said 2020 Bonds (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2020 Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Book -Entry Only System The 2020 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 2020 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 2020 Bonds. Purchasers of the 2020 Bonds will not receive certificates representing their interests therein, which will be held at DTC. See "APPENDIX G — DTC AND THE BOOK -ENTRY ONLY SYSTEM" for further information regarding DTC and the book -entry system. 12 DEBT SERVICE SCHEDULE The table below shows annual debt service payments on the 2020 Bonds, assuming no optional redemption. Year Ending Total June 1 Principal Interest Debt Service Total 13 SECURITY AND SOURCES OF PAYMENT FOR THE 2020 BONDS This section provides summaries of the 2020 Bonds and certain provisions of the Indenture and 2020 Installment Sale Agreement. See APPENDIX D for a more complete summary of the Indenture and 2020 Installment Sale Agreement. Capitalized terms used but not defined in this section have the meanings given in APPENDIX D. The principal of and interest on the 2020 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 encumbrance, upon any of their respective property, or upon any of their income, receipts, or revenues except the Net Revenues and other amounts pledged under the Indenture. Pledge of Authority Revenues The 2020 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 2020 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 2020 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 2020 INSTALLMENT PAYMENTS IS PAYABLE SOLELY FROM NET REVENUES RELATING TO THE CITY'S WATER SYSTEM AND MONEYS ON DEPOSIT IN ANY OF THE FUNDS AND ACCOUNTS ESTABLISHED AND HELD BY THE TRUSTEE UNDER THE INDENTURE TO SECURE THE 2020 INSTALLMENT PAYMENTS AND ANY PARITY OBLIGATIONS. NEITHER THE 2020 BONDS NOR THE OBLIGATION OF THE CITY TO MAKE 2020 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. 2020 Installment Payments The 2020 Installment Sale Agreement provides that the City's obligation to make the 2020 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 Water System, or out of indebtedness or liability at any time owing to the City by the Authority or the Trustee. Until all of the 2020 Installment Payments are fully paid or prepaid or provision is made for such payment in accordance with the terms of the 2020 Installment Sale Agreement, the City (a) will not suspend or discontinue payment of any 2020 Installment Payments, (b) will perform and observe all other agreements contained in the 2020 Installment Sale Agreement, and (c) will not terminate the 2020 Installment Sale 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 Water System, the taking by eminent domain of title to or temporary use of any component of the Water System, commercial frustration of purpose, any change in tax law or other laws of the United States of 14 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 2020 Installment Sale Agreement. Pursuant to the Indenture, the Authority transfers, assigns and sets over to the Trustee all of the 2020 Installment Payments and any and all rights, title, interest and privileges it has in, to and under the 2020 Installment Sale Agreement (other than its rights to expenses and indemnification), including without limitation, the right to collect and receive directly all of the 2020 Installment Payments and the right to enforce the provisions of the 2020 Installment Sale Agreement. The City consents to such assignment in the 2020 Installment Sale Agreement and agrees to make payments of the 2020 Installment Payments directly to the 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 2020 Installment Sale 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 2020 Installment Payments received by the Trustee shall be deposited immediately in the Bond Fund. All of the 2020 Installment Payments are to be held in trust by the Trustee for the benefit of the Owners of the 2020 Bonds and shall be disbursed and applied only as provided in the Indenture. Pledge of Net Revenues Pursuant to the 2020 Installment Sale Agreement, all Net Revenues and all moneys on deposit in any of the funds and accounts established and held by the Trustee under the Indenture to secure the Installment Payments and any Parity Debt are irrevocably pledged to the payment of the 2020 Installment Payments, which pledge shall be on a parity with any pledge of Net Revenues or of moneys in the Water System Fund securing Parity Obligations. "Gross Revenues" means all gross charges received for, and all other gross income and receipts derived by the City from, the ownership and operation of the Water System or otherwise arising from the Water System, including but not limited to connection charges (including the City's impact mitigation fees) to the extent permitted by law, investment earnings thereon and the Refundable Credits under the 2010 Installment Sale Agreement; but excluding (a) the proceeds of any ad valorem property taxes levied for the purpose of paying general obligation bonds of the City relating to the Water System and (b) the proceeds of any special assessments or special taxes levied upon real property within any improvement district served by the City levied for the purpose of paying special assessment bonds or special tax obligations of the City relating to the Water System. "Operation and Maintenance Costs" means the reasonable and necessary costs and expenses paid by the City for maintaining and operating the Water System, including but not limited to (a) costs of acquisition of water to be supplied by the Water System, (b) costs of electricity and other forms of energy supplied to the Water System, (c) the reasonable expenses of management and repair and other costs and expenses necessary to maintain and preserve the Water System in good repair and working order, and (d) the reasonable administrative costs of the City attributable to the operation and maintenance of the Water System; but in all cases excluding (i) debt service payable on obligations incurred by the City with respect to the Water 15 System, including but not limited to the 2020 Installment Payments and any Parity Debt, (ii) depreciation, replacement and obsolescence charges or reserves therefor, and (iii) amortization of intangibles or other bookkeeping entries of a similar nature. "Net Revenues" means, for any period, received during such period minus the amount Costs becoming payable during such period. an amount equal to all of the Gross Revenues required to pay all Operation and Maintenance The obligation of the City to make the 2020 Installment Payments is a special obligation of the City payable from the Net Revenues relating to the Water System and moneys on deposit in the Water System Fund, 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 City covenants in the 2020 Installment Sale Agreement that it will, to the maximum extent permitted by law, fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Water System during each Fiscal Year so as to yield: (a) Gross Revenues for such Fiscal Year sufficient to pay the following amounts in the following order of priority: (i) All Operation and Maintenance Costs estimated by the City to become due and payable in such Fiscal Year; (ii) All 2020 Installment Payments and all payments of principal of and interest on any Parity Debt as they become due and payable during such Fiscal Year, without preference or priority, except to the extent any of such payments are payable from bond proceeds or from any other source of legally available funds of the City which have been deposited with the Trustee for such purpose prior to the commencement of the related Fiscal Year; (iii) All amounts, if any, required to restore the balance in the Reserve Account to the full amount of the Reserve Requirement, and to restore the balance in the reserve account established for any Parity Debt to their required balances; and (iv) All Additional Payments and other payments required to meet any other obligations of the City which are charges, liens, encumbrances upon, or which are otherwise payable from, the Gross Revenues or the Net Revenues during such Fiscal Year. (b) Net Revenues for such Fiscal Year equal to at least one hundred twenty-five percent (125%) of all Installment Payments and all payments of principal of and interest on any Parity Obligations as they become due and payable during such Fiscal Year, without preference or priority, except to the extent any of such payments are payable from bond proceeds or from any other source of legally available funds of the City which have been deposited with the Trustee for such purpose prior to the commencement of the related Fiscal Year. For purposes of this paragraph (b), the amount of Net Revenues for a Fiscal Year will be computed on the basis that any transfers into the Water System Fund in that Fiscal Year from the 16 Rate Stabilization Fund are included in the calculation of Net Revenues, but only to the extent that the moneys transferred from the Rate Stabilization Fund would not otherwise constitute Gross Revenues for the Fiscal Year. (c) Net Revenues for such Fiscal Year equal to at least one hundred percent (100%) of the sum of (i) all Installment Payments and all payments of principal of and interest on any Parity Obligations as they become due and payable during such Fiscal Year, without preference or priority, except to the extent any of such payments are payable from bond proceeds or from any other source of legally available funds of the City which have been deposited with the Trustee for such purpose prior to the commencement of the related Fiscal Year and (ii) all amounts, if any, required to restore the balance in the Reserve Account to the full amount of the Reserve Requirement, and to restore the balance in the reserve account established for any Parity Obligations to their required balances. For purposes of this paragraph (c), the amount of Net Revenues for a Fiscal Year will be computed on the basis that (A) any connection charges (including the City's impact mitigation fees) deposited into the Water System Fund in that Fiscal Year shall not be included, (B) any transfers into the Water System Fund in that Fiscal Year from the Rate Stabilization Fund shall not be included in the calculation of Net Revenues, and (C) any deposits into the Rate Stabilization Fund in that Fiscal Year shall be included in the amount of Net Revenues, but only to the extent such deposits are made from Gross Revenues received by the City during that Fiscal Year. For definitions of additional terms used in the 2020 Installment Sale Agreement and the Indenture, see "APPENDIX D — SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — CERTAIN DEFINITIONS". Rate Stabilization Fund Under the 2020 Installment Sale Agreement, the City has the right at any time to establish a rate stabilization fund (the "Rate Stabilization Fund") to be held by it and administered in accordance with the 2020 Installment Sale Agreement, for the purpose of stabilizing the rates and charges imposed by the City with respect to the Water System. From time to time, the City may deposit amounts into the Rate Stabilization Fund from any source of legally available funds, including but not limited to Net Revenues that are released from the pledge and lien that secures the 2020 Bonds and any Parity Obligations, as the City may determine. The City may, but is not required to, withdraw from any amounts on deposit in a Rate Stabilization Fund and deposit such amounts into the Water System Fund in any Fiscal Year for the purpose of paying the 2020 Installment Payments or the principal of and interest on any Parity Obligations coming due and payable in such Fiscal Year. Amounts so transferred from a Rate Stabilization Fund to the Water System Fund will constitute Gross Revenues for such Fiscal Year and will be applied for the purposes of the Water System Fund. Amounts on deposit in a Rate Stabilization Fund will not be pledged to or otherwise secure the 2020 Bonds or any Parity Obligations. All interest or other earnings on deposits in the Rate Stabilization Fund will be retained therein or, at the option of the City, be applied for any other lawful purposes. The City has the right at any time to withdraw any or all amounts on deposit in a Rate Stabilization Fund and apply such amounts for any lawful purposes of the City. 17 Application of Revenues In order to carry out and effectuate the obligation of the City contained in the 2020 Installment Sale Agreement to pay the 2020 Installment Payments, the City agrees and covenants that all Gross Revenues, including, without limitation, Refundable Credits as defined in the 2010 Installment Sale Agreement shall be deposited when and as received in a special fund designated as the "Water System Fund", which fund the City agrees and covenants to maintain and to hold separate and apart from other funds so long as any 2020 Installment Payments remain unpaid. Amounts on deposit in the Water System Fund will be applied by the City to pay when due the following amounts in the following order of priority: all Operation and Maintenance Costs; (ii) the 2020 Installment Payments and all payments of principal of and interest on any Parity Debt; (iii) to the Trustee the amount of any deficiency in any reserve account established for Parity Debt, the notice of which deficiency has been sent to the City in accordance with the applicable provisions of the related Parity Debt Documents; (iv) any other payments required to comply with the provisions of the 2020 Installment Sale Agreement and any Parity Debt Documents; and (v) any other purposes authorized under the 2020 Installment Sale Agreement, including (A) the payment of any subordinate obligations or any unsecured obligations, (B) the acquisition and construction of improvements to the Water System, (C) the prepayment of any other obligations of the City relating to the Water System, or (D) any other lawful purposes of the City. No Debt Service Reserve Fund No debt service reserve fund is being established in connection with the issuance of the 2020 Bonds. The Authority and the City have reserved the right to establish debt service reserves for Parity Obligations. See "INTRODUCTION — No Reserve Account." Outstanding Parity Obligations Upon the issuance of the 2020 Bonds and the refunding of the Refunded Bonds and corresponding portion of the related installment payment obligation of the City, the only other outstanding obligations payable from Net Revenues on a parity with the 2020 Bonds will be the 2010A Bonds and the related installment payment obligation of the City. Additional Parity Obligations The City is permitted under the 2020 Installment Sale Agreement to incur Parity Obligations, subject to satisfaction of the following conditions. (a) No Event of Default has occurred and is continuing (unless the Event of Default will be cured as a result of the issuance of the Parity Debt). 18 (b) The Net Revenues, calculated in accordance with sound accounting principles, as shown by the books of the City for the most recent completed Fiscal Year for which audited financial statements are available, or for any more recent consecutive 12 -month period selected by the City at its option, in either case verified by a certificate or opinion of an Independent Accountant or Fiscal Consultant, plus the Additional Revenues, at least equal 125% of the amount of Maximum Annual Debt Service with respect to the 2020 Installment Payments and all Parity Debt then outstanding (including the Parity Debt then proposed to be issued). For purposes of this paragraph, the amount of any Refundable Credits that the City expects to receive in a Fiscal Year will be excluded from the amount of Gross Revenues for such Fiscal Year, but will be included as a credit against the applicable amount of 2020 Installment Payments and principal of and interest on any Parity Debt coming due in such Fiscal Year. For purposes of this paragraph, the amount of Net Revenues for a Fiscal Year will be computed on the basis that any transfers into the Water System Fund in that Fiscal Year from the Rate Stabilization Fund are included in the calculation of Net Revenues (but only to the extent that the moneys transferred from the Rate Stabilization Fund would not otherwise constitute Gross Revenues for the applicable Fiscal Year). (c) Except as provided in the next paragraph, upon the issuance of such Parity Debt a reserve fund will be established for such Parity Debt. The reserve fund which is established for an issue of Parity Debt will be required to be maintained in an amount which, together with the aggregate amount required to be on deposit in all of the reserve funds established for the 2020 Bonds and other outstanding Parity Debt, is at least equal to Maximum Annual Debt Service on the 2020 Installment Payments and all outstanding Parity Debt, taken as a whole (other than Parity Debt for which no reserve fund is established as described in the next paragraph). In the event the City issues Parity Debt the purchaser of which does not require the establishment of a reserve fund, such Parity Debt may be issued without a reserve fund. However, in that event, such Parity Debt is not entitled to the security of amounts held in the reserve fund which is established for the 2020 Bonds or for any other issue of Parity Debt, and such Parity Debt will be disregarded in determining the amount required to be maintained in any other reserve fund established for outstanding Parity Debt. (d) The trustee or fiscal agent for such Parity Debt (except to the extent required to be a separate entity from the City or the Authority by the purchaser of such Parity Debt) is the same entity performing the functions of Trustee under the Indenture. (e) The City must deliver to the Trustee a Written Certificate of the City certifying that the conditions precedent to the issuance of such Parity Debt set forth in the 2020 Installment Sale Agreement have been satisfied. 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 2020 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 2020 Installment Sale Agreement permits the City to incur obligations which are unsecured or which are payable from Net Revenues on a subordinate basis to the 2020 Installment Payments and any future Parity Obligations. There currently are no outstanding subordinate obligations. 19 THE WATER 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, 2019, the City had an estimated population of 68,272 within an area of approximately 14 square miles. See "APPENDIX A — GENERAL DEMOGRAPHIC INFORMATION ABOUT THE CITY OF LODI AND SAN JOAQUIN COUNTY." Governance and Management The City is governed by a five -member City Council. The City is converting to District elections, which started in November of 2018 and concludes 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 Doug Kuehne Alan Nakanishi Bob Johnson JoAnne Mounce Mark Chandler Title Mayor Mayor Pro Tem Councilmember Councilmember Councilmember Expiration of Term November 2022 November 2022 November 2020 November 2020 November 2022 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, Schwabauer negotiated the resolution of a multimillion dollar groundwater contamination action and associated financing scheme. Schwabauer also led labor negotiations for much of his tenure as City Attorney and developed significant experience with budget operations and employee relations. Schwabauer 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 20 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 U.C. Davis in 2006. He later received his Master's degree in Business Administration from U.C. Davis in 2013. Charles Swimley, Public Works Director, began his tenure with the City in 2001 as Senior Civil Engineer, was promoted to Water Services Manager in 2006, then Deputy Director of Utilities in 2010 where he oversaw wastewater collection and treatment, water production and distribution and street maintenance. In 2012, Swimley was promoted to City Engineer until his appointment to Public Works Director in April 2016. Swimley, a registered civil engineer since 1994, earned his Bachelor of Science degree from California State University, Sacramento. Employees As of July 1, 2019, the City had 57.3 full-time equivalent employee positions budgeted for the Water System and the City's wastewater system (the "Wastewater System"). Generally, employees work in both systems and are not specifically assigned to one system. The allocation is 50% to each system. Employees of the Water System and the Wastewater System are represented by the American Federation of State, County and Municipal Employees Maintenance and Operators and General Services Bargaining units, whose Memoranda of Understanding expired on December 31, 2019. Negotiations continue in a productive manner and there have been no strikes or other union work stoppages at the City, including in the Water System and Wastewater System. Water System Facilities The Water System consists of approximately 240 miles of water pipes ranging in diameter from two to 30 inches, 28 groundwater wells, a surface water treatment plant, and three storage facilities. Distribution System. The distribution system consists of approximately 240 miles of pipe ranging in size from two inches to fourteen inches and serves an area of 14 square miles. The distribution system currently serves over 26,500 residential, commercial, and industrial customers. There is a single pressure zone within the service area. The City acquired the Water System in 1910 when the population of the City was approximately 2,000. The Water System has slowly expanded to serve the current community of approximately 68,000 residents. The distribution system age ranges from 100 years to new and a substantial portion of the system has been replaced over the last ten years. The City has implemented a program to replace the oldest and smallest pipes, as described below in "Capital Improvement Plan." Upon completion of the eighth phase of the residential water meter program, which anticipated by the end of calendar year 2020, nearly 30 miles of older 2" and 3" water main will have been replaced with 8" diameter main. Supply. Groundwater and surface water compose the sources of supply for the City's Water System. In 2019, approximately 51 % of the Water System's water production came from groundwater wells and 49% came from surface water. Groundwater. The Water System operates 28 groundwater wells, seven of which are equipped with Granular Activated Carbon ("GAC") for DBCP and 1,2,3 -TCP treatment. See "- 21 Certain Environmental Conditions" for further information regarding DBCP and 1,2,3 -TCP. The combined capacity of the groundwater wells is approximately 37,000 gallons per minute or 52.9 million gallons per day. The wells operate automatically on water pressure demand and pump directly into the distribution system. The Sustainable Groundwater Management Act (the "SGMA") was signed into law in 2014 and provides a framework for long-term sustainable groundwater management throughout the State. The SGMA requires local and regional authorities in medium- and high-priority groundwater basins designated by the Department of Water Resources (the "DWR") to form groundwater sustainability agencies ("GSAs") and to adopt a groundwater sustainability plan (a "GSP") designed to achieve basin sustainability no later than 2040 for basins in critical conditions of overdraft and 2042 for basins not in critical condition of overdraft. The City overlies the Eastern San Joaquin Groundwater Subbasin, one of 21 basins and subbasins identified by the DWR as being in a state of critical overdraft. The City and 15 other GSAs formed the Eastern San Joaquin Groundwater Authority (the "ESJGWA"), a joint exercise of powers authority, effective February 8, 2017 in response to the SGMA. The purpose of the ESJGWA is to coordinate the management of the Eastern San Joaquin Groundwater Subbasin in accordance with the SGMA. The ESJGWA is governed by a Board of Directors (the "ESJGWA Board"), with one representative from each GSA, and is guided by an Advisory Committee, also with one representative from each GSA, that is tasked with making recommendations to the ESJGWA Board on technical and substantive matters. The ESJGWA released a draft GSP for public comment in July 2019. Following public workshops and hearings, the final GSP dated November 2019 was released. On January 8, 2020, after approval and adoption of the GSP by each GSA, the ESJGWA Board adopted a resolution agreeing to submit the GSP to the DWR in advance of the January 30, 2020 statutory submittal deadline, The City does not currently expect that enactment of or compliance with the SGMA or the GSP for the Eastern San Joaquin Groundwater Subbasin will have a material adverse effect on its ability to make the 2020 Installment Payments; however, the City can make no assurances as to the reliability or adequacy of future supplies of groundwater to meet future demands. Surface Water. The Water System also operates a surface water treatment plant (the "Treatment Plant"), which commenced operation in 2012. The Treatment Plant pumps raw water from the Mokelumne River and treats it with a microfiltration process. The Treatment Plant was initially constructed to treat and distribute up to 10 million gallons of water per day and was designed to be able to accommodate a future expansion of the Treatment Plant of up to 20 million gallons per day. The City does not have its own water rights to water from the Mokelumne River but instead contracts with other local agencies for the purchase of water from the Mokelumne River. In 2003, the City entered into a contract with the Woodbridge Irrigation District ("WID") for the purchase of up to 6,000 acre-feet annually of surface water from the Mokelumne River. The initial contract term with WID expires on October 15, 2047 and the contract provides for an extension at the City's option for an additional 40 years. In 2014, the City entered into a contract with the North San Joaquin Water Conservation District (the "NSJWCD") for the purchase of up to 1,000 acre- feet annually of surface water from the Mokelumne River. The contract with NSJWCD has an initial term of five years and is subject to further extensions of additional five-year periods, with a total term not to exceed 40 years. 22 Storage. The Water System contains three separate storage facilities. A 100,000 -gallon elevated tank, located on North Main Street in the City, modulates pressures with the distribution system. A one million -gallon storage tank and pressure boosting pump station, located east of State Route 99 on Thurman Street in the City, serve peak demands in the City's industrial areas. A three million -gallon storage tank is located at the site of the Treatment Plant. In addition, a fourth storage facility, with a 1 million gallon capacity, is under construction in the southeast side of the City that will provide additional water supply to accommodate peak fire flow demand. This project is a condition of development, is entirely funded by the developer of the Reynolds Ranch project, and will be dedicated to the City upon completion. Insurance. The City's boiler and machinery operations (including those parts of the Water System) are insured by the Alliant Property Insurance Program (APIP), which is a group purchase property program through the Lloyd's of London marketplace, and Hallmark Financial Services, for up to $100 million in coverage. The City, including the Water 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 Agency for up to $40 million per occurrence. The City is self-insured for workers' compensation losses for up to $250,000 and has pooled excess coverage through the Local Agency Workers' Compensation Excess Authority for statutory coverage. Service Area and Customers The City provides water to substantially all of the population of the City, representing an area of approximately 11.5 square miles. In addition, the City provides water service to a small 21 -unit residential subdivision outside the City via an agreement with the County of San Joaquin and anticipates that in 2020 it will begin providing water service to Henderson School, which is also outside the City limits, under an agreement with Lodi Unified School District. The table below shows the number of accounts in the Water System by user type and service charge revenues by class of user. Residential users represent approximately 89% of all accounts and approximately 76% of water sales revenues. 23 Table 1 City of Lodi Water System Number of Accounts and Revenues by User Type Source: City of Lodi Residential Number of Accounts 21,387 21,683 22,106 22,464 22,661 Revenue $9,410,460 9,500,400 9,960,627 10, 213, 988 10, 297, 008 The table below shows the 10 largest users of the Water System based on service charge revenues for the Fiscal Year 2018-19. Table 2 City of Lodi Water System Largest Users by Service Charge Revenues Fiscal Year 2018-19 User Commercial/Industrial/ Revenue Municipal City of Lodi Year Ending Number of 3.62% December 31 Accounts Revenue 2015 1,524 $2,830,790 2016 1,821 2,991,610 2017 2,909 3,087,136 2018 2,903 3,170,623 2019 2,897 3,201,535 Source: City of Lodi Residential Number of Accounts 21,387 21,683 22,106 22,464 22,661 Revenue $9,410,460 9,500,400 9,960,627 10, 213, 988 10, 297, 008 The table below shows the 10 largest users of the Water System based on service charge revenues for the Fiscal Year 2018-19. Table 2 City of Lodi Water System Largest Users by Service Charge Revenues Fiscal Year 2018-19 User Type of Business Revenue % of Total Revenue City of Lodi Government $484,915 3.62% Lodi Unified School District K-12, adult education 382,317 2.86 Pacific Coast Producers Private label fruit canning 160,516 1.20 Lodi Memorial Hospital Health care 65,454 0.49 Treehouse Foods Specialty bakery, frozen dough 52,500 0.39 All State Packer Produce grower -shipper 24,866 0.19 Lodi Grape Festival Festival grounds 24,530 0.18 Temple Baptist Church Church 22,338 0.17 Sweetener Products Sweetener distribution 20,651 0.15 Blue Shield of California Health insurance 19.314 0.14 Subtotal Top Ten Users 1,257,401 9.39 Total System $13,384,611 100.00% Source: City of Lodi Rate Consultant's Report The City retained The Reed Group, Inc. (the "Rate Consultant") in 2019 to assist in developing financial plans and utility rates for the Water System and the City's wastewater system. The Rate Consultant has prepared a report dated March 6, 2019 titled "Water and Wastewater Rate Study" attached hereto as Appendix C (the "Rate Consultant's Report"), which summarizes the financial strategy supporting the activities of the Water System. Much of the information concerning the rates for the Water System, and the projected operating results contained herein in Table 7 (the "Projected Operating Results"), have been excerpted from the Rate Consultant's Report. 24 The Rate Consultant's Report contains certain assumptions and estimates. The Rate Consultant's Report should be read in its entirety for a discussion of estimated future results of the Water System and the assumptions and rationale underlying the estimates. As noted in the Rate Consultant's Report, any future estimate is subject to uncertainties. There will usually be differences between actual and estimated results because not all events and circumstances occur as expected, and those differences may be material. If actual results are less favorable than the results projected or if the assumptions used in preparing such projections prove to be incorrect, the amount of Net Revenues may be materially less than expected and consequently, the ability of the City to make timely payment of the 2020 Installment Sale Payments may be materially adversely affected. Water Rates and Charges Subject to the requirements of Proposition 218, the City has the power to establish rates and charges as needed to operate the Water System. The rates and charges are established by the City Council and are not subject to review or approval by any other agency. Most recently, pursuant to Resolution No. 2019-42 adopted on March 20, 2019 (the "Rate Schedule Resolution"), the City Council set usage -based and flat water rates for residential, commercial and industrial customers for the period from March 21, 2019 through December 31, 2023. The Proposition 218 process was followed and notifications were sent to property owners and utility customers 45 days prior to the public hearing on March 20, 2019. At the public hearing, the total number of protests filed with the City Clerk represented less than 10% of that required to sustain the protest and the rate changes were adopted by the City Council. The Rate Schedule Resolution provides for inflationary -based increases in water rates in each year through 2023 equal to the Engineering New Record's 20 -Cities Construction Cost Index, or 3.0%, whichever is lower. Increases in water rates each year of the five-year period must be approved by the City Council by separate resolution. Pursuant to Resolution 2019-43, adopted on March 20, 2019, the City Council approved a 2.5% increase in water rates for 2019. Transition from Flat Rates to Metered Rates. In 2005, the State of California adopted legislation requiring that all new residential water services installed since 1992 begin receiving metered water bills beginning in 2011. The same legislation requires that all water utility customers have meters installed and begin receiving metered water bills no later than 2026. The City began transitioning single family residential customers with water meters from flat water rates to water -usage based water rates in January 2011. Prior to converting any customer to usage -based rates, the City provides the customer with actual water usage data and information regarding how the customer's bills may be affected with the change in billing. As of January of 2020, approximately 90% of single-family residential customers had been transitioned to water meters. It is expected that the meter retrofit program will be completed by 2023 and that, due to a planned lag between installation of a meter and conversion of a customer to metered water rates, full conversion to metered rates will occur by 2025. Flat rates for water are based on the number of bedrooms in single-family homes and multi -family homes. Metered water rates include a fixed monthly service charge based on the size of the water meter. Single-family residential customers paying metered rates are subject to a three-tier usage rate structure, while multi -family homes and non-residential customers pay a uniform water usage rate. 25 Set forth below is a table showing selected rates effective as of April 2019. Table 3 City of Lodi Water System Selected Rates Effective April 2019 Flat Rates ($/month) Single Family Residential Unit $33.66 2 Bedroom 40.43 3 Bedroom 48.45 Metered Water Rates Service Charge ($/month) Single Family Residential Up to 3/4" Meter 22.42 Multi -Family and Non -Residential 1" Meter 35.20 1 1/2" Meter 66.88 2" Meter 105.08 Water Usage Rates ($/CCF) Single Family Residential Tier 1 - 0 to 10 CCF/month 0.99 Tier 2 - 11 to 50 CCF/month 1.32 Tier 3 - Over 50 CCF/month 1.64 Multi -Family and Non -Residential All Water Usage 1.18 Source: City of Lodi 26 A history of water rate increases since 2014, and projections for water rate increases through 2023, is presented in the following table. Table 4 City of Lodi Water System History of Water Rate Increases Since 2014 and Projected Water Rate Increases Through 2023 Year Percentage 2014 2.500% 2015 2.000 2016 1.975 2017 3.000 2018 0.000 2019 2.500 2020 0.000 2021 -5.3000) 2022 3.000 2023 3.000 (1) Reflects planned rollback to 2016 rates. Source: City of Lodi Water Shortage Surcharge. The Rate Schedule Resolution includes a water shortage rate surcharge. This temporary water shortage surcharge is implemented under specified water shortage conditions and is designed to provide incremental revenue to help offset declines in revenue due to reduced water sales in times of water shortage. The temporary water shortage surcharge applies to usage rates (and not to the fixed monthly service charge for metered customers, or to flat rates) and begins when water use reductions of 10-20% are necessary. Billing and Collection. The City bills monthly for water, wastewater, solid waste and electricity on the same bill. If a bill is unpaid, the City will terminate electric service to a customer within 55 days of nonpayment after 48 hours' notice. Any termination of a customer's water services by the City would be required to be in compliance with the State's Water Shutoff Protection Act (California Health & Safety Code §116900, et. seq.). For Fiscal Year 2016-17 and Fiscal Year 2018-19, no accounts were sent to collection as the City was working through challenges with enterprise resource program software implementation. For Fiscal Year 2018-19, all closed accounts with a delinquent balance over 45 days were sent to collection. Closed accounts with outstanding balances greater than 45 days are now referred to a collection agency on a monthly basis. For financial reporting, the City records an allowance for bad debt equal to 1 % of receivables over 60 days old. The Water System component of accounts recently referred to collection are: Fiscal Year 2016-17 2017-18 2018-19 Amount $0 $0 $296,894 % of Sales Charge Revenue 0% 0% 0.37% Source: City of Lodi 27 Comparison of Monthly Water and Wastewater Service Charges of Selected Agencies. A comparison of water and wastewater service charges of selected agencies located in San Joaquin County for a single-family home is set forth below. Table 5 Comparison of Monthly Water and Wastewater Service Charges (as of March 2019) Agency (i Water Rate Wastewater Total City of Tracy $32.80 $34.00 $66.80 City of Manteca 32.60 43.30 75.90 City of Lodi (current) 39.15 52.87 92.02 City of Lodi (2021 )(2) 36.88 56.08 92.96 City of Galt 33.70 63.15 96.85 City of Stockton 68.75 44.16 112.91 City of Lathrop 90.93 75.00 165.93 (1) Rates for the City reflect rates approved in March 2019. Rates for other agencies are as of March 2019. Based on metered water rates with 15 CCF of average monthly water usage and 9 CCF of monthly winter water usage (for wastewater bill calculations), and a 3/4" residential meter. (2) Includes rollback of water rates to 2016 schedule. Source: City of Lodi Impact Fees. In addition to collecting service charges, the City also collects water impact mitigation fees, or "impact fees." Impact fees are one time fees charged to new development for capacity in the water system. The impact fee for a typical low density single family residence (five dwelling units per acre) is approximately $3,777 per equivalent single family dwelling unit ("EDU"), and is subject to annual inflation indexing. The Projected Operating Results include estimated water impact fees of approximately $575,500 in Fiscal Year 2019-20, including interest earnings. Actual impact fee revenues will depend on a variety of factors, including the actual increases in impact fees adopted by the City Council and the actual number of new connections for which impact fees are paid. In addition, there can be no assurances that the City Council will adopt impact fees at the level assumed in the Projected Operating Results, and that new connections for which impact fees are paid will occur at the levels assumed in the Projected Operating Results. Capital Improvement Plan The capital improvement program for the Water System includes multiple projects that total nearly $30 million through Fiscal Year 2029-30. Annual expenditures for the capital improvement program range from approximately $75,000 to approximately $7.5 million, and average approximately $2.5 million. Larger projects include completion of the water meter retrofit program (approximately $8 million over four fiscal years) and the replacement of a membrane at the Treatment Plant (approximately $2 million). A variety of smaller projects, including rehabilitation and upgrading of groundwater wells and pipe replacement, make up the remainder of the projected capital improvement program. The capital improvement program is projected to be funded from available revenues and reserves of the Water System. The issuance of Parity Debt is not currently expected. Fund Balance Policies The City Council has adopted policies of maintaining the following fund balance targets: 28 ■ General fund unassigned balance of at least 16% of general fund revenues, consisting of Catastrophic and Economic reserves of a minimum of 8% each of annual general fund revenues. • Water Enterprise fund target of 50% of Water System operating expenses. ■ Electric Enterprise fund working capital target of $23.3 million. Certain Environmental Conditions Following are discussions of certain environmental conditions which currently are, and may in the future, affect the operations and/or financial condition of the Water System. PCE/TCE Contamination. As described herein, the City currently relies upon groundwater for approximately 51 % of its production of potable water to its residents through the Water System. The City detected the chemicals tetrachloroethylene ("PCE" or "PERC") and trichloroethylene ("TCE") in the groundwater in 1989. The contamination was caused by releases into five different contamination plumes over many decades by businesses in the City. The City filed, and has fully resolved, a cost recovery action entitled "The People of the State of California and the City of Lodi v. M&P Investments, et. al U.S. District Court for the Eastern District of California, Case No. Civs-00-2441 FCD JFM." Although the contamination is a serious issue, no operating wells are out of compliance with water quality regulations and the City believes that it can manage its water supply to avoid adverse consequences to the Water System. The City has numerous wells that pump water from far outside the areas that are affected, but which are equipped with treatment systems as appropriate. In addition, the Treatment Plant has reduced the City's reliance on groundwater, increasing the ability of the City to avoid problematic groundwater areas. The five contamination plumes run along three narrow contours following the flow of groundwater. Twenty-three of the City's 28 wells pump water from outside the plumes' contours. With minor exceptions, because the plumes containing the contaminants follow the southerly groundwater flow, the City believes that five of the City's 28 wells could be affected in the future. However, the water supply can be completely protected by either closing the affected well or installing wellhead treatment to remove the contaminants at the time the water is ready to be introduced into the Water System. The City's audited financial statements for the year ended June 30, 2018 state that the City's remaining pollution remediation obligation was approximately $16.6 million as of June 30, 2019. See APPENDIX B — "AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019" — Note 14 to the Basic Financial Statements" for a discussion of the City's remediation liabilities. However, there can be no assurances that the actual costs of remediation will not exceed the City's current estimates. See "RISK FACTORS — Remediation Costs." DBCP Contamination. The City's groundwater is impacted by remnants of the former agricultural pesticide dibromochloropropane ("DBCP"). DBCP is a listed carcinogen that can be removed from water via activated carbon treatment. DBCP was used as a fumigant to treat infestations in vineyards. As the City has grown, it has annexed former vineyard sites. DBCP can be found in 12 of the City's 28 wells, primarily in the City's newer vineyard annexations to the 29 south and west. The City has no connection to, or liability for, the contamination except its obligation to purify the water to the extent it chooses to introduce it into its drinking water supply. As required by state law, the City monitors various contaminant levels including DBCP, at the wellhead on a regular basis. DBPC is treated by GAC in seven of the City's 28 wells. The City settled a lawsuit against the manufacturers of DBCP, including Dow, Shell and Occidental, in 1996 that requires the defendants to fund the City's well replacement and treatment costs through the year 2036. Although the reimbursement terms are complex, the amounts paid to date by the defendants have significantly exceeded the City's actual costs. The settlement agreement allows reimbursements to exceed costs because reimbursements are, in most cases, set at ninety percent (90%) of projected treatment costs and actual treatment costs have been less than projections. Staff anticipates that this trend will continue throughout the settlement agreement's term. The City does not anticipate that it will need to utilize Net Revenues of the Water System to fund treatment costs in the future because continued effective resource management are expected to keep costs below settlement revenues. 