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2022-07-12 - Financing Authority Meeting Agenda Packet
AGENDA YORBA LINDA WATER DISTRICT FINANCING AUTHORITY REGULAR MEETING Tuesday, July 12, 2022, 6:30 PM 1717 E Miraloma Ave, Placentia CA 92870 1. PARTICIPATION INSTRUCTIONS Due to the continuing state of emergency declared by the California Governor related to preventing the spread of Coronavirus (COVID-19), and pursuant to California Government Code Section 54953(e), this meeting will be facilitated in a hybrid format. As such, Directors and members of the public may choose to participate in person or by video/teleconference. Information for accessing this meeting by telephone or internet-based service is provided below. For questions regarding participation, please call the Board Secretary at (714) 701-3020. Computer/Mobile Device: https://us06web.zoom.us/j/86842995081 Telephone: (669) 900-6833 or (346) 248-7799 Meeting ID: 868 4299 5081 2. CALL TO ORDER 2.1. NOTE: This meeting will be called to order following consideration of Item No. 8. on the agenda for the Regular Board of Directors Meeting on Tuesday, July 12, 2022 at 6:30 p.m. 3. ROLL CALL J. Wayne Miller, PhD, President Brooke Jones, Vice President Trudi DesRoches, Director Phil Hawkins, Director Tom Lindsey, Director 4. PUBLIC COMMENTS Any individual wishing to address the Board (or Committee) is requested to identify themselves and state the matter on which they wish to comment. If the matter is on the agenda, the Chair will recognize the individual for their comment when the item is considered. No action will be taken on matters not listed on the agenda. Comments are limited to three minutes and must be related to matters of public interest within the jurisdiction of the Water District. (GC 54954.3) 5. CONSENT CALENDAR All items on the consent calendar are considered routine and may be approved by a single motion. There will be no discussion of these items unless a member of the Board, staff, or public requests separate consideration. 5.1. Minutes of the Financing Authority Regular Meeting Held December 14, 2021 Recommendation: That the Board of Directors approve the minutes as presented. 6. ACTION CALENDAR This portion of the agenda is for items where staff presentations and Board (or Committee) discussions are needed prior to formal action. Page 1 of 236 6.1. Authorizing the Sale of Revenue Bonds, Series 2022A Recommendation: That the Board of Directors adopt Resolution No. FA-2022- 01 approving the sale of Revenue Bonds, Series 2022A in an aggregate principal amount not to exceed $35,000,000 and approving the execution of certain documents in connection therewith and certain other matters. 7. ADJOURNMENT 7.1. The next annual meeting of the Financing Authority is scheduled to be held Tuesday, December 13, 2022 at 6:30 p.m. Items Distributed to the Board Less Than 72 Hours Prior to the Meeting Non-exempt materials related to open session agenda items that are distributed to a majority of the Board of Directors (or Committee Members) less than seventy-two (72) hours prior to the meeting will be available for public inspection in the lobby of the District’s Administrative building located at 1717 E Miraloma Ave, Placentia CA 92870 during regular business hours. When practical, these materials will also be posted on the District’s website at https://ylwd.com/. (GC 54957.5) Accommodations for the Disabled Requests for disability-related modifications or accommodations, including auxiliary aids or services, required for participation in the above posted meeting should be directed to the Board Secretary at (714) 701-3020 at least 24 hours in advance. (GC 54954.2(a)) Page 2 of 236 ITEM NO. 5.1. AGENDA REPORT MEETING DATE: July 12, 2022 TO: Board of Directors FROM: Doug Davert, Interim General Manager STAFF CONTACTS: Annie Alexander, Senior Executive Assistant / Board Secretary SUBJECT: Minutes of the Financing Authority Regular Meeting Held December 14, 2021 RECOMMENDATION: That the Board of Directors approve the minutes as presented. ATTACHMENTS: 1. Draft Meeting Minutes Page 3 of 236 Minutes of the Financing Authority Regular Meeting Held December 14, 2021 at 6:30 p.m. 1 FA-2021-XXX MINUTES OF THE YORBA LINDA WATER DISTRICT FINANCING AUTHORITY REGULAR MEETING Tuesday, December 14, 2021, 6:30 p.m. 1717 E Miraloma Ave, Placentia CA 92870 1. PARTICIPATION INSTRUCTIONS Were included on the agenda. 2. CALL TO ORDER The meeting was called to order at 6:48 p.m. 3. ROLL CALL DIRECTORS PRESENT STAFF PRESENT J. Wayne Miller, PhD, President Doug Davert, Assistant General Manager Brooke Jones, Vice President John DeCriscio, Operations Manager Phil Hawkins Gina Knight, Human Resources and Risk Manager Trudi DesRoches Delia Lugo, Finance Manager Tom Lindsey Rosanne Weston, Engineering Manager Alison Martin, Public Affairs Manager Annie Alexander, Board Secretary Paige Appel, Budget Analyst Veronica Ortega, Executive Assistant ALSO PRESENT Andrew Gagen, General Counsel, Kidman Gagen Law LLP 4. PUBLIC COMMENTS None. 5. CONSENT CALENDAR Director Hawkins made a motion, seconded by Director DesRoches, to approve the Consent Calendar. Motion carried 5-0-0-0 on a roll call vote. Page 4 of 236 Minutes of the Financing Authority Regular Meeting Held December 14, 2021 at 6:30 p.m. 2 FA-2021-XXX 5.1.Minutes of the Financing Authority Regular Meeting Held October 13, 2021 Recommendation: That the Board of Directors approve the minutes as presented. 5.1.Affirmation of Officers for the Financing Authority Recommendation: That the Board of Directors affirm the individuals designated as Chair, Vice Chair, Executive Director, Treasurer, and Secretary of the Yorba Linda Water District Financing Authority in accordance with the Joint Exercise of Powers Agreement between the District and the California Municipal Finance Authority. 7. ADJOURNMENT 7.1.Director Hawkins made a motion, seconded by Director Jones, to adjourn the meeting at 6:49 p.m. Motion carried 5-0-0-0 on a roll call vote. Annie Alexander Board Secretary Page 5 of 236 ITEM NO. 6.1. AGENDA REPORT MEETING DATE: July 12, 2022 TO: Board of Directors FROM: Doug Davert, Interim General Manager STAFF CONTACTS: Delia Lugo, Finance Manager SUBJECT: Authorizing the Sale of Revenue Bonds, Series 2022A RECOMMENDATION: That the Board of Directors adopt Resolution No. FA-2022-01 approving the sale of Revenue Bonds, Series 2022A in an aggregate principal amount not to exceed $35,000,000 and approving the execution of certain documents in connection therewith and certain other matters. BACKGROUND: As discussed during the budget process in developing the FY 2022-23 Operating Budget, the District proposes to undertake the financing of the construction of capital improvements, betterments, renovations, and expansions of facilities within its water system as presented in the 2022 Project listing. To where the Board of Directors has determined that it is desirable to issue Revenue Bonds, Series 2022A, (the "Bonds") in an aggregate principal amount not to exceed $35,000,000 to assist the District in financing the 2022 Project and refinancing the outstanding balance of the Refunding Revenue Bonds, Series 2012A (the "2012A Series"). The refinancing of the 2012A Series will provide the District with a projected aggregate NPV Savings of approximately $197,222, pending the rates and terms at the time of closing. The Bonds are to be secured by installment payments to be made pursuant to an Installment Purchase Agreement, by and between the District and the Yorba Linda Water District Financing Authority, for which installment payments will be payable from the net revenues of the District's water system. There is a resolution to be adopted authorizing this issuance of the 2022 Bonds and approving the execution of certain other documents. The District's Municipal Advisors from Fieldman Rolapp will be present at the meeting to provide updated details in support of the planned 2022 Bonds and the refinancing opportunity. ATTACHMENTS: 1. Presentation 2. Resolution No. FA-2022-01 - Sale of Series 2022A Revenue Bonds 3. Installment Purchase Agreement Page 6 of 236 4. Indenture 5. Bond Purchase Agreement 6. Official Statement Page 7 of 236 FIELDMAN, ROLAPP & ASSOCIATES, INC. July 12, 2022 YORBA LINDA WATER DISTRICT YORBA LINDA WATER DISTRICT FINANCING AUTHORITY BOARD MEETINGS Page 8 of 236 PROGRESS TO DATE Selected Barclays as Underwriter following Board approval Continued the review and update of the District’s proposed legal documents and Preliminary Official Statement (“POS”) Rating call with S&P on June 27th ü Expect to receive final rating by July 12th Correspondence with Bank of America, N.A. in connection with upcoming prepayment of the Credit Agreement 2Page 9 of 236 2022 BONDS: NEW MONEY & REFUNDING UPDATE* 3 *Preliminary, subject to change. Pricing scale provided by Barclays, market conditions as of June 29, 2022. Financing Statistics New Money Refunding of Series 2012A TOTAL All-in True Interest Cost 4.25%3.04%4.17% NPV Savings (%)NA 3.50%3.50% NPV Savings ($)NA $197,222 $197,222 Maximum Annual Debt Service $2,064,250 $572,625 $2,064,250 Final Maturity 10/1/2052 10/1/2033 10/1/2052 Sources:New Money Refunding of Series 2012A Total Par Amount $27,240,000 $4,815,000 $32,055,000 Premium $2,996,754 $578,328 $3,575,082 District Contribution $0 $377,829 $377,829 TOTAL $30,236,754 $5,711,157 $36,007,911 Uses:New Money Refunding of Series 2012A Total Project Fund $30,000,000 $0 $30,000,000 Escrow Deposit $0 $5,730,823 $5,730,823 Cost of Issuance $236,754 $40,334 $277,088 TOTAL $30,236,754 $5,771,157 $36,007,911 Date Prior Debt Service Refunding Debt Service Gross Savings 6/30/2023 $207,558 $155,520 $52,038 6/30/2024 $582,913 $565,300 $17,613 6/30/2025 $583,663 $568,100 $15,563 6/30/2026 $583,413 $566,750 $16,663 6/30/2027 $587,038 $572,625 $14,413 6/30/2028 $584,538 $567,500 $17,038 6/30/2029 $581,038 $566,500 $14,538 6/30/2030 $583,938 $564,500 $19,438 6/30/2031 $585,963 $571,250 $14,713 6/30/2032 $584,988 $566,750 $18,238 6/30/2033 $587,788 $571,000 $16,788 6/30/2034 $584,344 $568,875 $15,469 TOTAL $6,637,177 $6,404,670 $232,507 Page 10 of 236 ESTIMATED AGGREGATE DEBT PROFILE* 4 *Preliminary, subject to change. Pricing scale provided by Barclays, market conditions as of June 29, 2022. 6/3 0 / 2 0 2 3 6/3 0 / 2 0 2 4 6/3 0 / 2 0 2 5 6/3 0 / 2 0 2 6 6/3 0 / 2 0 2 7 6/3 0 / 2 0 2 8 6/3 0 / 2 0 2 9 6/3 0 / 2 0 3 0 6/3 0 / 2 0 3 1 6/3 0 / 2 0 3 2 6/3 0 / 2 0 3 3 6/3 0 / 2 0 3 4 6/3 0 / 2 0 3 5 6/3 0 / 2 0 3 6 6/3 0 / 2 0 3 7 6/3 0 / 2 0 3 8 6/3 0 / 2 0 3 9 6/3 0 / 2 0 4 0 6/3 0 / 2 0 4 1 6/3 0 / 2 0 4 2 6/3 0 / 2 0 4 3 6/3 0 / 2 0 4 4 6/3 0 / 2 0 4 5 6/3 0 / 2 0 4 6 6/3 0 / 2 0 4 7 6/3 0 / 2 0 4 8 6/3 0 / 2 0 4 9 6/3 0 / 2 0 5 0 6/3 0 / 2 0 5 1 6/3 0 / 2 0 5 2 6/3 0 / 2 0 5 3 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 Series 2022 Revenue Bonds Refunding of Series 2012A Bonds Series 2017A Revenue Bonds Page 11 of 236 FINANCING SCHEDULE 5 Date Description Status +/-Thursday, June 27, 2022 Rating Call with S&P Completed Monday, July 4, 2022 July 4th Holiday Completed Tuesday, July 12, 2022 Credit Ratings received Tuesday, July 12, 2022 Board Meeting to approve legal documents and the POS +/-Wednesday July 20, 2022 Bond Pricing Thursday, July 28, 2022 Closing and receipt of funds Monday, August 1, 2022 Prepay BANA Credit Agreement Page 12 of 236 OVERVIEW OF US TREASURY & MUNICIPAL BOND MARKETS Page 13 of 236 U.S. ECONOMIC BACKDROP ___________________________ 1.Source: Barclays Research, CNBC. 2.Source: Bloomberg. Current as of 7/1/2022. 3.Source: Bureau of Labor Statistics. Current as of 7/1/2022. Nonfarm payrolls actually dropped 20.5 million in April 2020 due to the onset of COVID-19. U.S. 10-Year Treasury fell sharply, as investors continue to assess the likelihood of a recession §The yield on the benchmark U.S. 10-year Treasury fell sharply over the last two weeks, as investors continue to assess the likelihood of a recession. §This week's incoming data and indicators point to a broad-based deceleration in overall consumer spending over the course of this year that was not evident in prior estimates. The May personal consumption expenditure (PCE) price inflation prints were a fair bit softer than the earlier CPI estimates, which is a hopeful sign that inflationary pressures are not as broad as thought. Revised estimates point to more substantial inventory accumulations. With numerous signs of deteriorating goods demand, disinflationary pressures seem to be intensifying. §Barclays’ economists expect the FOMC will execute a 50 bps hike in July, albeit with another 75 bps still on the table if another very robust CPI inflation print is seen in the weeks leading into the meeting. §We expect the FOMC will hike 50 bps in September, then scale down to 25 bps hikes in November/December, before concluding its hiking cycle in February 2023 with the target range for funds rate at 3.25-3.50%. Non-Farm Payroll & Unemployment Rate 3 (NFP, 000s)(%) May-19 May-20 May-21 May-22 (10,000) (8,000) (6,000) (4,000) (2,000) 0 2,000 4,000 6,000 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Nonfarm Payrolls Unemployment Rate (RHS) Consumer Price Index (Month-Over-Month)3 May-16 May-17 May-18 May-19 May-20 May-21 May-22 -1.00% -0.50% 0.00% 0.50% 1.00% 1.50% Bloomberg Consensus Interest Rate Forecast (%)2 Fed Funds 2-Year UST 10-Year UST 30-Year UST Current 1.50-1.75 2.84 2.88 3.11 Q3 2022 2.50-2.75 3.06 3.19 3.31 Q4 2022 3.00-3.25 3.11 3.17 3.33 Q1 2023 3.25-3.50 3.16 3.22 3.37 Q2 2023 3.25-3.50 3.16 3.26 3.42 Expected Change by Q2’23 +175 bps +32 bps +38 bps +31 bps 7 Page 14 of 236 TAX-EXEMPT MARKET THEMES Bond Buyer Revenue Bond Index4 Municipal yields possibly showing signs of stabilization, while municipal outflows totaled $1.3 billion last week ___________________________ 1.Source: Thomson Reuters. Current as of 7/1/2022. 2.Source: Lipper US Fund Flows. Current as of 7/1/2022. 3.Source: Bloomberg, Barclays Research. Current as of 7/1/2022. 4.Source: Bond Buyer. Current as of 7/1/2022. Municipal Fund Flows by Month2 0.00 1.00 2.00 3.00 4.00 1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930 % Years to Maturity 1-Year Range 10 YR Average Current Historic Low -28 -24 -20 -16 -12 -8 -4 0 4 8 12 16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 $mn 2022 Outflows YTD: -$76 billion 370 313 315 377 424 408 321 406 456 459 191 0 100 200 300 400 500 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 $ bn Actual Supply Expected Supply 44 0% 1% 2% 3% 4% 5% 6% RBI Current RBI 3.82% MMD Yields Near 1-Year Highs1 2022 Gross Supply Forecast is $430-$450 Billion3 8Page 15 of 236 Revenue Bonds, Series 2022A LEGAL DOCUMENTS Page 16 of 236 DISTRICT BOARD RESOLUTION Approves issuances of 2022A Bonds under certain parameters and sale to Barclays, as underwriter Approves key documents: 1.Installment Purchase Agreement - provides for the financing or refinancing, as applicable, of the projects, establishes the payment by the District of the Installment Payments from water revenues and describes certain covenants for the benefit of the bondholders 2.Bond Purchase Agreement - establishes the terms and conditions for the purchase of the Bonds by Barclays 3.Escrow Agreement - governs use of proceeds to retire the 2012A Bonds 4.Preliminary Official Statement (“POS”) - disclosure document to investors •Describes the pledge water revenues, District’s water operations and risk factors •Must include “material” information about the District •Subject to federal securities law 5. Continuing Disclosure Certificate - District agrees to annually update financial information and provide notice of certain events 10Page 17 of 236 FINANCING AUTHORITY RESOLUTION Approves issuance of 2022A Bonds under certain parameters and sale to Barclays, as underwriter Approves key documents: 1.Indenture of Trust - defines 2022A Bonds terms (principal amount, interest rate), establishes trust fund for pledged revenues, describes certain covenants for the benefit of the bondholders and includes redemption provisions 2.Installment Purchase Agreement - provides for the financing or refinancing, as applicable, of the projects, establishes the payment by the District of the Installment Payments from water revenues and describes certain covenants for the benefit of the bondholders 3.Bond Purchase Agreement - establishes the terms and conditions for the purchase of the Bonds by Barclays 4.Preliminary Official Statement (“POS”) - disclosure document to investors •Describes the 2022A Bonds, pledged water revenues, risk factors •Subject to federal securities law •Allows delivery of the final Official Statement 11Page 18 of 236 RECOMMENDATION Approve District and Financing Authority Resolutions authorizing the sale of the bonds and execution and delivery of certain documents in connection therewith 12Page 19 of 236 FIELDMAN DISCLAIMER These materials include an assessment of current market conditions, and include assumptions about interest rates, execution costs, and other matters related to municipal securities issuance or municipal financial products. These assumptions may change at any time subsequent to the date these materials were provided. The refinancing and refunding scenarios presented herein are not intended to be inclusive of every feasible or suitable refinancing alternative. Fieldman, Rolapp & Associates, Inc. is an SEC-registered Municipal Advisor, and undertaking a fiduciary duty in providing financial advice to the Yorba Linda Water District only. Compensation contingent on the completion of a financing or project is customary for municipal financial advisors. To the extent that our compensation for a transaction is contingent on successful completion of the transaction, a potential conflict of interest exists as we would have a potential incentive to recommend the completion of a transaction that might not be optimal for the public agency. However, Fieldman, Rolapp & Associates, Inc. undertakes a fiduciary duty in advising public agencies including the District regardless of compensation structure. 13Page 20 of 236 (a) Barclays Capital Inc. (“BCI”) is not recommending an action to you as the municipal entity or obligated person (“you” or the “Recipient”); (b) BCI is not acting as a municipal advisor to you within the meaning of Section 15B of the Securities Exchange Act of 1934 and is not acting as an advisor to you and does not owe a fiduciary duty pursuant to Section 15B of the Exchange Act to you with respect to the information and material contained in this communication; (c) BCI is acting for its own interests; (d) you should discuss any information and material contained in this communication with any and all internal or external advisors and experts that you deem appropriate before acting on this information or material; and (e) BCI seeks to serve as an underwriter on a future transaction and not as a financial advisor or municipal advisor. The information provided is for discussion purposes only in anticipation of being engaged to serve as underwriter. The primary role of an underwriter is to purchase securities with a view to distribution in an arm’s-length commercial transaction with the issuer. The underwriter has financial and other interests that differ from those of the Issuer. Interest rates used herein are hypothetical and take into consideration conditions in today’s market and other factual information such as the issuer’s credit rating, geographic location and market sector. Interest rates applied herein are hypothetical, based on current market facts and should not be viewed as rates that BCI expects to achieve for you should we be selected to act as your underwriter or placement agent. Information about interest rates and terms for state and local government series securities is based on current publically available information and treasury or agency rates for open-market escrows are based on current market interest rates for these types of credits and should not be seen as costs or rates that BCI expects to achieve for you should we be selected to act as your underwriter or placement agent. This document has been prepared by BCI for information purposes only and for the sole and exclusive use of the Recipient in connection with the matter or possible transaction to which this document relates. The final terms and conditions of the transaction will be set out in full in the applicable offering document(s) or binding transaction document(s). This document is incomplete without reference to, and should be assessed solely in conjunction with, the oral briefing provided by BCI. In the context of this engagement or potential engagement between BCI and you, in any discussions, communications, conferences, negotiations and undertakings, BCI (a) will act as a principal and not in a fiduciary capacity; (b) has not assumed an advisory or fiduciary responsibility in favor of you; and (c) is acting as underwriter and not as financial or municipal advisor. As such (i) the primary role of BCI as an underwriter is to purchase, or arrange for the placement of, securities; (ii) such purchase or placement will be effected in an arm’s-length commercial transaction between you and BCI; and (iii) BCI has financial and other interests that may differ from yours. Further, BCI advises you to consult your own legal, financial and other advisors to the extent you deem appropriate. Nothing herein shall be deemed to constitute investment, legal, tax, financial, accounting or other advice. BCI accepts no liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this document or its contents or any reliance on the information contained herein. This document is strictly confidential and remains the property of BCI. The Recipient agrees that it shall only use this document for the purpose of evaluating and considering the matter or possible transaction to which this document relates. This document may not be distributed, published, reproduced, or disclosed, in whole or in part, to any other person, nor relied upon by the Recipient or any other person, nor used for any other purpose at any time, in each case without the prior written consent of BCI. 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BCI’s research analysts may hold and make statements or investment recommendations and/or publish research reports with respect to any issuer, entity or security referred to herein, the transactions contemplated herein or any person involved therein or related thereto that differ from or are inconsistent with the views or advice communicated by Banking. Furthermore, any preliminary valuation summary presented herein represents the views of Banking. In the course of vetting potential transactions and pursuant to BCI’s internal preliminary valuation, diligence and compliance procedures, Banking may obtain the independent views of the Barclays Group’s research department regarding the issuer, entity or security and merits of a proposed transaction. However, the Barclays Group’s research department is independent and, in accordance with U.S. rules, Banking is not permitted to make any representation regarding the views of the research analyst who has been, or may be, assigned by research management to independently evaluate a issuer, entity or security and any proposed transaction. Accordingly, you should not infer that any preliminary valuation summary presented by Banking reflects the views of the Barclays Group’s research department and nothing herein or otherwise should be construed as a promise or offer of favorable coverage or an indication of a specific rating or price target that may be assigned in the future by any Barclays Group research analyst. 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NO ACTION HAS BEEN MADE OR WILL BE TAKEN THAT WOULD PERMIT A PUBLIC OFFERING OF THE SECURITIES DESCRIBED HEREIN IN ANY JURISDICTION IN WHICH ACTION FOR THAT PURPOSE IS REQUIRED. NO OFFERS, SALES, RESALES OR DELIVERY OF THE SECURITIES DESCRIBED HEREIN OR DISTRIBUTION OF ANY OFFERING MATERIAL RELATING TO SUCH SECURITIES MAY BE MADE IN OR FROM ANY JURISDICTION EXCEPT IN CIRCUMSTANCES WHICH WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS AND WHICH WILL NOT IMPOSE ANY OBLIGATION ON BCI OR ANY OF ITS AFFILIATES. THIS DOCUMENT DOES NOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ISSUES RELATED TO AN INVESTMENT IN THE SECURITIES DESCRIBED HEREIN. PRIOR TO TRANSACTING, POTENTIAL INVESTORS SHOULD ENSURE THAT THEY FULLY UNDERSTAND THE TERMS OF THE RELEVANT SECURITIES AND ANY APPLICABLE RISKS. THE INFORMATION CONTAINED HEREIN IS NOT INTENDED TO BE DISTRIBUTED TO ANY PROSPECTIVE OR ACTUAL INVESTORS AND, ACCORDINGLY, MAY NOT BE SHOWN OR GIVEN TO ANY PERSON OTHER THAN THE RECIPIENT, AND IS NOT TO BE FORWARDED TO ANY OTHER PERSON (INCLUDING ANY RETAIL INVESTOR OR CUSTOMER), COPIED OR OTHERWISE REPRODUCED OR DISTRIBUTED TO ANY SUCH PERSON IN ANY MANNER WHATSOEVER. Barclays Bank PLC (“Barclays PLC”) conducts its U.S. underwriting and broker-dealer activities through its wholly-owned indirect subsidiary, a registered broker-dealer, BCI. BCI is a member SIPC. Registered Office: 745 Seventh Avenue, New York, NY 10019. Copyright Barclays PLC, 2022 (all rights reserved). This document is confidential, and no part of it may be reproduced, distributed or transmitted without the prior written permission of Barclays. BCI is the United States investment bank of Barclays PLC. Barclays PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register No. 122702). Registered in England. Registered No. 1026167. Registered office: 1 Churchill Place, London E14 5HP. Copyright Barclays PLC, 2022 (all rights reserved). BARCLAYS DISCLAIMER Page 21 of 236 Resolution No. FA-2022-XX Approving Sale of Revenue Bonds Series 2022A Not to Exceed $35M A-2 RESOLUTION NO. FA-2022-01 RESOLUTION OF THE BOARD OF DIRECTORS OF THE YORBA LINDA WATER DISTRICT FINANCING AUTHORITY APPROVING THE SALE OF ITS REVENUE BONDS, SERIES 2022A IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $35,000,000 AND APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH AND CERTAIN OTHER MATTERS WHEREAS, the Yorba Linda Water District Financing Authority (the “Authority”), a public entity duly organized and existing under a joint exercise of powers agreement and under the Constitution and laws of the State of California (the “State”), has the powers, among others, to issue bonds and to finance water and wastewater facilities on behalf of its members pursuant to Articles 1, 2 and 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State, including but not limited to Article 4 thereof (known as the “Marks-Roos Local Bond Pooling Act of 1985,” Government Code Section 6584 et seq.); and WHEREAS, the Yorba Linda Water District (the “District”), a county water district duly organized and existing under and by virtue of the laws of the State, and a member of the Authority, proposes to undertake the financing of the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its water system (the “2022 Project”); and WHEREAS, the District also proposes to undertake the refinancing of the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its water system (the “2012 Project” and, together with the 2022 Project, the “Project”); and WHEREAS, the Board of Directors of the Authority (the “Board”) has determined that it is desirable to issue its Revenue Bonds, Series 2022A (the “Bonds”) in an aggregate principal amount not to exceed $35,000,000 to assist the District in financing the 2022 Project and refinancing the 2012 Project; and WHEREAS, the Bonds are to be secured by installment payments to be made pursuant to an Installment Purchase Agreement (the “Installment Purchase Agreement”), by and between the District and the Authority, which installment payments will be payable from net revenues of the District’s water system; and WHEREAS, the Board has determined that it is in the best interest of the Authority to enter into the Installment Purchase Agreement with the District, and to approve certain other documents; and Page 22 of 236 Resolution No. FA-2022-XX Approving Sale of Revenue Bonds Series 2022A Not to Exceed $35M A-2 WHEREAS, the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”), desire to enter into an Indenture of Trust (the “Indenture”), to provide for the issuance and security of the Bonds and to provide for the financing of the 2022 Project and the refinancing of the 2012 Project; and WHEREAS, pursuant to the Indenture, the Authority will assign to the Trustee the installment payments payable under the Installment Purchase Agreement; and WHEREAS, a preliminary official statement with respect to the Bonds (the “Preliminary Official Statement”), has been prepared by the District and the Authority with the assistance of Stradling Yocca Carlson & Rauth, a Professional Corporation, as bond counsel (“Bond Counsel”) and disclosure counsel; and WHEREAS, the Authority desires to execute and deliver a Bond Purchase Agreement (the “Purchase Contract”) with the District and Barclays Capital Inc., as underwriter of the Bonds (the “Underwriter”), with respect to the Bonds; and WHEREAS, there have been presented to the Board copies of each of the aforementioned documents and certain other documents relating to the foregoing; NOW, THEREFORE, the Board of Directors of the Yorba Linda Water District Financing Authority hereby finds, determines, declares and resolves as follows: SECTION 1.The Board hereby specifically finds and declares that each of the statements, findings and determinations of the Authority set forth in the above recitals and in the preambles of the documents approved herein are true and correct and that the financing and refinancing of the Project will result in significant public benefits for the residents of the District. The Board hereby further finds and determines that: (a) there are significant public benefits to the citizens of the District of the type described in Section 6586 of the Marks-Roos Local Bond Pooling Act of 1985 (the “Act”) in having the Authority assist the District with respect to the financing and refinancing of the Project through the issuance of the Bonds, in that the issuance of the Bonds and related transactions will result in demonstrable savings in effective interest rate to the District and significant reductions in effective user charges levied by the District; and (b) the Project includes facilities for the production, storage, transmission or treatment of water within the meaning of Section 6586.5(c) of the Act. Page 23 of 236 Resolution No. FA-2022-XX Approving Sale of Revenue Bonds Series 2022A Not to Exceed $35M A-2 SECTION 2.The Board hereby authorizes the preparation, sale and delivery of the Bonds in accordance with the terms and provisions of the Indenture in an aggregate principal amount (not in excess of $35,000,000) that is determined by the Executive Director or the Treasurer, together with other available funds, as being necessary: (a) to finance the 2022 Project; (b) to refinance the 2012 Project; and (c) to pay the costs of issuing the Bonds. SECTION 3.The form of the Bonds, as set forth in the form of the Indenture (as the Indenture may be modified pursuant hereto), is hereby approved; and the Chair and the Secretary are hereby authorized and directed to execute the Bonds by manual or facsimile signature in the name and on behalf of the Authority. SECTION 4.The Installment Purchase Agreement is hereby approved substantially in the form on file with the Secretary. The Chair or Vice Chair of the Board or the Executive Director or the Treasurer of the Authority (each, an “Authorized Officer”) or the designee thereof is hereby authorized and directed to execute and deliver such Installment Purchase Agreement with such changes, insertions and omissions as may be recommended by General Counsel or Bond Counsel and approved by the officer executing the same, said execution being conclusive evidence of such approval. SECTION 5.The Indenture is hereby approved substantially in the form on file with the Secretary. Each Authorized Officer or the designee thereof is hereby authorized and directed to execute and deliver such Indenture with such changes, insertions and omissions as may be recommended by General Counsel or Bond Counsel and approved by the officer executing the same, said execution being conclusive evidence of such approval. SECTION 6.The Purchase Contract is hereby approved substantially in the form on file with the Secretary. Each Authorized Officer or the designee thereof is hereby authorized and directed to execute and deliver such Purchase Contract with such changes, insertions and omissions as may be recommended by General Counsel or Bond Counsel and approved by the officer executing the same, said execution being conclusive evidence of such approval; provided, however, that in no event shall the aggregate principal amount of the Bonds exceed $35,000,000, nor shall the underwriting discount exceed 0.30% of the aggregate principal amount of the Bonds, nor shall the all-in true interest cost of the Bonds exceed 5.00% per annum. SECTION 7.The preparation and distribution of the Preliminary Official Statement in substantially the form on file with the Secretary is hereby approved. Each Authorized Officer or the designee thereof is hereby authorized to sign a certificate pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 relating to the Preliminary Official Statement, and Page 24 of 236 Resolution No. FA-2022-XX Approving Sale of Revenue Bonds Series 2022A Not to Exceed $35M A-2 each Authorized Officer or the designee thereof is hereby authorized and directed to execute, approve and deliver the final Official Statement substantially in the form of the Preliminary Official Statement with such changes, insertions and omissions as the officer or officers executing said document may require or approve, subject to advice from General Counsel or Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof. The Underwriter is directed to deliver copies of the final Official Statement to all actual initial purchasers of the Bonds. SECTION 8.The proceeds of the Bonds shall be deposited as provided in the Indenture and the Installment Purchase Agreement to finance the 2022 Project and refinance the 2012 Project. SECTION 9.The appointment of U.S. Bank Trust Company, National Association as Trustee under and pursuant to the Indenture, with the powers and duties of said office as set forth therein, is hereby approved. SECTION 10.The Board hereby authorizes the General Manager or his designee: (i) to solicit bids on a municipal bond insurance policy and/or reserve surety; (ii) to negotiate the terms of such policy or policies; (iii) to finalize, if appropriate, the form of such policy or policies with a municipal bond insurer; and (iv) if it is determined that the policy or policies will result in net savings for the District, to pay the insurance premium of such policy or policies from the proceeds of the issuance and sale of the Bonds. SECTION 11.The Authorized Officers, the Secretary or any other proper officer of the Authority, acting singly, be and each of them hereby is authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the transactions contemplated by the Indenture, the Installment Purchase Agreement, the Purchase Contract, bond insurance, a reserve surety and this resolution, including any reimbursement agreement or other agreement relative to bond insurance or a reserve surety. In the event that the Chair and Vice-Chair of the Board are unavailable to sign any of the agreements described herein, any other member of the Board may sign such agreement. SECTION 12.Good faith estimates of the costs associated with the Bonds, as required by California Government Code Section 5852.1, are disclosed in Exhibit A. SECTION 13.Unless otherwise defined herein, all terms used herein and not otherwise defined shall have the meanings given such terms in the Indenture unless the context otherwise clearly requires. Page 25 of 236 Resolution No. FA-2022-XX Approving Sale of Revenue Bonds Series 2022A Not to Exceed $35M A-2 SECTION 14.This resolution shall take effect immediately. PASSED AND ADOPTED this 12th day of July 2022 by the following called vote: AYES: NOES: ABSTAIN: ABSENT: J. Wayne Miller, PhD, President Yorba Linda Water District Financing Authority ATTEST: Annie Alexander, Board Secretary Yorba Linda Water District Financing Authority Reviewed as to form by General Counsel: Andrew B. Gagen, Esq. Kidman Gagen Law LLP Page 26 of 236 Resolution No. FA-2022-XX Approving Sale of Revenue Bonds Series 2022A Not to Exceed $35M A-1 EXHIBIT A GOOD FAITH ESTIMATES The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the Authority by Fieldman Rolapp & Associates, Inc. (the “Municipal Advisor”). Principal Amount. The Municipal Advisor has informed the Authority that, based on the District’s financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be sold is $32,055,000 (the “Estimated Principal Amount”). True Interest Cost of the Bonds. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 4.12%. Finance Charge of the Bonds. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $273,865. Amount of Proceeds to be Received. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the District for sale of the Bonds, plus the estimated premium amount of $3,575,082, plus the District’s estimated contributions of $377,829, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $35,734,046. Total Payment Amount. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the District will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $62,933,076. Page 27 of 236 Resolution No. FA-2022-XX Approving Sale of Revenue Bonds Series 2022A Not to Exceed $35M A-2 The foregoing estimates constitute good faith estimates only. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to: (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates; (b) the actual principal amount of Bonds sold being different from the Estimated Principal Amount; (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates; (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates; (e) other market conditions; or (f) alterations in the District’s financing plan, delays in the financing, additional legal work or a combination of such factors and additional finance charges, if any, attributable thereto. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the Authority based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the Authority. Page 28 of 236 Stradling Yocca Carlson & Rauth Draft of 6/30/22 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 INSTALLMENT PURCHASE AGREEMENT by and between YORBA LINDA WATER DISTRICT and YORBA LINDA WATER DISTRICT FINANCING AUTHORITY Dated as of July 1, 2022 Relating to $_____ YORBA LINDA WATER DISTRICT FINANCING AUTHORITY REVENUE BONDS, SERIES 2022A Page 29 of 236 TABLE OF CONTENTS Page i NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 ARTICLE I DEFINITIONS Section 1.01. Definitions................................................................................................................2 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.01. Representations by the District.................................................................................8 Section 2.02. Representations and Warranties by the Authority....................................................9 ARTICLE III ACQUISITION AND CONSTRUCTION OF PROJECTS Section 3.01. Acquisition and Construction of the 2022 Project....................................................9 Section 3.02. Changes to the 2022 Project.....................................................................................9 Section 3.03. Sale and Purchase of 2012 Project .........................................................................10 Section 3.04. Purchase and Sale of 2022 Project and 2012 Project .............................................10 Section 3.05. Title.........................................................................................................................10 Section 3.06. Acquisition Fund ....................................................................................................10 ARTICLE IV INSTALLMENT PAYMENTS Section 4.01. Purchase Price.........................................................................................................10 Section 4.02. Series 2022 Installment Payments..........................................................................11 ARTICLE V SECURITY Section 5.01. Pledge of Revenues ................................................................................................11 Section 5.02. Allocation of Revenues ..........................................................................................12 Section 5.03. Additional Contracts and Bonds.............................................................................13 Section 5.04. Investments.............................................................................................................14 Section 5.05. Rate Stabilization Fund ..........................................................................................14 ARTICLE VI COVENANTS OF THE DISTRICT Section 6.01. Compliance with Installment Purchase Agreement and Ancillary Agreements.............................................................................................................14 Section 6.02. Against Encumbrances...........................................................................................15 Section 6.03. Against Sale or Other Disposition of Property.......................................................15 Section 6.04. Against Competitive Facilities ...............................................................................15 Section 6.05. Tax Covenants........................................................................................................15 Section 6.06. Prompt Acquisition and Construction ....................................................................16 Section 6.07. Maintenance and Operating of the Water System..................................................16 Section 6.08. Payment of Claims..................................................................................................16 Section 6.09. Compliance with Contracts ....................................................................................17 Section 6.10. Insurance.................................................................................................................17 Section 6.11. Accounting Records; Financial Statements and Other Reports..............................18 Page 30 of 236 TABLE OF CONTENTS (continued) Page ii NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Section 6.12. Protection of Security and Rights of the Authority................................................18 Section 6.13. Payment of Taxes and Compliance with Governmental Regulations....................18 Section 6.14. Amount of Rates and Charges................................................................................18 Section 6.15. Collection of Rates and Charges ............................................................................19 Section 6.16. Eminent Domain Proceeds .....................................................................................19 Section 6.17. Further Assurances.................................................................................................19 Section 6.18. Enforcement of Contracts.......................................................................................19 ARTICLE VII PREPAYMENT OF SERIES 2022 INSTALLMENT PAYMENTS Section 7.01. Prepayment.............................................................................................................20 Section 7.02. Method of Prepayment ...........................................................................................20 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY Section 8.01. Events of Default and Acceleration of Maturities..................................................20 Section 8.02. Application of Funds Upon Acceleration...............................................................21 Section 8.03. Other Remedies of the Authority............................................................................22 Section 8.04. Non-Waiver............................................................................................................22 Section 8.05. Remedies Not Exclusive.........................................................................................22 ARTICLE IX DISCHARGE OF OBLIGATIONS Section 9.01. Discharge of Obligations........................................................................................23 ARTICLE X MISCELLANEOUS Section 10.01. Liability Limited.....................................................................................................23 Section 10.02. Benefits of Installment Purchase Agreement Limited to Parties............................24 Section 10.03. Successor Is Deemed Included in all References to Predecessor...........................24 Section 10.04. Waiver of Personal Liability...................................................................................24 Section 10.05. Article and Section Headings, Gender and References..........................................24 Section 10.06. Partial Invalidity.....................................................................................................24 Section 10.07. Assignment.............................................................................................................24 Section 10.08. Net Contract............................................................................................................25 Section 10.09. California Law........................................................................................................25 Section 10.10. Notices....................................................................................................................25 Section 10.11. Effective Date.........................................................................................................25 Section 10.12. Execution in Counterparts......................................................................................25 Section 10.13. Indemnification of Authority..................................................................................25 Section 10.14. Amendments Permitted ..........................................................................................26 Signatures ...............................................................................................................................S-1 Page 31 of 236 TABLE OF CONTENTS (continued) Page iii NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Exhibit A Description of the 2022 Project and the 2012 Project..........................................A-1 Exhibit B Purchase Price.......................................................................................................B-1 Exhibit C Form of Substitution Statement............................................................................C-1 Exhibit D Form of Requisition from Acquisition Fund........................................................D-1 Page 32 of 236 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 INSTALLMENT PURCHASE AGREEMENT This INSTALLMENT PURCHASE AGREEMENT, dated as of July 1, 2022, is entered into by and between YORBA LINDA WATER DISTRICT, a county water district duly organized and existing under and by virtue of the laws of the State of California (the “District”), and YORBA LINDA WATER DISTRICT FINANCING AUTHORITY, a joint exercise of powers agency duly organized and existing under and by virtue of the laws of the State of California (the “Authority”). RECITALS A. The District proposes to finance the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its Water System, as described in Exhibit A hereto (the “2022 Project”). B. The District also proposes to refinance the acquisition and construction of certain improvements, betterments, renovations and expansions of facilities within its Water System, as described in Exhibit A hereto (the “2012 Project”). C. The Authority has agreed to assist the District in financing the 2022 Project and refinancing the 2012 Project on the terms and conditions set forth herein. D. The Authority is authorized by Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California, including but not limited to Section 6540 et seq., to finance and refinance the acquisition and construction of property for its members. E. The District is authorized by Part 5 of Division 12 of the Water Code of the State of California, including but not limited to Article 3 of Chapter 1 thereof, to finance and refinance the acquisition and construction of property for its Water System. F. The District and the Authority have duly authorized the execution of this Installment Purchase Agreement. G. The District has determined that this Installment Purchase Agreement is a Contract within the meaning of the 2017 IPA, and that the Series 2022 Installment Payments that are payable hereunder will be secured by Revenues on a parity with the payments of principal of and interest on the 2017 IPA, in accordance with the meaning and intent of the 2017 IPA. H. All acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Installment Purchase Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Installment Purchase Agreement. NOW, THEREFORE, IN CONSIDERATION OF THESE PREMISES AND OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS: Page 33 of 236 2 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 ARTICLE I DEFINITIONS Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein. All capitalized terms used herein and not defined herein shall have the meanings ascribed thereto in the Indenture. Accountant’s Report The term “Accountant’s Report” means a report signed by an Independent Certified Public Accountant. Ad Valorem Tax Revenues The term “Ad Valorem Tax Revenues” means all amounts received on the District’s share of the 1% ad valorem property tax levied on property within the District pursuant to the provisions of Article XIIIA of the California Constitution. Bonds The term “Bonds” means all revenue bonds or notes of the District authorized, executed, issued and delivered by the District, the payments of which are payable from Net Revenues on a parity with the Series 2022 Installment Payments and which are secured by a pledge of and lien on Revenues as described in Section 5.01 hereof. Contracts The term “Contracts” means the 2017 IPA and all other contracts of the District previously or hereafter authorized and executed by the District, the payments under which are payable from Net Revenues on a parity with the Series 2022 Installment Payments and which are secured by a pledge and lien on Revenues as described in Section 5.01 hereof; and excluding contracts entered into for operation and maintenance of the Water System. Authority The term “Authority” means Yorba Linda Water District Public Financing Authority, a joint exercise of powers agency duly organized pursuant to the JPA Agreement and existing under and by virtue of the laws of the State of California. Date of Operation The term “Date of Operation” means, with respect to any uncompleted Project, the estimated date by which such Project will have been completed and, in the opinion of an engineer, will be ready for commercial operation by or on behalf of the District. Page 34 of 236 3 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Debt Service The term “Debt Service” means, for any period of calculation, the sum of: (i) the interest accruing during such period on all outstanding Bonds, assuming that all outstanding serial Bonds are retired as scheduled and that all outstanding term Bonds are redeemed or paid from sinking fund payments as scheduled (except to the extent that such interest is capitalized or is reasonably anticipated to be reimbursed to the District by the United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 23 Stat. 115 (2009), enacted February 17, 2009)), or any future similar program); (ii) those portions of the principal amount of all outstanding serial Bonds maturing in such period, but excluding Excluded Principal; (iii) those portions of the principal amount of all outstanding term Bonds required to be prepaid or paid in such period, but excluding Excluded Principal; and (iv) those portions of the Contracts required to be made during such period, (except to the extent that the interest evidenced and represented thereby is capitalized or is reasonably anticipated to be reimbursed to the District by the United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 23 Stat. 115 (2009), enacted February 17, 2009)), or any future similar program), but excluding Excluded Principal; but less the earnings to be derived from the investment of moneys on deposit in debt service reserve funds established for Bonds or Contracts; provided that, as to any such Bonds or Contracts bearing or comprising interest at other than a fixed rate, the rate of interest used to calculate Debt Service shall, for all purposes, be assumed to be a fixed rate equal to the higher of: (1) the then current variable interest rate borne by such Bonds or Contract plus 1%; and (2) the highest variable rate borne over the preceding 3 months by outstanding variable rate debt issued by the District or, if no such variable rate debt is at the time outstanding, by variable rate debt of which the interest rate is computed by reference to an index comparable to that to be utilized in determining the interest rate for the debt then proposed to be issued; provided further that if any series or issue of such Bonds or Contracts have twenty-five percent (25%) or more of the aggregate principal amount of such series or issue due in any one year (and such principal is not Excluded Principal), Debt Service shall be determined for the period of determination as if the principal of and interest on such series or issue of such Bonds or Contracts were being paid from the date of incurrence thereof in substantially equal annual amounts over a period of twenty-five (25) years from the date of calculation; and provided further that, as to any such Bonds or Contracts or portions thereof bearing no interest but which are sold at a discount and which discount accretes with respect to such Bonds or Contracts or portions thereof, such accreted discount shall be treated as interest in the calculation of Debt Service; and Page 35 of 236 4 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 provided further that if the Bonds or Contracts constitute paired obligations, the interest rate on such Bonds or Contracts shall be the resulting linked rate or the effective fixed interest rate to be paid by the District with respect to such paired obligations; and provided further that the amount on deposit in a debt service reserve fund on any date of calculation of Debt Service shall be deducted from the amount of principal due at the final maturity of the Bonds and Contracts for which such debt service reserve fund was established and, to the extent that the amount in such debt service reserve fund is in excess of such amount of principal, such excess shall be applied to the full amount of principal due, in each preceding year, in descending order, until such amount is exhausted. District The term “District” means Yorba Linda Water District, a county water district duly organized and existing under and by virtue of the laws of the State of California. Event of Default The term “Event of Default” means an event described in Section 8.01. Excluded Principal The term “Excluded Principal” means each payment of principal of any Bond or Contract for which there is on file with the Trustee: (1) a certificate of an Independent Financial Consultant to the effect that such Bond or Contract is commercial paper or otherwise of a revolving or short-term nature and has a maturity of less than 42 months; and (2) a certificate of an authorized representative of the District to the effect that the District intends to pay such principal from the proceeds of Bonds or Contracts or other bonds, notes or other obligations of the District. No such determination shall affect the security for such Bonds or Contracts or the obligation of the District to pay such Bonds or Contracts from Net Revenues. Fiscal Year The term “Fiscal Year” means the period beginning on July 1 of each year and ending on the last day of June of the following year, or any other twelve-month period selected and designated as the official Fiscal Year of the District. Indenture The term “Indenture” means the Indenture of Trust, dated as of the date hereof, by and between the District and the Authority, relating to the 2022A Bonds. Independent Certified Public Accountant The term “Independent Certified Public Accountant” means any firm of certified public accountants appointed by the District, and each of whom is independent pursuant to the Statement on Auditing Standards No. 1 of the American Institute of Certified Public Accountants. Page 36 of 236 5 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Independent Financial Consultant The term “Independent Financial Consultant” means a financial consultant or firm of such consultants appointed by the District, and who, or each of whom: (1) is in fact independent and not under domination of the District; (2) does not have any substantial interest, direct or indirect, with the District; (3) is not connected with the District as an officer or employee of the District, but who may be regularly retained to make reports to the District; and (4) is registered as a “municipal advisor,” as defined in Section 15B of the Securities Exchange Act of 1934, as amended. Installment Payment Date The term “Installment Payment Date” means any date on which Installment Payments are scheduled to be paid by the District under and pursuant to any Contract. Installment Payments The term “Installment Payments” means the Installment Payments of interest and principal scheduled to be paid by the District under and pursuant to the Contracts. Installment Purchase Agreement The term “Installment Purchase Agreement” means this Installment Purchase Agreement, by and between the District and the Authority, dated as of July 1, 2022, as originally executed and as it may from time to time be amended or supplemented in accordance herewith. JPA Agreement The term “JPA Agreement” means the Joint Exercise of Powers Agreement, dated April 11, 2017, by and between the District and California Municipal Finance Authority, pursuant to which the Authority is established. Law The term “Law” means the County Water District Law of the State of California (being Division 12 of the Water Code of the State of California, as amended) and all laws amendatory thereof or supplemental thereto. Manager The term “Manager” means the General Manager of the District, or any other person designated by the General Manager to act on behalf of the General Manager. Net Proceeds The term “Net Proceeds” means, when used with respect to any casualty insurance or condemnation award, the proceeds from such insurance or condemnation award remaining after payment of all expenses (including attorneys’ fees) incurred in the collection of such proceeds. Page 37 of 236 6 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Net Revenues The term “Net Revenues” means, for any Fiscal Year, the Revenues for such Fiscal Year less the Operating and Maintenance Costs and Non-Operating and Maintenance Costs for such Fiscal Year. When held by the Trustee in any funds or accounts established hereunder, Net Revenues shall include all interest or gain derived from the investment of amounts in any of such funds or accounts. Non-Operating and Maintenance Costs The term “Non-Operating and Maintenance Costs” means certain other expenses of the District not directly related to the operation and maintenance of the Water System, including but not limited to certain projects that were budgeted as capital improvements but accounted for as expenses. Operating and Maintenance Costs The term “Operating and Maintenance Costs” means: (i) costs spent or incurred for maintenance and operation of the Water System calculated in accordance with generally accepted accounting principles, including (among other things) the reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs of the District that are charged directly or apportioned to the Water System, including but not limited to salaries and wages of employees, payments to the Public Employees Retirement System, overhead, insurance, taxes (if any), fees of auditors, accountants, attorneys or engineers and insurance premiums, and including all other reasonable and necessary costs of the District or charges (other than debt service payments) required to be paid by it to comply with the terms of the Installment Purchase Agreement or of the Indenture or any Contract or of any resolution or indenture authorizing the issuance of any Bonds or of such Bonds; and (ii) costs spent or incurred in the purchase of water for the Water System; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature and all capital charges and any amounts that are transferred to the Rate Stabilization Fund. Project The term “Project” means additions, betterments, extensions or improvements to the District’s facilities designated by the Board of Directors of the District as a Project, the acquisition and construction of which is to be paid for by the proceeds of any Contracts or Bonds. Purchase Price The term “Purchase Price” means the principal amount plus interest thereon owed by the District to the Authority under the terms hereof as provided in Section 4.01. Rate Stabilization Fund The term “Rate Stabilization Fund” means the fund by that name that is described in Section 5.05. Page 38 of 236 7 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Revenue Fund The term “Revenue Fund” means the fund by that name continued pursuant to Section 5.02 herein. Revenues The term “Revenues” means all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the Water System, including, without limiting the generality of the foregoing: (i) the Ad Valorem Tax Revenues; (ii) all income, rents, rates, fees, charges or other moneys derived by the District from the sale, furnishing and supplying of the water or other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Water System, and certain administrative and maintenance costs related thereto; (iii) the proceeds of any stand-by or water availability charges, development fees and connection charges collected by the District; and (iv) the earnings on and income derived from the investment of amounts described in clauses (i), (ii) and (iii) above and from District reserves; but excluding: (x) customers’ deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the District; (y) any proceeds of taxes or assessments restricted by law to be used by the District to pay bonds or other obligations heretofore or hereafter issued; and (z) any proceeds of administrative penalties or fines levied pursuant to future Board action in response to drought conditions. “Revenues” also include all amounts transferred from the Rate Stabilization Fund, to the Revenue Fund during any Fiscal Year in accordance with Section 5.05 and do not include any amounts transferred from the Revenue Fund to the Rate Stabilization Fund, during any Fiscal Year in accordance with Section 5.02(c). Series 2022 Installment Payment Date The term “Series 2022 Installment Payment Date” means March 31 and September 30 of each year commencing on March 31, 2023. Series 2022 Installment Payments The term “Series 2022 Installment Payments” means the Installment Payments scheduled to be paid by the District under and pursuant to the Installment Purchase Agreement. Page 39 of 236 8 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Trustee The term “Trustee” means U.S. Bank Trust Company, National Association, acting in its capacity as Trustee under and pursuant to the Indenture, and its successors and assigns. Water Service The term “Water Service” means the water distribution service made available or provided by the Water System. Water System The term “Water System” means the whole and each and every part of the water system of the District, including all real property and buildings, including the portion thereof existing on the date hereof, and including all additions, betterments, extensions and improvements to such water system or any part thereof hereafter acquired or constructed, and excluding any water system acquired through merger, consolidation or similar action, to the extent that the exclusion of such acquired water system is required pursuant to the term of such merger, consolidation or similar action, and further excluding the District’s sewer system. 2012 Project The term “2012 Project” means the additions, betterments, extensions and improvements to the District’s Water System facilities, including real property and buildings, if any, described as such in Exhibit A hereto. 2017 IPA The term “2017 IPA” means the Installment Purchase Agreement, dated as of May 1, 2017, by and between the District and the Authority. 2022 Project The term “2022 Project” means the additions, betterments, extensions and improvements to the District’s Water System facilities, including real property and buildings, if any, described as such in Exhibit A hereto, to the extent: (i) approved pursuant to the California Environmental Quality Act; and (ii) paid for with the proceeds of the 2022A Bonds, and as modified in conformance with Section 3.02 hereof. 