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Current Council Agenda and Past Meeting Information

CITY COUNCIL AGENDA ITEM NO.15

Meeting Date: September 9, 2008

Subject/Title: Adopt a resolution authorizing execution of a Master Installment Sale Agreement, a First Supplemental Installment Sale Agreement with the Brentwood Infrastructure Financing Authority (the “Authority”) and a Bond Purchase Contract with said authority and RBC Capital Markets Corporation in connection with the refunding of a portion of the Authority’s outstanding water and Sewer Revenue Bonds, 1996 Series A, and the financing and Refinancing of the City’s 2008 Water Project.

Prepared by: Brian Kelleher, Accountant

Submitted by: Pamela Ehler, City Treasurer/Director of Finance and Information Systems

RECOMMENDATION
Approve a resolution authorizing execution of a Master Installment Sale Agreement, a First Supplemental Installment Sale Agreement with the Brentwood Infrastructure Financing Authority (the “Authority”) and a Bond Purchase Contract with said authority and RBC Capital Markets Corporation in connection with the refunding of a portion of the Authority’s outstanding water and Sewer Revenue Bonds, 1996 Series A, and the financing and Refinancing of the City’s 2008 Water Project.

PREVIOUS ACTION
On November 26, 1996, City Council approved Resolution No. 96-206 authorizing and approving the issuance of Water and Sewer Revenue Bonds 1996 Series A in an amount of $12,195,000 of which $9,701,123 was for water and $2,493,877 was for sewer.

On August 24, 2004, by Resolution No. 2004-206, City Council authorized the City Manager to execute an agreement with the Contra Costa Water District pertaining to long term treated water services as a part of the Surface Water Treatment Facility - Phase II, CIP Project No. 562-56290.

On September 11, 2007, City Council approved Resolution No. 2007-209 approving and authorizing the City Manager to execute a second amendatory agreement with the Contra Costa Water District (CCWD) pertaining to long term treated water services as a part of the Surface Water Treatment Facility Project.

On May 13, 2008, City Council approved Resolution No. 2008-107 1) appointing RBC Capital Markets, Inc. as the underwriter, 2) Orrick, Herrington & Sutcliffe LLP as the bond and disclosure counsel; 3) declaring official intent to reimburse certain expenditures from proceeds of indebtedness in an amount not-to-exceed $58,000,000 in connection with the financing of the new water treatment plant, to be constructed by the Contra Costa Water District (CCWD), and refinancing prior obligations issued for the water and wastewater enterprise; and 4) authorizing staff to undertake the proceedings of debt issuance for future Council consideration.


BACKGROUND
In 1996 the Brentwood Infrastructure Financing Authority issued the Water and Sewer Revenue Bonds 1996 Series A in the amount of $12,195,000 to finance certain capital improvements to the Water System and Sewer System. These improvements consisted of additional water and sewer pipelines, pumping stations, system control and data acquisition, in addition to water wells and connections to the existing water system, (the “1996 Water Project” and the “1996 Sewer Project”). The Water and Sewer Installment Sale Agreements allow the proceeds of the Bonds to be expended on “any additions, betterments, extensions or improvements to the Systems designated by the City Council”.

The costs of improvements to the Water System represented 79.55% or $9,701,122.50 and the projects funded were the Interim Water System, Zone #1 Water Line relocation, Lone Tree Water Line, Scada and several improvements to the Well Systems.

The Surface Water Treatment Facility - Phase I & II, (CIP Project No. 562-56290), started in December of 2004. Phase I which consisted of preparing all necessary environmental documents to jointly expand and construct a new facility adjacent to the Randall-Bold Water Treatment Plant, including the necessary pumping and distribution facilities also consisted of design and construction of the ultimate pumping facilities and main trunk line to the City's distribution system and all related appurtenances. Phase I of the project has been constructed and has been in service since spring 2006. Phase II consists of the design and construction of a new facility with CCWD to treat the City's surface water supply to potable drinking water standards to accommodate the ultimate water consumption demands of the City. Phase II began construction in fall 2006 and the plant has just become operational, and with the project 95% complete, we expect it to be completed, under budget, by the end of the year. The facility initially has the capacity to treat 12 to 15 million gallons per day but is expandable to 30 million gallons to meet the demands of the City at build-out.

The second amendatory agreement approved on September 11, 2007, further clarified the City’s financial responsibility related to the financing of the Surface Water Treatment Facility and the issuance of Water Revenue Bonds by the City vs. the issuance by CCWD. Per the agreement, the City has the option to issue bonds at anytime during the construction phase or within twelve months of receiving treated water. So far, the project construction costs have been financed through Contra Costa Water District’s commercial paper program and cash contributions from the City. The City has determined that a lower cost structure can be achieved through permanent financing for the facility through our own debt issuance.

On August 14th Standard & Poor’s rating agency assigned an “AA” rating to the City’s proposed water revenue bonds for the $56 million Surface Water Treatment Facility. Standard & Poor’s has defined their “AA” rating as “differing from the highest-rated obligations only to a small degree”. The “AA” rating will have a positive fiscal impact by allowing the City to issue the water revenue bonds at lower interest rates.

The City has several reasons for securing the financing on the water treatment plant rather than having CCWD issue the debt. First, the City will be able to refinance our existing 1996 Water bonds at much lower interest rates, allowing the City to realize approximately $592,000 in net present value (NPV) savings based on existing market conditions at the end of August 2008. This equates to 7.6% of the outstanding bonds to be refinanced, and compares favorably with the typical benchmark for municipal refundings of only 3% NPV. The existing water bonds will have $7,710,000 outstanding after making the July 1, 2008 bond payment. The refinance would lower the rate from 5.65% to approximately 4.95%. Moreover, it is much more cost effective to combine the refinance with the new money financing. A stand alone subordinate refunding would reduce the savings to approximately $200,000 or lower, making it at best only a marginal refunding.

FISCAL IMPACT
The construction amount is anticipated to be financed over a 30-year period with the debt service payment covered by the Water Enterprise and Water Facility fees. This debt service has already been accounted for in the current Water Rate Study and Development Fee Program. The actual savings realized from the City of Brentwood obtaining financing directly from the capital markets, rather than through CCWD, will depend on market conditions in the tax-exempt bond market at the time of bond issuance in October 2008. Current projections indicate that our annual debt service payments will range from $2,455,543 - $3,972,250, with the final payment due June 30, 2038. These debt service assumptions have been budgeted for in fiscal year 2008/09.


Attachments:
Resolution
Master Trust Agreement
First Supplemental Trust Agreement
Master Installment Sale Agreement
First Supplemental Installment Sale Agreement
Bond Purchase Contract
Preliminary Official Statement
Appendix A (to POS); and
Appendix D (to POS).

RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BRENTWOOD AUTHORIZING EXECUTION OF A MASTER INSTALLMENT SALE AGREEMENT, A FIRST SUPPLEMENTAL INSTALLMENT SALE AGREEMENT WITH THE BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY (THE “AUTHORITY”) AND A BOND PURCHASE CONTRACT WITH SAID AUTHORITY AND RBC CAPITAL MARKETS CORPORATION IN CONNECTION WITH THE REFUNDING OF A PORTION OF THE AUTHORITY'S OUTSTANDING WATER AND SEWER REVENUE BONDS, 1996 SERIES A, AND THE FINANCING AND REFINANCING OF THE CITY’S 2008 WATER PROJECT.

WHEREAS, on November 26, 1996, City Council of the City of Brentwood (the “City”) adopted Resolution No. 96-206 authorizing and approving the issuance of Water and Sewer Revenue Bonds 1996 Series A in an amount of $12,195,000 of which $9,701,123 was for water and $2,493,877 was for sewer.

WHEREAS, on August 24, 2004, by Resolution No. 2004-206, City Council authorized the City Manager to execute an agreement with the Contra Costa Water District pertaining to long term treated water services as a part of the Surface Water Treatment Facility - Phase II, CIP Project No. 562-56290.

WHEREAS, on September 11, 2007, City Council approved Resolution No. 2007-209 approving and authorizing the City Manager to execute a second amendatory agreement with the Contra Costa Water District (CCWD) pertaining to long term treated water services as a part of the Surface Water Treatment Facility Project.

WHEREAS, on May 13, 2008, City Council approved Resolution No. 2008-107 1) appointing RBC Capital Markets, Inc. as the underwriter, 2) Orrick, Herrington & Sutcliffe LLP as the bond and disclosure counsel; 3) declaring official intent to reimburse certain expenditures from proceeds of indebtedness in an amount not-to-exceed $58,000,000 in connection with the financing of the new water treatment plant, to be constructed by the Contra Costa Water District (CCWD), and refinancing prior obligations issued for the water and wastewater enterprise; and 4) authorizing staff to undertake the proceedings of debt issuance for future Council consideration.

WHEREAS, the City Council has determined that significant public benefits will accrue from the refinancing of the City’s 1996 Water Project and financing capital improvements to the City’s water system (the “2008 Water Project”);

WHEREAS, the Brentwood Infrastructure Financing Authority (the “Authority”) proposes to assist the City in the refinancing of the City’s 1996 Water Project through refunding a portion of the Authority’s Water and Sewer Revenue Bonds, 1996 Series A (the “Series 1996 Bonds”) and the financing of the 2008 Water Project through the issuance of the Authority’s Water Revenue Bonds, Series 2008 (the “Bonds”), pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Act”), Article 11 of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California and that certain Trust Agreement, dated as of September 1, 2008, as supplemented by that certain First Supplemental Trust Agreement, dated as of September 1, 2008 (the “Trust Agreement”);

WHEREAS, the Authority proposes to use a portion of the proceeds of the Bonds to currently refund a portion of the outstanding Series 1996 Bonds and finance the cost of the acquisition of the 2008 Water Project pursuant to the Master Installment Sale Agreement, dated as of September 1, 2008 (the “Master Installment Sale Agreement”), and the First Supplemental Installment Sale Agreement, dated as of September 1, 2008 (the “First Supplemental Installment Sale Agreement”), both by and between the City and the Authority; and

WHEREAS, the City has been presented with a form of Bond Purchase Contract (the “Bond Purchase Contract”), by and among the Authority, the City and RBC Capital Markets Corporation, as underwriter (the “Underwriter”), pursuant to which the Underwriter offers to purchase the Bonds;

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Brentwood, as follows:

Section 1. The Master Installment Sale Agreement, in substantially the form on file with the City Clerk (the “Clerk”) and presented at this meeting, is hereby approved. The Director of Finance and Information Systems or the City Manager, or designees thereof, are hereby authorized and directed to execute and deliver, and the Clerk is hereby authorized and directed to attest, said Master Installment Sale Agreement in substantially said form with such changes as the Director of Finance and Information Systems or the City Manager approves in the interest of the City, after consultation with the City Attorney, such approval to be conclusively evidenced by such execution and delivery.
Section 2. The First Supplemental Installment Sale Agreement, in substantially the form on file with the Clerk and presented to this meeting, is hereby approved. The Director of Finance and Information Systems or the City Manager, or designees thereof, are hereby authorized and directed to execute and deliver, and the Clerk is hereby authorized and directed to attest, said First Supplemental Installment Sale Agreement in substantially said form with such changes as the Director of Finance and Information Systems or the City Manager approves in the interest of the City, after consultation with the City Attorney, such approval to be conclusively evidenced by such execution and delivery; provided, however, that the maximum purchase price for the 2008 Water Project and the 1996 Water Project under the First Supplemental Installment Sale Agreement shall not exceed $60,000,000 and the term of the First Supplemental Installment Sale Agreement shall not extend beyond July 31, 2038.
Section 3. The Bond Purchase Contract, in substantially the form on file with the Clerk and presented to this meeting, is hereby approved. The Director of Finance and Information Systems or the City Manager, or designees thereof, are hereby authorized and directed to execute and deliver, and the Clerk is hereby authorized and directed to attest, said Bond Purchase Contract in substantially said form with such changes as the Director of Finance and Information Systems or the City Manager approves in the interest of the City, after consultation with the City Attorney, such approval to be conclusively evidenced by such execution and delivery; provided, however, that the Bond Purchase Contract shall not provide for a true interest cost with respect to the Bonds in excess of 6.00% or a maximum maturity of the Bonds beyond July 31, 2038.
Section 4. The Mayor, City Manager, Director of Finance and Information Systems or such officer’s designee is hereby authorized, upon a determination by such officer that the procurement of such policy or surety bond is in the best interests of the City, to procure and maintain a municipal bond insurance policy and/or a debt service reserve fund surety bond for the benefit of the registered owners of one or more maturities of the Bonds in such form and on such terms and conditions as such officer shall require or approve, such approval to be conclusively evidenced by the execution and delivery of a commitment letter for and on behalf of the City to the issuer of such municipal bond insurance policy or debt service reserve fund surety bond.
Section 5. The Mayor, Mayor Pro Tem, City Manager, Director of Finance and Information Systems, Clerk, City Attorney and all other officers, agents and employees of the City are hereby authorized and directed to take any and all actions and to execute and deliver a Continuing Disclosure Certificate, an escrow agreement a tax certificate and any and all other documents, certificates and opinions necessary or convenient to accomplish the issuance, sale and delivery by the Authority of the Bonds and to carry out the purposes of this resolution.
Section 6. Any action authorized or permitted to be taken hereunder by the Director of Finance and Information Systems may be taken by the City Manager in the absence or incapacity of the Director of Finance and Information Systems. Any action authorized or permitted to be taken hereunder by the Clerk may be taken by the Deputy City Clerk in the absence or incapacity of the Clerk.

Section 7. This resolution shall take effect immediately upon its passage.
PASSED, APPROVED AND ADOPTED this 9th day of September, 2008, by the following vote:

AYES:
NOES:
ABSENT:
ABSTAINED:



Mayor
(SEAL)


ATTEST:



City Clerk of
the City of Brentwood



CLERK’S CERTIFICATE
I, Margaret Wimberly, City Clerk of the City of Brentwood, do hereby certify as follows:

The foregoing resolution is a full, true and correct copy of a resolution duly adopted at a special meeting of the City Council of said City duly held at the regular meeting place thereof on the 9th day of September, 2008, of which meeting all of the members of said City Council had due notice and at which a majority thereof were present; and that at said meeting said resolution was adopted by the following vote:

AYES:
NOES:
ABSENT:
ABSTAINED:
An agenda of said meeting was posted at least 72 hours before said meeting at City Hall, 150 City Park Way, Brentwood, California 94513, a location freely accessible to members of the public, and a brief description of said resolution appeared on said agenda.
I have carefully compared the foregoing with the original minutes of said meeting on file and of record in my office, and the foregoing is a full, true and correct copy of the original resolution adopted at said meeting and entered in said minutes.

Said resolution has not been amended, modified or rescinded since the date of its adoption and the same is now in full force and effect.

Dated: _______________, 2008




City Clerk of
the City of Brentwood



MASTER TRUST AGREEMENT
between the
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY
and
U.S. BANK NATIONAL ASSOCIATION,
Trustee
Dated as of October 1, 2008
Brentwood Infrastructure Financing Authority
Water Revenue Bonds

ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section 1.01. Definitions 2
Section 1.02. Equal Security 16
ARTICLE II
THE BONDS
Section 2.01. Authorization and Purpose of the Bonds 16
Section 2.02. Terms of the Bonds 16
Section 2.03. Form of Bonds 17
Section 2.04. Execution of Bonds 17
Section 2.05. Transfer and Payment of Bonds 17
Section 2.06. Exchange of Bonds 18
Section 2.07. Bond Registration Books 18
Section 2.08. Mutilated, Destroyed, Stolen or Lost Bonds 18
Section 2.09. Temporary Bonds 19
Section 2.10. [Reserved] 19
Section 2.11. Special Covenants as to Book-Entry Only System for Bonds 19
ARTICLE III
ISSUANCE OF BONDS
Section 3.01. Issuance of Bonds 21
Section 3.02. Conditions for the Issuance of Additional Bonds 21
Section 3.03. Proceedings for Authorization of Additional Bonds 22
Section 3.04. Limitations on the Issuance of Obligations Payable from Revenues 22
ARTICLE IV
REDEMPTION, TENDER AND PURCHASE OF BONDS
Section 4.01. Terms of Redemption, Tender and Purchase 23
Section 4.02. Notice of Redemption 23
Section 4.03. Partial Redemption of Bonds 24
Section 4.04. Effect of Redemption 24
ARTICLE V
REVENUES
Section 5.01. Pledge of Revenues 24
Section 5.02. Receipt and Deposit of Revenues in the Revenue Fund 25
Section 5.03. Establishment and Maintenance of Accounts for Use of Money in the Revenue Fund 25
Section 5.04. Application of Interest Account 29
Section 5.05. Application of Principal Account 29
Section 5.06. Establishment, Funding and Application of Reserve Funds 30
Section 5.07. [Reserved] 32
Section 5.08. Application of Fees and Expenses Fund 32
Section 5.09. Application of Redemption Fund 33
Section 5.10. Payment Provisions Applicable to Interest Rate Swap Agreements 33
Section 5.11. Deposit and Investments of Money in Accounts and Funds 33
ARTICLE VI
COVENANTS OF THE AUTHORITY
Section 6.01. Punctual Payment and Performance 34
Section 6.02. Against Encumbrances 34
Section 6.03. Tax Covenants; Rebate Fund 34
Section 6.04. Accounting Records and Reports 35
Section 6.05. Prosecution and Defense of Suits 36
Section 6.06. Further Assurances 36
ARTICLE VII
THE TRUSTEE
Section 7.01. The Trustee 36
Section 7.02. Liability of Trustee 38
ARTICLE VIII
AMENDMENT OF THE TRUST AGREEMENT
Section 8.01. Amendment of the Trust Agreement 40
Section 8.02. Disqualified Bonds 42
Section 8.03. Endorsement or Replacement of Bonds After Amendment 42
Section 8.04. Amendment by Mutual Consent 42
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES OF HOLDERS
Section 9.01. Events of Default and Acceleration of Maturities 42
Section 9.02. Application of Funds Upon Acceleration 43
Section 9.03. Institution of Legal Proceedings by Trustee 44
Section 9.04. Non-Waiver 44
Section 9.05. Actions by Trustee as Attorney-in-Fact 45
Section 9.06. Remedies Not Exclusive 45
Section 9.07. Limitation on Bondholders’ Right to Sue 45
Section 9.08. Credit Provider Directs Remedies Upon Event of Default 46
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Bonds 46
Section 10.02. Unclaimed Money 47
ARTICLE XI
MISCELLANEOUS
Section 11.01. Liability of Authority Limited to Revenues 47
Section 11.02. Benefits of the Trust Agreement Limited to Parties 48
Section 11.03. Successor Is Deemed Included In All References To Predecessor 48
Section 11.04. Execution of Documents by Holders 48
Section 11.05. Waiver of Personal Liability 48
Section 11.06. Acquisition of Bonds by Authority 49
Section 11.07. Destruction of Canceled Bonds 49
Section 11.08. Content of Certificates 49
Section 11.09. Publication for Successive Weeks 49
Section 11.10. Accounts and Funds: Business Days 49
Section 11.11. Article and Section Headings and References 50
Section 11.12. Partial Invalidity 50
Section 11.13. Execution in Several Counterparts 50
Section 11.14. Amendments to Installment Sale Agreements 50
Section 11.15. Notices 51
EXHIBIT A FORM OF SERIES 2008 BOND A-1
EXHIBIT B FORM OF PROJECT ACCOUNT REQUISITION B-1


THIS MASTER TRUST AGREEMENT made and entered into as of October 1, 2008 (the “Trust Agreement”) by and between U.S. Bank National Association (the “Trustee”) and the BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY (the “Authority”), a joint exercise of powers authority, duly organized and existing pursuant to an Agreement entitled “Joint Exercise of Powers Agreement by and between the City of Brentwood and the Redevelopment Agency of the City of Brentwood,”
W I T N E S S E T H:
WHEREAS, the Authority is a joint exercise of powers authority duly organized and operating pursuant to Article 1 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California;
WHEREAS, Bonds may be issued by the Authority pursuant to the provisions of this Trust Agreement and Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California, and the acts amendatory thereof and supplemental thereto (the “Act”), for the purposes set forth in the Act, including the financing and refinancing of capital improvements of the City’s Water System (the “Water Project”);
WHEREAS, Article 11 of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California authorizes and empowers the Authority to issue bonds to assist local agencies in financing and refunding certain bonds, upon authorization by resolution of such local agency member of the joint powers authority;
WHEREAS, the Authority has determined to enter into this Trust Agreement in order to provide for the authentication and delivery of certain water revenue bonds on behalf of the City;
WHEREAS, in connection therewith the City has determined to make installment sale payments to the Authority, pursuant to Master Installment Sale Agreement for the City of Brentwood Water Project, dated as of October 1, 2008 (the “Water Master Installment Sale Agreement”) for the financing of the costs of the design, acquisition and construction of the Water Project and the incidental costs and expenses related thereto paid by the Authority; and
WHEREAS, the Authority has determined that all acts and proceedings required by law and this Trust Agreement necessary to make the Series 2008 Bonds, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid and binding obligations of the Authority payable in accordance with their terms, and to constitute this Trust Agreement a valid and binding agreement of the parties hereto for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this Trust Agreement have been in all respects duly authorized;
NOW, THEREFORE, the parties hereto agree and covenant, as follows:
ARTICLE I