1,2,3 -TCP Contamination. 1,2,3-Tricholoropropane ("1,2,3 -TCP") is a manmade chlorinated hydrocarbon that is typically found at industrial or hazardous waste sites and has been used as a cleaning and degreasing solvent. 1,2,3 -TCP is also associated with pesticide products formulated with dichloropropanes in the manufacturing of soil fumigant (nematicide) D -D, (no longer available in the United States) which does not attach to soil particles and may move into groundwater aquifers. 1,2,3 -TCP is recognized in California as a potential cancer causing substance. Since 2001, 1,2,3 -TCP has been found in numerous drinking water sources across the state. Currently five well sites that are known to contain 1,2,3 -TCP are equipped with GAC treatment units which were initially installed to remove DBCP contaminants from the well water. GAC is proven to be effective in removing 1,2,3 -TCP from drinking water and is identified by the State Water Resources Control Board as the best available technology for treating 1,2,3 -TCP. The City plans to install additional GAC units as necessary to remove 1,2,3 -TCP from two other contaminated well sites and has programmed these sites into the capital improvement plan. Financial Statements The audited Comprehensive Annual Financial Report of the City as of June 30, 2019 is included in Appendix B to this Official Statement. The 2020 Installment Payments are special obligations of the City payable solely from the Net Revenues of the Water System. The Comprehensive Annual Financial Report has been audited by The Pun Group, independent accountants (the "Independent Accountants") as stated in their report appearing in Appendix B. No review or investigation with respect to subsequent events has been undertaken in connection with such Comprehensive Annual Financial Report by the Independent Accountants and the Independent Accountants have not been asked to consent to the City regarding inclusion of the Comprehensive Annual Financial Report in this Official Statement. Historical and Projected Operating Results Tables 6 and 7 set forth, respectively, historical and projected revenues, expenses and debt service coverage of the Water System. The historical information in Table 6 is based on the City's audited financial statements for Fiscal Years 2014-15 through 2018-19. The Projected Operating Results in Table 7 were prepared by the City, and are based in part on the Rate 30 Consultant's Report. The coverage ratios have been computed in accordance with the requirements of the 2020 Installment Sale Agreement, including the definitions of Net Revenues and Operation and Maintenance Costs. Development of Projected Operating Results and Debt Service Coverage. The City's Projected Operating Results for the Water System for the Fiscal Years ending June 30, 2020 through 2024 set forth below reflect certain significant assumptions concerning future events and circumstances. The financial estimates represent the City's estimate of projected financial results based upon its judgment of the probable occurrence of future events, as well as the Rate Consultant's Report. The assumptions set forth in part in the footnotes set forth below are material in the development of the City's financial projections, and variations in the assumptions may produce substantially different financial results. The Rate Consultant's Report also describes various assumptions utilized in the preparation of the Projected Operating Results, and should be read in its entirety. Actual operating results achieved during the projection period may vary from those presented in the future estimates and such variations may be material. Major assumptions affecting the Projected Operating Results include the following: • Inflation Rates. The Projected Operating Results assume general inflation of 3.0% per year. This general inflation rate applies to all operating and maintenance costs, except water purchase from WID, which increases at 2.0% per year. • {Growth Projection. The annual pace of new development is assumed to be approximately 1.0% of the customer base. • Customer Demand. The City was under state -mandated water use restrictions during the recent statewide drought. A full rebound to pre -drought water usage is not included due to continued transition to metered rates, conservation measures implemented during the drought, and anticipated new water conservation requirements from the State. 31 Table 6 City of Lodi Water System Historical Operating Results and Debt Service Coverage Fiscal Years 2014-15 through 2018-19 Net Change in Reserve $88,823 $2,256,738 $(1,162,604) $495,097 $4,299,964 Water Enterprise Fundl41 Beginning Fund Balance $7,027,567 $7,116,390 $9,373,129 $8,210,525 $8,705,622 Ending Fund Balance 7,116,390 9,373,129 8,210,525 8,705,622 13,005,586 (1) Includes rent, sales of City property, discounts, water reimbursements, and damage to property, water tap fees, DBCP reimbursements, and other miscellaneous revenues. (2) Reflects total debt service for the 2010B Bonds, net of the interest rate subsidy for the Refunded Bonds. (3) Annual capital costs of the transition to water meters. (4) Water Enterprise Fund balance includes both operating and capital reserves and is presented on a cash basis. Source: City of Lodi. 32 Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2014-15 2015.16 2016-17 2017-18 2018-19 Gross Revenues Water Sales $12,722,619 $12,161,186 $12,473,676 $13,005,023 $13,344,473 Investment Earnings 87,211 166,791 132,364 99,018 448,331 Water Impact Mitigation Fees 20,299 332,765 206,847 362,481 528,885 Meter Retrofit Installation 56,502 76,103 19,255 21,577 33,347 Charges Other Revenues0) 483,710 287,839 1,011,756 932,652' 1,095.563 Total Gross Revenues $13,369,891 $13,024,684 $13,843,898 $14,420,751 $15,450,399 Operating and Maintenance Expenses Personnel Services $2,316,305 $2,515,542 $2,998,026 $2,833,892 $3,014,211 Supplies, Materials and 2,139,014 3,008,676 3,468,229 3,220,625 3,339,632 Services Utilities 579,774 496,316 453,488 518,271 537,561 Administrative overhead 780,000 780,000 813,000 820,560 821,900 Total O&M Expenses $5,815,093 $6,800,534 $7,732,743 $7,393,348 $7,713,304 Net Revenum Avallahle for $7,554,798 $6,224,150 $6,111,155 $7,027,403 $7,737,095 Debt Service Debt Service 2010A Bonds Debt Service $1,078,300 $1,077,050 $1,078,550 $1,076,100 $1,077,600 20108 Bonds Net Debt 1,277,841 1,274,531 1,275,193 1,273,206 1,270,556 Service(2) Total Net Debt Service $2,356,141 $2,351,581 $2,353,743 $2,349,306 $2,348,158 Debt Service Coverage Debt Service Coverage 321 2.65 2.60 2.99 3.29 Debt Service Coverage 320 2.51 2.51 2.84 3.07 (excluding impact mitigation fees) Net Remaining Revenues $5,198,657 $3,872,569 $3,757,412 $4,678,097 $5,388,937 Available for Capital Capital Improvement Projects Meter Retrofit Program(3) $4,841,932 $1,606,734 $4,589,636 $4,068,588 $652,540 Other Water System 267,902 9,097 330,380 114,412 436,433 Improvements Total Capital Improvement $5,109,834 $1,615,831 $4,920,016 $4,183,000 $1,088,973 Projects Net Change in Reserve $88,823 $2,256,738 $(1,162,604) $495,097 $4,299,964 Water Enterprise Fundl41 Beginning Fund Balance $7,027,567 $7,116,390 $9,373,129 $8,210,525 $8,705,622 Ending Fund Balance 7,116,390 9,373,129 8,210,525 8,705,622 13,005,586 (1) Includes rent, sales of City property, discounts, water reimbursements, and damage to property, water tap fees, DBCP reimbursements, and other miscellaneous revenues. (2) Reflects total debt service for the 2010B Bonds, net of the interest rate subsidy for the Refunded Bonds. (3) Annual capital costs of the transition to water meters. (4) Water Enterprise Fund balance includes both operating and capital reserves and is presented on a cash basis. Source: City of Lodi. 32 Table 7 City of Lodi Water System Projected Operating Results and Debt Service Coverage Fiscal Years 2019-20 through 2023-24 Gross Revenues Flat Rate Revenue Service Charge Revenue Usage Charge Revenue Miscellaneous Revenue Interest Earnings Total Gross Revenues Operating and Maintenance Expenses Water Administration WID Water Purchases Operating Transfer Out Damage to Property Water Production Electricity Water Distribution Surface Water Treatment Facility Electricity Water Conservation DBCP Total O&M Expenses Net Revenue Available for Debt Service Debt Service 2010A Bonds Debt Service 2010B Bonds Net Debt Service (1) 2020 Bonds Debt Service* Total Net Debt Service Debt Service Coverage* Net Remaining Revenues Available for Capital Transfer to Capital Improvement Fund Net Change in Reserve Water Enterprise Fund Beginning Fund Balance Ending Fund Balance Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2019-20 2020-21 2021-22 2022-23 2023-24 $3,498,000 $2,955,000 $2,630,000 $2,304,000 $1,464,000 5,446,000 5,570,000 5,575,000 6,000,000 6,511,000 4,773,000 4,905,000 4,845,000 5,150,000 5,722,000 377,300 377,300 377,300 377,300 377,300 159,000 66,000 96,600 109,800 131,100 $14,253,300 $13,876,300 $13,523,900 $13,941,100 $14,205,400 $1,717,300 $1,768,500 $1,821,300 $1,875,500 $1,931,500 1,487, 900 1,528,400 1,570,000 1,612,800 1,656,800 846,600 872,000 898,200 925,100 952,900 4,200 4,300 4,400 4,500 4,600 715,100 736,600 758,600 781,300 804,700 303,800 315,100 326,900 339,100 351,800 1,081,400 1,113, 800 1,147,100 1,181,400 1,216,700 1,666,100 1,715,700 1,766,600 1,819,100 1,873,000 155,600 161,400 167,400 173,600 180,100 151,700 156,100 160,700 165,300 170,100 69,600 71,700 73,900 76,100 78,300 $8,199,300 $8,443,600 $8,695,100 $8,953,800 $9,220,500 $6,054,000 $5,432,700 $4,828,800 $4,987,300 $4,984,900 $1,078,200 $1,076,400 634,286 176,910 1,079,450 $1,864,450 $1,861,200 $1,659,000 $1,889,396 $2,155,850 $1,854,450 $1,861,200 $1,859,000 3.20 252 2.60 2.68 2.68 $4,164,604 $3,276,850 $2,974,350 $3,126,100 $3,125,900 $6,745,000 $2,208,000 $2,082,000 $1,970,000 $869,000 $(2,580,396) $1,068,850 $892,350 $1,156,100 $2,256,900 $13,005,586 $10,425,190 $11,494,040 $12,386,390 $13,542,490 10,425,190 11, 494, 040 12, 386, 390 13, 542, 490 15, 799, 390 (1) Reflects debt service paid on December 1, 2019, net of the interest rate subsidy for the Refunded Bonds. Does not include not include the June 1, 2020 debt service that will be paid through the refunding escrow. The City will deposit a portion of the debt service that would have been due on June 1, 2020 into the refunding escrow -this payment is not reflected in the debt service shown. * Preliminary; subject to change. Source: The Reed Group, Inc.; City of Lodi. 33 Retirement Plan Retirement benefits to City employees, including those assigned to the Water and Wastewater Systems, 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 (6.949% in Fiscal Year 2019-20 for employees assigned to the Water System hired prior to January 1, 2013 ("Classic Employees") and 7.25% in Fiscal Year 2019-20 for employees assigned to the Water System hired after January 1, 2013 ("PEPRA Employees")) of their annual covered salary. In addition to the required contributions, both Classic Employees and PEPRA Employees pay an additional 2% or 3% of their annual covered salary towards the City's portion of the pension normal cost. 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, 2019, the Citywide contribution to the CaIPERS miscellaneous plan (of which all Water System employees are members) was $1,441,256 in Normal Cost and $3,502,555 in UAL. The Normal Cost is based on the City's assumption for payroll expense, and the UAL is set by CaIPERS. For the Water System's share of such contributions, the Fiscal Year 2018-19 contribution for the Normal Cost share was $129,576 and for the UAL was $328,790. 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 January 22, 2019, there are 24 PEPRA Employees and 15 Classic Employees in the Water and Wastewater Systems, with 50% of the total being allocated to the Water System. As more PEPRA Employees 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 1, 2018, CaIPERS began 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, 2019, $17,023,582 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, $2,160,715 was invested in Fiscal Year 2019-20 based on the results of Fiscal Year 2018-19. The PSP remains in effect until the funded status of the City's two pension plans for Miscellaneous and Safety employees are at a 34 combined 80% funded status when considering the Market Value of Assets at CalPERS and in the PSF. As of the July 2019 actuarial report, with a June 30, 2018 measurement date, the funded status for the Miscellaneous Plan was 69.0%, Safety plan was 58.6% and combined plans was 63.8%. As of December 31, 2019, the combined funded status when considering the PSF assets increases to 68.0%. Based on fiscal year ending June 30, 2019 combined normal cost and UAL pension payments, the Water System is responsible for approximately 4% of the total pension liability for the City. Copies of the CalPERS 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, 2019." Other Post -Employment Benefits The City provides certain post -employment benefits other than pensions ("OPEB") to City employees, including those assigned to the Water System, who retire from the City and receive a CalPERS pension through its participation in the CaIPERS medical benefits program. The City's OPEB plan is the CalPERS standard Minimum Contribution Benefit subsidy plan that provides a fixed monthly amount of premium subsidy for retirees. Employees of the City are eligible for retiree health benefits if they retire from the City and commence pension benefits under CalPERS. In addition, employees hired prior to dates that range from July 1, 1994 to December 6, 1995 (depending on the labor group the employee was part of), are allowed to convert their accumulated sick leave into postemployment medical benefits at retirement as long as they have ten or more years of service with the City. This 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 Unfunded Actuarial Accrued Liability ("UAAL") for OPEB as of June 30, 2019 was $33,422,021. The City's policy is to fund the normal cost (the current accrual for benefits being earned) plus an amortization of the net (unfunded accrued) OPEB liability. For Fiscal Year 2017- 18, the City contributed $2,947,260, of which $1 million was placed in an OPEB trust. For Fiscal Year 2018-19, the City contributed $1,862,969. The portion of the plan's assets allocable to the Water System employees, which is part of the City's liability pool, has not been separately calculated. The Water and Wastewater Systems employees together represent approximately 14% of employees of the City, with 50% of that amount being allocated to the Water System. For additional information relating to the City's retirement and other post -employment obligations, see Notes 8 and 9 to the City's Comprehensive Annual Financial Report for the Year Ended June 30, 2019 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 Water System. 35 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. 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 2020 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 2020 Installment Payments and thereby pay the principal of and interest on the 2020 Bonds depends on the ability of the City to generate Net Revenues in the levels required by the 2020 Installment Sale Agreement. Although, as more particularly described herein, the City expects that sufficient revenues will be generated through the imposition and collection of service charges, impact fees, and other Revenues described herein, there is no assurance that such imposition of service charges, impact fees, or other Revenues will result in the generation of Net Revenues in the amounts required by the 2020 Installment Sale 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 2020 Bonds. Limited Obligations The 2020 Bonds are payable only from 2020 Installment Payments received from the City and moneys in the funds and accounts held under the Indenture, and the 2020 Installment Payments are secured by and payable solely from Net Revenues. The 2020 Installment Payments are not secured by a legal or equitable pledge or charge or lien upon any property of the City or the Authority or any of their income or receipts, except the Net Revenues. The obligation of the City to make the 2020 Installment payments does not constitute an obligation which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. No Reserve Account No debt service reserve account has been established with respect to the 2020 Bonds. The Authority and the City have reserved the right to establish debt service reserves for Parity Obligations. 36 Parity Debt Upon the issuance of the 2020 Bonds and the refunding of the Refunded Bonds and corresponding portion of the related installment payment obligation of the City, the only other outstanding obligations payable from Net Revenues on a parity with the 2020 Bonds will be the 2010A Bonds and the related installment payment obligation of the City. In addition, the City is permitted under the 2020 Installment Sale Agreement, subject to satisfaction of certain conditions, to incur future Parity Debt. In the event Net Revenues were insufficient to pay all of the City's obligations with respect to the 2020 Installment Payments and any Parity Debt, when due, the City would be obligated to make payments on the Parity Debt and 2020 Installment payments on a pro rata basis. Demand and Usage There can be no assurance that the local demand for services provided by the Water System will continue according to historical levels. In addition, drought conditions and voluntary or mandatory conservation measures could decrease usage of the services of the Water System. See "— California Drought Conditions." Reduction in the level of demand or usage could require an increase in rates or charges in order to produce Net Revenues sufficient to comply with the City's rate covenant. Such increase in rates could include the approved temporary water shortage surcharge. See "THE WATER SYSTEM — Water Rates and Charges — Water Shortage Surcharge." Rate increases could increase the likelihood of nonpayment. Statutory and Regulatory Impact The kind and degree of water treatment is regulated, to a large extent, by the federal government and the State of California. Treatment standards set forth in federal and state law control the operations of the Water System and mandate its use of technology. If the federal government, acting through the Environmental Protection Agency, or the State of California, acting through the Department of Health Services, or additional federal or state legislation, should impose stricter water quality standards upon the Water System, the Water System's expenses could increase accordingly and rates and charges would have to be increased to offset those expenses. It is not possible to predict the direction which federal or state regulation will take with respect to drinking water quality standards, although it is likely that both will impose more stringent standards with attendant higher costs. In addition, as described herein, the City is currently undertaking remediation activities to address certain environmental conditions affecting the Water System. Although the City believes that existing funds available for such remediation will be sufficient to pay the cost of such remediation, there can be no assurances that he cost of remediation will not exceed the City's projections. Although the City has covenanted in the 2020 Installment Sale 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 2020 Installment Sale Agreement and to pay the 2020 Installment Payments. Certain potential 37 increasing regulatory standards could materially increase the cost to the City of providing water and wastewater services. Earthquake, Flood, Wildfire or Other Natural Disasters General. The occurrence of an earthquake, flood or other natural disaster which resulted in the temporary or permanent closure of major components of the Water System or resulted in significantly increased costs could materially adversely affect the ability of the City to operate the Water System or to generate Net Revenues at the levels required by the 2020 Installment Sale 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. 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 greaterthan 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. Wildfire. In recent years, wildfires have caused extensive damage throughout the State. Certain of these fires have burned thousands of acres and destroyed hundreds and in some cases thousands of homes. In some instances, entire neighborhoods have been destroyed. Several fires which occurred in 2017 damaged or destroyed property in areas that were not previously considered to be at risk from such events. In November 2018, the Camp Fire occurred in Butte County, California. The Camp Fire is the deadliest and most destructive wildfire in the recorded history of the State burning more than 150,000 acres and destroying more than 11,500 structures, including most of the structures in the City of Paradise, California. The City is located in a region of the State with a very low fire risk and no part of the City or its service territory is located in or near the High Fire Threat District designated in the California Public Utilities Commission's Fire Threat Map. The City's service area is predominately categorized as either "non -fuel" or "moderate" in the California Department of Forestry and Fire Protection's ("CALFIRE") Fire and Resource Assessment Program Fire Threat Map. In 2007, CALFIRE determined that San Joaquin County, which City's service territory is entirely within, has no Very High Fire Hazard Severity Zones. Some commentators believe that climate change will lead to even more frequent and damaging wildfires in the future. While the City and the Water System have not suffered direct effects of wildfire, there can be no assurance that wildfires will not affect the City and the Water System in the future, or the effects of any such wildfire, which could be material. California Drought Conditions California is subject to droughts from time to time. In particular, in the last decade the State experienced six consecutive years of below-average rain and snow, causing severe drought conditions in all 58 counties. On January 17, 2014, Governor Edmund G. Brown proclaimed a state of emergency due to the severe drought conditions faced by the State. On April 1, 2015, for the first time in California's history, Governor Brown directed the State Water Resources Control Board to implement mandatory water reductions in cities and towns across California to reduce water usage by 25%. In implementing the Governor's order, the State Water Resources Control 38 Board required the City to reduce water use by 20% relative to 2013 water use. The City responded by requiring customers to reduce water usage. Water year 2017 had above-average precipitation and snowpack, and on April 7, 2017, Governor Brown issued Executive Order B-40-17, officially ending the drought state of emergency in all California counties except Fresno, Kings, Tulare, and Tuolumne. However, there can be no assurance that drought conditions will not arise again, causing water rationing and adversely affecting property use and values. Implementation of mandatory water reductions imposed by the State Water Resources Control Board on the City reduced the amount of water sold by the Water System. While water demand has partially rebounded since the end of the last drought, demand has not fully returned to pre -drought levels and the Rate Consultant's Report does not project a full rebound to pre - drought levels due to hardening of usage (i.e., permanent conservation measures implemented during the drought) and the potential for new water conservation requirements from the State. The City cannot predict if and when drought conditions will return, what effect drought conditions may have on revenues of the Water System, or whether or to what extent water reduction requirements may affect the Water System. Potential Impact of Climate Change The issue of climate change has become an important factor in water resources planning. There is evidence that increasing concentrations of greenhouse gases have caused and will continue to cause a rise in temperatures around the world, which will result in a wide range of changes in climate patterns. Moreover, there is evidence that a warming trend occurred during the latter part of the 20th century and will likely continue through the 21st century. These changes will have a direct effect on water resources in the State, and numerous studies on climate and water in the State have been conducted to determine the potential impacts. Based on these studies, global warming could result in the following types of water resources impacts in the State, including impacts on the Water System: • Changes in the timing, intensity, and variability of precipitation, and an increased amount of precipitation falling as rain instead of as snow, • Long-term changes in watershed vegetation and increased incidence of wildfires that could affect water quality, fisheries, Increased water temperatures with accompanying adverse effects on some Increases in evaporation and concomitant increased irrigation need, and Changes in urban and agricultural water demand. However, other than the general trends listed above, there is no clear scientific consensus on exactly how climate change will quantitatively affect water supplies available to the Water System. 39 Cybersecurity The City, including the Water System, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. As a recipient and provider of personal, private or other sensitive electronic information, the City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. On April 4 and May 3, 2019, the City experienced information security incidents involving ransomware impacting multiple City systems. The City did not pay any ransom and its systems were either rebuilt or restored from backups. The City retained the services of Baker & Hostetler LLP and Cytelligence Inc. to provide legal, technical, and forensic services through the City's cyber insurance coverage. With the exception of the City's $25,000 deductible, all costs associated with these information security incidents, including legal and forensic experts and employee overtime, were covered by insurance. The City has taken steps to harden its cybersecurity and provide training for employees in the use of its digital networks and systems. No assurance can be given that the City's efforts to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City. No assurance can be given that the City, the Authority, the and Water System will not be affected by cyber threats and attacks in a manner that may affect the owners of the 2020 Bonds. Rate Consultant's Report The Rate Consultant's Report contained as Appendix C to this Official Statement contains certain assumptions and estimates. The Rate Consultant's Report should be read in its entirety for a discussion of the assumptions and rationale underlying the estimates, projections, conclusions and opinions contained therein. The estimates, projections, conclusions and opinions contained therein are subject to uncertainties. There will usually be differences between actual and estimated future results because not all events and circumstances occur as expected, and those differences may be material. Accordingly, the projections contained in the Rate Consultant's Report are not necessarily indicative of future performance, and neither the Rate Consultant nor the City assumes any responsibility for any failure to meet such projections. In addition, certain assumptions with respect to future business and financing decisions of the City are subject to change. No representation is made or intended, nor should any representation be inferred, with respect to the likely existence of any particular future set of facts or circumstances, and prospective purchasers of the 2020 Bonds are cautioned not to place undue reliance upon the Rate Consultant's Report or upon any estimates, projections, conclusions and opinions contained in the Rate Consultant's Report. If actual results are less favorable than the results projected or if the assumptions used in preparing such projections prove to be incorrect, the amount of Net Revenues may be materially less than expected and consequently, the ability of the City to make timely payment of the 2020 Installment Payments may be materially adversely affected. Neither the City's independent auditors, nor any other independent accountants have compiled, examined or performed any procedures with respect to the information in the Rate Consultant's Report, including the Net Revenues forecast, nor have they expressed any opinion or any form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the Rate Consultant's Report. 40 Remediation Costs As described in "THE WATER SYSTEM — Certain Environmental Conditions," pursuant to various litigation settlements and agreements with the Board, the City is required to undertake remediation activities with respect to environmental contamination of groundwater in the City. The City believes that remaining settlement proceeds and existing reserves will be sufficient to pay these remediation costs, and that available revenues will not be required to pay such costs. However, there can be no assurances that the actual costs of remediation will not significantly exceed the City's current estimates. If actual costs of remediation exceed the City's estimates, such circumstances could materially adversely affect the financial condition of the Water System. Limited Recourse on Default Failure by the City to make the 2020 Installment Payments, when due, constitutes an event of default under the 2020 Installment Sale Agreement and the Authority is permitted to pursue remedies at law or in equity to enforce the City's obligation to make the 2020 Installment Payments. Although the Trustee, as assignee of the Authority, has the right to accelerate the total unpaid principal component of the 2020 Installment Payments, there is no assurance that the City will have sufficient Net Revenues to pay the principal component of the 2020 Installment Payments upon acceleration. Effect of Bankruptcy In addition to the limitations on remedies contained in the 2020 Installment Sale Agreement and the Indenture, the rights and obligations under the 2020 Bonds, the 2020 Installment Sale 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 2020 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 2020 Bonds and the enforceability of the 2020 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 2020 Installment Sale 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 2020 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 2020 41 Bonds may be includable in the gross income of the Owners thereof for federal tax purposes retroactive to the date of issuance of the 2020 Bonds. See "TAX MATTERS." Articles XIIIC and XIIID of the California Constitution General. On November 5, 1996, California voters approved Proposition 218, the so-called "Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which affect the ability of local governments to levy and collect both existing and future taxes, assessments, and property -related fees and charges. Proposition 218, which generally became effective on November 6, 1996, changed, among other things, the procedure for the imposition of any new or increased property -related "fee" or "charge," which is defined as "any levy other than an ad valorem tax, a special tax or an assessment, imposed by a [local government] upon a parcel or upon a person as an incident of property ownership, including user fees or charges for a property related service" (and referred to in this section as a "property - related fee or charge"). On November 2, 2010, California voters approved Proposition 26, the so-called "Supermajority Vote to Pass New Taxes and Fees Act." Section 1 of Proposition 26 declares that Proposition 26 is intended to limit the ability of the State Legislature and local government to circumvent existing restrictions on increasing taxes by defining the new or expanded taxes as "fees." Proposition 26 amended Articles XIIIA and XIIIC of the State Constitution. The amendments to Article XIIIA limit the ability of the State Legislature to impose higher taxes (as defined in Proposition 26) without a two-thirds vote of the Legislature. Proposition 26's amendments to Article XIIIC broadly define "tax," but specifically exclude, among other things: (1) A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege. (2) 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. (3) A charge imposed as a condition of property development. (4) Assessments and property -related fees imposed in accordance with the provisions of Article XIII D. Property -Related Fees and Charges. Under Article XIIID, before a municipality may impose or increase any property -related fee or charge, the entity must give written notice to the record owner of each parcel of land affected by that fee or charge. The municipality must then hold a hearing upon the proposed imposition or increase at least 45 days after the written notice is mailed, and, if a majority of the property owners of the identified parcels present written protests against the proposal, the municipality may not impose or increase the property -related fee or charge. Further, under Article XIIID, revenues derived from a property -related fee or charge may not exceed the funds required to provide the "property -related service" and the entity may not use such fee or charge for any purpose other than that for which it imposed the fee or charge. The amount of a property -related fee or charge may not exceed the proportional cost of the service attributable to the parcel, and no property -related fee or charge may be imposed for a service 42 unless that service is actually used by, or is immediately available to, the owner of the property in question. Initiative Power, In addition, Article XIIIC states that "the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge. The power of initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments and neither the Legislature nor any local government charter shall impose a signature requirement higher than that applicable to statewide statutory initiatives." Judicial Interpretation of Articles XIIIC and XIIID. After Proposition 218 was enacted in 1996, appellate court cases and an Attorney General's opinion initially indicated that fees and charges levied for water and wastewater services would not be considered property -related fees and charges, and thus not subject to the requirements of Article XIIID regarding notice, hearing and protests in connection with any increase in the fees and charges being imposed. However, three subsequent court cases have held that certain types of water and wastewater charges could be subject to the requirements of Article XIIID under certain circumstances. In Richmond v. Shasta Community Services District (2004) 32 CalAth 409, the California Supreme Court addressed the applicability of the notice, hearing and protest provisions of Article XIIID to certain charges related to water service. In Richmond, the Court held that capacity charges are not subject to Proposition 218. The Court also indicated in dictum that a fee for ongoing water service through an existing connection could, under certain circumstances, constitute a property -related fee and charge, with the result that a local government imposing such a fee and charge must comply with the notice, hearing and protest requirements of Article XIIID. In Howard Jarvis Taxpayers Association v. City of Fresno (2005) 127 Cal.AppAth 914, the California Court of Appeal, Fifth District, concluded that water, sewer and trash fees are property - related fees subject to Proposition 218 and a municipality must comply with Article XIIID before imposing or increasing such fees. The California Supreme Court denied the City of Fresno's petition for review of the Court of Appeal's decision on June 15, 2005. In July 2006 the California Supreme Court, in Bighorn -Desert View Water Agency v. Verjil (2006) 39 CalAth 205, addressed the validity of a local voter initiative measure that would have (a) reduced a water agency's rates for water consumption (and other water charges), and (b) required the water agency to obtain voter approval before increasing any existing water rate, fee, or charge, or imposing any new water rate, fee, or charge. The court adopted the position indicated by its statement in Richmond that a public water agency's charges for ongoing water delivery are "fees and charges" within the meaning of Article XIIID, and went on to hold that charges for ongoing water delivery are also "fees" within the meaning of Article XIIIC's mandate that the initiative power of the electorate cannot be prohibited or limited in matters of reducing or repealing any local tax, assessment, fee or charge. Therefore, the court held, Article XIIIC authorizes local voters to adopt an initiative measure that would reduce or repeal a public agency's water rates and other water delivery charges. (However, the court ultimately ruled in favor of the water agency and held that the entire initiative measure was invalid on the grounds that the second part of the initiative measure, which would have subjected future water rate increases to prior voter approval, was not supported by Article XIIIC and was therefore invalid.) The court in Bighorn specifically noted that it was not holding that the initiative power is free of all limitations; the court stated that it was not determining whether the electorate's initiative power is subject to the statutory provision requiring that water service charges be set at a level 43 that will pay for operating expenses, provide for repairs and depreciation of assets, provide a reasonable surplus for improvements, extensions, and enlargements, pay the interest on any bonded debt, and provide a sinking or other fund for the payment of the principal of such debt as it may become due. In August 2013, an Orange County Superior Court judge ruled that the tiered pricing model of the City of San Juan Capistrano, which charges higher rates to customers who use more water, violates Proposition 218. The City of San Juan Capistrano appealed the decision, to the 4th District Court of Appeal, which published its decision on April 20, 2015. The court's decision found that the City of San Juan Capistrano's tiered rates were not sufficiently cost -justified, but that the Constitution does allow for tiered rates. In July 2015, the California Supreme Court denied a request to depublish the case. The City believes that its rate structure is distinguishable from the structure deemed unconstitutional in the San Juan Capistrano case and consistent with Proposition 218 and the Constitution because the City's tiered rates correlate with the actual costs for the various tiers. Articles XIIIC and XIIID and the City's Wastewater Rates and Charges. The City's current water rates (see "THE WATER SYSTEM — Water Rates and Charges") were adopted by resolution of the City Council on March 20, 2019, following notice to property owners and a public hearing held at least 45 days after the notice had been mailed, in compliance with Articles XIIIC and XIIID. Further, the City believes its water rates and charges do not constitute "taxes" under Article XIIIC as revised by Proposition 26 because, as described in subsection 1(e)(7) of Article XIIIC, they are "property -related fees imposed in accordance with the provisions of Article XIIID" (and are also charges for a "property -related service" as defined in subsection 2(g) of Article XIIID) and because, as described in subsection 1(e)(2) of Article XIIIC, they are charged for water service, "a specific government service or product provided directly to the payor that is not provided to those not charged." Conclusion. It is not possible to predict how courts will further interpret Article XIIIC and Article XIIID in future judicial decisions, and what, if any, further implementing legislation will be enacted. Under the Bighorn case, local voters could adopt an initiative measure that reduces or repeals the City's rates and charges, though it is not clear whether (and California courts have not decided whether) any such reduction or repeal by initiative would be enforceable in a situation in which such rates and charges are pledged to the repayment of bonds or other indebtedness, as is the case with respect to the 2020 Bonds. There can be no assurance that the courts will not further interpret, or the voters will not amend, Article XIIIC and Article XIIID to limit the ability of local agencies to impose, levy, charge and collect increased fees and charges for water services, or to call into question previously adopted water services rate increases. Secondary Market There can be no guarantee that there will be a secondary market for the 2020 Bonds or, if a secondary market exists, that any 2020 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. 