2022A Bonds The term “2022A Bonds” means the Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A, issued pursuant to the Indenture. Page 40 of 236 9 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.01. Representations by the District. The District makes the following representations: (a) The District is a county water district duly organized and existing under and pursuant to the laws of the State of California. (b) The District has full legal right, power and authority to enter into this Installment Purchase Agreement, carry out its obligations hereunder and carry out and consummate all other transactions contemplated by this Installment Purchase Agreement, and the District has complied with the provisions of the Law in all matters relating to such transactions. (c) By proper action, the District has duly authorized the execution, delivery and due performance of this Installment Purchase Agreement. (d) The District will not take or, to the extent within its power, permit any action to be taken which results in the interest paid for the installment purchase of the 2022 Project and the 2012 Project under the terms of this Installment Purchase Agreement being included in the gross income of the Authority or its assigns for purposes of federal or State of California personal income taxation. (e) The District has determined that it is necessary and proper for District uses and purposes within the terms of the Law that the District finance and acquire the 2022 Project and refinance and acquire the 2012 Project in the manner provided for in this Installment Purchase Agreement, in order to provide essential services and facilities to persons residing in the District. Section 2.02. Representations and Warranties by the Authority. The Authority makes the following representations and warranties: (a) The Authority is a joint exercise of powers agency duly organized under the JPA Agreement and in good standing under the laws of the State of California, has full legal right, power and authority to enter into this Installment Purchase Agreement and to carry out and consummate all transactions contemplated by this Installment Purchase Agreement and by proper action has duly authorized the execution and delivery and due performance of this Installment Purchase Agreement. (b) The execution and delivery of this Installment Purchase Agreement and the consummation of the transactions herein contemplated will not violate any provision of law, any order of any court or other agency of government, or any indenture, material agreement or other instrument to which the Authority is now a party or by which it or any of its properties or assets is bound, or be in conflict with, result in a breach of or constitute a default (with due notice or the passage of time or both) under any such indenture, agreement or other instrument, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority. (c) The Authority will not take or permit any action to be taken which results in interest paid for the installment purchase of the 2022 Project and the 2012 Project under the terms of this Page 41 of 236 10 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Installment Purchase Agreement being included in the gross income of the Authority or its assigns for purposes of federal or State of California personal income taxation. ARTICLE III ACQUISITION AND CONSTRUCTION OF PROJECTS Section 3.01. Acquisition and Construction of the 2022 Project. The Authority hereby agrees to cause the 2022 Project and any additions or modifications thereto to be constructed, acquired and installed by the District as its agent. The District shall enter into contracts and provide for, as agent for the Authority, the complete design, construction, acquisition and installation of the 2022 Project in accordance with all applicable laws. The District hereby agrees that it will cause the construction, acquisition and installation of the 2022 Project to be diligently performed after the deposit of funds into the Acquisition Fund pursuant to Section 3.02 of the Indenture, upon satisfactory completion of design work and compliance with the California Environmental Quality Act and approval by the Board of Directors of the District, and that it will use its best efforts to cause the construction, acquisition and installation of the 2022 Project to be completed by August 1, 2025, unforeseeable delays beyond the reasonable control of the District only excepted. It is hereby expressly understood and agreed that the Authority shall be under no liability of any kind or character whatsoever for the payment of any cost of the 2022 Project and that all such costs and expenses shall be paid by the District. Section 3.02. Changes to the 2022 Project. The District may substitute other improvements for those listed as components of the 2022 Project in Exhibit A hereto, but only if the District first files with the Authority and the Trustee a statement of the District in the form attached as Exhibit C: (a) identifying the improvements to be substituted and the improvements to District facilities they replace in the 2022 Project; and (b) stating that the estimated costs of construction, acquisition and installation of the substituted improvements are not less than such costs for the improvements previously planned. Section 3.03. Sale and Purchase of 2012 Project. The parties hereby confirm that the District currently has title to the 2012 Project. In consideration for the Authority’s assistance in refinancing the 2012 Project, the District agrees to sell, and hereby sells, to the Authority, and the Authority agrees to purchase and hereby purchases, from the District, the 2012 Project in the manner and in accordance with the provisions of the Installment Purchase Agreement. Section 3.04. Purchase and Sale of 2022 Project and 2012 Project. In consideration for the Series 2022 Installment Payments, the Authority agrees to sell, and hereby sells, to the District, and the District agrees to purchase, and hereby purchases, from the Authority, the 2022 Project and the 2012 Project at the purchase price specified in Section 4.01 hereof and otherwise in the manner and in accordance with the provisions of the Installment Purchase Agreement. Section 3.05. Title. All right, title and interest in each component of the 2022 Project shall vest in the District immediately upon acquisition or construction thereof. All right, title and interest in each component of the 2012 Project shall vest in the District immediately upon execution and delivery of the Installment Purchase Agreement. Such vesting shall occur without further action by the Authority or the District, and the Authority shall, if requested by the District or if necessary to assure such automatic vesting, deliver any and all documents required to assure such vesting. Section 3.06. Acquisition Fund. There has been established with the Trustee pursuant to the Indenture the Acquisition Fund. The moneys in the Acquisition Fund shall be held by the Trustee in Page 42 of 236 11 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 trust and applied to the payment of the costs of acquisition and construction of the 2022 Project and of expenses incidental thereto. Before any payment is made from the Acquisition Fund by the Trustee, the Finance Manager of the District, acting as agent of the Authority, shall cause to be filed with the Trustee a certificate of the District in the form set forth in Exhibit D hereto. ARTICLE IV INSTALLMENT PAYMENTS Section 4.01. Purchase Price. (a) The Purchase Price to be paid by the District hereunder to the Authority is the sum of the principal amount of the District’s obligations hereunder plus the interest to accrue on the unpaid balance of such principal amount from the effective date hereof over the term hereof, subject to prepayment as provided in Article VII. (b) The principal amount of the payments to be made by the District hereunder is set forth in Exhibit B hereto. (c) The interest to accrue on the unpaid balance of such principal amount is as specified in Section 4.02 and Exhibit B hereto, and shall be paid by the District as and constitute interest paid on the principal amount of the District’s obligations hereunder. Section 4.02. Series 2022 Installment Payments. The District shall, subject to its rights of prepayment provided in Article VII, pay the Authority the Purchase Price in installment payments of interest and principal in the amounts and on the Series 2022 Installment Payment Dates as set forth in Exhibit B hereto. Each Series 2022 Installment Payment shall be paid to the Authority in lawful money of the United States of America. In the event that the District fails to make any of the payments required to be made by it under this section, such payment shall continue as an obligation of the District until such amount shall have been fully paid, and the District agrees to pay the same with interest accruing thereon at the rate or rates of interest then applicable to the remaining unpaid principal balance of the Series 2022 Installment Payments if paid in accordance with their terms. The obligation of the District to make the Series 2022 Installment Payments is absolute and unconditional, and until such time as the Purchase Price shall have been paid in full (or provision for the payment thereof shall have been made pursuant to Article IX), the District will not discontinue or suspend any Series 2022 Installment Payment required to be made by it under this section when due, whether or not the Water System or any part thereof is operating or operable or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and whether or not the 2022 Project has been completed, and such payments shall not be subject to reduction whether by offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever. Page 43 of 236 12 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 ARTICLE V SECURITY Section 5.01. Pledge of Revenues. The Ad Valorem Tax Revenues, all other Revenues, other amounts on deposit in the Revenue Fund, amounts transferred from the Rate Stabilization Fund to the Revenue Fund as described in Section 5.05, and any other amounts (including proceeds of the sale of the 2022A Bonds) held in any fund or account established pursuant to the Installment Purchase Agreement (except the Rate Stabilization Fund (other than those amounts transferred by the District from the Rate Stabilization Fund to the Revenue Fund)), are irrevocably pledged to the payment of the Series 2022 Installment Payments. This Installment Purchase Agreement is a Contract for purposes of the 2017 IPA, and the District so finds, and represents that the conditions of Section 5.03 of the 2017 IPA have been met in full. The Ad Valorem Tax Revenues are irrevocably pledged as the first source of repayment of the 2017 IPA and the Series 2022 Installment Payments. The Ad Valorem Tax Revenues shall not be used for any other purposes while any of the Series 2022 Installment Payments remain unpaid, except as provided for herein and in the 2017 IPA. In the event that the Ad Valorem Tax Revenues are not sufficient in amount to pay the 2017 IPA and the Series 2022 Installment Payments when due, such amounts shall be paid from other Net Revenues. The District hereby reaffirms, in furtherance of the foregoing and the 2017 IPA, that all Revenues and all amounts on deposit in the Revenue Fund are hereby irrevocably pledged to the payment of the 2017 IPA and the Series 2022 Installment Payments as provided herein and, except for the payment of the Operating and Maintenance Costs and Non-Operating and Maintenance Costs, the Revenues shall not be used for any other purpose while any of the Series 2022 Installment Payments remain unpaid; provided that out of the Revenues there may be apportioned such sums for such purposes as are expressly permitted herein. This pledge shall constitute a first and exclusive lien on Revenues, the Revenue Fund and the other funds and accounts created hereunder for the payment of the 2017 IPA, the Series 2022 Installment Payments and all other Contracts and Bonds in accordance with the terms hereof and of the Indenture. Section 5.02. Allocation of Revenues. In order to carry out and effectuate the pledge and lien contained herein, the District agrees and covenants that: (i) all Revenues shall be received by the District in trust hereunder and shall be deposited when and as received in a special fund designated as the “Revenue Fund,” which fund has been previously continued under the 2017 IPA and which fund the District agrees and covenants to maintain and to hold separate and apart from other funds so long as any Installment Payments or Bonds remain unpaid; and (ii) all Ad Valorem Tax Revenues shall be deposited when and as received in the “Ad Valorem Taxes Account of the Revenue Fund,” which account has been continued under the 2017 IPA. Moneys in the Revenue Fund shall be used and applied by the District as provided in the 2017 IPA and this Installment Purchase Agreement. The District shall, from the moneys in the Revenue Fund in excess of amounts pledged to the 2017 IPA and Series 2022 Installment Payments, pay all Operating and Maintenance Costs (including amounts reasonably required to be set aside in contingency reserves for Operating and Maintenance Costs, the payment of which is not then immediately required) and all Non-Operating and Maintenance Costs as they become due and payable. All moneys in the Ad Valorem Taxes Account and all remaining moneys in the Revenue Fund shall be set aside by the District at the following times in the following respective special funds in the following order of priority and all moneys in each of such funds shall be held in trust and shall be applied, used and withdrawn only for the purposes hereinafter authorized in this Section: Page 44 of 236 13 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 (a) 2022A Bond Payment Fund. On or before each Series 2022 Installment Payment Date, the District shall, first from moneys in the Ad Valorem Taxes Account and second from other remaining moneys in the Revenue Fund, transfer to the Trustee for deposit in the 2022A Bond Payment Fund an amount equal to the interest and principal payable and coming due on the next succeeding Series 2022 Installment Payment Date. The District shall also, from the moneys in the Revenue Fund, transfer to the applicable trustee for deposit in the applicable payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other Debt Service in accordance with the provisions of the Contract, Bond, resolution or indenture relating thereto. Any moneys on deposit in the 2022A Bond Payment Fund on each Series 2022 Installment Payment Date (other than amounts required for the payment of past due principal or interest with respect to any 2022A Bonds not presented for payment) shall be credited to the payment of the Series 2022 Installment Payments due and payable on such date. No deposit need be made in the 2022A Bond Payment Fund as Series 2022 Installment Payments if the amount in the 2022A Bond Payment Fund is at least equal to the amount of the Series 2022 Installment Payment due and payable on the next succeeding Series 2022 Installment Payment Date. (b) Reserve Funds. On or before each Series 2022 Installment Payment Date, the District shall, first from moneys in the Ad Valorem Taxes Account and second from other remaining moneys in the Revenue Fund, thereafter, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the applicable trustee for deposit to such other reserve fund or account for Bonds or Contracts, an amount equal to the amount required to be deposited therein. (c) Surplus. Moneys on deposit in the Revenue Fund not necessary to make any of the payments required above may be expended by the District at any time for any purpose permitted by law or deposited in the Rate Stabilization Fund. Section 5.03. Additional Contracts and Bonds. The District may at any time execute any Contract or issue any Bonds, as the case may be, in accordance herewith; provided that: (a) The Net Revenues for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as the case may be, as evidenced by a special report prepared by an Independent Certified Public Accountant or Independent Financial Consultant on file with the District, shall have produced a sum equal to at least one hundred twenty-five percent (125%) of the Debt Service for such twelve month period. When calculated for purposes of this subsection, Net Revenues do not include amounts transferred from the Rate Stabilization Fund to the Revenue Fund pursuant to Section 5.05 that are in excess of twenty-five percent (25%) of Debt Service for such Fiscal Year; and (b) The Net Revenues for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as the case may be, including adjustments to give effect as of the first day of such twelve month period to increases or decreases in rates and charges for the Water Service approved and in effect as of the date of calculation, as evidenced by a special report prepared by an Independent Certified Public Accountant or Independent Financial Consultant on file with the District, shall have Page 45 of 236 14 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 produced a sum equal to at least: (i) one hundred twenty-five percent (125%) of the Debt Service for such twelve month period; plus (ii) the Debt Service which would have accrued on any Contracts executed or Bonds issued since the end of such twelve month period, assuming that such Contracts had been executed or Bonds had been issued at the beginning of such twelve month period; plus (iii) the Debt Service which would have accrued had such proposed additional Contract been executed or proposed additional Bonds been issued at the beginning of such twelve month period. When calculated for purposes of this subsection, Net Revenues do not include amounts transferred from the Rate Stabilization Fund to the Revenue Fund pursuant to Section 5.05 that are in excess of twenty-five percent (25%) of Debt Service for such Fiscal Year; and (c) The estimated Net Revenues for the then current Fiscal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted Project to be financed from proceeds of such Contracts or Bonds, as evidenced by a certificate of the General Manager of the District on file with the District, including (after giving effect to the completion of all such uncompleted Projects) an allowance for estimated Net Revenues for each of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be fixed, prescribed or received for Water Service and which are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by a certificate of the Manager on file with the District, shall produce a sum equal to at least one hundred twenty-five percent (125%) of the estimated Debt Service for each of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Bonds estimated to be required to be executed or issued to pay the costs of completing all uncompleted Projects within such Fiscal Years, assuming that all such Contracts and Bonds have maturities, interest rates and proportionate principal repayment provisions similar to the Contract last executed or then being executed or the Bonds last issued or then being issued for the purpose of acquiring and constructing any of such uncompleted Projects. Notwithstanding the foregoing, Bonds issued or Contracts executed to refund Bonds or prepay Contracts may be delivered without satisfying the conditions set forth above if Debt Service in each Fiscal Year after the Fiscal Year in which such Bonds are issued or Contracts executed is not greater than Debt Service would have been in each such Fiscal Year prior to the issuance of such Bonds or execution of such Contracts. Section 5.04. Investments. All moneys held by the District in the Revenue Fund shall be invested in Permitted Investments and the investment earnings thereon shall remain on deposit in such fund, except as otherwise provided in the 2017 IPA and herein. Section 5.05. Rate Stabilization Fund. The District has previously established a special fund designated as the “Rate Stabilization Fund,” which fund is hereby continued. Such fund is held by the District in trust under the Installment Purchase Agreement. The District agrees and covenants to maintain and to hold such fund, separate and apart from other funds so long as any Contracts or Bonds remain unpaid. Money transferred by the District from the Revenue Fund to the Rate Stabilization Fund in accordance with Section 5.02(c) will be held in the Rate Stabilization Fund and applied in accordance with the Installment Purchase Agreement. The District may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund and transfer such amounts to the Revenue Fund for application in accordance with Section 5.02 or, in the event that all or a portion of the Series 2022 Installment Payments are discharged in accordance with Article VII, transfer all or any portion of such amounts for application in accordance Page 46 of 236 15 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 with Article VII. Any such amounts transferred from the Rate Stabilization Fund to the Revenue Fund in accordance herewith constitute pledged Revenues. ARTICLE VI COVENANTS OF THE DISTRICT Section 6.01. Compliance with Installment Purchase Agreement and Ancillary Agreements. The District will punctually pay the Series 2022 Installment Payments in strict conformity with the terms hereof, and will faithfully observe and perform all of the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, and will not terminate the Installment Purchase Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the 2022 Project or the 2012 Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State of California or any political subdivision of either or any failure of the Authority to observe or perform any agreement, condition, covenant or term contained herein required to be observed and performed by it, whether express or implied, or any duty, liability or obligation arising out of or connected herewith or the insolvency, or deemed insolvency, or bankruptcy or liquidation of the Authority or any force majeure, including acts of God, tempest, storm, earthquake, war, rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, strikes, industrial disputes, lock outs, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities. The District will faithfully observe and perform all of the agreements, conditions, covenants and terms required to be observed and performed by it pursuant to all outstanding Contracts and Bonds as such may from time to time be executed or issued, as the case may be. Section 6.02. Against Encumbrances. The District will not make any pledge of or place any lien on Revenues or the moneys in the Revenue Fund except as provided herein and in the 2017 IPA. In addition, the District may at any time, or from time to time, issue evidences of indebtedness or incur other obligations for any lawful purpose which are payable from and secured by a pledge of and lien on Revenues or any moneys in the Revenue Fund as may from time to time be deposited therein (as provided in Section 5.02), provided that such pledge and lien shall be subordinate in all respects to the pledge of and lien thereon provided herein. Section 6.03. Against Sale or Other Disposition of Property. The District will not enter into any agreement or lease which impairs the operation of the Water System or any part thereof necessary to secure adequate Revenues for the payment of the Series 2022 Installment Payments, or which would otherwise impair the rights of the Authority hereunder or the operation of the Water System. Any real or personal property which has become nonoperative or which is not needed for the efficient and proper operation of the Water System, or any material or equipment which has become worn out, may be sold if such sale will not impair the ability of the District to pay the Series 2022 Installment Payments and if the proceeds of such sale are deposited in the Revenue Fund. Nothing herein shall restrict the ability of the District to sell any portion of the Water System if such portion is immediately repurchased by the District and if such arrangement cannot by its terms result in the purchaser of such portion of the Water System exercising any remedy which would deprive the District of or otherwise interfere with its right to own and operate such portion of the Water System. Page 47 of 236 16 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Section 6.04. Against Competitive Facilities. The District will not, to the extent permitted by law, acquire, construct, maintain or operate and will not, to the extent permitted by law and within the scope of its powers, permit any other public or private agency, corporation, district or political subdivision or any person whomsoever to acquire, construct, maintain or operate within the District any water system competitive with the Water System. Section 6.05. Tax Covenants. Notwithstanding any other provision of the Installment Purchase Agreement, absent an opinion of Bond Counsel that the exclusion from gross income of the interest on the 2022A Bonds will not be adversely affected for federal income tax purposes, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income with respect to the 2022A Bonds and specifically covenants, without limiting the generality of the foregoing, as follows: (a) Private Activity. The District will take no action and refrain from taking any action, and the District will make no use of the proceeds of the 2022A Bonds or of any other moneys or property, which would cause the 2022A Bonds to be “private activity bonds” within the meaning of Section 141 of the Code; (b) Arbitrage. The District will make no use of the proceeds of the 2022A Bonds or of any other amounts or property, regardless of the source, and the District will not take any action or refrain from taking any action, which will cause the 2022A Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code; (c) Federal Guarantee. The District will make no use of the proceeds of the 2022A Bonds, and the District will not take or omit to take any action, that would cause the 2022A Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Code; (d) Information Reporting. The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code necessary to preserve the exclusion of interest on the 2022A Bonds pursuant to Section 103(a) of the Code; (e) Hedge Bonds. The District will make no use of the proceeds of the 2022A Bonds or any other amounts or property, regardless of the source, and the District will not take any action or refrain from taking any action, that would cause the 2022A Bonds to be considered “hedge bonds” within the meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income of interest on the 2022A Bonds for federal income tax purposes; and (f) Miscellaneous. The District will not take any action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed by the District in connection with the issuance of the 2022A Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. This Section and the covenants set forth herein shall not be applicable to, and nothing contained herein shall be deemed to prevent the District from causing the Authority to issue revenue bonds or issuing bonds or executing and delivering contracts payable on a parity with the 2022A Bonds, the interest with respect to which has been determined to be subject to federal income taxation. Page 48 of 236 17 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Section 6.06. Prompt Acquisition and Construction. The District will take all necessary and appropriate steps to acquire and construct the 2022 Project, as agent of the Authority, with all practicable dispatch and in an expeditious manner and in conformity with law so as to complete the same as soon as possible. Section 6.07. Maintenance and Operating of the Water System. The District will maintain and preserve the Water System in good repair and working order at all times and will operate the Water System in an efficient and economical manner and will pay all Operating and Maintenance Costs as they become due and payable. Section 6.08. Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien on the Revenues or the funds or accounts created hereunder or under the Indenture or on any funds in the hands of the District pledged to pay the Series 2022 Installment Payments or the Bonds, or which might impair the security of the Series 2022 Installment Payments. Section 6.09. Compliance with Contracts. The District will comply with, keep, observe and perform all agreements, conditions, covenants and terms, express or implied, required to be performed by it contained in all contracts for the use of the Water System and all other contracts affecting or involving the Water System, to the extent that the District is a party thereto. Section 6.10. Insurance. (a) The District will procure and maintain or cause to be procured and maintained insurance on the Water System, excluding coverage for earthquake damage or destruction, with responsible insurers in such amounts and against such risks (including accident to or destruction of the Water System) as are usually covered in connection with facilities similar to the Water System so long as such insurance is available at reasonable rates. In the event of any damage to or destruction of the Water System caused by the perils covered by such insurance, the Net Proceeds thereof shall be applied to the reconstruction, repair or replacement of the damaged or destroyed portion of the Water System. The District shall begin such reconstruction, repair or replacement promptly after such damage or destruction shall occur, and shall continue and properly complete such reconstruction, repair or replacement as expeditiously as possible, and shall pay out of such Net Proceeds all costs and expenses in connection with such reconstruction, repair or replacement so that the same shall be completed and the Water System shall be free and clear of all claims and liens. If such Net Proceeds exceed the costs of such reconstruction, repair or replacement, then the excess Net Proceeds shall be applied in part to the prepayment of Series 2022 Installment Payments as provided in Article VII and in part to such other fund or account as may be appropriate and used for the retirement of Bonds and Contracts in the same proportion which the aggregate unpaid principal balance of Series 2022 Installment Payments then bears to the aggregate unpaid principal amount of such Bonds and Contracts. If such Net Proceeds are sufficient to enable the District to retire the entire obligation evidenced hereby prior to the final due date of the Series 2022 Installment Payments as well as the entire obligations evidenced by Bonds and Contracts then remaining unpaid prior to their final respective due dates, the District may elect not to reconstruct, repair or replace the damaged or destroyed portion of the Water System, and thereupon such Net Proceeds shall be applied to the Page 49 of 236 18 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 prepayment of Series 2022 Installment Payments as provided in Article VII and to the retirement of such Bonds and Contracts. (b) The District will procure and maintain such other insurance which it shall deem advisable or necessary to protect its interests and the interests of the Authority, which insurance shall afford protection in such amounts and against such risks as are usually covered in connection with municipal water systems similar to the Water System. (c) Any insurance required to be maintained by paragraph (a) above and, if the District determines to procure and maintain insurance pursuant to paragraph (b) above, such insurance, may be maintained under a self-insurance program so long as such self-insurance is maintained in the amounts and manner usually maintained in connection with water systems similar to the Water System and is, in the opinion of an accredited actuary, actuarially sound. All policies of insurance required to be maintained herein shall provide that the Authority or its assignee shall be given thirty (30) days’ written notice of any intended cancellation thereof or reduction of coverage provided thereby. Section 6.11. Accounting Records; Financial Statements and Other Reports. (a) The District will keep appropriate accounting records in which complete and correct entries shall be made of all transactions relating to the Water System, which records shall be available for inspection by the Authority and the Trustee at reasonable hours and under reasonable conditions. (b) The District will prepare and file with the Authority or its assignee, annually within two hundred seventy (270) days after the close of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2022) financial statements of the District for the preceding Fiscal Year prepared in accordance with generally accepted accounting principles, together with an Accountant’s Report thereon. The Trustee shall have no obligation to review any such financial statements. Section 6.12. Protection of Security and Rights of the Authority. The District will preserve and protect the security hereof and the rights of the Authority to the Series 2022 Installment Payments hereunder and will warrant and defend such rights against all claims and demands of all persons. Section 6.13. Payment of Taxes and Compliance with Governmental Regulations. The District will pay and discharge all taxes, assessments and other governmental charges which may hereafter be lawfully imposed upon the Water System, or any part thereof or upon the Revenues when the same shall become due. The District will duly observe and conform with all valid regulations and requirements of any governmental authority relative to the operation of the Water System, or any part thereof, but the District shall not be required to comply with any regulations or requirements so long as the validity or application thereof shall be contested in good faith. Section 6.14. Amount of Rates and Charges. (a) In any Fiscal Year in which the amount on deposit in the Rate Stabilization Fund on the first day of such Fiscal Year is less than the Series 2022 Installment Payments payable in such Fiscal Year, to the fullest extent permitted by law, the District will fix and prescribe, at the commencement of each such Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of such Fiscal Year, to be at least sufficient to yield during such Fiscal Page 50 of 236 19 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Year Net Revenues equal to one hundred twenty-five percent (125%) of Debt Service for such Fiscal Year. When calculated for purposes of this subsection, Net Revenues do not include amounts transferred from the Rate Stabilization Fund pursuant to Section 5.05 that are in excess of twenty-five percent (25%) of Debt Service for such Fiscal Year. (b) In any Fiscal Year in which the amount on deposit in the Rate Stabilization Fund on the first day of such Fiscal Year is at least equal to the Series 2022 Installment Payments payable in such Fiscal Year, to the fullest extent permitted by law, the District will fix and prescribe, at the commencement of each such Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of such Fiscal Year, to be at least sufficient to yield during such Fiscal Year Revenues equal to one hundred twenty-five percent (125%) of the sum of Operating and Maintenance Costs and Non-Operating and Maintenance Costs for such Fiscal Year. When calculated for purposes of this subsection, Revenues do not include any amounts transferred from the Rate Stabilization Fund pursuant to Section 5.05. (c) The District may make, or permit to be made, adjustments from time to time in such rates, fees and charges and may make, or permit to be made, such classification thereof as it deems necessary, but may not reduce or permit to be reduced such rates, fees and charges below those then in effect, unless the Revenues from such reduced rates, fees and charges will at all times be sufficient to meet the foregoing requirements. (d) So long as the District has complied with its obligations set forth in the preceding paragraphs, the failure of Net Revenues to meet the threshold set forth the preceding paragraphs will not constitute a default or an Event of Default under the Installment Purchase Agreement or the Indenture. Section 6.15. Collection of Rates and Charges. The District will have in effect at all times by-laws, rules and regulations requiring each customer to pay the rates and charges applicable to the Water Service to such land and providing for the billing thereof and for a due date and a delinquency date for each bill. In each case where such bill remains unpaid in whole or in part after it becomes delinquent, the District may discontinue such service from the Water System, and such service shall not thereafter be recommenced except in accordance with District by-laws or rules, regulations and state law governing such situations of delinquency. Section 6.16. Eminent Domain Proceeds. If all or any part of the Water System shall be taken by eminent domain proceedings, the Net Proceeds thereof shall be applied as follows: (a) If: (1) the District files with the Authority and the Trustee a certificate showing: (i) the estimated loss of annual Net Revenues, if any, suffered or to be suffered by the District by reason of such eminent domain proceedings; (ii) a general description of the additions, betterments, extensions or improvements to the Water System proposed to be acquired and constructed by the District from such Net Proceeds; and (iii) an estimate of the additional annual Net Revenues to be derived from such additions, betterments, extensions or improvements; and (2) the District, on the basis of such certificate filed with the Authority and the Trustee, determines that the estimated additional annual Net Revenues will sufficiently offset the estimated loss of annual Net Revenues resulting from such eminent domain proceedings so that the ability of the District to meet its obligations hereunder will not be substantially impaired (which determination shall be final and conclusive), then the District shall promptly proceed with the acquisition and construction of such additions, betterments, extensions or improvements substantially in accordance with such certificate and such Net Proceeds shall be applied for the payment Page 51 of 236 20 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 of the costs of such acquisition and construction, and any balance of such Net Proceeds not required by the District for such purpose shall be deposited in the Revenue Fund. (b) If the foregoing conditions are not met, then such Net Proceeds shall be applied in part to the prepayment of Series 2022 Installment Payments as provided in Article VII and in part to such other fund or account as may be appropriate and used for the retirement of Bonds and Contracts in the same proportion which the aggregate unpaid principal balance of Series 2022 Installment Payments then bears to the aggregate unpaid principal amount of such Bonds and Contracts. Section 6.17. Further Assurances. The District will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring and confirming unto the Authority of the rights and benefits provided to it herein. Section 6.18. Enforcement of Contracts. So long as any of the 2022A Bonds are outstanding, the District will not voluntarily consent to or permit any rescission of, nor will it consent to any amendment to or otherwise take any action under or in connection with any contracts previously or hereafter entered into which contracts provide for water to be supplied to the District which consent, revision, amendment or other action will reduce the supply of water thereunder (except as provided therein), unless the Board of Directors of the District determines by resolution that such rescission or amendment would not materially adversely affect the ability of the District to pay Series 2022 Installment Payments. ARTICLE VII PREPAYMENT OF SERIES 2022 INSTALLMENT PAYMENTS Section 7.01. Prepayment. (a) The District may or shall, as the case may be, prepay from Net Proceeds as provided herein the Series 2022 Installment Payments in whole, or in part, on any date in the order of payment date as directed by the District, at a prepayment price equal to the sum of the principal amount prepaid plus accrued interest thereon to the date of prepayment, without premium. (b) The District may prepay the Series 2022 Installment Payments as a whole, or in part, on _____ 1, 20__ or any date thereafter in the order of payment date as directed by the District, at a prepayment price equal to the principal amount of the Series 2022 Installment Payments to be prepaid, together with accrued interest thereon to the date of prepayment, without premium. (c) Notwithstanding any such prepayment, the District shall not be relieved of its obligations hereunder, including its obligations under Article IV, until the Purchase Price shall have been fully paid (or provision for payment thereof shall have been provided to the written satisfaction of the Authority). Section 7.02. Method of Prepayment. Before making any prepayment pursuant to Section 7.01, the District shall, within five (5) days following the event permitting the exercise of such right to prepay or creating such obligation to prepay, give written notice to the Authority and the Trustee describing such event and specifying the date on which the prepayment will be paid, which Page 52 of 236 21 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 date shall be not less than sixty (60) (or such shorter number of days as is acceptable to the Trustee) days from the date such notice is given. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF THE AUTHORITY Section 8.01. Events of Default and Acceleration of Maturities. If one or more of the following Events of Default shall happen: (1) if default shall be made by the District in the due and punctual payment of any Series 2022 Installment Payment or any Contract or Bond when and as the same shall become due and payable; (2) if default shall be made by the District in the performance of any of the agreements or covenants required herein to be performed by it, and such default shall have continued for a period of sixty (60) days after the District shall have been given notice in writing of such default by the Authority; provided, however, that if in the reasonable opinion of the District the default stated in the notice can be corrected, but not within such sixty (60) day period, and corrective action is instituted by the District within such sixty (60) day period and diligently pursued in good faith until the default is corrected, such default shall not be an Event of Default hereunder; (3) if the District shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the District seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the District or of the whole or any substantial part of its property; or (4) if payment of the principal of any Contract or Bond is accelerated in accordance with its terms; then and in each and every such case during the continuance of an Event of Default, the Authority shall, by notice in writing to the District, declare the entire principal amount of the unpaid Series 2022 Installment Payments and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, anything contained herein to the contrary notwithstanding. This Section, however, is subject to the condition that if at any time after the entire principal amount of the unpaid Series 2022 Installment Payments and the accrued interest thereon shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the District shall deposit with the Authority a sum sufficient to pay the unpaid principal amount of the Series 2022 Installment Payments or the unpaid payment of any other Contract or Bond referred to in clause (1) above due prior to such declaration and the accrued interest thereon, with interest on such overdue installments, at the rate or rates applicable to the remaining unpaid principal balance of the Series 2022 Installment Payments or such Contract or Bond if paid in accordance with their terms, and the reasonable expenses of the Authority, and any and all other defaults known to the Authority (other than in the payment of the entire principal amount of the unpaid Series 2022 Installment Payments and the accrued interest Page 53 of 236 22 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 thereon due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Authority or provision deemed by the Authority to be adequate shall have been made therefor, then and in every such case the Authority, by written notice to the District, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. Section 8.02. Application of Funds Upon Acceleration. Upon the date of the declaration of acceleration as provided in Section 8.01, first, all Ad Valorem Tax Revenues and, if such amounts are insufficient to make the following payments, then all Revenues thereafter received by the District shall be applied in the following order: First, to the payment, without preference or priority, and in the event of any insufficiency of such Revenues ratably without any discrimination or preference, of the fees, costs and expenses of the Trustee and its assigns and thereafter to the Authority, as the case may be, in carrying out the provisions of this article, including reasonable compensation to their respective accountants and counsel; Second, to the payment of the Operating and Maintenance Costs; and Third, to the payment of the entire principal amount of the unpaid Series 2022 Installment Payments and the unpaid principal amount of all Bonds and Contracts and the accrued interest thereon, with interest on the overdue installments at the rate or rates of interest applicable to the Series 2022 Installment Payments and such Bonds and Contracts if paid in accordance with their respective terms. Section 8.03. Other Remedies of the Authority. The Authority shall have the right: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the District or any director, officer or employee thereof, and to compel the District or any such director, officer or employee to perform and carry out its or his duties under the Law and the agreements and covenants required to be performed by it or him contained herein; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Authority; or (c) by suit in equity upon the happening of an Event of Default to require the District and its directors, officers and employees to account as the trustee of an express trust. Notwithstanding anything contained herein, the Authority shall have no security interest in or mortgage on the 2022 Project, the 2012 Project the Water System or other assets of the District and no default hereunder shall result in the loss of the 2022 Project, the 2012 Project, the Water System, or other assets of the District. Section 8.04. Non-Waiver. Nothing in this article or in any other provision hereof shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the Series 2022 Installment Payments to the Authority at the respective due dates or upon prepayment from the Ad Valorem Tax Revenues, the Net Revenues, the Revenue Fund and the other funds herein pledged for such payment, or shall affect or impair the right of the Authority, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein. A waiver of any default or breach of duty or contract by the Authority shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such Page 54 of 236 23 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 subsequent default or breach of duty or contract. No delay or omission by the Authority to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Authority by the Law or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Authority. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Authority, the District and the Authority shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. Section 8.05. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by the Law or any other law. ARTICLE IX DISCHARGE OF OBLIGATIONS Section 9.01. Discharge of Obligations. When: (a) all or any portion of the Series 2022 Installment Payments shall have become due and payable in accordance herewith or a written notice of the District to prepay all or any portion of the Series 2022 Installment Payments shall have been filed with the Trustee; and (b) there shall have been deposited with the Trustee at or prior to the Series 2022 Installment Payment Date or dates specified for prepayment, in trust for the benefit of the Authority or its assigns and irrevocably appropriated and set aside to the payment of all or any portion of the Series 2022 Installment Payments, sufficient moneys or sufficient moneys and non-callable Permitted Investments, described in clause (A) of the definition thereof, the principal of and interest on which Permitted Investments when due will provide money that is sufficient in the opinion of a certified public accountant to pay all principal, prepayment premium, if any, and interest of such Series 2022 Installment Payments to their respective Series 2022 Installment Payment Dates, as the case may be; and (c) provision shall have been made for paying all fees and expenses of the Trustee, then and in that event, the right, title and interest of the Authority herein and the obligations of the District hereunder shall, with respect to all or such portion of the Series 2022 Installment Payments as have been so provided for, thereupon cease, terminate, become void and be completely discharged and satisfied (except for the right of the Trustee and the obligation of the District to have such moneys and such Permitted Investments applied to the payment of such Series 2022 Installment Payments). In such event, upon request of the District the Trustee shall cause an accounting for such period or periods as may be requested by the District to be prepared and filed with the District and shall execute and deliver to the District all such instruments as may be necessary or desirable to evidence such total or partial discharge and satisfaction, as the case may be, and, in the event of a total discharge and satisfaction, the Trustee shall pay over to the District, after payment of all amounts due the Trustee Page 55 of 236 24 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 pursuant to the Indenture, as an overpayment of Series 2022 Installment Payments, all such moneys or such Permitted Investments held by it pursuant hereto other than such moneys and such Permitted Investments, as are required for the payment or prepayment of the Series 2022 Installment Payments, which moneys and Permitted Investments shall continue to be held by the Trustee in trust for the payment of the Series 2022 Installment Payments and shall be applied by the Trustee to the payment of the Series 2022 Installment Payments of the District. ARTICLE X MISCELLANEOUS Section 10.01. Liability Limited. Notwithstanding anything contained herein, the District shall not be required to advance any moneys derived from any source of income other than the Revenues, the Revenue Fund and the other funds provided herein for the payment of amounts due hereunder or for the performance of any agreements or covenants required to be performed by it contained herein. The District may, however, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the District for such purpose. The obligation of the District to make the Series 2022 Installment Payments is a special obligation of the District payable solely first from the Ad Valorem Tax Revenues and second from the Net Revenues and does not constitute a debt of the District or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction. Section 10.02. Benefits of Installment Purchase Agreement Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the District or the Authority any right, remedy or claim under or pursuant hereto, and any agreement or covenant required herein to be performed by or on behalf of the District or the Authority shall be for the sole and exclusive benefit of the other party. Section 10.03. Successor Is Deemed Included in all References to Predecessor. Whenever either the District or the Authority is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the District or the Authority, and all agreements and covenants required hereby to be performed by or on behalf of the District or the Authority shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 10.04. Waiver of Personal Liability. No director, officer or employee of the District shall be individually or personally liable for the payment of the Series 2022 Installment Payments, but nothing contained herein shall relieve any director, officer or employee of the District from the performance of any official duty provided by any applicable provisions of law or hereby. Section 10.05. Article and Section Headings, Gender and References. The headings or titles of the several articles and sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof, and words of any gender shall be deemed and construed to include all genders. All references herein to “Articles,” “Sections” and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof and the words “hereby,” “herein,” “hereof,” “hereto,” “herewith” and other words of Page 56 of 236 25 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 similar import refer to the Installment Purchase Agreement as a whole and not to any particular article, section, subdivision or clause hereof. Section 10.06. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the District or the Authority shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants or portions thereof and shall in no way affect the validity hereof. The District and the Authority hereby declare that they would have executed the Installment Purchase Agreement, and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. Section 10.07. Assignment. The Installment Purchase Agreement and any rights hereunder may be assigned by the Authority, as a whole or in part, without the necessity of obtaining the prior consent of the District. In addition to the rights and remedies assigned by the Authority to the Trustee, to the extent that the Indenture and the Installment Purchase Agreement confer upon or give or grant to the Trustee any right, remedy or claim under or by reason of the Indenture or the Installment Purchase Agreement, the Trustee is hereby explicitly recognized as being a third party beneficiary hereunder and may enforce any such right, remedy or claim conferred given or granted. Section 10.08. Net Contract. The Installment Purchase Agreement shall be deemed and construed to be a net contract, and the District shall pay absolutely net during the term hereof the Series 2022 Installment Payments and all other payments required hereunder, free of any deductions and without abatement, diminution or set-off whatsoever. Section 10.09. California Law. THE INSTALLMENT PURCHASE AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. Section 10.10. Notices. All written notices to be given hereunder shall be given by mail to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other party in writing from time to time, namely: If to the District: Yorba Linda Water District 1717 East Miraloma Avenue Yorba Linda, CA 92870 Attention: General Manager If to the Authority: Yorba Linda Water District Public Financing Authority 1717 East Miraloma Avenue Yorba Linda, CA 92870 Attention: Executive Director Page 57 of 236 26 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 If to the Trustee: U.S. Bank Trust Company, National Association 633 West Fifth Street, 24th Floor Los Angeles, CA 90071 Attention: Global Corporate Trust Services Reference: Yorba Linda Water District, Series 2022A Section 10.11. Effective Date. The Installment Purchase Agreement shall become effective upon its execution and delivery, and shall terminate when the Purchase Price shall have been fully paid (or provision for the payment thereof shall have been made to the written satisfaction of the Authority). Section 10.12. Execution in Counterparts. The Installment Purchase Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. Section 10.13. Indemnification of Authority. The District hereby agrees to indemnify and hold harmless the Authority and its assigns and its officers and directors if and to the extent permitted by law, from and against all claims, advances, damages and losses, including legal fees and expenses, arising out of or in connection with the acceptance or the performance of its duties hereunder and under the Indenture; provided that no indemnification will be made for willful misconduct, negligence or breach of an obligation hereunder or under the Indenture by the Authority. Section 10.14. Amendments Permitted. (a) This Installment Purchase Agreement and the rights and obligations of the Authority and the District and of the Owners of the 2022A Bonds and of the Trustee may be modified or amended at any time by an amendment hereto which shall become binding when the written consents of the Owners of a majority in aggregate principal amount of the 2022A Bonds then Outstanding, exclusive of 2022A Bonds disqualified as provided in Section 11.09 of the Indenture. No such modification or amendment shall: (1) extend the fixed maturity of any 2022A Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the rate of interest or the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each 2022A Bond so affected; or (2) reduce the aforesaid percentage of 2022A Bonds the consent of the Owners of which is required to affect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under the Installment Purchase Agreement prior to or on a parity with the lien created by the Installment Purchase Agreement except as permitted herein, or deprive the Owners of the 2022A Bonds of the lien created by the Indenture on such Revenues and other assets except as permitted herein, without the consent of the Owners of all of the 2022A Bonds then Outstanding. (b) This Installment Purchase Agreement and the rights and obligations of the Authority and the District and of the Owners of the 2022A Bonds may also be modified or amended at any time by an amendment hereto which shall become binding upon adoption, without the consent of the Owners of any 2022A Bonds, but only to the extent permitted by law and only for any one or more of the following purposes: (1) to add to the covenants and agreements of the District contained in the Installment Purchase Agreement other covenants and agreements thereafter to be observed, to pledge or assign additional security for the 2022A Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the District; (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Installment Purchase Agreement, or in regard to matters or questions arising Page 58 of 236 27 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 under the Installment Purchase Agreement, as the District may deem necessary or desirable; and (3) to modify, amend or supplement the Installment Purchase Agreement in such manner as to cause interest on the 2022A Bonds to remain excludable from gross income under the Code. No amendment without consent of the Owners may modify any of the rights or obligations of the Trustee without the written consent thereto. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] Page 59 of 236 S-1 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 IN WITNESS WHEREOF, the parties hereto have executed and attested this Installment Purchase Agreement by their officers thereunto duly authorized as of the day and year first written above. YORBA LINDA WATER DISTRICT By: President of the Board of Directors ATTEST: Secretary of the Board of Directors YORBA LINDA WATER DISTRICT FINANCING AUTHORITY By: Chair of the Board of Directors ATTEST: Secretary of the Board of Directors Page 60 of 236 A-1 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 EXHIBIT A DESCRIPTION OF THE 2022 PROJECT AND THE 2012 PROJECT Description of the 2022 Project Component Capital Cost Hidden Hills Booster Pump Station Upgrades $ 1,407,603 Timber Ridge Booster Pump Station Pump Replacement 5,599,400 Well 22 Equipping 1,901,208 Railroad Crossings 2,110,212 Resiliency Improvements to District Facilities 1,045,000 Site and Security Upgrades to District Facilities 1,045,000 Well Rehabilitation Project 660,000 Lakeview Booster Pump Station Piping 330,000 Waterline Replacements 6,517,600 PRS Rehabilitation 4,763,100 Golden Avenue Waterline 266,805 Santiago Booster Pump Station Rehabilitation 1,819,070 Well 23 Drilling and Equipping 4,439,900 Total Cost $31,904,898 Description of the 2012 Project (originally financed in 2003) Component Capital Cost Richfield Plant – Phase 3 $3,200,000 Highland Reservoir Renovation 7,000,000 Total Cost $10,000,000 Page 61 of 236 B-1 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 EXHIBIT B PURCHASE PRICE 1. The principal amount of payments to be made by the District hereunder is $_____. 2. The Series 2022 Installment Payments of principal and interest are payable in the amounts and on the Series 2022 Installment Payment Dates as follows: Installment Payment Dates Amount Attributable to Principal Amount Attributable to Interest Total 09/30/2022 $[__] $ [__]$ [__] 03/31/2023 - 09/30/2023 03/31/2024 - 09/30/2024 03/31/2025 - 09/30/2025 03/31/2026 - 09/30/2026 03/31/2027 - 09/30/2027 03/31/2028 - 09/30/2028 03/31/2029 - 09/30/2029 03/31/2030 - 09/30/2030 03/31/2031 - 09/30/2031 03/31/2032 - 09/30/2032 03/31/2033 - 09/30/2033 03/31/2034 - 09/30/2034 03/31/2035 - 09/30/2035 03/31/2036 - 09/30/2036 03/31/2037 - 09/30/2037 03/31/2038 - 09/30/2038 03/31/2039 - 09/30/2039 03/31/2040 - 09/30/2040 03/31/2041 - Page 62 of 236 B-2 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 Installment Payment Dates Amount Attributable to Principal Amount Attributable to Interest Total 09/30/2041 03/31/2042 - 09/30/2042 03/31/2043 - 09/30/2043 03/31/2044 - 09/30/2044 03/31/2045 - 09/30/2045 03/31/2046 - 09/30/2046 03/31/2047 - 09/30/2047 03/31/2048 - 09/30/2048 03/31/2049 - 09/30/2049 03/31/2050 - 09/30/2050 03/31/2051 - 09/30/2051 03/31/2052 - 09/30/2052 TOTALS $_____$$ Page 63 of 236 C-1 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 EXHIBIT C FORM OF SUBSTITUTION STATEMENT Yorba Linda Water District Financing Authority 1717 East Miraloma Avenue Yorba Linda, CA 92870 Attention: Chair U.S. Bank Trust Company, National Association 633 West Fifth Street, 24th Floor Los Angeles, CA 90071 Attention: Global Corporate Trust Services Reference: Yorba Linda Water District, Series 2022A The undersigned General Manager of the Yorba Linda Water District (the “District”) hereby states pursuant to Section 3.02 of the Installment Purchase Agreement, dated as of July 1, 2022, by and between Yorba Linda Water District Public Financing Authority and the District (the “Installment Purchase Agreement”) that each component of the 2022 Project (as defined in the Installment Purchase Agreement) described in the first column of Exhibit A attached hereto, with an estimated cost set forth in the second column of Exhibit A, will be replaced by the corresponding improvement described in the third column of Exhibit A, with an estimated cost set forth in the fourth column of Exhibit A. Dated: _________ __, 20__ General Manager Page 64 of 236 C-2 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 EXHIBIT A Components of Project to be Replaced Cost of Each Components of Project to be Replaced Improvements to be Substituted Cost of Each Improvement to be Substituted Page 65 of 236 D-1 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 EXHIBIT D FORM OF REQUISITION FROM ACQUISITION FUND $_____ YORBA LINDA WATER DISTRICT FINANCING AUTHORITY REVENUE BONDS, SERIES 2022A REQUISITION NO. _ FOR DISBURSEMENT FROM ACQUISITION FUND The undersigned hereby states and certifies: (i) that the undersigned is the duly appointed, qualified and acting Finance Manager of the Yorba Linda Water District, a county water district organized and existing under the Constitution and laws of the State of California (the “District”), and as such, is familiar with the facts herein certified and is authorized to certify the same; (ii) that, pursuant to Section 3.06 of that certain Installment Purchase Agreement, dated as of July 1, 2022 (the “Installment Purchase Agreement”), by and between the Yorba Linda Water District Financing Authority and the District, the undersigned hereby requests the Trustee to disburse this date the following amounts from the Acquisition Fund established under the Indenture relating to the above-captioned obligations, to the payees designated on the attached Exhibit A; (iii) that each obligation mentioned herein has been incurred by the District and is a proper charge against the Acquisition Fund; (iv) that any approval required under the California Environmental Quality Act, as amended (Division 13 of the California Public Resources Code), prior to the expenditure of such amount for the purpose set forth on the attached Exhibit A has been received and is final; and (v) that there has not been filed with or served upon the District notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys payable to any of the payees named on the attached Exhibit A, which has not been released or will not be released simultaneously with the payment of such obligation, other than materialmen’s or mechanics’ liens accruing by mere operation of law. Dated: , 20__ YORBA LINDA WATER DISTRICT By: Finance Manager Page 66 of 236 D-2 NG-U9ZQVMF2/4876-7827-6127v4/022608-0014 EXHIBIT A ACQUISITION FUND DISBURSEMENTS Item Number Payee Name and Address Purpose of Obligation Amount Page 67 of 236 Stradling Yocca Carlson & Rauth Draft of 6/30/22 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 INDENTURE OF TRUST Dated as of July 1, 2022 By and between U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee and the YORBA LINDA WATER DISTRICT FINANCING AUTHORITY Relating to $_____ YORBA LINDA WATER DISTRICT FINANCING AUTHORITY REVENUE BONDS, SERIES 2022A Page 68 of 236 TABLE OF CONTENTS Page i NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 ARTICLE I DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS Section 1.01. Definitions...............................................................................................................3 Section 1.02. Content of Certificates and Opinions....................................................................10 Section 1.03. Interpretation.........................................................................................................11 ARTICLE II THE BONDS Section 2.01. Authorization of Bonds.........................................................................................11 Section 2.02. Terms of the Bonds ...............................................................................................11 Section 2.03. Transfer of Bonds..................................................................................................13 Section 2.04. Exchange of Bonds................................................................................................13 Section 2.05. Registration Books................................................................................................13 Section 2.06. Form and Execution of Bonds...............................................................................13 Section 2.07. Bonds Mutilated, Lost, Destroyed or Stolen.........................................................14 Section 2.08. Book-Entry System ...............................................................................................14 ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS Section 3.01. Issuance of the Bonds............................................................................................17 Section 3.02. Application of Proceeds of the Bonds...................................................................17 Section 3.03. Establishment and Application of Costs of Issuance Fund...................................17 Section 3.04. Acquisition Fund...................................................................................................18 Section 3.05. Validity of Bonds ..................................................................................................18 ARTICLE IV REDEMPTION OF BONDS Section 4.01. Terms of Redemption............................................................................................18 Section 4.02. Selection of Bonds for Redemption ......................................................................19 Section 4.03. Notice of Redemption ...........................................................................................19 Section 4.04. Partial Redemption of Bonds ................................................................................20 Section 4.05. Effect of Redemption ............................................................................................20 ARTICLE V REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST Section 5.01. Pledge and Assignment; 2022A Bond Payment Fund ..........................................21 Section 5.02. Allocation of Authority Revenues.........................................................................21 Page 69 of 236 TABLE OF CONTENTS (continued) Page ii NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Section 5.03. Application of Interest Account............................................................................22 Section 5.04. Application of Principal Account..........................................................................22 Section 5.05. Application of Redemption Fund..........................................................................22 Section 5.06. Investments............................................................................................................22 Section 5.07. Rebate Fund...........................................................................................................23 Section 5.08. Application of Funds and Accounts When No Bonds are Outstanding................25 ARTICLE VI PARTICULAR COVENANTS Section 6.01. Punctual Payment..................................................................................................25 Section 6.02. Extension of Payment of Bonds............................................................................25 Section 6.03. Against Encumbrances..........................................................................................25 Section 6.04. Power to Issue Bonds and Make Pledge and Assignment.....................................25 Section 6.05. Accounting Records and Financial Statements.....................................................26 Section 6.06. Tax Covenants.......................................................................................................26 Section 6.07. Payments Under Installment Purchase Agreement...............................................27 Section 6.08. Waiver of Laws.....................................................................................................27 Section 6.09. Further Assurances................................................................................................27 Section 6.10. Eminent Domain....................................................................................................27 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS Section 7.01. Events of Default...................................................................................................27 Section 7.02. Remedies Upon Event of Default..........................................................................28 Section 7.03. Application of Authority Revenues and Other Funds After Default.....................29 Section 7.04. Trustee to Represent Bond Owners.......................................................................29 Section 7.05. Bond Owners’ Direction of Proceedings...............................................................30 Section 7.06. Suit by Owners......................................................................................................30 Section 7.07. Absolute Obligation of the Authority....................................................................30 Section 7.08. Remedies Not Exclusive .......................................................................................31 Section 7.09. No Waiver of Default............................................................................................31 ARTICLE VIII THE TRUSTEE Section 8.01. Duties, Immunities and Liabilities of Trustee.......................................................31 Section 8.02. Merger or Consolidation .......................................................................................32 Section 8.03. Liability of Trustee................................................................................................32 Section 8.04. Right to Rely on Documents.................................................................................35 Section 8.05. Preservation and Inspection of Documents...........................................................35 Section 8.06. Compensation and Indemnification.......................................................................35 Page 70 of 236 TABLE OF CONTENTS (continued) Page iii NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE Section 9.01. Amendments Permitted.........................................................................................36 Section 9.02. Effect of Supplemental Indenture..........................................................................37 Section 9.03. Endorsement of Bonds; Preparation of New Bonds..............................................37 Section 9.04. Amendment of Particular Bonds...........................................................................37 ARTICLE X DEFEASANCE Section 10.01. Discharge of Indenture..........................................................................................37 Section 10.02. Discharge of Liability on Bonds ...........................................................................38 Section 10.03. Deposit of Money or Securities with Trustee........................................................38 Section 10.04. Payment of Bonds After Discharge of Indenture..................................................39 ARTICLE XI MISCELLANEOUS Section 11.01. Liability of Authority Limited to Authority Revenues .........................................39 Section 11.02. Successor Is Deemed Included in All References to Predecessor.........................40 Section 11.03. Limitation of Rights to Parties and Bond Owners ................................................40 Section 11.04. Waiver of Notice; Requirement of Mailed Notice................................................40 Section 11.05. Destruction of Bonds.............................................................................................40 Section 11.06. Severability of Invalid Provisions.........................................................................40 Section 11.07. Notices...................................................................................................................40 Section 11.08. Evidence of Rights of Bond Owners.....................................................................41 Section 11.09. Disqualified Bonds................................................................................................41 Section 11.10. Money Held for Particular Bonds .........................................................................41 Section 11.11. Funds and Accounts ..............................................................................................41 Section 11.12. Waiver of Personal Liability .................................................................................42 Section 11.13. Execution in Several Counterparts........................................................................42 Section 11.14. CUSIP Numbers....................................................................................................42 Section 11.15. Choice of Law.......................................................................................................42 Section 11.16. Notice to Rating Agencies.....................................................................................42 Signatures .............................................................................................................................S-1 Exhibit A Form of Bond......................................................................................................A-1 Page 71 of 236 1 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 INDENTURE OF TRUST THE INDENTURE OF TRUST is made and entered into and dated as of July 1, 2022, by and between the YORBA LINDA WATER DISTRICT FINANCING AUTHORITY, a joint exercise of powers agency duly organized and existing under and by virtue of the laws of the State