DEFINITIONS; EQUAL SECURITY
SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this section shall for all purposes hereof and of any certificate, opinion, request or other document herein or therein mentioned have the meanings herein specified:
Act
The term “Act” means the Joint Exercise of Powers Act (being Chapter 5 of Division 7 of Title 1 of the California Government Code, as amended) and all laws amendatory thereof or supplemental thereto.
Accreted Value
The term "Accreted Value" means, with respect to any Capital Appreciation Bond, the principal amount thereof plus the interest accrued thereon, compounded at the approximate interest rate thereon on each date specified therein. The Accreted Value at any date shall be the amounts set forth in the Accreted Value Table as of such date, if such date is a compounding date, and if not, as of the immediately preceding compounding date.
Accreted Value Table
The term "Accreted Value Table" means the table denominated as such which appears as an exhibit to, and to which reference is made in, a Supplemental Trust Agreement providing for a Series of Capital Appreciation Bonds issued pursuant to such Supplemental Trust Agreement.
Alternate Credit Enhancement
The term "Alternate Credit Enhancement" means, with respect to a Series of Bonds, any Insurance, letter of credit, line of credit, surety bond or other instrument, if any, which secures or guarantees the payment of principal of and interest on a Series of Bonds, issued by an insurance company, commercial bank, pension fund or other financial institution, and delivered or made available to the Trustee, as a replacement or substitution for any Credit Enhancement then in effect.
Alternate Liquidity Facility
The term "Alternate Liquidity Facility" means, with respect to a Series of Bonds, a line of credit, letter of credit, standby purchase agreement or similar liquidity facility, issued by a commercial bank, insurance company, pension fund or other financial institution, and delivered or made available to the Trustee, as a replacement or substitute for any Liquidity Facility then in effect.
Authority
The term “Authority” means the Brentwood Infrastructure Financing Authority created pursuant to the Act and its successors and assigns in accordance herewith.
Bonds; Series 2008 Bonds; Additional Bonds; Serial Bonds; Term Bonds
The term “Bonds” means the Series 2008 Bonds and any Additional Bonds. The term “Series 2008 Bonds” means the “Brentwood Infrastructure Financing Authority Water Revenue Bonds, Series 2008.” The term “Additional Bonds” means all bonds of the Authority authorized by and at any time Outstanding pursuant hereto and executed, issued and delivered in accordance with Article III. The term “Serial Bonds” means Bonds for which no sinking fund payments are provided. The term “Term Bonds” means Bonds which are payable on or before their specified maturing dates from sinking fund payments established for that purpose and calculated to retire such Bonds on or before their specified maturity dates.
Bond Obligation
The term "Bond Obligation" means, as of any given date of calculation, (1) with respect to any Outstanding Current Interest Bond, the principal amount of such Bond, and (2) with respect to any Outstanding Capital Appreciation Bond, the Accreted Value thereof.
Bond Reserve Requirement
The term “Bond Reserve Requirement” with respect to a Series of Bonds for which the Authority shall have established a Reserve Fund shall have the meaning specified in the Supplemental Indenture establishing the terms and provisions of such Series of Bonds.
Business Day
The term “Business Day” means any day (other than a Saturday or a Sunday) on which banks in New York, New York, are open for business and on which the Trustee is open for business at its principal corporate trust office.
Capital Appreciation Bonds
The term "Capital Appreciation Bonds" means the Bonds of any Series designated as Capital Appreciation Bonds in the Supplemental Trust Agreement providing for the issuance of such Series of Bonds and on which interest is compounded and paid at maturity or on prior redemption.
Certificate of the Authority
The term “Certificate of the Authority” means an instrument in writing signed by the Chair, Vice-Chair or Treasurer/Controller of the Authority, or by any other officer of the Authority duly authorized by the Authority for that purpose.
Certificate of the City
The term “Certificate of the City” means an instrument in writing signed by the Mayor, Mayor Pro Tem, City Administrator or Director of Finance of the City, or by any other officer of the City duly authorized by the City for that purpose.
City
The term “City” means the City of Brentwood, a municipal corporation, duly organized and existing under and by virtue of the Constitution and laws of the State.
Code
The term “Code” means the Internal Revenue Code of 1986, as amended.
Costs of Issuance Account
The term “Costs of Issuance Account” means the account by that name in the Revenue Fund established and maintained pursuant to Section 4.02.
Counterparty
The term "Counterparty" means an entity which has entered into an Interest Rate Swap Agreement with the Authority.
Credit Enhancement
The term "Credit Enhancement" means, with respect to a Series of Bonds, any Insurance, letter of credit, line of credit, surety bond or other instrument, if any, which secures or guarantees the payment of principal of and interest on a Series of Bonds, issued by an insurance company, commercial bank or other financial institution, and delivered or made available to the Trustee, as from time to time supplemented or amended pursuant to its terms, or, in the event of the delivery or availability of an Alternate Credit Enhancement, such Alternate Credit Enhancement.
Credit Provider
The term "Credit Provider" means, with respect to a Series of Bonds, the Insurer, commercial bank or other financial institution issuing (or having primary obligation, or acting as agent for the financial institutions obligated, under) a Credit Enhancement then in effect with respect to such Series of Bonds.
Current Interest Bonds
The term "Current Interest Bonds" means the Bonds of any Series designated as Current Interest Bonds in the Supplemental Trust Agreement providing for the issuance of such Series of Bonds and that pay interest to the Holders thereof on a periodic basis prior to maturity.
Defeasance Securities
“Defeasance Securities” mean the following:
1. [Cash
2. U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series — “SLGs”)
3. Direct obligations of the Treasury which have been stripped by the Treasury itself, CATS, TIGRS and similar securities
4. Resolution Funding Corp. (REFCORP) Only the interest component of REFCORP strips which have been stripped by request of the Federal Reserve Bank of New York in book entry form are acceptable.
5. Pre-refunded municipal bonds rates “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.
6. Obligation 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 (FmHA)
Certificates of beneficial ownership
c. Federal Financing Bank
d. General Services Administration
Participation certificates
e. U.S. Maritime Administration
Guaranteed Title XI financing
f. U.S. Department of Housing and Urban Development (HUD)
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]
Fees and Expenses Account
The term “Fees and Expenses Account” means the fund by that name established pursuant to Section 5.03.
Fiscal Year
The term “Fiscal Year” means the twelve-month period terminating on June 30 of each year, or any other annual accounting period hereafter selected and designated by the Authority as its Fiscal Year in accordance with applicable law.
Holder
The term “Holder” means any person who shall be the registered owner of any Outstanding Bond.
Independent Certified Public Accountant
The term “Independent Certified Public Accountant” means any certified public accountant or firm of such accountants duly licensed and entitled to practice and practicing as such under the laws of the State or a comparable successor, appointed and paid by the Authority, and who, or each of whom —
(1) is in fact independent according to the Statement of Auditing Standards No. 1 and not under the domination of the Authority or any of its members;
(2) does not have a substantial financial interest, direct or indirect, in the operations of the Authority or any of its members; and
(3) is not connected with the Authority as a member, officer or employee of the Authority or any of its members, but who may be regularly retained to audit the accounting records of and make reports thereon to the Authority or any of its members.
Information Services
The term “Information Services” means Financial Information, Inc.’s “Daily Called Bond Service,” 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Mergent/FIS, Inc., 5250 77 Center Drive, Suite 150, Charlotte, North Carolina 28217, Attn: Called Bond Dept.; Kenny S&P, 55 Water Street, 45th Floor, New York, New York 10041, Attn: Notification Department; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other services providing information with respect to the redemption of bonds as the Authority may designate in a Certificate of the Authority delivered to the Trustee.
Installment Payments
The term “Installment Payments” means the installment payments due under the Installment Sale Agreements.
Installment Sale Agreements
The term “Installment Sales Agreements” means, collectively, the Master Installment Sale Agreement, and any Supplemental Installment Sale Agreements.
Insurance
The term "Insurance" means any financial guaranty insurance policy or municipal bond insurance policy issued by an Insurer insuring the payment when due of principal of and interest on a Series of Bonds as provided in such financial guaranty insurance policy or municipal bond insurance policy.
Insurer
The term "Insurer" means any provider of Insurance with respect to a Series of Bonds.
Interest Account
The term “Interest Account” means the account by that name in the Revenue Fund established and maintained pursuant to Section 5.03.
Interest Payment Date
The term "Interest Payment Date," with respect to each Series of Bonds, shall have the meaning specified in the Supplemental Trust Agreement establishing the terms and provisions of such Series of Bonds.
Interest Rate Swap Agreement
The term "Interest Rate Swap Agreement" means an interest rate swap, cap, collar, option, floor, forward, derivative, or other hedging agreement, arrangement or security, however denominated, entered into between the Authority and a Counterparty, in connection with or incidental to, the issuance or carrying of Bonds, including, without limitation, an interest rate swap, cap, collar, option, floor, forward, derivative, or other hedging agreement, arrangement or security entered into in advance of the issuance of Bonds.
Joint Powers Agreement
The term “Joint Powers Agreement” means the Joint Exercise of Powers Agreement by and between the City of Brentwood and the Redevelopment Agency of the City of Brentwood, dated March 14, 1995, as originally executed and as it may from time to time be amended or supplemented pursuant to the provisions hereof and thereof.
Liquidity Facility
The term "Liquidity Facility" means, with respect to a Series of Bonds, a line of credit, letter of credit, standby purchase agreement or similar liquidity facility securing or guaranteeing the payment of purchase price of such Series of Bonds and issued by a commercial bank, insurance company, pension fund or other financial institution, and delivered or made available to the Trustee, as from time to time supplemented or amended pursuant to its terms, or, in the event of the delivery or availability of an Alternate Liquidity Facility, such Alternate Liquidity Facility.
Liquidity Facility Bonds
The term "Liquidity Facility Bonds" means any Bonds purchased with moneys drawn under (or otherwise obtained pursuant to the terms of) a Liquidity Facility, but excluding any Bonds no longer considered to be Liquidity Facility Bonds in accordance with the terms of the applicable Liquidity Facility.
Liquidity Facility Rate
The term "Liquidity Facility Rate" means, with respect to a Series of Bonds, the interest rate per annum, if any, specified as applicable to Liquidity Facility Bonds in the Liquidity Facility delivered in connection with such Series of Bonds.
Liquidity Provider
The term "Liquidity Provider" means, with respect to a Series of Bonds, the commercial bank, insurance company, pension fund or other financial institution issuing (or having primary obligation, or acting as agent for the financial institutions obligated, under) a Liquidity Facility then in effect with respect to such Series of Bonds.
Mandatory Sinking Account Payment
The term "Mandatory Sinking Account Payment" means, with respect to Bonds of any Series and maturity, the amount required by the Supplemental Trust Agreement establishing the terms and provisions of such Series of Bonds to be deposited by the Authority in a Sinking Account for the payment of Term Bonds of such Series and maturity.
Master Installment Sale Agreement
The term “Master Installment Sale Agreement” means the Master Installment Sale Agreement, dated as of October 1, 2008, by and between the Authority and the City, as originally executed and as it may from time to time be amended or supplemented by all Supplemental Installment Sale Agreements executed pursuant to the provisions thereof.
Maximum Interest Rate
The term "Maximum Interest Rate" means, with respect to all Bonds other than Liquidity Facility Bonds, the lesser of (i) twelve percent (12%) and (ii) the maximum rate of interest that may legally be paid on the Bonds from time to time, and means, with respect to Liquidity Facility Bonds, the lesser of (x) the Liquidity Facility Rate and (ii) the maximum rate of interest that may legally be paid on the Liquidity Facility Bonds from time to time.
Net Proceeds
The term “Net Proceeds” shall have the meaning ascribed to such term in the Installment Sale Agreement.
Office of the Trustee
The term “Office of the Trustee” means the principal corporate trust office of the Trustee in __________ or __________, California.
Opinion of Counsel
The term “Opinion of Counsel” means a written opinion of counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the Authority and satisfactory to and approved by the Trustee (who shall be under no liability by reason of such approval).
Outstanding
The term “Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 7.02) all Bonds except
(1) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation;
(2) Bonds paid or deemed to have been paid within the meaning of Section 9.01; and
(3) Bonds in lieu of or in substitution for which other Bonds shall have been executed, issued and delivered by the Authority pursuant hereto.
Permitted Investments
“Permitted Investments” mean any of the following obligations if and to the extent that they are permissible investments of funds of the City as stated in its current investment policy (copies of which the City shall provide on a current basis to the Trustee) and to the extent then permitted by law:
[A. Direct obligations of the United States (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States.
B. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States (stripped securities are only permitted if they have been stripped by the agency itself):
1. United States Export-Import Bank
Direct obligations or fully guaranteed certificates of beneficial ownership
2. Farmers Home Administration
Certificates of beneficial ownership
3. Federal Financing Bank
4. Federal Housing Administration Debentures
5. General Services Administration
Participation certificates
6. Government National Mortgage Association (“GNMA”)
GNMA – guaranteed mortgage-backed bonds
GNMA – guaranteed pass-through obligations
7. United States Maritime Administration
Guaranteed Title XI financing
8. United States Department of Housing and Urban Development
Project Notes
Local Authority Bonds
New Communities Debentures - United States government guaranteed debentures
United States Public Housing Notes and Bonds - United States government guaranteed public housing notes and bonds
C. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit United States government agencies (stripped securities are only permitted if they have been stripped by the agency itself):
1. Federal Home Loan Bank System
Senior debt obligations
2. Federal Home Loan Mortgage Corporation (“FHLMC”)
Participation Certificates
Senior debt obligations
3. Federal National Mortgage Association (“FNMA”)
Mortgage-backed securities and senior debt obligations
4. Resolution Funding Corporation (“REFCORP”) obligations
5. Form Credit System
Consolidated systemwide bonds and notes
D. Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of “AAAm-G,” “AAA-m,” or “AA m” and if rated by Moody’s, rated “Aaa,” “Aa1” or “Aa2,” including funds for which the Trustee or any of its affiliates (including any holding company, subsidiaries, or other affiliates) provides investment advisory or other management services.
E. Certificates of deposit secured at all times by collateral described in (A) and/or (B) above. Such certificates must be issued by commercial banks (including affiliates of the Trustee), savings and loan associations or mutual savings banks. The collateral must be held by a third party and the Trustee must have a perfected first security interest in the collateral.
F. Certificates of deposit, savings accounts, deposit accounts or money market deposits (including those of the Trustee and its affiliates) which are fully insured by FDIC, including BIF and SAIF.
G. Investment Agreements, including Guaranteed Investment Contracts, Forward Purchase Agreements and Reserve Fund Put Agreements approved in writing by the Series 2008 Bond Insurer.
H. Commercial paper rated, at the time of purchase, “P-1” by Moody’s and “A-1+” by S&P and which matures not more than 270 calendar days after the date of purchase.
I. Bonds or notes issued by any state or municipality which are rated by Moody’s and S&P in one of the two highest rating categories assigned by such agencies.
J. Federal funds or bankers acceptances with a maximum term of one year of any bank 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.
K. Repurchase agreements that provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee (buyer/lender), and the transfer of cash from the Trustee 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 in exchange for the securities at a specified date.
Repurchase Agreements must satisfy the following criteria:
a. Repos must be between the municipal entity and a dealer bank or securities firm
(1) Primary dealers on the Federal Reserve reporting dealer list which are rated A or better by Standard & Poor’s Ratings Group and Moody’s, or
(2) Banks rated “A” or above by Standard & Poor’s Ratings Group and Moody’s Investor Services.
b. The written repo contract must include the following:
(1) Securities which are acceptable for transfer are:
(a) Direct U.S. governments
(b) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA & FHLMC)
(2) The term of the repo may be up to 30 days
(3) The collateral must be delivered to the municipal entity, 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 certificated securities).
(4) The trustee has a perfected first priority security interest in the collateral.
(5) Valuation of Collateral
(a) The securities must be valued weekly, marked-to-market at current market price plus accrued interest
(b) The value of collateral must be equal to 104% of the amount of cash transferred by the municipal entity to the dealer bank or security firm under the repo plus accrued interest. If the value of securities held as collateral slips below l04% of the value of the cash transferred by municipality, 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%.
c. Legal opinion which must be delivered to the municipal entity:
Repo meets guidelines under state law for legal investment of public funds.
L. Any state administered pool investment fund in which the City is statutorily permitted or required to invest.
M. Any other investment approved by the Insurer.]
Principal Account
The term “Principal Account” means the account by that name in the Revenue Fund established and maintained pursuant to Section 5.03.
Proportionate Basis
The term "Proportionate Basis," when used with respect to the redemption of Bonds, means that the amount of Bonds of each maturity to be redeemed shall be determined as nearly as practicable by multiplying the total amount of funds available for redemption by the ratio which the amount of Bond Obligation of Bonds of such maturity bears to the amount of all Bond Obligation of Bonds to be redeemed, provided, however that, any Bond may only be redeemed in an authorized denomination. For purposes of the foregoing, Term Bonds shall be deemed to mature in the years and in the amounts of the Mandatory Sinking Account Payments, and Capital Appreciation Bonds and Current Interest Bonds maturing or subject to Mandatory Sinking Account Payments in the same year shall be treated as separate maturities. When used with respect to the payment or purchase of a portion of Bonds, "Proportionate Basis" shall have the same meaning set forth above except that "pay" or purchase" shall be substituted for "redeem" or "redemption" and "paid" or "purchased" shall be substituted for "redeemed."
Rating Agencies
The term “Rating Agencies” shall have the meaning ascribed to such term in the Installment Sale Agreement.
Rating Category
The term "Rating Category" means: (i) with respect to any long-term rating category, all ratings designated by a particular letter or combination of letters, without regard to any numerical modifier, plus or minus sign or other modifier; and (ii) with respect to any short-term or commercial paper rating category, all ratings designated by a particular letter or combination of letters and taking into account any numerical modifier, but not any plus or minus sign or other modifier.
Rebate Fund
The term “Rebate Fund” means the fund by that name established and maintained pursuant to Section 5.03.
Resolution
The term “Resolution” means Resolution No. [_________], adopted by the Authority on [_________], 2008.
Reserve Facility
"Reserve Facility" means any insurance policy, letter of credit or surety bond issued by a Reserve Facility Provider, meeting the requirements set forth in Section 5.06, and delivered to the Trustee in satisfaction of all or a portion of the Bond Reserve Requirement applicable to one or more Series of Bonds.
Reserve Facility Provider
"Reserve Facility Provider" means any issuer of a Reserve Facility.
Reserve Fund
The term “Reserve Fund” means any fund by that name established with respect to one or more Series of Bonds pursuant to the Supplemental Trust Agreement establishing the terms and provisions of such Series of Bonds.
Revenue Fund
The term “Revenue Fund” means the Water Bond Revenue Fund established and maintained pursuant to Section 4.02.
Revenues
The term “Revenues” means all Installment Payments and other payments paid by the City and received by the Authority pursuant to any Installment Sale Agreements and all interest or other income from any investment of any money in any fund or account (other than the Rebate Fund) pursuant to Section 5.11.
Securities Depositories
The term “Securities Depositories” means: The Depository Trust Company, 55 Water Street, 50th Floor, New York, New York 10041-0099, Fax (212) 855-7232; or such other addresses and/or such other securities depositories as the Authority may designate.
Series
The term “Series” whenever used herein with respect to Bonds, means all of the Bonds designated as being of the same series, authenticated and delivered in a simultaneous transaction regardless of variations in maturity, interest rate, redemption and other provisions, and any Bonds thereafter authenticated and delivered upon transfer or exchange or in lieu of or in substitution for (but not to refund) such Bonds as herein provided.
Sinking Account
The term "Sinking Account" means an account by that name established in the Principal Account pursuant to Section 5.03 for the payment of Term Bonds.
State
The term “State” means the State of California.
Supplemental Installment Sale Agreement
The term “Supplemental Installment Sale Agreement” means any installment sale agreement then in full force and effect which has been duly executed and delivered by the Authority and the City amendatory to the Master Installment Sale Agreement as supplemented thereto; but only if and to the extent that such Supplemental Installment Sale Agreement is specifically authorized under the Master Installment Sale Agreement.
Supplemental Trust Agreement
The term “Supplemental Trust Agreement” means any trust agreement then in full force and effect which has been duly executed and delivered by the Authority and the Trustee amendatory hereof or supplemental hereto; but only if and to the extent that such Supplemental Trust Agreement is specifically authorized hereunder.
Swap Revenues
"Swap Revenues" means all regularly-scheduled amounts (but not termination payments) owed or paid to the Authority by any Counterparty under any Interest Rate Swap Agreement after offset for the regularly-scheduled amounts (but not termination payments) owed or paid by the Authority to such Counterparty under such Interest Rate Swap Agreement.
Tax Certificate
The term "Tax Certificate" means each Tax Certificate delivered by the Authority at the time of issuance and delivery of a Series of Bonds, as the same may be amended or supplemented in accordance with its terms.
Trust Agreement
The term “Trust Agreement” means this Trust Agreement, dated as of October 1, 2008, between the Authority and the Trustee, as originally executed and as it may from time to time be amended or supplemented by all Supplemental Trust Agreements executed pursuant to the provisions hereof.
Trustee
The term “Trustee” means U.S. Bank National Association, or any successor thereto action pursuant to this Trust Agreement.
Variable Rate Indebtedness
"Variable Rate Indebtedness" means any indebtedness, including Bonds, the interest rate on which is not fixed at the time of incurrence of such indebtedness, and has not at some subsequent date been fixed, at a numerical rate or rates for the entire term of such indebtedness.
Water System
The term “Water System” has the meaning ascribed to such term in the Master Installment Sale Agreement.
Written Request of the Authority
The term “Written Request of the Authority” means an instrument in writing signed by the Chair, Vice-Chair, or Treasurer/Controller of the Authority, or by any other officer of the Authority duly authorized by the Authority for that purpose.
SECTION 1.02. Equal Security. In consideration of the acceptance of the Bonds by the Holders thereof, the Trust Agreement shall be deemed to be and shall constitute a contract between the Authority and the Holders from time to time of all Bonds authorized, executed, issued and delivered hereunder and then Outstanding to secure the full and final payment of the interest on and principal of and redemption premiums, if any, on all Bonds which may from time to time be authorized, executed, issued and delivered hereunder, subject to the agreements, conditions, covenants and provisions contained herein; and all agreements and covenants set forth herein to be performed by or on behalf of the Authority shall be for the equal and proportionate benefit, protection and security of all Holders of the Bonds without distinction, preference or priority as to security or otherwise of any Bonds over any other Bonds by reason of the number or date thereof or the time of authorization, sale, execution, issuance or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein.
ARTICLE II

THE BONDS
SECTION 2.01. Authorization and Purpose of the Bonds. Bonds may be issued hereunder as fully registered bonds without coupons, in book-entry form or otherwise, from time to time as the issuance thereof is approved by the Authority. The maximum principal amount of Bonds which may be issued hereunder is not limited; subject, however, to any limitations contained in the Act and to the right of the Authority, which is hereby reserved, to limit the aggregate principal amount of Bonds which may be issued or Outstanding hereunder. The Bonds are designated generally as "Brentwood Infrastructure Financing Authority Water Revenue Bonds" each Series thereof to bear such additional designation as may be necessary or appropriate to distinguish such Series from every other Series of Bonds. The Bonds may be issued in such Series as from time to time shall be established and authorized by the Authority, subject to the covenants, provisions and conditions herein contained.
SECTION 2.02. Terms of the Bonds. The Bonds of each Series shall bear interest, if any, at such rate or rates or determined in such manner and payable at such intervals as may be determined by the Authority at the time of issuance thereof pursuant to the Supplemental Indenture under which issued, not to exceed the Maximum Interest Rate, and shall mature and become payable on such date or dates and in such year or years as the Authority may determine by the Supplemental Trust Agreement creating such Series. Principal of and interest on such Bonds shall be payable in such manner as may be specified in the Supplemental Trust Agreement creating such Series. The Bonds of each Series shall be issued in such denominations as may be authorized by the Supplemental Trust Agreement creating such Series.
Unless otherwise provided in the Supplemental Trust Agreement delivered in connection with such Series of Bonds, the Bonds of each Series shall be initially registered in the name of "Cede & Co.," as nominee of the Securities Depository and shall be evidenced by one bond certificate for each maturity of each Series of Bonds. Registered ownership of any Series of Bonds, or any portion thereof, may not thereafter be transferred except as set forth in Section 2.11, or in the event the use of the Securities Depository is discontinued, in accordance with the provisions set forth in Section 2.05.
SECTION 2.03. Form of Bonds. The Bonds of any Series shall be in such form or forms as may be specified in the Supplemental Trust Agreement creating such Series.
SECTION 2.04.Execution of Bonds. The Bonds shall be executed in the name and on behalf of the Authority by the facsimile or manual signature of the [Treasurer/Controller] of the Authority [and attested by the facsimile or manual signature of the Secretary of the Authority]. Unless otherwise provided in any Supplemental Trust Agreement, the Bonds shall then be delivered to the Trustee for authentication by the Trustee. In case any of the officers who shall have signed or attested any of the Bonds shall cease to be such officer or officers of the Authority before the Bonds so signed or attested shall have been authenticated or delivered by the Trustee or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and 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 Bond may be signed and attested on behalf of the Authority by such persons as at the actual date of execution of such Bond shall be the proper officers of the Authority although at the nominal date of such Bond any such person shall not have been such officer of the Authority.
Except as may be otherwise be provided in a Supplemental Trust Agreement establishing the terms and provisions of a Series of Bonds, only such of the Bonds as shall bear thereon a certificate of authentication substantially in the form recited in the Supplemental Trust Agreement creating such Series of Bonds, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Trust Agreement, and such certificate of authentication when manually executed by 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 this Trust Agreement.
SECTION 2.05. Transfer and Payment of Bonds. Any Bonds may, in accordance with its terms, be transferred in the books required to be kept pursuant to the provisions of Section 2.07 by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bonds for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form approved by the Trustee. Whenever any Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and deliver to the transferee a new Bond or Bonds of the same series and maturity for a like aggregate principal amount. The Trustee shall require the payment by the Holder requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer as a condition precedent to the exercise of such privilege.
The Authority and the Trustee may deem and treat the registered owner of any Bonds as the absolute owner of such Bonds for the purpose of receiving payment thereof and for all other purposes, whether such Bonds shall be overdue or not, and neither the Authority nor the Trustee shall be affected by any notice or knowledge to the contrary; and payment of the interest on and principal of and redemption premium, if any, on such Bonds shall be made only to such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on such Bonds to the extent of the sum or sums so paid.
The Trustee shall not be required to issue, register the transfer of or exchange any Bonds during the fifteen (15) days preceding each interest payment date or the date of selection by the Trustee of Bonds for redemption, or to register the transfer of or exchange any Bonds which have been selected for redemption in whole or in part.
SECTION 2.06. Exchange of Bonds. Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds of the same series and maturity of other authorized denominations. The Trustee shall require the payment by the Holder requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange as a condition precedent to the exercise of such privilege.
SECTION 2.07. Bond Registration Books. The Trustee will keep at its office sufficient books for the registration and transfer of the Bonds which shall at all times be open to inspection by the Authority on reasonable notice during regular business hours on any Business Day, and upon presentation for such purpose the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer the Bonds in such books as hereinabove provided.
SECTION 2.08. Mutilated, Destroyed, Stolen or Lost Bonds. If any Bond shall become mutilated the Trustee at the expense of the Holder shall thereupon authenticate and deliver, a new Bond of like tenor and number in exchange and substitution for the Bond 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.
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 Trustee, at the expense of the Holder, shall thereupon authenticate and deliver, a new Bond of like tenor and number in lieu of and in substitution for the Bond so lost, destroyed or stolen.
The Trustee may require payment of a reasonable sum for each new Bond issued under this Section 2.08 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 be equally and proportionately entitled to the benefits of this Trust Agreement with all other Bonds of the same series secured by this Trust Agreement. Neither the Authority nor the Trustee shall be required to treat both the original Bond and any duplicate Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be issued hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and duplicate Bond shall be treated as one and the same.
SECTION 2.09. Temporary Bonds. The Bonds issued under this Trust Agreement may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Authority, shall be in fully registered form and may contain such reference to any of the provisions of this Trust Agreement as may be appropriate. Every temporary Bond shall be executed and authenticated as authorized by the Authority, in accordance with the terms of the Act. If the Authority issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds may be surrendered, for cancellation, in exchange therefor at the Office of the Trustee, and the Trustee shall deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Trust Agreement as definitive Bonds delivered hereunder.
SECTION 2.10. [Reserved.]
SECTION 2.11. Special Covenants as to Book-Entry Only System for Bonds. (a) Except as otherwise provided in subsections (b) and (c) of this Section 2.11, all of the Bonds initially issued shall be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”), or such other nominee as DTC shall request pursuant to the Representation Letter. Payment of the interest on any Bond registered in the name of Cede & Co. shall be made on each interest payment date for such Bonds to the account, in the manner and at the address indicated in or pursuant to the Representation Letter.
(b) The Bonds initially shall be issued in the form of a single authenticated fully registered bond for each stated maturity of such Bonds, representing the aggregate principal amount of the Bonds of such maturity. Upon initial issuance, the ownership of all such Bonds shall be registered in the registration records maintained by the Trustee pursuant to Section 2.07 hereof in the name of Cede & Co., as nominee of DTC, or such other nominee as DTC shall request pursuant to the Representation Letter. The Trustee, the Authority and any paying agent may treat DTC (or its nominee) as the sole and exclusive owner of the Bonds registered in its name or the name of its nominee for the purposes of payment of the principal or redemption price of and interest on such Bonds, selecting the Bonds or portions thereof to be redeemed, giving any notice permitted or required to be given to Bondholders hereunder, registering the transfer of Bonds, obtaining any consent or other action to be taken by Bondholders of the Bonds and for all other purposes whatsoever; and neither the Trustee or the Authority or any paying agent shall be affected by any notice to the contrary. Neither the Trustee nor the Authority or any paying agent shall have any responsibility or obligation to any Participant (which shall mean, for purposes of this Section 2.13, securities brokers and dealers, banks, trust companies, clearing corporations and other entities, some of whom directly or indirectly own DTC), any person claiming a beneficial ownership interest in the Bonds under or through DTC or any Participant, or any other person which is not shown on the registration records as being a Bondholder, with respect to (i) the accuracy of any records maintained by DTC or any Participant, (ii) the payment by DTC or any Participant of any amount in respect of the principal or redemption price of or interest on the Bonds, (iii) any notice which is permitted or required to be given to Holders of Bonds hereunder, (iv) the selection by DTC or any Participant of any person to receive payment in the event of a partial redemption of the Bonds, or (v) any consent given or other action taken by DTC as Holder of Bonds. The Trustee shall pay all principal of and premium, if any, and interest on the Bonds only at the times, to the accounts, at the addresses and otherwise in accordance with the Representation Letter, and all such payments shall be valid and effective to satisfy fully and discharge the Authority’s obligations with respect to the principal of and premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of its then existing nominee, the Bonds will be transferable to such new nominee in accordance with subsection (f) of this Section 2.11.
(c) In the event that the Authority determines that it is in the best interests of the beneficial owners of the Bonds that they be able to obtain bond certificates, the Trustee shall, upon the written instruction of the Authority, so notify DTC, whereupon DTC shall notify the Participants of the availability through DTC of bond certificates. In such event, the Bonds will be transferable in accordance with subsection (f) of this Section 2.11. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice of such discontinuance to the Authority and the Trustee and discharging its responsibilities with respect thereto under applicable law. In such event, the Bonds will be transferable in accordance with subsection (f) of this Section 2.11. Whenever DTC requests the Authority and the Trustee to do so, the Trustee and the Authority will cooperate with DTC in taking appropriate action after reasonable notice to arrange for another securities depository to maintain custody of all certificates evidencing the Bonds then Outstanding. In such event, the Bonds will be transferable to such securities depository in accordance with subsection (f) of this Section 2.11, and thereafter, all references in this Trust Agreement to DTC or its nominee shall be deemed to refer to such successor securities depository and its nominee, as appropriate.
(d) Notwithstanding any other provision of this Trust Agreement to the contrary, so long as all Bonds Outstanding are registered in the name of any nominee of DTC, all payments with respect to the principal of and premium, if any, and interest on each such Bond and all notices with respect to each such Bond shall be made and given, respectively, to DTC as provided in the Representation Letter.
(e) The Trustee is hereby authorized and requested to execute and deliver the Representation Letter and, in connection with any successor nominee for DTC or any successor depository, enter into comparable arrangements, and shall have the same rights and immunities with respect to its actions thereunder as it has with respect to its actions under this Trust Agreement.
(f) In the event that any transfer or exchange of Bonds is authorized under subsection (b) or (c) of this Section 2.11, such transfer or exchange shall be accomplished upon receipt by the Trustee from the registered owner thereof of the Bonds to be transferred or exchanged and appropriate instruments of transfer to the permitted transferee, all in accordance with the applicable provisions of Sections 2.05 and 2.06 hereof. In the event Bond certificates are issued to Holders other than Cede & Co., its successor as nominee for DTC as holder of all the Bonds, another securities depository as holder of all the Bonds, or the nominee of such successor securities depository, the provisions of Sections 2.05 and 2.06 hereof shall also apply to, among other things, the registration, exchange and transfer of the Bonds and the method of payment of principal of, premium, if any, and interest on the Bonds.
ARTICLE III