44 Such prices could be substantially different from the original purchase price. No assurance can be given that the market price for the 2020 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 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 2020 Bonds for audit examination, or the course or result of any Internal Revenue Service audit or examination of the 2020 Bonds or obligations that present similar tax issues as the 2020 Bonds. 45 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 2020 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. The opinions set forth in the preceding paragraph are subject to the condition that the Authority comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Tax Code") that must be satisfied subsequent to the issuance of the 2020 Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. The Authority has 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 2020 Bonds. Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a 2020 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 2020 Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes "bond premium" for purposes of federal income taxes and State of California personal income taxes. 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 2020 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 2020 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2020 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2020 Bonds who purchase the 2020 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2020 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2020 Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering to the public at the first price at which a substantial amount of such 2020 Bonds is sold to the public. Under the Tax Code, bond premium is amortized on an annual basis over the term of the 2020 Bond (said term being the shorter of the 2020 Bond's maturity date or its call date). The amount of bond premium amortized each year reduces the adjusted basis of the owner of the 2020 Bond for purposes of determining taxable gain or loss upon disposition. The amount of bond premium on a 2020 Bond is amortized each year over the term to maturity of the 2020 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 2020 Bond premium is not deductible for federal income tax purposes. Owners of premium 2020 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 2020 Bonds. 46 California Tax Status. In the further opinion of Bond Counsel, interest on the 2020 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 2020 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 2020 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 2020 Bonds, or as to the consequences of owning or receiving interest on the 2020 Bonds, as of any future date. Prospective purchasers of the 2020 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 2020 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2020 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 2020 Bonds, the ownership, sale or disposition of the 2020 Bonds, or the amount, accrual or receipt of interest on the 2020 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 2020 Bonds, the Indenture, the 2020 Installment Sale Agreement or in any way contesting or affecting the validity of the 2020 Bonds or any proceedings of the City or the Authority taken with respect to the execution and delivery thereof. APPROVAL OF LEGALITY The 2020 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, Jones Hall, A Professional Law Corporation, San Francisco, California and for the Underwriter by Kutak Rock LLP, Los Angeles, California. Payment of the fees and expenses of Bond Counsel and Underwriter's Counsel is contingent upon execution and delivery of the 2020 Bonds. 47 FINANCIAL STATEMENTS The Pun Group, Certified Public Accountants (the "Auditor"), audited the financial statements of the City for the Fiscal Year ended June 30, 2019. 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, 2019." 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. RATING S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC ("S&P"), is expected to assign the 2020 Bonds the long-term rating of "_". The rating reflects only the views of S&P, and any explanation of the significance of such rating may be obtained only from S&P. There is no assurance that the rating will remain in effect for any given period of time or that it will not be revised downward or withdrawn entirely by S&P, if, in their judgment, circumstances so warrant. The City undertakes no responsibility to oppose any such revision or withdrawal. Any downward revision or withdrawal of the rating may have an adverse effect on the market price of the 2020 Bonds. CONTINUING DISCLOSURE The City will covenant for the benefit of owners of the 2020 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 2019-20 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 orthe notices of enumerated events is described in "APPENDIX F— Form of Continuing Disclosure Certificate," attached to this Official Statement. These covenants have been made in order to assist the underwriter of the 2020 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 Water System and the City's electric and wastewater utilities. During the past five years, the City has prepared continuing disclosure reports pursuant to these undertakings. Within the past five years, the City and certain of its related entities have failed to comply in certain respects with continuing disclosure obligations related to outstanding indebtedness, by (i) filing audited financial statements and operating data on EMMA for Fiscal Years 2014-15 and 48 2017-18 up to 24 days late and (ii) failing to associate certain filings on EMMA with all relevant CUSIPs of outstanding indebtedness. 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 2020 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 2020 Bonds. UNDERWRITING The 2020 Bonds are being purchased by Piper Sandler & Co. (the "Underwriter"), at a purchase price of $ (which represents the aggregate principal amount of the 2020 Bonds ($ ), plus an original issue premium/less an original issue discount of $ , less an Underwriter's discount of $ ). The purchase agreement relating to the 2020 Bonds provides that the Underwriter will purchase all of the 2020 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement. The Underwriter may offer and sell the 2020 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter. Piper Sandler & Co. has entered into a distribution agreement with Charles Schwab & Co., Inc. ("CS&Co.") for the retail distribution of certain securities offerings at the original issue prices. Pursuant to the agreement, CS&Co. will purchase the 2020 Bonds from Piper Sandler & Co. at the original issue price less a negotiated portion of the selling concession applicable to any 2020 Bonds that CS&Co. sells. VERIFICATION OF MATHEMATICAL COMPUTATIONS Upon delivery of the 2020 Bonds, Causey Demgen & Moore P.C., 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 Bonds on their respective payment and redemption dates. 49 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 SM Executive Director CITY OF LODI By: City Manager 50 APPENDIX A GENERAL INFORMATION ABOUT THE CITY OF LODI AND SAN JOAQUIN COUNTY The following information conceming the City of Lodi (the "City") and San Joaquin County (the "County") are included only for the purpose of supplying general information regarding the community. The 2019 Bonds are not a debt of the City, the County, the State of California (the "State') or any of its political subdivisions, and neither the City, the County, the State nor any of its political subdivisions is liable therefor. General The City. 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). The County. The County is one of California's original counties and was created at the time of statehood in 1850. The County covers an area of approximately 1,436 square miles, consisting of 1,399 square miles of land and 27 square miles of water. The County is adjacent to Stanislaus County to the south and southeast, Alameda and Contra Costa Counties to the west, Sacramento County to the north, Amador County to the northeast, Calaveras County to the east and a corner of Santa Clara County to the southwest. Population Population figures for the City, the County and the State for the last six years are shown in the following table. CITY OF LODI, SAN JOAQUIN COUNTY AND THE STATE OF CALIFORNIA Population Estimates Calendar Years 2014 through 2019, as of January 1 Calendar City of San Joaquin State of Year Lodi County California 2014 63,700 713,315 38, 622, 301 2015 64,503 724,859 38, 952,462 2016 65,074 736,027 39, 214, 803 2017 65,981 747,579 39, 504, 609 2018 67,042 757,279 39, 740, 508 2019 68,272 770,385 39,927,315 Source: State Department of Finance estimates A-1 Employment and Industry The City is included in the Stockton Metropolitan Statistical Area ("MSA"), which includes all of San Joaquin County. The unemployment rate in the County was 4.7% in September 2019, down from a revised 5.7% in August 2019, and below the year-ago estimate of 5.0%. This compares with an unadjusted unemployment rate of 3.5% for the State and 3.3% for the nation during the same period. Set forth below is data from calendar years 2014 to 2018 reflecting the County's civilian labor force, employment and unemployment. These figures are county -wide statistics and may not necessarily accurately reflect employment trends in the City. STOCKTON-LODI MSA (San Joaquin County) Annual Average Labor Force and Employment by Industry Calendar Years 2014 through 2018 (March 2018 Benchmark) Civilian Labor Force Employment Unemployment Unemployment Rate Wage and Salary Employment: (2) Agriculture Mining and Logging Construction Manufacturing Wholesale Trade Retail Trade Transportation, Warehousing and Utilities Information Financial Activities Professional and Business Services Educational and Health Services Leisure and Hospitality Other Services Federal Government State Government Local Government Total All Industries(') 2014 2015 2016 2017 2018 312,000 314,600 318,500 323,600 326,400 279,200 286,600 292,600 301,100 306,800 32,900 28,000 25,900 22,600 19,600 10.5% 8.9% 8.1% 7.0% 6.0% 15,700 16,700 16,600 16,300 16,100 100 100 100 100 100 8,900 10,100 11,100 11,700 12,700 18,600 18,700 18,900 19,400 19,700 11,000 11,300 11,600 12,000 12,600 25,700 26,000 26,500 26,800 26,600 18,300 20,400 23,600 26,700 28,400 2,100 1,900 2,000 1,800 1,800 7,500 7,400 7,500 7,800 8,100 18,300 19,400 19,600 19,200 19,600 35,900 36,500 36,400 38,200 38,500 19,100 19,700 20,500 21,500 22,000 6,900 7,200 7,500 7,600 7,600 3,100 3,000 3,000 3,100 3,100 5,800 6,200 6,400 6,600 6,700 29,600 30,400 31,400 32.800 33,700 226,700 234,900 242,600 251,600 257,300 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department. A-2 Largest Employers The following table lists the major employers within the County, listed in alphabetical order without regard to the number of employees, as of November 2019. SAN JOAQUIN COUNTY Major Employers As of November 2019 Employer Name Location Industry A Sambado & Sons Inc Linden Nuts -Edible Amazon Corpnet Tracy Internet & Catalog Shopping Amazon Fulfillment Ctr Stockton Mail Order Fulfillment Service Blue Shield of California Lodi Insurance Dameron Hospital Assn Stockton Hospitals Deuel Vocational Institution Tracy City Govt -Correctional Institutions Foster Care Svc Stockton Government Offices -County Juvenile Justice Div Cl Stockton State Govt -Correctional Institutions Leprino Foods Co Tracy Cheese Processors (mfrs) Lodi Health Home Health Agency Lodi Home Health Service Lodi Memorial Hospital Lodi Hospitals Morada Produce Stockton Fruits & Vegetables -Growers & Shippers NA Chaderjian Youth Stockton State Govt -Correctional Institutions Pacific Coast Producers Lodi Canning (mfrs) Prima Frutta Packing Inc Linden Fruit & Produce Packers Safeway Distribution Ctr Tracy Distribution Centers (whls) San Joaquin County Human Svc Stockton Government Offices -County San Joaquin County Sch Stockton School Districts San Joaquin General Hospital French Camp Hospitals San Joaquin Sheriff's Office French Camp Government Offices -County Sjgov Stockton Government Offices -County St Joseph's Cancer Ctr Stockton Cancer Treatment Centers Stockton Police Dept Stockton Police Departments Stockton Unified School Dist Stockton School Districts Walmart Supercenter Stockton Department Stores Source: State of California Employment Development Department, extracted from The America's Labor Market Information System (ALMIS) Employer Database, 2020 1st Edition. A-3 The following table lists the ten principal employers within the City, by number of employees, as of June 30, 2019. CITY OF LODI Principal Employers As of June 30, 2019 Employer Name Lodi Unified School District Pacific Coast Producers Adventist Health Lodi Memorial Blue Shield of CA Walmart City of Lodi TreeHouse Costco Farmers & Merchant Bank Frank C Alegre Trucking Inc. Number of Employees 2,109 1,350 1,270 901 410 381 301 256 204 200 Source: City of Lodi Comprehensive Financial Report for fiscal year ended June 30, 2019. A-4 Commercial Activity Summaries of historic taxable sales within the City and the County during the past five years in which data is available are shown in the following tables. Annual figures are yet not available for calendar year 2018. Total taxable sales during the first quarter of calendar year 2018 in the City were $255,731,022, a 7.92% increase over the total taxable sales of $236,965,791 reported during the first quarter of calendar year 2017. CITY OF LODI Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Retail Stores Number Taxable of Permits Transactions Total All Outlets Number Taxable of Permits Transactions 2013 1,143 $701,339 1,660 $871,322 2014 1,218 737,192 1,737 911,681 2015 0) 1,260 737,754 1,886 909,889 2016 1,327 779,583 1,987 947,638 2017 1,300 856,206 1,972 1,029,268 (1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part-time are now tabulated with store retailers. Source: State Board of Equalization. Taxable Sales in California (Sales & Use Tax) for years 2013- 2016. State Department of Tax and Fee Administration for year 2017. Total taxable sales during the first quarter of calendar year 2018 in the County were $3,019,083,970, a 10.74% increase over the total taxable sales of $2,726,400,144 reported during the first quarter of calendar year 2017. SAN JOAQUIN COUNTY Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Retail Stores Total All Outlets Number Taxable Number Taxable of Permits Transactions of Permits Transactions 2013 8,754 $6,519,537 12,752 $9,466,015 2014 8,900 6,780,160 12,865 10, 031, 845 20150) 4,958 6,986,878 14,255 10,467,214 2016 9,480 7,380,226 14,682 10,922,271 2017 9,506 7,994,473 14,758 12,153,268 (1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part-time are now tabulated with store retailers. A-5 Source: State Board of Equalization. Taxable Sales in California (Sales & Use Tax) foryears 2013- 2016. State Department of Tax and Fee Administration for year 2017. Effective Buying Income "Effective Buying Income" is defined as personal income less personal tax and nontax payments, a number often referred to as "disposable" or "after-tax" income. Personal income is the aggregate of wages and salaries, other labor -related income (such as employer contributions to private pension funds), proprietor's income, rental income (which includes imputed rental income of owner -occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as "disposable personal income." The following table summarizes the median household effective buying income for the City, the County, the State and the United States for the period 2015 through 2019. CITY OF LODI AND SAN JOAQUIN COUNTY Median Household Effective Buying Income 2015 through 2019 Source: The Nielsen Company (US), Inc for years 2015 through 2018; Claritas, LLC for 2019 A-6 2015 2016 2017 2018 2019 City of Lodi $40,478 $42,890 $44,142 $46,144 $50,111 San Joaquin County 44,235 46,491 48,149 49,883 55,534 California 50,072 53,589 55,681 59,646 62,637 United States 45,448 46,738 48,043 50,735 52,841 Source: The Nielsen Company (US), Inc for years 2015 through 2018; Claritas, LLC for 2019 A-6 Building Activity The tables below summarize building activity in the City and the County for the past five available years. Permit Valuation New Single-family New Multi -family Res. Alterations/Additions Total Residential New Commercial New Industrial New Other Com. Alterations/Additions Total Nonresidential New Dwelling Units Single Family Multiple Family TOTAL CITY OF LODI Building Permit Activity For Calendar Years 2014 through 2018 (Dollars in Thousands) 2014 2015 2016 2017 2018 $5,473.1 $21,470.6 $47,331.6 $54,475.9 $55,587.1 0.0 0.0 13, 501.8 16,178.1 0.0 3,679.8 4,261.5 4,619.9 4,791.8 7,349.5 $9,152.9 $25,732.1 $65,453.3 $75,445.8 $62,936.6 $928.9 $24,506.4 $6,019.3 $21,785.2 $10,987.0 0.0 0.0 0.0 0.0 0.0 3,169.5 1,595.8 2,568.9 3,478.6 5,402.4 9,676.0 4,064.0 16,162.1 17, 768.4 10.005.7 $13,774.4 $30,166.2 $25,750.3 $43,032.2 $26,395.1 21 80 189 168 243 0 0 82 134 0 21 80 271 302 243 Source: Construction Industry Research Board, Building Permit Summary. SAN JOAQUIN COUNTY Building Permit Activity For Calendar Years 2014 through 2018 (Dollars in Thousands) Source: Construction Industry Research Board, Building Permit Summary A-7 2014 2015 2016 2017 2018 Permit Valuation New Single-family $318,760.2 $455,877.1 $467,494.7 $652,308.1 $883,071.1 New Multi -family 4,726.9 48,792.9 66,794.5 62,635.8 99,601.4 Res. Alterations/Additions 78.511.0 42,764.8 99.049.9 86,516.1 95,073.4 Total Residential $401,998.1 $547,434.8 $633,339.1 $801,460.0 $1,077,745.9 New Commercial $57,241.2 $177,272.0 $218,485.4 $357,856.9 $498,359.0 New Industrial 29,357.3 85,322.6 61,687.0 179,728.4 240,073.7 New Other 27, 555.0 44, 373.1 46, 379.4 27, 794.7 31, 904.4 Com. Alterations/Additions 89,630.8 193.659.3 298,721.9 269,172.8 249.142.4 Total Nonresidential $203,784.3 $500,627.0 $625,273.7 $834,552.8 $1,019,479.5 New Dwel I i ng Units Single Family 1,214 1,698 1,754 2,078 2,765 Multiple Family 19 387 550 516 293 TOTAL 1,233 2,085 2,304 2,594 3,358 Source: Construction Industry Research Board, Building Permit Summary A-7 APPENDIX B AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2019 B-1 APPENDIX C RATE CONSULTANT'S REPORT C-1 APPENDIX D SUMMARY OF PRINCIPAL LEGAL DOCUMENTS D-1 APPENDIX E FORM OF OPINION OF BOND COUNSEL E-1 APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A This Continuing Disclosure Certificate (this "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") 2020 Refunding Water Revenue Bonds, Series A (the "2020 Bonds"). The 2020 Bonds are being issued pursuant to an Indenture of Trust dated as of April 1, 2020 (the "Indenture"), by and between the City and MUFG Union Bank, N.A., as trustee for the 2020 Bonds (the "Trustee"). In connection therewith, the City covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the holders and beneficial owners of the 2020 Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2 -12(b)(5). Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report' means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Annual Report Date" means the date that is seven months after the end of the City's fiscal year (currently January 31 based on the City's fiscal year end of June 30). "Dissemination Agent' shall mean , or any Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. "EMMA System" shall mean the MSRB's Electronic Municipal Market Access system, or such other electronic system designated by the MSRB. "Listed Events" means any of the events listed in Section 5(a) of this Disclosure Certificate. "MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule. "Official Statement" means the final official statement dated 2020, executed by the City and Authority in connection with the issuance of the 2020 Bonds. "Participating Underwrite" means Piper Sandler Companies, the original underwriter of the 2020 Bonds required to comply with the Rule in connection with offering of the 2020 Bonds. F-1 "Rule" means Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing January 31, 2021, with the report for the 2019-20 fiscal year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by 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 Annual Report Date, if 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 does not provide, or cause the Dissemination Agent to provide, an Annual Report by the Annual Report Date as required in subsection (a) above, the Dissemination Agent shall provide a notice to the MSRB, in a timely manner, in an electronic format as prescribed by the MSRB. (c) With respect to each Annual Report, the Dissemination Agent shall. (i) determine each year prior to the Annual Report Date the then -applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the City, file a report with the City and the Participating Underwriter certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. Section 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following documents and information: (a) The City's audited financial statements for the most recently completed fiscal year, prepared in accordance with Generally Accepted Accounting Principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City's audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Unless otherwise provided in the audited financial statements filed on or before the Annual Report Date, financial information and operating data with respect to the City for the preceding fiscal year, substantially similar to that provided in the corresponding tables in the Official Statement: F-2 (i) Principal amount of 2020 Bonds outstanding as of the end of such fiscal year. (ii) Updated information comparable to the information in Table 1 titled "City of Lodi Water System Number of Accounts and Revenue by User Type" as it appears in the Official Statement. (iii) Updated information comparable to the information in Table 2 titled City of Lodi Water System Largest Users by Service Charge Revenues" as it appears in the Official Statement. (iv) Updated information for such fiscal year comparable to the information in Table 3 titled "Selected Rates Effective April 1, 2019" as it appears in the Official Statement. (v) Updated information for such fiscal year and the four previous fiscal years only (i.e., no projected information for current or future years is required) comparable to the information in Table 6 titled "City of Lodi Water System Historic Operating Results and Debt Service Coverage" as it appears in the Official Statement. (vi) 'A description of any additional indebtedness incurred during the priorfiscal year which is payable from Net Revenues on a parity with the 2020 Installment Payments. (c) In addition to any of the information expressly required to be provided under paragraph (b) above, the City shall provide such further material information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. (d) 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 are available to the public on the MSRB's Internet web site or filed with the Securities and Exchange Commission. The City shall clearly identify each such other document so included by reference. Section 5. Reporting of Listed Events. (a) The City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the 2020 Bonds: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults, if material. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. F-3 (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the 2020 Bonds, or other material events affecting the tax status of the 2020 Bonds. (7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities, if material. (11) Rating changes. (12) Bankruptcy, insolvency, receivership or similar event of the City. (13) The consummation of a merger, consolidation, or acquisition involving the City, or the sale of all or substantially all of the assets of the City (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. (14) Appointment of a successor or additional Trustee or the change of name of the Trustee, if material. (15) Incurrence of a financial obligation of the obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the obligated person, any of which affect security holders, if material. (16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the obligated person, any of which reflect financial difficulties. (b) Upon the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 Business Days after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsection (a)(8) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds under the Indenture. (c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), (a)(14), and (a)(15) of this Section 5 contain F-4 the qualifier "if material" and that subparagraph (a)(6) also contains the qualifier "material" with respect to certain notices, determinations or other events affecting the tax status of the 2020 Bonds. The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event's occurrence is material for purposes of U.S. federal securities law. Upon occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above. (d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, trustee, or similar officer for the City in a proceeding under the United States 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 City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. (e) For purposes of Section 5(a)(15) and (16), "financial obligation" means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule. Section 6. Identifyinq Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the 2020 Bonds. If such termination occurs prior to the final maturity of the 2020 Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be . Any Dissemination Agent may resign by providing 30 days' written notice to the City. Section 9. 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(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the 2020 Bonds, or type of business conducted; F-5 (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the 2020 Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the 2020 Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of the Trustee or nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the 2020 Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be filed in the same manner as for a Listed Event under Section 5(c). Section 10. 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 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the 2020 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 Indenture, 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. Section 12. Duties. Immunities and Liabilities of Dissemination A ent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including F-6 the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Trustee, the 2020 Bond owners or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the 2020 Bonds. Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the 2020 Bonds, and shall create no rights in any other person or entity. Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument. Date: 2020 F-7 CITY OF LODI By: APPENDIX G DTC AND THE BOOK -ENTRY ONLY SYSTEM The information in this Appendix G 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 2020 Bonds. The 2020 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 2020 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 2020 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2020 Bonds on DTC's records. The ownership interest of each actual purchaser of each 2020 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 2020 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 2020 Bonds, except in the event that use of the book -entry system for the 2020 Bonds is discontinued. G-1 To facilitate subsequent transfers, all 2020 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 2020 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 2020 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 2020 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 2020 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2020 Bonds, such as redemptions, tenders, defaults and proposed amendments to the 2020 Bond documents. For example, Beneficial Owners of 2020 Bonds may wish to ascertain that the nominee holding the 2020 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 2020 Bonds are in the book -entry -only system, redemption notices will be sent to DTC. If less than all of the 2020 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 2020 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 2020 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the 2020 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 2020 Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in G-2 the event that a successor depository is not obtained, certificates representing the 2020 Bonds are required to be printed and delivered. 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 2020 Bonds will be printed and delivered to DTC. G-3 INSTALLMENT SALE AGREEMENT Dated as of April 1, 2020 between the LODI PUBLIC FINANCING AUTHORITY, as Seller and the CITY OF LODI, as Purchaser Relating to Lodi Public Financing Authority 2020 Refunding Water Revenue Bonds, Series A TABLE OF CONTENTS Page ARTICLE I Definitions; Rules of Interpretation SECTION 1.1. Definitions.............................................................................. 3 SECTION 1.2. Interpretation.......................................................................... 6 ARTICLE II Representations, Covenants and Warranties SECTION 2.1. Representations, Covenants and Warranties of the City ........ 7 SECTION 2.2. Representations, Covenants and Warranties of Authority ...... 8 ARTICLE III Issuance of Bonds; Refinancing of the 2010B Installment Payments SECTION 3.1. Issuance of Bonds; Deposit of Proceeds...............................10 SECTION 3.2. Payment and Prepayment of the 2010B Installment Payments; Defeasance and Prepayment of the 2010B Bonds ................ 10 SECTION 3.3, No Debt Service Reserve Fund.............................................10 ARTICLE IV Sale of 2010 Water Projects; Installment Payments SECTION4.1. Term.....................................................................................10 SECTION 4.2. Sale of 2010 Water Projects..................................................10 SECTION 4.3. Title.......................................................................................10 SECTION 4.4. Installment Payments............................................................11 SECTION 4.5. Pledge and Application of Net Revenues..............................11 SECTION 4.6. Establishment of Rate Stabilization Fund..............................13 SECTION 4.7. Special Obligation of the City; Obligations Absolute ..............13 SECTION 4.8. Additional Payments..............................................................14 ARTICLE V Covenants of the City SECTION 5.1. Disclaimer of Warranties.......................................................15 SECTION 5.2. Release and Indemnification Covenants...............................15 SECTION 5.3. Sale or Eminent Domain of the Water System.......................15 SECTION 5.4. Insurance..............................................................................16 SECTION 5.5. Records and Accounts..........................................................16 SECTION 5.6. Rates and Charges...............................................................17 SECTION 5.7. Superior and Subordinate Obligations...................................18 SECTION 5.8. Issuance of Parity Debt.........................................................18 SECTION 5.9. Operation of the Water System in Efficient and Economical Manner..................................................................................19 SECTION 5.10. Assignment and Amendment Hereof.....................................19 SECTION 5.11. Tax Covenants......................................................................20 SECTION 5.12. Continuing Disclosure...........................................................21 ARTICLE VI Events of Default SECTION 6.1. Events of Default Defined......................................................21 SECTION 6.2. Remedies on Default.............................................................22 SECTION 6.3. No Remedy Exclusive...........................................................23 SECTION 6.4. Agreement to Pay Attorneys' Fees and Expenses.................23 SECTION 6.5. No Additional Waiver Implied by One Waiver ........................ 23 SECTION 6.6. Trustee and Bond Owners to Exercise Rights .......................23 ARTICLE VII Prepayment of Installment Payments SECTION 7.1. Security Deposit....................................................................24 SECTION 7.2. Optional Prepayment.............................................................24 SECTION 7.3. Credit for Amounts on Deposit..............................................24 SECTION 8.1. SECTION 8.2. SECTION 8.3. SECTION 8.4. SECTION 8.5. SECTION 8.6. SECTION 8.7. SECTION 8.8. SECTION 8.9. SECTION 8.10. ARTICLE VIII Miscellaneous Further Assurances...............................................................25 Notice.................................................................................. 25 Governing Law......................................................................26 BindingEffect........................................................................26 Severability of Invalid Provisions...........................................26 Article and Section Headings and References .......................26 Payment on Non -Business Days...........................................26 Execution of Counterparts.....................................................26 Waiver of Personal Liability...................................................26 Trustee as Third Party Beneficiary........................................26 APPENDIX A Schedule of Installment Payments INSTALLMENT SALE AGREEMENT This INSTALLMENT SALE AGREEMENT (this "Agreement"), dated as of April 1, 2020, is between 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"), as seller, and the CITY OF LODI, a municipal corporation duly organized and existing under the laws of the State of California (the "City"), as purchaser. BACKGROUND: 1. The City owns and operates facilities and property for the supply, treatment and distribution of water within the service area of the City (the "Water System"). 2. The Authority is a joint exercise of powers authority that was established by the City and the Industrial Development Authority of the City of Lodi pursuant to a Joint Exercise of Powers Agreement, dated as of July 1, 2010. The Authority was formed for the purpose of assisting the City in the financing of public capital improvements. 3. In order to provide funds to finance the acquisition and construction of improvements to the Water System (the "2010 Water Projects"), the City previously caused the Authority to issue the following bonds (collectively, the "2010 Bonds") pursuant to an Indenture of Trust, dated as of October 1, 2010 (the "2010 Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2010 Trustee"): (i) $9,015,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series A ("2010A Bonds") and (ii) $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) ("2010B Bonds"). 