of California (the “Authority”), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States of America, as trustee hereunder (the “Trustee”). RECITALS A. The Authority has been created pursuant to the JPA Agreement with the powers, among others, to issue bonds and to finance water supply facilities on behalf of its members. B. Yorba Linda Water District (the “District”), a member of the Authority, has determined that it is in the best interest of the public to finance and refinance certain improvements to its Water System with the assistance of the Authority. C. The Authority is authorized pursuant to State law, including but not limited to, Section 6588(c) of the Government Code of the State of California (the “Government Code”) and pursuant to Sections 5 and 10 of the JPA Agreement to incur indebtedness to finance and refinance such improvements, and is authorized pursuant to State law, including but not limited to Section 6588(m) of the Government Code, to assign and pledge to the repayment of such indebtedness amounts payable to the Authority by its members. D. The District has determined that it is in the District’s best interest to finance and refinance the acquisition and construction of certain improvements to its Water System (the “2022 Project” and the “2012 Project,” respectively), as further described in the Installment Purchase Agreement. E. The Authority hereby finds pursuant to Section 6586 of the Government Code that the issuance of the bonds authorized pursuant to Section 2.01 hereof (the “Bonds”) to finance the 2022 Project and to refinance the 2012 Project will have demonstrable savings in effective interest rate, bond preparation, bond underwriting or bond issuance costs and significant reductions in effective user charges levied by the District. F. In order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the payment of the principal thereof and interest and premium, if any, thereon, the Authority has authorized the execution and delivery of the Indenture. G. The Authority has determined that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee, and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute the Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Indenture have been in all respects duly authorized. Page 72 of 236 2 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 GRANTING CLAUSES The Authority, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the owners thereof, and for other valuable considerations, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of and the interest and premium (if any) on all Bonds at any time issued and Outstanding under the Indenture, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, does hereby assign and pledge unto, and grant a security interest in, the following (the “Trust Estate”) to the Trustee, and its successors in trust and assigns forever, for the securing of the performance of the obligations of the Authority to the Bond Owners hereinafter set forth: FIRST All right, title and interest of the Authority in and to the Authority Revenues (as defined herein), including, but without limiting the generality of the foregoing, the present and continuing right to make claim for, collect, receive and receipt for any Authority Revenues payable to or receivable by the Authority under the Constitution of the State, the Government Code and the Indenture and any other applicable laws of this State or otherwise, to bring actions and proceedings thereunder for the enforcement thereof, and to do any and all things which the Authority is or may become entitled to do thereunder, subject to the terms hereof. SECOND All moneys and securities held in funds and accounts of the Indenture, except amounts held in the Rebate Fund, and all other rights of every name and nature from time to time herein or hereafter by delivery or by writing of any kind pledged, assigned or transferred as and for additional security hereunder to the Trustee by the Authority or by anyone on its behalf, or with its written consent, and to hold and apply the same, subject to the terms hereof. THIRD All of the rights, title, and interest of the Authority in the Installment Purchase Agreement, including all rights of the Authority to receive payments thereunder and all rights of the Authority thereunder as may be necessary to enforce compliance with said provisions (including enforcement of payment obligations and rate covenants, if any, contained in the Installment Purchase Agreement) or otherwise to protect the interest of the Owners of the Bonds, subject to the terms hereof, and excepting therefrom any rights to indemnification or to receive notices thereunder. TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned or hereafter acquired, unto the Trustee and its respective successors in trust and assigns forever for the benefit of the Owners, and such pledge shall constitute a lien on and security interest in such Trust Estate; IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future owners of the Bonds issued under and secured by the Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds; Page 73 of 236 3 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 PROVIDED, HOWEVER, that if the Authority, its successors or assigns shall well and truly pay, or cause to be paid, the principal of and interest and any redemption premium on the Bonds due or to become due thereon, at the times and in the manner provided in the Bonds according to the true intent and meaning thereof, and shall well and truly keep, perform and observe all of the covenants and conditions pursuant to the terms of the Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to Trustee all sums of money due or to become due in accordance with the terms and provisions hereof, then upon such final payments or deposits as herein provided, the Indenture and the rights hereby granted shall cease, terminate and be void; otherwise the Indenture shall remain in full force and effect. THE INDENTURE FURTHER WITNESSETH, and it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered, and all sold property, rights and interests, including, without limitation, the Authority Revenues, hereby assigned and pledged, are to be dealt with and disposed of, under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes hereinafter expressed, and the Authority has agreed and covenanted and does hereby covenant and agree with the Trustee, for the benefit of the respective Owners from time to time of the Bonds, as follows: ARTICLE I DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.01 shall, for all purposes of the Indenture and of any indenture supplemental hereto and of any certificate, opinion or other document herein mentioned, have the meanings herein specified, to be equally applicable to both the singular and plural forms of any of the terms herein defined. Unless the context otherwise requires, all capitalized terms used herein and not defined have the meanings ascribed thereto in the Installment Purchase Agreement. Acquisition Fund. The term “Acquisition Fund” means the fund by that name established pursuant to Section 3.04. Authority. The term “Authority” means the Yorba Linda Water District Financing Authority, a public body duly organized and existing under the JPA Agreement, and under the Constitution and laws of the State of California. Authority Revenues. The term “Authority Revenues” means: (a) all Series 2022 Installment Payments received by the Authority or the Trustee pursuant to or with respect to the Installment Purchase Agreement; and (b) all interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder. Authorized Representative. The term “Authorized Representative” means with respect to the Authority, its Chair, Vice Chair, Secretary, Treasurer or Executive Director or any other person designated as an Authorized Representative of the Authority by a Certificate of the Authority signed by its Chair, Vice Chair, Secretary, Treasurer or Executive Director and filed with the Trustee. Bond Counsel. The term “Bond Counsel” means Stradling, Yocca, Carlson & Rauth, or another firm of nationally recognized attorneys experienced in the issuance of obligations the interest on which is excludable from gross income under Section 103 of the Code. Page 74 of 236 4 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Bond Year. The term “Bond Year” means the period beginning on the date of issuance of the Bonds and ending on October 1, 2022, and each successive one year or, during the last period prior to maturity, shorter period thereafter until there are no Outstanding Bonds. Bonds. The term “Bonds” means the Revenue Bonds, Series 2022A issued by the Authority and at any time Outstanding pursuant to the Indenture. Business Day. The term “Business Day” means: (i) a day which is not a Saturday, Sunday or legal holiday on which banking institutions in the State, or in any other state in which the Office of the Trustee is located, are closed; or (ii) a day on which the New York Stock Exchange is not closed. Certificate; Direction; Request; Requisition. The terms “Certificate,” “Direction,” “Request,” and “Requisition” of the Authority mean a written certificate, direction, request or requisition signed in the name of the Authority by its Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by Section 1.02, each such instrument shall include the statements provided for in Section 1.02. Closing Date. The term “Closing Date” means the date on which the Bonds are delivered to the original purchaser thereof. Code. The term “Code” means the Internal Revenue Code of 1986, as amended. Costs of Issuance. The term “Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the Authority and related to the authorization, issuance, sale and delivery of the Bonds, including but not limited to costs of preparation and reproduction of documents, printing expenses, filing and recording fees, initial fees and charges of the Trustee and counsel to the Trustee, legal fees and charges, fees and disbursements of consultants and professionals, rating agency fees, title insurance premiums, letter of credit fees and bond insurance premiums (if any), fees and charges for preparation, execution and safekeeping of the Bonds and any other cost, charge or fee in connection with the original issuance of the Bonds. Costs of Issuance Fund. The term “Costs of Issuance Fund” means the fund by that name established pursuant to Section 3.03. Depository; DTC. The terms “Depository” and “DTC” mean The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York in its capacity as securities depository for the Bonds. District. The term “District” means the Yorba Linda Water District, a county water district duly organized and existing under and by virtue of the laws of the State. Escrow Agent. The term “Escrow Agent” means U.S. Bank Trust Company, National Association, as escrow agent pursuant to the terms of the Escrow Agreement (2012 Bonds), or its successor thereunder. Escrow Agreement (2012 Bonds). The term “Escrow Agreement (2012 Bonds)” means the Escrow Agreement (2012 Bonds), dated as of July 1, 2022, by and between the District and the Escrow Page 75 of 236 5 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Agent, as originally executed or as it may from time to time be amended or supplemented in accordance with its terms. Event of Default. The term “Event of Default” means any of the events specified in Section 7.01. Federal Securities. The term “Federal Securities” means any direct, noncallable general obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America), or noncallable obligations the timely payment of principal of and interest on which are fully and unconditionally guaranteed by the United States of America. Fiscal Year. The term “Fiscal Year” means the twelve month period beginning on July 1 of each year and ending on the next succeeding June 30, both dates inclusive, or any other twelve month period hereafter selected and designated as the official fiscal year period of the Authority. Fitch. The term “Fitch” means Fitch Ratings, Inc., or any successor thereto. Government Code. The term “Government Code” means the Government Code of the State. Indenture. The term “Indenture” means the Indenture of Trust, dated as of July 1, 2022, by and between the Authority and the Trustee, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture. Information Services. The term “Information Services” means the Municipal Securities Rulemaking Board; or, in accordance with then-current guidelines of the Securities and Exchange Commission, such other services providing information with respect to called bonds as the Authority may specify in a certificate to the Authority and the Trustee as the Trustee may select. Installment Purchase Agreement. The term “Installment Purchase Agreement” means the Installment Purchase Agreement, dated as of the date hereof, by and between the Authority and the District, as amended from time to time. Interest Account. The term “Interest Account” means the account by that name in the 2022A Bond Payment Fund established pursuant to Section 5.01. Interest Payment Date. The term “Interest Payment Date” means April 1 and October 1 of each year commencing ____ 1, 202__. Investment Agreement. The term “Investment Agreement” means an investment agreement by a provider, supported by appropriate opinions of counsel, provided that any such Investment Agreement shall: (i) be from a provider rated by S&P or Moody’s at “A-” or “A3”, respectively, or above; (ii) require the Authority or the District to terminate such agreement and immediately reinvest the proceeds thereof in other Permitted Investments if the rating assigned to the provider by S&P or Moody’s falls to “BBB” or “Baa2”, respectively, or below; and (iii) expressly permit the withdrawal, without penalty, of any amounts necessary at any time to fund any deficiencies on account of debt service requirements with respect to the Bonds, together with such amendments as may be approved by the Authority and the Trustee from time to time. Page 76 of 236 6 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 JPA Agreement. The term “JPA Agreement” means that certain Joint Exercise of Powers Agreement, dated April 11, 2017, by and between the District and California Municipal Finance Authority, a public body, corporate and politic, duly organized and existing under the laws of the State, as amended from time to time. Letter of Representations. The term “Letter of Representations” means the letter of the Authority delivered to and accepted by the Depository on or prior to delivery of the Bonds as book- entry bonds setting forth the basis on which the Depository serves as depository for such book-entry bonds, as originally executed or as it may be supplemented or revised or replaced by a letter from the Authority delivered to and accepted by the Depository. Moody’s. The term “Moody’s” means Moody’s Investors Service, Inc. or any successor thereto. Nominee. The term “Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.08 hereof. Office. The term “Office” means with respect to the Trustee, the principal corporate trust office of the Trustee at 633 West Fifth Street, 24th Floor, Los Angeles, California 90071, Attention: Global Corporate Trust Services, Reference: Yorba Linda Water District, Series 2022A, or at such other or additional offices as may be specified in writing by the Trustee to the Authority, except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term means the office or agency of the Trustee at which, at any particular time, its corporate trust agency business shall be conducted. Opinion of Counsel. The term “Opinion of Counsel” means a written opinion of counsel (including but not limited to counsel to the Authority) selected by the Authority. If and to the extent required by the provisions of Section 1.02, each Opinion of Counsel shall include the statements provided for in Section 1.02. Outstanding. The term “Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 11.09) all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under the Indenture except: (i) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (ii) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with Section 10.02, including Bonds (or portions thereof) described in Section 11.10; and (iii) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee pursuant to the Indenture. Owner; Bond Owner. The terms “Owner” or “Bond Owner,” whenever used herein with respect to a Bond, mean the person in whose name the ownership of such Bond is registered on the Registration Books. Participants. The term “Participants” means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds book-entry certificates as securities depository. Page 77 of 236 7 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Permitted Investments. The term “Permitted Investments” means any of the following which at the time are legal investments under the laws of the State for moneys held hereunder and then proposed to be invested therein: (A) for all purposes, including defeasance investments in refunding escrow accounts: (1) cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with obligations described in clause (2) below); (2) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America; (3) U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series); (4) Resolution Funding Corp. strips (only the interest component of REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York in book entry form are acceptable); (5) Pre-refunded municipal bonds rated “Aaa” by Moody’s and “AAA” by S&P. If however, the issue is only rated by S&P (i.e., there is no Moody’s rating), then the pre-refunded bonds must have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or “AAA” rated pre-refunded municipals to satisfy this condition; and (6) Obligations issued by the following agencies which are backed by the full faith and credit of the U.S.: a. U.S. Export-Import Bank (Eximbank): Direct obligations or fully guaranteed certificates of beneficial ownership; b. Farmers Home Administration: Certificates of beneficial ownership; c. Federal Financing Bank; d. General Services Administration: Participation Certificates; e. U.S. Maritime Administration: Guaranteed Title XI financing; and f. U.S. Department of Housing and Urban Development: Project Notes, Local Authority Bonds, New Communities Debentures - U.S. government guaranteed debentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds; and (B) for all purposes other than defeasance investments in refunding escrow accounts: (1) direct 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, and CATS and TIGRS) or obligations of the principal of and interest on which are unconditionally guaranteed by the United States of America; (2) obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America: the Export-Import Bank; Farmers Home Administration; General Services Administration; United States Maritime Administration; Government National Mortgage Association; United States Department of Housing & Urban Development; Federal Financing Bank; and Federal Housing Administration Debentures; (3) obligations of any of the following federal agencies which obligations do not represent the full faith and credit of the United States of America, including the Federal Home Loan Bank System; Federal Home Loan Mortgage Corporation (FHLMC); Federal National Mortgage Association (FNMA); Student Loan Marketing Association; Resolution Funding Corp.; and Farm Credit System; (4) commercial paper which is rated at the time of purchase in the single highest classification, “A-1” by S&P and “P-1” by Moody’s; (5) investments in a money market fund rated “AAAm”, “AAAm-G” or “AA-m” or better by S&P, or “Aaa”, “Aa1” or “Aa2” or better by Moody’s, including any fund for which the Trustee or an affiliate acts as investment advisor or provides other services; Page 78 of 236 8 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 (6) Certificates of deposit secured at all times by collateral described in (A) and/or (B)(1) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks, including the Trustee and its affiliates. The collateral must be held by a third party and the Trustee must have a perfected first security interest in the collateral; (7) Certificates of deposit (including those of the Trustee, its parent and its affiliates), savings accounts, deposit accounts or money market deposits; (8) Investment Agreements, including GICs, Forward Purchase Agreements and Reserve Fund Put Agreements; (9) Federal Funds or bankers acceptances with a maximum term of one year of any bank, including the Trustee and its affiliates, which has an unsecured, uninsured and unguaranteed obligation rating of “Prime-1” or “A3” or better by Moody’s and “A-1” or “A” or better by S&P; (10) Repurchase agreements provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee or the District, as applicable, and the transfer of cash from the Trustee or the District, as applicable, to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee or the District, as applicable, in exchange for the securities at a specified date; 1. Repurchase agreements must be between the municipal entity and a dealer bank or securities firm. a. Primary dealers on the Federal Reserve reporting dealer list which are rated A or better by Standard & Poor’s Corporation and Moody’s Investor Services; or b. Banks rated “A” or above by S&P and Moody’s. 2. The written contract must include the following: a. Securities which are acceptable for transfer are: (1) Direct U.S. Governments; or (2) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA & FHLMC); b. The term of the Repurchase agreement may be up to 30 days; c. The collateral must be delivered to the Trustee or the District, as applicable, trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee (if the trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificates securities). d. The securities must be valued weekly, marked-to-market at current market price plus accrued interest. The value of collateral must be equal to 104% of the amount of cash transferred by the Trustee or the District, as applicable, to the dealer bank or security firm under the repo plus accrued interest. If the value of the securities held as collateral slips below the 104% of the value of the cash transferred by the Trustee or the District, as applicable, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%. Page 79 of 236 9 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 3. Legal opinion which must be delivered to the Trustee and the District: the Repurchase Agreement meets guidelines under state law for legal investment of public funds; (11) The Local Agency Investment Fund of the State of California created pursuant to Section 16429.1 of the California Government Code; and (12) Unsecured certificates of deposit, time deposits, money market deposits, demand deposits and bankers’ acceptances of any bank (including those of Trustee, its parent and its affiliates) the short term obligations of which are rated on the date of purchase “A-1” or better by S&P, “P-1” or better by Moody’s or “F1” or better by Fitch. Principal Account. The term “Principal Account” means the account by that name in the 2022A Bond Payment Fund established pursuant to Section 5.01. Rating. The term “Rating” means any currently effective rating on the Bonds issued by a Rating Agency. Rating Agencies. The term “Rating Agencies” means S&P and Fitch. Rebate Fund. The term “Rebate Fund” means the fund by that name established pursuant to Section 5.07. Record Date. The term “Record Date” means, with respect to any Interest Payment Date, the fifteenth (15th) day of the calendar month preceding such Interest Payment Date, whether or not such day is a Business Day. Redemption Date. The term “Redemption Date” means the date fixed for an optional redemption prior to maturity of the Bonds. Redemption Fund. The term “Redemption Fund” means the fund by that name established pursuant to Section 5.05. Redemption Price. The term “Redemption Price” means, with respect to any Bond (or portion thereof), the principal amount of such Bond (or portion) plus the interest accrued to the applicable Redemption Date and the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such Bond and the Indenture. Registration Books. The term “Registration Books” means the records maintained by the Trustee for the registration of ownership and registration of transfer of the Bonds pursuant to Section 2.05. Responsible Officer of the Trustee. The term “Responsible Officer of the Trustee” means any officer within the corporate trust division (or any successor group or department of the Trustee) including any vice president, assistant vice president, assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, with responsibility for the administration of the Indenture. S&P. The term “S&P” means S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, or any successor thereto. Page 80 of 236 10 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Securities Depositories. The term “Securities Depositories” means The Depository Trust Company; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other securities depositories as the Authority may designate in a Request of the Authority deliver to the Trustee. State. The term “State” means the State of California. Supplemental Indenture. The term “Supplemental Indenture” means any indenture hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending the Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. Tax Certificate. The term “Tax Certificate” means the Tax Certificate dated the Closing Date, concerning certain matters pertaining to the use and investment of proceeds of the Bonds issued by the Authority on the date of issuance of the Bonds, including any and all exhibits attached thereto. Trustee. The term “Trustee” means U.S. Bank Trust Company, National Association, a national banking association duly organized and existing under the laws of the United States of America, or its successor, as Trustee hereunder as provided in Section 8.01. 2022A Bond Payment Fund. The term “2022A Bond Payment Fund” means the fund by that name established pursuant to Section 5.01(c). Section 1.02. Content of Certificates and Opinions. Every certificate or opinion provided for in the Indenture except the certificate of destruction provided for in Section 11.05 hereof, with respect to compliance with any provision hereof shall include: (1) a statement that the person making or giving such certificate or opinion has read such provision and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the certificate or opinion is based; (3) a statement that, in the opinion of such person he has made or caused to be made such examination or investigation as is necessary to enable him to express an informed opinion with respect to the subject matter referred to in the instrument to which his signature is affixed; (4) a statement of the assumptions upon which such certificate or opinion is based, and that such assumptions are reasonable; and (5) a statement as to whether, in the opinion of such person, such provision has been complied with. Any such certificate or opinion made or given by an officer of the Authority may be based, insofar as it relates to legal or accounting matters, upon a certificate or opinion of or representation by counsel or an Independent Certified Public Accountant, unless such officer knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which such certificate or statement may be based, as aforesaid, is erroneous. Any such certificate or opinion made or given by counsel or an Independent Certified Public Accountant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the Authority) upon a certificate or opinion of or representation by an officer of the Authority, unless such counsel or Independent Certified Public Accountant knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which such person’s certificate or opinion or representation may be based, as aforesaid, is erroneous. The same officer of the Authority, or the same counsel or Independent Certified Public Accountant, as the case may be, need not certify to all of the matters required to be certified under any provision of Page 81 of 236 11 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 the Indenture, but different officers, counsel or Independent Certified Public Accountants may certify to different matters, respectively. Section 1.03. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to include the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. (c) All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of the Indenture; the words “herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to the Indenture as a whole and not to any particular Article, Section or subdivision hereof. ARTICLE II THE BONDS Section 2.01. Authorization of Bonds. The Authority hereby authorizes the issuance hereunder from time to time of the Bonds, which shall constitute special obligations of the Authority, for the purpose of financing the 2022 Project and refinancing the 2012 Project. The Bonds are hereby designated the “Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A” in the aggregate principal amount of $_____. The Indenture constitutes a continuing agreement with the Owners from time to time of the Bonds to secure the full payment of the principal of and interest and premium (if any) on all the Bonds, subject to the covenants, provisions and conditions herein contained. Section 2.02. Terms of the Bonds. The Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The Bonds shall mature on October 1 in each of the years and in the amounts set forth below and shall bear interest on each Interest Payment Date at the rates set forth below: Page 82 of 236 12 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Maturity Date (October 1)Principal Amount Interest Rate 20__$ % _______ * Term Bond. Interest on the Bonds shall be payable on each Interest Payment Date to the person whose name appears on the Registration Books as the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check of the Trustee sent by first class mail on the applicable Interest Payment Date to the Owner at the address of such Owner as it appears on the Registration Books (except that in the case of an Owner of one million dollars ($1,000,000) or more in principal amount, such payment may, at such Owner’s option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such Owner prior to the Record Date. Principal of and premium (if any) on any Bond shall be paid by check of the Trustee upon presentation and surrender thereof at maturity or upon the prior redemption thereof, at the Office of the Trustee. Both the principal of and interest and premium (if any) on the Bonds shall be payable in lawful money of the United States of America. Each Bond shall be dated the date of initial delivery, and shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless: (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it shall bear interest from such Interest Payment Date; or (b) unless it is authenticated on or before _____ 15, 202__, in which event it shall bear interest from the date of initial delivery; provided, however, that if, as of the date of authentication of any Bond, interest thereon is in default, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Interest on the Bonds shall be calculated on the basis of a 360 day year composed of twelve 30 day months. Page 83 of 236 13 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Section 2.03. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond at the Office of the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. The Trustee shall not be required to register the transfer of any Bond during the period in which the Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds of authorized denomination or denominations for a like series and aggregate principal amount of the same maturity. The Trustee shall require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of Bonds, the Trustee will cancel and destroy the Bonds it has received. Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor will provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Section 6045 of the Code. The Trustee will conclusively rely on the information provided to it and has no responsibility to verify or ensure the accuracy of such information. Section 2.04. Exchange of Bonds. Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of other authorized denominations of the same series and maturity. The Trustee shall not be required to exchange any Bond during the period in which the Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. The Trustee shall require the Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of Bonds, the Trustee will cancel and destroy the Bonds it has received. Section 2.05. Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which shall upon reasonable notice and at reasonable times be open to inspection during regular business hours by the Authority, the District and the Owners; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore provided. The person in whose name any Bond shall be registered shall be deemed the Owner thereof for all purposes hereof, and payment of or on account of the interest on and principal and Redemption Price of by such Bonds shall be made only to or upon the order in writing of such registered Owner, which payments shall be valid and effectual to satisfy and discharge liability upon such Bond to the extent of the sum or sums so paid. Section 2.06. Form and Execution of Bonds. The Bonds shall be in substantially the form set forth in Exhibit A hereto. The Bonds shall be executed in the name and on behalf of the Authority with the manual or facsimile signature of its Chair, attested by the manual or facsimile signature of its Secretary. The Bonds may carry a seal, and such seal may be in the form of a facsimile of the Authority’s seal and may be reproduced, imprinted or impressed on the Bonds. The Bonds shall then be delivered to the Trustee for authentication by it. In case any of the officers who shall have signed Page 84 of 236 14 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 or attested any of the Bonds shall cease to be such officer or officers of the Authority before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee, or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though those who signed and attested the same had continued to be such officers of the Authority, and also any Bonds may be signed and attested on behalf of the Authority by such persons as at the actual date of execution of such Bonds shall be the proper officers of the Authority although at the nominal date of such Bonds any such person shall not have been such officer of the Authority. Only such of the Bonds as shall bear thereon a certificate of authentication substantially in the forms set forth in Exhibit A hereto, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of the Indenture, and such certificate of or on behalf of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of the Indenture. Section 2.07. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor, series and authorized denomination in exchange and substitution for the Bonds so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it and upon the written request of the Authority delivered to, or upon the order of, the Authority. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence be satisfactory to the Trustee and indemnity satisfactory to the Trustee shall be given, the Authority, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor, series and authorized denomination in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall be about to mature, instead of issuing a substitute Bond, the Trustee may pay the same without surrender thereof). The Authority may require payment by the Owner of a sum not exceeding the actual cost of preparing each new Bond issued under this Section and of the expenses which may be incurred by the Authority and the Trustee in the premises. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed, or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of the Indenture with all other Bonds secured by the Indenture. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond for a Bond which has been mutilated, lost, destroyed or stolen and which has matured or has been selected for redemption, the Trustee may make payment of such Bond upon receipt of indemnity satisfactory to the Trustee. Section 2.08. Book-Entry System. (a) Election of Book-Entry System. Prior to the issuance of the Bonds, the Authority may provide that such Bonds shall be initially issued as book-entry Bonds. If the Authority shall elect to deliver any Bonds in book-entry form, then the Authority shall cause the delivery of a separate single fully registered bond (which may be typewritten) for each maturity date of such Bonds in an authorized denomination corresponding to that total principal amount of the Bonds designated to mature on such date. Upon initial issuance, the ownership of each such Bond shall be registered in the Bond Registration Books in the name of the Nominee, as nominee of the Depository, and ownership of the Bonds, or any portion thereof may not thereafter be transferred except as provided in Section 2.08(e). Page 85 of 236 15 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 With respect to book-entry Bonds, the Authority and the Trustee shall have no responsibility or obligation to any Participant or to any person on behalf of which such a Participant holds an interest in such book-entry Bonds. Without limiting the immediately preceding sentence, the Authority and the Trustee shall have no responsibility or obligation with respect to: (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in book-entry Bonds; (ii) the delivery to any Participant or any other person, other than an Owner as shown in the Bond Registration Books, of any notice with respect to book-entry Bonds, including any notice of redemption; (iii) the selection by the Depository and its Participants of the beneficial interests in book- entry Bonds to be redeemed in the event that the Authority redeems the Bonds in part; or (iv) the payment by the Depository or any Participant or any other person of any amount of principal of, premium, if any, or interest on book-entry Bonds. The Authority and the Trustee may treat and consider the person in whose name each book-entry Bond is registered in the Bond Registration Books as the absolute Owner of such book-entry Bond for the purpose of payment of principal of, premium and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective Owner, as shown in the Bond Registration Books, or his respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Authority’s obligations with respect to payment of principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the Bond Registration Books, shall receive a Bond evidencing the obligation to make payments of principal of, premium, if any, and interest on the Bonds. Upon delivery by the Depository to the Authority and the Trustee of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in the Indenture shall refer to such nominee of the Depository. (b) Delivery of Letter of Representations. In order to qualify the book-entry Bonds for the Depository’s book-entry system, the Authority shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the Authority or the Trustee any obligation whatsoever with respect to persons having interests in such book-entry Bonds other than the Owners, as shown on the Bond Registration Books. In addition to the execution and delivery of a Letter of Representations, the Authority and the Trustee, if necessary, shall take such other actions, not inconsistent with the Indenture, as are reasonably necessary to qualify book-entry Bonds for the Depository’s book-entry program. (c) Selection of Depository. In the event that: (i) the Depository determines not to continue to act as securities depository for book-entry Bonds; or (ii) the Authority determines that continuation of the book-entry system is not in the best interest of the beneficial owners of the Bonds or the Authority, then the Authority will discontinue the book-entry system with the Depository. If the Authority determines to replace the Depository with another qualified securities depository, the Authority shall prepare or direct the preparation of a new single, separate, fully registered Bond for each of the maturity dates of such book-entry Bonds, registered in the name of such successor or substitute qualified securities depository or its Nominee as provided in subsection (e) hereof. If the Authority fails to identify another qualified securities depository to replace the Depository, then the Bonds shall no longer be restricted to being registered in such Bond Registration Books in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Bonds shall designate, in accordance with the provisions of Sections 2.03 and 2.04 hereof. Page 86 of 236 16 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 (d) Payments To Depository. Notwithstanding any other provision of the Indenture to the contrary, so long as all Outstanding Bonds are held in book-entry form and registered in the name of the Nominee, all payments of principal of, redemption premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively to the Nominee, as provided in the Letter of Representations or as otherwise instructed by the Depository and agreed to by the Trustee notwithstanding any inconsistent provisions herein. (e) Transfer of Bonds to Substitute Depository. (i) The Bonds shall be initially issued as provided in Section 2.01 hereof. Registered ownership of such Bonds, or any portions thereof, may not thereafter be transferred except: (A) to any successor of DTC or its nominee, or of any substitute depository designated pursuant to clause (B) of subsection (i) of this Section 2.08(e) (“Substitute Depository”); provided that any successor of DTC or Substitute Depository shall be qualified under any applicable laws to provide the service proposed to be provided by it; (B) to any Substitute Depository, upon: (1) the resignation of DTC or its successor (or any Substitute Depository or its successor) from its functions as depository; or (2) a determination by the Authority that DTC (or its successor) is no longer able to carry out its functions as depository; provided that any such Substitute Depository shall be qualified under any applicable laws to provide the services proposed to be provided by it; or (C) to any person as provided below, upon: (1) the resignation of DTC or its successor (or any Substitute Depository or its successor) from its functions as depository; or (2) a determination by the Authority that DTC or its successor (or Substitute Depository or its successor) is no longer able to carry out its functions as depository. (ii) In the case of any transfer pursuant to clause (A) or clause (B) of subsection (i) of this Section 2.08(e), upon receipt of all Outstanding Bonds by the Trustee, together with a written request of the Authority to the Trustee designating the Substitute Depository, a single new Bond, which the Authority shall prepare or cause to be prepared, shall be issued for each maturity of Bonds then Outstanding, registered in the name of such successor or such Substitute Depository or their Nominees, as the case may be, all as specified in such written request of the Authority. In the case of any transfer pursuant to clause (C) of subsection (i) of this Section 2.08(e), upon receipt of all Outstanding Bonds by the Trustee, together with a written request of the Authority to the Trustee, new Bonds, which the Authority shall prepare or cause to be prepared, shall be issued in such denominations and registered in the names of such persons as are requested in such written request of the Authority, subject to the limitations of Section 2.01 hereof, provided that the Trustee shall not be required to deliver such new Bonds within a period of less than sixty (60) days from the date of receipt of such written request from the Authority. (iii) In the case of a partial redemption or an advance refunding of any Bonds evidencing a portion of the principal maturing in a particular year, DTC or its successor (or any Substitute Depository or its successor) shall make an appropriate notation on such Bonds indicating the date and amounts of such reduction in principal, in form acceptable to the Trustee, all in accordance with the Letter of Representations. The Trustee shall not be liable for such Depository’s failure to make such notations or errors in making such notations and the records of the Trustee as to the outstanding principal amount of such Bonds shall be controlling. Page 87 of 236 17 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 (iv) The Authority and the Trustee shall be entitled to treat the person in whose name any Bond is registered as the Owner thereof for all purposes of the Indenture and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the Authority; and the Authority and the Trustee shall not have responsibility for transmitting payments to, communicating with, notifying, or otherwise dealing with any beneficial owners of the Bonds. Neither the Authority nor the Trustee shall have any responsibility or obligation, legal or otherwise, to any such beneficial owners or to any other party, including DTC or its successor (or Substitute Depository or its successor), except to the Owner of any Bonds, and the Trustee may rely conclusively on its records as to the identity of the Owners of the Bonds. ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS Section 3.01. Issuance of the Bonds. At any time after the execution of the Indenture, the Authority may execute and the Trustee shall authenticate and, upon Request of the Authority, deliver the Bonds in the aggregate principal amount of $_____. Section 3.02. Application of Proceeds of the Bonds. The proceeds received from the sale of the Bonds shall be deposited in trust with the Trustee, who shall apply such proceeds as follows pursuant to a Direction of the Authority or the District: (a) The Trustee shall deposit the amount of $_____ in the Costs of Issuance Fund. (b) The Trustee shall transfer to the Escrow Agent the amount of $_____ for deposit in the escrow fund created under the Escrow Agreement (2012 Bonds). (c) The Trustee shall deposit the amount of $_____ in the Acquisition Fund to finance a portion of the costs of the 2022 Project. The Trustee may establish temporary funds or accounts in its records to facilitate and record the above transfer of proceeds. Section 3.03. Establishment and Application of Costs of Issuance Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Costs of Issuance Fund.” The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee to pay the Costs of Issuance upon submission of Requisitions of the Authority stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred, that such payment is a proper charge against said fund and that payment for such charge has not previously been made. On the six month anniversary of the issuance of the Bonds, or upon the earlier Request of the Authority, all amounts remaining in the Costs of Issuance Fund shall be deposited in the Interest Account and the Costs of Issuance Fund shall be closed. Section 3.04. Acquisition Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Acquisition Fund.” The moneys in the Acquisition Fund shall be held by the Trustee in trust and applied by the Finance Manager of the District to the payment of the costs of acquisition and construction of the 2022 Project and of expenses incidental thereto. Page 88 of 236 18 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Before any payment is made from the Acquisition Fund by the Trustee, the Finance Manager of the District, acting as agent of the Authority, shall cause to be filed with the Trustee a certificate of the District in the form set forth in Exhibit D to the Installment Purchase Agreement. Upon receipt of each such certificate, the Trustee will pay the amount set forth in such certificate as directed by the terms thereof or disburse funds to the District for such payment as directed by the District in such certificate. The Trustee need not make any such payment if it has received notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of any of the moneys to be so paid, which has not been released or will not be released simultaneously with such payment. When the 2022 Project shall have been constructed and acquired in accordance with the Installment Purchase Agreement, a statement of the District stating the fact and date of such acquisition, construction and acceptance and stating that all of such costs of acquisition and incidental expenses have been determined and paid (or that all of such costs and expenses have been paid less specified claims which are subject to dispute and for which a retention in the Acquisition Fund is to be maintained in the full amount of such claims until such dispute is resolved), shall be delivered to the Trustee by the Finance Manager of the District. Upon the receipt of such statement, the Trustee shall deposit any remaining balance in the Acquisition Fund not needed for Acquisition Fund purposes (but less the amount of any such retention which amount shall be certified to the Trustee by the Finance Manager of the District) to the Trustee in the 2022A Bond Payment Fund for payment of 2022A Bonds in accordance with the Indenture. Section 3.05. Validity of Bonds. The validity of the authorization and issuance of the Bonds is not dependent on and shall not be affected in any way by any proceedings taken by the Authority, the District or the Trustee with respect to or in connection with the Installment Purchase Agreement. The recital contained in the Bonds that the same are issued pursuant to the Constitution and laws of the State shall be conclusive evidence of the validity and of compliance with the provisions of law in their issuance. ARTICLE IV REDEMPTION OF BONDS Section 4.01. Terms of Redemption. (a) The Bonds shall be subject to extraordinary redemption prior to their respective stated maturities, as a whole or in part on any date in the order of maturity and within maturities as directed by the Authority in a Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) prior to such date in integral multiples of $5,000 from Net Proceeds, upon the terms and conditions of, and as provided for in, Sections 6.09 and 6.15 of the Installment Purchase Agreement, at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. (b) The Bonds with stated maturities on or after October 1, 20__, shall be subject to redemption prior to their respective stated maturities, as a whole or in part as directed by the Authority in a Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Page 89 of 236 19 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Trustee) and by lot within each maturity in integral multiples of $5,000, on _____ 1, 20__ or any date thereafter at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. (c) The Bonds with stated maturities on October 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on October 1, 20__ and each October 1 thereafter, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Redemption Date (October 1) Principal Amount 20__$ 20__ 20__ 20__* * Maturity. Section 4.02. Selection of Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee shall select the Bonds for redemption as a whole or in part on any date as directed by the Authority and by lot within each maturity in integral multiples of $5,000 in accordance with Section 4.01 hereof. The Trustee will promptly notify the Authority in writing of the numbers of the Bonds or portions thereof so selected for redemption. Section 4.03. Notice of Redemption. Notice of redemption shall be mailed by first class mail not less than twenty (20) days before any Redemption Date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services. Each notice of redemption shall state the date of notice, the redemption date, the place or places of redemption, the Redemption Price, will designate the maturities, CUSIP numbers, if any, and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on the redemption date there will become due and payable on each of said Bonds or parts thereof designated for redemption the Redemption Price thereof or of said specified portion of the principal thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the redemption date, and that (provided that moneys for redemption have been deposited with the Trustee) from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered to the Trustee. Neither the failure to receive such notice nor any defect in the notice or the mailing thereof will affect the validity of the redemption of any Bond. Notice of redemption of Bonds shall be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority. With respect to any notice of optional redemption of Bonds, such notice may state that such redemption shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds to be redeemed and that, if such moneys shall not have been so received, said notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption shall not be made, and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. Page 90 of 236 20 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Section 4.04. Partial Redemption of Bonds. Upon surrender of any Bond redeemed in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered and of the same series, interest rate and maturity. Section 4.05. Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. The Trustee shall, upon surrender for payment of any of the Bonds to be redeemed on their Redemption Dates, pay such Bonds at the Redemption Price. All Bonds redeemed pursuant to the provisions of this Article shall be canceled upon surrender thereof. ARTICLE V REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST Section 5.01. Pledge and Assignment; 2022A Bond Payment Fund. (a) All of the Authority Revenues and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account established pursuant to the Indenture (except the Rebate Fund) are hereby irrevocably pledged to secure the payment of the principal of and interest, and the premium, if any, on the Bonds in accordance with their terms and the provisions of the Indenture subject only to the provisions of the Indenture permitting the terms and conditions set forth herein. Said pledge shall constitute a lien on and security interest in such amounts and shall attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act and shall be valid and binding against all parties having claims of any kind in tort, contract or otherwise against the Authority, irrespective of whether such parties have notice hereof. (b) The Authority, for good and valuable consideration in hand received, does hereby irrevocably assign and transfer to the Trustee without recourse, for the benefit of the Owners of the Bonds as set forth herein, all of its rights, title, and interest in all Series 2022 Installment Payments payable by the District pursuant to the Installment Purchase Agreement, including all rights of the Authority thereunder as may be necessary to enforce compliance with said provisions (including enforcement of payment obligations and rate covenants, if any, contained in the Installment Purchase Agreement, or otherwise to protect the interest of the Owners of the Bonds. Such assignment shall be subject to and limited by the terms of the Indenture. (c) There is hereby established with the Trustee the 2022A Bond Payment Fund, which the Trustee covenants to maintain and hold in trust separate and apart from other funds held by it so long as any Series 2022 Installment Payments remain unpaid. Except as directed in Sections 5.06 Page 91 of 236 21 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 and 5.08, all Authority Revenues shall be promptly deposited by the Trustee upon receipt thereof into the 2022A Bond Payment Fund; except that all moneys received by the Trustee and required hereunder to be deposited in the Redemption Fund shall be promptly deposited therein. All Authority Revenues deposited with the Trustee shall be held, disbursed, allocated and applied by the Trustee only as provided in the Indenture. The Trustee shall also create and maintain an Interest Account and a Principal Account within the 2022A Bond Payment Fund. Section 5.02. Allocation of Authority Revenues. The Trustee shall transfer from the 2022A Bond Payment Fund and deposit into the following respective accounts, the following amounts in the following order of priority and at the following times, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Authority Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority: (a) Not later than the day preceding each date on which the interest on the Bonds shall become due and payable hereunder, the Trustee shall deposit in the Interest Account that sum, if any, required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such date on all Bonds then Outstanding. With respect to any other Bonds (as such term is defined in the Installment Purchase Agreement) or Contracts, the Trustee shall also transfer to the applicable trustee for deposit in any applicable interest account, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other interest in accordance with the provisions of the indenture, resolution or contract relating thereto. (b) Not later than the day preceding each date on which the principal of the Bonds shall become due and payable hereunder, the Trustee shall deposit in the Principal Account that sum, if any, required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds coming due and payable on such date or subject to mandatory sinking fund redemption on such date. With respect to any other Bonds (as such term is defined in the Installment Purchase Agreement) or Contracts, the Trustee shall also transfer to the applicable trustee for deposit in any applicable principal account, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other principal in accordance with the provisions of the indenture, resolution or contract relating thereto. Section 5.03. Application of Interest Account. All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or accelerated prior to maturity pursuant to the Indenture). Section 5.04. Application of Principal Account. All amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds at maturity, mandatory sinking fund redemption, purchase or acceleration; provided, however, that at any time prior to selection for redemption of any such Bonds, upon written direction of the Authority, the Trustee shall apply such amounts to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be directed pursuant to a Request of the Authority, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. Page 92 of 236 22 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Section 5.05. Application of Redemption Fund. There is hereby established with the Trustee, when needed, a special fund designated as the “Redemption Fund.” All amounts in the Redemption Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of and accrued interest on the Bonds to be redeemed on any Redemption Date pursuant to Section 4.01(a) and (b); provided, however, that at any time prior to selection for redemption of any such Bonds, upon written direction of the Authority, the Trustee shall apply such amounts to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be directed pursuant to a Request of the Authority, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. Section 5.06. Investments. All moneys in any of the funds or accounts established with the Trustee pursuant to the Indenture shall be invested by the Trustee solely in Permitted Investments, which will, as nearly as practicable, mature on or before the dates when such moneys are anticipated to be needed for disbursement. Such investments shall be directed by the Authority pursuant to a Request of the Authority filed with the Trustee at least two (2) Business Days in advance of the making of such investments (which directions shall be promptly confirmed to the Trustee in writing). In the absence of any such directions from the Authority, the Trustee shall invest any such moneys in Permitted Investments described in clause (B)(5) of the definition thereof; provided, however, that any such investment shall be made by the Trustee only if, prior to the date on which such investment is to be made, the Trustee shall have received a written direction from the District specifying a specific money market fund and, if no such written direction from the District is so received, the Trustee shall hold such moneys uninvested. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder (except for interest or gain derived from the Permitted Investment described in clause (B)(8) of the definition thereof, which shall be retained in such Permitted Investment) shall be deposited in the Interest Account unless otherwise provided in the Indenture. For purposes of acquiring any investments hereunder, the Trustee may commingle funds (other than the Rebate Fund) held by it hereunder upon the Request of the Authority. The Trustee may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made pursuant to this Section 5.06. The 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 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. The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee under the Indenture. The Authority shall invest, or cause to be invested, all moneys in any fund or accounts established with the Trustee as provided in the Tax Certificate. Page 93 of 236 23 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. In making any valuations of investments hereunder, the Trustee may utilize and rely on computerized securities pricing services that may be available to the Trustee, including those available through the Trustee’s accounting system. Section 5.07. Rebate Fund. (a) Establishment. The Trustee shall establish a separate fund designated the “Rebate Fund” when required in accordance herewith. Absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest with respect to the Bonds will not be adversely affected, the Authority shall cause to be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to this Section and the Tax Certificate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust for payment to the United States Treasury. All amounts on deposit in the Rebate Fund for the Bonds shall be governed by this Section and the Tax Certificate for the Bonds, unless and to the extent that the Authority delivers to the Trustee an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest with respect to the Bonds will not be adversely affected, if such requirements are not satisfied. Notwithstanding anything to the contrary contained herein or in the Tax Certificate, the Trustee: (i) shall be deemed conclusively to have complied with the provisions thereof if it follows all Requests of the Authority; (ii) shall have no liability or responsibility to enforce compliance by the Authority with the terms of the Tax Certificate; (iii) may rely conclusively on the Authority’s calculations and determinations and certifications relating to rebate matters; and (iv) shall have no responsibility to independently make any calculations or determinations or to review the Authority’s calculations or determinations thereunder. (i) Annual Computation. Within 55 days of the end of each Bond Year (as such term is defined in the Tax Certificate), the Authority shall calculate or cause to be calculated the amount of rebatable arbitrage, in accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Treasury Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage, described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and the construction expenditures exception of Section 148(f)(4)(C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1(b) of the Treasury Regulations (the “Rebatable Arbitrage”). The Authority shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section. (ii) Annual Transfer. Within 55 days of the end of each Bond Year, upon the written Request of the Authority, an amount shall be deposited to the Rebate Fund by the Trustee from any Authority Revenues legally available for such purpose (as specified by the Authority in the aforesaid written Request), if and to the extent required so that the balance in the Rebate Fund shall equal the amount of Rebatable Arbitrage so calculated in accordance with clause (i) of this subsection (a). In the event that immediately following the transfer required by the previous sentence, the amount then on deposit to the credit of the Rebate Fund exceeds the amount required to be on deposit therein, upon written Request of the Authority, the Trustee shall withdraw the excess from the Rebate Fund and then credit the excess to the 2022A Bond Payment Fund. Page 94 of 236 24 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 (iii) Payment to the Treasury. The Trustee shall pay, as directed by Request of the Authority, to the United States Treasury, out of amounts in the Rebate Fund: (A) Not later than 60 days after the end of: (X) the fifth Bond Year; and (Y) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year; and (B) Not later than 60 days after the payment of all the Bonds, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code and Section 1.148-3 of the Treasury Regulations. In the event that, prior to the time of any payment required to be made from the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when such payment is due, the Authority shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a) shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T (prepared by the Authority), or shall be made in such other manner as provided under the Code. (b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund after redemption and payment of the Bonds and the payments described in subsection (a) above being made may be withdrawn by the Authority and utilized in any manner by the Authority. (c) Survival of Defeasance. Notwithstanding anything in this Section to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance or payment in full of the Bonds. Section 5.08. Application of Funds and Accounts When No Bonds are Outstanding. On the date on which all Bonds shall be retired hereunder or provision made therefor pursuant to Article X and after payment of all amounts due the Trustee hereunder, all moneys then on deposit in any of the funds or accounts (other than the Rebate Fund) established with the Trustee pursuant to the Indenture shall be withdrawn by the Trustee and paid to the Authority for distribution in accordance with the Installment Purchase Agreement. ARTICLE VI PARTICULAR COVENANTS Section 6.01. Punctual Payment. The Authority shall punctually pay or cause to be paid the principal and interest to become due in respect of all of the Bonds, in strict conformity with the terms of the Bonds and of the Indenture, according to the true intent and meaning thereof, but only out of Authority Revenues and other assets pledged for such payment as provided in the Indenture. 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 Page 95 of 236 25 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of the Indenture, except subject to the prior payment in full for the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this Section shall be deemed to limit the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of Bonds. Section 6.03. Against Encumbrances. The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrances upon the Authority Revenues and other assets pledged or assigned under the Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by the Indenture. Subject to this limitation, the Authority expressly reserves the right to enter into one or more other indentures for any of its corporate purposes, including other programs under the JPA Agreement, and reserves the right to issue other obligations for such purposes. Section 6.04. Power to Issue Bonds and Make Pledge and Assignment. The Authority is duly authorized pursuant to law to issue the Bonds and to enter into the Indenture and to pledge and assign the Authority Revenues and other assets purported to be pledged and assigned under the Indenture in the manner and to the extent provided in the Indenture. The Bonds and the provisions of the Indenture are and will be the legal, valid and binding special obligations of the Authority in accordance with their terms, and the Authority and the Trustee shall at all times, subject to the provisions of Article VIII and to the extent permitted by law, defend, preserve and protect said pledge and assignment of Authority Revenues and other assets and all the rights of the Bond Owners under the Indenture against all claims and demands of all persons whomsoever. Section 6.05. Accounting Records and Financial Statements. The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of Bonds, the Authority Revenues and all funds and accounts established by it pursuant to the Indenture. Such books of record and account shall be available for inspection by the Authority and the District upon reasonable prior notice during business hours and under reasonable circumstances. Section 6.06. Tax Covenants. Notwithstanding any other provision of the Indenture or the Installment Purchase Agreement, absent an opinion of Bond Counsel that the exclusion from gross income of the interest on the Bonds will not be adversely affected for federal income tax purposes, the Authority covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income with respect to the Bonds and specifically covenants, without limiting the generality of the foregoing, as follows: (a) Private Activity. The Authority will take no action and refrain from taking any action, and the Authority will make no use of the proceeds of the Bonds or of any other moneys or property, which would cause the Bonds to be “private activity bonds” within the meaning of Section 141 of the Code; (b) Arbitrage. The Authority will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, and the Authority will not take any action or refrain from taking any action, which will cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code; Page 96 of 236 26 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 (c) Federal Guarantee. The Authority will make no use of the proceeds of the Bonds, and the Authority will not take or omit to take any action, that would cause the Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Code; (d) Information Reporting. The Authority will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code necessary to preserve the exclusion of interest on the Bonds pursuant to Section 103(a) of the Code; (e) Hedge Bonds. The Authority will make no use of the proceeds of the Bonds or any other amounts or property, regardless of the source, and the Authority will not take any action or refrain from taking any action, that would cause the Bonds to be considered “hedge bonds” within the meaning of Section 149(g) of the Code unless the Authority takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income of interest on the Bonds for federal income tax purposes; and (f) Miscellaneous. The Authority will not take any action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed by the Authority in connection with the issuance of the Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. This Section and the covenants set forth herein shall not be applicable to, and nothing contained herein shall be deemed to prevent the Authority from issuing revenue bonds or executing and delivering contracts payable on a parity with the Bonds, the interest with respect to which has been determined to be subject to federal income taxation. Section 6.07. Payments Under Installment Purchase Agreement. The Authority shall promptly collect all Series 2022 Installment Payments due from the District pursuant to the Installment Purchase Agreement and, subject to the provisions of Article VIII, shall enforce, and take all steps, actions and proceedings which the Authority or the Trustee determines to be reasonably necessary for the enforcement of all of the obligations of the District thereunder. The Authority shall not enter into any amendments to the Installment Purchase Agreement except as permitted therein. The Trustee shall give written consent only if: (a) such amendment, modification or termination will not materially adversely affect the interests of the Bond Owners; or (b) the Trustee first obtains the written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding to such amendment, modification or termination. Section 6.08. Waiver of Laws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in the Indenture or in the Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Authority to the extent permitted by law. Section 6.09. Further Assurances. The Authority will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in the Indenture. Page 97 of 236 27 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Section 6.10. Eminent Domain. If all or any part of the 2022 Project or the 2012 Project shall be taken by eminent domain proceedings (or sold to a government entity threatening to exercise the power of eminent domain), the Net Proceeds therefrom shall be applied in the manner specified in Section 6.15 of the Installment Purchase Agreement. ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS Section 7.01. Events of Default. The following events shall be Events of Default hereunder: (a) Default by the Authority in the due and punctual payment of the principal of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise. (b) Default by the Authority in the due and punctual payment of any installment of interest on any Bonds when and as the same shall become due and payable. (c) Default by the Authority in the observance of any of the other covenants, agreements or conditions on its part in the Indenture or in the Bonds contained, if such default shall have continued for a period of sixty (60) days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the Authority by the Trustee or by the Owners of not less than a majority in aggregate principal amount of Bonds Outstanding; provided, however, that if in the reasonable opinion of the Authority the default stated in the notice can be corrected, but not within such sixty (60) day period, and corrective action is instituted by the Authority within such sixty (60) day period and diligently pursued in good faith until the default is corrected, such default shall not be an Event of Default hereunder. (d) The Authority shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or a court of competent jurisdiction shall approve a petition filed with or without the consent of the Authority seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property. Section 7.02. Remedies Upon Event of Default. If any Event of Default shall occur, then, and in each and every such case during the continuance of such Event of Default, the Trustee may, and, at the written direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding, shall, in each case, upon notice in writing to the Authority and the District, declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in the Indenture or in the Bonds contained to the contrary notwithstanding. Nothing contained in the Indenture shall permit or require the Trustee or the Authority to accelerate payments due under the Installment Purchase Agreement if the District, which is a party to such Installment Purchase Agreement, is not in default of its obligation thereunder. Page 98 of 236 28 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Any such declaration is subject to the condition that if, at any time after such declaration and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Authority or the District shall deposit with the Trustee a sum sufficient to pay all the principal of and installments of interest on the Bonds payment of which is overdue, with interest on such overdue principal at the rate borne by the respective Bonds to the extent permitted by law, and the reasonable charges and expenses of the Trustee, and any and all other Events of Default known to the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then, and in every such case the Trustee shall on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences and waive such Event of Default; but no such rescission and annulment shall extend to or shall affect any subsequent Event of Default, or shall impair or exhaust any right or power consequent thereon. Section 7.03. Application of Authority Revenues and Other Funds After Default. If an Event of Default shall occur and be continuing, all Authority Revenues and any other funds then held or thereafter received by the Trustee under any of the provisions of the Indenture (other than amounts held in the Rebate Fund) shall be applied by the Trustee as follows and in the following order: (a) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds and payment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Indenture; and (b) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of the Indenture, in the following order of priority: First: To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Second: To the payment to the persons entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by acceleration or redemption, with interest on the overdue principal at the rate of eight percent (8%) per annum, and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference; and Third: If there shall exist any remainder after the foregoing payments, such remainder shall be paid to the Authority. Section 7.04. Trustee to Represent Bond Owners. The Trustee is hereby irrevocably appointed (and the successive respective Owners of the Bonds, 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 Page 99 of 236 29 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 rights and remedies as may be available to such Owners under the provisions of the Bonds or the Indenture and applicable provisions of any other law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bond Owners, the Trustee in its discretion may, and upon the written request of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, shall proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the Bonds or the Indenture or any other law; and upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the Authority Revenues and other assets pledged under the Indenture, pending such proceedings. All rights of action under the Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions of the Indenture. Section 7.05. Bond Owners’ Direction of Proceedings. Anything in the Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, and upon indemnification of the Trustee to its reasonable satisfaction to direct the method of conduct in all remedial proceedings taken by the Trustee hereunder, provided that such direction shall not be otherwise than in accordance with law and the provisions of the Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to Bond Owners not parties to such direction. Section 7.06. Suit by Owners. No Owner of any Bonds shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under the Indenture, the Installment Purchase Agreement, the JPA Agreement or any other applicable law with respect to such Bonds, unless: (a) such Owners shall have given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) such Owner or Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall have failed to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee; and (e) no direction inconsistent with such written request shall have been given to the Trustee during such sixty (60) day period by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of the Indenture or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, the Indenture, the Installment Purchase Agreement, the JPA 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 Page 100 of 236 30 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of the Indenture. Section 7.07. Absolute Obligation of the Authority. Nothing in this Section 7.07 or in any other provision of the Indenture or in the Bonds contained shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest on the Bonds to the respective Owners of the Bonds at their respective dates of maturity, or upon call for redemption, as herein provided, but only out of the Authority Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds. Section 7.08. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Section 7.09. No Waiver of Default. No delay or omission of the Trustee or of any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein. ARTICLE VIII THE TRUSTEE Section 8.01. Duties, Immunities and Liabilities of Trustee. (a) The Trustee shall, prior to an Event of Default, and after the curing of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in the Indenture, and no implied covenants or duties shall be read into the Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Authority may remove the Trustee at any time, unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with subsection (e) of this Section, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee and thereupon shall promptly appoint a successor Trustee by an instrument in writing. (c) The Trustee may at any time resign by giving written notice of such resignation to the Authority and by giving the Bond Owners notice of such resignation by mail at the addresses Page 101 of 236 31 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 shown on the Registration Books. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing. (d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed and have accepted appointment within forty five (45) days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Bond Owner (on behalf of himself and all other Bond Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under the Indenture shall signify its acceptance of such appointment by executing and delivering to the Authority and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless at the Request of the Authority or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under the Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the Authority shall mail or cause the successor trustee to mail a notice of the succession of such Trustee to the trusts hereunder to each rating agency which is then rating the Bonds and to the Bond Owners at the addresses shown on the Registration Books. If the Authority fails to mail such notice within fifteen (15) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Authority. (e) Any Trustee appointed under the provisions of this Section in succession to the Trustee shall be a trust company, banking association or bank having the powers of a trust company, having a combined capital and surplus of at least Seventy Five Million Dollars ($75,000,000), and subject to supervision or examination for federal or state authority. If such bank, banking association or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this subsection the combined capital and surplus of such trust company, banking association or bank shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section. Section 8.02. Merger or Consolidation. Any trust company, banking association or bank into which the Trustee may be merged or converted or with which it may be consolidated or any trust company, banking association or bank resulting from any merger, conversion or consolidation to which it shall be a party or any trust company, banking association or bank to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided that such trust company, banking association or bank shall be eligible under subsection (e) of Section 8.01, shall be the successor to such Page 102 of 236 32 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Trustee, without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. Section 8.03. Liability of Trustee. (a) The recitals of facts herein and in the Bonds contained shall be taken as statements of the Authority, and the Trustee shall not assume responsibility for the correctness of the same, or make any representations as to the validity or sufficiency of the Indenture, the Bonds, the Installment Purchase Agreement, nor shall the Trustee incur any responsibility in respect thereof, other than as expressly stated herein in connection with the respective duties or obligations herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bond Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. (b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (c) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority (or such other percentage provided for herein) in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture. (d) The Trustee shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by the Indenture. (e) The Trustee shall not be deemed to have knowledge of any default or Event of Default hereunder or under the Installment Purchase Agreement or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default hereunder or under the Installment Purchase Agreement unless and until a Responsible Officer of the Trustee shall have actual knowledge of such event or the Trustee shall have been notified in writing, in accordance with Section 11.07, of such event by the Authority or the Owners of not less than twenty-five percent (25%) of the Bonds then Outstanding. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the Authority or the District of any of the terms, conditions, covenants or agreements herein, or under the Installment Purchase Agreement, of any of the documents executed in connection with the Bonds, or as to the existence of an Event of Default thereunder or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default thereunder. The Trustee shall not be responsible for the validity, effectiveness or priority of any collateral given to or held by it. Page 103 of 236 33 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 (f) No provision of the Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder, or in the exercise of any of its rights or powers. (g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by the Indenture at the request or direction of Owners pursuant to the Indenture, unless such Owners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. No permissive power, right or remedy conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such power, right or remedy. (h) Whether or not herein expressly so provided, every provision of the Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article VIII. (i) The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. (j) The immunities extended to the Trustee also extend to its directors, officers, employees and agents. (k) The Trustee may execute any of the trusts or powers of the Indenture and perform any of its duties through attorneys, agents and receivers and shall not be answerable for the conduct of the same if appointed by it with reasonable care. (l) The Trustee shall not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of enforced delay in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the 2022 Project or the 2012 Project, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee. (m) The Trustee agrees to accept and act upon instructions or directions pursuant to the Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that, for purposes of the Indenture, 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; and provided further 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 elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee’s understanding of such instructions shall be deemed Page 104 of 236 34 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding that such instructions conflict or are inconsistent with a subsequent written instruction. The Authority agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties. (n) The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. (o) The permissive right of the Trustee to do things enumerated herein shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct. Section 8.04. Right to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, requisition, request, consent, order, certificate, report, opinion, notes, direction, facsimile transmission, electronic mail or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Trustee may treat the Owners of the Bonds appearing in the Trustee’s Registration Books as the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any notice to the contrary. Whenever in the administration of the trusts imposed upon it by the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Certificate, Request or Requisition of the Authority, and such Certificate, Request or Requisition shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of the Indenture in reliance upon such Certificate, Request or Requisition, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it may deem reasonable. Section 8.05. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of the Indenture shall be retained in its possession and shall be subject at all reasonable times to the inspection of the Authority, the District and any Bond Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions. Section 8.06. Compensation and Indemnification. The Authority shall pay to the Trustee from time to time all reasonable compensation for all services rendered under the Indenture, and also all reasonable expenses, charges, legal and consulting fees and other disbursements and those of their attorneys, agents and employees, incurred in and about the performance of their powers and duties under the Indenture. Page 105 of 236 35 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 The Authority shall indemnify, defend and hold harmless the Trustee, its officers, employees, directors and agents from and against any loss, costs, claims, liability or expense (including fees and expenses of its attorneys and advisors) incurred without negligence or bad faith on its part, arising out of or in connection with the execution of the Indenture, acceptance or administration of this trust, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder. The rights of the Trustee and the obligations of the Authority under this Section 8.06 shall survive removal or resignation of the Trustee hereunder or the discharge of the Bonds and the Indenture. ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE Section 9.01. Amendments Permitted. (a) The Indenture and the rights and obligations of the Authority and of the Owners of the Bonds and of the Trustee may be modified or amended from time to time and at any time by an indenture or indentures supplemental thereto, which the Authority and the Trustee may enter into when the written consent of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 11.09 hereof, shall have been filed with the Trustee. No such modification or amendment shall: (1) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the rate of interest or the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each Bond so affected; or (2) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to affect any such modification or amendment, or permit the creation of any lien on the Authority Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as permitted herein, or deprive the Owners of the Bonds of the lien created by the Indenture on such Authority Revenues and other assets except as permitted herein, without the consent of the Owners of all of the Bonds then Outstanding. It shall not be necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Authority and the Trustee of any Supplemental Indenture pursuant to this subsection (a), the Trustee shall mail a notice, setting forth in general terms the substance of such Supplemental Indenture, to each Rating Agency and the Owners of the Bonds at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. (b) The Indenture and the rights and obligations of the Authority, the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority and the Trustee may enter into without the consent of any Bond Owners, if the Trustee shall receive an opinion of Bond Counsel to the effect that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners of the Outstanding Bonds, including, without limitation, for any one or more of the following purposes: (1) to add to the covenants and agreements of the Authority contained in the Indenture other covenants and agreements thereafter to be observed, to pledge or assign additional Page 106 of 236 36 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority; (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Indenture, or in regard to matters or questions arising under the Indenture, as the Authority may deem necessary or desirable; (3) to modify, amend or supplement the Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereunder in effect, and to add such other terms conditions and provisions as may be permitted by said act or similar federal statute; and (4) to modify, amend or supplement the Indenture in such manner as to cause interest on the Bonds to remain excludable from gross income under the Code. (c) The Trustee may in its discretion, but shall not be obligated to, enter into any such Supplemental Indenture authorized by subsections (a) or (b) of this Section which materially adversely affects the Trustee’s own rights, duties or immunities under the Indenture or otherwise. (d) Prior to the Trustee entering into any Supplemental Indenture hereunder, there shall be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of the Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion of interest on the Bonds from federal income taxation and from state income taxation. Section 9.02. Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this Article, the Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the Authority, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced thereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes. Section 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the Trustee so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and presentation of his or her Bonds for the purpose at the Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand on the Owners of any Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same maturity. Page 107 of 236 37 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Section 9.04. Amendment of Particular Bonds. The provisions of this Article shall not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by him. ARTICLE X DEFEASANCE Section 10.01. Discharge of Indenture. The Bonds may be paid by the Authority in any of the following ways, provided that the Authority also pays or causes to be paid any other sums payable hereunder by the Authority: (a) by paying or causing to be paid the principal of and interest and redemption premiums (if any) on the Bonds, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem all Bonds then Outstanding; or (c) by delivering to the Trustee, for cancellation by it, all of the Bonds then Outstanding. If the Authority shall also pay or cause to be paid all other sums payable hereunder by the Authority, then and in that case, at the election of the Authority (as evidenced by a Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to discharge all such indebtedness and the Indenture), and notwithstanding that any Bonds shall not have been surrendered for payment, the Indenture and the pledge of Authority Revenues and other assets made under the Indenture and all covenants, agreements and other obligations of the Authority under the Indenture shall cease, terminate, become void and be completely discharged and satisfied. In such event, upon the Request of the Authority, the Trustee shall execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over, transfer, assign or deliver all moneys or securities or other property held by it pursuant to the Indenture which are not required for the payment or redemption of Bonds not theretofore surrendered for such payment or redemption to the Authority. Section 10.02. Discharge of Liability on Bonds. Upon the deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Outstanding Bonds are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in Article IV or provisions satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the Authority in respect of such Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject, however, to the provisions of Section 10.04. The Authority may at any time surrender to the Trustee for cancellation by it any Bonds previously issued and delivered, which the Authority may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. Page 108 of 236 38 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Section 10.03. Deposit of Money or Securities with Trustee. Whenever in the Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds and accounts established pursuant to the Indenture and shall be: (a) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in Article IV or provisions satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the principal amount of such Bonds and all unpaid interest and premium, if any, thereon to the redemption date; or (b) Federal Securities the principal of and interest on which when due will, in the written opinion of an Independent Certified Public Accountant filed with the Authority and the Trustee, provide money sufficient to pay the principal of and all unpaid interest to maturity, or to the redemption date (with premium, if any), as the case may be, on the Bonds to be paid or redeemed, as such principal, interest and premium, if any, become due, provided that in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice; provided, in each case, that: (i) the Trustee shall have been irrevocably instructed (by the terms of the Indenture or by Request of the Authority) to apply such money to the payment of such principal, interest and premium, if any, with respect to such Bonds; and (ii) the Authority shall have delivered to the Trustee an opinion of Bond Counsel addressed to the Authority and the Trustee to the effect that such Bonds have been discharged in accordance with the Indenture (which opinion may rely upon and assume the accuracy of the Independent Certified Public Accountant’s opinion referred to above). Section 10.04. Payment of Bonds After Discharge of Indenture. Notwithstanding any provisions of the Indenture, any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any Bonds and remaining unclaimed for two (2) years after the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in the Indenture), if such moneys were so held at such date, or two (2) years after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall be repaid to the Authority free from the trusts created by the Indenture upon receipt of an indemnification agreement acceptable to the Authority and the Trustee indemnifying the Trustee with respect to claims of Owners of Bonds which have not yet been paid, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Authority as aforesaid, the Trustee shall at the written direction of the Authority (at the cost of the Authority) first mail to the Owners of Bonds which have not yet been paid, at the addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Authority of the moneys held for the payment thereof. Page 109 of 236 39 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 ARTICLE XI MISCELLANEOUS Section 11.01. Liability of Authority Limited to Authority Revenues. Notwithstanding anything in the Indenture or the Bonds, the Authority shall not be required to advance any moneys derived from any source other than the Authority Revenues and other moneys pledged under the Indenture for any of the purposes in the Indenture mentioned, whether for the payment of the principal of or interest on the Bonds or for any other purpose of the Indenture. Nevertheless, the Authority may, but shall not be required to, advance for any of the purposes hereof any funds of the Authority which may be made available to it for such purposes. The Bonds are not a debt of the members of the Authority, the State or any of its political subdivisions (other than the Authority) and neither the members of the Authority, said State nor any of its political subdivisions (other than the Authority) is liable herein. The District shall have no liability or obligation herein except with respect to Series 2022 Installment Payments payable under the Installment Purchase Agreement. Section 11.02. Successor Is Deemed Included in All References to Predecessor. Whenever in the Indenture either the Authority or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in the Indenture contained by or on behalf of the Authority or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 11.03. Limitation of Rights to Parties and Bond Owners. Nothing in the Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any person other than the Authority, the Trustee, the District and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of the Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the District and the Owners of the Bonds. Section 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in the Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in the Indenture any notice shall be required to be given by mail, such requirement shall be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class mail. Section 11.05. Destruction of Bonds. Whenever in the Indenture provision is made for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee shall destroy such Bonds as may be allowed by law, and deliver a certificate of such destruction to the Authority. Section 11.06. Severability of Invalid Provisions. If any one or more of the provisions contained in the Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in the Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of the Indenture, and the Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority hereby declares that it would have entered into the Indenture and each and every other Section, paragraph, sentence, Page 110 of 236 40 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of the Indenture may be held illegal, invalid or unenforceable. Section 11.07. Notices. Any notice to or demand upon the Authority or the Trustee shall be deemed to have been sufficiently given or served for all purposes by being sent by facsimile or by being deposited, first class mail, postage prepaid, in a post office letter box, addressed, as the case may be, to the Authority, c/o Yorba Linda Water District, 1717 East Miraloma Avenue, Yorba Linda, California 92870, Attention: General Manager (or such other address as may have been filed in writing by the Authority with the Trustee), or to the Trustee at its Office by first class mail. Notwithstanding the foregoing provisions of this Section 11.07, the Trustee shall not be deemed to have received, and shall not be liable for failing to act upon the contents of, any notice unless and until the Trustee actually receives such notice. Section 11.08. Evidence of Rights of Bond Owners. Any request, consent or other instrument required or permitted by the Indenture to be signed and executed by Bond Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Bond Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of Bonds transferable by delivery, shall be sufficient for any purpose of the Indenture and shall be conclusive in favor of the Trustee and the Authority if made in the manner provided in this Section. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The Ownership of Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon. Section 11.09. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under the Indenture, Bonds which are known by the Trustee to be owned or held by or for the account of the Authority, or by any other obligor on the Bonds, or by any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such Bonds and that the pledgee is not a person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or any other obligor on the Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request, the Authority shall Page 111 of 236 41 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 certify to the Trustee those Bonds that are disqualified pursuant to this Section 11.09 and the Trustee may conclusively rely on such certificate. Section 11.10. Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular Bonds (or portions of Bonds in the case of registered Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04 hereof but without any liability for interest thereon. Section 11.11. Funds and Accounts. Any fund or account required by the Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with corporate trust industry standards to the extent practicable, and with due regard for the requirements of Section 6.05 and for the protection of the security of the Bonds and the rights of every Owner thereof. Section 11.12. Waiver of Personal Liability. No member, officer, agent, employee, consultant or attorney of the Authority or the District shall be individually or personally liable for the payment of the principal of or premium or interest on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent, employee, consultant or attorney from the performance of any official duty provided by law or by the Indenture. Section 11.13. Execution in Several Counterparts. The Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. Section 11.14. CUSIP Numbers. Neither the Trustee nor the Authority shall be liable for any defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the Bondholders and that neither the Authority nor the Trustee shall be liable for any inaccuracies in such numbers. Section 11.15. Choice of Law. THE INDENTURE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. Section 11.16. Notice to Rating Agencies. The Trustee shall provide any rating agency rating the Bonds with written notice of each amendment to the Indenture and a copy thereof at least 15 days in advance of its execution. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] Page 112 of 236 S-1 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 IN WITNESS WHEREOF, the Authority has caused the Indenture to be signed in its name by its Chair and attested by its Secretary, and the Trustee, in token of its acceptance of the trusts created hereunder, has caused the Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the day and year first above written. YORBA LINDA WATER DISTRICT FINANCING AUTHORITY By: Chair of the Board of Directors ATTEST: Secretary of the Board of Directors U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: Authorized Officer Page 113 of 236 A-1 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 EXHIBIT A FORM OF BOND UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE INDENTURE) TO THE BOND REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. No. ____$__________ UNITED STATES OF AMERICA STATE OF CALIFORNIA YORBA LINDA WATER DISTRICT FINANCING AUTHORITY REVENUE BOND, SERIES 2022A INTEREST RATE MATURITY DATE ORIGINAL ISSUE DATE CUSIP ____%October 1, 20___August __, 2022 98618F ___ REGISTERED OWNER CEDE & CO. PRINCIPAL AMOUNT: _________________________________________ DOLLARS The YORBA LINDA WATER DISTRICT FINANCING AUTHORITY, a joint exercise of powers agency duly organized and existing under the laws of the State of California (the “Authority”), for value received, hereby promises to pay to the Registered Owner specified above or registered assigns (the “Registered Owner”), on the Maturity Date specified above (subject to any right of prior redemption hereinafter provided for), the Principal Amount specified above, in lawful money of the United States of America, and to pay interest thereon in like lawful money from the interest payment date next preceding the date of authentication of this Bond (unless: (i) this Bond is authenticated after the fifteenth day of the calendar month preceding an interest payment date, whether or not such day is a business day, and on or before the following interest payment date, in which event it shall bear interest from such interest payment date; or (ii) this Bond is authenticated on or before _____ 15, 202__, in which event it shall bear interest from the Original Issue Date identified above; provided, however, that if as of the date of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the interest payment date to which interest has previously been paid or made available for payment on this Bond), at the Interest Rate per annum specified above, payable semiannually on April 1 and October 1 in each year, commencing ______ 1, 202__, calculated on the Page 114 of 236 A-2 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 basis of a 360 day year composed of twelve 30 day months. Principal hereof and premium, if any, upon early redemption hereof are payable by check of the Trustee upon presentation and surrender hereof at the Office (as defined in the hereinafter described Indenture) of U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). Interest hereon is payable by check of the Trustee sent by first class mail on the applicable interest payment date to the Registered Owner hereof at the Registered Owner’s address as it appears on the registration books of the Trustee as of the close of business on the fifteenth day of the month preceding each interest payment date (except that in the case of a registered owner of one million dollars ($1,000,000) or more in principal amount, such payment may, at such registered owner’s option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such registered owner prior to the fifteenth (15th) day of the month preceding such interest payment date). This Bond is not a debt of the members of the Authority, the State of California, or any of its political subdivisions (other than the Authority), and neither the members of the Authority or said State, nor any of its political subdivisions (other than the Authority), is liable hereon, nor in any event shall this Bond be payable out of any funds or properties of the Authority other than the Authority Revenues (as such term is defined in the Indenture of Trust, dated as of July 1, 2022 (the “Indenture”), by and between the Authority and the Trustee) and other moneys pledged therefor under the Indenture. The obligation of the Yorba Linda Water District (the “District”) to make payments in accordance with the Installment Purchase Agreement (as such term is defined in the Indenture) is a limited obligation of the District as set forth in the Installment Purchase Agreement and the District shall have no liability or obligation in connection herewith except with respect to such Series 2022 Installment Payments to be made pursuant to the Installment Purchase Agreement. The Bonds do not constitute an indebtedness of the Authority in contravention of any constitutional or statutory debt limitation or restriction. This Bond is one of a duly authorized issue of bonds of the Authority designated as the “Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A” (the “Bonds”), of an aggregate principal amount of _____ Million _____ Hundred _____ Thousand Dollars ($_____), all of like tenor and date (except for such variation, if any, as may be required to designate varying series, numbers or interest rates) and all issued pursuant to the provisions of the Joint Exercise of Powers Agreement, dated April 11, 2017, by and between the District and California Municipal Finance Authority, a public body, corporate and politic, duly organized and existing under the laws of the State, as amended from time to time (the “JPA Agreement”) and the laws of the State of California and pursuant to the Indenture and the resolution authorizing the issuance of the Bonds. Reference is hereby made to the Indenture (copies of which are on file at the office of the Authority) and all supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Authority Revenues, and the rights thereunder of the Owners of the Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of the Authority hereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and agrees. The Bonds have been issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The Bonds have been issued by the Authority to finance and refinance certain public capital improvements and related costs, as more fully described in the Indenture. This Bond and the interest, premium, if any, hereon and all other Bonds and the interest and premium, if any, thereon (to the extent set forth in the Indenture) are special obligations of the Authority, and are payable from, and are secured by a pledge and lien on the Authority Revenues, including all Series 2022 Installment Payments received from the District by the Authority or the Page 115 of 236 A-3 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Trustee, and any other amounts on deposit in certain funds and accounts created under the Indenture. As and to the extent set forth in the Indenture, all of the Authority Revenues are exclusively and irrevocably pledged in accordance with the terms hereof and the provisions of the Indenture, to the payment of the principal of and interest and premium (if any) on the Bonds. The Indenture and the rights and obligations of the Authority and the Owners of the Bonds and the Trustee may be modified or amended from time to time and at any time with the written consent of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding, exclusive of Bonds disqualified as set forth in the Indenture, in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment shall: (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the owner of each Bond so affected; or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to affect any such modification or amendment, or permit the creation of any lien on the Authority Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as permitted in the Indenture, or deprive the Owners of the Bonds of the lien created by the Indenture on such Authority Revenues and other assets, except as expressly provided in the Indenture, without the consent of the Owners of all of the Bonds then Outstanding. The Indenture and the rights and obligations of the Authority, of the Trustee and the Owners of the Bonds may also be modified or amended for certain purposes described more fully in the Indenture at any time in the manner, to the extent and upon the terms provided in the Indenture by a supplemental indenture, which the Authority and the Trustee may enter into without the consent of any Bond Owners, if the Trustee shall receive an opinion of Bond Counsel to the effect that the provisions of such supplemental indenture will not materially adversely affect the interests of the Owners of the Outstanding Bonds. The Bonds are subject to extraordinary redemption prior to their respective stated maturities, as a whole or in part on any date in the order of maturity and within maturities as directed by the Authority in a Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) prior to such date in integral multiples of $5,000 from Net Proceeds, upon the terms and conditions of, and as provided for in, the Installment Purchase Agreement, at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. The Bonds with stated maturities on or after October 1, 20__, are subject to redemption prior to their respective stated maturities, as a whole or in part as directed by the Authority in a Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) and by lot within each maturity in integral multiples of $5,000, on _____ 1, 20__ or any date thereafter at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. The Bonds with stated maturities on October 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on October 1, 20__ and each October 1 thereafter, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Page 116 of 236 A-4 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 Redemption Date (October 1) Principal Amount 20__$ * * Maturity. As provided in the Indenture, notice of redemption shall be mailed by the Trustee by first class mail not less than twenty (20) days prior to the redemption date to the respective Owners of any Bonds designated for redemption at their addresses appearing on the registration books of the Trustee, but neither the failure to receive such notice nor any defect in the notice or the mailing thereof shall affect the validity of the proceedings for redemption or the cessation of accrual of interest thereon from and after the date fixed for redemption. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption. If an Event of Default, as defined in the Indenture, shall occur, the principal of all of the Bonds and the interest accrued thereon may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture, but such declaration and its consequences may be rescinded and annulled as further provided in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his or her duly authorized attorney in writing, at said office of the Trustee but only in the manner subject to the limitations and upon payment of the taxes and charges provided in the Indenture and upon surrender and cancellation of this Bond. Upon registration of such transfer, a new Bond or Bonds of the same series, of authorized denomination or denominations, for the same aggregate principal amount of the same maturity will be issued to the transferee in exchange therefor. Bonds may be exchanged at said office of the Trustee for a like aggregate principal amount of Bonds of other authorized denominations of the same series and same maturity, but only in the manner, subject to the limitations and upon payment of the taxes and charges provided in the Indenture. The Trustee shall not be required to register the transfer or exchange of any Bond during the period in which the Trustee is selecting Bonds for redemption or any Bond that has been selected for redemption. The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. It is hereby certified that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened or have been performed in due and regular time, form and manner as required by the JPA Agreement, and the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit under any laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. Page 117 of 236 A-5 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been manually signed by the Trustee. IN WITNESS WHEREOF, the Authority has caused this Bond to be executed in its name and on its behalf with the manual or facsimile signature of its Chair and attested to by the manual or facsimile signature of its Secretary, all as of the Original Issue Date specified above. YORBA LINDA WATER DISTRICT FINANCING AUTHORITY By: Chair Attest: Secretary of the Board Page 118 of 236 A-6 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 [FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION TO APPEAR ON BONDS] This is one of the Bonds described in the within-mentioned Indenture. Dated: August __, 2022 U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory [FORM OF LEGAL OPINION] The following is a true copy of the opinion rendered by Stradling Yocca Carlson & Rauth, a Professional Corporation, in connection with the issuance of, and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in my office. Secretary of the Board of the Yorba Linda Water District Financing Authority Page 119 of 236 A-7 NG-U9ZQVMF2/4859-7381-9424v4/022608-0014 [FORM OF ASSIGNMENT] For value received the undersigned hereby sells, assigns and transfers unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within registered Bond and hereby irrevocably constitute(s) and appoint(s) __________________ _________________________ attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. Signature Guaranteed: Note: Signature guarantee shall be made by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee. Page 120 of 236 NRF Draft 6/30/2022 131036604.3 $[PAR AMOUNT] YORBA LINDA WATER DISTRICT FINANCING AUTHORITY Revenue Bonds, Series 2022A BOND PURCHASE AGREEMENT ________ , 2022 Yorba Linda Water District 1717 East Miraloma Avenue Placentia, California 92870 Yorba Linda Water District Financing Authority 1717 East Miraloma Avenue Placentia, California 92870 Ladies and Gentlemen: The undersigned Barclays Capital Inc., as underwriter (hereinafter referred to as the “Underwriter”), acting on behalf of itself and not as an agent or representative of you, offers to enter into this bond purchase agreement (the “Purchase Agreement”) with the Yorba Linda Water District (the “District”) and the Yorba Linda Water District Financing Authority (the “Authority”), which will be binding upon the District, the Authority, and the Underwriter upon the acceptance hereof by the District and the Authority. This offer is made subject to its acceptance by the District by execution of this Purchase Agreement and its delivery to the Underwriter on or before 11:59 p.m., California time, on the date hereof. All terms used herein and not otherwise defined shall have the meanings given to such terms in the Indenture (as hereafter defined). 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the Underwriter hereby agrees to purchase, and the District hereby agrees to cause to be delivered to the Underwriter, all (but not less than all) of the $[PAR AMOUNT] aggregate principal amount of Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A (the “Bonds”). The Underwriter will purchase the Bonds at a purchase price of $________________ (representing the par amount of the Bonds [plus/less] $____________ of [net] original issue [premium/discount] and $_______ of Underwriter’s discount). If the Authority fails to deliver the Bonds at the Closing (as defined herein), or if the Authority shall be unable to satisfy the conditions of the obligation of the Underwriter to purchase and accept delivery of the Bonds as set forth in this Purchase Agreement, or if the obligation of the Underwriter with respect to the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate, and neither the Underwriter nor the Authority shall be under further obligation hereunder, Page 121 of 236 2 131036604.3 except that the respective obligations of the Authority and the Underwriter for the payment of expenses, as provided in Section 10, shall continue in full force and effect. The Authority and the District acknowledge and agree that: (a) the purchase and sale of the Bonds pursuant to this Purchase Agreement is an arm’s-length commercial transaction between the Authority, the District and the Underwriter; (b) the Underwriter is acting solely as underwriter and principal in connection with the matters contemplated by and with respect to all communications under this Purchase Agreement (irrespective of whether the Underwriter has provided other services or is currently providing other services to the Authority or the District on other matters), and is not acting as the agent or fiduciary of the Authority or the District or as Municipal Advisor (as defined in Section 15B of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of the Authority or the District and their advisors in connection with the matters contemplated by this Purchase Agreement; (c) the Underwriter has neither assumed an advisory or fiduciary responsibility in favor of the Authority or the District or their advisors with respect to the offering of the Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Authority or the District on other matters) nor has it assumed any other obligation to the Authority or the District except the obligations expressly set forth in this Purchase Agreement; (d) the Underwriter has financial and other interests that differ from those of the Authority and the District; and (e) in connection with the purchase and sale of the Bonds, the Authority and the District have consulted or been afforded the opportunity to consult, as applicable, with its own legal, accounting, tax, financial, municipal and other advisors, as applicable, to the extent they have deemed appropriate. The Authority and the District also acknowledge that they previously received from the Underwriter a letter regarding Municipal Securities Rulemaking Board (“MSRB”) Rule G-17 Disclosures, and that it has provided to the Underwriter an acknowledgement of such letter. 2. Description and Purpose of the Bonds. The Bonds will be issued pursuant to an Indenture of Trust, dated as of July 1, 2022 (the “Indenture”), by and between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Bonds are special limited obligations of the Authority and are payable solely from Revenues and from certain other amounts on deposit in funds and accounts under the Indenture. Revenues will consist primarily of amounts received by the Authority (the “Series 2022A Installment Payments”) pursuant to the Installment Purchase Agreement dated as of July 1, 2022 (the “Installment Purchase Agreement”), between the Authority and the District and all interest or gain derived from the investment of amounts in any of the funds or accounts established under the Indenture. The obligation of the District to make the Series 2022A Installment Payments is a special obligation of the District payable solely from Net Revenues (as such term is defined in the Installment Purchase Agreement) of the District. The Bonds shall be as described in the Indenture and the Official Statement dated April 26, 2017 relating to the Bonds (which, together with all exhibits and appendices included therein or attached thereto and such amendments or supplements thereto which shall be approved by the Underwriter, is hereinafter called the “Official Statement”). Page 122 of 236 3 131036604.3 Proceeds from the sale of the Bonds will be used (i) to finance the acquisition and construction of certain improvements to the District’s Water System, (ii) to refund all of the currently outstanding Yorba Linda Water District Refunding Revenue Bonds, Series 2012A (the “Refunded 2012A Bonds”), (iii) to pay off amounts outstanding under a Revolving Credit Agreement with Bank of America, N.A.; and (iv) to pay costs incurred in connection with the issuance of the Bonds. In order to effect the refunding of the Refunded 2012A Bonds, the District will enter into the Escrow Agreement (2012 Bonds), dated as of July 1, 2022 (the “Escrow Agreement”), by and between the District and U.S. Bank Trust Company, National Association, as escrow agent. 3. Public Offering. The Underwriter agrees to make an initial public offering of all the Bonds at the public offering prices (or yields) set forth in the Official Statement. Subsequent to the initial public offering, 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, provided that the Underwriter shall not change the interest rates set forth on Exhibit A attached hereto. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering price or prices set forth in the Official Statement. The Underwriter also reserves the right (i) to engage in transactions that stabilize, maintain or otherwise affect the market price of the Bonds at a level above that which might otherwise prevail in the open market and (ii) to discontinue such transactions, if commenced, at any time. 4.Establishment of Issue Price. (a) The Underwriter agrees to assist the Authority in establishing the issue price of the Bonds and shall execute and deliver to the Authority at or prior to Closing (as defined in Section 6 below) 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 (defined below), to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. (b) With respect to Bonds of those maturities as to which at least 10% of the Bonds of the maturity has been sold to the public (defined in subsection (g)(1) below) at a single price (the “10% test”), based on reporting by the Underwriter to the Authority on the date hereof and prior to the execution of this Purchase Agreement, which maturities are indicated in Exhibit A attached hereto (the “10% Test Maturities”), the Authority will treat the first price at which 10% of each such maturity of the Bonds was sold to the public as the issue price of that maturity. With respect to Bonds of those maturities, if any, as to which the 10% test has not been satisfied, based on reporting by the Underwriter to the Authority on the date hereof and prior to the execution of this Purchase Agreement, which maturities are also indicated in Exhibit A attached hereto (the “Hold-the-Offering-Price Maturities”), the Underwriter and the Authority agree that the rules in paragraph (d) below shall apply. For purposes of this section, for Bonds maturing on the same date but having different interest Page 123 of 236 4 131036604.3 rates, each separate CUSIP number for such Bonds is subject to the 10% test or subsection (c) below, as the case may be, as if such separate CUSIP number were a separate maturity. (c) With respect to the Hold-the-Offering-Price Maturities, the Underwriter confirms that the Underwriter has offered such maturities of 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. The Authority and the Underwriter agree that the restrictions set forth in the next sentence shall apply to the Hold-the-Offering-Price Maturities, 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 Hold-the-Offering-Price Maturities, the Underwriter will neither offer nor sell such maturity of the Hold-the-Offering-Price Maturities to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following: (1) the close of the fifth (5th) business day after the sale date; or (2) the date on which the Underwriter has sold at least 10% of that maturity of the Hold-the-Offering-Price Maturities to the public at a price that is no higher than the initial offering price to the public. The Underwriter shall 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 Hold-the- Offering-Price Maturities to the public at a price that is no higher than the initial offering price to the public. (d) The Underwriter confirms that: (1) any selling group agreement and each retail or other third-party distribution agreement (to which the Underwriter is a party) relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating the Underwriter, each dealer who is a member of the selling group and each broker-dealer that is a party to such retail or other third-party distribution agreement, as applicable: (i) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter and as set forth in the related pricing wires; (ii) 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 (iii) 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. Page 124 of 236 5 131036604.3 (2) 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 underwriter or dealer that is a party to a retail or other 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 retailor other third-party distribution agreement to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or 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 subsection (f), the Underwriter will rely on (i) the agreement of each underwriter 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 an agreement among underwriters and the related pricing wires, (ii) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (iii) in the event that an underwriter or dealer who is a member of the selling group is a party to a retail or other third-party distribution agreement that 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 retail or other third-party distribution agreement and the related pricing wires. The Authority further acknowledges that each underwriter shall be solely liable for its failure to comply with its agreement to adhere to the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, and that no underwriter shall be liable for the failure of any other underwriter, or of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a retail or other 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 4: (1) “public” means any person other than an underwriter or a related party, (2) “underwriter” means (A) any person that agrees pursuant to a written contract with the Authority (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public Page 125 of 236 6 131036604.3 (including a member of a selling group or a party to a retail or other third-party distribution agreement participating in the initial sale of the Bonds to the public), (3) 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 (4) “sale date” means the date of execution of this Purchase Agreement by all parties. 5. Delivery of Official Statement. Pursuant to the authorization of the Authority and the District, the Underwriter has distributed copies of the Preliminary Official Statement dated July ___, 2022, relating to the Bonds, which, together with the cover page and appendices thereto, is herein called the “Preliminary Official Statement.” By their acceptance of this proposal, the Authority and the District hereby approve and ratify the distribution use by the Underwriter of the Preliminary Official Statement. The Authority and the District agree to execute and deliver a final Official Statement in substantially the same form as the Preliminary Official Statement with such changes as may be made thereto, with the consent of the Authority and/or the District and the Underwriter, and to provide copies thereof to the Underwriter as set forth in Section 7(a)(v) hereof. The Authority and the District hereby authorize the Underwriter to use and distribute, in connection with the offer and sale of the Bonds: the Preliminary Official Statement, the Official Statement, the Indenture, the Escrow Agreement and the Continuing Disclosure Certificate (as hereinafter defined) and other documents or contracts to which the Authority and/or the District is a party in connection with the transactions contemplated by this Purchase Agreement, including this Purchase Agreement and all information contained herein, and all other documents, Bonds and statements furnished by the Authority or the District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement. 6. The Closing. At 8:00 a.m., California time, on July __, 2022 or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the Authority, the District, and the Underwriter, the Authority and the District will cause to be executed and delivered (i) the Bonds in book-entry form through the facilities of The Depository Trust Company (“DTC”) or its agent on behalf of the Underwriter, and (ii) the closing documents hereinafter mentioned at the offices of Stradling Yocca Carlson & Rauth, a Professional Corporation (“Bond Counsel”), Newport Beach, California, or another place to be mutually agreed upon by the Authority, the District, and the Underwriter. The Underwriter will accept such delivery and pay the purchase price of the Page 126 of 236 7 131036604.3 Bonds as set forth in Section 1 hereof in immediately available funds to the order of the District. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the “Closing.” 7. District Representations, Warranties and Covenants. (a) The District represents, warrants and covenants to the Underwriter that: (i) Due Organization, Existence and Authority. The District is a county water district duly organized and existing under and pursuant to Division 12 of the California Water Code (Section 30000 et seq.), and the constitution and laws of the State of California (the “State”), with full right, power and authority to execute, deliver and perform its obligations under this Purchase Agreement, the Installment Purchase Agreement, the Escrow Agreement and the Continuing Disclosure Certificate (collectively, the “District Documents”) and to carry out and consummate the transactions contemplated by the District Documents and the Official Statement. (ii) Due Authorization and Approval. By all necessary official action of the District, the District has duly authorized and approved the execution and delivery of, and the performance by the District of the obligations contained or described in, the Preliminary Official Statement, the Official Statement and the District Documents and as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered, and assuming due authorization and execution by the other parties thereto, as applicable, each District Document will constitute the legally valid and binding obligation of the District enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws or equitable principles relating to or affecting creditors’ rights generally or by the exercise of judicial discretion in appropriate cases or by limitations on legal remedies against public agencies in the State. (iii) Official Statement Accurate and Complete. The Preliminary Official Statement was as of its date, and the Official Statement is, and at all times subsequent to the date of the Official Statement up to and including the Closing will be, true and correct in all material respects, and the Preliminary Official Statement and the Official Statement contain and up to and including the Closing will contain no misstatement of any material fact and do not, and up to and including the Closing will not, omit any statement necessary to make the statements contained therein, in the light of the circumstances in which such statements were made, not misleading (except no representation is made with respect to information relating to DTC, DTC’s book-entry system). Page 127 of 236 8 131036604.3 (iv) Underwriter’s Consent to Amendments and Supplements to Official Statement. The District will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement and will not effect or consent to any such amendment or supplement without the consent of the Underwriter, which consent will not be unreasonably withheld. The District will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. (v) District Agreement to Amend or Supplement Official Statement. If after the date of this Purchase Agreement and until 25 days after the end of the “underwriting period” (as defined in Section 240 15c2- 12 in Chapter II of Title 17 of the Code of Federal Regulations (“Rule 15c2- 12”)), any event occurs as a result of which the Official Statement as then amended or supplemented would include an untrue statement of a material fact, or omit to state any material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading, and, in the reasonable opinion of the Underwriter, an amended or supplemented Official Statement should be delivered in connection with the offers or sales of the Bonds to reflect such event, the District promptly will prepare at its expense an amendment or supplement which will correct such statement or omission and the District shall promptly furnish to the Underwriter a reasonable number of copies of such amendment or supplement. The Underwriter hereby agrees to deposit the Official Statement with the Municipal Securities Rulemaking Board (the “MSRB”). The Underwriter acknowledges that the end of the “underwriting period” will be the date of Closing. (vi) No Material Change in Finances. At the time of the Closing, and except as otherwise described in the Official Statement, there shall not have been any material adverse changes in the financial condition of the District since June 30, 2021. (vii) No Breach or Default. As of the time of acceptance hereof and as of the time of the Closing, (i) the District is not in default, nor has it been in default, as to principal or interest with respect to an obligation issued by the District, and (ii) the District is not and will not, in any manner which would materially adversely affect the transactions contemplated by the District Documents, be in breach of or in default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the District 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, in any manner which would materially adversely affect the transactions contemplated by the District Page 128 of 236 9 131036604.3 Documents, a default or event of default under any such instrument; and, as of such times, the authorization, execution and delivery of the District Documents and compliance with the provisions of each of such agreements or instruments do not and will not, in any manner which would materially adversely affect the transactions contemplated by the District Documents, conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the District (or any of its officers in their respective capacities as such) is subject, or by which it or any of its properties is bound, nor will any such authorization, execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties or under the terms of any such law, regulation or instrument, except as may be provided by the District Documents. (viii) No Litigation. As of the time of acceptance hereof and as of the date of Closing, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, is pending or, to the best knowledge of the District after due investigation, threatened (i) in any way questioning the corporate existence of the District or the titles of the officers of the District to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the execution or delivery of any of the Bonds, or in any way contesting or affecting the validity of the Bonds or the District Documents or the consummation of the transactions contemplated thereby, or contesting the exclusion of the interest on the Bonds from gross income for federal income tax purposes or contesting the powers of the District to enter into the District Documents; (iii) which may result in any material adverse change to the financial condition of the District or to its ability to pay the debt service on the Bonds when due; or (iv) contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any 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, and there is no basis for any action, suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) of this sentence. (ix) No Prior Liens on Net Revenues. Except for the Yorba Linda Water District Financing Authority Revenue Bonds, Series 2017A (the “2017A Bonds”), which obligations have a lien on the Net Revenues that is on a parity with the lien of the Bonds, as of the date of the Closing, the District will not have outstanding any indebtedness which indebtedness Page 129 of 236 10 131036604.3 is secured by a lien on the Net Revenues superior to or on a parity with the lien of the Series 2022A Installment Payments on the Net Revenues. (x) Further Cooperation: Blue Sky. The District will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the District shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction. (xi) Consents and Approvals. All authorizations, approvals, licenses, permits, consents and orders of or filings with any governmental authority, legislative body, board, agency or commission having jurisdiction in the matters which are required for the due authorization of, which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by the District of its obligations in connection with, the District Documents or the refunding of the Refunded 2012A Bonds have been duly obtained or made, except as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds. (xii) No Other Obligations. Between the date of this Purchase Agreement and the date of Closing, the District will not, without the prior written consent of the Underwriter, offer or issue any bonds, notes or other obligations for borrowed money, or incur any material liabilities, directly or contingently payable from the Net Revenues on parity with the Bonds. (xiii) Certificates. Any certificate signed by any official of the District and delivered to the Underwriter shall be deemed to be a representation and warranty by the District to the Underwriter as to the statements made therein. (xiv) Compliance with Rule 15c2-12. The Preliminary Official Statement heretofore delivered to the Underwriter has been deemed final by the District as of its date and as of the date hereof, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(i) of Rule 15c2-12. The District hereby covenants and agrees that, within seven business days from the date hereof, it shall cause a final printed form of the Official Statement to be delivered to the Underwriter in Page 130 of 236 11 131036604.3 sufficient quantity to comply with paragraph (b)(4) of Rule 15c2-12 and Rules of the MSRB. (xv) Continuing Disclosure. The District will undertake, pursuant to a Continuing Disclosure Certificate (the “Continuing Disclosure Certificate”), to provide annual reports and notices of certain events in accordance with the requirements of Rule 15c2-12. A form of the Continuing Disclosure Certificate is set forth as Appendix E to the Official Statement. The District hereby represents that, except as otherwise disclosed in the Official Statement, for the last five years it has been in compliance with each continuing disclosure undertaking it has entered into pursuant to Rule 15c2-12. 