ISSUANCE OF BONDS

SECTION 3.01. Issuance of Bonds. Whenever the Authority shall determine to issue a Series of Bonds hereunder, the Authority (i) shall authorize the execution of a Supplemental Trust Agreement specifying the principal amount, and prescribing the forms of Bonds of such Series and providing the terms, conditions, distinctive designation, denominations, date, maturity date or dates, interest rate or rates (or the manner of determining the same), redemption provisions, tender provisions, if any, and place or places of payment of principal or Redemption Price, if any, of and interest on such Bonds, and any other provisions respecting the Bonds of such Series not inconsistent with the terms of this Trust Agreement, (ii) shall execute such Supplemental Trust Agreement and (iii) shall deliver such Supplemental Trust Agreement to the Trustee for execution.
SECTION 3.02.Conditions for the Issuance of Additional Bonds. Subsequent to the issuance of the Series 2008 Bonds, the Authority may by Supplemental Trust Agreement establish one or more additional Series of Bonds, payable from Revenues and secured by the pledge made under this Trust Agreement equally and ratably with the Series 2008 Bonds, and the Authority may issue, and the Trustee may authenticate and deliver to the purchasers thereof, Bonds of any Series so established, in such principal amount as shall be determined by the Authority, but only, with respect to each additional Series of Bonds issued subsequent to the Series 2008 Bonds issued hereunder, upon compliance by the Authority with the provisions of this Section 3.02, Section 3.03 and any additional requirements set forth in said Supplemental Trust Agreement and subject to the specific conditions set forth below, each of which is hereby made a condition precedent to the issuance of any such additional Series of Bonds.
(1) The Authority shall be in compliance with all agreements and covenants contained herein, and no Event of Default shall have occurred and be continuing.
(2) The Supplemental Trust Agreement shall require that the proceeds of the sale of such Additional Bonds shall be applied to the completion of the Water Project, or for the refunding or repayment of any Bonds then Outstanding or any other obligation of the Water System, including the payment of costs and expenses of and incident to the authorization and sale of such Additional Bonds. The Supplemental Trust Agreement may also provide that a portion of such proceeds shall be applied to the payment of the interest due or to become due on said Additional Bonds during the estimated period of any construction and for a period of not to exceed twelve (12) months thereafter.
(3) Subject to the provisions of Section 5.06, in the event a Supplemental Trust Agreement providing for the issuance of such Series shall require either (i) the establishment of a Reserve Fund to provide additional security for such Series of Bonds or (ii) that the balance on deposit in an existing Reserve Fund be increased, forthwith upon the receipt of the proceeds of the sale of such Series, to an amount at least equal to the Bond Reserve Requirement with respect to such Series of Bonds and all other Bonds secured by such Reserve Fund to be considered Outstanding upon the issuance of such additional Series of Bonds, the Supplemental Trust Agreement providing for the issuance of such additional Series of Bonds shall require deposit of the amount necessary. Said deposit shall be made as provided in the Supplemental Trust Agreement providing for the issuance of such additional Series of Bonds and may be made from the proceeds of the sale of such Series of Bonds or from other funds of the Authority or from both such sources or may be made in the form of a Reserve Facility.
(4) The aggregate principal amount of Bonds issued and at any time Outstanding hereunder shall not exceed any limit imposed by law, by this Trust Agreement or by any Supplemental Trust Agreement.
(5) The Authority and the City shall enter into a Supplemental Installment Sale Agreement in accordance with the Master Installment Sale Agreement.
SECTION 3.03.Proceedings for Authorization of Additional Bonds. Whenever the Authority and the City shall determine to execute and deliver any Additional Bonds pursuant to Section 3.01, the Authority and the Trustee shall enter into a Supplemental Trust Agreement providing for the issuance of such Additional Bonds, specifying the maximum principal amount of such Additional Bonds and prescribing the terms and conditions of such Additional Bonds.
The Supplemental Trust Agreement shall prescribe the form or forms of such Additional Bonds and, subject to the provisions of Section 3.01, shall provide for the distinctive designation, denominations, method of numbering, dates, interest rates, provisions for redemption (if desired) and places of payment of principal and interest.
Before such Additional Bonds shall be issued, the City and the Authority shall file or cause to be filed a Certificate of the City that the requirements of Section 3.01 have been met.
Upon the delivery to the Trustee of the foregoing instruments and upon the Trustee’s receipt of Certificates of the City and of the Authority stating that all applicable provisions of this Trust Agreement have been complied with (so as to permit the execution and delivery of the Additional Bonds in accordance with the Supplemental Trust Agreement then delivered to the Trustee), the Trustee shall execute and deliver said Additional Bonds, in the aggregate principal amount specified in such Supplemental Trust Agreement, to, or upon the Written Request of, the Authority.
SECTION 3.04.Limitations on the Issuance of Obligations Payable from Revenues. The Authority will not, so long as any of the Bonds are Outstanding, issue any obligations or securities, however denominated, payable in whole or in part from Revenues except the following:
(1) Bonds of any Series authorized pursuant to Sections 3.01 and 3.02; or
(2) Obligations which are junior and subordinate to the payment of the principal, premium, interest and reserve fund requirements for the Bonds and which subordinated obligations are payable as to principal, premium, interest and reserve fund requirements, if any, only out of Revenues after the prior payment of all amounts then required to be paid hereunder from Revenues for principal, premium, interest and reserve fund requirements for the Bonds, as the same become due and payable and at the times and in the manner as required in this Trust Agreement.
ARTICLE IV

REDEMPTION, TENDER AND PURCHASE OF BONDS
SECTION 4.01. Terms of Redemption, Tender and Purchase. Each Series of Bonds may be made subject to redemption or mandatory or optional tender and purchase prior to their respective stated maturities, as a whole or in part, at such time or times, upon such terms and conditions and upon such notice and with such effect as may be provided in the Supplemental Trust Agreement establishing the terms and provisions of such Series of Bonds.
SECTION 4.02. Notice of Redemption. Unless otherwise specified in a Supplemental Trust Agreement establishing the terms and provisions of a Series of Bonds, each notice of redemption shall be mailed by the Trustee, not less than ten (10) nor more than sixty (60) days prior to the redemption date, to each Holder and each of the Securities Depositories. Notice of redemption to the Holders and the Securities Depositories shall be given by first class mail. Each notice of redemption shall state the date of such notice, the date of issue of the Series of Bonds to which such notice relates, the redemption date, the redemption price, the place or places of redemption (including the name and appropriate address or addresses of the Trustee), the CUSIP number (if any) of the maturity or maturities, and, if less than all of any such maturity, the distinctive certificate numbers of the Bonds of such maturity, if any, to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of said Bonds the redemption price thereof or of said specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the date fixed for redemption, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered at the address or addresses of the Trustee specified in the redemption notice. Neither the Authority nor the Trustee shall have any responsibility for any defect in the CUSIP number that appears on any Bond or in any redemption notice with respect thereto, and any such redemption notice may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the Authority nor the Trustee shall be liable for any inaccuracy in such CUSIP numbers.
Failure by the Trustee to give notice to any one or more of the Securities Depositories or failure of any Holder or any Securities Depository to receive notice or any defect in any such notice shall not affect the sufficiency or validity of the proceedings for redemption.
With respect to any notice of optional redemption of Bonds delivered pursuant to this Section 4.02 or any provision of any Supplemental Trust Agreement, unless, upon the giving of such notice, such Bonds shall be deemed to have been paid within the meaning of Article X hereof, such notice shall state that such redemption shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of amounts sufficient to pay the principal of, and premium, if any, and interest on, such Bonds to be redeemed, and that if such amounts shall not have been so received said notice shall be of no force and effect and the Authority shall not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such amounts are not so received, the redemption shall not be made and the Trustee shall within a reasonable time thereafter give notice to the Holders to the effect that such amounts were not so received and such redemption was not made, such notice to be given by the Trustee in the manner in which the notice of redemption was given.
Any notice given pursuant to this Section 4.02 may be rescinded by written notice given to the Trustee by the Authority and the Trustee shall give notice of such rescission as soon thereafter as practicable in the same manner, and to the same Persons, as notice of such redemption was given pursuant to this Section 4.02.
SECTION 4.03. Partial Redemption of Bonds. Upon surrender of any Bond redeemed in part only, the Authority shall execute (but need not prepare) and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations, and of the same Series, maturity and interest rate, equal in aggregate principal amount to the unredeemed portion of the Bond surrendered.
SECTION 4.04. 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 redemption date 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 at the redemption price specified in such notice together with interest accrued thereon to the redemption date, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under this Trust Agreement and the Holders of said Bonds shall have no rights in respect thereof except to receive payment of said redemption price and accrued interest to the date fixed for redemption from funds held by the Trustee for such payment and such funds are hereby pledged to such payment. All Bonds redeemed pursuant to the provisions of this Article shall be canceled upon surrender thereof.
ARTICLE V

REVENUES
SECTION 5.01. Pledge of Revenues. (a) All Revenues and any other amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account established hereunder (other than amounts on deposit in the Rebate Fund created pursuant to Section 5.03) are hereby irrevocably pledged to the payment of the interest and premium, if any, on and principal of the Bonds as provided herein, and the Revenues shall not be used for any other purpose while any of the Bonds remain Outstanding; provided, however, that out of the Revenues and other moneys there may be applied such sums for such purposes as are permitted hereunder. This pledge shall constitute a first pledge of and charge and lien upon the Revenues and all other moneys on deposit in the funds and accounts established hereunder (other than amounts on deposit in the Rebate Fund created pursuant to Section 6.03) for the payment of the interest on and principal of the Bonds in accordance with the terms hereof and thereof. The Authority hereby assigns to the Trustee all of the Authority’s rights and remedies under the Installment Sale Agreement.
SECTION 5.02. Receipt and Deposit of Revenues in the Revenue Fund. In order to carry out and effectuate the pledge, charge and lien contained herein, the Authority agrees and covenants that all Revenues when and as received shall be received by the Authority in trust hereunder for the benefit of the Holders and shall be deposited when and as received by the Authority in a revenue account and sinking account in the Revenue Fund which fund is hereby created and which fund the Authority hereby agrees and covenants to maintain with the Trustee so long as any Bonds shall be Outstanding hereunder. All Revenues shall be accounted for through and held in trust in the Revenue Fund, and the Authority shall have no beneficial right or interest in any of the Revenues except only as herein provided. All Revenues, whether received by the Authority in trust or deposited with the Trustee as herein provided, shall nevertheless be allocated, applied and disbursed solely to the purposes and uses hereinafter in this Article set forth, and shall be accounted for separately and apart from all other accounts, funds, money or other resources of the Authority. Any money deposited in the Revenue Fund from the Capitalized Interest Account pursuant to Section 4.04 may only be applied for the purpose of paying the interest on the Bonds.
SECTION 5.03. Establishment and Maintenance of Accounts for Use of Money in the Revenue Fund. Subject to Section 6.03, all money in the Revenue Fund shall be set aside by the Trustee in the following respective special accounts within the Revenue Fund (each of which is hereby created and each of which the Authority hereby covenants and agrees to cause to be maintained) in the following order of priority:
(a) Interest Account,
(b) Principal Account; Sinking Accounts,
(c) Reserve Fund, and
(d) Fees and Expense Account.
All money in each of such accounts shall be held in trust by the Trustee and shall be applied, used and withdrawn only for the purposes hereinafter authorized in this section.
(a) Interest Account. On or before the last Business Day of each month beginning in ________ 2008, the Trustee shall set aside from the Revenue Fund and deposit in the Interest Account that amount of money which is equal to (a) one-sixth of the aggregate half-yearly amount of interest becoming due and payable on the Outstanding Current Interest Bonds (except for Bonds constituting Variable Rate Indebtedness which shall be governed by subparagraph (b) below) during the next ensuing six (6) months (excluding any interest for which there are moneys deposited in the Interest Account from the proceeds of any Series of Bonds or other source and reserved as capitalized interest to pay such interest during said next ensuing six (6) months), until the requisite half-yearly amount of interest on all such Outstanding Current Interest Bonds (except for Bonds constituting Variable Rate Indebtedness which shall be governed by subparagraph (b) below) is on deposit in such fund; provided that from the date of delivery of a Series of Current Interest Bonds until the first Interest Payment Date with respect to such Series of Bonds the amounts set aside in such fund with respect to such Series of Bonds shall be sufficient on a monthly pro rata basis to pay the aggregate amount of interest becoming due and payable on said Interest Payment Date with respect to such Series of Bonds, plus (b) the aggregate amount of interest to accrue during that month on Outstanding Variable Rate Indebtedness, calculated, if the actual rate of interest is not known, at the interest rate specified in writing by the Authority, or if the Authority shall not have specified an interest rate in writing, calculated at the maximum interest rate borne by such Variable Rate Indebtedness during the month prior to the month of deposit plus one hundred (100) basis points (provided, however, that the amount of such deposit into the Interest Account for any month may be reduced by the amount by which the deposit in the prior month exceeded the actual amount of interest accrued and paid during that month on said Outstanding Variable Rate Indebtedness and provided further that the amount of such deposit into the Interest Account for any month shall be increased by the amount by which the deposit in the prior month was less than the actual amount of interest accruing during that month on said Outstanding Variable Rate Indebtedness). No deposit need be made into the Interest Account if the amount contained therein is at least equal to the interest to become due and payable on the Interest Payment Dates falling within the next six (6) months upon all of the Bonds issued hereunder and then Outstanding and on [January] 1 and [July] 1 of each year any excess amounts in the Interest Account not needed to pay interest on such date (and not held to pay interest on Bonds having Interest Payment Dates other than [January] 1 and [July] 1) shall be transferred to the Authority (but excluding, in each case, any moneys on deposit in the Interest Account from the proceeds of any Series of Bonds or other source and reserved as capitalized interest to pay interest on any future Interest Payment Dates following such Interest Payment Dates). [All Swap Revenues received shall be deposited in the Interest Account.]

(b) Principal Account; Sinking Accounts. On or before the last Business Day of each month beginning in ________ 2008, the Trustee shall deposit in the Principal Account as soon as practicable in such month an amount equal to at least (a) one-sixth of the aggregate semiannual amount of Bond Obligation becoming due and payable on the Outstanding Serial Bonds of all Series having semiannual maturity dates within the next six (6) months, plus (b) one-twelfth of the aggregate yearly amount of Bond Obligation becoming due and payable on the Outstanding Serial Bonds of all Series having annual maturity dates within the next twelve (12) months, plus (c) one-sixth of the aggregate of the Mandatory Sinking Account Payments to be paid during the next six-month period into the respective Sinking Accounts for the Term Bonds of all Series for which Sinking Accounts have been created and for which semiannual mandatory redemption is required from said Sinking Accounts, plus (d) one-twelfth of the aggregate of the Mandatory Sinking Account Payments to be paid during the next 12-month period into the respective Sinking Accounts for the Term Bonds of all Series for which Sinking Accounts shall have been created and for which annual mandatory redemption is required from such Sinking Accounts; provided that if the Authority certifies to the Trustee that any principal payments are expected to be refunded on or prior to their respective due dates or paid from amounts on deposit in a Reserve Fund that would be in excess of the Bond Reserve Requirement applicable to such Reserve Fund upon such payment, no amounts need be set aside towards such principal to be so refunded or paid. All of the aforesaid deposits made in connection with future Mandatory Sinking Account Payments shall be made without priority of any payment into any one such Sinking Account over any other such payment.
In the event that the Revenues shall not be sufficient to make the required deposits so that moneys in the Principal Account on any principal or mandatory redemption date are equal to the amount of Bond Obligation to become due and payable on the Outstanding Serial Bonds of all Series plus the Bond Obligation amount of and redemption premium on the Outstanding Term Bonds required to be redeemed or paid at maturity on such date, then such moneys shall be applied on a Proportionate Basis and in such proportion as said Serial Bonds and said Term Bonds shall bear to each other, after first deducting for such purposes from said Term Bonds any of said Term Bonds required to be redeemed annually as shall have been redeemed or purchased during the preceding 12-month period and any of said Term Bonds required to be redeemed semiannually as shall have been redeemed or purchased during the six-month period ending on such date or the immediately preceding six month period. In the event that the Revenues shall not be sufficient to pay in full all Mandatory Sinking Account Payments required to be paid at any one time into all such Sinking Accounts, then payments into all such Sinking Accounts shall be made on a Proportionate Basis, in proportion that the respective Mandatory Sinking Account Payments required to be made into each Sinking Account during the then current 12-month period bear to the aggregate of all of the Mandatory Sinking Account Payments required to be made into all such Sinking Accounts during such 12-month period.
No deposit need be made into the Principal Account so long as there shall be in such fund (i) moneys sufficient to pay the Bond Obligations of all Serial Bonds issued hereunder and then Outstanding and maturing by their terms within the next twelve (12) months plus (ii) the aggregate of all Mandatory Sinking Account Payments required to be made in such 12-month period, but less any amounts deposited into the Principal Account during such 12-month period and theretofore paid from the Principal Account to redeem or purchase Term Bonds during such 12-month period; provided that if the Authority certifies to the Trustee that any principal payments are expected to be refunded on or prior to their respective due dates or paid from amounts on deposit in a Reserve Fund that would be in excess of the Bond Reserve Requirement applicable to such Reserve Fund upon such payment, no amounts need be on deposit with respect to such principal payments. At the beginning of each Fiscal Year and in any event not later than ______ 1 of each year, the Trustee shall request from the Authority a Certificate of the Authority setting forth the principal payments for which deposits will not be necessary pursuant to the preceding sentence and the reason therefor. On _____ 1 of each year or as soon as practicable thereafter any excess amounts in the Principal Account not needed to pay principal on such date (and not held to pay principal on Bonds having principal payment dates other than _____ 1) shall be transferred to the Authority.
(c) Reserve Fund. Upon the occurrence of any deficiency in any Reserve Fund, the Trustee shall make such deposit to such Reserve Fund as is required pursuant to Section 5.06, each such deposit to be made as soon as possible in each month, until the balance therein is at least equal to the applicable Bond Reserve Requirement.
(d) [Reserved]
(e) Fees and Expenses Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the "Fees and Expenses Fund." At the direction of the Authority, after the transfers described in (a), (b), (c) [and (d)] above have been made, the Trustee shall deposit as soon as practicable in each month in the Fees and Expenses Fund amounts necessary for payment of fees, expenses and similar charges (including fees, expenses and similar charges relating to any Liquidity Facility or Credit Enhancement for the Bonds owing in such month or following month by the Authority in connection with the Bonds. The Authority shall inform the Trustee of such amounts, in writing, on or prior to the first Business Day of each month.
Any Revenues remaining in the Revenue Fund after the foregoing transfers described in (a), (b), (c), (d) and (e) above, except as the Authority shall otherwise direct in writing or as is otherwise provided in a Supplemental Trust Agreement, shall be transferred to the Authority on the same Business Day or as soon as practicable thereafter. The Authority may use and apply the Revenues when received by it for any lawful purpose of the Authority, including the redemption of Bonds upon the terms and conditions set forth in the Supplemental Trust Agreement relating to such Bonds and the purchase of Bonds as and when and at such prices as it may determine.
If five (5) days prior to any principal payment date, Interest Payment Date or mandatory redemption date the amounts on deposit in the Revenue Fund, the Interest Account, the Principal Account, including the Sinking Accounts therein, and, as and to the extent applicable, any Reserve Fund established in connection with a Series of Bonds with respect to the payments to be made on such upcoming date are insufficient to make such payments, the Trustee shall immediately notify the Authority, in writing, of such deficiency and direct that the Authority transfer the amount of such deficiency to the Trustee on or prior to such payment date. The Authority hereby covenants and agrees to transfer to the Trustee from any Revenues in its possession the amount of such deficiency on or prior to the principal, interest or mandatory redemption date referenced in such notice.
SECTION 5.04. Application of Interest Account. All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purposes of: (a) paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to this Trust Agreement), or for reimbursing the Credit Provider for a drawing for such purposes made on Credit Enhancement provided in the form of an irrevocable, direct-pay letter of credit.
SECTION 5.05. Application of Principal Account.
(A) All amounts in the Principal Account shall be used and withdrawn by the Trustee solely for the purposes of paying the Bond Obligation of the Bonds when due and payable, except that all amounts in the Sinking Accounts shall be used and withdrawn by the Trustee solely to purchase or redeem or pay at maturity Term Bonds, as provided herein, or for reimbursing the Credit Enhancement Provider for a drawing for such purposes made on Credit Enhancement provided in the form of an irrevocable, direct-pay letter of credit.
(B) The Trustee shall establish and maintain within the Principal Account a separate account for the Term Bonds of each Series and maturity, designated as the "_____ Sinking Account," inserting therein the Series and maturity designation of such Bonds. On or before the Business Day prior to any date upon which a Mandatory Sinking Account Payment is due, the Trustee shall transfer the amount of such Mandatory Sinking Account Payment (being the principal thereof, in the case of Current Interest Bonds, and the Accreted Value, in the case of Capital Appreciation Bonds) from the Principal Account to the applicable Sinking Account. With respect to each Sinking Account, on each Mandatory Sinking Account Payment date established for such Sinking Account, the Trustee shall apply the Mandatory Sinking Account Payment required on that date to the redemption (or payment at maturity, as the case may be) of Term Bonds of such Series and maturity for which such Sinking Account was established, in the manner provided in this Trust Agreement or the Supplemental Trust Agreement pursuant to which such Series of Bonds was created; provided that, at any time prior to giving such notice of such redemption, the Trustee shall, upon receipt of a Request of the Authority, apply moneys in such Sinking Account to the purchase of Term Bonds of such Series and maturity 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 is directed by the Authority, except that the purchase price (excluding accrued interest, in the case of Current Interest Bonds) shall not exceed the principal amount or Accreted Value thereof. If, during the 12-month period (or six-month period with respect to Bonds having semi-annual Mandatory Sinking Account Payments) immediately preceding said Mandatory Sinking Account Payment date, the Trustee has purchased Term Bonds of such Series and maturity with moneys in such Sinking Account, or, during said period and prior to giving said notice of redemption, the Authority has deposited Term Bonds of such Series and maturity with the Trustee, or Term Bonds of such Series and maturity were at any time purchased or redeemed by the Trustee from the Redemption Fund and allocable to said Mandatory Sinking Account Payment, such Term Bonds so purchased or deposited or redeemed shall be applied, to the extent of the full principal amount thereof, to reduce said Mandatory Sinking Account Payment. All Term Bonds purchased or deposited pursuant to this subsection shall be cancelled by the Trustee and destroyed by the Trustee and a certificate of destruction shall be delivered to the Authority by the Trustee. Any amounts remaining in a Sinking Account on ________ 1 of each year following the redemption as of such date of the Term Bonds for which such account was established shall be withdrawn by the Trustee and transferred as soon as practicable to the Authority to be used for any lawful purpose. All Term Bonds purchased from a Sinking Account or deposited by the Authority with the Trustee in a twelve month period ending __________ 31 (or in a six-month period ending _________ 31 or ____________ 30 with respect to Bonds having semi-annual Mandatory Sinking Account Payments) and prior to the giving of notice by the Trustee for redemption from Mandatory Sinking Account Payments for such period shall be allocated first to the next succeeding Mandatory Sinking Account Payment for such Series and maturity of Term Bonds, if any, occurring on the next ________ 1 or __________ 1, then as a credit against such future Mandatory Sinking Account Payments for such Series and maturity of Term Bonds as may be specified in a Request of the Authority. All Term Bonds redeemed by the Trustee from the Redemption Fund shall be credited to such future Mandatory Sinking Account Payments for such Series and maturity of Term Bonds as may be specified in a Request of the Authority.
SECTION 5.06.Establishment, Funding and Application of Reserve Funds. The Authority may at its sole discretion at the time of issuance of any Series of Bonds or at any time thereafter by Supplemental Indenture provide for the establishment of a Reserve Fund as additional security for a Series of Bonds. Any Reserve Fund so established by the Authority shall be available to secure one or more Series of Bonds as the Authority shall determine and shall specify in the Supplemental Indenture establishing such Reserve Fund. Any Reserve Fund established by the Authority shall be held by the Trustee and shall comply with the requirements set forth in this Section 5.06.
(A) In lieu of making the Bond Reserve Requirement deposit applicable to one or more Series of Bonds in cash or in replacement of moneys then on deposit in any Reserve Fund (which shall be transferred by the Trustee to the Authority), or in substitution of any Reserve Facility comprising part of the Bond Reserve Requirement relating to one or more Series of Bonds, the Authority may, at any time and from time to time, deliver to the Trustee an irrevocable letter of credit issued by a financial institution having unsecured debt obligations rated at the time of delivery of such letter of credit in one of the two highest Rating Categories of Moody's and Standard & Poor's, in an amount, which, together with cash, Permitted Investment or other Reserve Facilities, as described in Section 5.06(B), then on deposit in such Reserve Fund, will equal the Bond Reserve Requirement relating to the Bonds to which such Reserve Fund relates. Such letter of credit shall have a term no less than three (3) years or, if less, the final maturity of the Bonds in connection with which such letter of credit was obtained and shall provide by its terms that it may be drawn upon as provided in this Section 5.06. At least one (1) year prior to the stated expiration of such letter of credit, the Authority shall either (i) deliver a replacement letter of credit, (ii) deliver an extension of the letter of credit for at least one (1) additional year or, if less, the final maturity of the Bonds in connection with which such letter of credit was obtained, or (iii) deliver to the Trustee a Reserve Facility satisfying the requirements of Section 5.06(B). Upon delivery of such replacement Reserve Facility, the Trustee shall deliver the then-effective letter of credit to or upon the order of the Authority. If the Authority shall fail to deposit a replacement Reserve Facility with the Trustee, the Authority shall immediately commence to make monthly deposits with the Trustee so that an amount equal to the Bond Reserve Requirement relating to the Bonds to which such Reserve Fund relates will be on deposit in such Reserve Fund no later than the stated expiration date of the letter of credit. If an amount equal to the Bond Reserve Requirement relating to the Bonds to which such Reserve Fund relates as of the date following the expiration of the letter of credit is not on deposit in such Reserve Fund one (1) week prior to the expiration date of the letter of credit (excluding from such determination the letter of credit), the Trustee shall draw on the letter of credit to fund the deficiency resulting therefrom in such Reserve Fund.
(B) In lieu of making a Bond Reserve Requirement deposit in cash or in replacement of moneys then on deposit in a Reserve Fund (which shall be transferred by the Trustee to the Authority) or in substitution of any Reserve Facility comprising part of a Bond Reserve Requirement for any Bonds, the Authority may, at any time and from time to time, deliver to the Trustee a surety bond or an insurance policy securing an amount which, together with moneys, Permitted Investment, or other Reserve Facilities then on deposit in a Reserve Fund, is no less than the Bond Reserve Requirement relating to the Bonds to which such Reserve Fund relates. Such surety bond or insurance policy shall be issued by an insurance company whose unsecured debt obligations (or for which obligations secured by such insurance company's insurance policies) are rated at the time of delivery in one of the two highest Rating Categories of Moody's and Standard & Poor's. Such surety bond or insurance policy shall have a term of no less than the final maturity of the Bonds in connection with which such surety bond or insurance policy is obtained. In the event that such surety bond or insurance policy for any reason lapses or expires, the Authority shall immediately implement (i) or (iii) of the preceding paragraph or make the required deposits to such Reserve Fund.
(C) Subject to Section 5.06(B), all amounts in any Reserve Fund (including all amounts which may be obtained from a Reserve Facility on deposit in such Reserve Fund) shall be used and withdrawn by the Trustee, as hereinafter provided: (i) for the purpose of making up any deficiency in the Interest Account or the Principal Account relating to the Bonds of the Series to which such Reserve Fund relates; or (ii) together with any other moneys available therefor, (x) for the payment or redemption of all Bonds then Outstanding of the Series to which such Reserve Fund relates, (y) for the defeasance or redemption of all or a portion of the Bonds then Outstanding of the Series to which such Reserve Fund relates, provided, however, that if funds on deposit in any Reserve Fund are applied to the defeasance or redemption of a portion of the Series of Bonds to which such Reserve Fund relates, the amount on deposit in the Reserve Fund immediately subsequent to such partial defeasance or redemption shall equal the Bond Reserve Requirement applicable to all Bonds of such Series Outstanding immediately subsequent to such partial defeasance or redemption, or (z) for the payment of the final principal and interest payment of the Bonds of such Series. Unless otherwise directed in a Supplemental Trust Agreement establishing the terms and provisions of a Series of Bonds, the Trustee shall apply amounts held in cash or Permitted Investment in any Reserve Fund prior to applying amounts held in the form of Reserve Facilities in any Reserve Fund, and if there is more than one Reserve Facility being held on deposit in any Reserve Fund, shall, on a pro rata basis with respect to the portion of a Reserve Fund held in the form of a Reserve Facility (calculated by reference to the maximum amount of such Reserve Facility), draw under each Reserve Facility issued with respect to such Reserve Fund, in a timely manner and pursuant to the terms of such Reserve Facility to the extent necessary in order to obtain sufficient funds on or prior to the date such funds are needed to pay the Bond Obligation of, Mandatory Sinking Account Payments with respect to, and interest on the Bonds of the Series to which such Reserve Fund relates when due. In the event that the Trustee has notice that any payment of principal of or interest on a Bond has been recovered from a Holder pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee, pursuant to the terms of, and if so provided by, the terms of the Reserve Facility, if any, securing the Bonds of such Series, shall so notify the issuer thereof and draw on such Reserve Facility to the lesser of the extent required or the maximum amount of such Reserve Facility in order to pay to such Holders the principal and interest so recovered.
(D) The Trustee shall notify the Authority of any deficiency in any Reserve Fund (i) due to a withdrawal from such Reserve Fund for purposes of making up any deficiency in the Interest Account or the Principal Account relating to the Bonds of the Series to which such Reserve Fund relates or (ii) resulting from a valuation of Permitted Investment held on deposit in such Reserve Fund pursuant to Section 5.11 and shall request that the Authority replenish such deficiency or repay any and all obligations due and payable under the terms of any Reserve Facility comprising part of any Bond Reserve Requirement. Upon receipt of such notification from the Trustee, the Authority shall instruct the Trustee to commence setting aside in each month following receipt of Sales Tax Revenues for deposit in the applicable Reserve Fund an amount equal to one-twelfth (1/12th) of the aggregate amount of each unreplenished prior withdrawal from such Reserve Fund or decrease resulting from a valuation pursuant to Section 5.11 and shall further instruct the Trustee to transfer to each Reserve Facility Provider providing a Reserve Facility satisfying a portion of the Bond Reserve Requirement relating to the Bonds of the Series to which such Reserve Fund relates, an amount equal to one-twelfth (1/12th) of the aggregate amount of any unreplenished prior withdrawal on such Reserve Facility, such amount to be transferred by the Trustee as promptly as possible after receipt of the Revenues each month, commencing with the month following the Authority's receipt of notification from the Trustee of withdrawal or decrease resulting from a valuation, as applicable, until the balance on deposit in such Reserve Fund is at least equal to the Bond Reserve Requirement relating to the Bonds of the Series to which such Reserve Fund relates.
(E) Unless the Authority shall otherwise direct in writing, any amounts in any Reserve Fund in excess of the Bond Reserve Requirement relating to the Bonds of the Series to which such Reserve Fund relates shall be transferred by the Trustee to the Authority on the Business Day following ________ 1 of each year; provided that such amounts shall be transferred only from the portion of such Reserve Fund held in the form of cash or Permitted Investment. In addition, amounts on deposit in any Reserve Fund shall be transferred by the Trustee to the Authority upon the defeasance, retirement or refunding of Bonds of the Series to which such Reserve Fund relates or upon the replacement of cash on deposit in such Reserve Fund with one or more Reserve Facilities in accordance with Section 5.06(A) or Section 5.06(B). The Bond Reserve Requirement shall be calculated upon the issuance or retirement of a Series of Bonds or upon the defeasance of all or a portion of a Series of Bonds.
SECTION 5.07. [Reserved.]
SECTION 5.08. Application of Fees and Expenses Fund. All amounts in the Fees and Expenses Fund shall be used and withdrawn by the Trustee solely for the purpose of paying fees, expenses and similar charges owed by the Authority in connection with the Bonds as such amounts shall become due and payable.
SECTION 5.09. Application of Redemption Fund. The Trustee shall establish, maintain and hold in trust a special fund designated as the "Redemption Fund." All moneys deposited by the Authority with the Trustee for the purpose of optionally redeeming Bonds of any Series shall, unless otherwise directed by the Authority, be deposited in the Redemption Fund. All amounts deposited in the Redemption Fund shall be used and withdrawn by the Trustee solely for the purpose of redeeming Bonds of such Series and maturity as shall be specified by the Authority in a Request to the Trustee, in the manner, at the times and upon the terms and conditions specified in the Supplemental Indenture pursuant to which the Series of Bonds was created; provided that, at any time prior to giving such notice of redemption, the Trustee shall, upon receipt of a Request of the Authority, 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, in the case of Current Interest Bonds, accrued interest, which is payable from the Interest Account) as is directed by the Authority, except that the purchase price (exclusive of any accrued interest) may not exceed the Redemption Price or Accreted Value then applicable to such Bonds. All Term Bonds purchased or redeemed from the Redemption Fund shall be allocated to Mandatory Sinking Account Payments applicable to such Series and maturity of Term Bonds as may be specified in a Request of the Authority.
SECTION 5.10. [Reserved]
SECTION 5.11. Deposit and Investments of Money in Accounts and Funds. Subject to Section 5.03, all money held by the Trustee in any of the accounts or funds established pursuant hereto shall be invested and reinvested in Permitted Investments at the Written Request of the Authority received not less than two (2) Business Days prior to the date of making such investment. In the absence of any such Written Request, the Trustee shall invest all such funds and accounts for which such instruction have not been received in investments described in clause D of the definition of Permitted Investments. All money held in the Reserve Funds shall be invested and reinvested in Permitted Investments with a term to maturity not exceeding five years, provided, that an investment which is subject to redemption at par at any time prior to maturity shall be deemed to have a maturity equal to the redemption date for purposes of this Section 5.11, and all such Permitted Investments shall be valued by the Trustee not less frequently than semi-annually on or before each ________ 1 and ________ 1, beginning ________ 1, 2008 at the lower of the cost or market value thereof. Subject to Section 5.03, all interest or profits received on any money so invested shall be deposited in the Revenue Fund. The Trustee may act as a principal or agent in making or disposing of any investment. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately.
ARTICLE VI