4. The 2010 Bonds are payable from installment payments (the "2010 Installment Payments") made by the City to the Authority under an Installment Sale Agreement dated as of October 1, 2010 (the "2010 Installment Sale Agreement"), under which the Authority acquired, constructed and improved the 2010 Water Projects and sold the completed 2010 Water Projects to the City in consideration of the agreement by the City to pay the 2010 Installment Payments. 5. Pursuant to Section 7.2 of the 2010 Installment Sale Agreement, the City has the right to prepay all or a portion of the 2010 Installment Payments on any date on or after the Installment Payment Date (as defined in the 2010 Installment Sale Agreement) relating to the June 1, 2020 Interest Payment Date (as defined in the 2010 Installment Sale Agreement) on the 2010 Bonds. 6. Pursuant to Section 7.1 of the 2010 Installment Sale Agreement, the City may secure the payment of the 2010 Installment Payments, in whole or in part, by irrevocably depositing with the Trustee an amount of cash which, invested in whole or in part in non -callable Federal Securities (as defined in the 2010 Indenture), in the opinion of an Independent Accountant (as defined in the Indenture), together with interest to accrue thereon and together with any cash which is deposited and not invested, will be fully sufficient to pay all such 2010 Installment Payments when due on any optional prepayment date. If the City makes a security deposit under Section 7.2 for all or a portion of the 2010 Installment Payments, all obligations of the City under the 2010 Installment Sale Agreement, and the pledge of Net Revenues (as defined in the 2010 Installment Sale Agreement) and all other security provided in the 2010 Installment Sale Agreement for such 2010 Installment Payments will cease and terminate, except the obligation of the City to make such 2010 Installment Payments from the security deposit. 7. The 2010 Bonds maturing on or after June 1, 2021 are subject to optional redemption, in whole or in part, on any date on or after June 1, 2020, at a redemption price equal to 100% of the principal amount of the 2010 Bonds to be redeemed, plus accrued interest to the redemption date, without premium. 8. Under Article X of the 2010 Indenture, the Authority may discharge its liability with respect to the 2010 Bonds by depositing money or non -callable Federal Securities (as defined in the 2010 Indenture) with the 2010 Trustee which, in the opinion of an Independent Accountant (as defined in the 2010 Indenture), will be sufficient to pay the principal, interest and premium (if any) on such 2010 Bonds when due for optional redemption. . 9. Under current municipal bond market conditions, it is possible for the City to refinance on a tax-exempt basis the portion of the 2010 Installment Payments attributable to the 2010B Bonds (the "2010B Installment Payments") for the purpose of achieving savings for the benefit of the customers of the Water System and to cause a redemption of the 2010B Bonds. 10. The City is not refinancing the portion of the 2010 Installment Payments attributable to the 2010A Bonds (the "2010A Installment Payments") or causing a redemption of the 2010A Bonds. 11. The Authority will raise funds for the payment and prepayment of the 2010B Installment Payments and, as a result, the defeasance and prepayment of the 2010B Bonds, by issuing its Lodi Public Financing Authority 2020 Refunding Water Revenue Bonds, Series A in the aggregate principal amount of $ (the "Bonds") under an Indenture of Trust dated as of April 1, 2020 (the "Indenture"), between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee"), which are payable from revenues consisting primarily of installment payments payable by the City hereunder. 12. In order to provide revenues which are sufficient to pay the principal of and interest on the Bonds when due, the Authority and the City wish to enter into this Agreement under which the Authority agrees to sell the 2010 Water Projects to the City (subject to the City's continuing obligation under the 2010 Installment Sale Agreement to pay the 2010A Installment Payments), in consideration of which the City agrees to pay the Installment Payments (the "Installment Payments") which are secured by a pledge of and lien on Net Revenues of the Water System. -2- AGREEMENT.- In GREEMENT: In consideration of the foregoing and the material covenants hereinafter contained, the City and the Authority formally agree as follows: ARTICLE I DEFINITIONS; RULES OF INTERPRETATION SECTION 1.1. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms in this Agreement have the respective meanings given such terms in this Section 1.1. Capitalized terms used in this Agreement and not otherwise defined in this Section 1.1 have the respective meanings given them in Appendix A to the Indenture. "Additional Payments" means the amounts payable by the City under Section 4.8. "Additional Revenues" means, with respect to the issuance of any Parity Debt, any or all of the following amounts: (a) An allowance for Net Revenues from any additions or improvements to or extensions of the Water System to be financed from the proceeds of such Parity Debt or from any other source but in any case which, during all or any part of the most recent completed Fiscal Year for which audited financial statements are available or for any other 12 -month period selected by the City under Section 5.8(b), were not in service, all in an amount equal to 90% of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first 36 -month period in which each addition, improvement or extension is to be in operation, all as shown by the certificate or opinion of a qualified independent engineer or Fiscal Consultant employed by the City. (b) An allowance for Net Revenues arising from any increase in the charges made for service from the Water System which has become effective prior to the incurring of such Parity Debt but which, during all or any part of such Fiscal Year or such other 12 -month period selected by the City under Section 5.8(b), was not in effect, in an amount equal to the total amount by which the Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year or such other 12 -month period, all as shown by the certificate or opinion of an Independent Accountant or Fiscal Consultant employed by the City. "Certificate of the Cit " means an instrument in writing signed by the Mayor, the City Manager, the chief financial officer of the City, or the City Attorney of the City, or by any other officer of the City duly authorized by the City for that purpose, such authorization to be evidenced by a certificate verifying the specimen signatures of such officers at the request of the Trustee. 3- "Continuing Disclosure Certificate" means the Continuing Disclosure Certificate which is executed and delivered by the City on the Closing Date. "Event of Default" means any of the events specified in Section 6.1. "Fiscal Consultant" means any consultant or firm of such consultants, including but not limited to a qualified engineer or rate consultant, appointed by the City and who, or each of whom: (a) is judged by the City to have experience in matters relating to the financing of water enterprises; (b) is in fact independent and not under domination of the City; (c) does not have any substantial interest, direct or indirect, with the City other than as purchaser of the Bonds or any Parity Debt; and (d) is not connected with the City as an officer or employee of the City, but who may be regularly retained to make reports to the City. "Gross Revenues" means all gross charges received for, and all other gross income and receipts derived by the City from, the ownership and operation of the Water System or otherwise arising from the Water System, including but not limited to connection charges (including the City's impact mitigation fees) to the extent permitted by law, investment earnings thereon and the Refundable Credits under the 2010 Installment Sale Agreement; but excluding (a) the proceeds of any ad valorem property taxes levied for the purpose of paying general obligation bonds of the City relating to the Water System and (b) the proceeds of any special assessments or special taxes levied upon real property within any improvement district served by the City levied for the purpose of paying special assessment bonds or special tax obligations of the City relating to the Water System. "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. "Installment Payment Date" means, with respect to any Interest Payment Date, the Business Day immediately preceding such Interest Payment Date. "Installment Payments" means the payments the City is required to pay pursuant to Section 4.4(a) as the purchase price of the 2010 Water Projects. "Maximum Annual Debt Service" means, as of the date of any calculation, the maximum sum obtained for the current or any future Bond Year so long as any of the Bonds remain Outstanding by totaling the following amounts for such Bond Year: (a) the aggregate amount of the Installment Payments coming due and payable in such Bond Year, except to the extent payable from any security deposit under Section 7.1 of this Installment Sale Agreement; (b) the principal amount of the all outstanding Parity Debt, if any, coming due and payable by their terms in such Bond Year; and -4- (c) the amount of interest which would be due during such Bond Year on the aggregate principal amount of all outstanding Parity Obligations, if any, which would be outstanding in such Bond Year if such Parity Obligations are retired as scheduled; provided, however, that with respect to any Parity Debt which bears interest at a variable rate, such interest shall be calculated at an assumed rate equal to the average rate of interest per annum for each of the five previous whole calendar years as shown by the J. J. Kenny Index (or, in the event and to the extent such index is not maintained for all or any portion of such period, any similar index of variable rate interest for tax-exempt obligations or taxable obligations, as applicable, as may be selected by the City in its sole discretion). "Net Revenues" means, for any period, an amount equal to all of the Gross Revenues received during such period minus the amount required to pay all Operation and Maintenance Costs becoming payable during such period. "Operation and Maintenance Costs" means the reasonable and necessary costs and expenses paid by the City for maintaining and operating the Water System, including but not limited to (a) costs of acquisition of water to be supplied by the Water System, (b) costs of electricity and other forms of energy supplied to the Water System, (c) the reasonable expenses of management and repair and other costs and expenses necessary to maintain and preserve the Water System in good repair and working order, and (d) the reasonable administrative costs of the City attributable to the operation and maintenance of the Water System; but in all cases excluding (i) debt service payable on obligations incurred by the City with respect to the Water System, including but not limited to the Installment Payments and any Parity Debt, (ii) depreciation, replacement and obsolescence charges or reserves therefor, and (iii) amortization of intangibles or other bookkeeping entries of a similar nature. "Overdue Rate" means the highest rate of interest on any of the Outstanding Bonds. "Parity Debt Documents" means, collectively, the indenture of trust, trust agreement or other document authorizing the issuance of any Parity Debt or any securities which evidence Parity Debt. "Parity Deb " means any bonds, notes, leases, installment sale agreements or other obligations of the City payable from and secured by a pledge of and lien upon any of the Net Revenues on a parity with the Installment Payments, entered into or issued under and in accordance with Section 5.8. As of the date of issuance of the Bonds, the 2010A Installment Payments are the only Parity Debt. "Rate Stabilization Fund" means any fund established and held by the City as a fund for the stabilization of rates and charges imposed by the City with respect to the Water System, which fund is established, held and maintained in accordance with Section 4.6. "Water System" means the entire water treatment, production, storage and distribution system owned or operated by the City, including but not limited to all facilities, properties and improvements at any time owned or operated by the City for the collection, -5- treatment and supply of water to residents served thereby, whether within or without the City, and any necessary lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto hereafter acquired, constructed or installed by the City. "Water System Fund" means the fund established and held by the City pursuant to Section 4.5 of this Agreement. "2010 Bonds" has the meaning given that term in the Background section of this Agreement. "2010 Indenture" has the meaning given that term in the Background section of this Agreement. "2010 Installment Payments" has the meaning given that term in the Background section of this Agreement. "2010 Installment Sale Agreement" has the meaning given that term in the Background section of this Agreement. "2010A Bonds" has the meaning given that term in the Background section of this Agreement. "2010A Installment Payments" has the meaning given that term in the Background section of this Agreement. "2010B Bonds" has the meaning given that term in the Background section of this Agreement. "2010B Installment Payments" has the meaning given that term in the Background section of this Agreement. "2010 Trustee" means The Bank of New York Mellon Trust Company, N.A., as trustee under the 2010 Indenture. SECTION 1.2. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and 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 do 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 Agreement; the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof. M ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1. Representations, Covenants and Warranties of the City. The City represents, covenants and warrants to the Authority as follows: (a) Due Organization and Existence. The City is a municipal corporation duly organized and validly existing under the laws of the State of California, has full legal right, power and authority under said laws to enter into this Agreement and to carry out and consummate all transactions contemplated hereby and thereby, and by proper action the City Council of the City has duly authorized the execution and delivery of this Agreement. (b) Due Execution. The representatives of the City executing this Agreement are fully authorized to execute the same. (c) Valid, Binding and Enforceable Obligations. This Agreement has been duly authorized, executed and delivered by the City and constitutes the legal, valid and binding agreement of the City enforceable against the City in accordance with its terms; except as the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and except as such enforceability may be subject to the exercise of judicial discretion in accordance with principles of equity. (d) No Conflicts. The execution and delivery of this Agreement, the consummation of the transactions herein contemplated and the fulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially adversely affect the consummation of the transactions contemplated by this Agreement or the financial condition, assets, properties or operations of the City, including but not limited to the performance of the City's obligations under this Agreement. -7- (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the City or of the voters of the City, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Agreement, or the consummation of any transaction herein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the City after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Agreement, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially adversely affect the consummation of the transactions contemplated by this Agreement, or the financial conditions, assets, properties or operations of the City, including but not limited to the payment and performance of the City's obligations under this Agreement. (g) Prior Indebtedness. Upon issuance of the Bonds, the City will remain obligated to make the 2010B Installment Payments from Net Revenues on a parity with the Installment Payments. SECTION 2.2. Representations, Covenants and Warranties of Authority. The Authority represents, covenants and warrants to the City as follows: (a) Due Organjzation and Existence. The Authority is a joint exercise of powers authority organized and existing under the laws of the State of California, and has power to enter into this Agreement and the Indenture and to perform the duties and obligations imposed on it hereunder and thereunder. The Board of Directors of the Authority has duly authorized the execution and delivery of this Agreement and the Indenture. (b) Due Execution. The representatives of the Authority executing this Agreement and the Indenture are fully authorized to execute the same. (c) Valid. Binding and Enforceable Obligations. This Agreement and the Indenture have been duly authorized, executed and delivered by the Authority and constitute the legal, valid and binding agreements of the Authority with the Authority, enforceable against the Authority in accordance with their respective terms; except as the enforceability M thereof may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and except as such enforceability may be subject to the exercise of judicial discretion in accordance with principles of equity. (d) No Conflicts. The execution and delivery hereof and of the Indenture, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof and thereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Authority is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially adversely affect the consummation of the transactions contemplated hereby and by the Indenture or the financial condition, assets, properties or operations of the Authority, including but not limited to the performance of the Authority's obligations under this Agreement and the Indenture. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the Authority, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery hereof or of the Indenture, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the Authority after reasonable investigation, threatened against or affecting the Authority or the assets, properties or operations of the Authority which, if determined adversely to the Authority or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Agreement or the Indenture, or upon the financial condition, assets, properties or operations of the Authority, and the Authority is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially adversely affect the consummation of the transactions contemplated by this Agreement or the Indenture or the financial conditions, assets, properties or operations of the Authority, 0 including but not limited to the performance of the Authority's obligations hereunder and under the Indenture. ARTICLE III ISSUANCE OF BONDS; REFINANCING OF THE 2010B INSTALLMENT PAYMENTS SECTION 3.1. Issuance of Bonds; Deposit of Proceeds. The Authority shall cause the Bonds to be issued under the Indenture in the aggregate principal amount set forth in the Indenture. The Trustee shall deposit the proceeds of sale of the Bonds received by it on the Closing Date in accordance with the Indenture. The City hereby approves the Indenture, the assignment thereunder to the Trustee of certain rights of the Authority, and the issuance of the Bonds. SECTION 3.2. Payment and Prepayment of the 2010B Installment Payments; Defeasance and Prepayment of the 2010B Bonds. The proceeds received by the Trustee from the sale of the Bonds to the Original Purchaser shall be deposited in the respective funds and accounts, and in the respective amounts, as set forth in Section 3.02 of the Indenture. SECTION 3.3. No Debt Service Reserve Fund. The City and the Authority acknowledge that no debt service reserve fund has been established for the Bonds or the Installment Payments, and that the owners of the Bonds shall have no right to the benefit of any debt service reserve fund established for other Parity Debt. ARTICLE IV SALE OF 2010 WATER PROJECTS; INSTALLMENT PAYMENTS SECTION 4.1. Term. The Term of this Agreement commences on the Closing Date, and ends on June 1, 2040, or such later or earlier date on which the Bonds cease to be Outstanding under and within the meaning of the Indenture. SECTION 4.2. Sale of 2010 Water Projects In consideration of the Authority's assistance with the refinancing of the 2010B Installment Payments, the City hereby sells the 2010 Water Projects to the Authority (subject to the City's continuing obligation to make the 2010A Installment Payments under the 2010 Installment Sale Agreement), and the Authority, subject to the terms and conditions hereof, hereby sells the 2010 Water Projects back to the City. SECTION 4.3. Title. Title to the 2010 Water Projects, and each component thereof, will be deemed conveyed by the Authority to and vested in the City upon execution and delivery of this Agreement. The Authority and the City will execute, deliver and cause -10- to be recorded any and all documents reasonably required by the City to consummate the transfer of title to the 2010 Water Projects, subject to the City's continuing obligation under the 2010 Installment Sale Agreement. SECTION 4.4. Installment Payments. (a) Obligation to Pay Installment Payments to Purchase the 2010 Water Pro ects. The City hereby agrees to pay to the Authority, as the purchase price of the 2010 Water Projects hereunder, the aggregate principal amount of $ together with interest (calculated on the basis of a 360 -day year of twelve 30 -day months) on the unpaid principal balance thereof, payable in semiannual installment payments in the respective amounts and on the respective Installment Payment Dates specified in Appendix A. (b) Payment Provisions. The City shall deposit the Installment Payment coming due and payable on any Interest Payment Date with the Trustee, as assignee of the Authority under the Indenture, on the related Installment Payment Date. In determining the amount required to be deposited with the Trustee on any Installment Payment Date, all amounts then held by the Trustee in the Bond Fund and the accounts therein shall be credited towards the Installment Payment then due. The Installment Payments are secured by and payable solely from the sources specified in Section 4.5. (c) Effect of Prepayment. If the City prepays all remaining Installment Payments in full under Section 7.2, the City's obligations under this Agreement will thereupon cease and terminate, including but not limited to the City's obligation to pay Installment Payments therefor under this Section 4.4; provided, however, that the City's obligations to compensate and indemnify the Trustee under Sections 4.8 and 5.2 will survive such prepayment. If the City prepays the Installment Payments in part but not in whole under Section 7.2, the principal component of each succeeding Installment Payment will be reduced as provided in such Sections, 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. (d) Rate on Overdue Payments. If the City fails to make any of the payments required under this Section 4.4 and Section 4.8, the payment in default will continue as an obligation of the City until fully paid, and the City agrees to pay the same with interest thereon, from the date of default to the date of payment, at the Overdue Rate. (e) Assignment. Certain rights of the Authority, including but not limited to the right of the Authority to receive payment of the Installment Payments, have been assigned by the Authority to the Trustee in trust under the Indenture, for the benefit of the Owners of the Bonds, and the City hereby consents to such assignment. The Authority hereby directs the City, and the City hereby agrees, to pay to the Trustee at its Office, all payments payable by the City under this Section 4.4 and all amounts payable by the City under Article VII. SECTION 4.5. Pledge and Application of Net Revenues. (a) Pledge. The City hereby establishes a pledge of, lien on and security interest in all of the Net Revenues and all moneys on deposit in any of the funds and -11- accounts established and held by the Trustee under the Indenture to secure the Installment Payments and any Parity Debt. (b) Deposit of Gross Revenues Into Water System Fund; Transfers to Make Payments. In order to carry out and effectuate the pledge and lien contained herein, the City agrees and covenants that all Gross Revenues, including, without limitation, Refundable Credits as defined in the 2010 Installment Sale Agreement, shall be received by the City in trust hereunder and shall be deposited when and as received in a special fund designated as the "Water System Fund", which fund the City agrees and covenants to maintain and to hold separate and apart from other funds so long as any Installment Payments remain unpaid. To the extent the City has an existing fund or existing funds which satisfy the foregoing requirements, then such shall be deemed to be the "Water System Fund" and the City shall not be required to create a new fund. The City may maintain separate funds or accounts within the Water System Fund. Moneys in the Water System Fund shall be used and applied by the City as provided in this Agreement and any Parity Debt Documents. Amounts on deposit in the Water System Fund will be applied by the City to pay when due the following amounts in the following order of priority: (i) all Operation and Maintenance Costs; (ii) the Installment Payments and all payments of principal of and interest on any Parity Debt; (iii) to the Trustee the amount of any deficiency in any reserve account established for Parity Debt, the notice of which deficiency has been sent to the City in accordance with the applicable provisions of the related Parity Debt Documents; (iv) any other payments required to comply with the provisions of this Agreement and any Parity Debt Documents; and (v) any other purposes authorized under subsection (d) of this Section 4.5. (c) No Preference or Priority. Payment of the Installment Payments and the principal of and interest on any Parity Debt will be made without preference or priority among the Installment Payments and such Parity Debt. If the amount of Net Revenues on deposit in the Water System Fund is at any time insufficient to enable the City to pay when due the Installment Payments and the principal of and interest on any Parity Debt, such payments will be made on a pro rata basis. (d) Other Uses of Net Revenues Permitted. The City shall manage, conserve and apply the Net Revenues on deposit in the Water System Fund in such a manner that all deposits required to be made under the preceding subsection (b) will be made at the times and in the amounts so required. Subject to the foregoing sentence, so long as no Event of Default has occurred and is continuing, the City may use and apply moneys in the Water System Fund for (i) the payment of any subordinate obligations or any unsecured obligations, (ii) the acquisition and construction of improvements to the Water System, (iii) -12- the prepayment of any other obligations of the City relating to the Water System, or (iv) any other lawful purposes of the City. (e) Budget and Appropriation of Installment Payments. During the Term of this Agreement, the City shall adopt all necessary budgets and make all necessary appropriations of the Installment Payments from the Net Revenues. If any Installment Payment requires the adoption by the City of any supplemental budget or appropriation, the City shall promptly adopt the same. The covenants on the part of the City contained in this subsection (e) constitute duties imposed by law and it is the duty of each and every public official of the City to take such actions and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this subsection (e). SECTION 4.6. Establishment of Rate Stabilization Fund. The City has the right at any time to establish a fund to be held by it and administered in accordance with this Section 4.6, for the purpose of stabilizing the rates and charges imposed by the City with respect to the Water System. From time to time the City may deposit amounts in the Rate Stabilization Fund, from any source of legally available funds, including but not limited to Net Revenues which are released from the pledge and lien which secures the Installment Payments and any Parity Debt, as the City may determine. The Rate Stabilization Fund shall be accounted for as a separate fund, although amounts credited to it may be commingled with other funds of the City. The City may, but is not be required to, withdraw amounts on deposit in the Rate Stabilization Fund and deposit such amounts in the Water System Fund in any Fiscal Year for the purpose of paying the Installment Payments or the principal of and interest on any Parity Debt coming due and payable in such Fiscal Year. Amounts so transferred from the Rate Stabilization Fund to the Water System Fund in any Fiscal Year constitute Gross Revenues for that Fiscal Year (except as otherwise provided herein), and will be applied for the purposes of the Water System Fund. Amounts on deposit in the Rate Stabilization Fund are not pledged to and do not otherwise secure the Installment Payments or any Parity Debt. All interest or other earnings on deposits in the Rate Stabilization Fund will be retained therein or, at the option of the City, be applied for any other lawful purposes. The City has the right at any time to withdraw any or all amounts on deposit in the Rate Stabilization Fund and apply such amounts for any other lawful purposes of the City. SECTION 4.7. Special Obligation of the City; Obligations Absolute. The City's obligation to pay the Installment Payments and any other amounts coming due and payable hereunder is a special obligation of the City limited solely to the Net Revenues. Under no circumstances is the City required to advance moneys derived from any source of income other than the Net Revenues and other sources specifically identified herein for the payment of the Installment Payments and such other amounts. No other funds or property of the City are liable for the payment of the Installment Payments and any other amounts coming due and payable hereunder. The obligations of the City to pay the Installment Payments from the Net Revenues and to perform and observe the other agreements contained herein 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 Water System, whether hereunder or otherwise, or out of indebtedness or liability at any time owing to the City by the Authority or the -13- Trustee. Until all of the Installment Payments, all of the Additional Payments and all other amounts coming due and payable hereunder are fully paid or prepaid, the City (a) will not suspend or discontinue payment of any Installment Payments, Additional Payments or such other amounts, (b) will perform and observe all other agreements contained in this Agreement, and (c) will not terminate this 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 Water System, failure to complete the acquisition and construction of the Project by the estimated completion date thereof, sale of the Water System, the taking by eminent domain of title to or temporary use of any component of the Water System, commercial frustration of purpose, any change in the tax or law 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 this Agreement. The foregoing provisions of this Section 4.7 do not release the Authority from the performance of any of the agreements on its part contained herein or in the Indenture, and if the Authority fails to perform any such agreements, the City may institute such action against the Authority as the City deems necessary to compel performance, so long as such action does not abrogate the obligations of the City contained in the preceding paragraph. The City may, however, at its cost and expense and in its name or in the name of the Authority, prosecute or defend any action or proceeding or take any other action involving third persons which the City deems reasonably necessary in order to secure or protect the City's rights hereunder, and in such event the Authority shall cooperate fully with the City and shall take such action necessary to effect the substitution of the City for the Authority in such action or proceeding if the City may request. SECTION 4.8. Additional Payments. In addition to the Installment Payments, the City shall pay when due the following amounts to the following parties: (a) to the Authority, all costs and expenses incurred by the Authority to comply with the provisions of this Agreement and the Indenture; and (b) to the Trustee upon request therefor, all of its costs and expenses payable as a result of the performance of and compliance with its duties hereunder or under the Indenture or any related documents; (c) to the Authority and the Trustee, all amounts required to indemnify the Authority and the Trustee under Section 5.2 hereof and Section 8.07 of the Indenture; (d) all costs and expenses of auditors, engineers and accountants for professional services relating to the Water System or the Bonds; and (e) all Excess Investment Earnings payable under Section 5.11(e) The Additional Payments are payable from, but are not secured by a pledge or lien upon, the Net Revenues. The rights of the Trustee and the Authority under this Section 4.8, and the obligations of the City under this Section 4.8, shall survive the termination of this Agreement. -14- ARTICLE V COVENANTS OF THE CITY SECTION 5.1. Disclaimer of Warranties. The Authority makes no warranty or representation, either express or implied, as to the value, design, condition, merchantability or fitness for any particular purpose or fitness for the use contemplated by the City of the 2010 Water Projects or any component thereof, or any other representation or warranty with respect to the 2010 Water Projects or any component thereof. In no event is the Authority liable for incidental, indirect, special or consequential damages, in connection with or arising out of this Agreement or the Indenture for the existence, furnishing, functioning or use of the 2010 Water Projects. SECTION 5.2. Release and Indemnification Covenants. The City agrees to indemnify the Authority, the Trustee and their respective officers, agents, successors and assigns, against any and all claims, liabilities, losses and damages, including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on or about the Water System by the City, (b) any breach or default on the part of the City in the performance of any of its obligations under this Agreement or the Indenture, (c) any act or omission of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Water System, (d) any act or omission of any lessee of the City with respect to the Water System, and (e) the Trustee's exercise and performance of its powers and duties hereunder, under the Indenture, and any other document or transaction contemplated in connection herewith or therewith. No indemnification is made under this Section 5.2 or elsewhere in this Agreement for willful misconduct or negligence under this Agreement by the Authority, the Trustee or their respective officers, agents, employees, successors or assigns. The provisions of this Section 5.2 shall survive the expiration of the Term of this Agreement and the resignation and removal of the Trustee. SECTION 5.3. Sale or Eminent Domain of the Water System. Except as provided herein, the City covenants that the Water System will not be encumbered, sold, leased, pledged, any charge placed thereon, or otherwise disposed of, as a whole or substantially as a whole if such encumbrance, sale, lease, pledge, charge or other disposition would materially impair the ability of the City to pay the Installment Payments or the principal of or interest on any Parity Debt, or would materially adversely affect its ability to comply with the terms of this Agreement or any Parity Debt Documents. The City may not enter into any agreement which impairs the operation of the Water System or any part of it necessary to secure adequate Net Revenues to pay the Installment Payments or any Parity Debt, or which otherwise would impair the rights of the Bond Owners or the Trustee with respect to the Net Revenues. If any substantial part of the Water System is sold or taken in eminent domain proceedings, the payment therefor shall either (a) be used for the acquisition or construction of improvements to the Water System, or (b) be applied at the election of the City to (i) prepay the Installment Payments on the next available prepayment date under Section 7.3, or (ii) redeem any Parity Debt in accordance with the related Parity Debt Documents. -15- SECTION 5.4. Insurance. The City shall at all times maintain with responsible insurers all such insurance on the Water System as is customarily maintained with respect to works and properties of like character against accident to, loss of or damage to the Water System. The City shall also maintain, with responsible insurers, worker's compensation insurance and insurance against public liability and property damage to the extent reasonably necessary to protect the City, the Authority, the Trustee and the Owners of the Bonds. Any policy of insurance required under this Section 5.4 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 all or any part of the Water System shall be damaged or destroyed, the Net Proceeds realized by the City as a result thereof shall be deposited by the City with the Trustee in a special fund which the Trustee shall establish as needed in trust and applied by the City to the cost of acquiring and constructing repairs, replacements, additions, betterments, extensions or improvements to the Water System if (A) the City first secures and files with the Trustee a Certificate of the City showing (i) the loss in annual Gross Revenues, if any, suffered, or to be suffered, by the City by reason of such damage or destruction, (ii) a general description of the repairs, replacements, additions, betterment, extensions or improvements to the Water System then proposed to be acquired and constructed by the City from such proceeds, and (iii) an estimate of the Gross Revenues to be derived after• the completions of such repairs, replacements, additions, betterment, extensions or improvements; and (B) the Trustee has been furnished a Certificate of the City, certifying that the Gross Revenues after such repair, replacement, addition, betterment, extension or improvement of the Water System will sufficiently offset on a timely basis the loss of Gross Revenues resulting from such damage or destruction so that the ability of the City to pay all Parity Debt when due will not be substantially impaired, and such Certificate of the City shall be final and conclusive, and any balance of such proceeds not required by the City for such purpose shall be deposited in the Water System Fund and applied as provided in Section 4.5; provided, that if the foregoing conditions are not met, then such proceeds shall be deposited with the Trustee and applied to make Installment Payments and any Parity Debt as they shall become due ratably without any discrimination or preference; provided further that the foregoing procedures for the application of Net Proceeds consisting of insurance payments shall be subject to any similar provisions for Parity Debt on a pro rata basis. If such damage or destruction has had no effect, or at most an immaterial effect, upon the Gross Revenues and the security of the Parity Debt, and a Certificate of the City to such effect has been filed with the Trustee, then the City shall forthwith deposit such proceeds in the Water System Fund, to be applied as provided in Section 4.5. SECTION 5.5. Records and Accounts. The City shall keep proper books of record and accounts of the Water System in which complete and correct entries are made of all transactions relating to the Water System. Said books shall, upon prior request, be subject to the reasonable inspection of the Owners of not less than 10% of the Outstanding Bonds, -16- or their representatives authorized in writing, upon not less than two Business Days' prior notice to the City. The City shall cause the books and accounts of the Water System to be audited annually by an Independent Accountant not more than nine months after the close of each Fiscal Year, and shall make