8. Authority Representations, Warranties and Covenants. The Authority represents, warrants and covenants to the Underwriter that: (a) Due Organization, Existence and Authority. The Authority is a public entity duly organized and existing under a joint exercise of powers agreement and under the Constitution and laws of the State, with full right, power and authority to execute, deliver and perform its obligations under this Purchase Agreement, the Installment Purchase Agreement and the Indenture (collectively, the “Authority Documents”) and to carry out and consummate the transactions contemplated by the Authority Documents and the Official Statement. (b) Due Authorization and Approval. By all necessary official action of the Authority, the Authority has duly authorized and approved the execution and delivery of, and the performance by the Authority of the obligations contained or described in the Preliminary Official Statement, the Official Statement and the Authority Documents and as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered, each Authority Document will constitute the legally valid and binding obligation of the Authority enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws or equitable principles relating to or affecting creditors’ rights generally or by the exercise of judicial discretion in appropriate cases or by limitations on legal remedies against public agencies in the State. (c) The Official Statement Accurate and Complete. The Preliminary Official Statement was as of its date, and the Official Statement is, and at all times subsequent to the date of the Official Statement up to and including the Closing will be, true and correct in all material respects, and the Preliminary Official Statement and the Official Statement contain, and up to and including the Closing, will contain no misstatement of any material fact and do not, and up to and including the Closing, will not omit any statement necessary to make the statements contained therein, in the light of the circumstances in which such statements were Page 131 of 236 12 131036604.3 made, not misleading (except no representation is made with respect to information relating to DTC or DTC’s book-entry system). (d) Underwriter’s Consent to Amendments and Supplements to the Official Statement. The Authority will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement and will not effect or consent to any such amendment or supplement without the consent of the Underwriter, which consent will not be unreasonably withheld. The Authority will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. (e) Authority Agreement to Amend or Supplement the Official Statement. If after the date of this Purchase Agreement and until 25 days after the end of the “underwriting period” (as defined in Section 240 15c2-12 in Chapter II of Title 17 of the Code of Federal Regulations (“Rule 15c2-12”)), any event occurs as a result of which the Official Statement as then amended or supplemented would include an untrue statement of a material fact, or omit to state any material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading, and, in the reasonable opinion of the Underwriter, an amended or supplemented the Official Statement should be delivered in connection with the offers or sales of the Bonds to reflect such event, the Authority promptly will prepare at its expense an amendment or supplement which will correct such statement or omission and the Authority shall promptly furnish to the Underwriter a reasonable number of copies of such amendment or supplement. (f) Compliance with Rule 15c2-12. The Preliminary Official Statement heretofore delivered to the Underwriter has been deemed final by the Authority as of the date of the Preliminary Official Statement, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(i) of Rule 15c2-12. 9. Closing Conditions. The Underwriter has entered into this Purchase Agreement in reliance upon the representations, warranties and covenants herein and the performance by the Authority and the District of their obligations hereunder, both as of the date hereof and as of the date of the Closing. The Underwriter’s obligations under this Purchase Agreement are and shall be subject to the following additional conditions: (a) Bring-Down Representation. The representations, warranties and covenants of the Authority and the District contained herein shall be true, complete and correct at the date hereof and at the time of the Closing, as if made on the date of the Closing. (b) Executed Agreements and Performance Thereunder. At the time of the Closing (i) the District Documents and the Authority Documents shall be in full force and effect, and shall not have been amended, modified or Page 132 of 236 13 131036604.3 supplemented except with the written consent of the Underwriter, (ii) there shall be in full force and effect such resolutions (the “Resolutions”) as, in the opinion of Bond Counsel, shall be necessary in connection with the transactions contemplated by the Official Statement and the District Documents, (iii) the District shall perform or have performed its obligations required or specified in the District Documents to be performed at or prior to Closing, (iv) the Authority shall perform or have performed its obligations required or specified in the Authority Documents to be performed at or prior to Closing, and (v) the Official Statement shall not have been supplemented or amended, except pursuant to Paragraphs 7(a)(iv) and 7(a)(v) hereof or as otherwise may have been agreed to in writing by the Underwriter. (c) No Default. At the time of the Closing, no default shall have occurred or be existing under the Resolutions, the District Documents, the Authority Documents, or any other agreement or document pursuant to which any of the District’s financial obligations was issued and the District shall not be in default in the payment of principal or interest on any of its financial obligations which default would adversely impact the ability of the District to pay debt service on the Bonds. (d) Termination Events. The Underwriter shall have the right to terminate the Underwriter’s obligation under the Purchase Agreement to purchase, to accept delivery of and to pay for the Bonds if, after the execution hereof and prior to the Closing, 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 the State legislature 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 or State 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 or State income tax consequences of any of the transactions contemplated herein; Page 133 of 236 14 131036604.3 (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 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 Resolution 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; (iii) There shall have occurred (i) declaration of war or any new material outbreak of hostilities (including, without limitation, an act of terrorism) (ii) the escalation of hostilities existing prior to the date hereof or (iii) any other extraordinary event, material national or international calamity or crisis (including any escalation of an already existing national or international calamity or crisis), or any material adverse change in the financial, political or economic conditions affecting the United States or the District; (iv) The declaration of a general banking moratorium by federal, New York or California authorities; (v) 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); (vi) There shall have occurred any downgrading or published negative credit watch or similar published information from a rating agency that at the date of the Purchase Agreement has published a rating (or has been asked to furnish a rating on the Bonds) on any of the Authority’s debt obligations, which action reflects a change or possible change, in the ratings accorded any such obligations of the Authority (including any rating to be accorded the Bonds); Page 134 of 236 15 131036604.3 (vii) Any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any material statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits to state a material fact 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 in any material respect and, in either such event, (a) the District or the Authority refuses to permit the Official Statement to be supplemented to supply such statement or information in a manner satisfactory to the Underwriter or (b) the effect of the Official Statement as so supplemented is, in the judgment of the Underwriter, to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale, at the contemplated offering prices (or yields), of the Bonds; (viii) There shall have occurred since the date of this Purchase Agreement any materially adverse change in the affairs or financial condition of the Authority or the District, except for changes which the Official Statement discloses are expected to occur; (ix) Any state Blue Sky or securities commission, or other governmental agency or body, shall have withheld registration, exemption or clearance of the offering of the Bonds as described herein, or issued a stop order or similar ruling relating thereto; (x) Any amendment shall have been made to the federal or State Constitution or action by any federal or State court, legislative body, regulatory body, or other authority materially adversely affecting the tax status of the Authority or the District, or its property and income securities (or interest thereon) or the validity or enforceability of the levy of taxes to pay principal of and interest on the Bonds; (xi) Any proceeding shall have been commenced or be threatened in writing by the Securities and Exchange Commission against the Authority or the District; (xii) A material disruption in commercial banking or securities settlement, payment or clearance services shall have occurred; or (xiii) The purchase of and payment for the Bonds by the Underwriter, or the resale of the Bonds by the Underwriter, on the Page 135 of 236 16 131036604.3 terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission. (e) Closing Documents. At or prior to the Closing, the Underwriter shall receive with respect to the Bonds the following documents, in each case dated as of the Closing Date and satisfactory in form and substance to the Underwriter: (i) Bond Counsel Opinion. An approving opinion of Bond Counsel dated the date of the Closing and substantially in the form included as Appendix C to the Official Statement, together with a letter from such counsel, dated the date of the Closing and addressed to the Underwriter, to the effect that the foregoing opinion addressed to the Authority and the District may be relied upon by the Underwriter to the same extent as if such opinion were addressed to it. (ii) Supplemental Opinion. A supplemental opinion or opinions of Bond Counsel addressed to the Underwriter, in form and substance acceptable to the Underwriter, and dated the date of the Closing substantially to the following effect: (A) The Purchase Agreement has been duly authorized, executed and delivered by the District and, assuming due authorization and execution by the Underwriter, is a valid and binding agreement of the District enforceable in accordance with its terms, except that the rights and obligations under the Purchase Agreement are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State; (B) The statements contained in the Official Statement on the cover page and under the captions “INTRODUCTION,” “THE BONDS,” “SECURITY FOR THE BONDS,” “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES,” and “TAX EXEMPTION” and in Appendix B thereto, insofar as such statements purport to summarize certain provisions of the Bonds, the Indenture, the Installment Purchase Agreement, State law and Bond Counsel’s opinions concerning certain federal tax matters relating to the Bonds, are accurate as of the date of the Official Statement and as of the date of Closing; and (C) The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Indenture is exempt Page 136 of 236 17 131036604.3 from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended (iii) District Counsel Opinion. An opinion of Kidman Gagen Law LLP, Irvine, California, counsel to the District, dated the date of the Closing and addressed to the Underwriter, in form and substance acceptable to the Underwriter substantially to the following effect: (A) The District is a county water district organized and validly existing under the constitution and the laws of the State; (B) The District Documents have been duly authorized, executed and delivered by the District and assuming due authorization and execution by the other parties thereto, as applicable, constitute the valid, legal and binding agreements of the District enforceable against the District in accordance with their respective terms, and the District has full right, power and authority to carry out and consummate all transactions contemplated by the District Documents as of the date of the Official Statement and as of the date of Closing; (C) To the best of such counsel’s knowledge based upon information provided by the District and except for the 2017A Bonds, as of the date of the Closing, the District does not and will not have outstanding any indebtedness which indebtedness is secured by a lien on the Net Revenues superior to or on a parity with the lien of the Bonds on the Net Revenues; (D) The resolution of the District approving and authorizing the execution and delivery of the District Documents, and approving the Official Statement, has been duly adopted at a meeting of the governing body of the District, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the resolution is in full force and effect and has not been modified, amended or rescinded; (E) To the best of such counsel’s knowledge based upon information provided by the District, the execution and delivery of the District Documents and compliance with the provisions thereof, under the circumstances contemplated thereby, do not and will not, in any respect which will have a material adverse impact on the transactions contemplated by the District Documents, conflict with, or constitute on the part of the District a breach of or default under, any material agreement or other instrument to which the District is a party or by which it is bound (as determined by reference to a certificate of the District identifying material agreements and Page 137 of 236 18 131036604.3 instruments) or any existing law, regulation, court order or consent decree to which the District is subject (excluding, however, any opinion as to compliance with any applicable federal or state securities laws); (F) To the best of such counsel’s knowledge based upon information provided by the District, the execution and delivery of the District Documents and compliance with the provisions thereof, under the circumstances contemplated thereby, do not and will not, in any respect which will have a material adverse impact on the transactions contemplated by the District Documents, conflict with or constitute a breach of or default under any term or provision of the Constitution of the State or any statute, administrative rule or regulation, judgment, decree, order, license, permit, agreement or instrument to which the District is subject or by which the District or any of its property is bound (excluding, however, any opinion as to compliance with any applicable federal or state securities laws); (G) Based on the information made available to such counsel in his role as general counsel to the District, and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained therein, the information in the Official Statement under the captions “THE 2022 PROJECT,” “REFUNDING PLAN,” “YORBA LINDA WATER DISTRICT,” and “LITIGATION,” is true and accurate to the best of such counsel’s knowledge at and as of the date of the Official Statement and at and as of the date of Closing; (H) To the best of such counsel’s knowledge based upon information provided by the District, no additional authorization, approval, consent, waiver or any other action by any person, board or body, public or private, not previously obtained is required as of the date of the Closing for the District to enter into the District Documents or to perform its obligations thereunder (excluding, however, any opinion as to compliance with any applicable federal or state securities laws); (I) Except as described in the Official Statement, based on information made available to such counsel in his role as general counsel to the District, he knows of no litigation, proceeding, action, suit, or investigation (or any basis therefor) at law or in equity before or by any court, governmental agency or body, pending or, to his best knowledge, threatened, against the District challenging the creation, organization or existence of the District, or the validity of the District Documents or seeking to restrain or enjoin the payments of debt service on the Bonds or in any way contesting or affecting Page 138 of 236 19 131036604.3 the validity of the District Documents or any of the transactions referred to therein or contemplated thereby or contesting the authority of the District to enter into or perform its obligations under any of the District Documents, or under which a determination adverse to the District would have a material adverse effect upon the financial condition or the revenues of the District, or which, in any manner, questions or affects the right or ability of the District to enter into the District Documents or affects in any manner the right or ability of the District to pay debt service on the Bonds; and (J) Based on the information made available to counsel to the District in their role as general counsel to the District, and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement, nothing has come to his attention which would lead him to believe that the Official Statement as of its date and as of the date of Closing (excluding therefrom the financial and statistical data and forecasts included therein, as to which no opinion is expressed) contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (iv) Authority Counsel Opinion. An opinion of Kidman Gagen Law LLP, Irvine, California, counsel to the Authority, dated the date of the Closing and addressed to the Underwriter, in form and substance acceptable to the Underwriter substantially to the following effect: (A) The Authority is a joint exercise of powers agency, duly created and lawfully existing under the laws and Constitution of the State; (B) The Authority Documents have been authorized by all necessary corporate action on the part of the Authority, have been duly executed and delivered by the Authority and, assuming due authorization, execution and delivery by the other parties thereto, the Authority Documents constitute legally valid and binding obligations of the Authority, enforceable against the Authority in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws or equitable principles relating to or limiting creditors’ rights generally or by the exercise of judicial discretion in appropriate cases or by limitations or legal remedies against public agencies in the State, and expressing no opinion as to the availability of equitable remedies; Page 139 of 236 20 131036604.3 (C) To the best of such counsel’s knowledge after due inquiry, the execution and delivery of the Authority Documents and compliance with the provisions thereof, under the circumstances contemplated thereby, do not and will not conflict with any existing law, regulation, court order or consent decree to which the Authority is subject 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; (D) The Official Statement has been prepared by, or on behalf of, the Authority and the Official Statement has been executed on its behalf by the Executive Director of the Authority; and (E) Based on the information made available to such counsel, and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained therein, the information in the Official Statement and relating to the Authority under the captions “INTRODUCTION,” “THE AUTHORITY” and “LITIGATION— Authority” is true and accurate to the best of such counsel’s knowledge at and as of the date of the Official Statement and at and as of the date of Closing. (v) Opinion of Counsel to Trustee. The opinion of counsel to U.S. Bank Trust Company, National Association (“Trustee”), dated the date of the Closing, addressed to the Underwriter, to the effect that: (A) Trustee is a national banking association, duly organized and validly existing under the laws of the United States of America, having full corporate power to undertake the trust created under the Indenture and to enter into the Escrow Agreement (collectively with the Indenture, the “Trustee Documents”); (B) The Trustee Documents have been duly authorized, executed and delivered by Trustee and, assuming due authorization, execution and delivery by the other parties thereto, the Trustee Documents constitute the valid and binding obligations of Trustee enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally and by the application of equitable principles, if equitable remedies are sought; (C) Trustee has duly authenticated the Bonds upon the order of the District; Page 140 of 236 21 131036604.3 (D) Trustee’s actions in executing and delivering the Trustee Documents are in full compliance with, and do not conflict with any applicable law or governmental regulation and, to the best of such counsel’s knowledge, after reasonable inquiry with respect thereto, do not conflict with or violate any contract to which Trustee is a party or any administrative or judicial decision by which Trustee is bound; and (E) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the banking or trust powers of Trustee that has not been obtained is or will be required for the authentication and delivery of the Bonds or the consummation by Trustee of its obligations under the Trustee Documents. (vi) Underwriter’s Counsel Opinion. An opinion of Norton Rose Fulbright US LLP, counsel to the Underwriter (“Underwriter’s Counsel”), dated the Closing Date and addressed to the Underwriter, in form and substance acceptable to the Underwriter. (vii) District Certificate. A certificate of the District, dated the date of the Closing, signed on behalf of the District by the General Manager or other duly authorized officer of the District to the effect that: (A) The representations, warranties and covenants of the District contained in the Purchase Agreement are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing and the District has complied with all of the terms and conditions of the Purchase Agreement required to be complied with by the District at or prior to the date of the Closing; (B) No event affecting the District has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement or amendment thereto which event should be disclosed in the Official Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (C) No event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute an event of default under the District Documents. (viii) Authority Certificate. A certificate of the Authority, dated the date of the Closing, signed on behalf of the Authority by a duly authorized officer of the Authority to the effect that: (ix) The representations, warranties and covenants of the Authority contained in the Purchase Agreement are true and correct in all Page 141 of 236 22 131036604.3 material respects on and as of the date of the Closing as if made on the date of the Closing and the Authority has complied with all of the terms and conditions of the Purchase Agreement required to be complied with by the Authority at or prior to the date of the closing; (x) No event affecting the Authority has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement or amendment thereto which event should be disclosed in the Official Statement in order to make the statements in the Official Statement, in the light of the circumstances under which they were made, not misleading (except no representation is made with respect to information relating to DTC or DTC’s book-entry system); and (xi) No event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute an event of default under the Authority Documents. (xii) Trustee’s Certificate. A certificate, dated the date of Closing, signed by a duly authorized official of Trustee satisfactory in form and substance to the Underwriter, to the effect that: (A) Trustee is duly organized and existing as a national banking association under the laws of the United States of America, having the full corporate power and authority to enter into and perform its duties under the Trustee Documents; (B) Trustee is duly authorized to enter into the Trustee Documents and has duly executed and delivered the Trustee Documents, and assuming due authorization and execution by the other parties thereto, the Trustee Documents are legal, valid and binding upon Trustee, and enforceable against Trustee in accordance with their terms; (C) Trustee has duly authenticated the Bonds under the Indenture and delivered the Bonds to or upon the order of the Underwriter; and (D) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the banking or trust powers of Trustee that has not been obtained is or will be required for the authentication and delivery of the Bonds or the consummation by Trustee of its obligations under the Trustee Documents. (xiii) Official Statement. The Official Statement and each supplement or amendment, if any, thereto, executed on behalf of the District by duly authorized officers of the District. Page 142 of 236 23 131036604.3 (xiv) Documents. An original executed copy of each of the District Documents. (xv) District Resolution. Certified copies of the District Resolution, certified by the District Clerk. (xvi) Authority Resolution. Certified copies of the Authority Resolution, certified by the Secretary or Assistant Secretary of the Authority. (xvii) Trustee Resolution. Certified copies of the general resolution of Trustee authorizing the execution and delivery of certain documents by certain officers and employees of Trustee, which resolution authorizes the execution and delivery of the Trustee Documents. (xviii) IRS Form 8038-G. Evidence that the federal tax information form 8038-G relating to the Bonds has been prepared for filing. (xix) 15c2-12 Certificates of the District and the Authority. Certificates of the District and the Authority “deeming final” the Preliminary Official Statement for purposes of Rule 15c2-12. (xx) Tax Certificate. A tax certificate in form satisfactory to Bond Counsel. (xxi) CDIAC Statements. A copy of the Notices of Sale required to be delivered to the California Debt Investment and Advisory Commission pursuant to Sections 8855(g) and 53583 of the California Government Code. (xxii) Rating. Evidence S&P that the Bonds have been assigned a rating of “___.” (xxiii) Continuing Disclosure Certificate. An executed copy of the Continuing Disclosure Certificate. (xxiv) Verification Report. A verification report from Robert Thomas CPA, LLC, Overland Park, Kansas (the “Verification Agent”) together with a letter, dated the date of Closing, from an authorized officer of said firm consenting to the inclusion in the Official Statement of references to the Verification Agent and the verification report. (xxv) DTC Letter of Representation. One copy of the executed Letter of Representation to The Depository Trust Company from the District. (xxvi) Parity Debt Certificate. A copy of the parity debt certificate prepared in accordance with the Indenture. Page 143 of 236 24 131036604.3 (xxvii) Additional Documents. Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter may reasonably request to evidence compliance (i) by the Authority or the District with legal requirements, (ii) the truth and accuracy, as of the time of Closing, of the representations of the Authority or the District herein contained, (iii) the truth and accuracy, as of the time of Closing, of the Official Statement and (iv) the due performance or satisfaction by the Authority or the District at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Authority or the District. (f) Notwithstanding anything to the contrary herein contained, if for any reason whatsoever the Bonds shall not have been delivered by the Authority to the Underwriter prior to the close of business, California Time, on the Closing Date, then the obligation to purchase Bonds hereunder shall terminate and be of no further force or effect. If the Authority or the District shall be unable to satisfy the conditions to the Underwriter’s obligations contained in this Purchase Agreement or if the Underwriter's obligations shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement may be canceled by the Underwriter at, or at any time prior to, the time of Closing. Notice of such cancellation shall be given, to the Authority and the District in writing, or by telephone or telegraph, confirmed in writing. Upon termination of this Purchase Agreement, all obligations of the Authority, the District and the Underwriter under the Purchase Agreement shall terminate, without further liability, except that the Authority, the District and the Underwriter shall pay their respective expenses as set forth in Section 10. Notwithstanding any provision herein to the contrary, the performance of any and all obligations of the Authority and the District hereunder and the performance of any and all conditions contained herein for the benefit of the Underwriter may be waived by the Underwriter in writing at its sole discretion. 10. Expenses. (a) Whether or not the Underwriter accepts delivery of and pays for the Bonds as set forth herein, it shall be under no obligation to pay, and the District shall pay or cause to be paid (out of the proceeds of the Bonds or any other legally available funds of the District) all expenses incident to the performance of the obligations of the District and the Authority hereunder, including but not limited to the cost of printing, engraving and delivering the Bonds to the Underwriter; the cost of printing, distribution and delivery of all the agreements and documents contemplated hereby (including but not limited to the Preliminary Official Statement and the Official Statement) and drafts of any thereof in reasonable quantities as requested by the Underwriter; the fees and disbursements of the Trustee, Bond Counsel, accountants, appraisers, economic consultants and any other experts or consultants retained by the District and the Authority in connection with the Bonds; CUSIP Service Bureau fees and charges; expenses (included in the expense component of the Underwriter’s spread) incurred on behalf of officers or employees of the District or the Authority which are directly related to the offering of the Bonds, including, but not limited to, meals, transportation, and lodging of those officers or Page 144 of 236 25 131036604.3 employees; and any other expenses not specifically enumerated in paragraph (b) of this section incurred in connection with the execution of the Bonds. (b) The Underwriter is required to pay fees to the California Debt and Investment Advisory Commission in connection with the offering of the Bonds. Notwithstanding that such fees are solely the legal obligation of the Underwriter, the District agrees to reimburse the Underwriter for such fees. (c) Whether or not the Bonds are delivered to the Underwriter as set forth herein, the District and the Authority shall be under no obligation to pay, and the Underwriter shall pay (included in the expense component of the Underwriter’s spread), all expenses paid or incurred to qualify the Bonds for sale under any blue sky laws; and all other expenses paid or incurred by the Underwriter in connection with its public offering and distribution of the Bonds not specifically enumerated in paragraph (a) of this section, including the fees and disbursements of its counsel and the fees of Digital Assurance Certification, L.L.C. for a continuing disclosure undertaking compliance review and fees customarily paid by the underwriters of municipal securities, such as the fees payable to the MSRB. 11. Notice. Any notice or other communication to be given to the District under this Purchase Agreement may be given by delivering the same in writing to Yorba Linda Water District, 1717 East Miraloma Avenue, Placentia, California 92870, Attention: General Manager. Any notice or other communication to be given to the Authority under this Purchase Agreement may be given by delivering the same in writing to Yorba Linda Water District Financing Authority, 1717 East Miraloma Avenue, Placentia, California 92870, Attention: President. Any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Barclays Capital Inc., 10250 Constellation Boulevard, Suite 750, Los Angeles, California 90067, Attention: Carmen Vargas, Director. 12. Entire Agreement. This Purchase Agreement, when accepted by the District, shall constitute the entire agreement between the District and the Underwriter and is made solely for the benefit of the District and the Underwriter (including the successors of the Underwriter). No other person shall acquire or have any right hereunder by virtue hereof, except as provided herein. All of the representations, warranties and agreements of the District and the Authority in this Purchase Agreement shall remain operative and in full force and effect except as otherwise provided herein, regardless of any investigations made by or on behalf of the Underwriter and shall survive the delivery of and payment for the Bonds. 13. Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall Page 145 of 236 26 131036604.3 be an original, but all such counterparts shall together constitute but one and the same instrument. 14. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof. 15. STATE LAW GOVERNS. THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS PURCHASE AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE. 16. No Assignment. The rights and obligations created by this Purchase Agreement shall not be subject to assignment by the Underwriter or the District without the prior written consent of the other party hereto. 17. Electronic Signature. Each of the parties hereto agrees that the transaction consisting of this Purchase Agreement may be conducted by electronic means. Each party agrees and acknowledges that it is such party’s intent (a) that, by signing of this Purchase Agreement using an electronic signature, it is signing, adopting and accepting this Purchase Agreement, and (b) that signing this Purchase Agreement using an electronic signature is the legal equivalent of having placed the undersigned officer’s handwritten signature on this Purchase Agreement on paper. Each party acknowledges that it is being provided with an electronic or paper copy of this Purchase Agreement in a usable format. [Remainder of page intentionally left blank.] Page 146 of 236 S-1 PURCHASE CONTRACT 131036604.3 BARCLAYS CAPITAL INC. By: Director Accepted as of the date first stated above: YORBA LINDA WATER DISTRICT FINANCING AUTHORITY By: President YORBA LINDA WATER DISTRICT By: General Manager Page 147 of 236 EXHIBIT A 131036604.3 EXHIBIT A $[PAR AMOUNT] Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A Maturity (October 1) Principal Amount Interest Rate Yield 10% Test Subject to Hold-The- Offering Price Rule $%% c Yield to optional call on October 1, _____. Page 148 of 236 EXHIBIT B 131036604.3 EXHIBIT B FORM OF ISSUE PRICE CERTIFICATE Barclays Capital Inc. (“Barclays”), has acted as the underwriter in connection with the sale and issuance by the Yorba Linda Water District Financing Authority (the “Issuer”) of its $[Par Amount] Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A (the “Bonds”), being issued on the date hereof, and the Underwriter hereby certifies and represents the following based upon the information available to it: 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 of the Bonds 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) The Underwriter 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 Bond Purchase Agreement dated [Sale Date], among the Issuer, the Yorba Linda Water District, and the Underwriter, the Underwriter 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 that are not “Hold- the-Offering-Price 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 (i.e., [Sale Date]), or (ii) the date on which the Underwriter has sold at least 10% of such Hold-the-Offering-Price Maturity to the Public at one or more prices, each of which is no higher than the Initial Offering Price for such Hold-the-Offering-Price Maturity. (d)Issuer means the Yorba Linda Water District Financing Authority. Page 149 of 236 131036604.3 (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. (g)Related Party means any entity if an Underwriter and such entity are subject, directly or indirectly, to (i) 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), (ii) more than 50% common ownership of their capital interests or profit interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other). (h)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 [Sale Date]. (i)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 the Underwriter’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. Accordingly, the Underwriter makes no representations as to the legal sufficiency of the factual matters set forth herein. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Tax Certificate and with respect to compliance with the federal income tax rules affecting Bonds, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of Internal Revenue Service Form 8038-G, and other federal income tax advice it may give to the Issuer from time to time relating to the Bonds. Except as expressly set forth above, the certifications set forth herein may not be relied upon or used by any third party or for any other purpose. Dated: July __, 2022 Page 150 of 236 131036604.3 BARCLAYS CAPITAL INC. By: Authorized Representative Page 151 of 236 131036604.3 SCHEDULE A $[PAR AMOUNT] Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A Maturity (October 1) Principal Amount Interest Rate Yield 10% Test Subject to Hold-The- Offering Price Rule $%% c Yield to optional call on October 1, _____. Page 152 of 236 131036604.3 SCHEDULE B PRICING WIRE OR EQUIVALENT COMMUNICATION (Attached.) Page 153 of 236 Stradling Yocca Carlson & Rauth Draft of 6/30/22 4878-9554-1791v3/022608-0014 PRELIMINARY OFFICIAL STATEMENT DATED JULY __, 2022 In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION” with respect to tax consequences relating to the Bonds. NEW ISSUE – BOOK-ENTRY ONLY RATING: See the caption “RATING” $_____* YORBA LINDA WATER DISTRICT FINANCING AUTHORITY REVENUE BONDS, SERIES 2022A Dated: Date of Delivery Due: October 1, as shown on inside front cover page The Bonds are being issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Individual purchases will be made in denominations of $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of the Bonds will not receive certificates representing their beneficial ownership in the Bonds but will receive credit balances on the books of their respective nominees. Interest on the Bonds is payable on April 1 and October 1 of each year, commencing April 1, 2023. Payment of the principal of and interest on the Bonds is to be made to Cede & Co., which is to disburse said payments to the Beneficial Owners of the Bonds through their nominees. The Bonds are subject to optional, mandatory sinking fund and extraordinary redemption prior to maturity, all as more fully described herein. The Bonds are being issued to provide funds: (i) to finance the acquisition and construction of certain improvements to the District’s Water System; (ii) to refund all of the currently outstanding Yorba Linda Water District Refunding Revenue Bonds, Series 2012A; (iii) to pay off amounts outstanding under a Revolving Credit Agreement with Bank of America, N.A.; and (iv) to pay costs incurred in connection with the issuance of the Bonds. The Bonds are being issued pursuant to the Indenture of Trust, dated as of July 1, 2022, by and between the Yorba Linda Water District Financing Authority and U.S. Bank Trust Company, National Association, as trustee. THE BONDS ARE A SPECIAL LIMITED OBLIGATION OF THE AUTHORITY PAYABLE SOLELY FROM AUTHORITY REVENUES, WHICH CONSIST OF SERIES 2022 INSTALLMENT PAYMENTS TO BE MADE BY THE DISTRICT TO THE AUTHORITY PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT, DATED AS OF JULY 1, 2022, BY AND BETWEEN THE DISTRICT AND THE AUTHORITY, AND FROM CERTAIN OTHER FUNDS AND ACCOUNTS HELD BY THE TRUSTEE PURSUANT TO THE INDENTURE. NEITHER THE FULL FAITH AND CREDIT NOR ANY OTHER REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO OR AVAILABLE FOR THE PAYMENT OF DEBT SERVICE ON THE BONDS. THE OBLIGATION OF THE AUTHORITY TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. The obligation of the District to make the Series 2022 Installment Payments is a special limited obligation of the District payable solely from Net Revenues of the District’s Water System on a parity with an obligation that is currently outstanding in the principal amount of $24,860,000. The District may incur additional obligations payable from Net Revenues on a parity with the obligation to pay the Series 2022 Installment Payments, subject to the terms and conditions of the Indenture, as more fully described herein. THE OBLIGATION OF THE DISTRICT TO MAKE SERIES 2022 INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT’S WATER SYSTEM AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. Neither the Installment Purchase Agreement nor the Indenture establishes a debt service reserve fund for the Bonds. ____________________________________ THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. MATURITY SCHEDULE (See inside front cover page) The Bonds are offered when, as and if issued and received by the Underwriter, subject to the approval of the valid, legal and binding nature of the Bonds by Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, and certain other conditions. Certain matters will be passed upon for the District by Kidman Gagen Law LLP, Irvine, California, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel, for the Underwriter by its counsel, Norton Rose Fulbright US LLP, and for the Trustee by its counsel. It is anticipated that the Bonds will be available for delivery through the facilities of The Depository Trust Company on or about July 28, 2022. Dated: July __, 2022 _______________________ * Preliminary; subject to change. Th i s P r e l i m i n a r y O f f i c i a l S t a t e m e n t a n d t h e i n f o r m a t i o n c o n t a i n e d h e r e i n a r e s u b j e c t t o c o m p l e t i o n o r a m e n d m e n t . T h e s e s e c u r i t i e s m a y n o t b e s o l d , n o r m a y o f f e r s t o b u y t h e m b e a c c e p t e d , p r i o r t o th e t i m e t h e O f f i c i a l S t a t e m e n t i s d e l i v e r e d i n f i n a l f o r m . U n d e r n o c i r c u m s t a n c e s s h a l l t h i s P r e l i m i n a r y O f f i c i a l S t a t e m e n t c o n s t i t u t e a n o f f e r t o s e l l o r t h e s o l i c i t a t i o n o f a n o f f e r t o b u y , n o r s h a l l t h e r e be a n y s a l e o f , t h e s e s e c u r i t i e s i n a n y j u r i s d i c t i o n i n w h i c h s u c h o f f e r , s o l i c i t a t i o n o r s a l e w o u l d b e u n l a w f u l . Page 154 of 236 4878-9554-1791v3/022608-0014 $_____* YORBA LINDA WATER DISTRICT FINANCING AUTHORITY REVENUE BONDS, SERIES 2022A MATURITY SCHEDULE BASE CUSIP†† 98618F $_____ Serial Bonds Maturity (October 1) Principal Amount Interest Rate Yield Price CUSIP† 20__$ % % $_____ ___% Term Bonds Due October 1, 20__, Yield: ____%, Price: _____, CUSIP† ____ _______________________ * Preliminary; subject to change. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright© 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 District, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers. Page 155 of 236 4878-9554-1791v3/022608-0014 YORBA LINDA WATER DISTRICT FINANCING AUTHORITY BOARD OF DIRECTORS J. Wayne Miller, Ph.D, Chair Brooke Jones, Vice Chair Trudy Kew DesRoches, Director Phil Hawkins, Director Tom Lindsey, Director YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS J. Wayne Miller, Ph.D, President Brooke Jones, Vice President Trudy Kew DesRoches, Director Phil Hawkins, Director Tom Lindsey, Director STAFF Douglass S. Davert, Interim General Manager Delia Lugo, Finance Manager SPECIAL SERVICES General Counsel Kidman Gagen Law LLP Irvine, California Bond Counsel and Disclosure Counsel Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California Trustee U.S. Bank Trust Company, National Association Los Angeles, California Municipal Advisor Fieldman, Rolapp & Associates, Inc. Irvine, California Verification Agent Robert Thomas CPA, LLC Overland Park, Kansas Page 156 of 236 4878-9554-1791v3/022608-0014 No dealer, broker, salesperson or other person has been authorized by the District or the Authority to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the District or the Authority. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. This Official Statement and the information contained herein are subject to completion or amendment without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or the Authority or any other parties described herein since the date hereof. These securities may not be sold nor may an offer to buy be accepted prior to the time the Official Statement is delivered in final form. This Official Statement is being submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the District. All summaries of documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget,” “intend” or similar words. Such forward-looking statements include, but are not limited to, certain statements contained under the captions “YORBA LINDA WATER DISTRICT,” “WATER SUPPLY,” “THE WATER SYSTEM” and “WATER SYSTEM FINANCIAL INFORMATION.” THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS, DEALER BANKS, BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF, AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT, AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. The District maintains a website and certain social media accounts; however, information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. Page 157 of 236 TABLE OF CONTENTS Page i 4878-9554-1791v3/022608-0014 INTRODUCTION..................................................................................................................................................1 THE 2022 PROJECT.............................................................................................................................................2 REFUNDING PLAN.............................................................................................................................................2 2012 Bonds......................................................................................................................................................2 Line of Credit..................................................................................................................................................3 ESTIMATED SOURCES AND USES OF FUNDS .............................................................................................3 THE BONDS .........................................................................................................................................................3 General Provisions ..........................................................................................................................................3 Book-Entry Only System................................................................................................................................4 Transfers and Exchanges Upon Termination of Book-Entry Only System....................................................4 Redemption .....................................................................................................................................................5 Selection of Bonds for Redemption................................................................................................................5 Notice of Redemption .....................................................................................................................................6 Effect of Redemption......................................................................................................................................6 DEBT SERVICE SCHEDULE..............................................................................................................................7 SECURITY FOR THE BONDS............................................................................................................................7 General............................................................................................................................................................7 Series 2022 Installment Payments Payable From Net Revenues....................................................................8 Rate Covenant.................................................................................................................................................9 No Reserve Fund.............................................................................................................................................9 Additional Parity Bonds and Contracts...........................................................................................................9 Rate Stabilization Fund.................................................................................................................................10 YORBA LINDA WATER DISTRICT................................................................................................................11 General..........................................................................................................................................................11 Land and Land Use .......................................................................................................................................12 Governance and Management.......................................................................................................................12 Management Policies ....................................................................................................................................13 Employees and Employee Benefits...............................................................................................................14 Budget Process..............................................................................................................................................23 District Insurance ..........................................................................................................................................23 Outstanding Obligations................................................................................................................................24 Ad Valorem Tax Revenues...........................................................................................................................24 COVID-19 Outbreak.....................................................................................................................................27 WATER SUPPLY................................................................................................................................................30 General..........................................................................................................................................................30 Historical and Projected Water Supply.........................................................................................................34 Drought Proclamations..................................................................................................................................35 THE WATER SYSTEM......................................................................................................................................38 General..........................................................................................................................................................38 PFAS Treatment Plant...................................................................................................................................38 Historical Water Connections .......................................................................................................................41 Historical Water Deliveries...........................................................................................................................42 Historical Water Sales Revenues ..................................................................................................................42 Largest Customers.........................................................................................................................................43 Page 158 of 236 TABLE OF CONTENTS (continued) Page -ii- 4878-9554-1791v3/022608-0014 Water System Rates and Charges..................................................................................................................43 Collection Procedures ...................................................................................................................................45 Projected Water Connections........................................................................................................................46 Projected Water Deliveries............................................................................................................................46 Projected Water Sales Revenues...................................................................................................................46 Future Water System Improvements.............................................................................................................47 WATER SYSTEM FINANCIAL INFORMATION...........................................................................................47 Financial Statements .....................................................................................................................................47 Investment of District Funds.........................................................................................................................48 Historical Operating Results and Debt Service Coverage.............................................................................49 Projected Operating Results and Debt Service Coverage.............................................................................49 CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES .........................................51 Article XIIIB.................................................................................................................................................51 Proposition 218 .............................................................................................................................................51 Future Initiatives ...........................................................................................................................................53 CERTAIN RISKS TO BONDHOLDERS...........................................................................................................53 Limited Obligations.......................................................................................................................................54 Accuracy of Assumptions .............................................................................................................................54 System Demand.............................................................................................................................................54 System Expenses...........................................................................................................................................54 Limited Recourse on Default ........................................................................................................................55 Rate-Setting Process under Proposition 218.................................................................................................55 Statutory and Regulatory Compliance ..........................................................................................................55 Natural Disasters...........................................................................................................................................55 Climate Change.............................................................................................................................................56 Cyber Security...............................................................................................................................................56 Rate Covenant Not a Guarantee....................................................................................................................56 Limitations on Remedies...............................................................................................................................57 Loss of Tax Exemption.................................................................................................................................57 Secondary Market .........................................................................................................................................57 Parity Obligations..........................................................................................................................................58 THE AUTHORITY..............................................................................................................................................58 APPROVAL OF LEGAL PROCEEDINGS........................................................................................................58 LITIGATION.......................................................................................................................................................58 District...........................................................................................................................................................58 Authority .......................................................................................................................................................58 TAX EXEMPTION .............................................................................................................................................59 CONTINUING DISCLOSURE...........................................................................................................................60 RATING...............................................................................................................................................................61 MUNICIPAL ADVISOR.....................................................................................................................................61 UNDERWRITING...............................................................................................................................................62 Page 159 of 236 TABLE OF CONTENTS (continued) Page -iii- 4878-9554-1791v3/022608-0014 FINANCIAL INTERESTS..................................................................................................................................62 MISCELLANEOUS ............................................................................................................................................63 APPENDIX A - DISTRICT FINANCIAL STATEMENTS.............................................................................A-1 APPENDIX B - DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE ..........................B-1 APPENDIX C - FORM OF OPINION OF BOND COUNSEL........................................................................C-1 APPENDIX D - INFORMATION CONCERNING DTC................................................................................D-1 APPENDIX E - FORM OF CONTINUING DISCLOSURE CERTIFICATE.................................................E-1 Page 160 of 236 -i- 4878-9554-1791v3/022608-0014 SUMMARY STATEMENT This Summary Statement is subject in all respects to the more complete information contained in this Official Statement, and the offering of the Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms that are used and not otherwise defined in this Summary Statement have the meanings ascribed to them in this Official Statement. Purpose. The Bonds are being issued to provide funds: (i) to finance the acquisition and construction of certain improvements to the District’s Water System, as described under the caption “THE 2022 Project;” (ii) to refund all of the currently outstanding Yorba Linda Water District Refunding Revenue Bonds, Series 2012A, as described under the caption “REFUNDING PLAN—2012 Bonds;” (iii) to pay off amounts outstanding under a Revolving Credit Agreement with Bank of America, N.A., as described under the caption “REFUNDING PLAN—Line of Credit;” and (iv) to pay costs incurred in connection with the issuance of the Bonds. See the caption “ESTIMATED SOURCES AND USES OF FUNDS.” Security for the Bonds. The Bonds are a special limited obligation of the Authority payable solely from Authority Revenues, which consist of Series 2022 Installment Payments to be made by the District to the Authority pursuant to the Installment Purchase Agreement, and from amounts on deposit in certain funds and accounts established by the Indenture. Neither the full faith and credit nor any other revenues or funds of the Authority are pledged to or available for the payment of debt service on the Bonds. THE OBLIGATION OF THE AUTHORITY TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE AUTHORITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. The obligation of the District to make Series 2022 Installment Payments is a special limited obligation of the District payable solely from Net Revenues of the District’s Water System, which consist of Revenues of the District’s Water System remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, on a parity with an obligation that is currently outstanding in the principal amount of $24,860,000. See the captions “SECURITY FOR THE BONDS” and “YORBA LINDA WATER DISTRICT— Outstanding Obligations.” The obligation of the District to make the Series 2022 Installment Payments under the Installment Purchase Agreement is absolute and unconditional, and until such time as all payments required thereunder have been paid in full (or provision for the payment thereof has been made as provided for in the Installment Purchase Agreement), the District will not discontinue or suspend any Series 2022 Installment Payments required to be made by it under the Installment Purchase Agreement when due, whether or not the Water System or any part thereof is operating or operable, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and whether or not the 2022 Project has been completed, and such payments will not be subject to reduction whether by offset or otherwise and will not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever. THE OBLIGATION OF THE DISTRICT TO MAKE SERIES 2022 INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. Page 161 of 236 -ii- 4878-9554-1791v3/022608-0014 Rate Covenant. In any Fiscal Year in which the amount on deposit in the Rate Stabilization Fund on the first day of such Fiscal Year is less than the Series 2022 Installment Payments payable in such Fiscal Year, to the fullest extent permitted by law, the District will fix and prescribe, at the commencement of each such Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of such Fiscal Year, to be at least sufficient to yield during such Fiscal Year Net Revenues equal to 125% of Debt Service for such Fiscal Year. When calculated for the foregoing purposes, Net Revenues do not include amounts transferred from the Rate Stabilization Fund pursuant to the Installment Purchase Agreement that are in excess of 25% of Debt Service for such Fiscal Year. In any Fiscal Year in which the amount on deposit in the Rate Stabilization Fund on the first day of such Fiscal Year is at least equal to the Series 2022 Installment Payments payable in such Fiscal Year, to the fullest extent permitted by law, the District will fix and prescribe, at the commencement of each such Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of such Fiscal Year, to be at least sufficient to yield during such Fiscal Year Revenues equal to 125% of the sum of Operating and Maintenance Costs and Non-Operating and Maintenance Costs for such Fiscal Year. When calculated for the foregoing purposes, Revenues do not include any amounts transferred from the Rate Stabilization Fund pursuant to the Installment Purchase Agreement. See the caption “SECURITY FOR THE BONDS—Rate Covenant.” Additional Indebtedness. The Installment Purchase Agreement does not permit the District to make any additional pledge of, or to place any additional lien, on the Revenues, or any portion thereof, which is senior to the pledge and lien securing the payment of the Series 2022 Installment Payments. The Installment Purchase Agreement does permit the District to incur Parity Bonds and Contracts payable on a parity with the Series 2022 Installment Payments provided that certain conditions are satisfied as described herein. Nothing in the Installment Purchase Agreement precludes the District from entering into obligations which are Operating and Maintenance Costs and, therefore, payable from Revenues prior to the Series 2022 Installment Payments, or from issuing any bonds or executing any contracts the payments under which are payable from Net Revenues on a subordinate basis to Parity Bonds and Contracts of the District. See the caption “SECURITY FOR THE BONDS—Additional Parity Bonds and Contracts.” Redemption. The Bonds are subject to optional, mandatory sinking fund and extraordinary redemption prior to maturity. See the caption “THE BONDS—Redemption.” The District. The District was established in 1959 as a county water district under the County Water District Law, Division 12 of the Water Code of the State of California, as the successor to a private water company that was incorporated in or about 1909, for purposes of supplying water for domestic, irrigation, sanitation, industrial, commercial, recreation and fire suppression use. The District is located in the northeastern portion of Orange County approximately 35 miles southeast of downtown Los Angeles and 11 miles north of Santa Ana, the county seat of the County. The District includes approximately 14,475 acres of land comprising 22.6 square miles. The District serves a population of approximately 81,000 and provided water service to approximately [25,440 residential, commercial, irrigation and other connections as of May 31], 2022. Residential connections comprised approximately 93% of the District’s total connections in Fiscal Year 2022. The District’s service area includes most of the City of Yorba Linda and portions of the cities of Anaheim, Brea and Placentia, as well as certain unincorporated areas of the County. The service area of the District is bounded by the City of Placentia on the west, the City of Brea on the northwest, the City of Anaheim on the south, the County/San Bernardino County line on the east and the Chino Hills State Park on the north. See the caption “YORBA LINDA WATER DISTRICT.” The District currently has two primary sources of water: (i) groundwater pumped from local wells; and (ii) imported water purchased from the Municipal Water District of Orange County delivered from The Metropolitan Water District of Southern California. See the caption “WATER SUPPLY.” Page 162 of 236 -1- 4878-9554-1791v3/022608-0014 $_____* YORBA LINDA WATER DISTRICT FINANCING AUTHORITY REVENUE BONDS, SERIES 2022A INTRODUCTION This Official Statement, including the front cover page, the inside front cover page and the appendices, provides certain information concerning the sale and delivery of the Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A (the “Bonds”). Descriptions and summaries of various documents that are set forth in this Official Statement do not purport to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each such document. Capitalized terms that are used and not otherwise defined in this Official Statement have the meanings which are ascribed thereto in Appendix B. The Bonds are being issued pursuant to an Indenture of Trust, dated as of July 1, 2022 (the “Indenture”), by and between the Yorba Linda Water District Financing Authority (the “Authority”) and U.S. Bank Trust Company, National Association, Los Angeles, California, as trustee (the “Trustee”). The Bonds are limited obligations of the Authority payable solely from Authority Revenues, which consist of payments (the “Series 2022 Installment Payments”) to be made by the Yorba Linda Water District (the “District”) to the Authority pursuant to an Installment Purchase Agreement, dated as of July 1, 2022 (the “Installment Purchase Agreement”), by and between the District and the Authority, and from amounts on deposit in certain funds and accounts established by the Indenture. The obligation of the District to make Series 2022 Installment Payments is a special limited obligation of the District payable solely from Net Revenues of the District’s Water System (as further described in the following sentence), which consist of Revenues of the District’s Water System remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, on a parity with the District’s obligation to make payments under the Installment Purchase Agreement, dated as of May 1, 2017 (the “2017 IPA”), by and between the District and the Authority, which is currently outstanding in the principal amount of $24,860,000. The obligation of the District to make Series 2022 Installment Payments is payable first from Ad Valorem Tax Revenues remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, if any, and, to the extent that such amounts are insufficient, next from other Net Revenues of the District’s Water System. See the captions “SECURITY FOR THE BONDS” and “YORBA LINDA WATER DISTRICT—Outstanding Obligations.” The Bonds are being issued to provide funds: (i) to finance the acquisition and construction of certain improvements to the District’s Water System (the “2022 Project”), as described under the caption “THE 2022 PROJECT;” (ii) to refund all of the currently outstanding Yorba Linda Water District Refunding Revenue Bonds, Series 2012A (the “2012 Bonds”), as described under the caption “REFUNDING PLAN—2012 Bonds;” (iii) to pay off amounts outstanding under a Revolving Credit Agreement with Bank of America, N.A. (the “Line of Credit”), as described under the caption “REFUNDING PLAN—Line of Credit;” and (iv) to pay costs incurred in connection with the issuance of the Bonds. See the caption “ESTIMATED SOURCES AND USES OF FUNDS.” The District regularly prepares a variety of reports, including audits, budgets and related documents. Any Bond Owner may obtain a copy of such report, as available, from the District. The District has also undertaken to provide annual reports to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (“EMMA”) pursuant to a continuing disclosure certificate. See the caption “CONTINUING DISCLOSURE” and Appendix E. _______________________ * Preliminary; subject to change. Page 163 of 236 -2- 4878-9554-1791v3/022608-0014 THE 2022 PROJECT The 2022 Project consists of the following capital improvements: 2022 Project Component Capital Cost Hidden Hills Booster Pump Station Upgrades $ 1,407,603 Timber Ridge Booster Pump Station Pump Replacement 5,599,400 Well 22 Equipping 1,901,208 Railroad Crossings 2,110,212 Resiliency Improvements to District Facilities 1,045,000 Site and Security Upgrades to District Facilities 1,045,000 Well Rehabilitation Project 660,000 Lakeview Booster Pump Station Piping 330,000 Waterline Replacements 6,517,600 PRS Rehabilitation 4,763,100 Golden Avenue Waterline 266,805 Santiago Booster Pump Station Rehabilitation 1,819,070 Well 23 Drilling and Equipping 4,439,900 Total Cost $31,904,898 The District expects to comply with all governmental approval, public bidding and other permitting requirements for each component of the 2022 Project as required by law and to complete the 2022 Project by mid-2025. Pursuant to the Installment Purchase Agreement, the District may substitute or add additional projects to the Project. See Appendix B under the caption “INSTALLMENT PURCHASE AGREEMENT—Acquisition and Construction of Projects—Changes to the 2022 Project.” REFUNDING PLAN 2012 Bonds The District issued the 2012 Bonds, which are currently outstanding in the aggregate principal amount of $5,630,000, pursuant to an Indenture of Trust, dated as of August 1, 2012 (the “2012 Indenture”), by and between the District and U.S. Bank Trust Company, National Association, as successor trustee (the “2012 Trustee”). The 2012 Bonds are payable from Net Revenues of the Water System on a parity with the obligation of the District to make payments under the 2017 IPA. The District plans to apply a portion of the proceeds of the Bonds to refund the 2012 Bonds in full. Under an Escrow Agreement (2012 Bonds), dated as of July 1, 2022 (the “2012 Escrow Agreement”), by and between the District and the 2012 Trustee, the District cause a portion of the proceeds of the Bonds, together with amounts on deposit for the 2012 Bonds and moneys contributed by the District, to be delivered to the 2012 Trustee for deposit in the escrow fund established under the 2012 Escrow Agreement (the “2012 Escrow Fund”). The 2012 Trustee will invest a portion of the amounts deposited in the 2012 Escrow Fund in Federal Securities as described in the 2012 Escrow Agreement. From the maturing principal of the Federal Securities and related investment income and other moneys on deposit in the 2012 Escrow Fund, the 2012 Trustee will pay on October 1, 2022 the principal of the 2012 Bonds maturing on and after October 1, 2022, plus interest accrued to such date, without premium. Assuming the accuracy of such computations, as a result of the deposit and application of funds as provided in the 2012 Escrow Agreement, the 2012 Bonds will be defeased pursuant to the provisions of the 2012 Indenture as of the date of issuance of the Bonds. Upon issuance of the Bonds Robert Thomas CPA, LLC, Overland Park, Kansas (the “Verification Agent”) will deliver a report on the mathematical accuracy of certain Page 164 of 236 -3- 4878-9554-1791v3/022608-0014 computations based upon certain information and assertions provided to it by the Underwriter relating to: (a) the adequacy of the maturing principal of and interest on the Federal Securities to pay the redemption price of the 2012 Bonds on October 1, 2022; and (b) the computations of yield on the Bonds and the Federal Securities which support Bond Counsel’s opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes. The amounts held and invested by the 2012 Trustee in the 2012 Escrow Fund are pledged solely to the payment of the 2012 Bonds. Neither the funds deposited in the 2012 Escrow Fund nor the interest on the invested funds will be available for the payments of principal of and interest on the Bonds. Line of Credit In 2020, the District entered into the Line of Credit with Bank of America, N.A., pursuant to which the District may borrow, repay and re-borrow funds on a revolving basis up to the amount of $20,000,000 outstanding at any one time. The Line of Credit terminates on May 12, 2023. Currently, approximately $5,743,751 is outstanding under the Line of Credit. Amounts borrowed under the Line of Credit are payable from Net Revenues of the Water System on a subordinate basis to the Bonds and the payments under the 2017 IPA. The District plans to apply a portion of the proceeds of the Bonds to pay off all amounts that are currently outstanding under the Line of Credit. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds in connection with the issuance of the Bonds: Sources(1) Principal Amount of Bonds $ Plus/Less Net Original Issue Premium/Discount Transferred Moneys(2) Total Sources $ Uses(1) Deposit to Acquisition Fund $ Deposit to 2012 Escrow Fund Transfer to Bank of America, N.A. to pay Line of Credit Costs of Issuance(3) Total Uses $ (1)Amounts rounded to the nearest dollar. Totals may not add due to rounding. (2)Reflects moneys transferred from funds and accounts established in connection with the 2012 Bonds. (3)Includes certain legal, municipal advisory, financing, rating agency, Verification Agent and Trustee fees, Underwriter’s discount and printing costs. THE BONDS General Provisions The Bonds will bear interest from and be dated the date of initial issuance, and will be payable upon maturity on the dates set forth on the inside front cover page hereof. Interest on the Bonds will be payable on April 1 and October 1 of each year, commencing April 1, 2023. Interest will be calculated at the rates set forth on the inside front cover page hereof and on the basis of a year of 360 days comprised of twelve 30 day months. The Bonds will be delivered only in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC Page 165 of 236 -4- 4878-9554-1791v3/022608-0014 will act as securities depository for the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only in denominations of $5,000 or any integral multiple thereof. See the caption “—Book-Entry Only System” and Appendix D. In the event that the book-entry only system that is described below is discontinued, the principal of and interest on any Bond will be payable by check or draft of the Trustee upon presentation and surrender thereof at maturity or upon prior redemption at the Office of the Trustee in Los Angeles, California. Such principal and interest will be payable in lawful money of the United States of America. Book-Entry Only System One fully-registered Bond will be issued for each maturity of the Bonds in the principal amount of the Bonds of such maturity. It will be registered in the name of Cede & Co. and will be deposited with DTC. As long as the ownership of the Bonds is registered in the name of Cede & Co., the term “Owner” as used in this Official Statement will refer to Cede & Co. and not to the actual purchasers of the Bonds (the “Beneficial Owners”). The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, the Bonds will be printed and delivered and will be governed by the provisions of the Indenture with respect to payment of principal and interest and rights of exchange and transfer. The Authority cannot and does not give any assurances that DTC participants or others will distribute payments with respect to the Bonds received by DTC or its nominee as the registered Owner, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will service and act in the manner described in this Official Statement. See Appendix D for additional information concerning DTC. Transfers and Exchanges Upon Termination of Book-Entry Only System In the event that the book-entry system described above is discontinued, the Bonds will be printed and delivered as provided in the Indenture. Thereafter, any Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond at the Office of the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. The Trustee is not required to register the transfer of any Bond during the period in which the Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. Whenever any Bond is surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver a new Bond or Bonds of authorized denomination or denominations for a like series and aggregate principal amount of the same maturity. The Trustee will require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of Bonds, the Trustee will cancel and destroy the Bonds it has received. Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor will provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Section 6045 of the Internal Revenue Code of 1986, as amended (the “Code”). The Trustee will conclusively rely on the information provided to it and has no responsibility to verify or ensure the accuracy of such information. Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of other authorized denominations of the same series and maturity. The Trustee is not required to exchange any Bond Page 166 of 236 -5- 4878-9554-1791v3/022608-0014 during the period in which the Trustee is selecting Bonds for redemption and any Bond that has been selected for redemption. The Trustee will require the Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of Bonds, the Trustee will cancel and destroy the Bonds it has received. Redemption Optional Redemption. The Bonds with stated maturities on or after October 1, 20__, are subject to redemption prior to their respective stated maturities, as a whole or in part as directed by the Authority in a Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) and by lot within each maturity in integral multiples of $5,000, on _____ 1, 20__ or any date thereafter at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. The Bonds with stated maturities on October 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on October 1, 20__ and each October 1 thereafter, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Redemption Date (October 1) Principal Amount 20__$ 20__ 20__ 20__* * Maturity. Extraordinary Redemption from Net Proceeds of Condemnation or Insurance. The Bonds are subject to extraordinary redemption prior to their respective stated maturities, as a whole or in part on any date in the order of maturity and within maturities as directed by the Authority in a Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) prior to such date in integral multiples of $5,000 from Net Proceeds, upon the terms and conditions of, and as provided for in, the Installment Purchase Agreement, at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. Partial Redemption of Bonds. Upon surrender of any Bond redeemed in part only, the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered and of the same series, interest rate and maturity. Selection of Bonds for Redemption Whenever provision is made in the Indenture for the redemption of less than all of the Bonds, the Trustee will select the Bonds for redemption as a whole or in part on any date as directed by the Authority and by lot within each maturity in integral multiples of $5,000 in accordance with the provisions set forth above under the caption “—Redemption.” The Trustee will promptly notify the Authority in writing of the numbers of the Bonds or portions thereof so selected for redemption. Page 167 of 236 -6- 4878-9554-1791v3/022608-0014 Notice of Redemption Notice of redemption will be mailed by first class mail not less than 20 days before any Redemption Date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services. Each notice of redemption will state the date of notice, the redemption date, the place or places of redemption, the Redemption Price, will designate the maturities, CUSIP numbers, if any, and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice will also state that on the redemption date there will become due and payable on each of said Bonds or parts thereof designated for redemption the Redemption Price thereof or of said specified portion of the principal thereof in the case of a Bond to be redeemed in part only, together with, interest accrued thereon to the redemption date, and that (provided that moneys for redemption have been deposited with the Trustee) from and after such redemption date interest thereon ceases to accrue, and will require that such Bonds be then surrendered to the Trustee. Neither the failure to receive such notice nor any defect in the notice or the mailing thereof will affect the validity of the redemption of any Bond. Notice of redemption of Bonds will be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority. With respect to any notice of optional redemption of Bonds, such notice may state that such redemption will be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds to be redeemed and that, if such moneys have not been so received, said notice will be of no force and effect and the Trustee will not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. Effect of Redemption Notice of redemption having been duly given as described above under the caption “—Notice of Redemption,” and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption will become due and payable, interest on the Bonds so called for redemption will cease to accrue, said Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. The Trustee will, upon surrender for payment of any of the Bonds to be redeemed on their Redemption Dates, pay such Bonds at the Redemption Price. All Bonds redeemed pursuant to the provisions of the Indenture will be canceled upon surrender thereof. Page 168 of 236 -7- 4878-9554-1791v3/022608-0014 DEBT SERVICE SCHEDULE Set forth below is a schedule of Series 2022 Installment Payments and payments on the 2017 IPA for each annual period ending on June 30 the years indicated. See the caption “YORBA LINDA WATER DISTRICT—Outstanding Obligations” for further information with respect to the 2012A Bonds. Series 2022 Installment Payments Period Ending June 30 Principal Interest Total 2017 IPA Payments(1) Total Series 2022 Installment Payments and 2017 IPA Payments 2023(2)$$ -$$ 2,139,293.76 $ 2024 2,143,418.76 2025 2,139,918.76 2026 2,133,918.76 2027 2,135,168.76 2028 2,133,418.76 2029 2,128,668.76 2030 2,126,393.76 2031 2,128,718.76 2032 2,124,171.88 2033 2,124,650.00 2034 2,115,900.00 2035 2,113,400.00 2036 2,116,900.00 2037 2,116,150.00 2038 2,110,925.00 2039 2,106,100.00 2040 - 2041 - 2042 - 2043 - 2044 - 2045 - 2046 - 2047 - 2048 - 2049 - 2050 - 2051 - 2052 - 2053 - Total $ $$$36,137,115.72 $ (1)See the caption “YORBA LINDA WATER DISTRICT—Outstanding Obligations.” (2)Excludes payments with respect to the 2012 Bonds, which are being refunded from proceeds of the Bonds. See the caption “REFUNDING PLAN—2012 Bonds.” Source: Underwriter. SECURITY FOR THE BONDS General Each Bond is a special limited obligation of the Authority payable solely from Authority Revenues, which consist of Series 2022 Installment Payments to be made by the District under the Installment Purchase Agreement, and from certain other funds and accounts established pursuant to the Indenture. NEITHER THE FULL FAITH AND CREDIT NOR ANY OTHER REVENUES OR FUNDS OF THE AUTHORITY ARE PLEDGED TO OR AVAILABLE FOR THE PAYMENT OF DEBT SERVICE ON THE BONDS. THE OBLIGATION OF THE AUTHORITY TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON THE BONDS DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE AUTHORITY IS OBLIGATED Page 169 of 236 -8- 4878-9554-1791v3/022608-0014 TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. The Authority has assigned substantially all of its right, title and interest in the Installment Purchase Agreement to the Trustee pursuant to the Indenture, for the benefit of the Owners of the Bonds, including its right to receive Series 2022 Installment Payments and its rights as may be necessary to enforce payment of the Series 2022 Installment Payments when due. Series 2022 Installment Payments Payable From Net Revenues All of the Authority Revenues and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account established pursuant to the Indenture (except the Rebate Fund) have been irrevocably pledged to secure the payment of the principal of and interest, and the premium, if any, on the Bonds in accordance with their terms and the provisions of the Indenture, subject only to the provisions of the Indenture permitting the terms and conditions set forth therein. Such pledge constitutes a lien on and security interest in such amounts and will attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act and will be valid and binding against all parties having claims of any kind in tort, contract or otherwise against the Authority, irrespective of whether such parties have notice hereof. The obligation of the District to pay the Series 2022 Installment Payments is payable solely from Net Revenues of the District’s Water System (as further described in the following sentence) on a parity with the District’s obligation to make payments under the 2017 IPA, which is currently outstanding in the principal amount of $24,860,000. See the caption “YORBA LINDA WATER DISTRICT—Outstanding Obligations” for a discussion of the 2017 IPA. The obligation of the District to pay the Series 2022 Installment Payments is payable first from Ad Valorem Tax Revenues remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, if any, and, to the extent that such amounts are insufficient, next from other Net Revenues of the District’s Water System. All Revenues (as such term is defined in Appendix B under the caption “INSTALLMENT PURCHASE AGREEMENT—Definitions”) of the District’s Water System and all amounts on deposit in the Revenue Fund have been irrevocably pledged to the payment of the Series 2022 Installment Payments as provided in the Installment Purchase Agreement. The Revenues will not be used for any other purpose while any of the Series 2022 Installment Payments remain unpaid; provided that out of the Revenues there may be apportioned such sums for such purposes as are expressly permitted in the Installment Purchase Agreement, including but not limited to the payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs of the Water System. Such pledge, together with the pledge created by all other Bonds and Contracts (as such terms are defined in Appendix B under the caption “INSTALLMENT PURCHASE AGREEMENT—Definitions” and referred to in the forepart of this Official Statement as “Parity Bonds and Contracts” or “Parity Bonds or Contracts,” as applicable), constitutes a lien on Revenues and, subject to application of Revenues and all amounts on deposit in the Revenue Fund as permitted in the Installment Purchase Agreement, the Revenue Fund and other funds and accounts created thereunder for the payment of the Series 2022 Installment Payments and all other Parity Bonds and Contracts in accordance with the terms thereof and of the Indenture. Notwithstanding anything contained in the Installment Purchase Agreement, the District is not required to advance any moneys derived from any source of income other than the Revenues and the Revenue Fund for the payment of amounts due under the Installment Purchase Agreement or for the performance of any agreements or covenants required to be performed by it contained therein. The District may, however, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the District for such purpose. THE OBLIGATION OF THE DISTRICT TO MAKE SERIES 2022 INSTALLMENT PAYMENTS PURSUANT TO THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF Page 170 of 236 -9- 4878-9554-1791v3/022608-0014 TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS IS A SPECIAL LIMITED OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT’S WATER SYSTEM AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. Rate Covenant In any Fiscal Year in which the amount on deposit in the Rate Stabilization Fund on the first day of such Fiscal Year is less than the Series 2022 Installment Payments payable in such Fiscal Year, to the fullest extent permitted by law, the District will fix and prescribe, at the commencement of each such Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of such Fiscal Year, to be at least sufficient to yield during such Fiscal Year Net Revenues equal to 125% of Debt Service for such Fiscal Year. When calculated for the foregoing purposes, Net Revenues do not include amounts transferred from the Rate Stabilization Fund pursuant to the Installment Purchase Agreement that are in excess of 25% of Debt Service for such Fiscal Year. In any Fiscal Year in which the amount on deposit in the Rate Stabilization Fund on the first day of such Fiscal Year is at least equal to the Series 2022 Installment Payments payable in such Fiscal Year, to the fullest extent permitted by law, the District will fix and prescribe, at the commencement of each such Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of such Fiscal Year, to be at least sufficient to yield during such Fiscal Year Revenues equal to 125% of the sum of Operating and Maintenance Costs and Non-Operating and Maintenance Costs for such Fiscal Year. When calculated for the foregoing purposes, Revenues do not include any amounts transferred from the Rate Stabilization Fund pursuant to the Installment Purchase Agreement. The District may make, or permit to be made, adjustments from time to time in such rates, fees and charges and may make, or permit to be made, such classification thereof as it deems necessary, but may not reduce or permit to be reduced such rates, fees and charges below those then in effect, unless the Revenues from such reduced rates, fees and charges will at all times be sufficient to meet the foregoing requirements. So long as the District has complied with its obligations set forth in the preceding paragraphs, the failure of Net Revenues to meet the threshold set forth the preceding paragraphs will not constitute a default or an Event of Default under the Installment Purchase Agreement or the Indenture. No Reserve Fund Neither the Installment Purchase Agreement nor the Indenture establishes a debt service reserve fund for the Bonds. Additional Parity Bonds and Contracts The District may at any time issue or execute any Parity Bonds or Contracts, as the case may be, payable from Net Revenues on a parity with the Installment Purchase Agreement and secured by a pledge of and lien on Revenues as described in the Installment Purchase Agreement, provided that: (a) The Net Revenues for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of, or the date of the execution of, such Parity Bonds or Contract, as the case may be, as evidenced by a special report prepared by an Independent Certified Public Accountant or Independent Financial Consultant on file with the District, produce a sum equal to at least 125% of the Debt Service for such twelve month period. When calculated for the foregoing purposes, Net Revenues do not include amounts Page 171 of 236 -10- 4878-9554-1791v3/022608-0014 transferred from the Rate Stabilization Fund to the Revenue Fund pursuant to the Installment Purchase Agreement that are in excess of 25% of Debt Service for such Fiscal Year; and (b) The Net Revenues for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of, or the date of the execution of, such Parity Bonds or Contract, as the case may be, including adjustments to give effect as of the first day of such twelve month period to increases or decreases in rates and charges for the Water Service approved and in effect as of the date of calculation, as evidenced by a special report prepared by an Independent Certified Public Accountant or Independent Financial Consultant on file with the District, produce a sum equal to at least: (i) 125% of the Debt Service for such twelve month period; plus (ii) the Debt Service which would have accrued on any Parity Bonds and Contracts issued or executed since the end of such twelve month period, assuming that such Parity Bonds and Contracts had been issued at the beginning of such twelve month period; plus (iii) the Debt Service which would have accrued had such proposed additional Parity Bonds or Contract been executed issued at the beginning of such twelve month period. When calculated for the foregoing purposes, Net Revenues do not include amounts transferred from the Rate Stabilization Fund to the Revenue Fund pursuant the Installment Purchase Agreement that are in excess of 25% of Debt Service for such Fiscal Year; and (c) The estimated Net Revenues for the then current Fiscal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted Project to be financed from proceeds of such Parity Bonds or Contract, as evidenced by a certificate of the General Manager of the District on file with the District, including (after giving effect to the completion of all such uncompleted Projects) an allowance for estimated Net Revenues for each of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be fixed, prescribed or received for Water Service and which are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by a certificate of the Manager on file with the District, produce a sum equal to at least 125% of the estimated Debt Service for each of such Fiscal Years, after giving effect to the issuance or execution, as applicable, of all Parity Bonds and Contracts estimated to be required to be executed or issued to pay the costs of completing all uncompleted Projects within such Fiscal Years, assuming that all such Parity Bonds and Contract have maturities, interest rates and proportionate principal repayment provisions similar to the Parity Bonds or Contracts last issued or executed or then being executed or issued, as applicable, for the purpose of acquiring and constructing any of such uncompleted Projects. Notwithstanding the foregoing, Parity Bonds or Contracts issued or executed to refund Parity Bonds or Contracts may be delivered without satisfying the conditions set forth above if Debt Service in each Fiscal Year after the Fiscal Year in which such Parity Bonds or Contracts are issued or executed, as applicable, is not greater than Debt Service would have been in each such Fiscal Year prior to the issuance or execution of such Parity Bonds or Contracts. Rate Stabilization Fund The District has established a special fund designated as the “Rate Stabilization Fund” which is held by the District in trust under the Installment Purchase Agreement, and in which $[4,245,917] is held as of June 30, 2022. The District has agreed and covenanted to maintain and to hold such fund separate and apart from other funds so long as any Parity Bonds or Contracts remain unpaid. Money transferred by the District from the Revenue Fund to the Rate Stabilization Fund in accordance the Installment Purchase Agreement will be held in the Rate Stabilization Fund and applied in accordance with the Installment Purchase Agreement. The District may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund and transfer such amounts to the Revenue Fund for application in accordance with the Installment Purchase Agreement or, in the event that all or a portion of the Series 2022 Installment Payments are discharged in accordance with the Installment Purchase Agreement, transfer all or any portion of such amounts for application in accordance with the Installment Purchase Agreement. Any such amounts transferred from the Rate Page 172 of 236 -11- 4878-9554-1791v3/022608-0014 Stabilization Fund to the Revenue Fund in accordance with the Installment Purchase Agreement constitute pledged Revenues. See the caption “YORBA LINDA WATER DISTRICT—Management Policies—Reserve Policy” for a discussion of the target levels for the Rate Stabilization Fund (referred to in the District’s Reserve Policy as the “Rate Stabilization Reserve”). YORBA LINDA WATER DISTRICT General The District was established in 1959 as a county water district under the County Water District Law, Division 12 of the Water Code of the State of California, as the successor to a private water company that was incorporated in or about 1909, for purposes of supplying water for domestic, irrigation, sanitation, industrial, commercial, recreation and fire suppression use. The District is located in the northeastern portion of Orange County (the “County”) approximately 35 miles southeast of downtown Los Angeles and 11 miles north of Santa Ana, the county seat of the County. The District includes approximately 14,475 acres of land comprising 22.6 square miles. The District serves a population of approximately 81,000 and currently provides water service to approximately 25,440 residential, commercial, irrigation and other connections. Residential connections comprised approximately 93% of the District’s total Water System connections in the fiscal year ended June 30 (each, a “Fiscal Year”), 2022. In addition, the District provides wastewater service to a portion of the District. However, no revenues from the District’s wastewater system are pledged to the payment of the Series 2022 Installment Payments. Approximately 91% of the operating revenues of the District for Fiscal Year 2022 were attributable to the Water System. The District service area includes most of the City of Yorba Linda and portions of the cities of Anaheim, Brea and Placentia, as well as certain unincorporated areas of the County. The service area of the District is bounded by the City of Placentia on the west, the City of Brea on the northwest, the City of Anaheim on the south, the County/San Bernardino County line on the east and the Chino Hills State Park on the north. The District currently has two primary sources of water: (i) groundwater pumped from local wells; and (ii) imported water purchased from the Municipal Water District of Orange County (“MWDOC”) and delivered by The Metropolitan Water District of Southern California (“MWD”). See the caption “WATER SUPPLY.” Prior to May 2014, approximately 26% of the District’s service area was outside of the boundaries of the Orange County Water District (“OCWD”), the agency responsible for managing the Orange County Groundwater Basin. See the caption “WATER SUPPLY—General—Groundwater.” In May 2014, the District’s application to annex such portions of the District’s service area into OCWD was approved. The annexation, together with the construction of pumping, pipeline and well facilities since 2014, allows the District to pump a higher percentage of its water supply from the Orange County Groundwater Basin (as described under the caption “WATER SUPPLY—General”) at a lower cost than purchasing the same amount of water from MWDOC, thereby reducing the District’s dependence on drought-sensitive imported water from northern California and the Colorado River. In addition, the District has entered into a Conjunctive Use Program Agreement (the “CUP”) with MWD, which requires the District to withdraw water in excess of the basin production percentage and to pay for such water at current imported water rates after subtracting power and operations and maintenance charges. The CUP authorizes MWD to compel the District to extract water from the Orange County Groundwater Basin in times of drought when MWD’s traditional sources (including the Colorado River and northern California supplies) are less plentiful. Under the CUP, MWD may only call upon such water if it has sufficient storage in the Orange County Groundwater Basin. The maximum amount that the District is obligated to produce under Page 173 of 236 -12- 4878-9554-1791v3/022608-0014 the CUP is approximately 2,000 acre feet in any 12 month period. The District does not anticipate that MWD will activate the CUP in Fiscal Year 2023. Land and Land Use The District currently includes approximately 14,475 acres of land. Land use within the District consists primarily of residential and small commercial uses. Currently, there are no heavy industrial or manufacturing uses within the District’s boundaries. There are several light industrial and commercial centers located mainly in the northwestern, southern and southeastern portions of the District. The District is approximately 90% built out and management does not expect significant additional development in the future with the exception of two housing developments in the northern portion of the service area that could include up to 400 single family homes. Governance and Management The District is governed by a 5-member Board of Directors (the “Board”), the members of which are elected at large by the registered voters in the District to staggered 4-year terms. The current Board members, the expiration dates of their terms and their occupations are set forth below. Board of Directors Member Expiration of Term Occupation J. Wayne Miller, Ph.D, President November 2024 Corporate Executive Brooke Jones, Vice President November 2022 Engineer Trudi Kew DesRoches, Director November 2024 Water Treatment Plant Manager Phil Hawkins, Director November 2022 Real Estate Association CEO Tom Lindsey, Director November 2022 Corporate Executive Day-to-day management of the District is delegated to the Interim General Manager, Douglass S. Davert. Mr. Davert has served as the District’s Interim General Manager since November 5, 2021. He is responsible for the daily operations of the District and for ensuring that policies established by the Board are followed and goals and objectives of the Board are carried out. Prior to his appointment as Interim General Manager, Mr. Davert served as the District’s Assistant General Manager. Before coming to the District, Mr. Davert maintained a private law practice. Mr. Davert currently serves as President of the Board of East Orange County Water District in Orange, California. He has a Bachelor of Arts degree from Chapman University and Juris Doctor degree from Loyola Law School. Mr. Davert is a member of the State Bar of California. Delia Lugo is the Finance Manager of the District. Ms. Lugo was named Finance Manager in 2013 and manages the Finance Department, which consists of the Accounting and Customer Service sections. Prior to being named Finance Manager, Ms. Lugo served as Senior Accountant for the District. Ms. Lugo has a Bachelor of Arts degree from California State University, Fullerton, with an emphasis in Financial Management. Management Policies The District has adopted several policies which are designed to ensure the prudent and effective management of its operations, including a debt management policy, an investment policy, a capital asset policy, a reserve policy and a pension and other post-employment benefits policy. Further information about these policies is set forth below. Debt Management Policy. The District has adopted a debt management policy in accordance with Government Code Section 8855 to establish guidelines and parameters for the effective governance, management and administration of debt issued by the District and its related entities and to ensure compliance with legislation, statutes and laws that place regulations on local agency debt. The following elements have been incorporated into this policy: Page 174 of 236 -13- 4878-9554-1791v3/022608-0014 The purposes for which debt may be incurred; The types of debt that may be issued; The relationship of the debt to, and integration with, the District’s capital improvement program or budget; Policy goals related to the District’s planning goals and objectives; and Ongoing debt administration, including the investment of proceeds, monitoring of expenditures and continuing disclosure procedures. Investment Policy. The District invests its funds in accordance with the District’s investment policy, which is described under the caption “WATER SYSTEM FINANCIAL INFORMATION—Investment of District Funds.” Capital Asset Policy. The District’s Capital Asset Investment and Management Policy (the “Capital Asset Policy”) establishes policies and procedures for the efficient planning of District capital-related needs and expenditures. Under the Capital Asset Policy, the District’s management team will review its asset management plan to determine the District’s capital asset requirements. From such review, the District’s capital improvement plan is developed, with projects prioritized and a funding strategy for each project determined. Projects which can be adequately funded from existing revenues and reserves and completed in an acceptable time frame, and for which borrowings may affect the District’s credit rating, are generally suited to pay-as-you-go financing. Projects may be suited for debt financings when: (i) repayment revenues are considered sufficient and reliable with an appropriate credit rating maintained; (ii) such projects are immediately required to meet or relieve capacity needs or comply with mandates or regulations by state or federal government; (iii) current revenues and reserves are insufficient to fund project costs; (iii) the life of the project or asset financed is five years or longer; or (iv) those expected to benefit from the project or asset include future generations. The Capital Asset Policy calls for the District to strive to maintain a year-end debt covenant ratio of at least 2.25x and a minimum of 365 days’ cash, as well as a “AA+” bond rating. Reserve Policy. Under the District’s Financial Reserves Policy (the “Reserve Policy”), the District segregates its reserves into Board-designated unrestricted reserves and Board-designed restricted reserves. Reserve targets are reviewed annually as part of the District’s budget process and reserve balances are reviewed monthly and reported to the Board quarterly. Unrestricted reserves are earmarked for the purpose of funding such items as new capital facilities, repair or replacement of existing facilities and general operating reserves designated for a specific purpose and use. All reserves in this category will be funded at least to the recommended minimum level. In order to retain the District’s “AA+” rating, the District has targeted a total reserve balance equal to 365 days’ cash at the end of each Fiscal Year. Although the District expects to comply with such reserve balance target, there can be no assurance that the District’s “AA+” rating will be maintained. See the captions “CERTAIN RISKS TO BONDHOLDERS” and “RATING.” Unrestricted reserves include: (i) an Operating Reserve to cover temporary cash flow deficiencies that occur as a result of timing differences between the receipt of operating revenue and expenditure requirements, as well as unexpected expenditures, which will be maintained at a minimum of 25% and a maximum of 50% of the annual operating budget; (ii) an Emergency Reserve to protect the District and its customers from losses arising from an unplanned event or circumstance (i.e. fires, earthquakes or financial emergencies), which will be maintained at a minimum level equal to 5% and a maximum level equal to 10% of net capital assets; Page 175 of 236 -14- 4878-9554-1791v3/022608-0014 (iii) a Capital Replacement Reserve to provide funding for capital projects and capital repairs and replacements, which will be maintained at a minimum level of the current Fiscal Year’s capital budget and a maximum level of the current and subsequent Fiscal Year’s capital budgets; (iv) a Rate Stabilization Reserve to assist in smoothing out water rate increases, which will be maintained at a minimum level of 5% of budgeted water sales for the current Fiscal Year and a maximum level of 20% of budgeted water sales for the current Fiscal Year. See the caption “SECURITY FOR THE BONDS— Rate Stabilization Fund;” and (v) a Metropolitan Water District Contingency Reserve to provide a source of funds to purchase additional amounts of imported water from MWD (which currently costs approximately double the cost of groundwater) in the event of an interruption in the groundwater supply, which will be maintained in an amount equal to the cost of purchasing sufficient imported water from MWD to meet 100% of the demand required to serve the District’s customers for one full year. This reserve is expected to be built up over a 10-year period beginning in Fiscal Year 2022. See the caption “WATER SYSTEM FINANCIAL INFORMATION—Investment of District Funds” for amounts held in the District’s unrestricted reserve funds as of [June 30], 2022. Restricted reserves include reserves that are held to satisfy limitations set by external requirements established by creditors, grant agencies or law, or those that are only permitted to be used for a specific purpose. Restricted reserves include: (1) a Conservation Reserve to provide funding for District-wide conservation efforts; and (2) an Employee Liability Reserve to cover employees’ accrued vacation and other compensatory time and to ensure the funding of health benefits at retirement, which will be maintained at a minimum target level of $309,902, of which $263,417 is allocated to the Water System. Pension and OPEB Policy. The District’s Pension Rate Stabilization Program and Other Post- Employment Benefits Funding Policy (the “Pension and OPEB Policy”) establishes guidelines for the District’s funding of its pension and other post-employment health care benefit (“OPEB”) obligations. Under the Pension and OPEB Policy, the District committed to establish and maintain trust funds under Internal Revenue Code Section 115 to fund its pension and OPEB obligations. Such trust funds have been established. See the caption “—Employees and Employee Benefits” for descriptions of the District’s pension and OPEB obligations, as well as the Section 115 trusts established in connection therewith. Employees and Employee Benefits General. As of June 30, 2022, the District had 82 full-time equivalent employees, including 8 employees in the Administration Department, 10 employees in the Engineering Department, 13 employees in the Finance Department, 3 employees in the Human Resources Department, 1 employee in the Information Technology Department, 46 employees in the Operations Department and 1 employee devoted to Communications/Public Affairs. Non-management and non-supervisory employees of the District are represented by the Yorba Linda Water District Employees Association (the “Association”). The current memorandum of understanding between the District and the Association expires on June 30, 2023. The District has not experienced any strikes or other labor actions. Of the total District employment, approximately 89% of the associated costs are chargeable to the Water System. Pension Benefits. Accounting and financial reporting by state and local government employers for defined benefit pension plans is governed by Governmental Accounting Standards Board Statement No. 68 (“GASB 68”). GASB 68 includes the following components: (i) unfunded pension liabilities are included on the employer’s balance sheet; (ii) pension expense incorporates rapid recognition of actuarial experience and investment returns and is not based on the employer’s actual contribution amounts; (iii) lower actuarial discount rates are required to be used for underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for unfunded liabilities are required to be used for certain purposes of the Page 176 of 236 -15- 4878-9554-1791v3/022608-0014 financial statements; and (v) the difference between expected and actual investment returns will be recognized over a closed five-year smoothing period. GASB 68 affects the District’s accounting and reporting requirements, but it does not change the District’s pension plan funding obligations. The District participates in a Miscellaneous Plan to fund pension benefits for employees that serve the Water System. The District’s pension plan is administered by the California Public Employees Retirement System (“CalPERS”). CalPERS administers an agent multiple-employer public employee defined benefit pension plan for all of the District’s full-time and certain part-time employees. CalPERS provides retirement, disability and death benefits to plan members and beneficiaries and acts as a common investment and administrative agent for participating public entities within the State, including the District. CalPERS plan benefit provisions and all other requirements are established by State statute and the Board. The District has established a trust fund with Public Agency Retirement Systems to fund future pension obligations (the “Pension Benefits Trust”). See the caption “—Management Policies—Pension and OPEB Policy.” The Pension Benefits Trust is irrevocable and holds funding contributions for the District pending future remittance to CalPERS, which will pay all retiree benefit payments to employees. Future contributions will be transferred to CalPERS at the District’s discretion. The funds held in the Pension Benefits Trust are legally protected from the claims of the general creditors of the District. The District’s total pension assets include funds held by CalPERS and funds held in the Pension Benefits Trust, although (in accordance with GASB Implementation Guide No. 2017-1), funds held in the Pension Benefits Trust are not counted toward the District’s pension funding status until they are delivered to CalPERS. As of June 30, 2022, the District held $[875,962] in the Pension Benefits Trust. District employees are subject to different benefit levels based on their hire date. Current benefit provisions for District employees are set forth below. YORBA LINDA WATER DISTRICT CALPERS MISCELLANEOUS PLAN – SUMMARY OF BENEFIT PROVISIONS Employees Hired Before December 8, 2011 Employees Hired On or After December 8, 2011 and Before January 1, 2013 Employees Hired On or After January 1, 2013 (Not Prior CalPERS Members) Benefit Formula 2.0% @ age 55 2.0% @ age 60 2.0% @ age 62 Benefit Vesting 5 years of service 5 years of service 5 years of service Benefit Payments Monthly for life Monthly for life Monthly for life Minimum Retirement Age 50-63 50-63 52-67 Monthly Benefits as % of Eligible Compensation 1.426% - 2.418%1.092% - 2.418%1.0% - 2.5% Employee Normal Cost 7.0%(1)7.0%(1)6.75%(1) Employer Normal Cost Rate 10.87%9.12%7.47% Payment of Unfunded Liability $885,734 $6,768 $13,437 (1)Employees are required to make the full employee contribution themselves. The District does not make any portion of the employee contribution. Source: District. Contributions to the District’s pension plan consist of: (a) contributions from plan participants (i.e., employees); and (b) contributions by the District. The District’s contributions constitute an Operation and Maintenance Cost of the Water System that is payable prior to the Series 2022 Installment Payments. Page 177 of 236 -16- 4878-9554-1791v3/022608-0014 District employees who were hired on or after January 1, 2013 and who were not previously CalPERS members receive benefits based on 2.0% at age 62 formula. Such employees are required to make the full amount of required employee contributions themselves under the California Public Employees’ Pension Reform Act of 2013 (“AB 340”), which was signed by the State Governor on September 12, 2012. AB 340 established a new pension tier for such employees. Benefits for such participants are calculated on the highest average annual compensation over a consecutive 36-month period. Employees are required to pay at least 50% of the total normal cost rate. AB 340 also capped pensionable income as noted below. Amounts are set annually, subject to Consumer Price Index increases, and retroactive benefits increases are prohibited, as are contribution holidays and purchases of additional non-qualified service credit. YORBA LINDA WATER DISTRICT PENSIONABLE INCOME CAPS FOR CALENDAR YEAR 2022 (AB 340 AND NON-AB 340 EMPLOYEES) Employees Hired Before January 1, 2013 (Non-AB 340 Employees) Employees Hired On or After January 1, 2013 (AB 340 Employees) Maximum Pensionable Income $305,000 $161,969 Maximum Pensionable Income if also Participating in Social Security N/A 134,974 Source: District. Additional employee contributions, limits on pensionable compensation and higher retirement ages for new members as a result of the passage of AB 340 are expected to reduce the District’s unfunded pension lability and potentially reduce District contribution levels in the long term. The District is also required to contribute the actuarially determined remaining amounts necessary to fund benefits for its members. Employer contribution rates for all public employers are determined on an annual basis by the CalPERS actuary and are effective on the July 1 following notice of a change in the rate. Total plan contributions are determined through the CalPERS annual actuarial valuation process. The total minimum required employer contribution is the sum of: (i) the plan’s employer normal cost rate, which funds pension benefits for current employees for the upcoming Fiscal Year (expressed as a percentage of payroll); plus (ii) the employer unfunded accrued liability contribution amount, which funds pension benefits that were previously earned by current and former employees, representing the actuarial shortfall between actuarial value of assets on deposit at CalPERS and the present value of the benefits that CalPERS will pay under the CalPERS plans to retirees and active employees upon their retirement (billed monthly). For Fiscal Year 2022, required employer normal cost rates as a percentage of payroll were 10.88% for employees hired before December 8, 2011, 9.13% for employees hired on or after December 8, 2011 and before January 1, 2013 and 7.59% for employees hired on or after January 1, 2013. For Fiscal Year 2023, required employer normal cost rates as a percentage of payroll are 10.87% for employees hired before December 8, 2011, 9.12% for employees hired on or after December 8, 2011 and before January 1, 2013 and 7.47% for employees hired on or after January 1, 2013. For Fiscal Year 2022, the total required employer payment of the unfunded accrued liability for the District’s Miscellaneous Plan was $762,686 for employees hired before December 8, 2011, $5,916 for employees hired on or after December 8, 2011 and before January 1, 2013 and $11,452 for employees hired on or after January 1, 2013. For Fiscal Year 2023, the total required employer payment of the unfunded accrued liability for the District’s Miscellaneous Plan is $885,734 for employees hired before December 8, 2011, $6,768 for employees hired on or after December 8, 2011 and before January 1, 2013 and $13,437 for employees hired on or after January 1, 2013. Page 178 of 236 -17- 4878-9554-1791v3/022608-0014 The following table summarizes the District’s annual required contributions for its CalPERS plan for Fiscal Years 2017 through 2021: YORBA LINDA WATER DISTRICT CALPERS PENSION PLAN – ANNUAL REQUIRED CONTRIBUTIONS Fiscal Year Ended June 30 Employer Contribution District-Funded Employee Contribution Employee Contribution Annual Pension Cost Percentage of Annual Pension Cost Contributed 2017 $ 755,544 $0 $416,746 $1,172,290 100% 2018 850,393 0 442,666 1,293,059 100 2019 981,952 0 445,902 1,427,854 100 2020 1,110,885 0 447,500 1,558,385 100 2021 1,281,792 0 472,754 1,754,546 100 Source: CalPERS Contribution Summary Report. The following table summarizes the schedule of funding for the District’s CalPERS plan as of June 30, 2021 (valuation date of June 30, 2020). YORBA LINDA WATER DISTRICT CALPERS PENSION PLAN – SCHEDULE OF FUNDING PROGRESS Valuation Date (June 30)Accrued Liability Market Value of Assets(1) Unfunded Liability Funded Ratio Annual Covered Payroll 2016 $34,023,874 $25,728,018 $ 8,295,856 75.6%$5,922,538 2017 35,928,532 27,673,197 8,255,335 77.0 6,096,025 2018 40,143,246 30,376,352 9,766,894 75.7 6,499,251 2019 42,397,631 31,984,158 10,413,473 75.4 6,256,442 2020 43,681,148 33,140,198 10,540,950 75.9 6,179,573 (1)Excludes funds held in the Pension Benefits Trust. Source: CalPERS Actuarial Valuation Reports as June 30, 2020, dated July 2021. Beginning in Fiscal Year 2018, CalPERS began collecting employer contributions toward a pension plan’s unfunded liability as dollar amounts instead of the prior method of a percentage of payroll. According to CalPERS, this change was intended to address potential funding issues that could arise from a declining payroll or a reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to underfunding of pension plans. Due to stakeholder feedback regarding internal needs for total contributions expressed as an estimated percentage of payroll, the CalPERS reports include such results in the contribution projection for informational purposes only. Contributions toward a pension plan’s unfunded liability will continue to be collected as set dollar amounts. The District’s required contributions to CalPERS fluctuate each year and, as noted, include a normal cost component and a component that is equal to an amortized amount of the unfunded liability. Many assumptions are used to estimate the ultimate liability of pensions and the contributions that will be required to meet those obligations, including, among others, the rate of investment return, average life expectancy, average age of retirement, inflation, salary increases and occurrences of disabilities. In addition, the unfunded liability reflects certain actuarial adjustments such as, among others, the actuarial practice of smoothing losses and gains over multiple years. As a result, the unfunded may be considered an estimate of the unfunded actuarial present value of the benefits that CalPERS will fund under the CalPERS plans to retirees and active employees upon their retirement and not as a fixed expression of the liability that the District owes to CalPERS. Page 179 of 236 -18- 4878-9554-1791v3/022608-0014 The CalPERS Board of Administration has adjusted and may in the future further adjust certain assumptions used in the CalPERS actuarial valuations, which adjustments may increase the District’s required contributions to CalPERS in future years. Accordingly, the District cannot provide any assurances that the District’s required contributions to CalPERS in future years will not significantly increase (or otherwise vary) from any past or current projected levels of contributions. CalPERS earnings reports for Fiscal Years 2011 through 2021 report investment gains of approximately 21.7%, 0.1%, 13.2%, 18.4%, 2.4%, 0.6%, 11.2%, 8.6%, 6.7%, 4.7% and 21.3%, respectively. Future earnings performance may increase or decrease future contribution rates for plan participants, including the District. The District notes that CalPERS’ earnings in Fiscal Year 2020 were below its investment targets, which could increase future contribution rates for plan participants, including the District. See the caption “THE DISTRICT—COVID-19 Outbreak.” On December 21, 2016, the CalPERS Board of Administration voted to lower its discount rate from 7.50% to 7.00% over a three period. For public agencies such as the District, the new discount rate took effect July 1, 2017. Lowering the discount rate means that employers which contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013 will also see their contribution rates rise under AB 340. The reduction of the discount rate will result in average employer rate increases of approximately 1% to 3% of normal cost as a percentage of payroll for most retirement plans such as the District’s plans. Additionally, many employers will see a 30% to 40% increase in their current unfunded accrued liability payments (relative to the unfunded accrued liability payments projected in the June 30, 2015 valuation report) for pension plans. These payments are made to amortize unfunded liabilities over 20 years to bring pension funds to a fully funded status over the long-term. The announcement on July 12, 2021 that CalPERS achieved investment returns of 21.3% in Fiscal Year 2021 caused the CalPERS Board of Administration to lower CalPERS’ discount rate from 7.00% to 6.80% in fall 2021 in accordance with a risk mitigation policy that was adopted in 2015, which calls for the discount rate to be lowered if returns exceed the then-current discount rate by two or more percentage points. Lowering the discount rate means that employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013 who were not previously CalPERS members will also see their contribution rates rise under AB 340. Portions of the above disclosures are primarily derived from information that has been produced by CalPERS, its independent accountants and its actuaries. The District has not independently verified such information and neither makes any representations nor expresses any opinion as to the accuracy of the information that has been provided by CalPERS. The comprehensive annual financial reports of CalPERS are available on CalPERS’ Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information that concerns benefits and other matters. The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. The District, the Authority and the Underwriter cannot guarantee the accuracy of such information. Actuarial assessments are “forward-looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. The District’s Miscellaneous Plan had a total net pension liability of $10,323,992 for Fiscal Year 2021 (as of the measurement date of June 30, 2020), excluding funds held in the Pension Benefits Trust. The net pension liability is the difference between the total pension liability and the fair market value of pension assets. The District’s total pension assets include funds that are held by CalPERS, and its net pension asset or liability is based on such amounts. For Fiscal Year 2022, the District incurred Miscellaneous Plan pension expenses of $[__]. A summary of principal assumptions and methods used to determine the total pension liability for Fiscal Year 2022 is shown below. Page 180 of 236 -19- 4878-9554-1791v3/022608-0014 YORBA LINDA WATER DISTREICT ACTUARIAL ASSUMPTIONS FOR CALPERS MISCELLANEOUS PLAN Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB 68 Asset Valuation Method Market Value of Assets Actuarial Assumptions: Discount Rate 7.00% Inflation 2.50% Salary Increases Varies by entry age and service Investment Rate of Return 7.00% net of pension plan investment and administrative expenses; includes projected inflation rate of 2.50% Mortality Rate Table(1)Derived using CalPERS’ membership data for all funds (1)The mortality table used was developed based on CalPERS-specific data from a 2017 actuarial experience study for the period from 1997-2015. Source: District. Changes in the net pension liability for the District’s pension plan in Fiscal Year 2021 were as follows: YORBA LINDA WATER DISTRICT CHANGES IN CALPERS MISCELLANEOUS PLAN NET PENSION LIABILITY Increase / (Decrease) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability / (Asset) Balance at June 30, 2019 $ 41,343,850 $ 31,971,545 $ 9,372,305 Balance at June 30, 2020 43,611,608 33,287,616 10,323,992 Net Changes for period from July 1, 2019 through June 30, 2020 $ 2,267,758 $ 1,316,071 $ 951,687 Source: District. The table below presents the net pension liability of the District’s pension plans, calculated using the discount rate applicable to Fiscal Year 2021 (7.15%), as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.15%) or 1 percentage point higher (8.15%) than the Fiscal Year 2020 rate: YORBA LINDA WATER DISTRICT SENSITIVITY OF CALPERS MISCELLANEOUS PLAN NET PENSION LIABILITY TO CHANGES IN THE DISCOUNT RATE Discount Rate – 1% (6.15%) Applicable Discount Rate (7.15%) Discount Rate + 1% (8.15%) Net Pension Liability/(Asset)$16,127,633 $10,323,992 $5,528,626 Source: District. The District’s projections of Operation and Maintenance Costs under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” do not assume unusual increases in pension funding expenses in the future. However, future changes in funding policies and assumptions, including those related to assumed rates of investment return, could trigger increases in the District’s annual required contributions, and such increases could be material to the finances of the District. No assurance can be provided that such expenses will not increase significantly in the future. The District does not Page 181 of 236 -20- 4878-9554-1791v3/022608-0014 expect that any increased funding of pension benefits will have a material adverse effect on the ability of the District to pay the Series 2022 Installment Payments. For additional information relating to the District’s CalPERS Miscellaneous pension plan, see Note 7 to the District’s audited financial statements set forth in Appendix A. Other Post-Employment Benefits. The District, through an agent multiple-employer defined benefit plan, provides OPEB to retired employees. Specifically, the District provides health (medical, dental and vision) insurance for its retired employees, their dependent spouses (if married and covered on the District’s plan at time of retirement), or survivors, in accordance with Board resolutions. Medical coverage is provided for retired employees who are age 50 or over, have a minimum of 5 years of service with the District and were employed by the District prior to December 8, 2011. The District pays 100% of the premium for the retiree and two-thirds of the premium amount for eligible dependents accrued at a rate of one year for every three years of service. Two-thirds of the premium amount of medical coverage is provided for the surviving spouse of retired employees for the remaining vested period. The OPEB plan does not provide a publicly available financial report. The contribution requirements of OPEB plan members and the District are established and may be amended by the Board. Currently, contributions are not required from plan members. The District has established a trust fund to fund future OPEB obligations. See the caption “—Management Policies—Pension and OPEB Policy.” In Fiscal Years 2022, 2021 and 2020, the District made contributions of $0, $278,000 and $272,075 to the OPEB trust fund. The District has budgeted $175,000 to contribute to the OPEB trust fund in Fiscal Year 2023. Trust fund assets are irrevocable and may not be used for any purpose other than funding OPEB. The District’s total assets to pay OPEB include funds held in the OPEB trust fund. Governmental Accounting Standards Board Statement No. 75 (“GASB 75”) requires governmental agencies to account for and report the outstanding obligations and commitments related to other post-employment benefits in essentially the same manner as for pensions. While requiring the District to disclose the unfunded actuarial accrued liability and the Actuarially Determined Contribution (the actuarial value of benefits earned during a Fiscal Year plus costs to amortize the unfunded actuarial accrued liability, or “OPEB ADC”) in its financial statements, GASB 75 does not require the District to fund such OPEB ADC. The OPEB ADC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded liabilities of the plan over a period not to exceed thirty years. The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the OPEB plan, and the net OPEB obligation for the last five Fiscal Years were as follows: YORBA LINDA WATER DISTRICT NET OPEB OBLIGATION Fiscal Year Ended June 30 Annual OPEB Costs Percentage of Annual OPEB Costs Contributed Net OPEB Obligation (Asset) 2018 $214,896 165.51%$2,273,415 2019 202,501 212.96 2,046,040 2020 159,488 290.10 1,461,264 2021 126,362 853.32 595,209 2022 925,248 2,047.47 (227,487) Source: District. As of July 1, 2021, the District’s OPEB plan was 105.93% funded. The actuarial accrued liability for benefits was $3,837,322 and the actuarial value of assets was $4,064,809 resulting in an unfunded actuarial accrued liability (the “OPEB UAL”) of $(227,487). The covered payroll (annual payroll of active employees covered by the plan) was $3,384,450 and the ratio of the OPEB UAL to the covered payroll was negative 6.72%. Page 182 of 236 -21- 4878-9554-1791v3/022608-0014 Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about rates of employee turnover, retirement and mortality, as well as economic assumptions regarding claim costs per retiree, healthcare inflation and interest rates. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress set forth below presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. YORBA LINDA WATER DISTRICT OPEB PLAN – SCHEDULE OF FUNDING PROGRESS Valuation Date Actuarial Accrued Liability (a) Actuarial Value of Assets (b) OPEB UAL (a) – (b) Funded Ratio (b) / (a) Annual Covered Payroll OPEB UAL as Percentage of Annual Covered Payroll June 30, 2017 $3,595,567 $1,322,152 $2,273,415 36.77%$6,116,587 37.17% June 30, 2019 3,521,739 2,060,475 1,461,264 58.51 3,799,637 38.46 June 30, 2021 3,837,322 4,064,809 (227,487)105.93 3,384,450 (6.72) Source: District. Changes in the net liability for the District’s OPEB plan were as follows. YORBA LINDA WATER DISTRICT CHANGES IN OPEB PLAN LIABILITY Increase / (Decrease) Total OPEB Plan Liability Plan Fiduciary Net Position Net OPEB Plan Liability / (Asset) Balance at June 30, 2020 $3,594,092 $2,998,883 $595,209 Balance at June 30, 2021 3,837,322 4,064,809 (227,487) Net Changes for period from July 1, 2020 through June 30, 2021 $ 243,230 $1,065,926 $(822,696) Source: District. The following table presents the net liability of the District’s OPEB plan, calculated using the discount rate applicable to Fiscal Year 2021 (6.50%), as well as what the net OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower (5.50%) or 1 percentage point higher (7.50%) than the Fiscal Year 2021 rate: Page 183 of 236 -22- 4878-9554-1791v3/022608-0014 YORBA LINDA WATER DISTRICT SENSITIVITY OF THE OPEB PLAN NET LIABILITY TO CHANGES IN THE DISCOUNT RATE Discount Rate – 1% (5.50%) Applicable Discount Rate (6.50%) Discount Rate + 1% (7.50%) Plan’s Net Liability/(Asset) $145,866 $(227,487) $(552,647) Source: District. The District’s projections of Operating and Maintenance Costs shown under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” do not assume further unusual increases in OPEB funding expenses. However, future changes in OPEB funding policies and assumptions, including those related to assumed rates of investment return and inflation, could trigger increases in the District’s annual required contributions, and such increases could be material to the finances of the Water System. No assurance can be provided that such expenses will not increase significantly in the future. The District does not expect that any increased funding of OPEB will have a material adverse effect on the ability of the District to make the Series 2022 Installment Payments. For additional information relating to the District’s CalPERS Miscellaneous pension plan, see Note 6 to the District’s audited financial statements set forth in Appendix A. See the caption “—Management Policies—Pension and OPEB Policy” for a discussion of District policies related to pension and OPEB funding. Budget Process Prior to June 30 of each year, District staff submits a proposed budget for the following Fiscal Year to the Board. The Board conducts a series of public workshops to obtain comments from residents and ratepayers before adopting the budget. On May 24, 2022, the Board approved the budget for Fiscal Year 2023. Decisions by the Board and the General Manager during the period covered by the budget are flexible so that the District can respond to changing conditions as necessary, while meeting the generally basic budgetary objectives of the Board. Water rates, fees and customer service charges are presented to the Board by or before June of each year, prior to approval of the budget. District Insurance The District is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions, injuries to employees and natural disasters. In an effort to manage its risk exposure, the District is a member of the Association of California Water Agencies/Joint Powers Insurance Authority (“ACWA/JPIA”). ACWA/JPIA is a risk-pooling self-insurance authority, created under provisions of State law. The purpose of ACWA/JPIA is to arrange and administer programs of insurance for the pooling of self- insured losses and to purchase excess insurance coverage. As of June 30, 2022, as a member of ACWA/JPIA, the District participated in the following insurance programs: General and auto liability, public officials and employee’s error and omissions: Total risk financing self-insurance limits of $5,000,000 and combined single limit at $55,000,000 per occurrence. ACWA/JPIA purchases additional excess coverage layers as follows: $55,000,000 for general, auto and public officials liability, which increases the limits on the insurance coverage noted above. Page 184 of 236 -23- 4878-9554-1791v3/022608-0014 Employee dishonesty coverage up to $100,000 per loss, including public employee dishonesty, forgery or alteration and theft, disappearance and destruction coverages, subject to a $1,000 deductible per occurrence. Property loss is paid at the replacement cost for property on file, if replaced within two years after the loss; otherwise, property loss is paid on an actual cash value basis. The District’s deductible is $25,000 per occurrence. ACWA/JPIA is self-insured for the first $100,000, and purchases excess coverage up to a $500,000,000 limit per occurrence. The District has flood damage coverage with an aggregate limit of $25,000,000, subject to a $100,000 deductible. Certain portions of the Water System, including underground pipelines, are not covered by the District’s property insurance coverage. Boiler and machinery coverage for the replacement cost up to $100,000,000 per occurrence, subject to various deductibles depending on the type of equipment. Workers’ compensation insurance up to State statutory limits for all work related injuries/illnesses covered by State law. The District maintains earthquake insurance through the ACWA/JPIA risk pool in the amount (shared with other entities in the pool) of $2,500,000. The occurrence of an earthquake or other natural disaster in or near the District’s service area, including, without limitation, wildfire, landslide, high winds, drought or flood, could have an adverse material impact on the economy within the District, the Water System and the Net Revenues available for the payment of the Series 2022 Installment Payments. Portions of the Water System may be at risk of damage or destruction from wildfires or subject to unpredictable seismic activity. Certain portions of the Water System, including underground pipelines, are not covered by insurance, and there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers. See the caption “CERTAIN RISKS TO BONDHOLDERS—Natural Disasters.” Settled claims have not exceeded any of the coverage amounts in any of the last three Fiscal Years. Outstanding Obligations Parity Obligations. In May 2017, the District entered into the 2017 IPA for the purpose of financing and refinancing certain capital improvements to the Water System of the District. The 2017 IPA is currently outstanding in the principal amount of $24,860,000. The 2017 IPA is payable from Net Revenues and secured by a lien on and pledge of Revenues on a parity with the Series 2022 Installment Payments. Payments under the 2017 IPA support the payment of principal of and interest on the Authority’s Revenue Bonds, Series 2017A. Subordinate Obligations. In May 2020, the District entered into the Line of Credit to finance certain capital improvements to the Water System and to provide working capital from time to time. Under the Line of Credit, the District may borrow, repay and re-borrow funds on a revolving basis up to the amount of $20,000,000 outstanding at any one time. The Line of Credit terminates on May 12, 2023. Currently, approximately $5,743,751 is outstanding under the Line of Credit. See the caption “REFUNDING PLAN—Line of Credit” for a discussion of the payoff of currently outstanding amounts under the Line of Credit. Amounts borrowed under the Line of Credit are payable from Net Revenues of the Water System on a subordinate basis to the Bonds and the payments under the 2017 IPA. Ad Valorem Tax Revenues General. The County levies a 1% ad valorem property tax on behalf of all taxing agencies in the County, including the District. The taxes collected are allocated to taxing agencies within the County, including the District, on the basis of a formula established by State law enacted in 1979. Under this formula, the County and all other taxing entities receive a base year allocation plus an allocation on the basis of “situs” growth in assessed Page 185 of 236 -24- 4878-9554-1791v3/022608-0014 value (new construction, change of ownership and inflation) prorated among the jurisdictions which serve the tax rate areas within which the growth occurs. Tax rate areas are specifically defined geographic areas which were developed to permit the levying of taxes for less than county-wide or less than city-wide special districts. In Fiscal Year 2022, the District received $[2,138,640] in 1% ad valorem property tax revenues from the County. Such revenues constitute Ad Valorem Tax Revenues pledged, to the extent remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, as the first source of payment of the Series 2022 Installment Payments. From time to time legislation has been considered as part of the State budget to shift property tax revenues from special districts to school districts or other governmental entities. Legislation enacted in connection with the 1992-93 State budget shifted approximately 35% of many special districts’ shares of the countywide 1% ad valorem tax, including the District’s share. The 2004-05 State budget reallocated additional portions of the special districts’ shares of the countywide 1% ad valorem tax, shifting a portion of the Ad Valorem Tax Revenues collected by the County from special districts to school districts. As a result of the 2004- 05 State budget, the District lost approximately $1,586,028 of Ad Valorem Tax Revenues, cumulatively, over Fiscal Years 2005 and 2006. Pursuant to the 2004-05 State budget, such Ad Valorem Tax Revenues reverted to the District in Fiscal Year 2007. On July 27, 2009, the Governor of the State signed a revised fiscal year 2009-10 State budget which included a shift of approximately 8% of 1% ad valorem property tax revenues from certain local agencies, including the District, to school districts and other governmental agencies. The State repaid the portion of the Ad Valorem Tax Revenues that were subject to such shift, totaling $102,192, to the District in Fiscal Year 2013, plus interest at the rate of 2% per annum. On November 2, 2010, State voters approved Proposition 22, which: (i) prohibits the State from shifting or delaying the distribution of funds from special districts to schools and community colleges; (ii) eliminates the authority to shift property taxes temporarily during a severe financial hardship of the State; and (iii) restricts the State’s authority to use fuel tax revenues to pay debt service on transportation bonds, to borrow or change the distribution of fuel tax revenues or to use vehicle license fee revenues to reimburse local governments for state- mandated costs. Notwithstanding the passage of Proposition 22, there can be no assurance that the Ad Valorem Tax Revenues that the District currently expects to receive will not be temporarily shifted from the District, or reduced pursuant to State legislation, in the future. If the property tax formula is changed for a State fiscal year or permanently changed in the future, it could have a material adverse effect on the receipt of Ad Valorem Tax Revenues by the District, to the extent received by the District in accordance with State law. Ad Valorem Tax Revenues comprise a portion of Revenues from which Operating and Maintenance Costs and Non-Operating and Maintenance Costs are payable, but the District has no taxing power. See the caption “SECURITY FOR THE BONDS—Series 2022 Installment Payments” for a discussion of the extent to which Ad Valorem Tax Revenues are available to make the Series 2022 Installment Payments. Assessed Valuation. The assessed valuation of the property in the County is established by the County Assessor, except for public utility property, which is assessed by the California Department of Tax and Finance Administration. Generally, property can be reappraised to market value only upon a change in ownership or completion of new construction. The assessed value of property that has not incurred a change of ownership or new construction must be adjusted annually to reflect inflation at a rate not to exceed 2% per year based on the State consumer price index. In the event of declining property value caused by substantial damage, destruction, economic or other factors, the assessed value must be reduced temporarily to reflect market value. The County Assessor determines and enrolls a value for each parcel of taxable real property in the County every year. The value review may result in a reduction in value. Taxpayers in the County also may appeal the determination of the County Assessor with respect to the assessed value of their property. Page 186 of 236 -25- 4878-9554-1791v3/022608-0014 The table below sets forth the secured and unsecured assessed valuations for property in the District for the last five Fiscal Years. The information in the table below has been provided by the County Auditor-Controller. The District has not independently verified the information in the table below and does not guarantee its accuracy. TABLE 1 YORBA LINDA WATER DISTRICT ASSESSED VALUATION Fiscal Year Local Secured Unsecured Total 2018 $14,715,199,230 $147,065,979 $14,862,265,209 2019 15,471,407,750 151,783,300 15,623,191,050 2020 16,110,015,194 182,102,581 16,292,117,775 2021 16,775,906,875 157,350,556 16,933,257,430 2022 17,350,846,033 183,164,417 17,534,010,450 Source: Orange County Auditor-Controller. Tax Levies and Delinquencies. Property in the State which is subject to ad valorem taxes is classified as “secured” or “unsecured.” The secured classification includes property on which any property tax levied by a county becomes a lien on that property. Every tax which becomes a lien on secured property has priority over all other liens, arising pursuant to State law, on the secured property, regardless of the time of the creation of other liens. In accordance with the State Revenue and Taxation Code, the County tax collector collects secured tax levies for each Fiscal Year. Property taxes on the secured roll are due in two installments, on November 1 and February 1. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared tax-defaulted on or about June 30. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus costs and a redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted property is subject to sale by the County Treasurer-Tax Collector. The exclusive means of forcing the payment of delinquent taxes with respect to secured property is the sale of the property securing the taxes of the State for the amount of taxes that are delinquent. A tax levied on unsecured property may become a lien on certain other property owned by the taxpayer. Property taxes on the unsecured roll are due as of a January 1 lien date and become delinquent, if unpaid, on August 31. A 10% penalty attaches to delinquent taxes on property on the unsecured roll and an additional penalty of 1.5% per month begins to accrue on November 1. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for recordation in the County Recorder’s office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the taxpayer. In an attempt to mitigate the effects of the COVID-19 pandemic on State property taxpayers, on May 6, 2020, the Governor signed Executive Order N-61-20 (“Order N-61-20”). Under Order N-61-20, certain provisions of the State Revenue and Taxation Code were suspended until May 6, 2021 to the extent that they required a tax collector to impose penalties, costs or interest for the failure to pay secured or unsecured property taxes, or to pay a supplemental bill, before the date that such taxes become delinquent. Such penalties, costs and interest were cancelled under the conditions provided for in Order N-61-20, including if the property is residential real property occupied by the taxpayer or the real property qualifies as a small business under certain State laws, the taxes were not delinquent prior to March 4, 2020, the taxpayer files a claim for relief with the tax Page 187 of 236 -26- 4878-9554-1791v3/022608-0014 collector and the taxpayer demonstrates economic hardship or other circumstances that have arisen due to the COVID-19 pandemic or due to a local, state, or federal governmental response thereto. See the caption “— COVID-19 Outbreak.” The District did not receive material amounts of property tax payments for Fiscal Years 2020 or 2021 later than usual as a result of Order N-61-20. State law also provides for the supplemental assignment and taxation of property as of the occurrence of a change in ownership or completion of new construction. Collection of taxes based on supplemental assessments occurs throughout the year. Taxes due are prorated according to the amount of time remaining in the tax year. An initiative measure (the “Split Roll Initiative”) to amend Article XIIIA of the State Constitution qualified for the State’s November 2020 ballot. Although it was not adopted by State voters, the Split Roll Initiative would have based property taxes for commercial and industrial properties on periodic analyses of market values beginning in tax year 2020-21. Such market values would have been reassessed by the applicable county assessor’s office at least once every three years. The Split Roll Initiative included exceptions for businesses with a total market value of less than $2 million (adjusted for inflation), which would have continued to be subject to property taxes based on purchase price, and exempted from property tax assessments up to $500,000 of the value of personal property, or all personal property for businesses with fewer than 50 employees. Although the Split Roll Initiative was not adopted, there can be no assurance that a similar initiative will not be brought before voters in the future. The District is unable to predict how the adoption of such a future initiative would affect the receipt of Ad Valorem Tax Revenues. The table below sets forth property tax levies and delinquencies in the District as of June 30 for the last five Fiscal Years for which information is available. TABLE 2 YORBA LINDA WATER DISTRICT PROPERTY TAX LEVIES AND COLLECTIONS Fiscal Year Secured Tax Charge(1) Amount Delinquent June 30 Percent Delinquent June 30 2017 $1,631,905__$31,549 __1.93% 2018 1,711,323 26,575 1.55 2019 1,792,451 26,659 1.49 2020 1,861,835 27,570 1.48 2021 1,956,060 26,003 1.33 (1)1% General Fund apportionment. Includes secured and supplemental rolls. Excludes additional collections, penalties and interest. Source: California Municipal Statistics Inc. In Fiscal Year 2022, Ad Valorem Tax Revenues constituted approximately 5% of total Revenues received by the District. The Board of Supervisors of the County has approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the State Revenue and Taxation Code. As a result of the implementation of the Teeter Plan by the County, the County apportions secured property taxes and assessments on an accrual basis when due (irrespective of actual collections) to participating local political subdivisions for which the County acts as the levying or collecting agency. The District does not participate in the Teeter Plan. As a result, the District is subject to the risk that delinquencies in the payment of 1% ad valorem property taxes could reduce the amount of Ad Valorem Property Taxes received by the District. Conversely, the District will benefit from Ad Valorem Property Taxes generated by penalties and interest charged on delinquent ad valorem property taxes. Page 188 of 236 -27- 4878-9554-1791v3/022608-0014 COVID-19 Outbreak The spread of the strains of coronavirus which are collectively called SARS-CoV-2, which cause the disease known as COVID-19 (“COVID-19”), and local, State and federal actions in response to COVID-19, have impacted the District’s operations and finances. In response to the increasing number of COVID-19 infections and fatalities, health officials and experts recommended, and some governments mandated, a variety of responses ranging from travel bans and social distancing practices to complete shutdowns of certain services and facilities. The World Health Organization declared the COVID-19 outbreak to be a pandemic and, on March 4, 2020, as part of the State’s response to address the outbreak, the Governor declared a state of emergency. On March 13, 2020, the President declared a national emergency, freeing up funding for federal assistance to state and local governments. Many school districts across the State temporarily closed some or all school campuses (including schools within the District) in response to local and State directives or guidance. On March 19, 2020, the Governor issued Executive Order N-33-20, a mandatory Statewide shelter-in- place order applicable to all non-essential services. Certain aspects of the shelter-in-place directives were extended indefinitely until indicators for modifying the stay-at-home order were met. The County also declared a state of emergency in response to the COVID-19 outbreak. On May 4, 2020, the Governor issued an executive order informing local health jurisdictions and industry sectors that they could gradually re-open under new modifications and guidance provided by the State. A phased re-opening of various sectors was underway beginning in mid-2020 in accordance with a four-stage re-opening plan that ended with a full reopening of the economy on June 15, 2021. Although pursuant to the re-opening plan certain restrictions on activities were eased, restrictions were also re-imposed in various jurisdictions as local conditions warranted, and such restrictions may be renewed as the pandemic continues. On March 27, 2020, the President signed the $2.2 trillion Coronavirus Aid, Relief, and Economic Stabilization Act (the “CARES Act”) which provided, among other measures, $150 billion in financial aid to states, tribal governments and local governments to provide emergency assistance to those most significantly impacted by COVID-19. Under the CARES Act, local governments were eligible for reimbursement of certain costs which were expended to address the impacts of the pandemic. The District did not apply for or receive any funds under the CARES Act. On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (the “ARP Act”), a $1.9 trillion economic stimulus package that was designed to help the United States’ economy recover from the adverse impacts of the COVID-19 pandemic. The District did not apply for or receive any funds under the ARP Act. The effects of the COVID-19 outbreak and governmental actions responsive to it have altered the behavior of businesses and people in a manner that has had significant negative impacts on global and local economies. In addition, financial markets in the United States and globally have experienced significant volatility attributed to COVID-19 concerns. The outbreak resulted in increased pressure on State finances as budgetary resources were directed towards containing the pandemic and tax revenues sharply declined in early 2020. Identified cases of COVID-19 and deaths attributable to the COVID-19 outbreak continue to occur throughout the United States, including the County. Potential impacts to the District associated with the COVID-19 outbreak include, but are not limited to, increased costs and challenges to the public health system in and around the District, cancellations of public events and disruption of the regional and local economy, with corresponding decreases in the District’s revenues, including as a result of reduced water use (particularly among commercial and hotel establishments). In addition, the Governor suspended utility service shutoffs and the collection (although not the imposition) of late fees and penalties for residential customers (including Water System customers) through December 31, 2021. Despite the foregoing actions, the District has not accumulated a significant number of uncollectible accounts and has written off approximately $33,700 (for Fiscal Years 2020 through 2022 Page 189 of 236 -28- 4878-9554-1791v3/022608-0014 combined) of nonpayment, including uncollected late fees. The District has an allowance for doubtful accounts as of June 30, 2022 of $45,000, and in February 2022 re-instituted its pandemic-paused standard collection procedures. See the caption “THE WATER SYSTEM—Collection Procedures.” The District did not participate in the California Water and Wastewater Arrearage Payment Program, a State program that provided up to $1 billion to water service providers to cover delinquencies by commercial and residential customers during the period between March 4, 2020 and June 15, 2021. In response to the COVID-19 outbreak, the District employed aggressive actions to ensure business continuity and seamless service to its customers and ratepayers. The District temporarily modified its operations to implement remote work opportunities for employees, provided services online, closed the District’s administrative building to the public and deferred several non-essential capital improvement projects. In order to transition District employees to working from home, the District procured additional hardware, established secure access to District computer systems and remote access to District telephone systems, and deployed tele- conferencing applications. In addition, large gatherings of District personnel at any one time were prohibited for much of 2020 and early 2021 per health officer orders. Board meetings occurred via teleconference, and public comment and participation for Board meetings were also conducted via teleconference and electronic means. With improvements in local case rates, the District has resumed normal operations and activities while complying with public health orders and California Occupational Safety and Health Administration COVID-19 Prevention Plan mandates. The District has not experienced and does not at this time foresee a future negative impact on the execution of District services as a result of the COVID-19 pandemic. The District has worked diligently to provide its employees with personal protective equipment and voluntary access to screening and vaccinations. However, there can be no assurance that absences of employees or District leadership due to COVID-19 will not adversely impact District operations. The District reports that Water System revenues and expenses were not materially affected by the COVID-19 outbreak in any of Fiscal Years 2020 through 2022. The District’s customer base is primarily residential and its water rate structure consists of variable and fixed rate components, which partially mitigates the effect of any reduced water usage by non-residential customers. In Fiscal Year 2022, the variable portion of the District’s water sales revenues was approximately 54% and the fixed rate component was approximately 46%. The District experienced an increase in water usage in 2020 and 2021 as compared to the three-year historical average, attributed primarily to an increased occupancy of residences during the pandemic. See the captions “THE WATER SYSTEM—Historical Water System Connections” and “THE WATER SYSTEM— Water System Rates and Charges.” The projected Water System operating results which are set forth under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” include the following assumptions based on the trends that the District has experienced since the beginning of the outbreak: (i) projected water sales for Fiscal Year 2023 are assumed to remain at levels which are approximately equal to water sales in recent years, with incremental revenue increases resulting from increased rates and connections; (ii) Water System write-offs for Fiscal Year 2023 are projected to total approximately $9,000 (significantly less than the District projects for Fiscal Year 2022 ($17,200)); and (iii) Water System connections are expected to grow only slightly in Fiscal Year 2023. The COVID-19 pandemic is ongoing, and the duration and severity of the outbreak and the economic and other actions that may be taken by governmental authorities to contain the outbreak or to treat its impact are uncertain. The ultimate impact of COVID-19 on the operations and finances of the District and the Water System is unknown. The District continues to actively monitor Water System usage, payment delinquencies, and revenues and expenditures, so that any further impacts of the COVID-19 pandemic can be anticipated. The District does not currently expect that the COVID-19 pandemic will have a material adverse effect on the District’s ability to pay the Series 2022 Installment Payments. Page 190 of 236 -29- 4878-9554-1791v3/022608-0014 WATER SUPPLY General The District currently has two primary sources of water: (i) groundwater pumped from nine active wells; and (ii) imported water purchased from MWDOC delivered from MWD. Groundwater. The District operates nine active water wells. Wells 1, 5, 7, 10, 12, 18 and 19 are located at the District’s Richfield Facility. Wells 20 and 21 are located in the City of Anaheim adjacent to OCWD’s spreading basins, and the District is currently constructing Well 22, which is also located in the City of Anaheim adjacent to OCWD’s spreading basins. Well 22 is expected to be completed and in operation in early 2023. In 1998, the District renovated Wells 1, 5, 7 and 12, upgrading them to the latest standards and to a single lift operation, which improves operational performance and reliability. The District’s wells draw water from the Orange County Groundwater Basin, which is managed by OCWD. The Orange County Groundwater Basin is estimated to have a total water storage capacity of approximately 66,000,000 acre feet. The District’s wells have been drilled to an average depth of 400 feet and produce high quality water that meets all State and federal drinking water standards in sufficient quantities to supply approximately 76% of annual customer demand within the District. See the caption “THE WATER SYSTEM—PFAS Treatment Plant” for a discussion of recently completed water treatment plant at the District’s headquarters. Total average production from the District’s wells for Fiscal Years 2017 through 2022 was approximately 10.5 million gallons per day (“mgd”), and total maximum daily production capacity from the District’s wells is approximately 19 mgd. See the caption “THE WATER SYSTEM—PFAS Treatment Plant” for a discussion of the District’s decision to temporarily shut down its groundwater wells in 2020 and 2021 while the District’s treatment facility was being designed and constructed. District groundwater pumping is affected by policies of OCWD, the agency responsible for managing the Orange County Groundwater Basin, including the setting of replenishment assessments, basin production percentages of total water demand by agencies pumping basin groundwater and basin equity assessments. OCWD establishes and collects replenishment assessments as a means of purchasing water and funding projects for the purpose of replenishing the Orange County Groundwater Basin. The replenishment assessment is established annually by OCWD and applies to every acre foot of groundwater produced from the Orange County Groundwater Basin. In addition, and per statute, OCWD sets a basin production percentage (the “BPP”) for water to be extracted from the Orange County Groundwater Basin. The BPP represents the percentage of each groundwater producer’s (including the District’s) water supply that comes from groundwater pumped from the Orange County Groundwater Basin. It is set both annually and uniformly for all producers. Multiplying the BPP against a producer’s total water demand yields a groundwater production limit (the “BPP formula”), and OCWD imposes an additional assessment on the producer for all groundwater pumped in excess of that limit. The additional assessment incurred by an agency that pumps groundwater above the limit established by the BPP formula is called the basin equity assessment (the “BEA”). The BEA is established annually by OCWD and is intended to discourage pumping of amounts above the BPP formula by raising the cost of producing groundwater so that it is comparable to the cost of treated imported water, thereby encouraging groundwater pumping agencies to supplement their groundwater production with imported water for the portion of their water use that exceeds the BPP. The BEA is a surcharge to discourage, yet still allow for, the production of groundwater in excess of the BPP formula. One of the District’s operating objectives is to minimize the production of groundwater in excess of the BPP formula in order to minimize the BEA payment. In Fiscal Year 2021, the District did not pay a BEA to OCWD. Page 191 of 236 -30- 4878-9554-1791v3/022608-0014 The BPP has historically varied from between 65% and 75%; however, the annexation agreement between the District and OCWD (as discussed under the caption “YORBA LINDA WATER DISTRICT— General”) restricted the District’s BPP to 70% until October 2018. The effective BPP for Fiscal Year 2019 was 75%, and the BPP was established at 53%, 52% and 34% in Fiscal Years 2020, 2021 and 2022, respectively, with the lower BPP reflecting the temporary shutdown of certain wells as described under the caption “THE WATER SYSTEM—PFAS Treatment Plant.” In Fiscal Year 2023, based on estimated water demands, the District projects that it will pump up to 76% of its water demand from the Orange County Groundwater Basin, which equals approximately 15,000 acre feet. The District currently pays OCWD a replenishment assessment of $507 per acre foot for all groundwater pumped and a BEA equal to an additional $563 per acre foot for groundwater pumped in excess of the BPP formula, if any. For Fiscal Year 2023, the replenishment assessment has been set at $558 per acre foot for all groundwater pumped and the BEA has been set at an additional $406 per acre foot of groundwater in excess of the BPP formula, if any. Since Fiscal Year 2016, the District has also paid OCWD an Annual Annexation Charge (as such term is defined in the annexation agreement between the District and OCWD that is discussed under the caption “YORBA LINDA WATER DISTRICT—General”). The Annual Annexation Charge replaces property tax revenues that would otherwise be received by OCWD had the annexation of the land that is the subject of the agreement not taken place. Annual Annexation Charge payments to OCWD have ranged from $336,000 in Fiscal Year 2019 to $645,000 in Fiscal Year 2022. OCWD faces various challenges in managing the Orange County Groundwater Basin. A description of these challenges, as well as a variety of other operating information with respect to OCWD, is included in certain disclosure documents prepared by OCWD. OCWD has certain publicly available documents and has entered into certain continuing disclosure agreements pursuant to which OCWD is contractually obligated, for the benefit of owners of certain of its outstanding obligations, to file certain annual reports, notices of certain enumerated events as defined under Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended (“Rule 15c2-12”), and annual audited financial statements (collectively, the “OCWD Information”), with EMMA, maintained on the Internet at http://emma.msrb.org. The OCWD Information is not incorporated herein by reference thereto, and the District makes no representation as to the accuracy or completeness of such information. OCWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE DISTRICT, THE AUTHORITY, THE TRUSTEE OR THE OWNERS OF THE BONDS TO PROVIDE OCWD INFORMATION TO THE DISTRICT OR THE OWNERS OF THE BONDS. OCWD HAS NOT REVIEWED THIS OFFICIAL STATEMENT AND HAS NOT MADE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO OCWD. OCWD IS NOT CONTRACTUALLY OBLIGATED, AND HAS NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE BENEFIT OF THE DISTRICT OR THE OWNERS OF THE BONDS UNDER RULE 15c2-12. Complaint against OCWD. As discussed under the caption “—Groundwater,” OCWD annually establishes the BPP, which is the amount of groundwater, as a percentage of total water demands, that groundwater producers can pump from the Orange County Groundwater Basin without incurring additional assessments. In June 2016, Irvine Ranch Water District (“IRWD”), a water service provider within OCWD boundaries, filed a complaint (the “Complaint”) against OCWD in the Superior Court for the State of California, County of Orange (the “Court”), seeking an order determining that OCWD’s BPP calculation methodology is unlawful. In August 2016, OCWD filed an answer to the Complaint denying all substantive allegations. The District, the City of Anaheim, two other local water agencies and one private water company, which all produce groundwater from the Orange County Groundwater Basin, filed answers in order to join the litigation as Page 192 of 236 -31- 4878-9554-1791v3/022608-0014 interested parties. In June 2021, IRWD filed a Seventh Amended Complaint (the “Amended Complaint”), which is currently the operative pleading in this matter. All interested parties that remain in the litigation (including the District) have filed cross-complaints against IRWD, each of which seek relief in opposition to the relief that IRWD seeks in the Amended Complaint. The Amended Complaint (incorporating claims that were originally raised in earlier amended complaints) challenges OCWD’s practice of prohibiting the “unlawful exportation” of groundwater to the portions of IRWD’s service area that are outside of OCWD’s service area, as well as OCWD’s April 17, 2019 adoption of a resolution which set a production limitation and surcharge on groundwater pumping from the Orange County groundwater basin (the “Production Limitation and Surcharge”). IRWD is contesting the validity of the Production Limitation and Surcharge. On July 17, 2018, the Court issued its ruling on the first phase of trial, which addressed OCWD’s actions disallowing recycled water as a supplemental source of water within the meaning of Section 31.5 of OCWD’s governing act (the “OCWD Act”). The Court upheld OCWD’s position and denied relief to IRWD on the first four causes of action. On September 30, 2019, the Court issued its ruling on the second phase of the trial, which addressed IRWD’s claims concerning unlawful exportation (as discussed above). The Court granted IRWD relief and held that on OCWD’s ability to restrict the exportation of groundwater was limited to filing a formal legal action against an alleged unlawful exporter of groundwater from the Orange County Groundwater Basin. In the third phase of trial (designated as Phase 2a), IRWD asserted claims challenging the validity of the Production Limitation and Surcharge (as discussed above) adopted by OCWD in April 2019. IRWD claimed that the Production Limitation and Surcharge improperly seeks to prohibit exports in violation of the OCWD Act and its limitation on OCWD’s statutory power to prohibit exports through non-litigation means. On November 13, 2020, the Court issued a ruling denying IRWD’s claims asserted in Phase 2a. IRWD has since dismissed OCWD from the lawsuit. The sole remaining claims in the case are cross claims seeking declaratory relief against IRWD relating to the groundwater rights of cross complainants (including the District, other nearby water districts and the City of Anaheim) arising under a judgment entered in 1933 in an action entitled Campbell v. The Irvine Company. On June 16, 2022, the Court heard and denied IRWD’s Motion for Summary Judgment to dispose of the remaining cross claims, so these cross claims may proceed to trial, which has not yet been scheduled. If IRWD’s arguments under the remaining claims are successful and the cross-complaints are unsuccessful, or if IRWD successfully appeals judgments that have already been rendered by the Court, IRWD may be able to pump additional amounts of groundwater, and such additional amounts of groundwater would not be subject to the BEA. Such an outcome could reduce the BPP for all other groundwater pumpers, including the District, and compel the District either to pay a BEA or to purchase more expensive imported water in order to make up the difference of groundwater that would otherwise be included within the District’s BPP. The projected water production expenses that are set forth under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” do not assume any reduction in the BPP as a result of the foregoing dispute. Imported Water. The other source of supply available to the District is water that the District purchases from MWDOC, a member of MWD. MWD is the largest wholesale water agency in the United States, distributing water to a service area that extends from Ventura to the California-Mexico border. MWD’s distribution system sells water directly to certain agencies such as MWDOC. The District pays for its imported water through MWDOC but takes actual delivery of the water that it purchases through pipelines owned by MWD in the County (the Allen-McColloch Pipeline (in which the District holds rights to approximately 30 cubic feet per second of capacity) and the East Orange County Feeder No. 2 (in which the District holds rights to approximately 10 cubic feet per second of capacity). District pipelines used to deliver imported water have a Page 193 of 236 -32- 4878-9554-1791v3/022608-0014 combined capacity of approximately 26 mgd. MWD supplies are treated to potable water standards at the Robert B. Diemer Filtration Plant (the “Diemer Plant”), a 520 mgd capacity water treatment plant in the City of Yorba Linda near the District’s service area. The District currently has adequate capacity from MWDOC to meet its average daily demands from its customers. MWDOC is a member agency of MWD. MWD imports water into southern California from both the Colorado River via the Colorado River Aqueduct and from northern California via the State Water Project. The same water rate is charged for water provided from each source. MWD was created in 1928 by vote of the electorates of a number of Southern California cities to provide a supplemental supply of water for domestic and municipal uses at wholesale to its member agencies. The MWD service area comprises approximately 5,200 square miles and includes portions of the six counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura. There are 26 member agencies of MWD, consisting of 14 cities, 11 municipal water districts (including MWDOC) and one county water authority. MWD is governed by a Board of Directors (the “MWD Board”), which currently has 38 members. Each member agency has at least one representative on the MWD Board. Representation and voting rights are based upon each member agency’s assessed valuation. MWDOC is among MWD’s largest customers and has four representatives on the MWD Board. The total population of the MWD service area is approximately 19 million. MWD member agencies request water from MWD at various delivery points within MWD’s service area and pay for such water at uniform rates that are established by the MWD Board for each class of service. For planning purposes, each MWD member agency advises MWD annually in December of its anticipated delivery requirements for each of the five following fiscal years. Charges for water delivered are billed monthly and payable by the end of the second month following delivery. MWD’s water rates are established by majority vote of the MWD Board and are not subject to regulation by the California Public Utilities Commission or any other local, State or federal agency. Rates must be uniform for any class of service, and no water may be provided free of charge. Under the Metropolitan Water District Act, California Statutes 1969, Chapter 209, as amended (the “MWD Act”), MWD is required, so far as practicable, to fix such rate or rates for water as will result in revenue which, together with revenue from any water standby or availability charge or assessment, will pay the operating expenses of MWD, provide for repairs and maintenance, provide for payment of the purchase price or other charges for property or services or other rights acquired by MWD and provide for the payment of the interest and principal of the bonded debt of MWD, subject to the applicable provisions of the MWD Act authorizing the issuance and retirement of such bonds. MWDOC’s charge to the District consists of four components: (a) MWDOC’s cost to purchase water from MWD; (b) a capacity charge in the current amount of approximately $302,800 per year; (c) a readiness-to-serve charge in the current amount of approximately $391,000 per year; and (d) an annual retail connection charge in the current amount of $13 per connection. MWD faces various challenges in the continued supply of imported water to MWDOC. In March 2022, the State of California Department of Water Resources (“DWR”), which operates the State Water Project, announced that allocations for water year 2022-23 would be limited to 5% of requested supplies in the face of a third year of drought. Allocations represent the amount of State Water Project water that DWR will deliver for the year and are reviewed monthly based on several factors, including water in storage, environmental requirements and rain and snow runoff projections. In addition, in April 2022, MWD declared a water shortage emergency for those portions of its service area that are primarily dependent on State Water Project water, which does not include the District’s or MWDOC’s service area. As discussed above under the subcaption “—Groundwater,” the District’s primary water source is groundwater supplies from District-owned wells rather than water purchased from MWD. A description of many of the challenges faced by MWD, as well as a variety of other operating information with respect to MWD, is included in certain disclosure documents prepared by MWD. MWD has Page 194 of 236 -33- 4878-9554-1791v3/022608-0014 certain publicly available documents and has entered into certain continuing disclosure agreements pursuant to which MWD is contractually obligated, for the benefit of owners of certain of its outstanding obligations, to file certain annual reports, notices of certain enumerated events as defined under Rule 15c2-12 and annual audited financial statements (collectively, the “MWD Information”) with EMMA. The MWD Information is not incorporated herein by reference thereto, and the District makes no representation as to the accuracy or completeness of such information. MWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE DISTRICT, THE AUTHORITY, THE TRUSTEE OR THE OWNERS OF THE BONDS TO PROVIDE MWD INFORMATION TO THE DISTRICT OR THE OWNERS OF THE BONDS. MWD HAS NOT REVIEWED THIS OFFICIAL STATEMENT AND HAS NOT MADE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO MWD. MWD IS NOT CONTRACTUALLY OBLIGATED, AND HAS NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE BENEFIT OF THE DISTRICT OR THE OWNERS OF THE BONDS UNDER RULE 15c2-12. Historical and Projected Water Supply Set forth below is a summary of the District’s sources of water supply for the last five Fiscal Years. Although reductions in water supply result in lower Water System Revenues, they also result in reduced Operating and Maintenance Costs to the District. TABLE 3 YORBA LINDA WATER DISTRICT HISTORICAL WATER SUPPLY IN ACRE FEET PER YEAR Fiscal Year Groundwater Imported Water Total Increase/(Decrease) 2018 14,269 6,117 20,386 N/A% 2019(1)14,920 3,106 18,026 (11.58) 2020 10,245 9,076(2)19,321 7.18 2021 10,742 9,728(2)20,470 5.95 2022 6,705 13,169(2)19,874 (2.91) (1) Decrease reflects wet hydrological year. (2) Increases in imported water supplies reflect the idling of certain District wells as a result of the detection of PFAS. See the caption “THE WATER SYSTEM—PFAS Treatment Plant.” Source: District. Set forth below is a summary of the District’s projected sources of water supply for the current and next four Fiscal Years. Page 195 of 236 -34- 4878-9554-1791v3/022608-0014 TABLE 4 YORBA LINDA WATER DISTRICT PROJECTED WATER SUPPLY IN ACRE FEET PER YEAR(1) Fiscal Year Groundwater Imported Water Total Increase/(Decrease) 2023 14,721 4,728 19,449 (2.14)% 2024 14,721 4,728 19,449 0.00 2025 14,721 4,728 19,449 0.00 2026 14,721 4,728 19,449 0.00 2027 14,721 4,728 19,449 0.00 (1) Reflects satisfaction of 76% of total water demands by pumping from the Orange County Groundwater Basin. See the caption “—General—Groundwater.” Reflects no additional water use restrictions beyond those that are currently in place. See the caption “—Drought Proclamations.” Source: District. Drought Proclamations State Orders. On January 17, 2014, the Governor declared a drought state of emergency (the “Declaration”) with immediate effect. The Declaration included an order encouraging local urban water suppliers, including the District, to implement their local water shortage contingency plans; the District’s plan is discussed under the subcaption “—District Response to Drought.” On April 7, 2017, after significant improvement in water supply conditions across the State, the Governor issued Executive Order B-40-17, which rescinded mandatory conservation measures for most counties in the State (including the County). In 2018, the Governor signed Senate Bill 606 and Assembly Bill 1668 into law. These bills relate to water conservation and drought planning and empower DWR and the State Water Resources Control Board (the “SWRCB”) to adopt long-term standards for the following: (i) indoor residential water use; (ii) outdoor residential water use; (iii) commercial, industrial and institutional water use for landscape irrigation; and (iv) water loss. The indoor water use standard has been defined as 55 gallons per person per day (“GPCD”) until January 2025; the standard will decrease to 50 GPCD in January 2030. Standards for outdoor residential water use and commercial, industrial and institutional water use for landscape irrigation are still being developed. Urban water suppliers will be required to stay within annual water budgets, based on these standards, for their service areas. The District is planning to respond to the impacts on the Water System of the implementation of Senate Bill 606 and Assembly Bill 1668 or any future legislation with respect to water conservation and water loss. However, the State Legislature is proposed to lower indoor water use standards even further. The District is prepared to meet the 55 GPCD standard for indoor water use, and annual State-mandated water use efficiency standards, based on the District’s current water demands and ongoing efforts to encourage conservation, as described below under the subcaption “—District Response to Drought.” The District will continue to monitor the ongoing conservation proposals made by the State. On October 19, 2021, the Governor declared a Statewide drought state of emergency and requested that all water users voluntarily reduce water use by 15%. The declaration encouraged water agencies to draw upon supplies other than groundwater and to implement their water shortage contingency plans and authorized the SWRCB to adopt regulations that prohibit wasteful water use (such as the use of potable water to wash paved surfaces or to irrigate landscaping during the two days following rainfall). In August 2021, the federal government declared a water shortage at Lake Mead, which is a major storage reservoir on the Colorado River. As discussed under the caption “—General—Imported Water,” Colorado River supplies are among the water sources for MWD, which provides water to the District’s water wholesaler, MWDOC. The water shortage declaration triggered mandatory cuts in water allocations for water Page 196 of 236 -35- 4878-9554-1791v3/022608-0014 users in Arizona and Nevada, although not for MWD or other users in California. Notwithstanding the foregoing, in December 2021, water users in California (including MWD), Arizona and Nevada agreed to voluntary cuts of 500,000 acre feet of water from the Colorado River in both 2022 and 2023, and MWD agreed to pay up to $20 million to certain agricultural rights holders that leave their land fallow. There can be no assurance that subsequent declarations with respect to the Colorado River will not require mandatory water cuts to MWD should dry conditions persist in 2022 or future years. There can be no assurance that subsequent State declarations will not impose mandatory water use restrictions should dry conditions persist in 2022 or future years. On March 28, 2022, the Governor issued Executive Order N0-27-22, which directed the SWRCB to issue drought regulations, including a recommendation to have urban water suppliers initiate Level 2 of their water shortage contingency plan. [UPDATE IF REGS ISSUED BEFORE POSTING OF POS] As set forth in its Urban Water Management Plan (a planning document that is required to be maintained and updated periodically in accordance with State law), the District believes that it has significant water supplies and storage and is well positioned to respond to both drought and regulatory requirements. At this time, the District does not foresee a water supply shortage. District Response to Drought. Under the District’s Water Shortage Contingency Plan (the “WSCP”), the District may take Demand Reduction Action and Supply Augmentation Action in response to mandatory conservation measures imposed by the State. Various stages of the District’s prior drought ordinance were implemented in Fiscal Year 2016. Currently, the District is only implementing the Demand Reduction Actions up to Level 2 of the WSCP, with no mandatory enforcement actions in place. If the District believes that stronger action needs to be implemented to reduce customer demand, the Board take action to implement the following drought rates: YORBA LINDA WATER DISTRICT DROUGHT RATES Drought Stage Water Use Reduction Target Additional Charge Per Unit(1) (Effective 7/1/22) Additional Charge Per Unit(1) (Effective 7/1/23) Additional Charge Per Unit(1) (Effective 7/1/24) Additional Charge Per Unit(1) (Effective 7/1/25) None None $ -$ -$ -$ - Stage 1 10%0.14 0.16 0.18 0.20 Stage 2 20%0.29 0.32 0.35 0.39 Stage 3 30%0.60 0.66 0.73 0.80 Stage 4 50% 1.11 1.22 1.34 1.37 (1)A unit equals 100 cubic feet (748 gallons) of water. Source: District. The proceeds of any administrative penalties or fines that the District may levy in the future pursuant to an adopted ordinance do not constitute Revenues that are pledged to the Series 2022 Installment Payments. See Appendix B under the caption “INSTALLMENT PURCHASE AGREEMENT—Definitions” for a detailed definition of Revenues. Under the WSCP, the District may: (1) engage in public outreach and education efforts; (2) offer rebates for turf removal, the installation of rain barrels and smart irrigation meters and high-efficiency appliances; (3) and impose the below-described mandatory restrictions on water use (beginning with irrigation and other outdoor uses) and enforcement actions. Page 197 of 236 -36- 4878-9554-1791v3/022608-0014 In addition, under the WSCP, the District may implement water conservation measures in stages as follows: Under Level 1, the District seeks to reduce water use by up to 10% by expanding its public awareness campaign, promoting MWDOC’s rebate campaign for water efficiency measures and requiring leaks to be fixed within 5 days. Under Level 2, the District seeks to reduce water use by up to 20% by requiring leaks to be fixed promptly, requiring the use of automatic shutoff nozzles when irrigating by hand and enhancing customer billing practices to provide leak reports and repair assistance. Under Level 3, the District seeks to reduce water use by up to 30% by prohibiting outdoor landscaping between 9:00 a.m. and 6:00 p.m., prohibiting the irrigation of street medians, prohibiting restaurants from serving water except upon request, requiring lodging establishments to enable guests to opt out of linen service and prohibiting the installation of single pass cooling systems in new construction. Under Level 4, the District seeks to reduce water use by up to 40% by prohibiting non-essential commercial and industrial water use, limiting outdoor irrigation to 15 minutes per day and prohibiting the washing down of paved surfaces except to alleviate sanitary or safety hazards. Under Level 5, the District seeks to reduce water use by up to 50% by prohibiting the filling of ornamental water features, prohibiting the filling or re-filling of swimming pools and prohibiting the irrigation of schools and parks. Under Level 6, the District seeks to reduce water use by over 50% by undertaking other measures to be determined by the Board. Implementation of the WSCP in future years would be expected to reduce water sales revenues, although the impact of such reductions would be partially mitigated by the fact that operating costs would also be reduced as the District would purchase less imported water and/or extract less groundwater. In addition, as discussed under the caption “THE WATER SYSTEM—Water System Rates and Charges,” the District’s rate structure consists of variable and fixed rate components, so a reduction in water sales would not have a direct correlation to reduced revenues as the District would continue to collect fixed monthly service charges. The projected operating results set forth under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” reflect the continued implementation of Demand Reduction Actions up to Level 2 of the WSCP through Fiscal Year 2027, with no mandatory enforcement actions in place. The District does not believe that the continued implementation of Demand Reduction Actions up to Level 2 of the WSCP will have a material adverse effect on its ability to make the Series 2022 Installment Payments from Net Revenues. The District notes that Net Revenues include Ad Valorem Tax Revenues which are received independent of water sales. See the caption “YORBA LINDA WATER DISTRICT—Ad Valorem Tax Revenues.” If the Statewide water shortage should persist or worsen, legal issues exist as to whether different State Water Code provisions should be invoked to require reasonable regulations for the allocation of water in time of shortage. Any curtailment pursuant to State orders that is accompanied by an increase in MWD water charges to its member agencies could necessitate an increase in the District’s water rates to District customers. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218” for a discussion of certain restrictions on the District’s ability to raise water rates. Page 198 of 236 -37- 4878-9554-1791v3/022608-0014 THE WATER SYSTEM General The Water System of the District serves approximately 22.6 square miles of territory. The Water System consists of more than 350 miles of water pipeline of various diameters, 14 active reservoirs with a combined capacity of approximately 57,000,000 gallons, 12 booster pumps and nine active water wells providing a combined maximum capacity of approximately 19 mgd. Additionally, the Water System contains three pipeline connections for potable imported water with a combined capacity of 26 mgd, and one pipeline connection for non-potable water with a capacity of 2.6 mgd. The well water depths of the Water System are monitored on a continuous basis. The entire Water System is linked to the Supervisory Control and Data Acquisition System, a computer software system that monitors and controls the wells, tanks, lift stations and booster stations. The District has an automatic meter reading system for water consumption, which is recorded through radio reads and downloaded into the District’s computer system for billing. The District maintains has backup power supplies at all key facilities, including natural gas and electric pumps, as well as three portable diesel backup pumps and a large diesel-powered electric generator. The District classifies its customers into the following major categories: residential, commercial and industrial, landscape, private fire service, construction and untreated water. As shown in the table below, as of June 30, 2022, the District provided water service to approximately [23,410 individually metered residential connections, 264 master-metered multifamily residential units, 839 commercial and industrial connections and 927] irrigation connections. The commercial and industrial customer base is composed primarily of service businesses such as markets, service stations and restaurants as well as hospitals, office buildings, car washes and other commercial service establishments. The City of Yorba Linda is the District’s largest customer, primarily using water to irrigate landscaping in parks, street medians and slopes. The table below illustrates the number of customers in each major category and percent of total as of May 31, 2022. [UPDATE IF AVAILABLE FOR 6/30/22] TABLE 5 YORBA LINDA WATER DISTRICT NUMBER OF UNITS SERVED AND WATER USE BY CATEGORY Customer Category Number of Connections Percent of Total Connections Percent of Water Use Residential [23,410 92.02%77.3% Master-Metered Multifamily 264 1.04 2.3 Commercial and Industrial 839 3.30 6.5 Irrigation 927 3.64 13.9] Total 25,440 100.00%100% Source: District. PFAS Treatment Plant The District’s primary water sources are treated imported water which is supplied by MWD and groundwater extracted from District-owned wells. See the caption “WATER SUPPLY—General.” MWD water supplies come from the Colorado River and the State Water Project and are treated to potable water standards at the Diemer Plant prior to delivery to the District. Page 199 of 236 -38- 4878-9554-1791v3/022608-0014 Water extracted from the District’s wells can on occasion have concentrations of nitrates and total dissolved solids, which can increase the salinity of water supplies. OCWD, which manages the Orange County Groundwater Basin from which the District extracts groundwater, monitors the basin for such minerals. As a result of OCWD monitoring and the District’s ability to blend groundwater supplies, the District does not expect the quality of the water that it serves to customers to be significantly affected by the presence of nitrates or total dissolved solids in the future. In 2019, the SWRCB’s Division of Drinking Water (the “Division”) lowered the Notification Levels (the “NLs”) for Perfluorooctanoic acid (“PFOA”) and Perfluorooctanesulfonic acid (“PFOS”) to 5.1 and 6.5 parts per trillion (“PPT”), respectively. NLs are non-regulatory, precautionary health-based measures for concentrations of chemicals in drinking water that warrant notification and further monitoring and assessment. In 2020, the Division lowered the Response Level (the “RL”) for PFOA and PFOS from 70 PPT, combined, to 10 and 40 PPT, respectively. RLs are non-regulatory, precautionary health-based measures that are set at higher levels than NLs and represent thresholds at which the Division recommends that water systems remove a water source from use or treat it. PFOA and PFOS are fluorinated organic chemicals which are part of a family of synthetic compounds referred to as per- and polyfluoroalkyl substances (“PFAS”). PFAS are water and lipid resistant substances that were previously used in a variety of manufacturing processes and industrial applications. They are often present in water supplies which are impacted by wastewater treatment plant effluent or active or former military installations. The District understands that recent technological advances have enabled water agencies to detect PFAS compounds at very low concentrations. Beginning in February 2020, the District temporarily ceased extractions from its wells as a result of the detection of PFAS in the District’s groundwater supplies. There were no groundwater extractions during the following periods: (i) February 2020 through May 2020; (ii) February 2021 through June 2021; and (iii) July 2021 through December 20, 2021. During these periods, the District increased its purchases of imported water from MWD. See Table 3 under the caption “WATER SUPPLY—Historical and Projected Water Supply.” In April 2020, the District and OCWD entered into an agreement pursuant to which OCWD agreed to finance the construction of a facility to remove PFAS from District groundwater supplies prior to delivery to customers (the “PFAS Treatment Plant”). The PFAS Treatment Plant, which has been constructed and which commenced operations in December 2021, is located adjacent to the District’s administrative headquarters in the City of Placentia. The PFAS Treatment Plant is one of 36 PFAS treatment facilities that are being financed by OCWD. The PFAS Treatment Plant treats up to 25 mgd of groundwater utilizing an ion exchange treatment process in which highly porous resin that acts like a powerful magnet adsorbs and retains contaminants. The PFAS Treatment Plant consists of six pre-filters, 22 ion exchange vessels, a booster pump station, an upgraded onsite chlorine generation system and a 1,000-kilowatt backup generator. The PFAS Treatment Plant is the largest ion exchange treatment plant in the United States and was named the Outstanding Water Project and Project of the Year at the 2022 American Society of Civil Engineers Orange County awards ceremony. Under the District’s agreement with OCWD, OCWD funded 100% of the design and construction costs and will fund 50% of the ongoing operation and maintenance costs of the PFAS Treatment Plant up to $75 per acre foot, with the District responsible for the remaining ongoing operation and maintenance costs. The District, OCWD and other agencies that extract groundwater from the Orange County Groundwater Basin filed a lawsuit against several PFAS manufacturers (the “PFAS Lawsuit”) seeking to recover the costs of designing, constructing and operating and maintaining the PFAS treatment facilities, as well as the costs of purchasing imported water while groundwater wells were idle. The PFAS Lawsuit was initially filed in the Superior Court, County of Orange, State of California, but has since been transferred to the United States District Court for the District of South Carolina, Charleston Division, in the Multi-District Litigation (MDL No. 2:18- mn-2873-RMG) titled In Re: Aqueous Film-Forming Foams Products Liability Litigation. As of mid-June 2022, the status of the Multi-District Litigation is as follows: Expert depositions have commenced and are expected to Page 200 of 236 -39- 4878-9554-1791v3/022608-0014 be completed in August 2022; motions for summary judgement and discovery motions will be filed in the “bellwether” case, which is a test case representative of similarly situated cases, in August 2022; and the bellwether case is on track for trial in March 2023. The result of this bellwether trial will influence, but not establish, the value of the PFAS Lawsuit. Any monetary award under the PFAS Lawsuit will largely be recovered by OCWD, which designed and constructed the PFAS Treatment Plant and funds 50% of the cost to operate and maintain the PFAS Treatment Plant (up to $75 per acre foot), but the District could recover the other amounts needed to operate and maintain the PFAS Treatment Plant plus the cost of purchasing imported water while the District’s groundwater wells were idle. The District will not incur any monetary loss if it does not prevail in the PFAS lawsuit. Imported water is approximately twice as expensive as groundwater extractions. The District raised its water rates in 2020 and 2021 to reflect the additional expenses associated with purchasing larger amounts of imported water from MWD than had originally been anticipated and budgeted. The projected operating results which are set forth under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” assume higher levels of Operating and Maintenance Costs to operate and maintain the PFAS Treatment Facility on an ongoing basis. To offset the higher costs of producing groundwater, the District imposed a monthly PFAS Impact Fee charged to customers based on meter size from February 2021 through December 2021. Pursuant to the notice, hearing and protest provisions of Proposition 218 described under the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218,” the Board of Directors also adopted a five-year schedule of water system rates and charges for the period beginning on July 1, 2021. The District’s water rates and charges are scheduled to be adjusted by no more than 9% per annum beginning in Fiscal Year 2024. All rate adjustments are subject to Board adoption and there can be no assurance that any such rate increases will ultimately be adopted by the Board. See the caption “—Water System Rates and Charges—Water Service Charges.” The District is subject to a covenant requiring it to set rates and charges at levels that are sufficient to pay the Series 2022 Installment Payments. See the caption “SECURITY FOR THE BONDS—Rate Covenant.” On June 15, 2022, the United States Environmental Protection Agency (“EPA”) released four health advisories relating to various types of PFAS, including PFOA and PFOS. Health advisories provide technical information that federal, state, and local officials can use to inform the development of monitoring plans, investments in treatment solutions and future policies to protect the public from PFAS exposure. Although the health advisories include EPA recommendations, in this case to the effect that even concentrations as low as 2 parts per trillion (as to PFOS) should be mitigated, they do not constitute binding regulations. The EPA’s June 15, 2022 release indicates that the EPA expects to release proposed regulations related to PFAS by late 2022 and makes available $1 billion in grant fund to reduce PFAS levels in affected communities. The District can provide no assurance as to the ultimate content of any EPA regulations related to PFAS. However, given the construction of the PFAS Treatment Plant as described above, the District does not currently expect such regulations to impact its water operations or revenues. Page 201 of 236 -40- 4878-9554-1791v3/022608-0014 Historical Water Connections The following table shows the number of water connections to the Water System for the last five Fiscal Years. TABLE 6 YORBA LINDA WATER DISTRICT HISTORICAL WATER CONNECTIONS Fiscal Year Connections(1)Increase/(Decrease) 2018 25,040 N/A% 2019 25,206 0.66 2020 25,350 0.57 2021 25,417 0.26 2022 [25,440]0.09 (1)Excludes private fire connections. Source: District. Page 202 of 236 -41- 4878-9554-1791v3/022608-0014 Historical Water Deliveries The following table presents a summary of historical water deliveries for the Water System in acre feet per year for the last five Fiscal Years. TABLE 7 YORBA LINDA WATER DISTRICT HISTORICAL WATER DELIVERIES IN ACRE FEET PER YEAR Fiscal Year Water Deliveries(1)Increase/(Decrease) 2018 18,582 N/A% 2019(2)16,501 (11.20) 2020 16,973 2.86 2021 19,235 13.33 2022 [18,284](4.94) (1)The differences between historical water deliveries and historical water supply set forth in Table 3 under the caption “WATER SUPPLY—Historical and Projected Water Supply” reflect system losses. (2) Decrease reflects wet hydrological year. Source: District. Historical Water Sales Revenues The following table shows annual water sales revenues of the District for the last five Fiscal Years. TABLE 8 YORBA LINDA WATER DISTRICT HISTORICAL WATER SALES REVENUES Fiscal Year Sales Revenues CFC(2)Total Increase/(Decrease) 2018 $32,082,152 $ -$32,082,152 N/A% 2019(1)29,819,532 -29,819,532 (7.05) 2020 32,192,312 -32,192,312 7.96 2021 35,539,146 -35,539,146 10.40 2022(3)33,265,791(4)2,847,615 36,113,406 1.62 (1) Decrease reflects wet hydrological year. (2) This charge was first imposed in Fiscal Year 2022 and is described under the caption “Water System Rates and Charges— Water Service Charges.” (3)Reflects unaudited actual Fiscal Year 2022 results based on available information to date. Subject to change. (4) Decrease reflects changes in District’s fixed rate structure in 2021 to mitigate impact of reduced water sales on total revenues. See the caption “—Water System Rates and Charges.” Source: District. Page 203 of 236 -42- 4878-9554-1791v3/022608-0014 Largest Customers The following table sets forth the ten largest customers of the Water System as of June 30, 2021, as determined by annual payments. [UPDATE IF AVAILABLE FOR 6/30/22] TABLE 9 YORBA LINDA WATER DISTRICT TEN LARGEST WATER SYSTEM CUSTOMERS Customer Type of Business Annual Payments Percent of Total City of Yorba Linda Government $2,409,028 6.78% Placentia-Yorba Linda Unified School District Government 402,826 1.13 Fairmont Hill Community Association Homeowners Association 158,754 0.45 The Hills at Yorba Linda Homeowners Association 151,995 0.43 Yorba Linda Villages Homeowners Association 142,207 0.40 RRE Yorba Linda Holdings Manufacturer 130,948 0.37 Beverage Visions, LLC Manufacturer 105,523 0.30 Amalfi Hills Community Association Homeowners Association 90,258 0.25 Woodgate Condominium Homeowners Association 75,794 0.21 Placentia Linda Hospital Hospital 73,618 0.21 TOTAL $3,740,952 10.53% Source: District. These ten largest customers accounted for approximately 10.53% of total water sales revenues of $35,539,146 for Fiscal Year 2021. Water System Rates and Charges General. Rates and charges for water service in the District’s service area are set by the Board and are not subject to the jurisdiction of, or regulation by, the California Public Utilities Commission or any other regulatory body. The Board currently sets water charges to pay the costs of water pumping and to recover operating expenses of the Water System as well as depreciation. Capital improvements and debt service payments for the Water System are funded from capital facilities fees, property tax revenues and water rates, including the CFC (as such term is defined under the subcaption “—Water Service Charges”), which is predominantly collected as a special assessment on property tax billing statements. The District generally applies one schedule of rates and charges for the Water System, with the exception of separately stated rates for construction water, untreated water and private fire water. Additionally, the District sets separate rates and charges for its sewer operations, the revenues from which are not pledged to the payment of Series 2022 Installment Payments. The District is statutorily authorized and has adopted a policy whereby the Board, at its option and determination, may pass through to customers increased wholesale water costs and power and energy rates imposed on the District that are greater than those projected and used in the model to develop its financial plan. Any costs passed through to customers must be approved in advance by the Board. Pursuant to the policy, “increased costs of purchased wholesale water costs which are charged to the District by the Orange County Water District and the Metropolitan Water District of Southern California via the Municipal Water District of Orange County and/or power/energy costs will pass through by determining the unit cost per 100 cubic feet of water and then applying such cost to retail accounts on the basis of water usage.” The Board is required to provide notice to District customers for any increased water costs resulting from any of such pass-through costs. On June 8, 2021, after compliance with the notice, hearing and protest provisions of Proposition 218 described under the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND Page 204 of 236 -43- 4878-9554-1791v3/022608-0014 CHARGES—Proposition 218,” the Board adopted a resolution implementing water rate increases effective July 1, 2021. The projected water revenues for Fiscal Years 2023 and thereafter set forth under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” assume adjustments to the monthly capacity charge, the water consumption charge and the CFC which total approximately 9% per annum. There can be no assurance that the Board will adopt additional rate adjustments as currently projected in the future. Water Service Charges. The District requires water meters for all of its customers. Since July 1, 2022, the District’s water consumption charge has been $2.90 per 100 cubic feet (748 gallons) (a “unit”) of water use, which includes a $0.02 pass-through adjustment for increased energy costs. See the caption “WATER SUPPLY—Drought Proclamations—District Response