COVENANTS OF THE AUTHORITY
SECTION 6.01. Punctual Payment and Performance. The Authority will punctually pay out of the Revenues the interest on and the principal of and redemption premiums, if any, to become due on every Bond issued hereunder in strict conformity with the terms hereof and of the Bonds, and will faithfully observe and perform all the agreements and covenants to be observed or performed by the Authority contained herein and in the Bonds.
SECTION 6.02. Against Encumbrances. The Authority will not make any pledge of or place any charge or lien upon the Revenues except as provided herein, and will not issue any bonds, notes or obligations payable from the Revenues or secured by a pledge of or charge or lien upon the Revenues except the Bonds.
SECTION 6.03. Tax Covenants; Rebate Fund.
(a) In addition to the accounts created pursuant to Section 5.03, the Trustee shall establish and maintain a fund separate from any other fund or account established and maintained hereunder designated as the Rebate Fund. There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the each Tax Certificate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement (as defined in the each Tax Certificate), for payment to the United States of America. Notwithstanding the provisions of Sections 5.01, 5.02, 5.11, 9.02 and 10.01 relating to the pledge of Revenues, the allocation of money in the Revenue Fund, the investments of money in any fund or account, the application of funds upon acceleration and the defeasance of Outstanding Bonds, all amounts required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively by this Section 6.03 and by each Tax Certificate (which is incorporated herein by reference). The Trustee shall be deemed conclusively to have complied with such provisions if it follows the written directions of the Authority, and shall have no liability or responsibility to enforce compliance by the Authority with the terms of each Tax Certificate.
(b) Any funds remaining in the Rebate Fund after redemption and payment with respect to each Series of Bonds or provision made therefor satisfactory to the Trustee, including accrued interest and payment of any applicable fees to the Trustee and satisfaction of the Rebate Requirement (as defined in the applicable Tax Certificate), shall be withdrawn by the Trustee and remitted to or upon the written direction of the Authority.
(c) The Authority shall not use or permit the use of any proceeds of any Series of Bonds or any funds of the Authority, directly or indirectly, to acquire any securities or obligations, and shall not take or permit to be taken any other action or actions, which would cause any Series of Bonds to be an “arbitrage bond” within the meaning of Section 148 of the Code, “private activity bond” within the meaning of Section 141(a) of the Code, or “federally guaranteed” within the meaning of Section 149(b) of the Code and any such applicable requirements promulgated from time to time thereunder and under Section 103(c) of the Internal Revenue Code of 1954, as amended. The Authority shall observe and not violate the requirements of Section 148 of the Code and any such applicable regulations. The Authority shall comply with all requirements of Sections 148 and 149(b) of the Code to the extent applicable to each Series of Bonds. In the event that at any time the Authority is of the opinion that for purposes of this Section 6.03(c) it is necessary to restrict or to limit the yield on the investment of any moneys held by the Trustee under this Trust Agreement, the Authority shall so instruct the Trustee under this Trust Agreement in writing, and the Trustee shall take such action as may be necessary in accordance with such instructions.
(d) The Authority and the Trustee (as directed by the Authority) specifically covenant to comply with the provisions and procedures of each Tax Certificate; provided that the Trustee shall not be bound by this covenant if an Event of Default has occurred and is continuing.
(e) The Authority shall not use or permit the use of any proceeds of any Series of Bonds or any funds of the Authority, directly or indirectly, in any manner, and shall not take or omit to take any action that would cause any Series of Bonds to be treated as an obligation not described in Section 103(a) of the Code.
(f) Notwithstanding any provisions of this Section 6.03, if the Authority shall provide to the Trustee an Opinion of Counsel that any specified action required under this Section 6.03 or the applicable Tax Certificate is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on a Series of Bonds, the Trustee and the Authority may conclusively rely on such opinion in complying with the requirements of this Section, and, notwithstanding Article VII hereof, the covenants hereunder shall be deemed to be modified to that extent.
SECTION 6.04. Accounting Records and Reports.
(a) The Authority will keep or cause to be kept proper books of record and accounts in which complete and correct entries shall be made of all transactions relating to the receipts, disbursements, allocation and application of the Revenues, and such books shall be available for inspection by the Trustee and the applicable Credit Provider, if any, at reasonable hours and under reasonable conditions. Not more than six months after the close of each Fiscal Year, the Authority shall furnish or cause to be furnished to the Trustee and the applicable Credit Provider, if any, a complete financial statement, audit or annual report covering receipts, disbursements, allocation and application of Revenues for such Fiscal Year; provided, however, that in no event shall the Trustee be responsible for reviewing any such financial statements or any of the information contained therein or taking notice of any fact contained therein. The applicable Credit Provider, if any, shall have the right to direct an accounting at the Authority’s expense, and the Authority’s failure to comply with such direction within thirty (30) days after receipt of written notice of the direction from the applicable Credit Provider, if any, shall be deemed a default hereunder; provided, however, that if compliance cannot occur within such period, then such period will be extended so long as compliance is begun within such period and diligently pursued, but only if such extension would not materially adversely affect the interests of any Holder of the applicable Series of Bonds. The Authority shall also keep or cause to be kept such other information as required under the Rebate Certificate.
SECTION 6.05. Prosecution and Defense of Suits. In addition to the indemnity provided herein, the Authority agrees that it shall defend against every suit, action or proceeding at any time brought against the Trustee upon any claim to the extent arising out of the receipt, application or disbursement of any of the Revenues or to the extent involving the failure of the Authority to fulfill its obligations hereunder; provided that the Trustee or any affected Holder at its election may appear in and defend any such suit, action or proceeding. The Authority will indemnify and hold harmless the Trustee against any and all liability claimed or asserted by any person to the extent arising out of such failure by the Authority, and will indemnify and hold harmless the Trustee against any attorney’s fees or other expenses which it may incur in connection with any litigation to which it may become a party by reason of its actions hereunder, except for any loss, cost, damage or expense resulting from the active or passive negligence, willful misconduct or breach of duty by the Trustee. Notwithstanding any contrary provision hereof, this covenant shall remain in full force and effect even though all Bonds secured hereby may have been fully paid and satisfied.
SECTION 6.06. Further Assurances. Whenever and so often as reasonably requested to do so by the Trustee or any Holder, the Authority will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments, and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Holders all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred upon them hereby.
ARTICLE VII

THE TRUSTEE
SECTION 7.01. The Trustee. U.S. Bank National Association shall serve as the Trustee for the Bonds for the purpose of receiving all money which the Authority is required to deposit with the Trustee hereunder and for the purpose of allocating, applying and using such money as provided herein and for the purpose of paying the interest on and principal of and redemption premiums, if any, on the Bonds presented for payment in __________, California, with the rights and obligations provided herein. The Authority agrees that it will at all times maintain a Trustee having a principal office in __________ or __________, California.
The Authority may at any time, unless there exists any event of default as defined in Section 8.01 and subject to the prior written consent of each Credit Provider then providing Credit Enhancement for any Series of Bonds, remove the Trustee initially appointed and any successor thereto and may appoint a successor or successors thereto by an instrument in writing; provided that any such successor shall be a bank or trust company in good standing doing business and having a principal office in San Francisco or Los Angeles, California, duly authorized to exercise trust powers, having a combined capital (exclusive of borrowed capital) and surplus of at least seventy-five million dollars ($75,000,000) and subject to supervision or examination by federal or state authority. If such bank 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 section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Trustee may at any time resign by giving written notice of such resignation to the Authority and by mailing to the Holders and, each Credit Provider then issuing any Series of Bonds notice of such resignation. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing and, so long as any Series 2008 Bonds are Outstanding, shall provide notice of such appointment to each Credit Provider then issuing any Series of Bonds. For so long as a Credit Enhancement is in full force and effect with respect to any Series of Bonds and the Credit Provider providing such Credit Enhancement is not failing to make a payment as required therewith, the Trustee may be removed at any time, at the request of any Credit Provider, for any breach of the trust set forth herein by giving advice of such renewal to the Trustee and each Credit Provider then issuing any Series of Bonds. Any removal or resignation of a Trustee and appointment of a successor Trustee shall become effective only upon the acceptance of appointment by the successor Trustee. If, within thirty (30) days after notice of the removal or resignation of the Trustee no successor Trustee shall have been appointed and shall have accepted such appointment, the removed or resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Trustee having the qualifications required hereby. Notwithstanding any other provision of this Trust Agreement, no removal, resignation or termination of the Trustee shall take effect until a successor, acceptable to each Credit Provider then issuing any Series of Bonds, which approval shall not be unreasonably withheld, shall be appointed.
The Trustee is hereby authorized to redeem the Bonds when duly presented for payment at maturity or on redemption prior to maturity. The Trustee shall cancel all Bonds upon payment thereof or upon the surrender thereof by the Authority and shall destroy such Bonds and a certificate of destruction shall be delivered to the Authority. The Trustee shall keep accurate records of all Bonds paid and discharged and canceled by it.
The Authority shall from time to time, subject to any agreement between the Authority and the Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee for all its advances and expenditures including but not limited to advances to and fees and expenses of independent accountants and in-house and other counsel or other experts employed by it and reasonably required in the exercise and performance of its rights and obligations hereunder, and, to the extent permitted by law, indemnify and hold the Trustee and its officers, directors, employees and agents harmless against any claim, loss, liability, damages, expenses (including legal fees and expenses) or advances not arising from the Trustee’s own active or passive negligence, willful misconduct or breach of fiduciary duty, which the Trustee may incur in the exercise and performance of its rights and obligations hereunder. The obligations of the Authority under this paragraph to compensate, indemnify, reimburse and hold the Trustee harmless shall constitute additional indebtedness hereunder, and such indebtedness shall have priority over the Bonds in respect of all property and funds held or collected by the Trustee as such, except funds held in trust by the Trustee for the benefit of the holders of particular Bonds, including, without limitation, funds held by the Trustee in trust to redeem all or a portion of Outstanding Bonds prior to their respective maturities for which a notice of redemption has been sent as provided herein.
SECTION 7.02. Liability of Trustee. The recitals of facts, agreements and covenants herein and in the Bonds shall be taken as recitals of facts, agreements and covenants of the Authority, and the Trustee assumes no responsibility for the use of any proceeds of the Bonds, the correctness of the same, the collection of the Revenues or makes any representation as to the sufficiency or validity hereof, of the Bonds or any security therefor or any offering material distributed in connection with the Bonds and shall not incur any responsibility in respect thereof other than in connection with the rights or obligations assigned to or imposed upon it herein, in the Bonds or in law or equity. The Trustee shall not be liable in connection with the performance of its duties hereunder except for its own negligence, willful misconduct or breach of fiduciary duty.
The Trustee shall not be bound to recognize any person as the Holder of a Bond unless and until such Bond is submitted for inspection, if required, and such Bond is registered in such person’s name.
Whenever the Trustee shall deem it necessary or desirable that a factual or legal matter be established or proved prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a certificate conforming to the requirements herein or an opinion of counsel, which certificate or opinion shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, 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.
In accepting the trust hereby created, the Trustee acts solely as Trustee for the Holders and not in its individual capacity and all persons, including without limitation the Holders, the Authority, the Credit Providers and the City, having any claim against the Trustee arising from this Trust Agreement not attributable to the Trustee’s negligence or willful misconduct shall look only to the funds and accounts held by the Trustee hereunder for payment except as otherwise provided herein. The duties and obligations of the Trustee shall be determined solely by the express provisions of this Trust Agreement, the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Trust Agreement, and no implied covenants or obligations (fiduciary or otherwise) shall be read into this Trust Agreement against the Trustee. The Trustee shall not be liable with respect to any action taken or not taken hereunder in good faith in accordance with the direction of the holders of not less than a majority in aggregate principal amount of the Bonds at the time outstanding or any Credit Provider then providing Credit Enhancement for any Series of Bonds. 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 this Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise of use under the circumstances in the conduct of its own affairs. The permissive right of the Trustee to do things enumerated in this Trust Agreement shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct. The immunities and exceptions from liability of the Trustee shall extend to its officers, directors, employees and agents and such immunities and exceptions and its right to payment of its fees and expenses shall survive its resignation or removal and the final payment and defeasance of the Bonds. Under no circumstances shall the Trustee be liable in its individual capacity for the obligations evidenced by the Bonds. The Trustee, in its individual or any other capacity, may become the owner of any Bonds or other obligations of any party hereto with the same rights which it would have if not the Trustee. At any and all reasonable times, the Trustee, and its agents shall have the right to fully inspect all books, papers and records of the Authority or the City pertaining to the Bonds, and to take such memoranda therefrom and with regard thereto and make photocopies thereof as may be desired. The Trustee shall not be required to give any bond or surety in respect of the execution of said trusts and powers or otherwise in respect of the premises. Before taking or refraining from any action hereunder at the request or direction of the Holders or of any Credit Provider then providing Credit Enhancement for any Series of Bonds, the Trustee may require that an indemnity bond satisfactory to the Trustee be furnished to it and be in full force and effect.
None of the provisions contained herein or in the Installment Sale Agreements shall require the Trustee to expend for risk its own funds or continue to do so or otherwise incur individual financial liability in the performance of any of its duties or in the exercise of any of its rights or powers if it shall reasonably believe that repayment of such funds or adequate indemnity against such risk or liability is not assured to it. The Trustee may rely and shall be protected in acting or failing to act upon any certificate, request, requisition, facsimile transmission, electronic mail, paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee shall not be required to take notice or be deemed to have notice of any Event of Default hereunder except failure by the Authority to make any payment or principal or interest hereunder when due, unless the Trustee shall be specifically notified in writing at its principal corporate trust office of such default by the Authority, any Credit Provider then providing Credit Enhancement for any Series of Bonds, the City or the Holders of not less than twenty-five percent (25%) of the aggregate principal amount of Bonds then outstanding. Notwithstanding any other provision hereof, the Trustee shall have the right, but shall not be required, to demand any showings, certificates, opinions, appraisals or other information, or official action or evidence thereof, in addition so that by the terms hereof required as a condition of such action, by the Trustee deemed desirable for the purpose of establishing the rights of the Trustee with respect to the authentication of any Bonds, the withdrawal of any cash, the release of any property or the taking of any other action by the Trustee.
The Trustee agrees to accept and act upon facsimile transmission of written instructions and/or directions pursuant to this Trust Agreement provided, however, that: (a) subsequent to such facsimile transmission of written instructions and/or directions the Trustee shall forthwith receive the originally executed instructions and/or directions, (b) such originally executed instructions and/or directions shall be signed by a person as may be designated and authorized to sign for the party signing such instructions and/or directions, and (c) the Trustee shall have received a current incumbency certificate containing the specimen signature of such designated person.
ARTICLE VIII

AMENDMENT OF THE TRUST AGREEMENT
SECTION 8.01. Amendment of the Trust Agreement. The Trust Agreement and the rights and obligations of the Authority, the Trustee and the Holders may be amended at any time by a Supplemental Trust Agreement which shall become binding when the written consents of (i) the Holders of a majority in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 7.02, or (ii) each Credit Provider then providing Credit Enhancement for any Series of Bonds, provided that the Credit Enhancement provided by such Credit Provider is in full force and effect and the Credit Provider is not failing to make a payment as required in connection therewith, are filed with the Trustee. No such amendment shall (1) extend the maturity of or reduce the interest rate on or amount of interest on or principal of or redemption premium, if any, on any Bond without the express written consent of the Holder of such Bond, or (2) permit the creation by the Authority of any pledge of or charge or lien upon the Revenues as provided herein superior to or on a parity with the pledge, charge and lien created hereby for the benefit of the Bonds, or (3) reduce the percentage of Bonds required for the written consent to any such amendment, or (4) modify any rights or obligations of the Trustee, the Authority or the City without their prior written assent thereto, respectively.
The Trust Agreement and the rights and obligations of the Authority and of the Holders may also be amended at any time by a Supplemental Trust Agreement which shall become binding upon adoption without the consent of any Holders, but with the written consent of each Credit Provider then providing a Credit Enhancement for any Series of Bonds which shall be materially and adversely affected by such amendment, which consent shall not be unreasonably withheld; provided, however, that such written consent shall be required only if the Credit Enhancement provided by such Credit Provider is in full force and effect and if the Credit Provider is not then failing to make a payment as required in connection therewith, but only to the extent permitted by law and only for any one or more of the following purposes:
(a) to add to the agreements and covenants required herein to be performed by the Authority other agreements and covenants thereafter to be performed by the Authority, or to surrender any right or power reserved herein to or conferred herein on the Authority;
(b) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the Authority may deem desirable or necessary and not inconsistent herewith;
(c) to add to the agreements and covenants required herein, such agreements and covenants as may be necessary to qualify the Trust Agreement under the Trust Indenture Act of 1939;
(d) to provide for the issuance of an additional Series of Bonds pursuant to the provisions of Article III hereof;
(e) to make modifications or adjustments necessary, appropriate or desirable to provide for the issuance or incurrence, as applicable, of Capital Appreciation Bonds or Variable Rate Indebtedness, with such interest rate, payment, maturity and other terms as the Authority may deem desirable; subject to the provisions of Section 3.02, Section 3.03 and Section 3.05;
(f) to make modifications or adjustments necessary, appropriate or desirable to provide for change from one interest rate mode to another in connection with any Series of Bonds;
(g) to make modifications or adjustments necessary, appropriate or desirable to accommodate Credit Enhancements, Liquidity Facilities and Reserve Facilities;
(h) to make modifications or adjustments necessary, appropriate or desirable to provide for the appointment of an auction agent, a broker-dealer, a remarketing agent, a tender agent and/or a paying agent in connection with any Series of Bonds;
(i) to modify the auction provisions applicable to any Series of Bonds in accordance with the terms and provisions set forth in the Supplemental Trust Agreement establishing the terms and provisions of such Series of Bonds;
(j) to provide for any additional covenants or agreements necessary to maintain the tax-exempt status of interest on any Series of Bonds;
(k) if the Authority agrees in a Supplemental Trust Agreement to maintain the exclusion of interest on a Series of Bonds from gross income for purposes of federal income taxation, to make such provisions as are necessary or appropriate to ensure such exclusion;
(l) to provide for the issuance of Bonds in book-entry form or bearer form and/or to modify or eliminate the book-entry registration system for any Series of Bonds;
(m) to modify, alter, amend or supplement this Trust Agreement in any other respect, including amendments that would otherwise be described in the first paragraph of this Section 8.01, if the effective date of such amendments is a date on which all Bonds affected thereby are subject to mandatory tender for purchase pursuant to the provisions of this Trust Agreement or if notice of the proposed amendments is given to Holders of the affected Bonds at least thirty (30) days before the proposed effective date of such amendments and, on or before such effective date, such Holders have the right to demand purchase of their Bonds pursuant to the provisions of this Trust Agreement or if all Bonds affected thereby are in an auction mode and a successful auction is held following notice of such amendment; and
(n) for any other purpose that does not materially and adversely affect the interests of the Holders of the Bonds.
Copies of any amendments herein shall be sent to Standard & Poor’s.
SECTION 8.02. Disqualified Bonds. Bonds owned or held by or for the account of the Authority or the City shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Bonds provided in this article, and shall not be entitled to consent to or take any other action provided in this article.
SECTION 8.03. Endorsement or Replacement of Bonds After Amendment. After the effective date of any action taken as hereinabove provided, the Authority may determine that the Bonds may bear a notation by endorsement in form approved by the Authority as to such action, and in that case upon demand of the Holder of any Outstanding Bonds and presentation of his Bond for such purpose at the office of the Trustee a suitable notation as to such action shall be made on such Bond. If the Authority shall so determine, new Bonds so modified as, in the opinion of the Authority, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Holder of any Outstanding Bond a new Bond or Bonds shall be exchanged at the office of the Trustee without cost to each Holder for its Bond or Bonds then Outstanding upon surrender of such Outstanding Bonds.
SECTION 8.04. Amendment by Mutual Consent. The provisions of this article shall not prevent any Holder from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds.
ARTICLE IX