a copy of such report available for inspection by the Bond Owners at the office of the City and at the Office of the Trustee. Such report may be part of a combined financial audit or report covering all or part of the City's finances. SECTION 5.6. Rates and Charges. (a) Covenant Regarding Gross Revenues. The City shall fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Water System during each Fiscal Year, which are at least sufficient, after making allowances for contingencies and error in the estimates, to yield Gross Revenues sufficient to pay the following amounts in the following order of priority: (i) All Operation and Maintenance Costs estimated by the City to become due and payable in such Fiscal Year; (ii) All Installment Payments and all payments of principal of and interest on any Parity Debt as they become due and payable during such Fiscal Year, without preference or priority, except to the extent any of such payments are payable from bond proceeds or from any other source of legally available funds of the City which have been deposited with the Trustee for such purpose prior to the commencement of the related Fiscal Year; (iii) All amounts, if any, required to restore the balance in the Reserve Account to the full amount of the Reserve Requirement, and to restore the balance in the reserve account established for any Parity Debt to their required balances; and (iv) All Additional Payments and other payments required to meet any other obligations of the City which are charges, liens, encumbrances upon, or which are otherwise payable from, the Gross Revenues or the Net Revenues during such Fiscal Year. (b) Covenant Regarding Net RevenUes. In addition, the City shall fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Water System during each Fiscal Year which are sufficient to yield both of the following: (i) Net Revenues equal to at least 125% of the amount described in the preceding clause (a)(ii) that is due in such Fiscal Year. For purposes of this paragraph (b)(i), the amount of Net Revenues for a Fiscal Year will be computed on the basis that any transfers into the Water System Fund in that Fiscal Year from the Rate Stabilization Fund are included in the calculation of Net Revenues, as provided in Section 4.6, but only to the extent that the moneys transferred from the Rate Stabilization Fund would not otherwise constitute Gross Revenues for the Fiscal Year. -17- (ii) Net Revenues equal to at least 100% of the amounts described in the preceding clauses (a)(ii) and (iii) that are due in such Fiscal Year. For purposes of this paragraph (b)(ii), the amount of Net Revenues for a Fiscal Year will be computed on the basis that (A) any connection charges (including the City's impact mitigation fees) deposited into the Water System Fund in that Fiscal Year shall not be included, (B) any transfers into the Water System Fund in that Fiscal Year from the Rate Stabilization Fund shall not be included in the calculation of Net Revenues, and (C) any deposits into the Rate Stabilization Fund in that Fiscal Year shall be included in the amount of Net Revenues, but only to the extent such deposits are made from Gross Revenues received by the City during that Fiscal Year. SECTION 5.7. Superior and Subordinate Obligations. The City may not issue or incur any additional bonds or other obligations during the Term of this Agreement having any priority in payment of principal or interest out of the Gross Revenues or the Net Revenues over the Installment Payments. Nothing herein limits or affects the ability of the City to issue or incur (a) Parity Obligations under Section 5.8, or (b) obligations which are either unsecured or which are secured by an interest in the Net Revenues which is junior and subordinate to the pledge of and lien upon the Net Revenues established hereunder. SECTION 5.8. Issuance of Parity Debt. Except for obligations incurred to prepay or discharge the Installment Payments or any Parity Debt, the City may not issue or incur any Parity Debt during the Term hereof unless all of the following conditions are satisfied: (a) No Event of Default has occurred and is continuing (unless the Event of Default will be cured as a result of the issuance of the Parity Debt). (b) The Net Revenues, calculated in accordance with sound accounting principles, as shown by the books of the City for the most recent completed Fiscal Year for which audited financial statements are available, or for any more recent consecutive 12 -month period selected by the City at its option, in either case verified by a certificate or opinion of an Independent Accountant or Fiscal Consultant, plus the Additional Revenues, at least equal 125% of the amount of Maximum Annual Debt Service with respect to the Installment Payments and all Parity Debt then outstanding (including the Parity Debt then proposed to be issued). For purposes of this paragraph, the amount of any Refundable Credits that the City expects to receive in a Fiscal Year shall be excluded from the amount of Gross Revenues for such Fiscal Year, but shall be included as a credit against the applicable amount of Installment Payments and principal of and interest on any Parity Debt coming due in such Fiscal Year. For purposes of this paragraph, the amount of Net Revenues for a Fiscal Year will be computed on the basis that any transfers into the Water System Fund in that Fiscal Year from the Rate Stabilization Fund are included in the calculation of Net Revenues, as provided in Section 4.6 (but only to the extent that the moneys transferred from the Rate Stabilization Fund would not otherwise constitute Gross Revenues for the applicable Fiscal Year). -18- (c) Except as provided below, upon the issuance of such Parity Debt a reserve fund shall be established for such Parity Debt. The reserve fund which is established for an issue of Parity Debt shall be required to be maintained in an amount which, together with the aggregate amount required to be on deposit in all of the reserve funds established for the Bonds and other outstanding Parity Debt, is at least equal to Maximum Annual Debt Service on the Installment Payments and all outstanding Parity Debt, taken as a whole (other than Parity Debt for which no reserve fund is established as described below). Notwithstanding the foregoing, the amount which is required to be maintained in any reserve fund which is established for Parity Debt shall not exceed the maximum amount then permitted to be funded from the proceeds of tax-exempt obligations under the Tax Code. The Reserve Account and all other reserve funds which are funded from the proceeds of Parity Debt shall constitute a single reserve for the equal and proportionate benefit of the Bonds and all outstanding Parity Debt (other than Parity Debt for which no reserve fund established as required below), without preference or priority. Any such reserve fund may be maintained in the form of a letter of credit or surety bond. In the event the City issues Parity Debt the purchaser of which does not require the establishment of a reserve fund, such Parity Debt may be issued without a reserve fund. However, in that event, such Parity Debt is not entitled to the security of amounts held in the reserve fund which is established for the Bonds or for any, other issue of Parity Debt, and such Parity Debt will be disregarded in determining the amount required to be maintained in any other reserve fund established for outstanding Parity Debt. (d) The trustee or fiscal agent for such Parity Debt (except to the extent required to be a separate entity from the City or the Authority by the purchaser of such Parity Debt) is the same entity performing the functions of Trustee under the Indenture. (e) The City must deliver to the Trustee a Written Certificate of the City certifying that the conditions precedent to the issuance of such Parity Debt set forth in this Section 5.8 have been satisfied. SECTION 5.9. Operation of the Water System in Efficient and Economical Manner. The City covenants and agrees to operate the Water System in an efficient and economical manner and to operate, maintain and preserve the Water System in good repair and working order. SECTION 5.10. Assignment and Amendment Hereof. 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 -19- 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; (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 5.11. 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) Federal 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. -20- cure such failure within such 30 day period and thereafter diligently and in good faith cures the failure in a reasonable period of time. (d) Only as long as it is an event of default under and as defined with respect to any Parity Debt, 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. (e) The occurrence of any event of default under and as defined with respect to any Parity Debt. SECTION 6.2. 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 any Parity Debt, declare all principal components of the unpaid Installment Payments, together with accrued interest thereon at the Overdue Rate from the immediately preceding Interest 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, with interest on such overdue principal and interest components calculated at the Overdue Rate, 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 a responsible officer of 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 Agreement, or enforce performance and observance of any obligation, agreement or covenant of the City under this Agreement. -22- (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 Gross Revenues and other amounts pledged hereunder, with such powers as the court making such appointment may confer. SECTION 6.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive. Every such remedy is cumulative and in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default impairs any such right or power or operates as a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it in this Article VI, it is not necessary to give any notice, other than such notice as may be required in this Article VI or by law. SECTION 6.4. Agreement to Pay Attorneys' Fees and Expenses. If either party to this Agreement defaults under any of the provisions hereof and the nondefaulting party, the Trustee or the Owner of any Bonds employs attorneys or incurs other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party, the Trustee or such Owner, as the case may be, the reasonable fees of such attorneys and such other expenses so incurred. The provisions of this Section 6.4 survive the expiration of the Term of this Agreement and the resignation and removal of the Trustee. SECTION 6.5. No Additional Waiver Implied by One Waiver. If any agreement contained in this Agreement is breached by either party and thereafter waived by the other party, such waiver is limited to the particular breach so waived and does not waive any other breach hereunder. SECTION 6.6. Trustee and Bond Owners to Exercise Rights. Such rights and remedies as are given to the Authority under this Article VI have been assigned by the Authority to the Trustee under the Indenture, to which assignment the City hereby consents. Such rights and remedies will be exercised by the Trustee and the Owners of the Bonds as provided in the Indenture. ARTICLE VII PREPAYMENT OF INSTALLMENT PAYMENTS -23- SECTION 7. 1. 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 4.4(a), 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 4.4(a) or when due on any optional prepayment date under Section 7.2, 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 or a portion of the remaining Installment Payments, all obligations of the City hereunder, and the pledge of Net Revenues and all other security provided by this Agreement, for said obligations, will thereupon cease and terminate, excepting only the obligation of the City to make, or cause to be made, such Installment Payments from the security deposit. The security deposit will be deemed to be and will constitute a special fund for the payment of such Installment Payments in accordance with the provisions hereof. SECTION 7.2. 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 June 1, 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 Section 4.01(a) of the Indenture. The Trustee shall deposit the prepayment price in the Installment Payment 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 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 7.3. Credit forAmounts on Deposit. If the City prepays the Installment Payments in full under this Article VII, such that the Indenture is discharged by its terms as a result of the prepayment, and upon payment in full of all Additional Payments and other amounts then due and payable hereunder, all available amounts then on deposit in -24- the funds and accounts established under the Indenture will be credited towards the amounts then required to be so prepaid. ARTICLE VIII MISCELLANEOUS SECTION 8.1. Further Assurances. The City agrees that it will execute and deliver any and all such further agreements, instruments, financing statements or other assurances as may be reasonably necessary or requested by the Authority or the Trustee to carry out the intention or to facilitate the performance of this Agreement, including, without limitation, to perfect and continue the security interests herein intended to be created. It is understood that the Trustee shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest. SECTION 8.2. Notices. Any notice, request, complaint, demand or other communication under this Agreement must be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or by telecopier or other form of telecommunication, at its number set forth below. Notice is effective either (a) upon transmission by fax or other form of telecommunication, (b) upon actual receipt after deposit in the United States of America mail, postage prepaid, or (c) in the case of personal delivery to any person, 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. If to the City City of Lodi or the Authority: P.O. Box 3006 Lodi, California 95241-1910 Attention: City Manager Email: citymanager@lodi.gov If to the Trustee: MUFG Union Bank, N.A. 350 California St., 17th FI. San Francisco, California 94104 Attention: Corporate Trust Department Email: SFCT@unionbank.com 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 party providing electronic instructions agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties. -25- SECTION 8.3. Governing Law. This Agreement will be construed in accordance with and governed by the laws of the State of California. SECTION 8.4. Binding Effect. This Agreement inures to the benefit of and is binding upon the Authority, the City and their respective successors and assigns, subject, however, to the limitations contained herein. SECTION 8.5. Severability of Invalid Provisions. If any one or more of the provisions contained in this Agreement are for any reason held to be invalid, illegal or unenforceable in any respect, then such provision or provisions will be deemed severable from the remaining provisions contained in this Agreement and such invalidity, illegality or unenforceability will not affect any other provision of this Agreement, and this Agreement will be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority and the City each hereby declares that it would have entered into this Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Agreement may be held illegal, invalid or unenforceable. SECTION 8.6. Article and Section Headings and References. The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, are solely for convenience of reference and do not affect the meaning, construction or effect of this Agreement. All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement; the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof; and words of the masculine gender mean and include words of the feminine and neuter genders. SECTION 8.7. Payment on Non -Business Days. Whenever any payment is required to be made hereunder on a day which is not a Business Day, such payment will be made on the immediate preceding Business Day. SECTION 8.8. Execution of Counterparts. This Agreement may be executed in any number of counterparts, each of which will for all purposes be deemed to be an original and all of which together constitute but one and the same instrument. SECTION 8.9. Waiver of Personal Liability. No member of the City Council, officer, agent or employee of the City has any individual or personal liability for the payment of Installment Payments or Additional Payments or be subject to any personal liability or accountability by reason of this Agreement; but nothing herein contained relieves any such member of the City Council, officer, agent or employee from the performance of any official duty provided by law or by this Agreement. SECTION 8.10. Trustee as Third Party Beneficiary. The Trustee is hereby made a third party beneficiary hereof and is entitled to the benefits of this Agreement with the same force and effect as if the Trustee were a party hereto. -26- IN WITNESS WHEREOF, the Authority and the City have caused this Agreement to be executed in their respective names by their duly authorized officers, all as of the date first above written. ATTEST ATTEST: By Secretary Assistant City Clerk LODI PUBLIC FINANCING AUTHORITY, as Seller a Executive Director CITY OF LODI, as Purchaser By -27- Mayor A proved as to Form: JA D. MAGDICH _ - 4 Attorr:ey APPENDIX A SCHEDULE OF INSTALLMENT PAYMENTS Installment Principal Interest Total Pavrnent DateComponent Component Payment TOTALS (1) Installment Payment Dates are the Business Day immediately preceding each Interest Payment Date shown in the table. A-1 ESCROW DEPOSIT AND TRUST AGREEMENT Relating to $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) This ESCROW DEPOSIT AND TRUST AGREEMENT (this "Agreement"), dated April _, 2020, 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"), and 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 2010B Bonds described below (the "Escrow Agent") and as trustee (the "2010 Trustee") for the 2010B Bonds. BACKGROUND 1. The City owns and operates facilities and property for the supply, treatment and distribution of water within the service area of the City (the "Water System"). 2. The Authority is a joint exercise of powers authority that was established by the City and the Industrial Development Authority of the City of Lodi pursuant to a Joint Exercise of Powers Agreement, dated as of July 1, 2010. The Authority was formed for the purpose of assisting the City in the financing of public capital improvements. 3. In order to provide funds to finance the acquisition and construction of improvements to the Water System (the "2010 Water Projects"), the City previously caused the Authority to issue the following bonds (collectively, the "2010 Bonds") pursuant to an Indenture of Trust, dated as of October 1, 2010 (the "2010 Indenture"), by and between the Authority and the 2010 Trustee: (i) $9,015,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series A ("2010A Bonds") and (ii) $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) ("2010B Bonds"). 4. The 2010 Bonds are payable from installment payments (the "2010 Installment Payments") made by the City to the Authority under an Installment Sale Agreement dated as of October 1, 2010 (the "2010 Installment Sale Agreement"), under which the Authority acquired, constructed and improved the 2010 Water Projects and sold the completed 2010 Water Projects to the City in consideration of the agreement by the City to pay the 2010 Installment Payments. 5. Pursuant to Section 7.2 of the 2010 Installment Sale Agreement, the City has the right to prepay all or a portion of the 2010 Installment Payments on any date on or after the Installment Payment Date (as defined in the 2010 Installment Sale Agreement) relating to the June 1, 2020 Interest Payment Date (as defined in the 2010 Installment Sale Agreement) on the 2010 Bonds. 6. Pursuant to Section 7.1 of the 2010 Installment Sale Agreement, the City may secure the payment of the 2010 Installment Payments, in whole or in part, by irrevocably depositing with the Trustee an amount of cash which, invested in whole or in part in non - callable Federal Securities (as defined in the 2010 Indenture), in the opinion of an Independent Accountant (as defined in the Indenture), together with interest to accrue thereon and together with any cash which is deposited and not invested, will be fully sufficient to pay all such 2010 Installment Payments when due on any optional prepayment date. If the City makes a security deposit under Section 7.2 for all or a portion of the 2010 Installment Payments, all obligations of the City under the 2010 Installment Sale Agreement, and the pledge of Net Revenues (as defined in the 2010 Installment Sale Agreement) and all other security provided in the 2010 Installment Sale Agreement for such 2010 Installment Payments will cease and terminate, except the obligation of the City to make such 2010 Installment Payments from the security deposit. 7. The 2010 Bonds maturing on or after June 1, 2021 are subject to optional redemption, in whole or in part, on any date on or after June 1, 2020, at a redemption price equal to 100% of the principal amount of the 2010 Bonds to be redeemed, plus accrued interest to the redemption date, without premium. 8. Under Article X of the 2010 Indenture, the Authority may discharge its liability with respect to the 2010 Bonds by depositing money or non -callable Federal Securities (as defined in the 2010 Indenture) with the 2010 Trustee which, in the opinion of an Independent Accountant (as defined in the 2010 Indenture), will be sufficient to pay the principal, interest and premium (if any) on such 2010 Bonds when due for optional redemption. 9. Under current municipal bond market conditions, it is possible for the City to refinance on a tax-exempt basis the portion of the 2010 Installment Payments attributable to the 2010B Bonds (the "2010B Installment Payments") and to cause a redemption of the 2010B Bonds for the purpose of achieving savings for the benefit of the customers of the Water System. 10. The City is not refinancing the portion of the 2010 Installment Payments attributable to the 2010A Bonds (the "2010A Installment Payments") or causing a redemption of the 2010A Bonds. 11. In order to accomplish the refinancing described above, the Authority and the City have entered into an Installment Sale Agreement dated as of April 1, 2020 (the "Installment Sale Agreement"), under which the City will sell the 2010 Water Projects to the Authority and the Authority will sell the 2010 Water Projects to the City in consideration of the agreement by the City to pay the purchase price thereof in semiannual installment payments, in each case subject to the continuing obligation of the City to make the 2010A Installment Payments under the 2010 Installment Sale Agreement. 12. For the purpose of obtaining funds to refinance the 2010B Installment Payments and to cause the redemption of the 2010B Bonds, the Authority is issuing its Lodi Public Financing Authority 2020 Refunding Water Revenue Bonds, Series A in the 2 aggregate principal amount of $ (the "Refunding Bonds") under an Indenture of Trust, dated as of April 1, 2020 (the "Refunding Bonds Indenture"), by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee") 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"). 13. 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 2010B Installment Payments and the payment in full of the principal of and interest and premium (if any) on the outstanding 2010B Bonds, and to provide certain directions to the 2010 Trustee with respect to the 2010B Bonds. 14. As a result of the deposit and investment of funds in accordance with this Agreement, the 2010B Installment Payments will be secured by a security deposit under Section 7.1 of the 2010 Installment Sale Agreement, and the 2010B Bonds will be discharged and defeased in accordance with the provisions of Article X of the 2010 Indenture. 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 2010 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 (a) establish a security deposit for and prepay the 2010B Installment Payments in accordance with the 2010 Installment Sale Agreement and (b) defease and redeem the 2010B Bonds in accordance with the 2010 Indenture. 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 2010B Installment Payments and the 2010B Bonds 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 2010B Installment Payments in accordance with the 2010 Installment Sale Agreement and the payment of the principal of and interest and premium (if any) on the 2010B Bonds in accordance with the 2010 Indenture. 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 2010B Bonds, 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 April _, 2020 (the "Closing Date"), the Authority, pursuant to the Refunding Bonds 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 Refunding Bonds. In addition, the City hereby directs the 2010 Trustee to transfer to the Escrow Agent for deposit into the Escrow Fund the amount of $ , to be derived from moneys related to the 2010B Bonds that are available as a result of the defeasance of the 2010B Bonds. 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 non -callable "Federal Securities" as defined in the 2010 Indenture. 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 non -callable Federal Securities that comply with the requirements of the 2010 Indenture, along with a verification report and defeasance opinion of bond counsel. 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 2010 Trustee an amount required to pay the principal of and interest and prepayment premium (if any) on the 2010B Bonds, in accordance with the schedule attached as Exhibit B hereto, which payment shall also constitute payment of the 2010B Installment Payments. Following the payment and prepayment of the 2010B Installment Payments and the 2010B Bonds in full, the Escrow Agent shall transfer any amounts remaining on deposit in the Escrow Fund to the Trustee for the Refunding Bonds, for deposit in the Bond Fund established under the Refunding Bonds Indenture, to be applied to pay interest next coming due and payable on the Refunding Bonds. SECTION 4. Irrevocable Election to Prepay 2010B Bonds; Defeasance Notice. The City has irrevocably elected to pay and prepay all of the unpaid 2010B Installment Payments and all of the outstanding 2010B Bonds on the date set forth in Exhibit B, in accordance with the provisions of the 2010 Indenture. The City hereby directs the 2010 Trustee to give notice of the prepayment of the 2010B Bonds in accordance with the requirements of the 2010 Indenture, at the expense of the City, using the form set forth in Exhibit C. The City further hereby directs the 2010 Trustee to file on the Closing Date the notice attached as Exhibit D on the Municipal Securities Rulemaking Board's EMMA system. The sole remedy for failure to file such notice on EMMA shall be an action by the 4 City or the holders of the 20108 Bonds 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 loss 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 2010B Bonds. 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. 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 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 0 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 2010B Bonds and all fees, expense 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. [Remainder of page intentionally left blank.] 7 SECTION 10. Amendments. 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 prevent the 2010B Bonds from being treated as Build America Bonds and Qualified Bonds and therefore eligible for the Refundable Credits (as those terms are defined in the 2010 Indenture), (b) the amendment will not result in loss of the exemption from federal income taxes of interest on the Refunding Bonds and (c) such amendment will not have a material adverse effect on the interests of the holders of the 2010B Bonds. THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Agent and as 2010 Trustee IS Authorized Officer ACKNOWLEDGED AND ACCEPTED: LODI PUBLIC FINANCING AUTHORITY M Executive Director CITY OF LODI M 9 Mayor Approved as to Form: s NIC MAGDiCH -C1 orney ATTACHMENT 1 2010B Bonds Maturity Date CUSIP Outstanding Principal Amount Interest Rate June 1, 2022 540257AL6 $1,075,000 5.014% June 1, 2023 540257AM4 1,115,000 5.214 June 1, 2024 540257AN2 1,150,000 5.414 June 1, 2025 540257AP7 1,190,000 5.614 June 1, 2030* 540257AQ5 6,705,000 6.387 June 1, 2040* 540257AR3 18 415,000 6.637 *: Term Bond 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 June 1, 2020 B-1 EXHIBIT C FORM OF NOTICE OF REDEMPTION $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) NOTICE IS HEREBY GIVEN, by the Lodi Public Financing Authority (the "Authority") that the captioned bonds (the "2010B Bonds") have been defeased and discharged under and within the meaning of the Indenture of Trust, dated as of October 1, 2010 (the "2010 Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A. as trustee (the "2010 Trustee"), and that the Authority has irrevocably elected to redeem the outstanding 2010B Bonds on June 1, 2020, at a redemption price equal to the par amount thereof together with accrued interest thereon to the redemption date, without premium. The 2010B Bonds consist of the following: Maturity Date CUSIP Outstanding Principal Amount Interest Rate June 1, 2022 540257AL6 $1,075,000 5.014% June 1, 2023 540257AM4 1,115,000 5.214 June 1, 2024 540257AN2 1,150,000 5.414 June 1, 2025 540257AP7 1,190,000 5.614 June 1, 2030* 540257AQ5 6.705,000 6.387 June 11 2040" 540257AR3 18,415,000 6.637 ': Term Bond On June 1, 2020, there will become due on each of the 2010B Bonds the redemption price thereof, and after June 1, 2020, interest thereon shall cease to accrue. Funds for the payment of the 2010B Bonds have been deposited with the 2010 Trustee, as escrow agent, and the sufficiency of the funds and investments for the purpose of paying the principal of and interest on the 2010B Bonds has been verified by 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_Dny 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. C-1 Payment of interest on the 2010B Bonds shall be made by check or, at the option of any owner of at least $1,000,000 aggregate principal amount of 2010B Bonds, by wire transfer to a bank account in the United States of America. IMPORTANT TAX NOTICE Withholding of 28% of gross redemption proceeds of any payment made within the United States may be required by the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the "Act'), unless the Trustee has the correct taxpayer identification number (social security or employer identification number) or exemption certificate of the payee. Please furnish a properly completed Form W-9 or exemption certificate or equivalent when presenting your certificates. *Note: The Authority 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 2010B Bond. They are included solely for the convenience of the holders. Dated: , 2020 The Bank of New York Mellon Trust Company, N.A.., as Escrow Agent C-2 EXHIBIT D FORM OF NOTICE OF DEFEASANCE $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) NOTICE IS HEREBY GIVEN, by the Lodi Public Financing Authority (the "Authority") that the captioned bonds (the "2010B Bonds") have been defeased and discharged under and within the meaning of the Indenture of Trust, dated as of October 1, 2010 (the "2010 Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A. as trustee (the "2010 Trustee"), and that the Authority has irrevocably elected to redeem the outstanding 2010B Bonds on June 1, 2020, at a redemption price equal to the par amount thereof together with accrued interest thereon to the redemption date, without premium. Funds for the payment of the 2010B Bonds have been deposited with the 2010 Trustee, as escrow agent, and the sufficiency of the funds and investments for the purpose of paying the principal of and interest on the 2010B Bonds has been verified by As a consequence of the foregoing actions and in accordance with the 2010 Indenture, all obligations of 2010 Trustee and the Authority with respect to the 2010B Bonds have 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 2010B Bonds consist of the following: Maturity Date CUSIP Outstanding Principal Amount Interest Rate June 1, 2022 540257AL6 $1,075,000 5.014% June 1, 2023 540257AM4 1,115,000 5.214 June 1, 2024 540257AN2 1j50,000 5.414 June 1, 2025 540257AP7 1,190,000 5.614 June 1, 2030* 540257AQ5 6,705,000 6.387 1 June 1, 2040* 540257AR3 18,415,000 6.637 *: Term Bond 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. D-1 Note: The Authority 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 2010B Bond. They are included solely for the convenience of the holders. Dated: April _, 2020 THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Agent D-2 LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A BOND PURCHASE AGREEMENT .2020 Lodi Public Financing Authority P.O. Box 3006 Lodi, California 95241-1910 City of Lodi P.O. Box 3006 Lodi, California 95241-1910 Ladies and Gentlemen: Piper Sandler & Co. (the "Underwriter") hereby offers to enter into this Bond Purchase Agreement (the "Purchase Agreement") with you, the Lodi Public Financing Authority (the "Authority") and the City of Lodi (the "City"), for the purchase by the Underwriter and the delivery by the Authority of the above -referenced Bonds (the "Bonds"). The proceeds of the Bonds will be used to: (i) redeem all of the outstanding Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds - Direct Payment) (the "Refunded Bonds") and the corresponding portion of the related installment payment obligation of the City; and (ii) pay the costs of issuing the Bonds. This offer is subject to your acceptance prior to 11:59 p.m., California time, on the date hereof and if not so accepted will be subject to withdrawal by the Underwriter upon written notice delivered to the Authority and the City at any time prior to the acceptance thereof by the Authority and the City. Upon such acceptance, this Purchase Agreement shall be in full force and effect in accordance with its terms and shall be binding upon you and the Underwriter. All terms not defined herein shall have the meanings set forth in the Indenture and the Installment Sale Agreement (each defined below). The Authority and the City acknowledge and agree that: (i) the purchase and sale of the Bonds pursuant to this Purchase Agreement is an arm's-length commercial transaction among the City, the Authority and the Underwriter in which the Underwriter is acting solely as a principal and not as an agent of the Authority or the City and the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the Authority or the City; (ii) the Underwriter has not assumed any advisory or fiduciary responsibility to the Authority or the City with respect to the transaction contemplated by this Purchase Agreement and the discussions, undertakings or procedures leading thereto (irrespective of whether the Underwriter, or any affiliate of the Underwriter has provided other services or is currently providing other services to the Authority or the City on other matters); (iii) the only obligations the Underwriter has to the Authority and the City with respect to the transaction contemplated by this Purchase Agreement are expressly set forth in this Purchase Agreement; and (iv) the Authority and the City have consulted their own financial and/or municipal, legal, accounting, tax and other advisors, as applicable, to the extent the Authority and the City have deemed appropriate. The Authority acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the Municipal Securities Rulemaking Board (the "MSRB"). 1. Upon the terms and conditions and upon the basis of the representations herein set forth, the Underwriter hereby agrees to purchase from the Authority for offering to the public, and the Authority hereby agrees to sell and deliver to the Underwriter, all (but not less than all) of the $ aggregate principal amount of the Lodi Public Financing Authority 2020 Refunding Water Revenue Bonds, Series A to be dated the Closing Date, at a price of $ , being the principal amount of the Bonds, plus net original issue premium of $ less an Underwriter's discount of $ The Bonds shall mature in the amounts and on the dates, and bear interest at the rates, set forth in Exhibit A hereto. The Bonds shall be as described in and shall be secured under and pursuant to an Indenture of Trust, dated as of April 1, 2020 (the "Indenture"), by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee"), substantially in the form previously submitted to the Underwriter with only such changes therein as shall be mutually agreed upon by the Authority, the Trustee and the Underwriter. The obligation of the Authority to pay the principal of and interest on the Bonds is a special obligation of the Authority, payable solely from Authority Revenues (as defined in the Indenture), and certain other amounts held under the Indenture. Authority Revenues consist primarily of Installment Payments made by the City to the Authority pursuant to the Installment Sale Agreement (as defined below). The Installment Payments are secured by and payable from net revenues ("Net Revenues") of the City's water supply, treatment and distribution system (the "Water System") on a parity basis with installment payments payable by the City under an Installment Sale Agreement dated as of October 1, 2010. The principal of and interest on the Bonds are not required to be paid from any other funds of the Authority, including any proceeds of any taxes, and does not constitute a debt or pledge of the faith and credit of the Authority or the State of California (the "State") or any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction. The Refunded Bonds will be defeased and refunded in accordance with an Escrow Deposit and Trust Agreement, dated as of April 1, 2020 (the "Escrow Agreement"), between the City and The Bank of New York Mellon Trust Company, N.A., as escrow agent (the "Escrow Agent"). The Authority and the City hereby ratify the use by the Underwriter of the Preliminary Official Statement, dated , 2020 relating to the Bonds (together with the cover page and all appendices thereto, and any supplements thereof, the "Preliminary Official Statement"), and authorizes the Underwriter to use and distribute the Preliminary Official Statement, the Official Statement (as defined below), the Indenture, the Installment Sale Agreement, dated as of April 1, 2020, between the Authority and the City (the "Installment Sale Agreement"), the Continuing Disclosure Certificate as required by Securities and Exchange Commission Rule 15c2-12 ("Rule 15c2-12"), and substantially in the form attached as an appendix to the Official Statement, dated , 2020 (the "Continuing Disclosure Certificate"), executed by the City and this Purchase Agreement, and all information contained therein, and all other documents, certificates and statements furnished by the Authority and the City to the Underwriter in connection with the offer and sale of the Bonds by the Underwriter. The Authority and the City have heretofore "deemed final" the Preliminary Official Statement within the meaning of Rule 15c2-12. 2 The City will undertake pursuant to the Continuing Disclosure Certificate to provide certain annual financial and operating information and notices of the occurrence of certain events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the final Official Statement. This undertaking will be entered into in order to assist the Underwriter in complying with the Rule. 2. The Underwriter agrees to offer all the Bonds to the public initially at the prices (or yields) set forth on the inside cover page of the Official Statement of the Authority pertaining to the Bonds, dated _, 2020 (together with all appendices thereto, and with such changes therein and supplements thereto and as are consented to in writing by the Underwriter, and with the Preliminary Official Statement, are herein called the "Official Statement"). Subsequent to the initial public offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds subject to Section 5 hereof. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. "Public Offering" shall include an offering to a representative number of institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold. The Underwriter agrees that prior to the time the final Official Statement relating to the Bonds is available, the Underwriter will send to any potential purchaser of the Bonds, upon the request of such potential purchaser, a copy of the most recent Preliminary Official Statement. Such Preliminary Official Statement shall be sent by first class mail or electronic distribution (or other equally prompt means) not later than the first business day following the date upon which each such request is received. 3. The Authority shall also deliver a sufficient number of copies of the Official Statement to enable the Underwriter to distribute a single copy of each Official Statement to any potential customer of the Underwriter requesting an Official Statement during the time period beginning when the Official Statement becomes available and ending on the End Date (defined below). The Authority shall deliver these copies to the Underwriter no later than the earlier of (i) seven (7) business days after the execution of this Purchase Agreement or (ii) one (1) business day prior to the Closing Date in order to permit the Underwriter to comply with Rule 15c2-12, and the applicable rules of the MSRB, with respect to distribution of the Official Statement. The Authority and the City shall prepare the Official Statement, including any amendments thereto, in word- searchable PDF format as described in the MSRB's Rule G-32 and shall provide the electronic copy of the word-searchable PDF format of the Official Statement to the Underwriter no later than one (1) business day prior to the Closing Date to enable the Underwriter to comply with MSRB Rule G-32. The Underwriter shall inform the City in writing of the End Date, and covenants to file the Official Statement with the MSRB on a timely basis. The Official Statement, as of its date, as of the Closing Date (as defined herein) and as of the date of any update, amendment or supplement thereto as required hereby subsequent to the Closing, up to and including the date which is twenty-five (25) days following the end (the "End Date") of the Underwriting Period (as hereinafter defined), will be correct and complete in all material respects 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. If, after the date of this Purchase Agreement and until the earlier of (i) ninety (90) days after the end of the "underwriting period" (as defined in Rule 15c2-12) (the "Underwriting Period"), or (ii) twenty-five (25) days following the end of the Underwriting Period if the Official Statement is 3 available to any person from the MSRB as contemplated by Rule 15c2 -12(b)(4), any event shall occur or circumstance shall exist of which the Authority or the City have knowledge that would cause the Official Statement to contain any 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 or the City, as the case may be, shall notify the Underwriter (and for the purpose of this Section provide the Underwriter with such information as it may from time to time reasonably request), and, if in the opinion of the City, the Authority or the Underwriter such event or circumstance requires the preparation and publication of a supplement or amendment to the Official Statement, the Authority and the City will, at their expense, supplement or amend the Official Statement in a form and manner jointly approved by the City, the Authority and the Underwriter and furnish to the Underwriter a reasonable number of copies of such supplement or amendment provided that the Underwriter agrees that it will promptly notify the Authority and the City of the end of the Underwriting Period. 4. At 8:30 a.m., Pacific Time, on 2020, or at such other time or date as shall be agreed upon by the Underwriter, Authority and the City (such time and date being herein referred to as the "Closing Date"), the Authority will deliver to the Underwriter, the Bonds, in book - entry form, through the facilities of The Depository Trust Company or its agent (all Bonds having had the CUSIP numbers assigned to them thereon), duly executed by an authorized officer of the Authority as provided in the Indenture, and the other documents herein mentioned at the offices of Jones Hall, A Professional Law Corporation, San Francisco, California ("Bond Counsel") or another place to be mutually agreed to by the City and the Underwriter and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 of this Purchase Agreement in immediately available funds (such delivery and payment being herein referred to as the "Closing"). Upon initial issuance, the ownership of such Bonds shall be registered in the registration books kept by the Trustee in the name of Cede & Co., as the nominee of The Depository Trust Company. It is anticipated that CUSIP numbers will be printed on the Bonds, but neither the failure to provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Purchase Agreement. 5. A. The Underwriter agrees to assist the Authority in establishing the issue price of the Bonds and shall execute and deliver to the Authority at Closing an "issue price" or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit B, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Authority and Bond Counsel (as defined herein), to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. B. Except as otherwise set forth in Exhibit A attached hereto, the Authority will treat the first price at which 10% of each maturity of the Bonds (the "10% test") is sold to the public as the issue price of that maturity. At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the Authority the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Authority the prices at which it sells the unsold 4 Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until either (i) the Underwriter has sold all Bonds of that maturity or (ii) the 10% test has been satisfied as to the Bonds of that maturity, provided that, the Underwriter's reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Authority or Bond Counsel. For purposes of this Section, if Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Bonds. C. The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the "initial offering price"), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Authority and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Authority to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the "hold -the -offering -price rule"). So long as the hold -the -offering -price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following: a. the close of the fifth (5th) business day after the sale date; or b. the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. The Underwriter will advise the Authority promptly after the close of the fifth (5th) business day after the sale date whether it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. D. The Underwriter confirms that: (i) any selling group agreement and any third -party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such third -party distribution agreement, as applicable: (A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) to comply with the hold -the -offering -price rule, if applicable, if and for so long as directed by the Underwriter, (B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public. (ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third -party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third -party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold -the -offering -price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. E. The Authority acknowledges that, in making the representations set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing the issue price of the Bonds, including, but not limited to, its agreement to comply with the hold -the -offering -price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third -party distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing the issue price of the Bonds, including, but not limited to, its agreement to comply with the hold -the -offering -price rule, if applicable to the Bonds, as set forth in the third -party distribution agreement and the related pricing wires. The Authority further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a third -party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing the issue price of the Bonds, including, but not limited to, its agreement to comply with the hold -the -offering -price rule, if applicable to the Bonds. F. The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: "public" means any person other than an underwriter or a related party; b. "underwriter" means (A) any person that agrees pursuant to a written contract with the Authority (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to RI participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third -party distribution agreement participating in the initial sale of the Bonds to the public); C. a purchaser of any of the Bonds is a "related party" to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and d. "sale date" means the date of execution of this Purchase Agreement by all parties. 6. The Underwriter represents to and agrees with the Authority and the City that, as of the date hereof and as of the Closing Date: (a) The Underwriter is duly authorized to execute this Purchase Agreement and to take any action under this Purchase Agreement required to be taken by it; (b) The Underwriter is in compliance with MSRB Rule G-37 with respect to the Authority and the City, and is not prohibited thereby from acting as the underwriter with respect to securities of the Authority and the City; (c) The Underwriter has, and has had, no financial advisory relationship, as that term is defined in California Government Code Section 53590 (c) or MSRB Rule G-32, with the City with respect to the Bonds, and no investment firm controlling, controlled by or under common control with such Underwriter have or has had any such financial advisory relationship; and (d) The Underwriter has reasonably determined that the undertaking to provide continuing disclosure with respect to the Bonds pursuant to the Continuing Disclosure Certificate is sufficient to effect compliance with Rule 15c2-12. 7. The Authority represents, warrants and covenants to the Underwriter that: (a) The Authority is a joint exercise of powers authority duly organized and validly existing pursuant to the laws of the State of California and has all necessary power and authority to enter into and perform its duties under the Indenture, the Installment Sale Agreement and this Purchase Agreement (collectively, the "Authority Documents") and, when executed and delivered by the respective parties thereto, the Authority Documents will constitute the legal, valid and binding obligations of the Authority in accordance with their respective terms. (b) Neither the execution and delivery of the Authority Documents, or the approval and execution of the Official Statement, and compliance with the provisions on the Authority's part contained therein, nor the consummation of any other of the transactions herein and 7 therein contemplated, nor the fulfillment of the terms hereof and thereof, conflicts with or constitutes a breach of or default under nor contravenes 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 does any such execution, delivery, adoption or compliance result in the 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, except as provided by the Authority Documents. (c) Except as may be required under blue sky or other securities laws of any state, there is no consent, approval, authorization or other order of, or filing with, or certification by, any regulatory authority having jurisdiction over the Authority required for the execution and delivery of the Bonds or the consummation by the Authority of the other transactions contemplated by the Official Statement and this Purchase Agreement. (d) To the best of the knowledge of the Authority, there is, and on the Closing there will be, no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or threatened against the Authority to restrain or enjoin the delivery of any of the Bonds, or the payments to be made pursuant to the Indenture, or in any way contesting or affecting the validity of the Authority Documents or of the Authority to enter into the Authority Documents or contesting the powers of the Authority to perform its obligations under any of the foregoing or in any way contesting the powers of the Authority in connection with any action contemplated by this Purchase Agreement, or in any way questioning or challenging the tax status of the Bonds. (e) As of the date thereof and at all times subsequent thereto up to and including the End Date, the information relating to the Authority contained in the Official Statement will be complete and will not contain any untrue or misleading statement of a material fact or omit to state any material fact (unless an event occurs of the nature described in Section 70) below) necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of its date and as of the date hereof, the information relating to the Authority and the Bonds contained in the Official Statement is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (f) The Authority agrees to cooperate with the Underwriter in endeavoring to qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the Authority will not be required to execute a special or general consent to service of process in any jurisdiction in which it is not now so subject or to qualify to do business as a foreign agency in any jurisdiction where it is not so qualified. (g) By official action of the Authority prior to or concurrently with the execution hereof, the Authority has duly approved the distribution of the Official Statement, and has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations on its part contained in the Authority Documents and the consummation by it of all other transactions contemplated by the Official Statement and this Purchase Agreement. 8 (h) The Authority is not in breach of or default under any applicable law or administrative regulation of the State of California or the United States 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 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 a default or an event of default under any such instrument. (i) The Authority is not in default, nor has been in default at any time, as to the payment of principal or interest with respect to an obligation issued by the Authority or successor of the Authority or with respect to an obligation guaranteed by the Authority as guarantor or successor of a guarantor. (j) If between the date of this Purchase Agreement and the End Date an event occurs, of which the Authority has knowledge, which might or would cause the information relating to the Authority or the Authority's functions, duties and responsibilities 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 required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading, the Authority will notify the Underwriter, and if, in the opinion of the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Authority will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a form and in a manner approved by the Underwriter, provided all expenses thereby incurred will be paid for by the City. (k) If the information relating to the Authority, its functions, duties and responsibilities contained in the Official Statement is amended or supplemented pursuant to the immediately preceding subsection, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subsection) at all times subsequent thereto up to and including the date of the Closing, 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 required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading. (1) No consent, approval, authorization or other action by a governmental or regulatory authority that has not been obtained is or will be required of the Authority for the delivery and sale of the Bonds or the consummation of the other transactions contemplated by this Purchase Agreement and the Official Statement, except as may be required under the state securities or blue sky laws in connection with the sale of the Bonds by the Underwriter. (m) The Authority will deliver all opinions, Bonds, letters and other instruments and documents reasonably required by the Underwriter and this Purchase Agreement. (n) Any certificate of the Authority delivered to the Underwriter shall be deemed a representation and warranty by the Authority to the Underwriter as to the statements made therein. (o) Other than as described in the Official Statement, as of the time of acceptance hereof and as of the Closing, the Authority does not and will not have outstanding any indebtedness W which is secured by a lien on the Authority Revenues superior to or on a parity with the lien of the Bonds thereon. (p) Between the date of this Purchase Agreement and the date of Closing, the Authority will not, without the prior written consent of the Underwriter, and except as disclosed in the Official Statement, offer or issue any bonds, notes or other obligations for borrowed money, or incur any material liabilities, direct or contingent. (q) The Authority is not presently and as a result of the execution of the Authority Documents and the sale of the Bonds will not be in violation of any debt limitation, appropriation limitation or any other provision of the California Constitution or statutes or any additional debt or similar provision of any bond, note, contract or other evidence of indebtedness to which the Authority is a party or to which the Authority is bound. (r) The Authority will not knowingly take or omit to take any action, which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner other than as provided in the Authority Documents, unless otherwise required by law. 8. The City represents, warrants and covenants to the Underwriter that: (a) The City is a general law city duly organized under the laws of the State of California, and has all necessary power and authority to enter into and perform its duties under the Installment Sale Agreement, the Continuing Disclosure Certificate, the Escrow Agreement and this Purchase Agreement (collectively, the "City Documents") and, when executed and delivered by the respective parties thereto, the City Documents will constitute the legal, valid and binding obligations of the City in accordance with their respective terms. (b) Neither the execution and delivery of the City Documents, or the approval and execution of the Official Statement, and compliance with the provisions on the City's part contained therein, nor the consummation of any other of the transactions herein and therein contemplated, nor the fulfillment of the terms hereof and thereof, conflicts with or constitutes a breach of or default under nor contravenes 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 does any such execution, delivery, adoption or compliance result in the 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, except as provided by the City Documents. (c) Except as may be required under blue sky or other securities laws of any state, there is no consent, approval, authorization or other order of, or filing with, or certification by, any regulatory authority having jurisdiction over the City required for the execution and delivery of the Bonds or the consummation by the City of the other transactions contemplated by the Official Statement and this Purchase Agreement. (d) To the best of the knowledge of the City, there is, and on the Closing there will be, no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or threatened against the City to restrain or enjoin the delivery of any of the Bonds, or the payments to be made pursuant to the Installment Sale Agreement and 10 Indenture, or in any way contesting or affecting the validity of the City Documents or of the City to approve or enter into the City Documents, or in any way questioning or challenging the tax status of the Bonds. (e) As of the date thereof and at all times subsequent thereto up to and including the End Date, the information relating to the City, the Installment Sale Agreement and the Water System contained in the Official Statement will be complete and will not contain any untrue or misleading statement of a material fact or omit to state any material fact (unless an event occurs of the nature described in Section 80) below) necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of its date and as of the date hereof, the information relating to the City, the Installment Sale Agreement and the Water System contained in the Official Statement is true and correct in all material respects and such information does not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (i) The City agrees to cooperate with the Underwriter in endeavoring to qualify the Bonds for offering and sale under the securities or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the City will not be required to execute a special or general consent to service of process in any jurisdiction in which it is not now so subject or to qualify to do business as a foreign agency in any jurisdiction where it is not so qualified. (g) By official action of the City prior to or concurrently with the execution hereof, the City has duly approved the 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 City Documents and the consummation by it of all other transactions contemplated by the Official Statement and this Purchase Agreement. (h) The City is not in breach of or default under any applicable law or administrative regulation of the State of California or the United States 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 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 a default or an event of default under any such instrument. (i) The City is not in default, nor has been in default at any time, as to the payment of principal or interest with respect to an obligation issued by the City or successor of the City or with respect to an obligation guaranteed by the City as guarantor or successor of a guarantor. 0) If between the date of this Purchase Agreement and the End Date an event occurs, of which the City has knowledge, which might or would cause the information relating to the City, the Water System or the City's functions, duties and responsibilities 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 required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading, the City will notify the Underwriter, and if, in the opinion of the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate with the Underwriter in the preparation of an amendment or supplement to the Official Statement in a 11 form and in a manner approved by the Underwriter, provided all expenses thereby incurred will be paid for by the City. (k) If the information relating to the Water System, the City, its functions, duties and responsibilities contained in the Official Statement is amended or supplemented pursuant to the immediately preceding subsection, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subsection) at all times subsequent thereto up to and including the date of the Closing, 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 required to be stated therein or necessary to make such information therein, in the light of the circumstances under which it was presented, not misleading. (1) The City covenants that it will comply with all tax covenants relating to it in the City Documents and the Certificate as to Arbitrage and Certificate Regarding Use of Proceeds. (m) The written information supplied by the City to the Underwriter with respect to the financial information relating to the Water System is true, correct and complete in all material respects for the purposes for which it was supplied. (n) No consent, approval, authorization or other action by a governmental or regulatory agency that has not been obtained is or will be required of the City for the delivery and sale of the Bonds or the consummation of the other transactions contemplated by this Purchase Agreement and the Official Statement, except for such licenses, certificates, approvals, variances or permits which may be necessary for the construction or operation of the Water System which the City has applied for (or will apply for in the ordinary course of business) and expects to receive, and except as may be required under the state securities or blue sky laws in connection with the sale of the Bonds by the Underwriter. (o) The City will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that provided in the Indenture and as described in the Official Statement, unless otherwise required by law. (p) The City will deliver all opinions, certificates, letters and other instruments and documents reasonably required by the Underwriter and this Purchase Agreement. (q) Any certificate of the City delivered to the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein. (r) Other than as described in the Official Statement, as of the time of acceptance hereof and as of the Closing, the City does not and will not have outstanding any indebtedness which is secured by a lien on the Net Revenues superior to or on a parity with the lien of the Bonds thereon. (s) Between the date of this Purchase Agreement and the date of Closing, the City will not, without the prior written consent of the Underwriter, and except as disclosed in the Official Statement, offer or issue any bonds, notes or other obligations for borrowed money, or incur any material liabilities, direct or contingent payable from the Net Revenues. 12 W The City is not presently and as a result of the execution of the City Documents and the sale of the Bonds will not be in violation of any debt limitation, appropriation limitation or any other provision of the California Constitution or statutes or any additional debt or similar provision of any bond, note, contract or other evidence of indebtedness to which the City is a party or to which the City is bound. (u) Based on a review of its previous undertakings and except as disclosed in the Official Statement, the City has not, in the last five years, failed to comply in any material respect with its obligations under any continuing disclosure undertaking entered into pursuant to Rule 15c2-12. The City will undertake, pursuant to the Continuing Disclosure Certificate to provide annual reports and notices of certain events in accordance with the requirements of Rule 15c2-12. 9. The Underwriter has entered into this Purchase Agreement in reliance upon the representations, warranties and agreements of the Authority and the City contained herein, and the opinions of Bond Counsel, Disclosure Counsel, counsel to the Trustee, counsel to the City and counsel to the Authority required hereby. The Underwriter's obligations under this Purchase Agreement are and shall be subject to the following further conditions: (a) At the time of Closing, this Purchase Agreement, the Indenture, the Installment Sale Agreement, the Escrow Agreement and the Continuing Disclosure Certificate (collectively the "Legal Documents"), all as described in the Official Statement, shall be in full force and effect as valid and binding agreements between or among the various parties thereto, and the Legal Documents and the Official Statement shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Underwriter, and there shall be in full force and effect such resolutions as, in the opinion of Bond Counsel, shall be necessary in connection with the transactions contemplated hereby. (b) At or prior to the Closing, the Underwriter shall receive the following documents, in each case satisfactory in form and substance to them: (1) The unqualified approving opinion of Bond Counsel, dated the date of Closing, addressed to the Authority, the City, the Trustee and the Underwriter (or a reliance letter to the Underwriter and the Trustee), in substantially the form attached as Appendix E to the Official Statement. (2) A supplemental opinion of Bond Counsel, dated as of the date of Closing and addressed to the Underwriter, in form and substance to the effect that: (a) The statements contained in the Official Statement on the cover page relating to tax exemption, the description of the Bonds and security for the Bonds, and statements under the captions "INTRODUCTION," "THE 2020 BONDS," "SECURITY AND SOURCES OF PAYMENT FOR THE 2020 BONDS," "TAX MATTERS" and APPENDICES D and E to the extent they purport to summarize certain provisions of the Legal Documents and the opinion of such counsel, present a fair and accurate summary of such provisions; (b) The Bonds are exempt from registration under the Securities Act of 1933, as amended, and the Indenture is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended; and 13 (c) The Purchase Agreement has been duly authorized, executed and delivered by the Authority and the City, and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding agreement of the Authority and the City enforceable against each in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and equitable remedies if equitable remedies are sought, and except no opinion need be expressed as to the enforceability of the indemnification, waiver, choice of law or contributions provisions contained in the Purchase Agreement. (3) The negative assurance letter of Jones Hall, A Professional Law Corporation, Disclosure Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that, based upon the information made available to them in the course of their participation in the preparation of the Preliminary Official Statement and Official Statement and without passing on and without assuming any responsibility for the accuracy, completeness and fairness of the statements in the Official Statement, and having made no independent investigation or verification thereof, no facts have come to their attention that lead them to believe that the Preliminary Official Statement as of its date and as of the date of the Purchase Agreement, and the Official Statement as of its date or as of the Closing Date (except for any CUSIP numbers, financial or statistical data or forecasts, numbers, charts, estimates, projections, assumptions or expressions of opinion, the information under the captions "LITIGATION," "RATING" and "UNDERWRITING" and in the appendices thereto (excluding Appendix F - "FORM OF CONTINUING DISCLOSURE CERTIFICATE,"), any information about DTC and its book -entry only system, as to which no opinion or view need be expressed) contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (4) An opinion of counsel to the Authority, dated the date of Closing in form and substance satisfactory to the Underwriter and Bond Counsel, addressed to the City, the Trustee and the Underwriter, to the effect that: (i) the Authority is a joint powers authority duly organized and validly existing under the laws of the State of California; (ii) the preparation and distribution of the Official Statement and the Authority Documents have been duly approved by the Authority; (iii) the resolution of the Authority approving and authorizing the execution and delivery of the Official Statement and the Authority Documents was duly adopted at a regular meeting of the governing body of the Authority which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and such resolution has not been amended or modified and is in full force and effect; 14 (iv) there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or, to the best knowledge of such counsel, threatened against or affecting the Authority, which would adversely impact the Authority's ability to complete the transactions described in and contemplated by the Official Statement, to restrain or enjoin the payments under the Installment Sale Agreement, or in any way contesting or affecting the validity of the Authority Documents, or the transactions described and defined in the Official Statement wherein an unfavorable decision, ruling or finding would adversely affect the validity and enforceability of the Authority Documents; (v) the execution and delivery of the Authority Documents and the approval of the Official Statement, and compliance with the provisions thereof and hereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the Authority a breach of or default under any agreement or other instrument to which the Authority is a party or by which it is bound or any existing law, regulation, court order or consent decree to which the Authority is subject; (vi) the Authority Documents and the Official Statement have been duly authorized, executed and delivered by the Authority, and, assuming due authorization, execution and delivery by the other parties thereto, the Authority Documents constitute legal, valid and binding agreements of the Authority enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and by the application of equitable principles if sought and by the limitations on legal remedies imposed on actions against public agencies in the State of California; (vii) no authorization, approval, consent, or other order of the State of California or any other governmental authority or agency within the State of California is required for the valid authorization, execution and delivery of the Authority Documents and the approval of the Official Statement; and (viii) nothing has come to such counsel's attention which would lead such counsel to believe that the information relating to the Authority contained in the Official Statement contains an untrue statement or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (5) An opinion of counsel to the City, dated the date of Closing in form and substance satisfactory to the Underwriter and Bond Counsel, addressed to the Authority, the Trustee and the Underwriter, to the effect that: (i) the City is a general law city duly organized and validly existing in accordance with the laws of the State of California; 15 (ii) the preparation and distribution of the Official Statement and the City Documents have been duly approved by the City; (iii) the resolution of the City approving and authorizing the execution and delivery of the Official Statement and the City Documents has been duly adopted at a meeting of the governing body of the City which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and such resolution has not been amended or modified and is in full force and effect; (iv) there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or, to the best knowledge of such counsel, threatened against or affecting the City, which would adversely impact the City's ability to complete the transactions described in and contemplated by the Official Statement, to restrain or enjoin the payments under, or in any way contesting or affecting the validity of the City Documents, or the transactions described and defined in the Official Statement wherein an unfavorable decision, ruling or finding would adversely affect the validity and enforceability of the City Documents; (v) the execution and delivery of the City Documents and the approval of the Official Statement, and compliance with the provisions thereof and hereof, under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the City a breach of or default under any agreement or other instrument to which the City is a party or by which it is bound or any existing law, regulation, court order or consent decree to which the City is subject; (vi) the City Documents and the Official Statement have been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, the City Documents constitute legal, valid and binding agreements of the City enforceable in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and by the application of equitable principles if sought and by the limitations on legal remedies imposed on actions against public agencies in the State of California; (vii) no authorization, approval, consent, or other order of the State of California or any other governmental authority or agency within the State of California is required for the valid authorization, execution and delivery of the City Documents and the approval of the Official Statement; (viii) the City's charges and fees with respect to the Water System were duly approved and adopted by the City, and are valid and enforceable at the current levels levied by the City; and (ix) nothing has come to the such counsel's attention which would lead such counsel to believe that the information relating to the City or the 16 Water System contained in the Official Statement contains an untrue statement or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (6) The opinion of counsel to the Trustee, dated the date of Closing in form and substance satisfactory to the Underwriter and Bond Counsel, and addressed to the Authority, the City and the Underwriter, to the effect that: (i) the Trustee is a national banking association duly organized and validly existing under the laws of the United States; (ii) the Trustee has duly authorized the execution and delivery of the Indenture; (iii) the Indenture has been duly entered into and delivered by the Trustee and assuming due, valid and binding authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Trustee enforceable against the Trustee in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally, or by general principles of equity; (iv) the Trustee has duly authenticated and delivered the Bonds in its capacity as trustee under the Indenture; (v) acceptance by the Trustee of the duties and obligations under the Indenture and compliance with provisions thereof will not conflict with or constitute a breach of or default under any law or administrative regulation to which the Trustee is subject; and (vi) all approvals, consents and orders of any governmental authority or agency having jurisdiction in the matter which would constitute a condition precedent to the performance by the Trustee of its duties and obligations under the Indenture have been obtained and are in full force and effect. (7) An opinion, dated the date of the Closing and addressed to the Underwriter, of Kutak Rock LLP, counsel to the Underwriter ("Underwriter's Counsel"), in such form as may be acceptable to the Underwriter. (8) A certificate, dated the date of Closing, signed by a duly authorized official of the Authority satisfactory in form and substance to the Underwriter and Bond Counsel, (a) confirming as of such date the representations and warranties of the Authority contained in this Purchase Agreement; (b) certifying that the Authority has complied with all agreements, covenants and conditions to be complied with by the Authority at or prior to the Closing under the Authority Documents; and (c) certifying that to the best of such official's knowledge, no event affecting the Authority has occurred since the date of the Official Statement which either makes 17 untrue or incorrect in any material respect as of the Closing the statements 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. (9) A certificate or certificates, dated the date of Closing, signed by a duly authorized official of the City satisfactory in form and substance to the Underwriter and Bond Counsel, (a) confirming as of such date the representations and warranties of the City contained in this Purchase Agreement; (b) certifying that the City has complied with all agreements, covenants and conditions to be complied with by the City at or prior to the Closing under the City Documents; and (c) certifying that to the best of such official's knowledge, no event affecting the City has occurred since the date of the Official Statement which either makes untrue or incorrect in any material respect as of the Closing the statements 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. (10) A certificate, dated the date of the Preliminary Official Statement, signed by a duly authorized official of the Authority deeming the Preliminary Official Statement "final" for purposes of Rule 15c2-12. (11) A certificate, dated the date of the Preliminary Official Statement, signed by a duly authorized official of the City deeming the Preliminary Official Statement "final" for purposes of Rule 15c2-12. (12) An executed or certified copy of each of the Legal Documents. (13) The opinion of counsel to the Escrow Agent, dated the Closing Date in form and substance satisfactory to the Underwriter and Bond Counsel, and addressed to the City and the Underwriter. (14) One counterpart original or copy certified by a duly authorized officer of the City of a complete transcript of all proceedings of the City relating to the approval of the City Documents and the authorization, issuance, sale and delivery of the Bonds, together with a certificate dated as of the date of Closing of a duly authorized officer of the City to the effect that each included resolution is a true, correct and complete copy of the one duly adopted by the City Council of the City and that none have been amended, modified or rescinded since adoption (except as reflected in said transcript or as may have been agreed to in writing by the Underwriter) and is in full force and effect as of the date of Closing. (15) One counterpart original or copy certified by a duly authorized officer of the Authority of a complete transcript of all proceedings of the Authority relating to the approval of the Authority Documents and the authorization, issuance, sale and delivery of the Bonds, together with a certificate dated as of the date of Closing of a duly authorized officer of the Authority to the effect that each included resolution is a true, correct and complete copy of the one duly adopted by the Board of Directors of the Authority and that none have been amended, modified or rescinded since 18 adoption (except as reflected in said transcript or as may have been agreed to in writing by the Underwriter) and is in full force and effect as of the date of Closing. (16) An executed copy of the Official Statement. (17) A certified copy of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution and delivery of documents such as the Bonds and the Indenture. (18) A Certificate as to Arbitrage and a Certificate Regarding Use of Proceeds in forms and substance acceptable to Bond Counsel. (19) A Certificate of the Trustee; dated the Closing Date to the effect that: (i) the Trustee is duly organized and existing as a national banking association in good standing under the laws of the United States, having the full power and authority to accept and perform its duties under the Indenture; (ii) subject to the provisions of the Indenture, the Trustee will apply the proceeds from the Bonds to the purposes specified in the Indenture; (iii) the Trustee has duly authorized and executed the Indenture; and (iv) the Trustee has duly authenticated and delivered the Bonds in its capacity as trustee under the Indenture. (20) A Certificate of the Escrow Agent, dated the Closing Date to the effect that: (i) the Escrow Agent is duly organized and existing as a national banking association in good standing under the laws of the United States, having the full power and authority to accept and perform its duties under the Indenture; (ii) subject to the provisions of the Escrow Agreement, the Escrow Agent will apply the proceeds from the Bonds and other available moneys to the purposes specified in the Escrow Agreement; and (iii) the Escrow Agent has duly authorized and executed the Escrow Agreement. (21) Evidence that the Bonds have been given the rating set forth in the Official Statement and that such rating continues in effect as of the date of Closing. (22) Evidence that a federal tax information form 8038-G has been prepared for fling with respect to the Bonds. 