to Drought” for a description of additional charges that can be imposed on customers for water use to promote water conservation. In addition to consumption charges, customers are charged the following monthly capacity charge based on meter size: TABLE 10 YORBA LINDA WATER DISTRICT MONTHLY CAPACITY CHARGES Meter Size Monthly Capacity Charge 5/8” and 3/4”(1)$ 30.14 1”(1)47.02 1½”89.17 2”139.45 3”299.96 4”536.03 6” 1,353.89 (1) Approximately [92]% of District connections, representing approximately [72]% of Water System Revenues in Fiscal Year 2022, were to residential customers with 5/8”, 3/4” or 1” meters. Source: District. In order to pay for the costs associated with the debt financing of certain capital improvement projects, the District currently levies an additional charge, the capital (finance) charge (the “CFC”), which is levied annually through the County property tax roll. The approved CFCs for Fiscal Year 2023 are set forth below: Page 205 of 236 -44- 4878-9554-1791v3/022608-0014 YORBA LINDA WATER DISTRICT CAPITAL (FINANCE) CHARGE Meter Size Annual Charge 5/8” and 3/4”(1)$ 74.28 1”(1)123.84 1½”247.44 2”395.64 3”865.20 4”1,557.00 6”3,954.24 (1) Approximately [92]% of District connections, representing approximately [72]% of Water System Revenues in Fiscal Year 2022, were to residential customers with 5/8”, 3/4” or 1” meters. Source: District. The table below sets forth a comparison of the District’s annual water rates and charges for a single family residential user to those of nearby water purveyors as of July 1, 2022. All amounts reflect the billing for 15 units of water use per month: TABLE 11 YORBA LINDA WATER DISTRICT WATER SERVICE CHARGE COMPARISON Water Purveyor Total Bill East Orange County Water District $132.29 Mesa Water District 108.48 Golden State Water Company 104.18 Serrano Water District 97.46 City of Orange 92.01 Yorba Linda Water District $90.52(1)(2) Irvine Ranch Water District 63.20 (1) Excludes the CFC described above, which is collected through the annual property tax roll. (2) The water service charge for a single family residential user consuming 15 units per month is approximately $90.52 ($2.90 per unit multiplied by 15 units ($43.50) plus a $47.02 capacity charge for a 1” meter). Source: District. Collection Procedures The District is on a monthly billing cycle for Water Service, sending out bills every 28 to 36 days for the preceding month’s service. If payment is not received within 27 days, a late notice is rendered and a 10% late charge is assessed. A yellow tag notice of discontinuance is posted at the location(s) of all unpaid accounts when an account becomes 31 days past due from the bill due date. If the account remains unpaid thereafter, at 52 days past due, the account holder is contacted via phone and/or electronic mail to provide notice of an impending disconnection. For any account that remains unpaid after 64 days, water is turned off and the meter is locked until the unpaid balance and all associated notice and disconnection fees are paid. See the caption “YORBA LINDA WATER DISTRICT—COVID-19 Outbreak” for a discussion of the suspension of the imposition of late payment penalties and water shutoffs for delinquent accounts during the height of the COVID-19 pandemic. As a result of the foregoing actions, the District has maintained a schedule documenting approximately $412,000 in late fees that were not assessed during the period between March 18, Page 206 of 236 -45- 4878-9554-1791v3/022608-0014 2020 and June 30, 2021. The District has written off a total of approximately $33,700 (for Fiscal Years 2020 through 2022 combined) of nonpayment, including uncollected late fees. As noted under the caption “—Water System Rates and Charges—Water Service Charges,” the CFC is collected on an annual basis through the County property tax roll rather than through the District’s monthly billing process. See the caption “YORBA LINDA WATER DISTRICT—Ad Valorem Tax Revenues” for a discussion of property tax collection procedures. Projected Water Connections The following table shows the number of connections to the Water System projected by the District for the current and next four Fiscal Years. TABLE 12 YORBA LINDA WATER DISTRICT PROJECTED WATER CONNECTIONS Fiscal Year Connections Increase/(Decrease) 2023 25,477 [0.15]% 2024 25,497 0.08 2025 25,517 0.08 2026 25,533 0.06 2027 25,591 0.23 Source: District. Projected Water Deliveries The following table shows the Water System deliveries in acre feet per year projected by the District for the current and next four Fiscal Years. There can be no assurance that the projected water deliveries set forth below will be achieved, whether occasioned by a shortfall of water deliveries due to continued drought or other limiting conditions. See the caption “WATER SUPPLY” for a discussion of factors that could affect the District’s water supply. Differences between projected water deliveries and projected supplies set forth under the caption “WATER SUPPLY—Historical and Projected Water Supply” reflect water losses and other non-revenue water use. TABLE 13 YORBA LINDA WATER DISTRICT PROJECTED WATER DELIVERIES IN ACRE FEET PER YEAR(1) Fiscal Year Deliveries Increase/(Decrease) 2023 17,893 [(2.14)]% 2024 17,893 0.00 2025 17,893 0.00 2026 17,893 0.00 2027 _17,893 0.00 (1) Reflects implementation of Demand Reduction Actions up to Level 2 of the WSCP, with no mandatory enforcement actions in place for the projection period. See the caption “WATER SUPPLY—Drought Proclamations.” Source: District. Page 207 of 236 -46- 4878-9554-1791v3/022608-0014 Projected Water Sales Revenues The following table shows annual water sales revenues projected by the District for the current and next four Fiscal Years. TABLE 14 YORBA LINDA WATER DISTRICT PROJECTED WATER SALES REVENUES Fiscal Year Sales Revenues CFC(1)Total Increase/(Decrease) 2023 $37,438,271 $3,103,900 $40,542,171 [12.26%] 2024 40,697,652 3,525,449 44,223,101 9.08 2025 44,346,340 3,842,740 48,189,080 8.97 2026 48,323,410 4,188,586 52,511,996 8.97 2027 52,658,417 4,565,559 57,223,976 8.97 (1) This charge was first imposed in Fiscal Year 2022 and is described under the caption “Water System Rates and Charges— Water Service Charges.” Source: District. The above projections are based on the projected water deliveries that are described under the caption “—Projected Water Deliveries,” the rates that are described under the caption “—Water System Rates and Charges—Water Service Charges” for Fiscal Year 2023 and projected adjustments to water rates of approximately 9% per annum beginning in Fiscal Year 2024. Projected water rate adjustments for Fiscal Years 2024 and thereafter have not yet been authorized. There can be no assurance that the Board will adopt such rate increases as currently projected. There can be no assurance that the projected water sales revenues set forth above will be achieved. Future Water System Improvements The District projects total capital improvements to the Water System (excluding the 2022 Project that is discussed under the caption “THE 2022 PROJECT”) of approximately $10,000,000 over the current and next four Fiscal Years, including rehabilitations to water lines and pressure reducing stations and facility improvements. The District expects that such projected capital improvements will be funded by grants and Revenues remaining after payment of Debt Service. The District does not expect to enter into additional obligations payable from Net Revenues to finance such capital improvements. WATER SYSTEM FINANCIAL INFORMATION Financial Statements A copy of the most recent financial statements of the District audited by CliftonLarsenAllen LLP, Irvine, California (the “Auditor”) are included as Appendix A hereto (the “Financial Statements”) and should be read in their entirety. The Auditor’s letter dated September 28, 2021 is set forth therein. The Financial Statements are public documents and are included within this Official Statement without the prior approval of the Auditor. Accordingly, the Auditor has not performed any post-audit analysis of the financial condition of the District, nor has the Auditor reviewed or audited this Official Statement. The summary operating results contained under the caption “—Historical Operating Results and Debt Service Coverage” are derived from the Financial Statements and audited financial statements for prior Fiscal Years (excluding certain non-cash items and after certain other adjustments, including adjustments to reflect the receipt of certain development fees in a given Fiscal Year that the District’s audited financial statements display Page 208 of 236 -47- 4878-9554-1791v3/022608-0014 such fees on an amortized basis over a 40-year period on the advice of the District’s Auditor). The summary operating results contained under the caption “—Historical Operating Results and Debt Service Coverage” are qualified in their entirety by reference to such statements, including the notes thereto. The Auditor has not reviewed or audited the summary operating results or any other portion of this Official Statement. The District accounts for moneys received and expenses paid in accordance with generally accepted accounting principles applicable to governmental agencies such as the District (“GAAP”). In certain cases, GAAP requires or permits moneys collected in one Fiscal Year to be recognized as revenue in a subsequent Fiscal Year and requires or permits expenses paid or incurred in one Fiscal Year to be recognized as expenses in a subsequent Fiscal Year. See Appendix A. Except as otherwise expressly noted herein, all financial information derived from the District’s audited financial statements reflects the application of GAAP. Investment of District Funds The District invests its funds in accordance with Resolution No. 18-12 of the District adopted in 2018 (the “Investment Policy”). The Investment Policy sets forth the policies and procedures applicable to the investment of District funds and designates eligible investments. The Investment Policy also sets forth stated objectives, including the assurance of the safety of invested funds, the maintenance of sufficient liquidity and the attainment of the best yield or returns on investments. The Board has delegated the authority for investing the funds of the District to the General Manager. Such authority is subject to renewal each year. The General Manager is authorized to designate representatives to manage the funds of the District and has designated such authority to the Finance Manager of the District and the Senior Accountant of the District. The District Investment Policy provides a number of permitted investment categories authorized under State law. The permitted investment categories include the following: (i) Federal Deposit Insurance Corporation- or Federal Savings and Loan Insurance Corporation-insured or collateralized obligations of banks or savings and loan institutions; (ii) certificates of deposit issued by financial institutions which maintain a rating equivalent of “A” or higher by one of the nationally recognized statistical rating organizations (“NRSROs”) up to a maximum maturity of 5 years, provided that the maximum investment in this category does not exceed 30% of the investment portfolio in the aggregate; (iii) the State Local Agency Investment Fund; (iv) the Orange County Treasurer’s Commingled Investment Pool; (v) the California Asset Management Program, limited to bond proceeds; (vi) treasury bills, notes and bonds, with maturities not to exceed five years; (vii) obligations issued by federal agencies and United States government-sponsored enterprises, such as the Federal National Mortgage Association, the Federal Land Bank and the Federal Home Loan Bank, with maturities not to exceed five years; (viii) corporate bonds rated “A” or its equivalent or better by an NRSRO, provided that the maximum maturity is limited to five years and the maximum investment in this category does not exceed 30% of the investment portfolio in the aggregate; (ix) banker’s acceptances, provided that the maximum term does not to exceed 180 days and the maximum investment in this category does not exceed 10% of the investment portfolio in the aggregate; (x) commercial paper, provided that the corporation has assets in excess of $500,000,000 and its commercial paper is rated “a-1” or higher by an NRSRO and that the investment matures in 270 days or less, and provided that the maximum investment in this category does not exceed 25% of the investment portfolio in aggregate; (xi) the Investment Trust of California; and (xii) money market mutual funds, provided that the maximum investment in this category does not exceed 20% of the investment portfolio in the aggregate. The Board may revise the Investment Policy from time to time. As of June 30, 2022 (excluding restricted amounts held in the Conservation Reserve and Employee Liability Reserve, as discussed under the caption “YORBA LINDA WATER DISTRICT—Management Policies—Reserve Policy”), the District had funds invested in the amount of $[__] in authorized investments under the Investment Policy, summarized as follows: money market securities ($[__]), certificates of deposit ($[__]) and the State of California Local Agency Investment Fund ($[__]). Page 209 of 236 -48- 4878-9554-1791v3/022608-0014 As of June 30, 2022 (excluding restricted amounts held in the Conservation Reserve and Employee Liability Reserve), approximately [__]% of the $[__] in District reserves was attributable to the Water System, including the Operating Reserve ($[__]), the Emergency Reserve ($[__]), the Capital Replacement Reserve ($[__]), the Rate Stabilization Reserve ($[__]) and the Metropolitan Water District Contingency Reserve ($[__]). Historical Operating Results and Debt Service Coverage The following table sets forth the operating results of the Water System of the District for the last five Fiscal Years. TABLE 15 YORBA LINDA WATER DISTRICT HISTORICAL OPERATING RESULTS (FISCAL YEAR ENDED JUNE 30) 2018 2019 2020 2021 2022(5) [CONFIRM AFTER 6/30/22] Revenues Water Sales $ 32,082,152 $ 29,819,532 $ 32,192,312 $ 35,539,146 $[33,265,791 CFC(1)- - - - 2,847,615 Ad Valorem Tax Revenues 1,749,957 1,874,688 1,961,002 2,072,582 2,138,640 Interest Income 444,371 687,320 595,316 192,022 65,284 Other(2)1,166,790 1,908,293 1,845,446 2,048,041 2,391,450(6) Total Revenues $ 35,443,270 $ 34,289,833 $ 36,594,076 $ 39,851,791 $ 40,708,780 Operating and Maintenance Costs Variable Water Costs(3)$ 15,028,131 $ 13,327,860 $ 16,916,388 $ 18,638,471 $ 20,766,799 Personnel Services 8,828,638 8,602,890 9,827,340 9,389,188 9,579,107 Supplies & Services 3,865,733 4,068,320 4,303,126 4,465,134 5,486,003 Total Operating and Maintenance Costs $ 27,722,502 $ 25,999,070 $ 31,046,854 $ 32,492,793 $ 35,831,909 Net Operating Revenues $ 7,720,768 $ 8,290,763 $ 5,547,222 $ 7,358,998 $ 4,876,871 Non-Operating and Maintenance Costs $ 47,465 $ 25,299 $ 109,564 $ -$ 8,711 Net Revenues $ 7,673,303 $ 8,265,464 $ 5,437,658 $ 7,358,998 $ 4,868,160 Debt Service 2012 Bonds(4)$ 588,313 $ 591,213 $ 583,713 $ 590,713 $ 586,250 2017 IPA 2,141,486 2,147,044 2,143,244 2,138,669 2,142,669 Total Debt Service $ 2,729,799 $ 2,738,256 $ 2,726,956 $ 2,729,381 $ 2,728,919 Remaining Revenues $ 4,943,504 $ 5,527,208 $ 2,710,702 $ 4,629,617 $ 2,139,241 Debt Service Coverage 2.81 3.02 1.99 2.70 1.78] (1)This charge was first imposed in Fiscal Year 2022 and is described under the caption “Water System Rates and Charges— Water Service Charges.” (2)Includes customer service charges, rental and royalty income and other miscellaneous revenues. Also includes certain development fees earned in each Fiscal Year that the District’s audited financial statements display on an amortized basis over a 40-year period on the advice of the District’s Auditor. See the caption “—Financial Statements.” (3)Increases in Fiscal Years 2020 through 2022 reflect increased purchases of imported water during the period of design and construction of the PFAS Treatment Plant. See the caption “THE WATER SYSTEM—PFAS Treatment Plant.” (4)This obligation is being refunded from proceeds of the Bonds. See the caption “REFUNDING PLAN.” (5)Reflects unaudited actual Fiscal Year 2022 results based on available information to date. Subject to change. (6)Includes proceeds of PFAS Impact Fee described under the caption “THE WATER SYSTEM—PFAS Treatment Plant.” Source: District. Page 210 of 236 -49- 4878-9554-1791v3/022608-0014 Projected Operating Results and Debt Service Coverage The following table sets forth the projected operating results of the Water System of the District for the current and next four Fiscal Years, reflecting certain significant assumptions concerning future events and circumstances. The financial forecast represents the District’s estimate of projected financial results based on several significant assumptions, including the assumptions set forth in the footnotes to the chart set forth below and the assumed continuation of the current Demand Reduction Actions up to Level 2 of the WSCP, with no mandatory enforcement actions in place, as described under the caption “WATER SUPPLY—Drought Proclamations” through Fiscal Year 2027. All of such assumptions are material in the development of the District’s financial projections, and variations in the assumptions may produce substantially different financial results. Although the District believes these projections to be reasonable, actual operating results achieved during the projection period may vary from those presented in the forecast and such variations may be material. TABLE 16 YORBA LINDA WATER DISTRICT PROJECTED OPERATING RESULTS (FISCAL YEAR ENDING JUNE 30) 2023(1)2024 2025 2026 2027 Revenues Water Sales(2)$ 37,438,271 $ 40,697,652 $ 44,346,340 $ 48,323,410 $ 52,658,417 CFC(3)3,103,900 3,525,449 3,842,740 4,188,586 4,565,559 Ad Valorem Tax Revenues(4)2,095,000 2,136,900 2,179,638 2,223,231 2,267,695 Interest Income(5)70,200 74,119 76,193 79,168 88,387 Other(6)1,831,246 2,577,946 2,904,551 2,922,601 2,940,832 Total Revenues $ 44,538,617 $ 49,012,066 $ 53,349,462 $ 57,736,996 $ 62,520,890 Operating and Maintenance Costs Variable Water Costs(7)$ 17,686,074 $ 18,993,122 $ 20,270,275 $ 21,621,771 $ 23,002,530 Personnel Services(8)10,661,853 11,514,801 12,435,985 13,430,864 14,505,333 Supplies & Services(9)8,102,413 7,784,123 7,903,715 8,228,747 8,567,492 Total Operating and Maintenance Costs $ 36,450,340 $ 38,292,046 $ 40,609,975 $ 43,281,382 $ 46,075,355 Net Operating Revenues $ 8,088,277 $ 10,720,020 $ 12,739,487 $ 14,455,614 $ 16,445,535 Non-Operating and Maintenance Costs(10)$ 12,350 $ 12,844 $ 13,358 $ 13,892 $ 14,448 Net Revenues $ 8,075,927 $ 10,707,176 $ 12,726,129 $ 14,441,722 $ 16,431,087 Debt Service 2017 IPA(11)$ 2,139,294 $ 2,143,419 $ 2,139,919 $ 2,133,919 $ 2,135,169 Series 2022 Installment Payments*1,498,360 2,079,475 2,082,100 2,078,875 2,081,875 Total Debt Service $ 3,637,654 $ 4,222,894 $ 4,222,019 $ 4,212,794 $ 4,217,044 Remaining Revenues $ 4,438,273 $ 6,484,282 $ 8,504,110 $ 10,228,928 $ 12,214,043 Debt Service Coverage 2.22 2.54 3.01 3.43 3.90 (1)Reflects Fiscal Year 2023 budgeted amounts with certain adjustments. See the caption “YORBA LINDA WATER DISTRICT—Budget Process.” (2)Reflects projected water deliveries described under the caption “THE WATER SYSTEM—Projected Water Deliveries,” approved rates for Fiscal Year 2023 and projected rate adjustments of approximately 9% per annum beginning in Fiscal Year 2024, as described under the caption “THE WATER SYSTEM—Water System Rates and Charges—General.” Such rate adjustments have not yet been authorized and there can be no assurance that the Board will adopt such rate increases as currently projected. (3)This charge was first imposed in Fiscal Year 2022 and is described under the caption “Water System Rates and Charges— Water Service Charges.” Projected to increase approximately 13% in Fiscal Year 2024 and approximately 9% per annum thereafter. _______________________ * Preliminary; subject to change. Page 211 of 236 -50- 4878-9554-1791v3/022608-0014 (4)Projected to increase by approximately 2% per annum. (5)Projected to vary as a result of the expenditure of reserves on capital improvements. (6)Includes customer service charges, rental and royalty income and other miscellaneous revenues. Also includes reimbursements from OCWD for operation of the PFAS Treatment Plant. See the caption “THE WATER SYSTEM—PFAS Treatment Plant.” (7)Reflects expenses of groundwater production and water purchases from MWDOC. See Table 4 under the caption “WATER SUPPLY—Historical and Projected Water Supply.” Decrease from Fiscal Year 2022 amount in Fiscal Year 2023 reflects reduced water purchases from MWDOC in light of full operation of PFAS Treatment Plant. See the caption “THE WATER SYSTEM—PFAS Treatment Plant.” (8)Projected to increase by approximately 8% per annum. (9)Reflects District projections. (10)Projected to increase by approximately 4% per annum. (11)Reflects scheduled payments. See the caption “YORBA LINDA WATER DISTRICT—Outstanding Obligations.” Source: District. CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Article XIIIB Article XIIIB of the State Constitution limits the annual appropriations of the State and of any city, county, school district, authority, special district or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and population. The “base year” for establishing such appropriation limit is the 1978-79 State fiscal year and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of an entity may also be made if: (a) the financial responsibility for a service is transferred to another public entity or to a private entity; (b) the financial source for the provision of services is transferred from taxes to other revenues; or (c) the voters of the entity approve a change in the limit for a period of time not to exceed four years. Appropriations that are subject to Article XIIIB generally include the proceeds of taxes levied by or for the State or other entity of local government, exclusive of certain State subventions, refunds of taxes and benefit payments from retirement, unemployment, insurance and disability insurance funds. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to an entity of government from: (i) regulatory licenses, user charges, and user fees (but only to the extent that such proceeds exceed the cost reasonably borne by the entity in providing the service or regulation); and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. Certain expenditures are excluded from the appropriations limit, including payments of indebtedness existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters and payments required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably make the provision of existing services more costly. The District is of the opinion that its charges for Water Service do not exceed the costs that it reasonably bears in providing such service and therefore are not subject to the limits of Article XIIIB. The District has covenanted in the Installment Purchase Agreement, to the fullest extent permitted by law, to fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of each Fiscal Year, to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 125% of Debt Service on the Bonds and other Parity Bonds and Contracts for such Fiscal Year. See the caption “SECURITY FOR THE BONDS—Rate Covenant.” Proposition 218 General. An initiative measure entitled the “Right to Vote on Taxes Act” (the “Initiative”) was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Articles Page 212 of 236 -51- 4878-9554-1791v3/022608-0014 XIIIC and XIIID to the State Constitution. According to the “Title and Summary” of the Initiative prepared by the State Attorney General, the Initiative limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” Article XIIID. Article XIIID defines the terms “fee” and “charge” to mean “any levy other than an ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including user fees or charges for a property-related service.” A “property-related service” is defined as “a public service having a direct relationship to property ownership.” Article XIIID further provides that reliance by an agency on any parcel map (including an assessor’s parcel map) may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership. Article XIIID requires that any agency imposing or increasing any property-related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be imposed or increased if a majority of owners of the identified parcels file written protests against it. As a result, if and to the extent that a fee or charge imposed by a local government for water service is ultimately determined to be a “fee” or “charge” as defined in Article XIIID, the local government’s ability to increase such fee or charge may be limited by a majority protest. In addition, Article XIIID includes a number of limitations applicable to existing, new or increased fees and charges including provisions to the effect that: (a) revenues derived from the fee or charge may not exceed the funds required to provide the property-related service; (b) such revenues may not be used for any purpose other than that for which the fee or charge was imposed; (c) the amount of a fee or charge imposed upon any parcel or person as an incident of property ownership may not exceed the proportional cost of the service attributable to the parcel; and (d) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property-related fees or charges based on potential or future use of a service are not permitted. Based upon the California Court of Appeal decision in Howard Jarvis Taxpayers Association v. City of Los Angeles, 85 Cal. App. 4th 79 (2000), which was denied review by the State Supreme Court, it was generally believed that Article XIIID did not apply to charges for water services that are “primarily based on the amount consumed” (i.e., metered water rates), which had been held to be commodity charges related to consumption of the service, not property ownership. The State Supreme Court ruled in Bighorn-Desert View Water Agency v. Verjil, 39 Cal. 4th 205 (2006) (the “Bighorn Case”), however, that fees for ongoing water service through an existing connection were property-related fees and charges. The Court specifically disapproved the holding in Howard Jarvis Taxpayers Association v. City of Los Angeles that metered water rates are not subject to Proposition 218. Since 2007, the District has complied with the notice, hearing and protest procedures in Article XIIID with respect to water rate increases, as further explained by the State Supreme Court in the Bighorn Case. On April 20, 2015, the California Court of Appeal, Fourth District, issued an opinion in Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal. App. 4th 1493 (2015) (the “SJC Case”) upholding tiered water rates under Proposition 218 provided that the tiers correspond to the actual cost of furnishing service at a given level of usage. The opinion included a finding that the City of San Juan Capistrano did not attempt to calculate the actual costs of providing water at various tier levels. The District’s water rates, which are described under the caption “THE WATER SYSTEM—Water System Rates and Charges,” do not currently include tiered rates based on usage. The District does not currently expect the decision in the SJC Case to affect its water rate structure. The District believes that its current water rates comply with the requirements of Proposition 218 and expects that any future water rate increases will comply with Proposition 218’s procedural and substantive requirements to the extent applicable thereto. Article XIIIC. Article XIIIC provides that the initiative power may not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect local taxes, assessments, fees and charges is applicable to all local governments. Article XIIIC does Page 213 of 236 -52- 4878-9554-1791v3/022608-0014 not define the terms “local tax,” “assessment,” “fee” or “charge,” so it was unclear whether the definitions set forth in Article XIIID referred to above are applicable to Article XIIIC. Moreover, the provisions of Article XIIIC are not expressly limited to local taxes, assessments, fees and charges imposed after November 6, 1996. On July 24, 2006, the State Supreme Court held in the Bighorn Case that the provisions of Article XIIIC applied to rates and fees charged for domestic water use. In the decision, the Court noted that the decision did not address whether an initiative to reduce fees and charges could override statutory rate setting obligations. On August 3, 2020, the State Supreme Court issued an opinion in Wilde v. City of Dunsmuir (9 Cal. 5th 1105 (2020)) holding that taxpayers do not have the right under Proposition 218 to challenge water rates by referendum, and the District and its general counsel do not believe that Article XIIIC grants to the voters within the District the power (whether by initiative under Article XIIIC or otherwise, or by referendum, which is not authorized under Article XIIIC) to repeal or reduce rates and charges for the Water Service in a manner that would interfere with the contractual obligations of the District or the obligation of the District to maintain and operate the Water System. However, there can be no assurance as to the availability of particular remedies adequate to protect the Beneficial Owners of the Bonds. Remedies that are available to Beneficial Owners of the Bonds in the event of a default by the District are dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time-consuming to obtain. So long as the Bonds are held in book-entry form, DTC (or its nominee) will be the sole registered owner of the Bonds and the rights and remedies of the Bond Owners will be exercised through the procedures of DTC. In addition to the specific limitations on remedies contained in the applicable documents themselves, the rights and obligations with respect to the Bonds, the Indenture and the Installment Purchase Agreement are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, and to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State. The various opinions of counsel to be delivered with respect to such documents, including the opinion of Bond Counsel (the form of which is attached as Appendix C), will be similarly qualified. The District believes that its current water rates and property-related charges comply with the requirements of Proposition 218 and expects that any future water rates and property-related charges will comply with Proposition 218’s procedural and substantive requirements to the extent applicable thereto. Future Initiatives Articles XIIIB, XIIIC and XIIID were adopted as a measure that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiatives could be proposed and adopted affecting the District’s revenues or ability to increase revenues. CERTAIN RISKS TO BONDHOLDERS The following information, in addition to the other matters that are described in this Official Statement, should be considered by prospective investors in evaluating the Bonds. However, the following does not purport to be comprehensive, definitive or an exhaustive listing of risks and other considerations that may be relevant to making an investment decision with respect to the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. If any risk factor materializes to a sufficient degree, it alone could delay or preclude payment of principal of or interest on the Bonds. Limited Obligations The obligation of the District to pay the Series 2022 Installment Payments is a limited obligation of the District and is not secured by a legal or equitable pledge or charge or lien upon any property of the District or any of its income or receipts, except the Net Revenues. The obligation of the District to pay the Series 2022 Page 214 of 236 -53- 4878-9554-1791v3/022608-0014 Installment Payments does not constitute an obligation of the District to levy or pledge any form of taxation or for which the District has levied or pledged any form of taxation. Accuracy of Assumptions To estimate the Net Revenues available to pay the principal of and interest on the Bonds, the District has made certain assumptions with regard to future development within the District and increases in revenues resulting therefrom, the rates and charges to be imposed in future years, the expenses associated with operating the Water System and the interest rate at which funds will be invested. The District believes these assumptions to be reasonable, but to the extent that any of such assumptions fail to materialize, the Net Revenues available to pay the principal of and interest on the Bonds will, in all likelihood, be less than those projected herein. See the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage.” The District may choose, however, to maintain compliance with the rate covenant set forth in the Installment Purchase Agreement in part by means of contributions from available reserves or resources, including the Rate Stabilization Fund. In such event, Net Revenues may generate amounts which are less than 1.25 times Debt Service in any given Fiscal Year. See the captions “SECURITY FOR THE BONDS—Rate Covenant” and “SECURITY FOR THE BONDS—Rate Stabilization Fund.” System Demand There can be no assurance that the demand for water services will occur as described in this Official Statement. Reduction in levels of demand could require an increase in rates or charges in order to comply with the rate covenant. See the caption “SECURITY FOR THE BONDS—Rate Covenant.” Demand for water services could be reduced as a result of reduced levels of development in the District’s service area, hydrological conditions, an economic downturn (including as a result of the COVID-19 outbreak that is discussed under the caption “THE DISTRICT—COVID-19 Outbreak”), conservation efforts or mandatory State conservation orders and other factors. System Expenses There can be no assurance that the District’s expenses will be consistent with the descriptions in this Official Statement. Water System Operating and Maintenance Costs may vary with groundwater conditions, including the presence of PFAS and the ability of the District to remove PFAS from its water supplies at the PFAS Treatment Plant (as discussed under the caption “THE WATER SYSTEM—PFAS Treatment Plant”), and the quality and amount of local supplies as well as treatment costs, regulatory compliance costs, labor costs (including costs related to pension and other post-retirement benefits), energy costs and other factors. Much of the District’s water supply is sold to the District by MWDOC, which in turn purchases a large portion of its water from MWD. Increases in MWDOC or MWD costs or changes in such agencies’ operations over which the District has no control could impact the District’s cost of water to supply its customers. See the caption “WATER SUPPLY—General.” In addition, continued drought conditions and State or federal orders in response thereto could increase the cost of water for MWDOC and/or MWD, which increases would be expected to be passed on to the District. Increases in Operating and Maintenance Costs could require an increase in rates or charges in order to comply with the rate covenant. See the caption “SECURITY FOR THE BONDS— Rate Covenant.” Limited Recourse on Default If the District defaults on its obligation to pay the Series 2022 Installment Payments, the Trustee has the right to declare the total unpaid principal amount of the Series 2022 Installment Payments, together with the accrued interest thereon, to be immediately due and payable. However, in the event of a default and such acceleration, there can be no assurance that the District will have sufficient funds to pay such accelerated amounts from Net Revenues. Page 215 of 236 -54- 4878-9554-1791v3/022608-0014 Rate-Setting Process under Proposition 218 Proposition 218, which added Articles XIIIC and XIIID to the State Constitution, affects the District’s ability to maintain existing Water System rates and impose rate increases, and no assurance can be given that future Water System rate increases will not encounter majority protest opposition or be challenged by initiative action authorized under Proposition 218. In the event that future proposed Water System rate increases cannot be imposed as a result of majority protest or initiative, the District might thereafter be unable to generate Net Water System Revenues in the amounts required by the Installment Purchase Agreement to pay the Series 2022 Installment Payments. The District believes that the current Water System rates were approved by the Board in accordance with the public hearing and majority protest provisions of Proposition 218. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.” Statutory and Regulatory Compliance Laws and regulations governing treatment and delivery of water are enacted and promulgated by federal, State and local government agencies. Compliance with these laws and regulations is and will continue to be costly, and, as more stringent standards are developed, such costs will likely increase. Claims against the Water System for failure to comply with applicable laws and regulations could be significant. Such claims may be payable from assets of the Water System and constitute Operating and Maintenance Costs or from other legally available sources. In addition to claims by private parties, changes in the scope and standards for public agency water systems such as that operated by the District may also lead to administrative orders issued by federal or State regulators. Future compliance with such orders can also impose substantial additional costs on the District. No assurance can be given that the cost of compliance with such laws, regulations and orders would not adversely affect the ability of the District to generate Net Revenues sufficient to pay the Bonds. Natural Disasters The occurrence of any natural disaster in the District, including, without limitation, earthquake, wildfire, drought, high winds or flood, could have an adverse material impact on the economy within the District and the revenues available for the payment of the Bonds and result in substantial damage to and interference with the operations of the Water System. Portions of the District’s service area may be subject to unpredictable seismic activity. The Installment Purchase Agreement does not require the District to maintain earthquake insurance. The District maintains liability insurance for the Water System and property casualty insurance (for losses other than from seismic events) for certain portions of the Water System. See the caption “YORBA LINDA WATER DISTRICT— District Insurance.” However, there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers. Furthermore, significant portions of the Water System, including underground pipelines, are not covered by property casualty insurance. Damage to such portions of the Water System as a result of natural disasters would result in uninsured losses to the District. Climate Change The State has historically been susceptible to wildfires and hydrologic variability. As greenhouse gas emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is expected to intensify, increasing the frequency and severity of extreme weather events such as coastal storm surges, drought, wildfires, floods and heat waves, and raising sea levels. The future fiscal impact of climate change on the District is difficult to predict, but it could be significant and it could have a material adverse effect on the Water System’s finances by requiring greater expenditures to counteract the effects of climate change, by changing the business and activities of Water System customers or by increasing the cost or decreasing the Page 216 of 236 -55- 4878-9554-1791v3/022608-0014 availability of water supplies from CCWD. See the captions “—System Expenses” and “WATER SUPPLY— Drought Proclamations.” Cyber Security The District relies on computers and technology to conduct its operations. The District and its departments face cyber threats from time to time including, but not limited to, hacking, viruses, malware and other forms of technology attacks. Recently, there have been significant cyber security incidents affecting municipal agencies, including a freeze affecting computer systems of the City of Atlanta, an attack on the City of Baltimore’s 911 system, an attack on the Colorado Department of Transportation’s computers, an attack that resulted in the temporary closure of the Port of Los Angeles’ largest terminal and an attack on a water treatment facility in Oldsmar, Florida. The District uses multiple layers of security systems to safeguard against cyber-attacks. These systems are deployed at the perimeter as well as at end points of the District’s network. The District’s multi-level cyber protection scheme includes firewalls, anti-virus software, anti-spam/malware software, intrusion protection, intrusion detection, log monitoring and other security measures. One of the systems is artificial-intelligence based, which analyses the behavior of users/devices on the network and takes corrective action if any anomaly is detected. The District’s network is also scanned by third party consultants on a regular basis. To date, the District has not experienced a successful attack against its network and servers. However, there can be no assurance that a future attack or attempted attack would not result in disruption of District operations. The District expects that any such disruptions would be temporary in nature due to its backup/restore procedures and disaster recovery planning. Rate Covenant Not a Guarantee The Series 2022 Installment Payments, which secure the Bonds, are payable from Net Revenues of the Water System. See the caption “SECURITY FOR THE BONDS.” The District’s ability to pay the Series 2022 Installment Payments depends on its ability to generate Net Revenues at the levels required by the Installment Purchase Agreement. Although the District has covenanted in the Installment Purchase Agreement to impose rates and charges as more particularly described under the caption “SECURITY FOR THE BONDS—Rate Covenant,” and although the District expects that sufficient Revenues will be generated through the imposition and collection of such rates and charges, there is no assurance that the imposition and collection of such rates and charges will result in the generation of Net Revenues in amounts that are sufficient to pay the Series 2022 Installment Payments. Among other matters, the availability of and demand for water and changes in law and government regulations could adversely affect the amount of Revenues realized by the District. The failure to generate sufficient Revenues to pay the Series 2022 Installment Payments does not constitute a default or Event of Default under the Installment Purchase Agreement or the Indenture, provided that the District has set rates and charges at levels that it reasonably expects will generate sufficient Revenues at the beginning of each Fiscal Year. Limitations on Remedies The ability of the District to comply with its covenants under the Installment Purchase Agreement and to generate Net Revenues sufficient to pay the Series 2022 Installment Payments may be adversely affected by actions and events outside of the control of the District and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or persons obligated to pay assessments, fees and charges. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.” Furthermore, the remedies available to the owners of the Bonds upon the occurrence of an event of default under the Indenture are in many respects dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time consuming to obtain. Page 217 of 236 -56- 4878-9554-1791v3/022608-0014 In addition, usual equity principles may limit the specific enforcement under State law of certain remedies, as may the exercise by the United States of America of the powers delegated to it by the federal Constitution and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium proceedings and other laws relating to or affecting creditors’ rights, or the exercise of powers by the federal or State government, if initiated, could subject the Beneficial Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitations, or modification of their rights. Remedies may be limited because the Water System serve an essential public purpose. The opinion to be delivered by Bond Counsel concurrently with the execution and delivery of the Bonds will be subject to such limitations and the various other legal opinions to be delivered concurrently with the issuance of the Bonds will be similarly qualified. See Appendix C. In the event that the District fails to comply with its covenants under the Installment Purchase Agreement or fails to pay the Series 2022 Installment Payments, which secure the payments of principal of and interest on the Bonds, there can be no assurance of the availability of remedies adequate to protect the interest of the holders of the Bonds. Loss of Tax Exemption In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Authority and the District have covenanted in the Indenture and the Installment Purchase Agreement, respectively, to comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the “Code”), and not to take any action or fail to take any action if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Bonds thereunder. Interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of such Bonds as a result of acts or omissions of the Authority or the District in violation of this or other covenants in the Indenture or the Installment Purchase Agreement. The Bonds are not subject to redemption or any increase in interest rates should an event of taxability occur and will remain outstanding until maturity or prior redemption in accordance with the provisions contained in the Indenture. See the caption “TAX EXEMPTION.” Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that the Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history, incomplete or deficient continuing disclosure or economic prospects connected with a particular issue, secondary marketing practices are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Parity Obligations The Installment Purchase Agreement permits the District to enter into Parity Bonds and Contracts payable from Net Revenues of the Water System on a parity with the Bonds, subject to the terms and conditions set forth therein. The entry into of additional Parity Bonds and Contracts could result in reduced Net Revenues available to pay the principal of and interest on the Bonds. The District has covenanted to maintain coverage of 125% on the Bonds and all Parity Bonds and Contracts, as further described under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Additional Parity Bonds and Contracts.” Page 218 of 236 -57- 4878-9554-1791v3/022608-0014 THE AUTHORITY The Authority is a public body that is duly organized and existing under the Joint Exercise of Powers Agreement, dated April 11, 2017 (the “JPA Agreement”), by and between the District and California Municipal Finance Authority, and under the Constitution and laws of the State. The Authority was formed for the purpose of assisting in the financing and refinancing of capital improvement projects of the District and to finance working capital for the District by exercising the powers referred to in the JPA Agreement, including the power to issue bonds to pay the costs of public improvements. Neither the District nor California Municipal Finance Authority is responsible for repayment of the obligations of the other. The members of the Board of Directors of the Authority are the members of the Board of Directors of the District. APPROVAL OF LEGAL PROCEEDINGS The valid, legal and binding nature of the Bonds is subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, acting as Bond Counsel. The form of such legal opinion is attached as Appendix C, and such legal opinion will be attached to each Bond. Certain matters will be passed upon for the District by Kidman Gagen Law LLP, Irvine, California, general counsel to the District, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel, for the Underwriter by its counsel, Norton Rose Fulbright US LLP, and for the Trustee by its counsel. LITIGATION District At the time of delivery of and payment for the Bonds, the District will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the District, threatened against the District affecting the existence of the District or the titles of its directors or officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Installment Purchase Agreement and the Indenture, or that would have a material adverse effect on the District’s ability to pay the Series 2022 Installment Payments, or in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, the Installment Purchase Agreement, or any action of the District contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the District or its authority with respect to the Bonds or any action of the District contemplated by any of said documents, nor to the knowledge of the District, is there any basis therefor. Authority At the time of delivery of and payment for the Bonds, the Authority will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the Authority, threatened against the Authority affecting the existence of the Authority or the titles of its directors or officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Installment Purchase Agreement and the Indenture, or that would have a material adverse effect on the Authority’s ability to pay the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture, the Installment Purchase Agreement, or any action of the Authority contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the Authority or its authority with respect to the Bonds or any action of the Authority contemplated by any of said documents, nor to the knowledge of the Authority, is there any basis therefor. Page 219 of 236 -58- 4878-9554-1791v3/022608-0014 TAX EXEMPTION In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. In the opinion of Bond Counsel, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bond of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner’s basis in the Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations and is exempt from State personal income tax. The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. Bond Counsel’s opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the Authority, the District and others and is subject to the condition that the Authority and the District comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Authority and the District have covenanted to comply with all such requirements, as applicable. The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar municipal obligations). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their market value. SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE BONDS, INCLUDING THE IMPOSITION OF ADDITIONAL Page 220 of 236 -59- 4878-9554-1791v3/022608-0014 FEDERAL INCOME OR STATE TAXES ON OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT SUBSEQUENT TO THE ISSUANCE OF THE BONDS STATUTORY CHANGES WILL NOT BE INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS. Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Bond Counsel’s engagement with respect to the Bonds terminates upon their issuance and Bond Counsel disclaims any obligation to update the matters set forth in its opinion. The Indenture, the Installment Purchase Agreement and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the Authority and the District continue to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) on the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds. Should interest (and original issue discount) on the Bonds become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption or an increase in interest rates and will remain outstanding until maturity or until redeemed in accordance with the Indenture. A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix C. CONTINUING DISCLOSURE The District has covenanted in a Continuing Disclosure Certificate for the benefit of the Owners and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District by not later than each April 1 following the end of the District’s Fiscal Year (currently its Fiscal Year ends on June 30) (the “Annual Report”), commencing April 1, 2023 with the Annual Report for the Fiscal Year ending June 30, 2022, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the District with EMMA. The specific nature of the information to be contained in the Annual Report and the notice of enumerated events is set forth in Appendix E. These covenants have been made in order to assist the Underwriter in complying with Section (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission. [TO BE UPDATED] The District has not failed to comply with the terms of its prior continuing disclosure undertakings in the last five years in any material respect. The Board has adopted a debt management policy that establishes detailed continuing disclosure procedures for the District. See the caption “YORBA LINDA WATER DISTRICT—Management Policies—Debt Management Policy.” Page 221 of 236 -60- 4878-9554-1791v3/022608-0014 RATING The Authority expects that S&P Global Ratings, a Standard & Poor’s Financial Services LLC business (“S&P”), will assign the Bonds the rating of “[__]”. A rating is not a recommendation to buy, sell or hold securities. Future events, including the impacts of the COVID-19 pandemic that is described under the caption “YORBA LINDA WATER DISTRICT—COVID-19 Outbreak,” could have an adverse impact on the rating of the Bonds, and there is no assurance that the credit rating given to the Bonds will be maintained for any period of time or that the rating may not be qualified, downgraded, lowered or withdrawn entirely by S&P if, in the judgment of S&P, circumstances so warrant. Any such qualification, downgrade, lowering or withdrawal of the rating may have an adverse effect on the market price of the Bonds. Such rating reflects only the views of S&P (which views and criteria could change at any time), and an explanation of the significance of such rating may be obtained from S&P. Generally, rating agencies base their ratings on information and materials furnished to them (which may include information and material from the District that is not included in this Official Statement) and on investigations, studies and assumptions by the rating agencies. The District has covenanted in the Continuing Disclosure Certificate to file notices of any rating changes on the Bonds with EMMA. See the caption “CONTINUING DISCLOSURE” and Appendix E. Notwithstanding such covenant, information relating to rating changes on the Bonds may be publicly available from S&P prior to such information being provided to the District and prior to the date by which the District is obligated to file a notice of rating change. Purchasers of the Bonds are directed to S&P and its websites and official media outlets for the most current rating with respect to the Bonds after the initial issuance of the Bonds. In providing a rating on the Bonds, S&P may have performed independent calculations of coverage ratios using its own internal formulas and methodology which may not reflect the provisions of the Indenture or the Installment Purchase Agreement. The District makes no representations as to any such calculations, and such calculations should not be construed as a representation by the District as to past or future compliance with any financial covenants, the availability of particular revenues for the payment of debt service or for any other purpose. MUNICIPAL ADVISOR The District has retained Fieldman, Rolapp & Associates, Inc., Irvine, California (the “Municipal Advisor”) as municipal advisor in connection with the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained herein. The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. UNDERWRITING The Bonds are being purchased by Barclays Capital Inc. (the “Underwriter”) pursuant to a purchase contract, dated the date hereof, by and among the Authority, the District and the Underwriter. The Underwriter will purchase the Bonds from the Authority at an aggregate purchase price of $_____, representing the principal amount of the Bonds, plus/less $_____ of net original issue premium/discount and less $_____ of Underwriter’s discount. The initial public offering prices stated on the inside front cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices. Page 222 of 236 -61- 4878-9554-1791v3/022608-0014 The Underwriter and its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The Underwriter and its affiliates have, from time to time, performed, and may in the future perform, various investment banking services for the District for which they received or will receive customary fees and expenses. In addition, certain affiliates of the Underwriter are lenders, and in some cases agents or managers for the lenders, under credit and liquidity facilities. In the ordinary course of their various business activities, the Underwriter and its respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the District. FINANCIAL INTERESTS The fees being paid to the Underwriter, Bond Counsel, Disclosure Counsel, the Municipal Advisor and counsel to the Underwriter are contingent upon the issuance and delivery of the Bonds and, in the case of the Municipal Advisor, the principal amount of the Bonds. Page 223 of 236 -62- 4878-9554-1791v3/022608-0014 MISCELLANEOUS Insofar as any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of such statements made will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the Owners of the Bonds. The execution and delivery of this Official Statement have been duly authorized by the Authority and the District. YORBA LINDA WATER DISTRICT FINANCING AUTHORITY By: Executive Director YORBA LINDA WATER DISTRICT By: Interim General Manager Page 224 of 236 A-1 4878-9554-1791v3/022608-0014 APPENDIX A DISTRICT FINANCIAL STATEMENTS Page 225 of 236 B-1 4878-9554-1791v3/022608-0014 APPENDIX B DEFINITIONS AND SUMMARY OF CERTAIN PROVISIONS OF THE INSTALLMENT PURCHASE AGREEMENT AND THE INDENTURE The following is a summary of certain provisions of the Installment Purchase Agreement and the Indenture that are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the applicable document for a full and complete statement of the provisions thereof. [TO COME FROM BOND COUNSEL] Page 226 of 236 C-1 4878-9554-1791v3/022608-0014 APPENDIX C FORM OF OPINION OF BOND COUNSEL Upon issuance of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form: July __, 2022 Yorba Linda Water District Financing Authority c/o Yorba Linda Water District 1717 East Miraloma Avenue Placentia, California 92870 Re: $_____ Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A Members of the Board of Directors: We have acted as Bond Counsel to the Yorba Linda Water District Financing Authority (the “Authority”) in connection with the issuance of $_____ aggregate principal amount of Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A (the “Bonds”). The Bonds have been issued by the Authority pursuant to the terms of the Indenture of Trust, dated as of July 1, 2022 (the “Indenture”), by and between the Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Bonds are limited obligations of the Authority payable solely from payments to be made by the Yorba Linda Water District (the “District”) to the Authority pursuant to an Installment Purchase Agreement, dated as of July 1, 2022 (the “Installment Purchase Agreement”), by and between the District and the Authority, and from certain funds and accounts established under the Indenture. In connection with our representation we have examined a certified copy of the proceedings relating to the Bonds. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigations. Based upon the foregoing and after examination of such questions of law as we have deemed relevant in the circumstances, but subject to the limitations set forth herein, we are of the opinion that: 1. The proceedings of the Authority show lawful authority for the issuance and sale by the Authority of the Bonds under the laws of the State of California (the “State”) now in force, and the Indenture has been duly authorized, executed and delivered by the Authority. Assuming due authorization, execution and delivery by the Trustee, as appropriate, the Bonds and the Indenture are valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms. 2. The obligation of the Authority to make the payments of principal and interest on the Bonds from Authority Revenues (as such term is defined in the Indenture) is an enforceable obligation of the Authority and does not constitute an indebtedness of the Authority in contravention of any constitutional or statutory debt limit or restriction. 3. Under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on Page 227 of 236 C-2 4878-9554-1791v3/022608-0014 individuals and corporations. It should be noted that, with respect to corporations, such interest may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. 4. Interest (and original issue discount) on the Bonds is exempt from State personal income tax. 5. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner’s basis in the Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State personal income tax. 6. The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Internal Revenue Code of 1986, as amended (the “Code”); such amortizable Bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The opinions that are expressed herein as to the exclusion from gross income of interest on the Bonds are based upon certain representations of fact and certifications made by the District and the Authority and are subject to the condition that the District and the Authority comply with all requirements of the Code that must be satisfied subsequent to issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District and the Authority have covenanted to comply with all such requirements. The opinions that are expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Our engagement with respect to the Bonds terminates on the date of their issuance. The Indenture, the Installment Purchase Agreement and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes if any such action is taken or omitted based upon the opinion or advice of counsel other than ourselves. Other than expressly stated herein, we express no other opinion regarding tax consequences with respect to the Bonds. Our opinion is limited to matters governed by the laws of the State and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. The opinions that are expressed herein are based upon our analysis and interpretation of existing statutes, regulations, rulings and judicial decisions and cover certain matters which are not directly addressed by such authorities. We call attention to the fact that the rights and obligations under the Indenture, the Installment Purchase Agreement and the Bonds are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles Page 228 of 236 C-3 4878-9554-1791v3/022608-0014 if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the Owners of the Bonds with respect to matters contained in the Official Statement. Respectfully submitted, Page 229 of 236 D-1 4878-9554-1791v3/022608-0014 APPENDIX D INFORMATION CONCERNING DTC The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the Authority, the District and the Underwriter believe to be reliable, but neither the Authority, the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value, if any, and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Page 230 of 236 D-2 4878-9554-1791v3/022608-0014 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Trustee’s DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. Page 231 of 236 E-1 4878-9554-1791v3/022608-0014 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE Upon the issuance of the Bonds, the District proposes to enter into a Continuing Disclosure Certificate in substantially the following form: This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Yorba Linda Water District (the “District”) in connection with the execution and delivery of the $_____ Yorba Linda Water District Financing Authority Revenue Bonds, Series 2022A (the “Bonds”). The Bonds are being issued pursuant to an Indenture of Trust, dated as of July 1, 2022 (the “Indenture of Trust”), by and between the Yorba Linda Water District Financing Authority and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The District covenants and agrees as follows: 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. 2. Definitions. In addition to the definitions set forth in the Indenture of Trust, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report. The term “Annual Report” means any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner. The term “Beneficial Owner” means any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income tax purposes. EMMA. The term “EMMA” means the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/. Financial Obligation. The term “Financial Obligation” means a: (A) debt obligation; (B) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (C) guarantee of (A) or (B). The term “Financial Obligation” does not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule. Fiscal Year. The term “Fiscal Year” means the one-year period ending on the last day of June of each year, or any other period selected as the District’s fiscal year. In the event of a change in the District’s Fiscal Year, the District shall give notice of such change in the same manner as for a Listed Event under Section 5(a). Holder. The term “Holder” means a registered owner of the Bonds. Listed Events. The term “Listed Events” means any of the events listed in Sections 5(a) and (b) of this Disclosure Certificate. Official Statement. The term “Official Statement” means the Official Statement of the District dated July __, 2022 delivered in connection with the issuance of the Bonds. Participating Underwriter. The term “Participating Underwriter” means the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Page 232 of 236 E-2 4878-9554-1791v3/022608-0014 Rule. The term “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. 3. Provision of Annual Reports. (a) The District shall provide to EMMA not later than each April 1 following the end of its Fiscal Year (commencing April 1, 2023) an Annual Report relating to the immediately preceding Fiscal Year which is consistent with the requirements of Section 4 of this Disclosure Certificate, which Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the District is unable to provide to EMMA an Annual Report by the date required in subsection (a), the District shall send to EMMA a notice in substantially the manner prescribed by the Municipal Securities Rulemaking Board. 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) The audited financial statements of the District for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Principal amount of the Bonds outstanding. (c) An update of the information in substantially the form set forth in the following tables in the Official Statement: 1. Table 2 “PROPERTY TAX LEVIES AND COLLECTIONS;” 2. Table 3 “HISTORICAL WATER SUPPLY IN ACRE FEET PER YEAR;” 3. Table 6 “HISTORICAL WATER CONNECTIONS;” 4. Table 7 “HISTORICAL WATER DELIVERIES IN ACRE FEET PER YEAR;” 5. Table 8 “HISTORICAL WATER SALES REVENUES;” 6. Table 9 “TEN LARGEST WATER SYSTEM CUSTOMERS;” and 7. Table 15 “HISTORICAL OPERATING RESULTS.” Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission; provided that if any document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board; and provided further that the District shall clearly identify each such document so included by reference. 5. Reporting of Significant Events. Page 233 of 236 E-3 4878-9554-1791v3/022608-0014 (a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) Business Days after the event: 1. principal and interest payment delinquencies; 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers, or their failure to perform; 5. adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determination of taxability or Notices of Proposed Issue (IRS Form 5701-TEB); 6. tender offers; 7. defeasances; 8. ratings changes; 9. bankruptcy, insolvency, receivership or similar proceedings. Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person; and 10. default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation of the District, any of which reflect financial difficulties. (b) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a timely manner not more than ten (10) Business Days after the event: 1. unless described in Section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds; 2. modifications to the rights of Bondholders; 3. optional, unscheduled or contingent Bond calls; 4. release, substitution or sale of property securing repayment of the Bonds; 5. non-payment related defaults; 6. the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, 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 Page 234 of 236 E-4 4878-9554-1791v3/022608-0014 agreement relating to any such actions, other than pursuant to its terms; 7. appointment of a successor or additional trustee or the change of the name of a trustee; and 8. incurrence of a Financial Obligation of the District, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the District, any of which affect security holders. (c) If the District determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the District shall file a notice of such occurrence with EMMA in a timely manner not more than ten (10) Business Days after the event. 6. Customarily Prepared and Public Information. Upon request, the District shall provide to any person financial information and operating data regarding the District which is customarily prepared by the District and is publicly available. 7. Termination of Obligation. The District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall not thereby have any obligation under this Disclosure Certificate to update such information or include it in any future notice of occurrence of a Listed Event. 10. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate, any Holders or Beneficial Owners of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture of Trust, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. No Holder or Beneficial Owner of the Bonds may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the District satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the District shall have refused to comply therewith within a reasonable time. 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. 12. Filings with the MSRB. All financial information, operating data, financial statements, notices, and other documents provided to the Municipal Securities Rulemaking Board in accordance with this Disclosure Page 235 of 236 E-5 4878-9554-1791v3/022608-0014 Certificate shall be provided in an electronic format prescribed by the Municipal Securities Rulemaking Board and shall be accompanied by identifying information as prescribed by the Municipal Securities Rulemaking Board. Dated: July ___, 2022 YORBA LINDA WATER DISTRICT By: J. Wayne Miller, President Page 236 of 236