EVENTS OF DEFAULT AND REMEDIES OF HOLDERS
SECTION 9.01. Events of Default and Acceleration of Maturities. If one or more of the following events (herein called “events of default”) shall happen, that is to say:
(a) if default shall be made by the Authority in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable;
(b) if default shall be made by the Authority in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed or by proceedings for redemption;
(c) if default shall be made by the Authority in the performance of any of the other agreements or covenants required herein to be performed by the Authority, and such default shall have continued for a period of thirty (30) days after the Authority shall have been given notice in writing of such default by the Trustee or any Credit Provider; or
(d) if the Authority shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the Authority seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property;
then and in each and every such case during the continuance of such event of default the Trustee, upon the written request of the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding by notice in writing to the Authority, declare the principal of all Bonds then Outstanding and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become due and payable, anything contained herein or in the Bonds to the contrary notwithstanding. The Trustee shall promptly notify all Holders of any such event of default which is continuing. Such notice shall include a reference to or a summary of the rights and remedies available to the Holders as set forth herein.
This provision, however, is subject to the condition that if at any time after the principal of the Bonds then Outstanding shall have been so declared due and payable and before any judgment or decree for the payment of the money due shall have been obtained or entered the Authority shall deposit with the Trustee a sum sufficient to pay all matured interest on all the Bonds and all principal of the Bonds matured prior to such declaration, with interest at the rate borne by such Bonds on such overdue interest and principal, and the reasonable expenses of the Trustee, and any and all other defaults known to the Trustee (other than in the payment of interest on and principal of 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 Holders of not less than a majority in aggregate principal amount of Bonds then Outstanding, by written notice to the Authority and to the Trustee, may on behalf of the Holders of all the Bonds then Outstanding 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.
The Trustee shall immediately notify each Credit Provider providing Credit Enhancement for any Series of Bonds of any events of default described hereunder.
SECTION 9.02. Application of Funds Upon Acceleration. All moneys in the accounts and funds provided in Sections 5.02, 5.03 and 5.11 upon the date of the declaration of acceleration by the Trustee as provided in Section 8.01 and all Revenues (other than Revenues on deposit in the Rebate Fund) thereafter received by the Authority hereunder shall be transmitted to the Trustee and shall be applied by the Trustee in the following order.
First, to the payment of the costs and expenses of the Holders in providing for the declaration of such event of default, including reasonable compensation to their accountants and counsel, and to the payment of the fees, costs and expenses of the Trustee (including any predecessor trustee), if any, in carrying out the provisions of this Trust Agreement, including reasonable compensation to its accountants and counsel (in each case with interest thereon at the highest rate of interest then applicable to the Bonds); and
Second, upon presentation of the several Bonds, and the stamping thereon of the amount of the payment if only partially paid or upon the surrender thereof if fully paid, to the payment of the whole amount then owing and unpaid upon the Bonds for interest and principal, with (to the extent permitted by law) interest on the overdue interest and principal at the rate borne by such Bonds, and in case such money shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such interest, principal and (to the extent permitted by law) interest on overdue interest and principal without preference or priority among such interest, principal and interest on overdue interest and principal ratably to the aggregate of such interest, principal and interest on overdue interest and principal.
SECTION 9.03. Institution of Legal Proceedings by Trustee. If one or more of the events of default shall happen and be continuing, the Trustee may, and, with respect to any Series of Bonds for which a Credit Enhancement has been provided, upon the written request of the Credit Provider providing such Credit Enhancement, or if such Credit Provider is then failing to make a payment required pursuant to such Credit Enhancement, upon the written request of the Holders of a majority in principal amount of the Bonds then Outstanding so long as the Trustee is indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Holders of Bonds under this Trust Agreement and under Article VI of the Master Installment Sale Agreement by a suit in equity or action at law, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or by mandamus or other appropriate proceeding for the enforcement of any other legal or equitable remedy as the Trustee shall deem most effectual in support of any of its rights and duties hereunder; provided, however, that, with respect to any Series of Bonds for which a Credit Enhancement has been provided, the Trustee may only act with the consent of the Credit Provider providing such Credit Enhancement.
SECTION 9.04. Non-Waiver. Nothing in this article or in any other provision hereof or in the Bonds shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the interest on and principal of and redemption premiums, if any, on the Bonds to the respective Holders of the Bonds at the respective dates of maturity or upon prior redemption as provided herein from the Revenues as provided herein pledged for such payment, or shall affect or impair the right of such Holders, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein and in the Bonds.
A waiver of any default or breach of duty or contract by any Holder shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by any Holder 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 Holders by the Act or by this Article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Holders.
If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned, the Authority and any Holder shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.
SECTION 9.05. Actions by Trustee as Attorney-in-Fact. Any action, proceeding or suit which any Holder shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Holders, whether or not the Trustee is a Holder, and the Trustee is hereby appointed (and the successive Holders, by taking and holding the Bonds issued hereunder, shall be conclusively deemed to have so appointed it) the true and lawful attorney-in-fact of the Holders for the purpose of bringing any such action, proceeding or suit and for the purpose of doing and performing any and all acts and things for and on behalf of the Holders as a class or classes as may be advisable or necessary in the opinion of the Trustee as such attorney-in-fact.
SECTION 9.06. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Holders 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 at 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 Act or any other law. If any remedial action hereunder is discontinued or abandoned, the Trustee, Bondholders and the Series 2008 Bond Insurer shall be restored to their former positions.
SECTION 9.07. Limitation on Bondholders’ Right to Sue. No Holder of any Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or equity, for any remedy under or upon this Trust Agreement, unless (a) such Holder shall have previously given to the Trustee written notice of the occurrence of an event of default as defined in Section 8.01 hereunder; (b) the Holders of at least a majority in aggregate principal amount of all 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) said Holders shall have tendered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such request and consent shall have been received by, and said tender of indemnity shall have been made to, the Trustee; provided, however, that the written consent of a Credit Provider providing a Credit Enhancement with respect to a Series of Bonds shall be required if the Credit Enhancement with respect to such Series of Bonds is in full force and effect and if the Credit Provider providing such Credit Enhancement is not then failing to make a payment as required in connection therewith.
Such notification, request, consent, 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; 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 enforce any right under this Trust Agreement, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of the Trust Agreement shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Holders of the Outstanding Bonds.
SECTION 9.08. Credit Provider Directs Remedies Upon Event of Default. Anything in the Indenture to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default as defined herein, the Credit Provider then providing Credit Enhancement for any Series of Bonds shall be entitled to control and direct the enforcement of all rights and remedies granted to the Holders of the Bonds secured by such Credit Enhancement or granted to the Trustee for the benefit of the Holders of the Bonds secured by such Credit Enhancement, provided that the Credit Provider's consent shall not be required as otherwise provided herein if such Credit Provider is in default of any of its payment obligations as set forth in the Credit Enhancement provided by such Credit Provider.
ARTICLE X

DEFEASANCE
SECTION 10.01. Discharge of Bonds.
(a) If the Authority shall pay or cause to be paid or there shall otherwise be paid to the Holders of all Outstanding Bonds the interest thereon and the principal thereof and the redemption premiums, if any, thereon at the times and in the manner stipulated herein and therein, then the Holders of such Bonds shall cease to be entitled to the pledge of and charge and lien upon the Revenues as provided herein, and all agreements, covenants and other obligations of the Authority to the Holders of such Bonds hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, the Trustee shall pay over or deliver to the Authority all money or securities held by it pursuant hereto which are not required for the payment of the interest on and principal of and redemption premiums, if any, on such Bonds.
(b) Any Outstanding Bonds shall prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in subsection (a) of this section if (1) in case any of such Bonds are to be redeemed on any date prior to their maturity date, the Authority shall have given to the Trustee in form satisfactory to it irrevocable instructions to provide notice in accordance with Section 2.03, (2) there shall have been deposited with the Trustee either (A) money in an amount which shall be sufficient or (B) Defeasance Securities, in each case the interest on and principal of which when paid will provide money which, together with the money, if any, deposited with the Trustee at the same time, shall be sufficient, in the opinion of an Independent Certified Public Accountant, to pay when due the interest to become due on such Bonds on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and redemption premiums, if any, on such Bonds, and (3) in the event such Bonds are not by their terms subject to redemption within the next succeeding sixty (60) days, the Authority shall have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to the Holders of such Bonds that the deposit required by clause (2) above has been made with the Trustee and that such Bonds are deemed to have been paid in accordance with this section and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and redemption premiums, if any, on such Bonds.
Notwithstanding anything in this Section 10.01 to the contrary, if the principal of or interest on a Series of Bonds shall be paid by a Credit Provider pursuant to the Credit Enhancement issued in connection with such Series of Bonds, the obligations of the Authority shall not be deemed to be satisfied or considered paid by the Authority by virtue of such payments, and the right, title and interest of the Authority herein and the obligations of the Authority hereunder shall not be discharged and shall continue to exist and to run to the benefit of such Credit Provider, and such Credit Provider shall be subrogated to the rights of the Holders of the Bonds of such Series.
SECTION 10.02. Unclaimed Money. Anything contained herein to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Bonds which remains unclaimed for two (2) years after the date when such Bonds have become due and payable, either at their stated maturity dates or by call for redemption prior to maturity, if such money was held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the date when such Bonds have become due and payable, shall be repaid by the Trustee to the Authority as its absolute property free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Holders shall not look to the Trustee for the payment of such Bonds; provided, however, that before being required to make any such payment to the Authority, the Trustee may, and at the request of the Authority shall, at the expense of the Authority, cause to be published once a week for two (2) successive weeks in a financial newspaper of general circulation in San Francisco and in Los Angeles, California and in the same or a similar financial newspaper of general circulation in New York, New York a notice that such money remains unclaimed and that, after a date named in such notice, which date shall not be less than thirty (30) days after the date of the first publication of each such notice, the balance of such money then unclaimed will be returned to the Authority. Any moneys held by the Trustee in trust for the payment and discharge of any Bonds shall not bear interest or be otherwise invested from and after such maturity or redemption date.
ARTICLE XI

MISCELLANEOUS
SECTION 11.01. Liability of Authority Limited to Revenues. Notwithstanding anything contained herein, the Authority shall not be required to advance any money derived from any source other than the Revenues as provided herein for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds or for the performance of any agreements or covenants herein contained. The Authority may, however, advance funds for any such purpose so long as such funds are derived from a source legally available for such purpose without incurring an indebtedness.
The Bonds are limited obligations of the Authority and are payable, as to interest thereon, principal thereof and any premiums upon the redemption of any thereof, solely from the Revenues as provided herein, and the Authority is not obligated to pay them except from the Revenues. All the Bonds are equally secured by a pledge of and charge and lien upon the Revenues, and the Revenues constitute a trust fund for the security and payment of the interest on and principal of and redemption premiums, if any, on the Bonds as provided herein. The Bonds are not a debt of the Authority, the State of California or any of its political subdivisions, and neither the Authority, said State nor any of its political subdivisions is liable thereon, nor in any event shall the Bonds be payable out of any funds or properties other than those of the Authority as provided herein. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory limitation or restriction.
SECTION 11.02. Benefits of the Trust Agreement Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the Authority, the Trustee, the Holders , each Credit Provider, each Liquidity Provider and each Reserve Facility Provider any right, remedy or claim under or by reason hereof. Any agreement or covenant required herein to be performed by or on behalf of the Authority or any member, officer or employee thereof shall be for the sole and exclusive benefit of the Trustee, the Holders.
SECTION 11.03. Successor Is Deemed Included In All References To Predecessor. Whenever herein either the Authority or any member, officer or employee thereof or of the State of California is named or referred to, such reference shall be deemed to include the successor to the powers, duties and functions with respect to the Water Project that are presently vested in the Authority or such member, officer or employee, and all agreements and covenants required hereby to be performed by or on behalf of the Authority or any member, officer or employee thereof shall bind and inure to the benefit of the respective successors thereof whether so expressed or not.
SECTION 11.04. Execution of Documents by Holders. Any declaration, request or other instrument which is permitted or required herein to be executed by Holders may be in one or more instruments of similar tenor and may be executed by Holders in person or by their attorneys appointed in writing. The fact and date of the execution by any Holder or his attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to make acknowledgments of deeds to be recorded in the state or territory in which he purports to act that the person signing such declaration, request or other instrument or writing 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 any Bonds and the amount, maturity, number and date of holding the same may be proved by the registration books relating to the Bonds at the office of the Trustee.
Any declaration, request or other instrument or writing of the Holder of any Bond shall bind all future Holders of such Bond with respect to anything done or suffered to be done by the Authority in good faith and in accordance therewith.
SECTION 11.05. Waiver of Personal Liability. No member, officer or employee of the Authority, the City of Brentwood shall be individually or personally liable for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds by reason of their issuance, but nothing herein contained shall relieve any such member, officer or employee from the performance of any official duty provided by the Act or any other applicable provisions of law or hereby.
SECTION 11.06. Acquisition of Bonds by Authority. All Bonds acquired by the Authority, whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation.
SECTION 11.07. Destruction of Canceled Bonds. Whenever provision is made herein for the cancellation of any Bonds, the Trustee shall destroy such Bonds and furnish to the Authority a certificate of such destruction.
SECTION 11.08. Content of Certificates. Every Certificate of the Authority with respect to compliance with any agreement, condition, covenant or provision provided herein shall include (a) a statement that the person or persons making or giving such certificate have read such agreement, condition, covenant or provision and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate are based; (c) a statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such agreement, condition, covenant or provision has been complied with; and (d) a statement as to whether, in the opinion of the signers, such agreement, condition, covenant or provision has been complied with.
Any Certificate of the Authority may be based, insofar as it relates to legal matters, upon an Opinion of Counsel unless the person making or giving such certificate knows that the Opinion of Counsel with respect to the matters upon which his certificate may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Authority, upon a representation by an officer or officers of the Authority unless the counsel executing such opinion of Counsel knows that the representation with respect to the matters upon which his opinion may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous.
SECTION 11.09. Publication for Successive Weeks. Any publication required to be made hereunder for successive weeks in a financial newspaper may be made in each instance upon any Business Day of the first week and need not be made on the same Business Day of any succeeding week or in the same financial newspaper for any subsequent publication, but may be made on different Business Days or in different financial newspapers, as the case may be.
SECTION 11.10. Accounts and Funds: Business Days. Any account or fund required herein to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund; but all such records with respect to all such accounts and funds shall at all times be maintained in accordance with the written directions of the Authority delivered pursuant to any Tax Certificate and sound corporate trust accounting practice and with due regard for the protection of the security of the Bonds and the rights of the Holders. Any action required to occur hereunder on a day which is not a Business Day shall be required to occur on the next succeeding Business Day.
SECTION 11.11. Article and Section Headings 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. 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,” “hereunder” and other words of similar import refer to the Trust Agreement as a whole and not to any particular article, section, subdivision or clause hereof.
SECTION 11.12. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the Authority or the Trustee 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 or of the Bonds, and the Holders shall retain all the benefit, protection and security afforded to them under the Act or any other applicable provisions of law. The Authority and the Trustee hereby declare that they would have executed and delivered the Trust Agreement and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the issuance of the Bonds pursuant hereto 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 11.13. Execution in Several Counterparts. This Trust Agreement 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. Amendments to Installment Sale Agreements. The Authority shall not supplement, amend, modify or terminate any of the terms of the Installment Sale Agreements (other than by a Supplemental Installment Sale Agreement), or consent to any such supplement, amendment, modification or termination, without the written consent of the Trustee. The Trustee shall give such written consent only if (1) (a) in the opinion of the Trustee (which may be based solely on an opinion of counsel), such supplement, amendment, modification or termination will not materially adversely affect the interests of the Holders or result in any material impairment of the security hereby given for the payment of the Bonds (provided that such supplement, amendment or modification shall not be deemed to have such adverse effect or to cause such material impairment solely by reason of providing for the execution of additional Obligation as provided for Article III of the Master Installment Sale Agreement), or (b) the Trustee first obtains the written consent of the Holders of a majority in principal amount of the Bonds then Outstanding to such supplement, amendment, modification or termination and (2) the Trustee obtains the prior written consent of each Credit Provider then providing a Credit Enhancement for any Series of Bonds, provided that the Credit Enhancement provided by such Credit Provider is in full force and effect and the Credit Provider is not then failing to make a payment as required in connection therewith; provided, that no such supplement, amendment, modification or termination shall reduce the amount of Installment Payments to be made to the Authority or the Trustee by the City pursuant to the Installment Sale Agreement, or extend the time for making such payments, or permit the creation of any lien prior to or on a parity with the lien created by the Installment Sale Agreement on Water Revenues (except as expressly provided in the Installment Sale Agreement), in each case without the written consent of all of the Holders of the Bonds then Outstanding; provided that if such modification or amendment will, by its terms, not take effect so long as any Bonds of any particular maturity remain Outstanding, the consent of the Holders of such Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of any calculation of Bonds Outstanding under this Section; and provided, further, that if the Credit Enhancement provided for any Series of Bonds is in full force and effect and if the Credit Provider providing such Credit Enhancement is not failing to make a payment as required in connection therewith, such Credit Provider shall also consent in writing to such modification or amendment, which consent shall not be unreasonably withheld.
SECTION 11.15. Notices. Except as otherwise provided herein, for the purposes hereof, any notice, consent, request, requisition, direction, certificate or demand or other communication may be served or presented, and such notice or demand may be made and shall be deemed to have been sufficiently given or served for all purposes by being deposited, first-class postage prepaid, in a post office letter box, addressed, as the case may be, to the parties as follows:
Authority: Brentwood Infrastructure Financing Authority
150 City Park Way
Brentwood, CA 94513
Attention: Treasurer/Controller
Trustee: U.S. Bank National Association
[address]
Attention:
Any such communication may also be sent by telecopy at the telecopy numbers given above. Any party may change its address by notice to each other party.

IN WITNESS WHEREOF, the BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY has caused this Trust Agreement to be signed in its name by its Treasurer/Controller and U.S. Bank National Association, in token of its acceptance of the trusts created hereunder, has caused this Trust Agreement to be signed by one of the officers thereunder duly authorized, all as of the day and year first above written.
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY


By
Treasurer/Controller
Attest:


Secretary
U.S. BANK NATIONAL ASSOCIATION,
AS TRUSTEE

By
Authorized Officer






















FIRST SUPPLEMENTAL
TRUST AGREEMENT
by and between the
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Dated as of October 1, 2008
(Supplemental to the Trust Agreement dated as of October 1, 2008)


ARTICLE XII
THE 2008 BONDS
SECTION 12.01. Definitions 2
SECTION 12.02. Authorization; Terms of the Series 2008 Bonds. 3
SECTION 12.03. Redemption of Series 2008 Bonds 5
SECTION 12.04. Selection of Series 2008 Bonds for Redemption 5
SECTION 12.05. Notice of Redemption of Series 2008 Bonds 5
SECTION 12.06. Partial Redemption of Series 2008 Bonds 5
SECTION 12.07. Effect of Redemption of Series 2008 Bonds 5
SECTION 12.08. Form of Series 2008 Bonds 6
SECTION 12.09. Issuance of Series 2008 Bonds 6
SECTION 12.10. Application of Proceeds of Series 2008 Bonds 6
SECTION 12.11. Establishment and Application of Series 2008 Costs of Issuance Account 6
SECTION 12.12. Establishment and Application of Series 2008 Project Fund 7
SECTION 12.13. Use of Depository 7
SECTION 12.14. [Reserved] 9
SECTION 12.15. Establishment of the Series 2008 Reserve Fund 10
SECTION 12.16. Terms of Series 2008 Bonds Subject to the Trust Agreement 10
SECTION 12.17. Effective Date of First Supplement 10
SECTION 12.18. Execution in Counterparts 10
EXHIBIT A Form of Series 2008 Bonds


First Supplemental Trust Agreement
(Supplemental to the Trust Agreement
dated as of October 1, 2008)
Authorizing the Issuance of
$__________ Aggregate Principal Amount of
Brentwood Infrastructure Financing Authority
Water Revenue Bonds,
Series 2008

This FIRST SUPPLEMENTAL TRUST AGREEMENT, dated as of October 1, 2008 (the “First Supplement”), by and between the BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY, a joint exercise of powers authority, duly organized and existing pursuant to an Agreement entitled “Joint Exercise of Powers Agreement by and between the City of Brentwood and the Redevelopment Agency of the City of Brentwood” (the “Authority”), and U.S. BANK NATIONAL ASSOCIATION, as trustee (the “Trustee”),
W I T N E S S E T H :
WHEREAS, the Authority is a joint exercise of powers authority duly organized and operating pursuant to Article 1 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California;
WHEREAS, Bonds may be issued by the Authority pursuant to the provisions of this Trust Agreement and Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California, and the acts amendatory thereof and supplemental thereto (the “Act”), for the purposes set forth in the Act, including the financing and refinancing of capital improvements of the City’s Water System (the “Water Project”);
WHEREAS, Article 11 of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California authorizes and empowers the Authority to issue bonds to assist local agencies in financing and refunding certain bonds, upon authorization by resolution of such local agency member of the joint powers authority;
WHEREAS, in accordance with a Trust Agreement, dated as of December 1, 1996 (the “Prior Trust Agreement”), the Authority has previously issued its Waster and Sewer Revenue Bonds, 1996 Series A (the “1996 Series A Bonds”) in an aggregate principal amount of $12,195,000 in part to provide funds to fund improvements to the Water System; and
WHEREAS, the Authority has determined that it is desirable and necessary and in the best interest of the Authority and the City to (i) refund a portion of the outstanding 1996 Series A Bonds in the amount of $[_________] (the “Defeased Bonds”) and to enter into a Trust Agreement, dated as of October 1, 2008 (the “Trust Agreement”), between the Authority and the Trustee, providing for the issuance of water revenue bonds hereafter there under (the “Bonds”); and
WHEREAS, the Trust Agreement provides that the Authority may issue Bonds from time to time as authorized by a supplemental trust agreement; and
WHEREAS, this First Supplement is supplemental to the Trust Agreement; and
WHEREAS, the Authority has determined that it is necessary and required that the Authority enter into this First Supplement in order to establish and declare, in conjunction with the Trust Agreement, the terms and conditions upon which Brentwood Infrastructure Financing Authority Water Revenue Bonds, Series 2008 (the “Series 2008 Bonds”) shall be issued and secured and to secure the payment of the principal thereof and premium (if any) and interest thereon; and
WHEREAS, the Authority has determined that all acts and proceedings required by law and this Trust Agreement necessary to make the Series 2008 Bonds, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid and binding obligations of the Authority payable in accordance with their terms, and to constitute this Trust Agreement a valid and binding agreement of the parties hereto for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this Trust Agreement have been in all respects duly authorized;
NOW, THEREFORE, the parties hereto agree and covenant, as follow


THE 2008 BONDS
Definitions. The terms defined in this Section shall, for all purposes of this First Supplement 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. Terms defined in the Trust Agreement not otherwise defined herein shall have the meanings specified therein.
“Annual Debt Service” means, for any Fiscal Year or twelve (12) calendar month period, the 2008 Payments required to be made under the First Supplemental Installment Sale Agreement (as defined in the Master Installment Sale Agreement) in such Fiscal Year or twelve (12) calendar month period.
“Average Annual Debt Service” means the sum of the Annual Debt Service for the remaining Fiscal Years to the last Fiscal Year in which any 2008 Payments (as defined in the Master Installment Sale Agreement) are due under the last First Supplemental Installment Sale Agreement (as defined in the Master Installment Sale Agreement) divided by the number of such Fiscal Years.
“First Supplement” means this First Supplemental Trust Agreement, dated as of October 1, 2008, between the Authority and the Trustee.
“Maximum Annual Debt Service” means the largest Annual Debt Service during the period from the date of such determination through the final maturity date of any of the Series 2008 Bonds.
“Prior Trust Agreement” means the Trust Agreement, dated as of December 1, 1996, by and between the Authority and U.S. Bank National Association, as successor trustee, as amended and supplemented to the date hereof.
“1996 Series A Bonds” means the Brentwood Infrastructure Financing Authority Waster and Sewer Revenue Bonds, 1996 Series A issued and outstanding under the Prior Trust Agreement.
“Series 2008 Bonds” means the Brentwood Infrastructure Financing Authority Water Revenue Bonds, Series 2008, as described in Section 12.02(A) hereof.
“Series 2008 Costs of Issuance Account” means the fund by that name established pursuant to Section 12.11 hereof.
“Series 2008 Project” means those certain additions, betterments, extensions and improvements to the Enterprise which may include, but are not limited to, _________________, together with such additions thereto or substitutions therefor.
“Series 2008 Project Fund” means the fund by that name established in Section 12.12 hereof.
“Series 2008 Reserve Fund” means the fund established in Section 12.15 hereof.
“Series 2008 Reserve Requirement” means, as of any date of determination, the least of (a) ten per cent (10%) of the amount of the Series 2008 Bonds, or (b) the Maximum Annual Debt Service on the Series 2008 Bonds, or (c) one hundred twenty-five per cent (125%) of the Average Annual Debt Service on the 2008 Series Bonds, all as computed by the City under the Code and specified in writing to the Trustee.
“1996 Bonds Escrow Agreement” means the Escrow Agreement, dated as of ________ 1, 2008, between the Authority and U.S. Bank National Association, as escrow agent, relating to the defeasance of the outstanding [Defeased Bonds].
Authorization; Terms of the Series 2008 Bonds.
A first Series of Bonds to be issued under the Trust Agreement is hereby created. Such Series shall be known as the “Brentwood Infrastructure Financing Authority Water Revenue Bonds, Series 2008” (herein referred to as the “Series 2008 Bonds”). The Series 2008 Bonds shall be issued in the aggregate initial principal amount of $[___________] in accordance with the this Trust Agreement for the purposes of (i) refunding a portion of the outstanding 1996 Series A Bonds in the aggregate principal amount of $[_________] (the "1996 Defeased Bonds"), (iii) funding various capital improvements to the Water System; and (iii) paying the Costs of Issuance in connection with the issuance and delivery of the Series 2008 Bonds.
The Series 2008 Bonds shall be issued in fully registered form and shall be initially registered in the name of “Cede & Co.”, as nominee of The Depository Trust Company. The Series 2008 Bonds shall be evidenced by one Series 2008 Bond maturing on each of the maturity dates as set forth in subsection 12.02(C) in a denomination corresponding to the total principal amount of the Series 2008 Bonds of such maturity. Each Series 2008 Bond may be assigned by the Trustee a distinctive number or letter and number, and a record of the same shall be maintained by the Trustee. Registered ownership of the Series 2008 Bonds, or any portion thereof, may not thereafter be transferred except as set forth in Section 12.13.
The Series 2008 Bonds shall be dated the date of delivery, shall be bonds which are Current Interest Indebtedness, shall be issued in denominations of $5,000 or any integral multiple thereof, and shall bear interest from the date thereof at the following rates per annum and shall mature on [July] 1 in the following years in the following amounts:
Maturity Date ([July] 1) Principal Amount Interest Rate















The Series 2008 Bonds maturing on [July] 1, 20__ through [July] 1, 20__ inclusive, are designated Serial Bonds.

Interest on the Series 2008 Bonds shall be payable commencing on ________ 1, 2008 and semiannually thereafter on [January] 1 and [July] 1 of each year in lawful money of the United States of America by check mailed by first-class mail on each interest payment date to the Owner thereof as of the close of business on the fifteenth (15th) day of the calendar month immediately preceding such interest payment date; provided, that upon the written request of an Owner of one million dollars ($1,000,000) or more in aggregate principal amount of Series 2008 Bonds received by the Trustee prior to the applicable Record Date (which such request shall remain in effect until rescinded in writing by such Owner), interest shall be paid by wire transfer in immediately available funds. Interest on the Series 2008 Bonds shall be computed on the basis of a 360-day year of twelve 30-day months. The principal of and premium, if any, on the Series 2008 Bonds are payable when due upon presentation thereof at the Corporate Trust Office of the Trustee, in lawful money of the United States of America.

So long as the Series 2008 Bonds are maintained in book-entry form, payments of principal, premium, if any, and interest shall be made by the Trustee to the Securities Depository by wire transfer.

The Trustee shall provide to Series 2008 Bondholders CUSIP number identification, with appropriate dollar amounts for each CUSIP number, on all redemption payments and interest payments, whether by check or by wire transfer.
Redemption of Series 2008 Bonds.
Optional Redemption. The Series 2008 Bonds are subject to redemption prior to their respective stated maturities at the direction of the Authority, from moneys deposited by the Authority or the City from any source of available funds, as a whole on any date, or in part (in such maturities as are designated by the Authority at the direction of the City or, if the Authority fails to designate such maturities, in inverse order of maturity and by lot within a maturity) on any date on or after [July] 1, 20__, at a redemption price equal to the principal amount of Series 2008 Bonds called for redemption, together with accrued interest thereon to the date fixed for redemption, without premium.
Selection of Series 2008 Bonds for Redemption. Whenever provision is made in this First Supplement for the redemption of less than all of the Series 2008 Bonds of any maturity (and interest rate), the Trustee shall select the Series 2008 Bonds to be redeemed, from all Series 2008 Bonds of the respective maturity (and interest rate) not previously called for redemption, in authorized denominations, by lot in any manner which the Trustee in its sole discretion shall deem appropriate. The Trustee shall promptly notify the Authority and the City in writing of the Series 2008 Bonds so selected for redemption.
Notice of Redemption of Series 2008 Bonds. Notice of redemption of any Series 2008 Bonds shall be mailed by the Trustee, not less than thirty (30) nor more than sixty (60) days prior to the redemption date, (i) to the respective Holders of any Series 2008 Bonds designated for redemption at their addresses appearing on the bond registration books of the Trustee by first class mail, and (ii) to the Securities Depositories by facsimile and by first class mail. Notice of redemption shall be given in the form and in accordance with the terms of the Trust Agreement.
Partial Redemption of Series 2008 Bonds. Upon surrender of any Series 2008 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 Series 2008 Bond of authorized denominations, and of the same maturity and interest rate, equal in aggregate principal amount to the unredeemed portion of the Series 2008 Bond surrendered.
Effect of Redemption of Series 2008 Bonds. Notice of redemption having been duly given as aforesaid, and moneys for payment of the Redemption Price of, together with interest accrued to the redemption date on, the Series 2008 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Series 2008 Bonds (or portions thereof) so called for redemption shall become due and payable at the redemption price specified in such notice, together with interest accrued thereon to the date fixed for redemption, interest on the Series 2008 Bonds so called for redemption shall cease to accrue, said Series 2008 Bonds (or portions thereof) shall cease to be entitled to any benefit or security under this Trust Agreement, and the Owners of said Series 2008 Bonds shall have no rights in respect thereof except to receive payment of said Redemption Price and accrued interest.