19 (23) A verification report or reports of Causey Demgen & Moore P.C., as verification agent (the "Verification Agent") verifying the arithmetical accuracy of certain computations relating to the computation of forecasted receipts of principal of and interest on the securities and cash deposits in the escrow account to pay the principal of and interest on and redemption price of the Refunded Bonds. (24) A copy of the Notice of Final Sale required to be delivered to the California Debt and Investment Advisory Commission pursuant to Section 8855 of the California Government Code. (25) Such additional legal opinions, certificates, proceedings, instruments and other documents as Bond Counsel, the Underwriter and Underwriter's Counsel may reasonably request to evidence compliance with legal requirements, the truth and accuracy, as of the time of Closing, of the representations contained herein and in the Official Statement and the due performance or satisfaction by the Trustee and the Authority at or prior to such time of all agreements then to be performed and all conditions then to be satisfied. If the conditions to the Underwriter's obligations contained in this Purchase Agreement are not satisfied or if the Underwriter's obligations shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and none of the Underwriter, the City nor the Authority shall have any further obligation hereunder. 10. The Underwriter may terminate its obligation to purchase the Bonds at any time before the Closing Date if the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds shall be materially adversely affected in the reasonable judgment of the Underwriter by the occurrence of any of the following: (i) Legislation shall be enacted by or introduced in the Congress of the United States or recommended to the Congress for passage by the President of the United States, or the Treasury Department of the United States or the Internal Revenue Service or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or of the State or the United States Tax Court shall be rendered, or an order, ruling, regulation (final, temporary or proposed), press release, statement or other form of notice by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to alter, directly or indirectly, federal income taxation upon interest received on obligations of the general character of the Bonds, or the interest on the Bonds as described in the Official Statement, or other action or events shall have transpired which may have the purpose or effect, directly or indirectly, of changing the federal income tax consequences of any of the transactions contemplated herein; or (ii) Legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary, or 20 proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering, or sale of obligations of the general character of the Bonds, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect; or (iii) A general suspension of trading in securities on the New York Stock Exchange or any other national securities exchange, the establishment of minimum or maximum prices on any such national securities exchange, the establishment of material restrictions (not in force as of the date hereof) upon trading securities generally by any governmental authority or any national securities exchange, or any material increase of restrictions now in force (including, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter); or (iv) A general banking moratorium shall have been established by federal, New York or California authorities; or (v) Establishment of any new restrictions in securities materially affecting the free market for securities of the same nature as the Bonds (including the imposition of any limitations on interest rates) or the charge to the net capital requirements of the Underwriter established by the New York Stock Exchange, the Securities and Exchange Commission, any other Federal or state agency or the Congress of the United States, or by Executive Order; or (vi) The occurrence of an adverse event in the affairs of the Authority or the City which, in the opinion of the Underwriter, materially impairs the investment quality of the Bonds; or (vii) Any amendment to the federal or California Constitution or action by any federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Authority or the City, its property, income or securities (or interest thereon), or the ability of the City to execute the Installment Sale Agreement or the Authority to issue the Bonds and pledge the Authority Revenues as contemplated by the Indenture and the Official Statement; or (viii) There shall have occurred any (1) new material outbreak of hostilities (including, without limitation, an act of terrorism) or (2) new material other national or international calamity or crisis, or any material adverse change in the financial, political or economic conditions affecting the United States, including, but not limited to, an escalation of hostilities that existed prior to the date hereto; or 21 (ix) A material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or (x) There shall have occurred any materially adverse change in the affairs or financial position, results of operations or condition, financial or otherwise, of the Authority or the City, other than changes in the ordinary course of business or activity or in the normal operation of the Authority or the City, except as described in the Official Statement; or (xi) Any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Preliminary Official Statement or the Official Statement, or results in the Preliminary Official Statement or the Official Statement containing any untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (xii) Any fact or event shall exist or have existed that requires or has required an amendment of or supplement to the Official Statement in which the market price or marketability of the Bonds, or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall have been materially adversely affected in the reasonable judgment of the Underwriter; or (xiii) An event described in Section 70) or 80) hereof shall have occurred which, in the reasonable professional judgment of the Underwriter, requires the preparation and publication of a supplement or amendment to the Official Statement; or (xiv) Any rating of the Bonds or other obligations of the Authority or the City by a national rating agency shall have been withdrawn or downgraded or placed on negative outlook or negative watch. 11. Performance by the Authority and the City of their respective obligations under this Purchase Agreement is conditioned upon (i) performance by the Underwriter of its obligations hereunder, and (ii) receipt by the Underwriter of all opinions and certificates to be delivered at Closing by persons and entities other than the Authority or the City. 12. After the Closing and until the End Date (a) neither the Authority nor the City will adopt any amendment of or supplement to the Official Statement to which the Underwriter shall object in writing, and (b) if any event relating to or affecting the Authority or the City shall occur as a result of which it is necessary, in the opinion of the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to an initial purchaser of the Bonds, and the Authority will forthwith prepare and furnish to the Underwriter a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to the Underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact necessary in order to make the statements therein, in the light of the circumstances 22 existing at the time the Official Statement is delivered to an initial purchaser of the Bonds, not misleading. The costs of preparing any necessary amendment or supplement to the Official Statement to be utilized until the End Date shall be borne by the City. For the purposes of this Section, the Authority and the City will furnish such information with respect to itself as the Underwriter may from time to time request. 13. (a) The Underwriter shall be under no obligation to pay, and the City or Authority shall pay or cause to be paid out of the proceeds of the Bonds, all expenses incident to the performance of the Authority's and City's obligations hereunder, including but not limited to: the cost of photocopying and delivering the Bonds to the Underwriter; the cost of preparing, printing (and/or word processing and reproducing), distributing and delivering the City Documents and the Authority Documents, and the cost of printing, distributing and delivering the Preliminary Official Statement and the Official Statement in such reasonable quantities as requested by the Underwriter; and the fees and disbursements of Bond Counsel, Disclosure Counsel, the Municipal Advisor, any accountants, financial advisors or other engineers or experts or consultants the Authority or the City have retained in connection with the Bonds and expenses (included in the expense component of the Underwriter's spread) incurred on behalf of the Authority or City officers or employees which are incidental to implementing this Purchase Agreement, including, but not limited to, meals, transportation, and lodging of those officers or employees. (b) Whether or not the Bonds are delivered to the Underwriter as set forth herein, neither the Authority nor the City shall be under any obligation to pay, and the Authority and the City shall not pay, any expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds (except those specifically enumerated in subsection (a) of this section), including any advertising expenses and the fees of the California Debt and Investment Advisory Commission, CUSIP Services Bureau charges, the cost of preparation of any "blue sky" or legal investment memoranda, and the fees and disbursements of Underwriter's Counsel. 14. Any notice or other communication to be given to the Underwriter may be given by delivering the same to Piper Jaffray & Co., 50 California Street, Suite 3100, San Francisco, California 94111; Attention: Tom Innis, Managing Director. Any notice or other communication to be given to the Authority or the City may be given by delivering the same to addresses initially provided herein, Attention: Executive Director with respect to the Authority and Attention: City Manager with respect to the City. The approval of the Underwriter when required hereunder or the determination of satisfaction as to any document referred to herein shall be in writing signed by the Underwriter and delivered to you. 15. This Purchase Agreement is made solely for the benefit of the Authority, the City and the Underwriter (including the successors or assigns thereof) and no other person shall acquire or have any right hereunder or by virtue hereof. 16. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which such counterparts shall together constitute but one and the same instrument. 17. 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 made by or on behalf of the Underwriter (or statements as to the 23 results of such investigations) concerning such representations and warranties of the Authority and the City and regardless of delivery of and payment for the Bonds. 18. The primary role of the Underwriter, as underwriter, is to purchase the Bonds for resale to investors in an arms -length commercial transaction among the City, the Authority and the Underwriter. The Underwriter, as underwriter, has financial and other interests that differ from those of the Authority and the City. 19. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Authority, the City and the Underwriter, and shall be valid and enforceable as of the time of such acceptance. 20. This Purchase Agreement shall be governed by the laws of the State of California. This Purchase Agreement shall not be assigned by either party hereto. 21. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understandings between the parties hereto in relation to the sale of Bonds by the Authority and the City and represents the entire agreement of the parties as to the subject matter herein. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 24 22. Any provision of this Purchase Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Purchase Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. PIPER SANDLER & CO. Managing Director The foregoing is hereby agreed to and accepted as of the date first above written: LODI PUBLIC FINANCING AUTHORITY Authorized Officer Time of Execution: CITY OF LODI I5A Authorized Officer Time of Execution: p.m. California time p.m. California time gas to Form: . MAGDICH ey [EXECUTION PAGE OF BOND PURCHASE AGREEMENT — LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A] S-1 Maturity (June 1) 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 20_(T) 20 (T) EXHIBIT A LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A Subject to 10% Test Hold -The - Principal Interest 10% Test Not Offering - Amount Rate Yield Price Satisfied* Satisfied Price Rule (") Term Bond. (c) Priced to optional call at [par] on June 1, 20. * At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement. Exhibit A-1 EXHIBIT B LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A FORM OF ISSUE PRICE CERTIFICATE The undersigned, on behalf of PIPER SANDLER & CO. ("Piper") hereby certifies as set forth below with respect to the sale and issuance of the above -captioned obligations (the "Bonds"). 1. Sale of the General Rule Maturities. As of the date of this certificate, for each Maturity of the General Rule Maturities, the first price at which at least 10% of such Maturity was sold to the Public is the respective price listed in Schedule A. 2. Initial Offering Price of the Hold -the -Offering -Price Maturities. (a) Piper offered the Hold -the -Offering -Price Maturities to the Public for purchase at the respective initial offering prices listed in Schedule A (the "Initial Offering Prices") on or before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is attached to this certificate as Schedule B. (b) As set forth in the Purchase Agreement, Piper has agreed in writing that, (i) for each Maturity of the Hold -the -Offering -Price Maturities, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the "hold -the -offering -price rule"), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold -the -offering -price rule. Pursuant to such agreement, no Underwriter (as defined below) has offered or sold any Maturity of the Hold -the -Offering -Price Maturities at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period. 3. Defined Terms. (a) General Rule Maturities means those Maturities of the Bonds listed in Schedule A hereto as the "General Rule Maturities." (b) Hold -the -Offering -Price Maturities means those Maturities of the Bonds listed in Schedule A hereto as the "Hold -the -Offering -Price Maturities." (c) Holding Period means, with respect to a Hold -the -Offering -Price Maturity, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date, or (ii) the date on which Piper has sold at least 10% of such Hold -the -Offering -Price Maturity to the Public at prices that are no higher than the Initial Offering Price for such Hold -the - Offering -Price Maturity. Exhibit B-1 (d) Issuer means Lodi Public Financing Authority. (e) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate maturities. (f) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term "related party" for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (g) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is 32020. (h) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Piper's interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Certificate as to Arbitrage and Certificate Regarding Use of Proceeds and with respect to compliance with the federal income tax rules affecting the Bonds, and by Jones Hall, A Professional Law Corporation in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. Dated: , 2020 PIPER SANDLER & CO. .0 Name: Exhibit B-2 SCHEDULE A SALE PRICES OF THE GENERAL RULE MATURITIES AND INITIAL OFFERING PRICES OF THE HOLD -THE -OFFERING -PRICE MATURITIES (Attached) Exhibit B-3 SCHEDULE B PRICING WIRE OR EQUIVALENT COMMUNICATION (Attached) Exhibit B-4 April , 2020 Lodi Public Financing Authority 221 West Pine Street Lodi, CA 95240 OPINION: $ Lodi Public Financing Authority 2020 Refunding Water Revenue .Bonds Series A Members of the Board of Directors of the Authority: We have acted as bond counsel to the Lodi Public Financing Authority (the "Authority") in connection with the issuance by the Authority of the captioned bonds dated the date hereof (the "Bonds"). In such capacity, we have examined such law and such certified proceedings, certifications and other documents as we have deemed necessary to render this opinion. The Bonds are issued pursuant to Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the "Bond Law"), the Indenture of Trust, dated as of April 1, 2020 (the "Indenture"), by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee "), and a resolution (the "Resolution") of the Board of Directors of the Authority adopted , 2020. Under the Indenture, the Authority has pledged certain revenues (the "Revenues") for the payment of principal, premium (if any), and interest on the Bonds when due, including installment payments made by the City of Lodi (the "City") under an Installment Sale Agreement dated as of April 1, 2020 (the "Installment Sale Agreement") between the Authority and the City. Regarding questions of fact material to our opinion, we have relied on representations of the Authority contained in the Indenture and the City contained in the Installment Sale Agreement, and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation. Based on the foregoing, we are of the opinion that, under existing law: Lodi Public Financing Authority April _, 2020 Page 2 1. The Authority is a duly created and validly existing joint exercise of powers authority with the power to adopt the Resolution, enter into the Indenture and perform the agreements on its part contained therein, and issue the Bonds. 2. The City is a duly created and validly existing general law city with the power to enter into the Installment Sale Agreement and perform the agreements on its part contained therein. 3. The Indenture has been duly authorized, executed and delivered by the Authority, and constitutes a valid and binding obligation of the Authority, enforceable against the Authority. 4. The Installment Sale Agreement has been duly authorized, executed and delivered by the Authority and the City, and constitutes a valid and binding obligation of the Authority and the City, enforceable against the Authority and the City. 5. The Indenture creates a valid lien on the Revenues and other funds pledged by the Indenture for the security of the Bonds, on a parity with other bonds (if any) issued or to be issued under the Indenture. 6. The Bonds have been duly authorized and executed by the Authority, and are valid and binding limited obligations of the Authority, payable solely from the Revenues and other funds provided therefor in the Indenture. 7. The interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax. The opinions set forth in the preceding sentence are subject to the condition that the Authority and the City comply with all requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the issuance of the Bonds in order that the interest thereon be, and continue to be, excludable from gross income for federal income tax purposes. 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 Bonds. 8. Interest on the Bonds is exempt from personal income taxation imposed by the State of California. We express no opinion regarding any other tax consequences arising with respect to the ownership, sale or disposition of, or the amount, accrual or receipt of interest on, the Bonds. The rights of the owners of the Bonds and the enforceability of the 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. Lodi Public Financing Authority April _, 2020 Page 3 This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Our engagement with respect to this matter has terminated as of the date hereof. Respectfully submitted, A Professional Law Corporation o W 0 d O o— y d N N a o o y c � o E ami � 'c � N c N U d �i aci FL- E m c � a� E m ,0 - _ E 0 ca z M c o c o,Ea •a �' v a d 0 U L 3 o � � r � N y O a � c N 01,8 2 y0 m C1 O a: ` N U N L C O C y U f0 a 7 C C N 0? r - o E 3 c o c0 r m •� lC •� C C C EC 01 •.i-'' N N N L mO o C a ,E v � L � H=2, PRELIMINARY OFFICIAL STATEMENT DATED , X2020 NEW ISSUE - FULL BOOK -ENTRY RATING: S&P: See "Rating" In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the 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. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "TAX MATTERS." Dated: Date of Delivery $22,400,000' LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A Due: June 1, as shown on inside cover Authority for Issuance. The 2020 Refunding Water Revenue Bonds, Series A (the "2020 Bonds") are being issued by the Lodi Public Financing Authority (the "Authority") under a resolution adopted by the Board of Directors of the Authority on March 4. 2020, and an Indenture of Trust dated as of April 1, 2020 (the "Indenture") by and between the Authority and MUFG Union Bank, N.A., as trustee for the 2020 Bonds (the "Trustee"). See "INTRODUCTION — General." Use of Proceeds. The proceeds of the 2020 Bonds will be used to (i) redeem all of the outstanding $29,650,000 principal amount of Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (the "Refunded Bonds") 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 2020 Bonds. See "THE REFINANCING PLAN." Security for the 2020 Bonds. Under the Indenture, the 2020 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 2020 Installment Payments ("2020 Installment Payments") to be made by the City pursuant to an Installment Sale Agreement dated as of April 1, 2020 (the "2020 Installment Sale Agreement") between the City and the Authority. The obligation of the City to make the 2020 Installment Payments is a special obligation of the City that is secured by a pledge of, and payable from, Net Revenues relating to the City's water system (the "Water System") and moneys on deposit in the Water System Fund. 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 2020 Installment Payments. The City is authorized under the 2020 Installment Sale Agreement to incur other obligations payable from Net Revenues on a parity basis with the 2020 Installment Payments and any obligations issued or incurred by the City, the payment of which constitutes a charge and lien on the Net Revenues and moneys in the Water System Fund equal to and on a parity basis with the charge and lien upon the Net Revenues and moneys in the Water System Fund for the payment of the 2020 Installment Payments ("Parity Obligations"). See "SECURITY AND SOURCES OF PAYMENT FOR THE 2020 BONDS" and "THE WATER SYSTEM." Bond Terms; Book -Entry Only. The 2020 Bonds will bear interest at the rates shown on the inside cover page, payable semiannually on June 1 and December 1 of each year, commencing on June 1, 2020, and will be issued in fully -registered form without coupons in integral multiples of $5,000. The 2020 Bonds will be issued in book -entry only form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), Purchasers of the 2020 Bonds will not receive certificates representing their interests in the 2020 Bonds. Payments of the principal of, premium, if any, and interest on the 2020 Bonds will be made to DTC, which is obligated in turn to remit such principal, premium, if any, and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the 2020 Bonds. See "THE 2020 BONDS — General." Redemption. The 2020 Bonds are subject to redemption prior to maturity. See "THE 2020 BONDS — Redemption." NEITHER THE 2020 BONDS, NOR THE OBLIGATION OF THE AUTHORITY TO PAY PRINCIPAL OF OR INTEREST ON THE 2020 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 2020 BONDS ARE SECURED SOLELY BY THE PLEDGE OF AUTHORITY REVENUES AND CERTAIN FUNDS HELD UNDER THE INDENTURE. THE 2020 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 2020 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 2020 BONDS. The 2020 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 Jones Hall, A Professional Law Corporation, San Francisco, California, Disclosure Counsel to the City, for the Authority by the City Attorney, and for the Underwriter by Kutak Rock LLP, Los Angeles, California. It is anticipated that the 2020 Bonds will be delivered in book -entry form through the facilities of DTC on or about , 2020. [Piper Sandler Logo] The date of this Official Statement is:, , 2020. Preliminary; subject to change. OFFICIAL STATEMENT $22,400,000" LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A 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 D — Summary of Principal Legal Documents." General The Lodi Public Financing Authority (the "Authority") is issuing its 2020 Refunding Water Revenue Bonds, Series A (the "2020 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 MambA_2020 (the "Authority Resolution"), a resolution adopted by the City Council (the "City Council") of the City of Lodi (the "City") on , Marsh 4. 2020 (the "City Resolution"), and an Indenture of Trust (the "indenture"), dated as of April 1, 2020, by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee"). The 2020 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 2020 Bonds. Purchasers of the 2020 Bonds will not receive certificates representing the 2020 Bonds that are purchased. See "THE 2020 Bonds — Book -Entry Only System" and "APPENDIX G — DTC AND THE BOOK -ENTRY ONLY SYSTEM." The 2020 Bonds are being issued to provide funds to (i) redeem all of the outstanding $29,650,000 principal amount of the Lodi Public Financing Authority's 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds - Direct Payment) (such amount being redeemed constituting the "Refunded Bonds") and a related Installment payment obligation of the City; and (ii) pay the costs of iSSUMg the 2020 Bonds, The City is not refinancing the portion of its installment payment obligation attributable to the Lodi Public Financing Authority's 2010 Water Revenue Bonds, Series A (the "2010A Bonds") or causing a redemption of the 2010A Bonds. The Refunded Bonds and the 2010A Bonds are referred to herein as the "2010 Bonds." See "THE REFINANCING PLAN." Preliminary; subject to change. ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds relating to the 2020 Bonds and the Refunded Bonds are as follows: Sources: Principal Amount [Plus/Less] Original Issue [Premium/Discount] Less Underwriter's Discount Plus Available Funds Relating to the Refunded Bonds Total Sources Uses: Deposit to Escrow Fund Costs of Issuance (') Total Uses (1) 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 2020 BONDS This section provides summaries of the 2020 Bonds and certain provisions of the Indenture. See APPENDIX D for a more corrmpfete summaryof the Indenture. Capitalized terms used but not defined in this section have the meanings given in APPENDIX D. General Bond Terms. The 2020 Bonds will be dated their date of delivery and issued in fully registered form without coupons in integral multiples of $5,000. The 2020 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 2020 Bonds will be payable on June I and December 1 in each year, beginning mer --.June 1, 2020 (each an "Interest Payment Date"). Principal on the 2020 Bonds will be payable on June 1 in the amounts and in the years set forth on the inside front cover of this Official Statement. I While the 2020 Bonds are subject to the book -entry system, the principal, interest and any prepayment premium with respect to the 2020 Bonds will be paid by the Trustee to DTC for subsequent disbursement to beneficial owners of the 2020 Bonds. See APPENDIX G — "DTC AND THE BOOK -ENTRY ONLY SYSTEM." Interest on the 2020 Bonds is payable from the Interest Payment Date next preceding the date of authentication thereof unless: a 2020 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 2020 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 2020 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 2020 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 2020 Bonds will be payable in lawful money of the United States of America. Interest with respect to the 2020 Bonds will be computed on the basis of a 360 -day year composed of twelve 30 -day months. Transfer, Registration and Exchange See "APPENDIX D — Summary of Principal Legal Documents" for a description of the provisions of the Indenture relating to the transfer, registration and exchange of the 2020 Bonds. Redemption The 2020 Bonds maturing on or before June 1, 20_, are not subject to optional redemption prior to their respective stated maturity dates. The 2020 Bonds maturing on or after June 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 June 1, 20_, from any 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 2020 Installment Sale Agreement. Pursuant to the Indenture, the Authority transfers, assigns and sets over to the Trustee all of the 2020 Installment Payments and any and all rights, title, interest and privileges it has in, to and under the 2020 Installment Sale Agreement (other than its rights to expenses and indemnification), including without limitation, the right to collect and receive directly all of the 2020 Installment Payments and the right to enforce the provisions of the 2020 Installment Sale Agreement. The City consents to such assignment in the 2020 Installment Sale Agreement and agrees to make payments of the 2020 Installment Payments directly to the 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 2020 Installment Sale 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 2020 Installment Payments received by the Trustee shall be deposited immediately in the Bond Fund. All of the 2020 Installment Payments are to be held in trust by the Trustee for the benefit of the Owners of the 2020 Bonds and shall be disbursed and applied only as provided in the Indenture. Pledge of Net Revenues Pursuant to the 2020 Installment Sale Agreement, all Net Revenues and all moneys on deposit in any of the funds and accounts established and held by the Trustee under the Indenture to secure the Installment Payments and any Parity Debt are irrevocably pledged to the payment of the 2020 Installment Payments, which pledge shall be on a parity with any pledge of Net Revenues or of moneys in the Water System Fund securing Parity Obligations. "Gross Revenues" means all gross charges received for, and all other gross income and receipts derived by the City from, the ownership and operation of the Water System or otherwise arising from the Water System, including but not limited to connection charges (including the City's impact mitigation fees) to the extent permitted by law, investment earnings thereon and the Refundable Credits under the 2010 Installment Sale Agreement; but excluding (a) the proceeds of any ad valorem property taxes levied for the purpose of paying general obligation bonds of the City relating to the Water System and (b) the proceeds of any special assessments or special taxes levied upon real property within any improvement district served by the City levied for the purpose of paying special assessment bonds or special tax obligations of the City relating to the Water System. "EQfUndabig redit " .ander the 2010 Installe�lnea au IyWq�payable tQ the Issuer of build America 13QI)d5 I)y the fadaral government un Seytl _y�t�Ca_ - �hi�b.the issuer�f such Budd America_13�Il ele EQ.rec L\ve under Sectio f - Operation and Maintenance Costs means the reasonable and necessary costs and expenses paid by the City for maintaining and operating the Water System, including but not limited to (a) costs of acquisition of water to be supplied by the Water System, (b) costs of 12 has the right at any time to withdraw any or all amounts on deposit in a Rate Stabilization Fund and apply such amounts for any lawful purposes of the City. Application of Revenues In order to carry out and effectuate the obligation of the City contained in the 2020 Installment Sale Agreement to pay the 2020 Installment Payments, the City agrees and covenants that all Gross Revenues, including, without limitation, Refundable Credits as defined in the 2010 Installment Sale Agreemen lift aw, t ��e-QL tto�Bud MAS, ffff2ed w :i._$.s�d� "t3uil erical3and,„Z1 shall be deposited when and as received in a special fund designated as the "Water System Fund", which fund the City agrees and covenants to maintain and to hold separate and apart from other funds so long as any 2020 Installment Payments remain unpaid. Amounts on deposit in the Water System Fund will be applied by the City to pay when due the following amounts in the following order of priority: (i) all Operation and Maintenance Costs; (ii) the 2020 Installment Payments and all payments of principal of and interest on any Parity Debt; (iii) to the Trustee the amount of any deficiency in any reserve account established for Parity Debt, the notice of which deficiency has been sent to the City in accordance with the applicable provisions of the related Parity Debt Documents; (iv) any other payments required to comply with the provisions of the 2020 Installment Sale Agreement and any Parity Debt Documents; and (v) any other purposes authorized under the 2020 Installment Sale Agreement, including (A) the payment of any subordinate obligations or any unsecured obligations, (B) the acquisition and construction of improvements to the Water System, (C) the prepayment of any other obligations of the City relating to the Water System, or (D) any other lawful purposes of the City. No Debt Service Reserve Fund No debt service reserve fund is being established in connection with the issuance of the 2020 Bonds. The Authority and the City have reserved the right to establish debt service reserves for Parity Obligations. See "INTRODUCTION — No Reserve Account." Outstanding Parity Obligations Upon the issuance of the 2020 Bonds and the refunding of the Refunded Bonds and corresponding portion of the related installment payment obligation of the City, the only other outstanding obligations payable from Net Revenues on a parity with the 2020 Bonds will be the 2010A Bonds and the related installment payment obligation of the City. 15 Additional Parity Obligations The City is permitted under the 2020 Installment Sale Agreement to incur Parity Obligations, subject to satisfaction of the following conditions. (a) No Event of Default has occurred and is continuing (unless the Event of Default will be cured as a result of the issuance of the Parity Debt). (b) The Net Revenues, calculated in accordance with sound accounting principles, as shown by the books of the City for the most recent completed Fiscal Year for which audited financial statements are available, or for any more recent consecutive 12 -month period selected by the City at its option, in either case verified by a certificate or opinion of an Independent Accountant or Fiscal Consultant, plus the Additional Revenues, at least equal 125% of the amount of Maximum Annual Debt Service with respect to the 2020 Installment Payments and all Parity Debt then outstanding (including the Parity Debt then proposed to be issued). For purposes of this paragraph, the amount of any Refundable Credits that the City expects to receive in a Fiscal Year will be excluded from the amount of Gross Revenues for such Fiscal Year, but will. be included as a credit against the applicable amount of 2020 Installment Payments and principal of and interest on any Parity Debt coming due in such Fiscal Year. For purposes of this paragraph, the amount of Net Revenues for a Fiscal Year will be computed on the basis that any transfers into the Water System Fund in that Fiscal Year from the Rate Stabilization Fund are included in the calculation of Net Revenues (but only to the extent that the moneys transferred from the Rate Stabilization Fund would not otherwise constitute Gross Revenues for the applicable Fiscal Year). (c) Except as provided in the next paragraph, upon the issuance of such Parity Debt a reserve fund will be established for such Parity Debt. The reserve fund which is established for an issue of Parity Debt will be required to be maintained in an amount which, together with the aggregate amount required to be on deposit in all of the reserve funds established for the 2020 Bonds and other outstanding Parity Debt, is at least equal to Maximum Annual Debt Service on the 2020 Installment Payments and all outstanding Parity Debt, taken as a whole (other than Parity Debt for which no reserve fund is established as described in the next paragraph). In the event the City issues Parity Debt the purchaser of which does not require the establishment of a reserve fund, such Parity Debt may be issued without a reserve fund. However, in that event, such Parity Debt is not entitled to the security of amounts held in the reserve fund which is established for the 2020 Bonds (for which no reserve fund isbeirtu t Iish (j or for any other issue of Parity Debt, and such Parity Debt will be disregarded in determining the amount required to be maintained in any other reserve fund established for outstanding Parity Debt. (d) The trustee or fiscal agent for such Parity Debt (except to the extent required to be a separate entity from the City or the Authority by the purchaser of such Parity Debt) is the same entity performing the functions of Trustee under the Indenture. (e) The City must deliver to the Trustee a Written Certificate of the City certifying that the conditions precedent to the issuance of such Parity Debt setforth in the 2020 Installment Sale Agreement have been satisfied. 