All Series 2008 Bonds redeemed pursuant to the provisions of this Article shall be cancelled upon surrender thereof and destroyed.
Form of Series 2008 Bonds. The Series 2008 Bonds and the certificate of authentication and registration to be executed thereon shall be in substantially the form set forth as Exhibit A hereto. The Series 2008 Bond designation letters and numbers, maturity dates, principal amounts, and interest rates and yields to maturity shall be inserted therein in conformity with Section 12.02.
Issuance of Series 2008 Bonds. At any time after the execution and delivery of this First Supplement, the Authority may execute and the Trustee shall authenticate and deliver the Series 2008 Bonds in the aggregate principal amount of $__________ upon the Order of the Authority.
Application of Proceeds of Series 2008 Bonds.
The proceeds of the sale of the Series 2008 Bonds in the amount of $______________ (computed as $_________ aggregate principal amount of the Series 2008 Bonds, less $__________ Underwriter’s discount, [plus/less] net original issue [premium/discount] of $_________) shall be received by the Trustee on behalf of the Authority and held in trust and set aside as follows:
The Trustee shall transfer to U.S. Bank National Association, as escrow agent under the 1996 Bonds Escrow Agreement, $___________, to be applied, together with certain other amounts deposited therein at the direction of the Authority, towards the redemption of the 1996 Defeased Bonds pursuant to the 1996 Bonds Escrow Agreement;
The Trustee shall deposit in the Series 2008 Project Fund $________; and
The Trustee shall deposit in the Series 2008 Costs of Issuance Account $__________, to be applied, together with certain other amounts transferred thereto at the direction of the Authority, in accordance with Section 12.11 hereof.
On the date hereof, the Trustee shall deposit the amount of [_______], being the Series 2008 Reserve Requirement, into the Parity Reserve Fund.
Establishment and Application of Series 2008 Costs of Issuance Account. The Trustee shall establish, maintain and hold in trust a separate account designated as the “Series 2008 Costs of Issuance Account.” The moneys in the Series 2008 Costs of Issuance Account shall be used and withdrawn by the Trustee to pay the Costs of Issuance of the Series 2008 Bonds. Before any payment from the Series 2008 Costs of Issuance Account shall be made, the Authority shall file or cause to be filed with the Trustee a requisition of the Authority signed by an authorized officer designated in writing by the Authority and stating (i) the item number of such payment; (ii) the name of the person to whom each such payment is due, which may be the Authority in the case of reimbursement for costs theretofore paid by the Authority; (iii) the respective amounts to be paid; (iv) the purpose by general classification for which each obligation to be paid was incurred; and (v) that obligations in the stated amounts have been incurred by the Authority and are presently due and payable and that each item thereof is a proper charge against the Series 2008 Costs of Issuance Account and has not been previously paid from said account.
Upon receipt of each such requisition, the Trustee shall pay the amount set forth in such requisition as directed by the terms thereof out of the Series 2008 Costs of Issuance Account. 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. The Trustee shall not incur any liability for any disbursement from the Series 2008 Costs of Issuance Account made in reliance upon any requisition.
The Trustee shall maintain the Series 2008 Costs of Issuance Account for a period of 180 days following the date of delivery of the Series 2008 Bonds and then shall transfer any balance therein to the Revenue Fund, pursuant to the priority established in Section 5.03 hereof.
Establishment and Application of Series 2008 Project Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Series 2008 Project Fund.” All money in the Series 2008 Project Fund shall be disbursed, upon the Request of the Authority, for the payment of the costs of the design, acquisition and construction of the Series 2008 Project and the incidental costs and expenses related thereto (including reimbursement to the Authority for any such costs or expenses paid by it). Each such Request of the Authority shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts.
When the design, acquisition and construction of the Series 2008 Project have been completed (as evidenced by a Certificate of the Authority filed with the Trustee), the Trustee shall transfer any balance remaining in the Series 2008 Project Fund for deposit in the Revenue Fund, unless the Authority provides an opinion of counsel to the effect that another use of such moneys will not cause the interest represented by the Series 2008 Bonds to be included in the gross income of the Owners thereof for federal income tax purposes, in which case, such money may be expended by the Authority as provided in such opinion.
Use of Depository. Notwithstanding any provision of the Trust Agreement or this First Supplement to the contrary:
The Series 2008 Bonds shall be issued in fully registered form, in authorized denominations and shall be initially registered in the name of “Cede & Co.”, as nominee of The Depository Trust Company (the “Securities Depository”), and shall be evidenced by one Series 2008 Bond maturing on each of the maturity dates as set forth in subsection 12.02(C) in a denomination corresponding to the total principal amount of the Series 2008 Bonds of such maturity. Each Series 2008 Bond shall be assigned by the Trustee a distinctive number or letter or letter and number, and a record of the same shall be maintained by the Trustee.
Registered ownership of the Series 2008 Bonds, or any portions thereof, may not thereafter be transferred except:
To any successor of The Depository Trust Company or its nominee, or to any substitute depository designated pursuant to clause (ii) of this subsection (A) (a “Substitute Depository”); provided that any successor of The Depository Trust Company or Substitute Depository shall be qualified under any applicable laws to provide the services proposed to be provided by it;
To any Substitute Depository not objected to by the Trustee, upon (1) the resignation of The Depository Trust Company or its successor (or any Substitute Depository or its successor) from its functions as depository, or (2) a determination by the Authority that The Depository Trust Company or its successor (or any Substitute Depository 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
To any person as provided below, upon (1) the resignation of The Depository Trust Company or its successor (or Substitute Depository or its successor) from its functions as depository; provided that no Substitute Depository which is not objected to by the Trustee can be obtained, or (2) a determination by the Authority that it is in the best interests of the Authority to remove The Depository Trust Company or its successor (or any Substitute Depository or its successor) from its function as depository.
In the case of any transfer pursuant to clause (i) or clause (ii) of subsection 12.13(A), upon receipt of all Outstanding Series 2008 Bonds by the Trustee, together with a Certificate of the Authority to the Trustee, a single new Series 2008 Bond for each maturity shall be executed and delivered, registered in the name of such successor or such Substitute Depository, or their nominees, as the case may be, all as specified in such Certificate of the Authority. In the case of any transfer pursuant to clause (iii) of subsection 12.13(A) hereof, upon receipt of all Outstanding Series 2008 Bonds by the Trustee together with a Certificate of the Authority to the Trustee, new Series 2008 Bonds shall be executed and delivered in such denominations and registered in the names of such persons as are requested in such a Certificate of the Authority, subject to the limitations of Section 12.02 hereof; provided the Trustee shall not be required to deliver such new Series 2008 Bonds within a period less than 60 days from the date of receipt of such a Certificate of the Authority.
In the case of partial redemption, cancellation or an advance refunding of any Series 2008 Bonds evidencing all or a portion of the principal maturing in a particular year, The Depository Trust Company shall make an appropriate notation on the Series 2008 Bonds indicating the date and amounts of such reduction in principal, in form acceptable to the Trustee.
The Authority and the Trustee shall be entitled to treat the person in whose name any Series 2008 Bond is registered as the Owner thereof for all purposes of the Trust Agreement and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the Authority; and the Authority and the Trustee shall have no responsibility for transmitting payments to, communication with, notifying, or otherwise dealing with any beneficial owners of the Series 2008 Bonds. Neither the Authority nor the Trustee will have any responsibility or obligations, legal or otherwise, to the beneficial owners or to any other party including The Depository Trust Company or its successor (or Substitute Depository or its successor), except to the Owner of any Series 2008 Bond.
So long as all Outstanding Series 2008 Bonds are registered in the name of “Cede & Co.” or its registered assign, the Authority and the Trustee shall cooperate with “Cede & Co.,” as sole registered Owner, and its registered assigns in effecting payment of the principal of and redemption premium, if any, and interest on the Series 2008 Bonds by arranging for payment in such manner that funds for such payments are properly identified and are made immediately available on the date they are due.
[Reserved.]
Establishment of the Series 2008 Reserve Fund. There is hereby created a special account of the City within the Reserve Fund to be known as the “Series 2008 Reserve Fund” (the “Series 2008 Reserve Fund”) to be held in trust by the Trustee. The City shall deposit in such account on the date of issuance of the Series 2008 Bonds an amount equal to the Series 2008 Reserve Requirement. If at any time the amount on deposit in the Series 2008 Reserve Fund is less than the Series 2008 Reserve Requirement, the City shall transfer to the Series 2008 Reserve Fund, from Revenues in accordance with the priorities established in Section 5.02 of the Trust Agreement or other available funds, an amount equal to the deficiency in the Series 2008 Reserve Fund. Any withdrawal from the Series 2008 Reserve Fund shall be replenished from Revenues first available for such purpose, but in any event within one year from the date of withdrawal. All investment earnings on amounts on deposit in the Series 2008 Reserve Fund and any amounts on deposit in the Series 2008 Reserve Fund in excess of the Series 2008 Reserve Requirement shall be transferred by the Trustee to the Revenue Fund. All amounts in the Series 2008 Reserve Fund shall be used and withdrawn by the City, as hereinafter provided, solely for the purpose of (i) paying principal of and interest on the Series 2008 Bonds in the event moneys in the Revenue Fund are insufficient therefor, or (ii) for the payment of the final principal and interest payment on the Series 2008 Bonds. Notwithstanding the provisions of Section 5.11 of the Trust Agreement, investments in the Series 2008 Reserve Fund shall only be valued as of [January] 1 of each Fiscal Year.
Terms of Series 2008 Bonds Subject to the Trust Agreement. Except as in this First Supplement expressly provided, every term and condition contained in the Trust Agreement shall apply to the First Supplement and to the Series 2008 Bonds with the same force and effect as if the same were herein set forth at length, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to the First Supplement.
The First Supplement and all the terms and provisions herein contained shall form part of the Trust Agreement as fully and with the same effect as if all such terms and provisions had been set forth in the Trust Agreement. The Trust Agreement is hereby ratified and confirmed and shall continue in full force and effect in accordance with the terms and provisions thereof, as supplemented and amended hereby, subject to the next sentence.
Effective Date of First Supplement. The First Supplement shall take effect upon its execution and delivery.
Execution in Counterparts. The First Supplement 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.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

IN WITNESS WHEREOF, the parties hereto have executed the First Supplement by their officers thereunto duly authorized as of the day and year first written above.
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY
By:
Treasurer/Controller
(Seal)
ATTEST:
By:
Secretary
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
Authorized Officer

EXHIBIT A
(FORM OF SERIES 2008 BOND)
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY
WATER REVENUE BOND
SERIES 2008
No. R-_____ $________
NEITHER THE FULL FAITH AND CREDIT OF THE AUTHORITY, THE CITY OF BRENTWOOD NOR THE REDEVELOPMENT AGENCY OF THE CITY OF BRENTWOOD IS PLEDGED FOR THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF THE BONDS AND NO TAX OR OTHER SOURCE OF FUNDS OTHER THAN THE REVENUES HEREINAFTER REFERRED TO IS PLEDGED TO PAY THE INTEREST ON OR PRINCIPAL OF THE BONDS. NEITHER THE PAYMENT OF THE PRINCIPAL OF NOR INTEREST ON THE BONDS CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE CITY OF BRENTWOOD OR REDEVELOPMENT AGENCY OF THE CITY OF BRENTWOOD.
Interest Rate Maturity Date Original
Issue Date CUSIP

__________, 2008

REGISTERED OWNER: CEDE & CO.
PRINCIPAL SUM: DOLLARS
The BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY, a joint exercise of powers authority, duly organized and validly existing under and pursuant to the laws of the State of California (the “Authority”), for value received hereby, promises to pay (but only out of the Revenues hereinafter referred to) to the registered owner identified above or registered assigns, on the maturity date specified above (subject to any right of prior redemption hereinafter provided for) the principal sum specified above, together with interest on such principal sum from the interest payment date next preceding the date of registration of this Bond (unless this Bond is registered as of an interest payment date, in which event it shall bear interest from that date, or unless this Bond is registered prior to ________ 1, 2008, in which event it shall bear interest from the original issue date specified above) until the principal hereof shall have been paid at the interest rate per annum specified above, payable on _________ 1, 2008, and semiannually thereafter on each [January] 1 and [July] 1. Interest due on or before the maturity or prior redemption of this Bond shall be payable only by check mailed to the registered owner hereof. The principal hereof is payable in lawful money of the United States of America at the principal office of U.S. Bank National Association in ____________, California.
This Bond is one of a duly authorized issue of bonds of the Authority designated as its “Water Revenue Bonds, Series 2008” (the “Bonds”) in aggregate principal amount of ________________________ dollars ($_____________), all of like tenor and date (except for such variations, if any, as may be required to designate varying numbers, maturities and interest rates), and is issued under and pursuant to the provisions of the Joint Exercise of Powers Act (being Chapter 5 of Division 7 of Title 1 of the California Government Code, as amended) and all laws amendatory thereof or supplemental thereto (the “Act”), Article 11 of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California and under and pursuant to the provisions of a trust agreement, dated as of October 1, 2008, as supplemented by a first supplemental trust agreement, dated October 1, 2008, between the Authority and U.S. Bank National Association as trustee (the “Trustee”), (the “Trust Agreement”) (copies of which are on file at the office of Trustee in __________, California).
The Bonds are issued to provide funds to refund a portion of the Brentwood Infrastructure Financing Authority Water and Sewer Revenue Bonds, 1996 Series A (the “Series 1996 Bonds”) and finance the cost of improvements to the Water System of the City. The Bonds are limited obligations of the Authority and are payable, as to interest thereon and principal thereof, solely from certain proceeds of the Bonds held in certain funds and accounts pursuant to the Trust Agreement and the revenues (the “Revenues”) derived from the 2008 Payments and other payments made by the City of Brentwood (the “City”), and all interest or other investment income, pursuant to (1) the Master Installment Sale Agreement for the City of Brentwood Water Project, dated as of October 1, 2008 as supplemented by a First Supplemental Installment Sale Agreement, dated as of October 1, 2008 (collectively the “Water Installment Sale Agreement”), by and between the Authority and the City, and (2) the Authority is not obligated to pay interest on and principal of the Bonds except from the Revenues. All Bonds are equally and ratably secured in accordance with the terms and conditions of the Trust Agreement by a pledge of and charge and lien upon the Revenues, and the Revenues constitute a trust fund for the security and payment of the interest on and principal of the Bonds as provided in the Trust Agreement. The general fund of the Authority is not liable, and the full faith and credit of the Authority, the City of Brentwood and the Redevelopment Agency of the City of Brentwood are not pledged, for the payment of the interest on or principal of the Bonds. No tax shall ever be levied or collected to pay the interest on or principal of the Bonds. The Bonds are not secured by a legal or equitable pledge of or charge or lien upon any property of the Authority or any of its income or receipts except the Revenues, and neither the payment of the interest on nor principal of the Bonds is a debt, liability or general obligation of the Authority. Additional bonds payable from the Revenues may be issued which will rank equally as to security with the Bonds, but only subject to the conditions and upon compliance with the procedures set forth in the Trust Agreement. Reference is hereby made to the Act and to the Trust Agreement and any and all amendments thereof and 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 Revenues, the rights of the registered owners of the Bonds, security for payment of the Bonds, remedies upon default and limitations thereon, and amendment of the Trust Agreement (with or without consent of the registered owners of the Bonds); and all the terms of the Trust Agreement are hereby incorporated herein and constitute a contract between the Authority and the registered owner of this Bond, to all the provisions of which the registered owner of this Bond, by acceptance hereof, agrees and consents.
The Bonds are subject to redemption prior to their respective stated maturities at the direction of the Authority, from moneys deposited by the Authority or the City from any source of available funds, as a whole on any date, or in part (in such maturities as are designated by the Authority at the direction of the City or, if the Authority fails to designate such maturities, in inverse order of maturity and by lot within a maturity) on any date on or after [July] 1, 20__, at a redemption price equal to the principal amount of Bonds called for redemption, together with accrued interest to the date fixed for redemption, without premium.
Notice of redemption of this Bond shall be given by mail not less than thirty (30) days nor more than sixty (60) days before the redemption date to the registered owner hereof, subject to and in accordance with provisions of the Trust Agreement with respect thereto. If notice of redemption has been duly given as aforesaid and money for the payment of the above-described redemption price is held by the Trustee, then this Bond shall, on the redemption date designated in such notice, become due and payable at the above-described redemption price; and from and after the date so designated, interest on this Bond shall cease to accrue and the registered owner of this Bond shall have no rights with respect hereto except to receive payment of the redemption price hereof.
If an event of default, as defined in the Trust Agreement, shall occur, the principal of all Bonds (and any additional bonds authorized by the Trust Agreement) may be declared due and payable upon the conditions, in the manner and with the effect provided in the Trust Agreement; except that the Trust Agreement provides that in certain events such declaration and its consequences may be rescinded under the circumstances as provided therein.
This Bond is transferable only on a register to be kept for that purpose at the above-mentioned office of the Trustee by the registered owner hereof in person or by his duly authorized attorney upon payment of the charges provided in the Trust Agreement and upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his duly authorized attorney, and thereupon a new fully registered Bond or Bonds in the same aggregate principal amount will be issued to the transferee in exchange therefor. The Authority and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof for the purpose of receiving payment of the interest hereon and principal hereof and for all other purposes, whether or not this Bond shall be overdue, and neither the Authority nor the Trustee shall be affected by any notice or knowledge to the contrary; and payment of the interest on and principal of this Bond shall be made only to such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on this Bond to the extent of the sum or sums so paid.
This Bond shall not be entitled to any benefit, protection or security under the Trust Agreement or become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been executed and dated by the Trustee.
It is hereby certified that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Constitution or laws of the State of California and is not in excess of the amount of Bonds permitted to be issued under the Trust Agreement.
IN WITNESS WHEREOF, the Brentwood Infrastructure Financing Authority has caused this Bond to be executed in its name and on its behalf by the facsimile signature of the Treasurer/Controller of the Authority and countersigned by the facsimile signature of the Secretary of said Authority, and has caused this Bond to be dated as of the original issue date specified above.
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY
By _____________________________________
Treasurer/Controller
Countersigned:

Secretary

[FORM OF CERTIFICATE OF AUTHENTICATION AND
REGISTRATION TO APPEAR ON SERIES 2008 BONDS]
This is one of the Bonds described in the within mentioned Trust Agreement which has been authenticated and registered on .
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By
Authorized Signatory
Unless this Bond is presented by an authorized representative of The Depository Trust Company to the issuer or its agent for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.

[FORM OF ASSIGNMENT TO
APPEAR ON SERIES 2008 BONDS]
For value received the undersigned hereby sells, assigns and transfers unto _________________________________________ the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints _____________________________ attorney to transfer the within bond on the books kept for registration thereof, with full power of substitution in the premises.
_____________________________________
Dated: _____________
Note: The signature to this Assignment must correspond with the name as written on the face of the Bond in every particular, without alteration or enlargement or any change whatever.
Signature Guaranteed: __________________________
Notice: Signature must be guaranteed by a qualified guarantor institution.


____________________________________________________________________________________________________________________________________________________________





MASTER INSTALLMENT SALE AGREEMENT

by and between the

CITY OF BRENTWOOD

and the

BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY

for the

CITY OF BRENTWOOD WATER PROJECT





Dated as of October 1, 2008





____________________________________________________________________________________________________________________________________________________________


ARTICLE I DEFINITIONS
Section 1.01. Definitions 1
ARTICLE II ACQUISITION, CONSTRUCTION AND SALE OF WATER PROJECTS; FUNDS
Section 2.01. Acquisition, Construction and Sale of Water Projects 16
Section 2.02. Rate Stabilization Fund 17
Section 2.03. Revenue Fund; Pledge of Net Water Revenues 17
Section 2.04. Improvement Fund 19
ARTICLE III EXECUTION OF SUPPLEMENTAL INSTALLMENT SALE AGREEMENTS; SPECIAL FACILITIES
Section 3.01. Conditions for the Execution of Parity Obligations 19
Section 3.02. Conditions for the Execution of Subordinate Obligations 21
Section 3.03. Procedure for the Execution of Supplemental Installment Sale Agreements 21
ARTICLE IV COVENANTS OF THE CITY
Section 4.01. Compliance with Contracts 22
Section 4.02. Use of Proceeds 22
Section 4.03. Against Encumbrances 22
Section 4.04. Sale or Other Disposition of Property 23
Section 4.05. Prompt Acquisition and Construction of the Water Projects 24
Section 4.06. Maintenance and Operation of the Water System; Budgets 24
Section 4.07. Compliance with Contracts for Use of the Water System 24
Section 4.08. Payment of Claims 24
Section 4.09. Insurance 24
Section 4.10. Accounting Records; Financial Statements and Other Reports 25
Section 4.11. Protection of Security and Rights of the Authority 25
Section 4.12. Payment of Taxes and Compliance with Governmental Regulations 25
Section 4.13. Amount of Rates, Fees and Charges 25
Section 4.14. Collection of Rates, Fees and Charges 25
Section 4.15. Eminent Domain and Insurance Proceeds 26
Section 4.16. Separate Utility Systems 26
Section 4.17. Contract Resource Obligations 26
Section 4.18. Additional Covenants 27
Section 4.19. Further Assurances 27
ARTICLE V EVENTS OF DEFAULT AND REMEDIES
Section 5.01. Events of Default 27
Section 5.02. Application of Net Water Revenues Upon Event of Default 28
Section 5.03. Other Remedies 29
Section 5.04. Non-Waiver 29
Section 5.05. Remedies Not Exclusive 29
ARTICLE VI DISCHARGE OF OBLIGATIONS
Section 6.01. Discharge of Obligations 30

ARTICLE VII MISCELLANEOUS
Section 7.01. Liability of City Limited to Net Water Revenues 31
Section 7.02. Benefits of the Master Installment Sale Agreement Limited to Parties 31
Section 7.03. Amendments to Master Installment Sale Agreement 31
Section 7.04. Successor Is Deemed Included in all References to Predecessor 32
Section 7.05. Waiver of Personal Liability 32
Section 7.06. Article and Section Headings, Gender and References 32
Section 7.07. Partial Invalidity 32
Section 7.08. Net Contract 32
Section 7.09. California Law 32
Section 7.10. Indemnification 32
Section 7.11. Funds 33
Section 7.12. Notices 33
Section 7.13. Assignment 34
Section 7.14. Effective Date 34
Section 7.15. Execution in Counterparts 34
EXHIBIT A FORM OF REQUEST OF THE CITY FOR IMPROVEMENT FUND REQUISITION A-1


MASTER INSTALLMENT SALE AGREEMENT
This MASTER INSTALLMENT SALE AGREEMENT (the “Master Installment Sale Agreement”), dated as of October 1, 2008, by and between the CITY OF BRENTWOOD, a municipal corporation duly organized and existing under and by virtue of the laws of the State of California (the “City”), and the BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY, a joint exercise of powers authority duly organized and existing under and by virtue of the laws of the State of California (the “Authority”);
W I T N E S S E T H:
WHEREAS, the City has determined that the design, acquisition and construction from time to time of additions, betterments and improvements to the Water System (as that term is defined herein, and herein the “Water System”) of the City is necessary and proper for City purposes and is for the common benefit of the City; and
WHEREAS, the City has determined to enter into the Master Installment Sale Agreement with the Authority to provide for the design, acquisition and construction of additions, betterments and improvements to the Water System; and
WHEREAS, the City and the Authority have determined that 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 entering into of the Master Installment Sale 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 the Master Installment Sale Agreement;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
ARTICLE XII

DEFINITIONS
SECTION 12.01. 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 certificate, opinion, report, request 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:
Accountant’s Report
“Accountant’s Report” means a report signed by an Independent Certified Public Accountant.
Adjusted Annual Debt Service
“Adjusted Annual Debt Service” means, for any Fiscal Year or twelve (12) calendar month period, the Annual Debt Service for such Fiscal Year or twelve (12) calendar month period minus the amount of such Annual Debt Service paid from the proceeds of Parity Obligations or from any interest earnings from amounts on deposit in all Reserve Funds and Reserve Accounts established in connection with Parity Obligations, as set forth in a Certificate of the City.
Adjusted Annual Net Water Revenues
“Adjusted Annual Net Water Revenues” means, for any Fiscal Year or twelve (12) calendar month period, the Adjusted Annual Water Revenues during such Fiscal Year or twelve (12) calendar month period minus the Maintenance and Operation Costs during such Fiscal Year or twelve (12) calendar month period.
Adjusted Annual Water Revenues
“Adjusted Annual Water Revenues” means, for any Fiscal Year or twelve (12) calendar month period, the Water Revenues during such Fiscal Year or twelve (12) calendar month period plus the deposits in the Revenue Fund from the Rate Stabilization Fund during or allocable to such Fiscal Year or twelve (12) calendar month period minus the deposits in the Rate Stabilization Fund from the Revenue Fund during or allocable to such Fiscal Year or twelve (12) calendar month period.
Adjusted Subordinate Annual Debt Service
“Adjusted Subordinate Annual Debt Service” means, for any Fiscal Year or twelve (12) calendar month period, the Subordinate Annual Debt Service for such Fiscal Year or twelve (12) calendar month period minus the amount of such Subordinate Annual Debt Service paid from the proceeds of Subordinate Obligations or from any interest earnings from amounts on deposit in all Reserve Funds and Reserve Accounts established in connection with Subordinate Obligations, as set forth in a Certificate of the City
Annual Debt Service
“Annual Debt Service” means, for any Fiscal Year or twelve (12) calendar month period, the Parity Payments required to be made under all Supplemental Installment Sale Agreements in such Fiscal Year or twelve (12) calendar month period.
Authority
“Authority” means the Brentwood Infrastructure Financing Authority, a joint exercise of powers authority duly organized and existing under and by virtue of the laws of the State of California and a Joint Exercise of Powers Agreement, dated March 14, 1995, between the Redevelopment Agency of the City of Brentwood and the City, as amended.
Authority Bonds
“Authority Bonds” means all revenue bonds issued by the Authority to finance or refinance any Water Projects.
Average Annual Debt Service
“Average Annual Debt Service” means the sum of the Annual Debt Service for the remaining Fiscal Years to the last Fiscal Year in which any Parity Payments are due under the last Outstanding Supplemental Installment Sale Agreement divided by the number of such Fiscal Years.
Balloon Contract
“Balloon Contract” means any Supplemental Installment Sale Agreement described as such in such Supplemental Installment Sale Agreement.
Business Day
“Business Day” means any day (other than a Saturday or a Sunday) on which banks in New York, New York, are open for business and on which the Trustee is open for business at its principal corporate trust office.
Bond Insurer
“Bond Insurer” means any insurance company that is then providing a policy of insurance for any Outstanding Parity Obligations.
Certificate of the City
“Certificate of the City” means an instrument in writing signed by the Mayor, Mayor Pro Tem, City Administrator or Director of Finance of the City, or by any other officer of the City duly authorized by the City for that purpose.
City
“City” means the City of Brentwood, a municipal corporation duly organized and existing under and by virtue of the laws and Constitution of the State of California.
City Council
“City Council” means the City Council of the City.
Code
“Code” means the Internal Revenue Code of 1986, as amended, and regulations issued thereunder.
Connection Fees
“Connection Fees” means all initial connection fees or water impact fees and charges payable to the City for the Water Service made available or provided by the Water System.
Contract Resource Obligation
“Contract Resource Obligation” means an obligation of the City, designated as a Contract Resource Obligation and entered into pursuant to Section 4.17, to make payments for Water Service or any other commodity or service to another person or entity (including without limitation a separate utility system created pursuant to Section 4.16), the payments under which without the application of Section 4.17 would not be treated as Maintenance and Operation Costs in accordance with Generally Accepted Accounting Principles.
Contracts
“Contracts” means all installment sale contracts, capital leases or similar obligations of the City authorized and executed by the City under and pursuant to applicable law, the interest and principal and prepayment premium, if any, payments under and pursuant to which are payable from Water Revenues on a parity with the payment of the Parity Payments.
Coverage Requirement
“Coverage Requirement” means, for any Fiscal Year or twelve (12) calendar month period: (1) an amount of Adjusted Annual Net Water Revenues equal in each case to at least (i) one hundred twenty-five per cent (125%) of the Adjusted Annual Debt Service for such Fiscal Year or twelve (12) calendar month period, (ii) one hundred ten per cent (110%) of the sum of the Adjusted Annual Debt Service plus the Adjusted Subordinate Annual Debt Service for such Fiscal Year or twelve (12) calendar month period, and (iii) one hundred per cent (100%) of all obligations of the City which are charges, liens or encumbrances upon or payable from the Water Revenue Fund in such Fiscal Year or twelve (12) calendar month period; and (2) an amount of Net Operating Revenues equal to at least one hundred per cent (100%) of all obligations of the City which are charges, liens or encumbrances upon or payable from the Water Revenue Fund in such Fiscal Year or twelve (12) calendar month period (including, for purposes of Section 4.13 only, all amounts owed to any issuer of a Financial Guaranty then in effect in a Reserve Fund or a Reserve Account under the terms of such Financial Guaranty); provided, that for purposes of determining compliance with the Coverage Requirement, the following provisions shall apply:
(A) Generally. Except as otherwise provided by subparagraph (B) of this proviso with respect to Variable Interest Rate Contracts and by subparagraph (C) of this proviso with respect to Obligations with respect to which a Payment Agreement is in force, interest on any Obligation shall be calculated based on the actual amount of interest that is payable under such Obligation;
(B) Interest on Variable Interest Rate Contracts. Interest deemed to be payable on any Variable Interest Rate Contract for periods when the actual interest rate can be determined shall be the actual Variable Interest Rates and for periods when the actual interest rate cannot yet be determined shall be calculated on the assumption that the interest rate on such Variable Interest Rate Contract would be equal to the rate (the “assumed RBI-based rate”) that is ninety per cent (90%) of the average RBI during the twelve (12) calendar month period immediately preceding the date in which such calculation is made;
(C) Interest on Obligations with respect to which a Payment Agreement is in force. Interest deemed to be payable on any Obligation with respect to which a Payment Agreement is in force shall be based on the net economic effect on the City expected to be produced by the terms of such Obligation and such Payment Agreement, including but not limited to the effects that (i) such Obligation would, but for such Payment Agreement, be treated as an obligation bearing interest at a Variable Interest Rate instead shall be treated as an obligation bearing interest at a fixed interest rate, and (ii) such Obligation would, but for such Payment Agreement, be treated as an obligation bearing interest at a fixed interest rate instead shall be treated as an obligation bearing interest at a Variable Interest Rate; and accordingly, the amount of interest deemed to be payable on any Obligation with respect to which a Payment Agreement is in force shall be an amount equal to the amount of interest that would be payable at the rate or rates stated in such Obligation plus the Payment Agreement Payments minus the Payment Agreement Receipts, and for the purpose of calculating as nearly as practicable the Payment Agreement Receipts and the Payment Agreement Payments under such Obligation, the following assumptions shall be made:
(1) City Obligated to Pay Net Variable Payments. If a Payment Agreement has been entered into by the City with respect to an Obligation resulting in the payment of a net variable interest rate with respect to such Obligation and Payment Agreement by the City, the interest rate on such Obligation for future periods when the actual interest rate cannot yet be determined shall be assumed (but only during the period the Payment Agreement is in effect) to be equal to the sum of (i) the fixed rate or rates stated in such Obligation, minus (ii) the fixed rate paid by the Qualified Counterparty to the City, plus (iii) the lesser of (A) the interest rate cap, if any, provided by a Qualified Counterparty with respect to such Payment Agreement (but only during the period that such interest rate cap is in effect) and (B) the assumed RBI-based rate; and
(2) City Obligated to Pay Net Fixed Payments. If a Payment Agreement has been entered into by the City with respect to an Obligation resulting in the payment of a net fixed interest rate with respect to such Obligation and Payment Agreement by the City, the interest on such Obligation shall be included in the calculation of the Coverage Requirement (but only during the period the Payment Agreement is in effect) by including for each Fiscal Year or twelve (12) calendar month period an amount equal to the amount of interest payable at the fixed interest rate pursuant to such Payment Agreement; and
(D) For purposes of calculating the Annual Debt Service or the Subordinate Annual Debt Service on any Balloon Contract, it shall be assumed that the principal of such Balloon Contract, together with interest thereon at a rate equal to the assumed RBI-based rate, will be amortized in equal annual installments of principal and interest over a term of thirty (30) years.
Date of Operation
“Date of Operation” means, with respect to any uncompleted Water Project, the estimated date by which such Water Project will have been completed and, in the opinion of an Independent Engineer, will be ready for continuous and reliable operation by the City.
Defeasance Securities
“Defeasance Securities” mean the following:
1. [Cash
2. U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series – “SLGs”
3. Direct obligations of the Treasury which have been stripped by the Treasury itself, CATS, TIGRS and similar securities.
4. Resolution Funding Corp. (REFCORP) Only the interest component of REFCORP strips which have been stripped by request of the Federal Reserve Bank of New York in book entry form are acceptable.
5. Pre-refunded municipal bonds rates “Aaa” by Moody’s and “AAA” by S&P. If however, the issue is only rated by S&P (i.e., there is not 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.
6. Obligation issued by the following agencies which are backed by the full faith and credit of the U.S.
U.S. Export-Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial ownership
Farmers Home Administration (FmHA)
Certificates of beneficial ownership
Federal Financing Bank
General Services Administration
Participation certificates
U.S. Maritime Administration
Guaranteed Title XI financing
U.S. Department of Housing and Urban Development (HUD)
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]
Director of Finance
“Director of Finance” means the Director of Finance of the City or his or her successor designated by the City Council.
Engineer’s Report
“Engineer’s Report” means a report signed by an Independent Engineer.
Event of Default
“Event of Default” means an event described in Section 5.01.
Financial Guaranty
“Financial Guaranty” means a policy of municipal bond insurance or surety bonds issued by a municipal bond insurer or a letter of credit issued by a bank or other institution if the obligations insured by such insurer or issued by such bank or other institution, as the case may be, have ratings at the time of issuance of such policy or surety bond or letter of credit in the highest rating category by S&P and Moody’s and, if rate by A.M. Best & Company, also in the highest rating category by A.M. Best & Company.
First Supplemental Installment Sale Agreement
“First Supplemental Installment Sale Agreement” means that certain First Supplemental Installment Sale Agreement executed and entered into as of October 1, 2008, by and between the City and the Authority, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance therewith.
Fiscal Year
“Fiscal Year” means the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other annual accounting period hereafter selected and designated by the Board of Directors as the Fiscal Year of the City.
Generally Accepted Accounting Principles
“Generally Accepted Accounting Principles” means the uniform accounting and reporting procedures set forth in publications of the American Institute of Certified Public Accountants or its successor, or by any other generally accepted authority on such procedures, and includes, as applicable, the standards set forth by the Governmental Accounting Standards Board or its successor.
Improvement Fund
“Improvement Fund” means the City of Brentwood Water Improvement Fund established under Section 2.04.
Independent Certified Public Accountant
“Independent Certified Public Accountant” means any firm of certified public accountants duly licensed and entitled to practice and practicing as such under the laws of the State, appointed and paid by the City, and each of whom –
(1) is in fact independent and not under the domination of the City;
(2) does not have a substantial financial interest, direct or indirect, in the operations of the City; and
(3) is not connected with the City as a director, officer or employee of the City, but may be regularly retained to audit the accounting records of and make reports thereon to the City.
Independent Engineer
“Independent Engineer” means any registered engineer or firm of registered engineers of national reputation generally recognized to be well qualified in engineering matters relating to sanitation collection systems, appointed and paid by the City, and who or each of whom –
(1) is in fact independent and not under the domination of the City;
(2) does not have a substantial financial interest, direct or indirect, in the operations of the City; and
(3) is not connected with the City as a director, officer or employee of the City, but may be regularly retained to make reports to the City.
Interest Payment Date
“Interest Payment Date” means a date on which any interest installment of the Payments is due and payable.
Issuing Document
“Issuing Document” means the Master Trust Agreement and any other indenture, trust agreement or other document the obligations issued or delivered pursuant to which are secured by Payments under Contracts; provided, that the trustee under each Issuing Document shall be the Trustee.
Maintenance and Operation Costs
“Maintenance and Operation Costs” means, for any Fiscal Year or twelve (12) calendar month period, all reasonable and necessary costs paid or incurred by the City during such Fiscal Year or twelve (12) calendar month period for maintaining and operating the Water System, determined in accordance with Generally Accepted Accounting Principles, including all 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 all amounts due under Contract Resource Obligations (but only at the times described in Section 4.17), and including all administrative costs of the City that are charged directly or apportioned to the operation of the Water System, such as salaries and wages of employees, overhead, taxes (if any), insurance premiums and payments into pension funds, and including all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms hereof or of any resolution authorizing the execution of any Supplemental Installment Sale Agreement or of such Supplemental Installment Sale Agreement, such as compensation, reimbursement and indemnification of the Trustee and fees and expenses of Independent Certified Public Accountants and Independent Engineers and the Director of Finance, but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles.
Master Installment Sale Agreement
“Master Installment Sale Agreement” means this Master Installment Sale Agreement executed and entered into as of October 1, 2008, by and between the City and the Authority, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance herewith.
Master Trust Agreement
“Master Trust Agreement” means that certain Trust Agreement executed and entered into as of October 1, 2008, by and between the Authority and the Trustee, as originally executed and entered into and as may from time to time be amended or supplemented in accordance with the terms thereof.
Maximum Annual Debt Service
“Maximum Annual Debt Service” means the largest Annual Debt Service during the period from the date of such determination through the final maturity date of any Outstanding Parity Debt.
Moody’s
“Moody’s” means Moody’s Investors Service, a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors or assigns, but only to the extent that such entity is then rating any obligations secured by Parity Payments at the request of the Authority.
Net Operating Revenues
"Net Operating Revenues" mean, for any Fiscal Year or any designated twelve (12) month period in question, the Adjusted Annual Net Water Revenues during such Fiscal Year or twelve month period less the Connection Fees during such Fiscal Year or twelve month period.
Net Proceeds
“Net Proceeds” means, when used with respect to any condemnation award or any insurance proceeds received with respect to the Water System, the amount of such condemnation award or insurance proceeds remaining after payment of all expenses (including attorneys’ fees) incurred in the collection of such award or proceeds.
Net Water Revenues
“Net Water Revenues” means, for any Fiscal Year or twelve (12) calendar month period, the Water Revenues during such Fiscal Year or twelve (12) calendar month period less the Maintenance and Operation Costs during such Fiscal Year or twelve (12) calendar month period.
Obligations
“Obligations” means all Parity Obligations and all Subordinate Obligations.
Opinion of Counsel
“Opinion of Counsel” means a written opinion of Orrick, Herrington & Sutcliffe LLP or such other counsel of recognized national standing in the field of law relating to municipal bonds, retained by the City and satisfactory to the Trustee (who shall be under no liability by reason of such approval).
Outstanding
“Outstanding” means, with respect to the Payments, all Payments which have not been paid or otherwise satisfied as provided in Article VI, and with respect to the Supplemental Installment Sale Agreements, all Supplemental Installment Sale Agreements the Payments under which have not been paid or otherwise satisfied as provided in Article VI.
Parity Obligation Payment Fund
“Parity Obligation Payment Fund” means the City of Brentwood Water Parity Obligation Payment Fund established under Section 2.03.
Parity Obligations
“Parity Obligations” means all Supplemental Installment Sale Agreements, Payment Agreements or other loan agreements entered into by the City, the Parity Payments under which (other than Termination Payments) are secured by a senior lien on Net Water Revenues created hereby and are payable on a parity therefrom.
Parity Payment Agreement
“Parity Payment Agreement” means a Payment Agreement which is a Parity Obligation.
Parity Payments
“Parity Payments” means all installment payments scheduled to be paid by the City under all Parity Obligations.
Payment Agreement
“Payment Agreement” means a written agreement for the purpose of managing or reducing the City’s exposure to fluctuations in interest rates or for any other interest rate, investment, asset or liability managing purposes, entered into either on a current or forward basis by the City and a Qualified Counterparty as authorized under any applicable laws of the State in connection with, or incidental to (but not necessarily concurrent with), the entering into of any Supplemental Installment Sale Agreement, that provides for an exchange of payments based on interest rates, ceilings or floors on such payments, options on such payments or any combination thereof, or any similar device.
Payment Agreement Payments
“Payment Agreement Payments” means the amounts periodically required to be paid by the City to all Qualified Counterparties under all Payment Agreements.
Payment Agreement Receipts
“Payment Agreement Receipts” means the amounts periodically required to be paid by all Qualified Counterparties to the City under all Payment Agreements.
Payment Date
“Payment Date” means any date on which Payments are scheduled to be paid by the City.
Payments
“Payments” means the Parity Payments and the Subordinate Payments.
Principal Payment Date
“Principal Payment Date” means a date on which any principal installment of the Payments is due and payable.
Qualified Counterparty
“Qualified Counterparty” means a party (other than the City or a party related to the City) who is the other party to a Payment Agreement and (1) (a) who is rated at least equal to the ratings assigned by each of the Rating Agencies to the obligations secured by Parity Payments (without regard to any gradations within a rating category), (b) whose senior debt obligations are rated at least equal to the ratings assigned by each of the Rating Agencies to the obligations secured by Parity Payments (without regard to any gradations within a rating category), or guaranteed by an entity so rated, (c) whose obligations under the Payment Agreement are guaranteed for the entire term of the Payment Agreement by a bond insurer or other institution which has been assigned a credit rating at least equal to the ratings assigned by each of the Rating Agencies to the obligations secured by Parity Payments, or (d) whose obligations under the Payment Agreement are collateralized in such a manner as to obtain a rating at least equal to the ratings assigned by each of the Rating Agencies to the obligations secured by Parity Payments, and (2) who is otherwise qualified to act as the other party to a Payment Agreement under all applicable laws of the State.
Rate Stabilization Fund
“Rate Stabilization Fund” means the City of Brentwood Water Rate Stabilization Fund established under Section 2.02.
Rating Agencies
“Rating Agencies” means collectively Moody’s and S&P, together with any other nationally recognized municipal securities rating agency or agencies selected by the Authority that is then rating any obligations secured by Parity Payments at the request of the Authority.
RBI
“RBI” means the Bond Buyer Revenue Bond Index or comparable index, or, if no comparable index can be obtained, eighty per cent (80%) of the interest rate on actively traded thirty (30) year United States Treasury Bonds, except that if no such United States Treasury Bonds are actively traded, it means eighty per cent (80%) of the interest rate on actively traded United States Treasury obligations or other obligations generally recognized to constitute “benchmark securities” in the municipal bond industry.
Request of the City
“Request of the City” means an instrument in writing signed by the Director of Finance, or by any officer of the City duly authorized by the City Council for that purpose.
Reserve Fund and Reserve Account
“Reserve Fund” and “Reserve Account” shall have the meanings given to such terms in any Issuing Document or Supplemental Installment Sale Agreement.
Reserve Fund Credit Facility Costs
“Reserve Fund Credit Facility Costs” means the repayment of draws, expenses and accrued interest or other similar costs payable in connection with a Financial Guaranty deposited with the Trustee for the credit of a Reserve Fund or Reserve Account.
S&P
“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc., a corporation duly organized and existing under and by virtue of the laws of the State of New York, and its successors or assigns, but only to the extent that such entity is then rating any obligations secured by Parity Payments at the request of the Authority.
State
“State” means the State of California.
Subordinate Annual Debt Service
“Subordinate Annual Debt Service” means, for any Fiscal Year or twelve (12) calendar month period, the Subordinate Payments required to be made under all Supplemental Installment Sale Agreements in such Fiscal Year or twelve (12) calendar month period.
Subordinate Obligations
“Subordinate Obligations” means all Supplemental Installment Sale Agreements or Payment Agreements the Subordinate Payments under which (other than Termination Payments related to Subordinate Payment Agreements) are secured by the subordinate lien on Net Water Revenues created hereby and are payable on a parity therefrom.
Subordinate Payment Agreements
“Subordinate Payment Agreements” means a Payment Agreement which is a Subordinate Obligation.
Subordinate Payments
“Subordinate Payments” means all installment payments scheduled to be paid by the City under all Subordinate Obligations.
Supplemental Installment Sale Agreements
“Supplemental Installment Sale Agreements” means all installment sale agreements supplemental to the Master Installment Sale Agreement executed and entered into by the City and the Authority under and pursuant to the Master Installment Sale Agreement and applicable law, as originally executed and entered into and as they may from time to time be amended or supplemented in accordance herewith and therewith.
Tax Certificate
“Tax Certificate” means any certificate or agreement delivered with respect to the maintenance of the tax-exempt status of Payments the interest component of which is intended to be excluded from gross income pursuant to Section 103 of the Code.
Termination Payments
“Termination Payments” means any payments due and payable to a Qualified Counterparty in connection with the termination of a Payment Agreement.
Trustee
“Trustee” means The Bank of New York Trust Company, N.A., as Trustee under each Issuing Document or any other banking corporation which may at any time be substituted in its place as provided in each Issuing Document.
Variable Interest Rate
“Variable Interest Rate” means any variable interest rate or rates to be paid under any Supplemental Installment Sale Agreements, the method of computing which variable interest rate shall be as specified in the applicable Supplemental Installment Sale Agreement, which Supplemental Installment Sale Agreement shall also specify either (i) the payment period or periods or time or manner of determining such period or periods or time for which each value of such variable interest rate shall remain in effect, and (ii) the time or times based upon which any change in such variable interest rate shall become effective, and which variable interest rate may, without limitation, be based on the interest rate on certain bonds or may be based on interest rate, currency, commodity or other indices.
Variable Interest Rate Contracts
“Variable Interest Rate Contracts” means, for any period of time, any Supplemental Installment Sale Agreements that bear a Variable Interest Rate during such period, except that no Supplemental Installment Sale Agreement shall be treated as a Variable Interest Rate Contract if the net economic effect of interest rates on any particular Payments or such Supplemental Installment Sale Agreement and interest rates on any other Payments of the same Supplemental Installment Sale Agreement, as set forth in such Supplemental Installment Sale Agreement, or the net economic effect of a Payment Agreement with respect to any particular Payments, in either case is to produce obligations that bear interest at a fixed interest rate, and any Supplemental Installment Sale Agreement with respect to which a Payment Agreement is in force shall be treated as a Variable Interest Rate Contract if the net economic effect of the Payment Agreement is to produce obligations that bear interest at a Variable Interest Rate.
Water Project Accounts
“Water Project Accounts” means collectively all the accounts established in the Improvement Fund pursuant to any Supplemental Installment Sale Agreements or other agreements incidental thereto to finance the acquisition and construction of all the Water Projects.
Water Project
“Water Project” means any additions, betterments, extensions or improvements to the Water System designated by the City Council of the City as a designated Water Project, the design, acquisition or construction of which (together with the incidental costs and expenses related thereto) is to be financed by the proceeds of any Bonds, Contracts, or Supplemental Installment Sale Agreements.
Water Revenue Fund
“Water Revenue Fund” means the City of Brentwood Water Revenue Fund established under Section 2.03.
Water Revenues
“Water Revenues” means, for any Fiscal Year or twelve (12) calendar month period, all income and revenue received or receivable by the City during such Fiscal Year or twelve (12) calendar month period from the ownership or operation of the Water System, determined in accordance with Generally Accepted Accounting Principles, including all rates, fees and charges (including all Connection Fees) received by the City for the Water Service and the other services of the Water System and all proceeds of insurance covering business interruption loss relating to the Water System and all connection fees and charges payable to the City for the Water Service made available or provided by the Water System and all payments for the lease of property comprising a part of the Water System and all other income and revenue howsoever derived by the City from the ownership or operation of the Water System or arising from the Water System, and including all Payment Agreement Receipts, and including all income from the investment of amounts on deposit in the Revenue Fund, the Parity Obligation Payment Fund and the Rate Stabilization Fund, but excluding in all cases any proceeds of taxes and any refundable deposits made to establish credit and any advances or contributions in aid of construction and excluding any income from the investment of amounts on deposit in the Improvement Fund and excluding any earnings of a separate utility system acquired and constructed by the City pursuant to Section 4.16. Notwithstanding the foregoing, there shall be deducted from Water Revenues any amounts transferred into the Rate Stabilization Fund as contemplated by Section 2.02, and there shall be added to Water Revenues any amounts transferred out of the Rate Stabilization Fund as contemplated by Section 2.02.
Water Service
“Water Service” means the sanitation collection service furnished, made available or provided by the Water System.
Water System
“Water System” means all facilities for providing sanitation collection service now owned by the City and all other facilities acquired and constructed by the City and determined to be a part of the Water System, together with all additions, betterments and improvements to such facilities or any part thereof hereafter acquired and constructed by the City, but excluding any separate utility system acquired or constructed by the City pursuant to Section 4.16.
ARTICLE XIII

ACQUISITION, CONSTRUCTION AND SALE
OF WATER PROJECTS; FUNDS
SECTION 13.01. Acquisition, Construction and Sale of Water Projects. The Authority hereby agrees to finance and refinance the costs of the design, acquire and construct the Water Projects for, and to sell the Water Projects to, the City, and the City hereby agrees to buy the Water Projects from the Authority; and in order to implement this provision, the Authority hereby appoints the City as its agent for the purpose of such acquisition and construction, and the City hereby agrees to enter into such construction contracts and purchase orders as may be necessary, as agent for the Authority, to provide for the complete acquisition and construction of the Water Projects, and the City hereby agrees that as such agent it will cause the acquisition and construction of the Water Projects to be diligently completed after the deposit of funds in the Improvement Fund for such purpose under Section 2.04, and that it will use its best efforts to cause the acquisition and construction of the Water Projects to be completed in a timely fashion, unforeseeable delays beyond the reasonable control of the City only excepted. Notwithstanding the foregoing, 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 costs or expenses incurred by the City for the acquisition and construction of the Water Projects and that all such costs and expenses shall be paid by the City, regardless of whether the funds deposited in the corresponding Water Project Funds are sufficient to cover all such costs and expenses.
SECTION 13.02. Rate Stabilization Fund. There is hereby established the “City of Brentwood Water Rate Stabilization Fund,” which fund the Director of Finance hereby agrees to hold and maintain as directed by the City so long as any Payments due hereunder shall be Outstanding. The City may at any time deposit in the Rate Stabilization Fund any Net Water Revenues and any other money available to be used therefor, the City may at any time withdraw from the Rate Stabilization Fund any money therein for deposit in the Revenue Fund and the City shall withdraw from the Rate Stabilization Fund any money therein for deposit in the Revenue Fund in the event there are insufficient amounts in the Revenue Fund to make the deposits and transfers required by Section 2.03; provided, that any such deposits or withdrawals may be made up to and including the date that is one hundred eighty (180) days after the end of the Fiscal Year or twelve (12) calendar month period for which such deposit or withdrawal will be taken into account in determining Adjusted Annual Water Revenues; and provided further, that no deposit of Net Water Revenues shall be made into the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement in any Fiscal Year or twelve (12) calendar month period.
SECTION 13.03. Revenue Fund; Pledge of Net Water Revenues. There is hereby established the “City of Brentwood Water Revenue Fund,” which fund the Director of Finance hereby agrees to hold and maintain so long as any Payments due hereunder shall be Outstanding. The City hereby irrevocably grants and pledges the Net Water Revenues first, to secure Parity Obligations and second, to secure Subordinate Obligations. Such lien and pledge shall constitute a first lien on Net Water Revenues to secure Parity Obligations and a secured lien on Net Water Revenues to secure subordinate obligations. The City hereby represents that it has not previously granted any lien or charge on any of the Net Water Revenues; provided that out of Net Water Revenues there may be apportioned such sums for such purposes as are expressly permitted by this Section 2.03. All Parity Obligations shall be of equal rank without preference, priority or distinction of any Parity Obligations over any other Parity Obligations. In order to carry out and effectuate the obligation of the City contained herein and in all Supplemental Installment Sale Agreements and Payment Agreements to pay the Payments, the City agrees and covenants that all Water Revenues received by it shall be deposited when and as received in the Revenue Fund, and all money on deposit in the Revenue Fund shall be applied and used only in the following order as provided herein:
(A) The City shall pay all Maintenance and Operation Costs (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operation Costs the payment of which is not then immediately required) from the Revenue Fund as they become due and payable and shall make such deposits in the Rate Stabilization Fund as it may determine from time to time in accordance with Section 2.02; and
(B) On or before the fifth day before the last Business Day in each month, the Director of Finance shall, from the remaining money then on deposit in the Revenue Fund, deposit in the “City of Brentwood Parity Obligation Payment Fund,” which fund the Director of Finance hereby agrees to hold and maintain so long as any Parity Payments due hereunder shall be Outstanding the following amounts in the following order of priority:
(1) a sum equal to (a) the interest and principal payments becoming due and payable under all Supplemental Installment Sale Agreements that are Parity Obligations, plus (b) the net payments becoming due and payable on all Parity Payment Agreements (except any Termination Payments), plus (c) any other amounts with respect to Parity Obligations (including any letter of credit and remarketing fees), in each case, during the next succeeding month; plus
(2) (unless otherwise covered by subparagraph (B)(1) above) a sum equal to (a) one-sixth (1/6) of the amount of interest becoming due and payable under all Supplemental Installment Sale Agreements that are Parity Obligations on the next succeeding Interest Payment Date, plus (b) one-twelfth (1/12) of the amount of principal becoming due and payable under all Supplemental Installment Sale Agreements that are Parity Obligations on the next succeeding Principal Payment Date, except that no such deposit need be made if the Director of Finance then holds money in the Parity Obligation Payment Fund equal to the amount of interest becoming due and payable under all Supplemental Installment Sale Agreements that are Parity Obligations on the next succeeding Interest Payment Date plus the amount of principal becoming due and payable under all Supplemental Installment Sale Agreements that are Parity Obligations on the next succeeding Principal Payment Date plus the net payments due on all Parity Payment Agreements on such dates (except any Termination Payments) plus any other amounts becoming due and payable with respect to Parity Obligations (including any letter of credit and remarketing fees); plus
(3) all amounts due to make up any deficiency in the Reserve Funds and Reserve Accounts for Parity Obligations in accordance with the provisions of the applicable Issuing Document, including all Reserve Fund Credit Facility Costs.
All money on deposit in the Parity Obligation Payment Fund shall be transferred by Director of Finance to the Trustee or other third party payee thereof to make and satisfy the Parity Payments due on the next applicable Payment Dates on such dates and so the Trustee will be able to satisfy the requirements of Section 4.03 of the Trust Agreement.
(C) After the payments contemplated by subparagraphs (A) and (B) above have been made, any amounts thereafter remaining in the Revenue Fund may from time to time be used for the payment of the interest and principal payments becoming due and payable under all Supplemental Installment Sale Agreements that are Subordinate Obligations and the net payments becoming due and payable on all Subordinate Payment Agreements (except any Termination Payments) and any other amounts becoming due and payable with respect to Subordinate Obligations (including any letter of credit and remarketing fees and any other amounts becoming due and payable to make up any deficiency in the Reserve Funds and the Reserve Accounts for Subordinate Obligations, including all Reserve Fund Credit Facility Costs) and any Termination Payments on all Parity Payment Agreements; so long as the following conditions are met:
(1) all Maintenance and Operations Costs are being and have been paid and are then current; and
(2) all deposits and payments contemplated by subparagraphs (A) and (B) above shall have been made in full and no deficiency in any Reserve Fund or Reserve Account for Parity Obligations shall exist and no Reserve Fund Credit Facility Costs shall be due and payable, and there shall have been paid, or segregated within the Revenue Fund, the amounts currently payable pursuant to subparagraphs (A) and (B) above.
(D) After deposits contemplated by this section have been made, any amounts thereafter remaining in the Revenue Fund may be used for any lawful purpose, including, but not limited to the payment of any Termination Payments on all Subordinate Payment Agreements.
SECTION 13.04. Improvement Fund. There is hereby established the “City of Brentwood Water Improvement Fund,” which fund the Director of Finance hereby agrees to hold and maintain until the completion of the acquisition and construction of all Water Projects to be financed from the Water Project Accounts established in such fund as provided in all Supplemental Installment Sale Agreements; and all money in the Improvement Fund (and interest earnings thereon) shall be used and withdrawn by the Director of Finance to pay the costs of the acquisition and construction of the Water Projects (or to reimburse the City for such costs paid by it), including the payment of interest on the Obligations upon receipt of a Request of the City filed with the Director of Finance in substantially the form attached hereto as Exhibit A, each of which shall be sequentially numbered and shall state the person or entity to whom payment is to be made, the amount of money to be paid, the purpose for which the obligation to be paid was incurred and that such payment is a proper charge against the related Water Project Account in the Improvement Fund and has not been the subject of a previous Request of the City. After the completion of the acquisition and construction of each Water Project to be financed from the related Water Project Account in the Improvement Fund, any remaining balance of money in such Project Account shall be transferred to the City for any lawful purpose of the City subject to the provisions of any Tax Certificate.
ARTICLE XIV