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 16 Certain Environmental Conditions" for further information regarding DBCP and 1,2,3-TCP. The combined capacity of the groundwater wells is approximately 37,000 gallons per minute or 52.9 million gallons per day. The wells operate automatically on water pressure demand and pump directly into the distribution system. The Sustainable Groundwater Management Act (the "SGMA") was signed into law in 2014 and provides a framework for long-term sustainable groundwater management throughout the State. The SGMA requires local and regional authorities in medium- and high-priority groundwater basins designated by the Department of Water Resources (the "DWR") to form groundwater sustainability agencies ("GSAs") and to adopt a groundwater sustainability plan (a "GSP") designed to achieve basin sustainability no later than 2040 for basins in critical conditions of overdraft and 2042 for basins not in critical condition of overdraft. The City overlies the Eastern San Joaquin Groundwater Subbasin, one of 21 basins and subbasins identified by the DWR as being in a state of critical overdraft. The City and 15 other GSAs formed the Eastern San Joaquin Groundwater Authority (the "ESJGWA"), a joint exercise of powers authority, effective February 8, 2017 in response to the SGMA. The purpose of the ESJGWA is to coordinate the management of the Eastern San Joaquin Groundwater Subbasin in accordance with the SGMA. The ESJGWA is governed by a Board of Directors (the "ESJGWA Board"), with one representative from each GSA, and is guided by an Advisory Committee, also with one representative from each GSA, that is tasked with making recommendations to the ESJGWA Board on technical and substantive matters. The ESJGWA released a draft GSP for public comment in July 2019. Following public workshops and hearings, the final GSP dated November 2019 was released. On January 8, 2020, after approval and adoption of the GSP by each GSA, the ESJGWA Board adopted a resolution agreeing to submit the GSP to the DWR in advance of the January 30, 2020 statutory submittal deadline, The City does not currently expect that enactment of or compliance with the SGMA or the GSP for the Eastern San Joaquin Groundwater Subbasin will have a material adverse effect on its ability to make the 2020 Installment Payments; however, the City can make no assurances as to the reliability or adequacy of future supplies of groundwater to meet future demands. Surface Water. The Water System also operates a surface water treatment plant (the "Treatment Plant"), which commenced operation in 2012. The Treatment Plant pumps raw water from the Mokelumne River and treats it with a microfiltration process. The Treatment Plant was initially constructed to treat and distribute up to 10 million gallons of water per day and was designed to be able to accommodate a future expansion of the Treatment Plant of up to 20 million gallons per day. The City does not have its own water rights to water from the Mokelumne River but instead contracts with other local agencies for the purchase of water from the Mokelumne River. In 2003, the City entered into a contract with the Woodbridge Irrigation District ("WID") for the purchase of up to 6,000 acre-feet annually of surface water from the Mokelumne River " The -WID Contract expires on October 15, 2047 and t44-&oRtrast-provides for an extension at the City's option for an additional 40 years. In 2014, the City entered into a contract with the North San Joaquin Water Conservation District (the "NSJWCD") forthe purchase of up to 1,000 acre-feet annually of surface water from the Mokelumne River, �- " . Pursuant o the NSJW D Contract t e 't c -s-ed QOO a re-feet of water in 2016. ntract ex 20 IT MEN me I 11-11M.-MII� ■ ■■ l' ■ ■ -'. Storage. The Water System contains three separate storage facilities. A 100,000 -gallon elevated tank, located on North Main Street in the City, modulates pressures with the distribution system. A one million -gallon storage tank and pressure boosting pump station, located east of State Route 99 on Thurman Street in the City, serve peak demands in the City's industrial areas. A three million -gallon storage tank is located at the site of the Treatment Plant. In addition, a fourth storage facility, with a 1 million gallon capacity, is under construction in the southeast side of the City that will provide additional water supply to accommodate peak fire flow demand. This project is a condition of development, is entirely funded by the developer of the Reynolds Ranch project, and will be dedicated to the City upon completion. Insurance. The City's boiler and machinery operations (including those parts of the Water System) are insured by the Alliant Property Insurance Program (APIP), which is a group purchase property program through the Lloyd's of London marketplace, and Hallmark Financial Services, for up to $100 million in coverage. The City, including the Water 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 Agency for up to $40 million per occurrence. The City is self-insured for workers' compensation losses for up to $250,000 and has pooled excess coverage through the Local Agency Workers' Compensation Excess Authority for statutory coverage. Service Area and Customers The City provides water to substantially all of the population of the City, representing an area of approximately 11.5 square miles. In addition, the City provides water service to a small 21 -unit residential subdivision outside the City via an agreement with the County of San Joaquin and anticipates that in 2020 it will begin providing water service to Henderson School, which is also outside the City limits, under an agreement with Lodi Unified School District. The table below shows the number of accounts in the Water System by user type and service charge revenues by class of user. Residential users represent approximately 89% of all accounts and approximately 76% of water sales revenues. 21 Set forth below is a table showing selected rates hedul RqQn. ani effective as of April 2019. - - Table 3 City of Lodi Water System Selected Rates Effective April 2019 Flat Rates ($/month) Single Family Residential Unit $33.66 2 Bedroom 40.43 3 Bedroom 48.45 Metered Water Rates Service Charge ($/month) Single Family Residential Up to 3/4" Meter 22.42 Multi -Family and Non -Residential 1" Meter 35.20 1 1/2" Meter 66.88 2" Meter 105.08 Water Usage Rates ($/CCF) Single Family Residential Tier 1 - 0 to 10 CCF/month 0.99 Tier 2 - 11 to 50 CCF/month 1.32 Tier 3 - Over 50 CCF/month 1.64 Multi -Family and Non -Residential All Water Usage 1.18 Source: City of Lodi 24 A history of water rate increases since 2014, and projections for water rate increases through 2023, is presented in the following table. Table 4 , City of Lodi Water System History of Water Rate Increases Since 2014 and Projected Water Rate Increases Through 2023 Year Percentage 2014 2.500% 2015 2.000 2016 1.975 2017 3.000 2018 0,000 2019 2.500 2020 0.000 2021 -5.3000) 2022 3.000 2023 3.000 (1) Reflects planned rollback to 2016 rates Wile -Ci -LY -Council pur-spant to Rescillition Na 202-23 -qtrdin Source: City of Lodi Water Shortage Surcharge. The .Rate Schedule Resolution includes a water shortage rate surcharge. This temporary water shortage surcharge is implemented under specified water shortage conditions and is designed to provide incremental revenue to help offset declines in revenue due to reduced water sales in times of water shortage. The temporary water shortage surcharge applies to usage rates (and not to the fixed monthly service charge for metered customers, or to flat rates) and begins when water use reductions of 10-20% are necessary. Billing and Collection. The City bills monthly for water, wastewater, solid waste and electricity on the same bill. If a bill is unpaid, the City will terminate electric service to a customer within 55 days of nonpayment after 48 hours' notice. Any termination of a customer's water services by the City would be required to be in compliance with the State's Water Shutoff Protection Act (California Health & Safety Code §116900, et. seq.). For Fiscal Year 2016-17 and Fiscal Year 2018-19, no accounts were sent to collection as the City was working through challenges with enterprise resource program software implementation. For Fiscal Year 2018-19, all closed accounts with a delinquent balance over 45 days were sent to collection. Closed accounts with outstanding balances greater than 45 days are now referred to a collection agency on a monthly basis. For financial reporting, the City records an allowance for bad debt equal to 1 % of receivables over 60 days old. The Water System component of accounts recently referred to collection are: Fiscal Year 2016-17 2017-18 2018-19 Amount $0 $0 $296,894 % of Sales Charge Revenue 0% 0% 0.37% Source: City of Lodi 25 Cybersecurity The City, including the Water System, like many other public and private entities, relies on computer and other digital networks and systems to conduct its operations. As a recipient and provider of personal, private or other sensitive electronic information, the City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. On April 4 and May 3, 2019, the City experienced information security incidents involving ransomware impacting multiple City systems. The City did not pay any ransom and its systems were either rebuilt or restored from backups. The City retained the services of Baker & Hostetler LLP and Cytelligence Inc. to provide legal, technical, and forensic services through the City's cyber insurance coverage. With the exception of the City's $2-55Q,000 deductible, all costs associated with these information security incidents, including legal and forensic experts and employee overtime, were covered by insurance. The City believes it ha taken reasonable steps to rnitiQate the adverse effe is of_ _ c berattacksin , c uding _#3� takeR—steps to harden its cybersecurity and provide training for employees in the use of its digital networks and systems. No assurance can be given that the City's efforts to manage cyber threats and attacks will be successful in all cases, or that any such attack will not materially impact the operations or finances of the City, No assurance can be given that the City, the Authority, the and Water System will not be affected by cyber threats and attacks in a manner that may affect the owners of the 2020 Bonds. Rate Consultant's Report The Rate Consultant's Report contained as Appendix C to this Official Statement contains certain assumptions and estimates. The Rate Consultant's Report should be read in its entirety for a discussion of the assumptions and rationale underlying the estimates, projections, conclusions and opinions contained therein. The estimates, projections, conclusions and opinions contained therein are subject to uncertainties. There will usually be differences between actual and estimated future results because not all events and circumstances occur as expected, and those differences may be material. Accordingly, the projections contained in the Rate Consultant's Report are not necessarily indicative of future performance, and neither the Rate Consultant nor the City assumes any responsibility for any failure to meet such projections. In addition, certain assumptions with respect to future business and financing decisions of the City are subject to change. No representation is made or intended, nor should any representation be inferred, with respect to the likely existence of any particular future set of facts or circumstances, and prospective purchasers of the 2020 Bonds are cautioned not to place undue reliance upon the Rate Consultant's Report or upon any estimates, projections, conclusions and opinions contained in the Rate Consultant's Report. If actual results are less favorable than the results projected or if the assumptions used in preparing such projections prove to be incorrect, the amount of Net Revenues may be materially less than expected and consequently, the ability of the City to make timely payment of the 2020 Installment Payments may be materially adversely affected. Neither the City's independent auditors, nor any other independent accountants have compiled, examined or performed any procedures with respect to the information in the Rate Consultant's Report, including the Net Revenues forecast, nor have they expressed any opinion or any form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the Rate Consultant's Report. 38 FINANCIAL STATEMENTS The Pun Group, Certified Public Accountants (the "Auditor"), audited the financial statements of the City for the Fiscal Year ended June 30, 2019, 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, 2019." 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. RATING S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC ("S&P"), is expected to assign the 2020 Bonds the long-term rating of The rating reflects only the views of S&P, and any explanation of the significance of such rating may be obtained only from S&P. There is no assurance that the rating will remain in effect for any given period of time or that it will not be revised downward or withdrawn entirely by S&P, if, in their judgment, circumstances so warrant. The City undertakes no responsibility to oppose any such revision or withdrawal. Any downward revision or withdrawal of the rating may have an adverse effect on the market price of the 2020 Bonds. CONTINUING DISCLOSURE The City will covenant for the benefit of owners of the 2020 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 2019-20 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 F— Form of Continuing Disclosure Certificate," attached to this Official Statement. These covenants have been made in order to assist the underwriter of the 2020 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 Water System and the City's electric and wastewater utilities. During the past five years, the City has prepared continuing disclosure reports pursuant to these undertakings. Within the past five years, the City and certain of its related entities have failed to comply in certain respects with continuing disclosure obligations related to outstanding indebtedness, by (i) filing audited financial statements and operating data on EMMA for Fiscal Years 2014-15 and 46 APPENDIX A GENERAL INFORMATION ABOUT THE CITY OF LODI AND SAN JOAQUIN COUNTY The following information concerning the City of Lodi (the "City') and San Joaquin County (the "County') are included only for the purpose of supplying general information regarding the community. The 244 -9 -202D -Bonds are not a debt of the City, the County, the State of California (the "State') or any of its political subdivisions, and neither the City, the County, the State nor any of its political subdivisions is liable therefor. General The City. 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). The County. The County is one of California's original counties and was created at the time of statehood in 1850. The County covers an area of approximately 1,436 square miles, consisting of 1,399 square miles of land and 27 square miles of water. The County is adjacent to Stanislaus County to the south and southeast, Alameda and Contra Costa Counties to the west, Sacramento County to the north, Amador County to the northeast, Calaveras County to the east and a corner of Santa Clara County to the southwest. Population Population figures for the City, the County and the State for the last six years are shown in the following table. CITY OF LODI, SAN JOAQUIN COUNTY AND THE STATE OF CALIFORNIA Population Estimates Calendar Years 2014 through 2019, as of January 1 Calendar City of San Joaquin State of Year Lodi Count o California 2014 63,700 713,315 38,622,301 2015 64,503 724,859 38,952,462 2016 65,074 736,027 39,214,803 2017 65,981 747,579 39,504,609 2018 67,042 757,279 39,740,508 2019 68,272 770,385 39,927,315 Source: State Department of Finance estimates. A-1 APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE LODI PUBLIC FINANCING AUTHORITY 2020 REFUNDING WATER REVENUE BONDS, SERIES A This Continuing Disclosure Certificate (this "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") 2020 Refunding Water Revenue Bonds, Series A (the "2020 Bonds"). The 2020 Bonds are being issued pursuant to an Indenture of Trust dated as of April 1, 2020 (the "Indenture"), by and between the City and MUFG Union Bank, N.A., as trustee for the 2020 Bonds (the "Trustee"). In connection therewith, the City covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the holders and beneficial owners of the 2020 Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2 -12(b)(5). Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Annual Report Date" means the date that is seven months after the end of the City's fiscal year (currently January 31 based on the City's fiscal year end of June 30). "Dissemination Agent" shall mean , the Ci or any Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. "EMMA System" shall mean the MSRB's Electronic Municipal Market Access system, or such other electronic system designated by the MSRB. "Listed Events" means any of the events listed in Section 5(a) of this Disclosure Certificate. "MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule. "Official Statement" means the final official statement dated 2020, executed by the City and Authority in connection with the issuance of the 2020 Bonds. "Participating Underwrite" means Piper Sandler Gempan e,6&Co., the original underwriter of the 2020 Bonds required to comply with the Rule in connection with offering of the 2020 Bonds. F-1 "Rule" means Rule 15c2 -12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time. Section 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date, commencing January 31, 2021, with the report for the 2019-20 fiscal year, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by 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 Annual Report Date, if 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(bs). (b) If the City does not provide, or cause the Dissemination Agent to provide, an Annual Report by the Annual Report Date as required in subsection (a) above, the Dissemination Agent shall provide a notice to the MSRB, in a timely manner, in an electronic format as prescribed by the MSRB. (c) With respect to each Annual Report, the Dissemination Agent shall: (i) determine each year prior to the Annual Report Date the then -applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (ii) if the Dissemination Agent is other than the City, file a report with the City and the Participating Underwriter certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided. Section 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following documents and information: (a) The City's audited financial statements for the most recently completed fiscal year, prepared in accordance with Generally Accepted Accounting Principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City's audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Unless otherwise provided in the audited financial statements filed on or before the Anrival Report Date, financial information and operating data with respect to the City for the preceding fiscal year, substantially similar to that provided in the corresponding tables in the Official Statement: F-2 (i) Principal amount of 2020 Bonds outstanding as of the end of such fiscal year. (ii) Updated information comparable to the information in Table 1 titled "City of Lodi Water System Number of Accounts and Revenue by User Type" as it appears in the Official Statement. (iii) Updated information comparable to the information in Table 2 titled City of Lodi Water System Largest Users by Service Charge Revenues" as it appears in the Official Statement. (iv) Updated information for such fiscal year comparable to the information in Table 3 titled "Selected Rates Effective April -4, 2019" as it appears in the Official Statement. (v) Updated information for such fiscal year and the four previous fiscal years only (i.e., no projected information for current or future years is required) comparable to the information in Table 6 titled "City of Lodi Water System Historic Operating Results and Debt Service Coverage" as it appears in the Official Statement. (vi) A description of any additional indebtedness incurred during the prior fiscal year which is payable from Net Revenues on a parity with the 2020 Installment Payments. (c) In addition to any of the information expressly required to be provided under paragraph (b) above, the City shall provide such further material information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. (d) 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 are available to the public on the MSRB's Internet web site or filed with the Securities and Exchange Commission. The City shall clearly identify each such other document so included by reference. Section 5. Repoiling of Listed Events. (a) The City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the 2020 Bonds: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults, if material. (3) Unscheduled draws on. debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. F-3 the qualifier "if material" and that subparagraph (a)(6) also contains the qualifier "material" with respect to certain notices, determinations or other events affecting the tax status of the 2020 Bonds. The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event's occurrence is material for purposes of U.S. federal securities law. Upon occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above. (d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, trustee, or similar officer for the City in a proceeding under the United States 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 City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. (e) For purposes of Section 5(a)(15) and (16), "financial obligation" means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule, Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB under the Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of RePaLiinq Obligation, The City's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the 2020 Bonds. If such termination occurs prior to the final maturity of the 2020 Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(s12). Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be . lha-L1t Any Dissemination Agent may resign by providing 30 days' written notice to the City. Section 9. 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(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the 2020 Bonds, or type of business conducted; F-5 H.2 RESOLUTION NO. 2020- A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING DOCUMENTS AND OFFICIAL ACTIONS RELATING TO THE REFINANCING OF AN OUTSTANDING INSTALLMENT PAYMENT OBLIGATION FOR WATER SYSTEM IMPROVEMENTS AND THE ISSUANCE BY THE LODI PUBLIC FINANCING AUTHORITY OF REFUNDING WATER REVENUE BONDS WHEREAS, the City of Lodi (the "City") owns and operates facilities and property for the supply, treatment, and distribution of water within the service area of the City (the "Water System"); and WHEREAS, the Lodi Public Financing Authority (the "Authority") is a joint exercise of powers authority that was established by the City and the Industrial Development Authority of the City of Lodi pursuant to a Joint Exercise of Powers Agreement, dated as of July 1, 2010; the Authority was formed for the purpose of assisting the City in the financing of public capital improvements; and WHEREAS, in order to provide funds to finance the acquisition and construction of improvements to the Water System (the "2010 Water Projects"), the City previously caused the Authority to issue the following bonds (collectively, the "2010 Bonds") pursuant to an Indenture of Trust, dated as of October 1, 2010 (the "2010 Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2010 Trustee"): (i) $9,015,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series A ("2010A Bonds"), and (ii) $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) ("2010B Bonds"); and WHEREAS, the 2010 Bonds are payable from installment payments (the "2010 Installment Payments") made by the City to the Authority under an Installment Sale Agreement dated as of October 1, 2010 (the "2010 Installment Sale Agreement"), under which the Authority acquired, constructed and improved the 2010 Water Projects and sold the completed 2010 Water Projects to the City in consideration of the agreement by the City to pay the 2010 Installment Payments; and WHEREAS, under current municipal bond market conditions, it is possible for the City to refinance on a tax-exempt basis the portion of the 2010 Installment Payments attributable to the 2010B Bonds (the "20108 Installment Payments") for the purpose of achieving savings for the benefit of the customers of the Water System, and to cause a redemption of the 2010B Bonds on June 1, 2020; and WHEREAS, the City does not expect to refinance the portion of the 2010 Installment Payments attributable to the 2010A Bonds (the "2010A Installment Payments") or to cause a redemption of the 2010A Bonds; and WHEREAS, in order to provide funds to refinance the 2010B Installment Payments and cause a redemption of the 2010B Bonds, the City wishes to ask the Authority to issue its 2020 Refunding Water Revenue Bonds, Series A (the "Refunding 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 Refunding Bonds, the City proposes to enter into an installment sale agreement (the "Refunding Installment Sale Agreement") with the Authority and to pay installment payments (the "Refunding Installment Payments") in an amount sufficient to pay debt service on the Refunding Bonds; and WHEREAS, the Refunding Installment Payments will be secured by a pledge of and lien on the net revenues of the Water System, on a parity with the pledge of and lien on the net revenues securing the City's obligation under the 2010 Installment Sale Agreement to make the 2010A Installment Payments; and WHEREAS, there has also been submitted to the City Council a form of Preliminary Official Statement in connection with the marketing of the Refunding Bonds and the City Council, with the aid of its staff, has reviewed the Preliminary Official Statement; and WHEREAS, in accordance with Government Code Section 5852.1, the City Council has obtained and wishes to disclose the information set forth in Exhibit A hereto; and WHEREAS, the City Council wishes at this time to take action approving the proposed refinancing 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 Refunding 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 Refunding Bonds by the Authority under the Bond Law in the aggregate principal amount of not to exceed $31,000,000. Section 2. Approval of Refunding Installment Sale Agreement. The City Council hereby approves the Refunding Installment Sale Agreement between the Authority and the City. The Refunding Installment Sale 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, the City Manager, the Deputy City Manager or the 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 Refunding Installment Sale Agreement, and such execution shall be conclusive evidence of the approval of the final form thereof. -2- Section 3. Sale of Refunding Bonds; Approval of Bond Purchase Agreement. The City Council hereby approves the negotiated sale of the Refunding Bonds by the Authority to Piper Sandler Companies (the "Underwriter"). The Refunding Bonds shall be sold upon the terms and conditions set forth in the Bond Purchase Agreement 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 Refunding 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% of the principal component of the 2010B 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 City by an Authorized Officer. Section 4. Official Statement. The City Council hereby approves and deems nearly final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, the Preliminary Official Statement describing the Refunding Bonds in the form on file with the City Clerk, 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 Underwriter a certificate deeming the Preliminary Official Statement to be nearly 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. Section 5. Approval of Escrow Deposit and Trust Agreement. The City Council hereby approves an Escrow Deposit and Trust Agreement between the City and the 2010 Trustee, as escrow bank, providing for the deposit, investment and application of funds to refinance the 2010B Installment Payments and defease and redeem the 2010B Bonds. The Escrow Deposit and Trust 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 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 6. Continuing Disclosure Certificate. 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 7. Approval of Professional Services. The City Council hereby appoints the firm of Jones Hall, A Professional Law Corporation, as bond counsel and disclosure counsel to the City in connection with the issuance of the Refunding Bonds, and an Authorized Officer is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the City Clerk. The City Council hereby appoints the firm of Fieldman, Rolapp & Associates, Inc. as municipal advisor to the City in connection with the issuance of the Refunding Bonds, -3- and an Authorized Officer is authorized to execute an agreement with said firm in substantially the form of the agreement on file with the City Clerk. Section 8. Official Actions. The Authorized Officers 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 9. Effective Date. This Resolution shall take effect immediately upon its passage and adoption. Dated: March 4, 2020 ------------- I hereby certify that Resolution No. 2020- was passed and adopted by the City Council of the City of Lodi in a regular joint meeting of the Lodi City Council and the Lodi Public Financing Authority held on March 4, 2020 by the following vote: AYES: COUNCIL MEMBERS — NOES: COUNCIL MEMBERS — ABSENT: COUNCIL MEMBERS — ABSTAIN: COUNCIL MEMBERS — PAMELA M. FARRIS Assistant City Clerk 2020- -4- EXHIBIT A GOVERNMENT CODE SECTION 5852.1 DISCLOSURE The following information consists of estimates that have been provided by the City's municipal advisor, which has been represented by such party to have been provided in good faith: (A) True Interest Cost of the Refunding Bonds: 2.36%- (B) Finance Charge of the Refunding Bonds (Sum of all fees paid to third parties): $258,337. (C) Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if any): $28,291,138. (D) Total Payment Amount Through Maturity: $36,455,360. The foregoing estimates constitute good faith estimates only based on a refinancing of the 2010B Installment Payments and the 2010B Bonds. The principal amount of the Refunding Bonds, the true interest cost of the Refunding 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 Refunding Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Refunding Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the Refunding 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 Refunding Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City's financing plan (including a refinancing of the 2010A Installment Payments and redemption of the 2010A Bonds), or a combination of such factors. The actual date of sale of the Refunding Bonds and the actual principal amount of Refunding Bonds sold will be determined by the City based on the timing of the need for proceeds of the Refunding Bonds and other factors. The actual interest rates borne by the Refunding Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Refunding 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. -5- RESOLUTION NO. LPFA2020- A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LODI PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE AND SALE OF REFUNDING WATER REVENUE BONDS TO REFINANCE THE CONSTRUCTION OF WATER SYSTEM IMPROVEMENTS, AND APPROVING RELATED DOCUMENTS AND OFFICIAL ACTIONS WHEREAS, the City of Lodi (the "City") owns and operates facilities and property for the supply, treatment, and distribution of water within the service area of the City (the "Water System"); and WHEREAS, the Lodi Public Financing Authority (the "Authority") is a joint exercise of powers authority that was established by the City and the Industrial Development Authority of the City of Lodi pursuant to a Joint Exercise of Powers Agreement, dated as of July 1, 2010; the Authority was formed for the purpose of assisting the City in the financing of public capital improvements; and WHEREAS, in order to provide funds to finance the acquisition and construction of improvements to the Water System (the "2010 Water Projects"), the City previously caused the Authority to issue the following bonds (collectively, the "2010 Bonds") pursuant to an Indenture of Trust, dated as of October 1, 2010 (the "2010 Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the "2010 Trustee"): (i) $9,015,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series A ("201 OA Bonds"), and (ii) $29,650,000 Lodi Public Financing Authority 2010 Water Revenue Bonds, Series B (Federally Taxable - Build America Bonds — Direct Payment) ("2010B Bonds"); and WHEREAS, the 2010 Bonds are payable from installment payments (the "2010 Installment Payments") made by the City to the Authority under an Installment Sale Agreement dated as of October 1, 2010 (the "2010 Installment Sale Agreement"), under which the Authority acquired, constructed and improved the 2010 Water Projects and sold the completed 2010 Water Projects to the City in consideration of the agreement by the City to pay the 2010 Installment Payments; and WHEREAS, under current municipal bond market conditions, it is possible for the City to refinance on a tax-exempt basis the portion of the 2010 Installment Payments attributable to the 2010B Bonds (the "2010B Installment Payments") for the purpose of achieving savings for the benefit of the customers of the Water System, and to cause a redemption of the 2010B Bonds on June 1, 2020; and WHEREAS, the City does not expect to refinance the portion of the 2010 Installment Payments attributable to the 2010A Bonds (the "2010A Installment Payments") or to cause a redemption of the 2010A Bonds; and WHEREAS, in order to provide funds to refinance the 2010B Installment Payments and cause a redemption of the 2010B Bonds, the City has asked the Authority to issue its 2020 Refunding Water Revenue Bonds, Series A (the "Refunding 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 Refunding Bonds, the City proposes to enter into an installment sale agreement (the "Refunding Installment Sale Agreement") with the Authority and to pay installment payments (the "Refunding Installment Payments") in an amount sufficient to pay debt service on the Refunding Bonds; and WHEREAS, the Refunding Installment Payments will be secured by a pledge of and lien on the net revenues of the Water System, on a parity with the pledge of and lien on the net revenues securing the City's obligation under the 2010 Installment Sale Agreement to make the 2010A Installment Payments; and WHEREAS, there has also been submitted to the Board of Directors a form of Preliminary Official Statement in connection with the marketing of the Refunding Bonds and the Board of Directors, with the aid of its staff, has reviewed the Preliminary Official Statement; and WHEREAS, in accordance with Government Code Section 5852.1, the Board of Directors has obtained and wishes to disclose the information set forth in Exhibit A hereto; and WHEREAS, the Board of Directors wishes at this time to take action approving the proposed refinancing 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 Refunding Bonds under the Bond Law in the aggregate principal amount of not to exceed $31,000,000. Section 2. Approval of Related Financing Agreements. The Board of Directors hereby approves each of the following agreements required to implement the refinancing plan to be accomplished by the Refunding Bonds, in substantially the respective forms on file with the Secretary together with any changes therein or additions thereto deemed advisable by the Executive Director or the Treasurer (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 Refunding Bonds will be issued. -2- (b) Installment Sale Agreement between the Authority and the City, under which the City will pay the Refunding Installment Payments to the Authority. (c) Bond Purchase Agreement among the Authority, the City and Piper Sandler Companies, as underwriter (the "Underwriter"), under which the Underwriter agrees to purchase the Refunding Bonds from the Authority. 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 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 Refunding Bonds. The Board of Directors hereby approves the negotiated sale of the Refunding Bonds to the Underwriter. The Refunding Bonds shall be sold upon the terms and conditions set forth in the Bond Purchase Agreement which is approved under Section 2. The Board of Directors hereby delegates to an Authorized Officer the authority to accept an offer from the Underwriter to purchase the Refunding Bonds, provided that the Refunding 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% of the principal component of the 2010B Installment Payments, as such savings shall be verified and conclusively determined by the City's municipal advisor (the "Minimum Savings Requirement"). The maximum amount of Underwriter's discount on the sale of the Refunding Bonds shall not exceed 0.3% of the par amount of the Refunding Bonds. 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 nearly final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, the Preliminary Official Statement describing the Refunding 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 Underwriter a certificate deeming the Preliminary Official Statement to be nearly 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 and all other officers of the Authority are each authorized and directed, acting alone, in the name and on behalf of the Authority to make any and all assignments, certificates, requisitions, agreements (including an escrow deposit and trust agreement), 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 financial 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 -3- 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. Dated: March 4, 2020 I hereby certify that Resolution No. LPFA2020- was passed and adopted by the Board of Directors of the Lodi Public Financing Authority in a regular joint meeting of the Lodi Public Financing Authority and Lodi City Council held on March 4, 2020 by the following vote: AYES: BOARD MEMBERS — NOES. BOARD MEMBERS — ABSENT: BOARD MEMBERS — ABSTAIN: BOARD MEMBERS — PAMELA M. FARRIS Secretary LPFA2020- -4- EXHIBIT A GOVERNMENT CODE SECTION 5852.1 DISCLOSURE The following information consists of estimates that have been provided by the City's municipal advisor, which has been represented by such party to have been provided in good faith: (A) True Interest Cost of the Refunding Bonds: 2.36%. (B) Finance Charge of the Refunding Bonds (Sum of all fees paid to third parties): $258,337. (C) Net Proceeds to be Received (net of finance charges, reserves and capitalized interest, if any): $28,291,138. (D) Total Payment Amount Through Maturity: $36,455,360. The foregoing estimates constitute good faith estimates only based on a refinancing of the 2010B Installment Payments and the 2010B Bonds. The principal amount of the Refunding Bonds, the true interest cost of the Refunding 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 Refunding Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Refunding Bonds sold being different from the estimated amount used for purposes of such estimates, (c) the actual amortization of the Refunding 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 Refunding Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City's financing plan (including a refinancing of the 2010A Installment Payments and redemption of the 2010A Bonds), or a combination of such factors. The actual date of sale of the Refunding Bonds and the actual principal amount of Refunding Bonds sold will be determined by the City based on the timing of the need for proceeds of the Refunding Bonds and other factors. The actual interest rates borne by the Refunding Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Refunding Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the Authority. -5-