EXECUTION OF SUPPLEMENTAL INSTALLMENT SALE AGREEMENTS;
SPECIAL FACILITIES
SECTION 14.01. Conditions for the Execution of Parity Obligations. The City may at any time execute any Parity Obligations (other than the Parity Obligations issued pursuant to the First Supplemental Installment Sale Agreement) payable as provided herein; provided:
(1) There shall be on file with the City either:
(1) A Certificate of the City demonstrating that, during the last audited Fiscal Year or any twelve (12) calendar month period during the immediately preceding eighteen (18) calendar month period, the Adjusted Annual Net Water Revenues were at least equal to the Coverage Requirement for all Outstanding Supplemental Installment Sale Agreements plus the Parity Obligation proposed to be executed; provided, that for the purpose of providing this Certificate, the City may adjust the foregoing Adjusted Annual Net Water Revenues to reflect:
(a) An allowance for Net Water Revenues that would have been derived from each new connection to the Water System that was made prior to the execution of any Outstanding Supplemental Installment Sale Agreement but which, during all or any part of such Fiscal Year or twelve (12) calendar month period, was not in existence, in an amount equal to ninety per cent (90%) of the estimated additional Net Water Revenues that would have been derived from each such connection if it had been made prior to the beginning of such Fiscal Year or twelve (12) calendar month period, and
(b) An allowance for Net Water Revenues that would have been derived from any increase in the rates, fees and charges fixed and prescribed for Water Service which became effective prior to the execution of such Outstanding Supplemental Installment Sale Agreement but which, during all or any part of such Fiscal Year or twelve (12) calendar month period, was not in effect, in an amount equal to ninety per cent (90%) of the estimated additional Net Water Revenues that would have been derived from such increase in rates, fees and charges if it had been in effect prior to the beginning of such Fiscal Year or twelve (12) calendar month period; or
(2) An Engineer’s Report that the estimated Adjusted Annual Net Water Revenues for each of the five (5) Fiscal Years next following the earlier of (i) the end of the period during which interest on the Parity Obligation proposed to be executed is to be capitalized or, if no interest is capitalized, the Fiscal Year in which the Parity Obligation proposed to be executed is executed, or (ii) the date on which substantially all Water Projects financed with the Parity Obligation proposed to be executed plus all Water Projects financed with all existing Supplemental Installment Sale Agreements are expected to commence operations, will be at least equal to the Coverage Requirement for such period; provided, that for the purpose of providing this Engineer’s Report, the Independent Engineer may adjust the foregoing estimated Adjusted Annual Net Water Revenues to reflect:
(c) An allowance for Net Water Revenues that are estimated to be derived from any increase in the rates, fees and charges for Water Service in effect and being charged or from any increase in the rates, fees and charges for Water Service that are expected to be charged; and
(d) An allowance for Net Water Revenues that are estimated to be derived from customers of the Water System anticipated to be served by the additions, betterments or improvements to the Water System to be financed by the Parity Obligation proposed to be executed together with any additional Supplemental Installment Sale Agreements expected to be executed and entered into during such five (5)-year period;
and provided further, that if estimates of Connection Fees are assumed for inclusion in the foregoing Adjusted Annual Net Water Revenues, such report shall project that in each of the Fiscal Years for which projections are to be made only seventy-five per cent (75%) of the estimated Connection Fees in each of such Fiscal Years shall be treated as Water Revenues during such period.
(2) A Certificate of the City that during the last audited Fiscal Year, Adjusted Annual Net Water Revenues were equal to at least one hundred percent (100%) of Maximum Annual Debt Service calculated for all Outstanding Parity Obligations and all proposed additional Parity Obligations.
(3) A Certificate of the City that the Water Project to be acquired and constructed with the proceeds of such Parity Obligation is technically feasible and the estimated cost of the acquisition and construction thereof is reasonable, and (after giving effect to the completion of all uncompleted Water Projects) the rates, fees and charges estimated to be fixed and prescribed for the Water Service for each Fiscal Year from the Fiscal Year in which such Parity Obligation is executed to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted Water Project are economically feasible and reasonably considered necessary based on projected operations for such period.
(4) At the time of such execution of Parity Obligations, no Event of Default shall have occurred and be continuing.
(5) If required by the terms of such Parity Obligations, a separate reserve has been or will be established therefor and that provisions have been made to fund such reserve.
Notwithstanding the foregoing provisions, there shall be no limitations on the ability of the City to execute any Parity Obligation at any time to refund any outstanding Obligation.
SECTION 14.02. Conditions for the Execution of Subordinate Obligations. The City may at any time execute any Subordinate Obligations payable as provided in Section 2.03; provided that no Event of Default has occurred and is continuing and the provisions of Section 3.01 relating to the conditions for the execution of Parity Obligations are satisfied for the execution of such Subordinate Obligation assuming that the first paragraph of the definition of Coverage Requirement in Section 1.01 is defined as (i) one hundred ten per cent (110%) of the sum of the Adjusted Annual Debt Service plus the Adjusted Subordinate Annual Debt Service for such Fiscal Year or twelve (12) calendar month period and (ii) one hundred per cent (100%) of all obligations of the City payable in such Fiscal Year or twelve (12) calendar month period.
Nothing contained herein shall limit the ability of the City to execute obligations payable from a lien on Net Water Revenues that is subordinate to the lien of Net Water Revenues for both Parity Obligations and Subordinate Obligations contained herein.
SECTION 14.03. Procedure for the Execution of Supplemental Installment Sale Agreements. Before the execution of any Supplemental Installment Sale Agreement (other than the First Supplemental Installment Sale Agreement), there shall first be delivered to the Director of Finance the following documents or money or securities:
(1) An executed counterpart of the Supplemental Installment Sale Agreement;
(2) A Request of the City as to the delivery of such Supplemental Installment Sale Agreement;
(3) An Opinion of Counsel to the effect that the Supplemental Installment Sale Agreement has been duly and lawfully executed and delivered by the City in accordance with the Law and herewith, is in full force and effect and is valid and binding upon the City and enforceable in accordance with its terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, the application of equitable principles, the exercise of judicial discretion in appropriate cases and the limitations on legal remedies against cities in the State);
(4) A Certificate of the City containing such statements as may be reasonably necessary to show compliance with the requirements hereof; and
(5) Such further documents, money and securities as are required by the provisions hereof and the resolution, indenture, contract or other obligation providing for the issuance of the Obligation.
ARTICLE XV

COVENANTS OF THE CITY
SECTION 15.01. Compliance with Contracts. The City will punctually pay the Payments in strict conformity with the terms hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, and will not terminate the Contracts 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 Water Projects or the Water System, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either of them 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, the Trustee or any force majeure, including Acts of God, tempest, storm, earthquake, war, rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, strikes, industrial disputes, lockouts, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities.
SECTION 15.02. Use of Proceeds. The Authority and the City agree that the proceeds of the Supplemental Installment Sale Agreements will be used by the City, as agent for the Authority, to pay the costs of financing or refinancing the acquisition, construction, expansion, reconstruction and rehabilitation of the Water Projects and to pay the incidental costs and expenses related thereto as provided herein.
SECTION 15.03. Against Encumbrances. The City will pay or cause to be paid when due all sums of money that may become due for any labor, services, materials, supplies or equipment furnished, or alleged to have been furnished, to or for the City in, upon, about or relating to the Water System and will keep the Water System free of any and all liens against any portion of the Water System. In the event any such lien attaches to or is filed against any portion of the Water System, the City will cause each such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that if the City desires to contest any such lien it may do so; provided, that if any such lien shall be reduced to final judgment and such judgment or any process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and such stay thereafter expires, the City will forthwith pay or cause to be paid and discharged such judgment. The City will, to the maximum extent permitted by law, indemnify and hold the Authority harmless from, and defend it against, any claim, demand, loss, damage, liability or expense (including attorneys’ fees) as a result of any such lien or claim of lien against any portion of the Water System.
SECTION 15.04. Sale or Other Disposition of Property. The City will only sell, transfer or otherwise dispose of any of the facilities of the Water System or any real or personal property comprising a part of the Water System consistent with one or more of the following limitations:
(1) The City in its discretion may carry out such a sale, transfer or other disposition (each, as used in this section, a “transfer”) if the facilities or property of the Water System transferred are not material to the operation of the Water System, or shall have become unserviceable, inadequate, obsolete or unfit to be used in the operation of the Water System, or are no longer necessary, material or useful to the operation of the Water System; or
(2) The City in its discretion may carry out such a transfer if the aggregate depreciated cost value of the facilities or property of the Water System transferred in any one Fiscal Year comprises no more than ten per cent (10%) of the total assets of the Water System; or
(3) The City in its discretion may carry out such a transfer if the City receives from the transferee an amount equal to the fair market value of the facilities or property of the Water System transferred (as used in this subparagraph, “fair market value” means the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, with a willing buyer and a willing seller each acting prudently and knowledgeably and assuming that the price is not affected by coercion or undue stimulus) and if the proceeds of such transfer are used (i) to promptly prepay, or irrevocably set aside for the prepayment of, first the Parity Payments and, thereafter, the Subordinate Payments, and/or (ii) to provide for the cost of additions, betterments or improvements to the Water System; provided, that before any such transfer is made under this subparagraph, (A) the City shall obtain an Engineer’s Report that upon such transfer and the use of the proceeds thereof as proposed by the City, the remaining facilities or property of the Water System will retain their operational integrity and the estimated Adjusted Annual Net Water Revenues during each of the five (5) Fiscal Years next following the Fiscal Year in which the transfer is to occur will be at least equal to the estimated Coverage Requirement in each of such Fiscal Years, taking into account (w) the estimated reduction in Net Water Revenues resulting from such transfer, (x) the use of the proceeds of such transfer for the prepayment of first, the Parity Payments and thereafter, the Subordinate Payments, (y) the estimated additional Water Revenues from customers anticipated to be served by any additions, betterments or improvements to the Water System financed by the portion of the proceeds received from such transfer, and (z) any other adjustment permitted in the preparation of an Engineer’s Report under Section 3.01(a)(2), or (B) the City shall obtain confirmation from the Rating Agencies to the effect that the ratings then in effect will not be reduced or withdrawn upon such transfer.
SECTION 15.05. Prompt Acquisition and Construction of the Water Projects. The City will take all necessary and appropriate steps to acquire and construct the Water Projects, 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 15.06. Maintenance and Operation of the Water System; Budgets. The City will maintain and preserve the Water System in good repair and working order at all times and in accordance with sound engineering practices and will operate the Water System in an efficient and economical manner and will pay all Maintenance and Operation Costs as they become due and payable. The City will adopt and file with the Authority, not later than October 1 of each year, a budget approved by the Board of Directors setting forth the estimated Water Revenues and Maintenance and Operation Costs for the then current Fiscal Year; provided, that any such budget may be amended at any time during any Fiscal Year and such amended budget shall be filed by the City with the Authority. Upon adoption of its budget, not later than October 1 of each year, the City will file with the Trustee a certificate of the City that such budget has been adopted by the Board of Directors and that said budget provides for the payment of all Maintenance and Operation Costs and all required payments from the Parity Obligation Payment Fund throughout the then-current Fiscal Year.
SECTION 15.07. Compliance with Contracts for Use of the Water System. The City will comply with, keep, observe and perform all agreements, conditions, covenants and terms, express or implied, required to be performed by it contained in all contracts for the use of the Water System and all other contracts affecting or involving the Water System to the extent that the City is a party thereto.
SECTION 15.08. Payment of Claims. The City will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien on the Water Revenues or any part thereof or which might impair the security of the Payments.
SECTION 15.09. Insurance. The City will procure and maintain such insurance relating to the Water System which it shall deem advisable or necessary to protect its interests and the interests of the Authority and the Trustee, which insurance shall afford protection in such amounts and against such risks as are usually covered in the State in connection with sanitation systems comparable to the Water System; provided, that any 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 sanitation systems in the State comparable 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 and the Trustee shall be given thirty (30) days’ written notice of any intended cancellation thereof or reduction of coverage provided thereby.
SECTION 15.10. Accounting Records; Financial Statements and Other Reports.
(1) The City will keep appropriate accounting records in which complete and correct entries shall be made of all transactions relating to the Water System and the Water Revenues and the Maintenance and Operation Costs, which records shall be available for inspection by the Authority and the Trustee at reasonable hours and under reasonable conditions.
(2) The City will prepare and file with the Authority and the Trustee annually within two hundred seventy (270) days after the close of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2008) financial statements of the City for the preceding Fiscal Year prepared in accordance with Generally Accepted Accounting Principles, together with an Accountant’s Report thereon and a special report prepared by the Independent Certified Public Accountant who examined such financial statements stating that nothing came to his attention in connection with such examination that caused him to believe that the City was not in compliance with any of the financial agreements or covenants contained herein.
SECTION 15.11. Protection of Security and Rights of the Authority. The City will preserve and protect the security hereof and the rights of the Authority to the Payments hereunder and will warrant and defend such rights against all claims and demands of all persons.
SECTION 15.12. Payment of Taxes and Compliance with Governmental Regulations. The City will pay and discharge all taxes, assessments and other governmental charges which may hereafter be lawfully imposed upon the Water System or any part thereof when the same shall become due. The City will duly observe and conform with all valid regulations and requirements of any governmental authority relative to the operation of the Water System or any part thereof, but the City shall not be required to comply with any regulations or requirements so long as the validity or application thereof shall be contested in good faith.
SECTION 15.13. Amount of Rates, Fees and Charges. The City will at all times fix, prescribe and collect rates, fees and charges for the Water Service during each Fiscal Year which are reasonably fair and nondiscriminatory and which are estimated to yield Adjusted Annual Net Water Revenues for such Fiscal Year equal to at least the Coverage Requirement for such Fiscal Year. The City may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the rates, fees and charges then in effect unless the Adjusted Annual Net Water Revenues from such reduced rates, fees and charges are estimated to be sufficient to meet the requirements of this section.
SECTION 15.14. Collection of Rates, Fees and Charges. The City will have in effect at all times rules and regulations requiring each consumer or customer located on any premises connected with the Water System to pay the rates, fees and charges applicable to the Water Service to such premises and providing for the billing thereof and for a due date and a delinquency date for each bill. The City will not permit any part of the Water System or any facility thereof to be used or taken advantage of free of charge by any corporation, firm or person, or by any public agency (including the United States of America, the State and any city, county, district, political subdivision, public corporation or agency of any thereof); provided, that the City may without charge use the Water System.
SECTION 15.15. Eminent Domain and Insurance Proceeds. If all or any part of the Water System shall be taken by eminent domain proceedings, or if the City receives any insurance proceeds resulting from a casualty loss to the Water System, the Net Proceeds thereof, at the option of the City, shall be applied either to the prepayment of the Payments or to acquire and construct additions, betterments or improvements to the Water System to replace the condemned or destroyed portion of the Water System.
SECTION 15.16. Separate Utility Systems. The City may create, acquire, construct, finance, own and operate one or more additional systems for sanitation service or other commodity or service, and the revenues of that separate utility system shall not be included in the Water Revenues and may be pledged to the payment of revenue obligations issued to purchase, construct, condemn or otherwise acquire or expand such separate utility system. Neither the Water Revenues nor the Net Water Revenues shall be pledged by the City to the payment of any obligations of a separate utility system except (1) as a Contract Resource Obligation upon compliance with Section 4.17, or (2) with respect to the Net Water Revenues, on a basis subordinate to the lien of the Parity Obligations and Subordinate Obligations on the Net Water Revenues.
SECTION 15.17. Contract Resource Obligations. The City may at any time enter into one or more Contract Resource Obligations for the acquisition, from facilities to be constructed, of sanitation services or other capacity or service relating to the Water System. The City may determine that, and may agree under a Contract Resource Obligation to provide that, all payments under that Contract Resource Obligation (including payments prior to the time that sanitation services or other capacity or service is being provided, or during a suspension or after termination of supply or service) shall be Maintenance and Operation Costs if the following requirements are met at the time such a Contract Resource Obligation is entered into:
(1) No Event of Default as defined in Section 5.01 has occurred and is continuing.
(2) There shall be on file with the City an Engineer’s Report stating that (i) the payments to be made by the City in connection with the Contract Resource Obligation are reasonable for the services or capacity rendered; (ii) the source of any new capacity, and any facilities to be constructed to provide the capacity, are sound from a sanitation or other service planning standpoint, are technically and economically feasible in accordance with prudent utility practice, and are likely to provide capacity or service no later than a date set forth in the Engineer’s Report; and (iii) the Adjusted Annual Net Water Revenues (further adjusted by the Independent Engineer’s estimate of the payments to be made in accordance with the Contract Resource Obligation) for the five (5) Fiscal Years following the year in which the Contract Resource Obligation is incurred, as such Adjusted Annual Net Water Revenues are estimated by the Independent Engineer in accordance with the provisions of and adjustments permitted in Section 3.01(a)(2), will be at least equal to the Coverage Requirement.
Payments required to be made under Contract Resource Obligations shall not be subject to acceleration.
Nothing in this section shall be deemed to prevent the City from entering into other agreements for the acquisition of sanitation or other commodity or service from existing facilities and from treating those payments as Maintenance and Operation Costs; and nothing in this section shall be deemed to prevent the City from entering into other agreements for the acquisition of sanitation or other commodity or service from facilities to be constructed and from agreeing to make payments with respect thereto, such payments constituting a lien and charge on Net Water Revenues subordinate to that of the Contracts.
SECTION 15.18. Additional Covenants. The City may provide additional covenants pursuant to any Supplemental Installment Sale Agreement, including covenants relating to any credit support and/or liquidity support obtained for Obligations; provided, however, that such additional covenants do not materially and adversely affect the right of Owners of outstanding Obligations issued prior to any such Supplemental Installment Sale Agreement.
SECTION 15.19. Further Assurances. The City will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring and confirming unto the Authority of the rights and benefits provided to it herein.
ARTICLE XVI

EVENTS OF DEFAULT AND REMEDIES
SECTION 16.01. Events of Default. If one or more of the following Events of Default shall happen, that is to say –
(1) if default shall be made in the due and punctual payment of any Payment under any Supplemental Installment Sale Agreement or any Parity Obligation when and as the same shall become due and payable;
(2) if default shall be made by the City in the performance of any other of the agreements or covenants contained herein or in any Supplemental Installment Sale Agreement required to be performed by it, and such default shall have continued for a period of sixty (60) days after the City shall have been given notice in writing of such default by the Authority or the Trustee; or
(3) if the City 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 City 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 City or of the whole or any substantial part of its property;
then and in each and every such case during the continuance of such Event of Default specified in clause (1) or (3) above, the Authority shall, upon written approval of the [[Series 2006 Bond Insurer]], and for any other such Event of Default the Authority may, by notice in writing to the [[Series 2006 Bond Insurer]] and the City given not later than three (3) Business Days after it receives notice of an Event of Default or direction to proceed under an Event of Default, declare the entire amount of the unpaid principal amount of the 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; provided, that if at any time after the entire amount of the unpaid principal amount of the 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 money due shall have been obtained or entered the City shall deposit with the Authority a sum sufficient to pay the unpaid principal amount of the Payments due and payable prior to such declaration and the accrued interest thereon, with interest on such overdue installments at the rate or rates applicable to such unpaid principal amounts of the Payments 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 amount of the unpaid Payments 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 City, 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. The payment of principal and interest on the Payments shall not be accelerated upon the declaration of an Event of Default hereunder.
SECTION 16.02. Application of Net Water Revenues Upon Event of Default. All Net Water Revenues upon the date of the declaration of acceleration by the Authority as provided in Section 5.01 and all Net Water Revenues thereafter received shall be applied in the following order –
First, to the payment of the costs and expenses of the Authority, if any, in carrying out the provisions of this article, including reasonable compensation to its agents, accountants and counsel and including any indemnification expenses;
Second, to the payment of the interest then due and payable on the principal amount of the unpaid Parity Payments (except any Termination Payments), and, if the amount available shall not be sufficient to pay in full all such interest then due and payable, then to the payment thereof ratably, according to the amounts due thereon without any discrimination or preference;
Third, to the payment of the unpaid principal amount of the Parity Payments (except any Termination Payments) then due and payable with interest on the overdue principal and interest amounts of the unpaid Parity Payments at the rate or rates of interest then applicable to such Parity Payments if paid in accordance with their terms, and, if the amount available shall not be sufficient to pay in full all the amounts due with respect to the Parity Payments on any date, together with such interest, then to the payment thereof ratably, according to the principal amount due on such date, without any discrimination or preference;
Fourth, to the payment of any other amounts becoming due and payable with respect to Parity Obligations (including any letter of credit and remarketing fees);
Fifth, to the payment of the Subordinate Payments (except any Termination Payments) then due and payable and any other amounts becoming due and payable with respect to Subordinate Obligations (including any letter of credit and remarketing fees) and any Termination Payments on all Parity Payment Agreements; and
Sixth, to the payment of all other amounts due and payable by the City, including, but not limited to the payment of any Termination Payments on all Subordinate Payment Agreements.
SECTION 16.03. Other Remedies. The Authority shall have the right –
(1) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the City or any director, officer or employee thereof, and to compel the City or any such director, officer or employee to perform and carry out its or his duties under the agreements and covenants required to be performed by it or him contained herein;
(2) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Authority; or
(3) by suit in equity upon the happening of an Event of Default to require the City and its directors, officers and employees to account as the trustee of an express trust.
SECTION 16.04. Non-Waiver. Nothing in this article or in any other provision hereof shall affect or impair the obligation of the City, which is absolute and unconditional, to pay from Net Water Revenues, first the Parity Payments and second, the Subordinate Payments to the Authority at the respective due dates or upon prepayment, or shall affect or impair the right of the Authority, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein.
A waiver of any default or breach of duty or contract by the Authority shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Authority to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Authority by or any applicable law or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Authority.
If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Authority, the City and the Authority shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken.
SECTION 16.05. 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 any applicable law.
ARTICLE XVII

DISCHARGE OF OBLIGATIONS
SECTION 17.01. Discharge of Obligations.
(1) If the City shall pay or cause to be paid all the Payments at the times and in the manner provided herein, the right, title and interest of the Authority herein and the obligations of the City hereunder and under all Supplemental Installment Sale Agreements shall cease, terminate, become void and be completely discharged and satisfied.
(2) All or any portion of the Payments shall, prior to their payment dates or dates of prepayment, be deemed to have been paid within the meaning of and with the effect expressed in subsection (a) of this section if the City makes payment of such Payment and the prepayment premium, if applicable, in the manner provided in the applicable Issuing Document, or if not so provided therein, in the manner provided in Section 6.01(c).
(3) All or any portion of the Payments shall, prior to their payment dates or dates of prepayment, be deemed to have been paid within the meaning of and with the effect expressed in subsection (a) of this section if (i) notice is provided by the City to the Authority, (ii) there shall have been deposited with the Authority either money in an amount which shall be sufficient, or Defeasance Securities, the interest on and principal of which when paid will provide money which, together with money, if any, deposited with the Authority, shall be sufficient (as evidenced by a report of an Independent Certified Public Accountant or other party satisfactory to the Trustee regarding such sufficiency) to pay when due the principal installments of such Payments or such portions thereof on and prior to their payment dates or their dates of prepayment, as the case may be, and the prepayment premiums, if any, applicable thereto and (iii) all fees and expenses with respect to the Obligations shall have been paid.
(4) After the payment of all Payments and prepayment premiums, if any, as provided in this section, and the payment in full of all fees and expenses of the Authority, the Authority, upon receipt of a Request of the City, shall cause an accounting for such period or periods as may be requested by the City to be prepared and filed with the City and the Authority and shall execute and deliver to the City and the Authority all such instruments as may be necessary or desirable to evidence such total discharge and satisfaction hereof, and the Authority shall pay over and deliver to the City, as an overpayment of Payments, all such money or investments held by it pursuant hereto other than such money and such investments as are required for the payment or prepayment of the Payments, which money and investments shall continue to be held in trust for the payment of the Payments.
ARTICLE XVIII

MISCELLANEOUS
SECTION 18.01. Liability of City Limited to Net Water Revenues. Notwithstanding anything contained herein, the City shall not be required to advance any money derived from any source of income other than the Net Water Revenues for the payment of first, the Parity Payments and second, the Subordinate Payments or for the performance of any agreements or covenants required to be performed by it contained herein; provided, that the City may advance money for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the City for such purpose.
The obligation of the City to make first, the Parity Payments and second, the Subordinate Payments is a special obligation of the City payable solely from the Net Water Revenues as provided herein, and such obligations do not constitute a debt of the City or of the State or of any political subdivision thereof within the meaning of any constitutional or statutory debt limitation or restriction.
SECTION 18.02. Benefits of the Master Installment Sale Agreement Limited to Parties. Nothing contained herein, expressed or implied, is intended to give to any person other than the Authority or the City 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 Authority or the City shall be for the sole and exclusive benefit of the other party; provided, that with respect to enforcing the Authority’s or the Trustee’s rights hereunder, the Trustee shall be a third party beneficiary hereof and shall have the right to enforce the obligations of the City hereunder and pursue the remedies granted to the Authority hereunder.
SECTION 18.03. Amendments to Master Installment Sale Agreement. The City and the Authority shall not supplement, amend, modify or terminate any of the terms of the Master Installment Sale Agreement, or consent to any such supplement, amendment, modification or termination, without the prior written consent of the Trustee, which such consent shall be given only if (a) such supplement, amendment, modification or termination will not materially adversely affect the interests of the holders of Obligations or result in any material impairment of the security hereby given for the payment of the Obligations, or (b) the Trustee first obtains the written consent of a majority in aggregate principal amount of the Parity Obligations then Outstanding and of all Bond Insurers acting unanimously to such supplement, amendment, modification or termination, and, if the supplement, amendment, modification or termination affects the definition of the term “Coverage Requirement” or any of the other defined terms used in such definition or Sections 2.04, 3.01, 4.04 or 4.13, the Trustee shall also first obtain the written consent of a majority in aggregate principal amount of Subordinate Obligations then Outstanding and of all Bond Insurers acting unanimously; provided, that any supplement that complies with Sections 3.01, 3.02 and 3.03 of the Master Installment Sale Agreement shall not be deemed to materially adversely affect the interests of the holders of Obligations or result in any material impairment of the security hereby given for the payment of the Obligations; and provided further, that no such supplement, amendment, modification or termination shall reduce the amount of Payments to be made to the Authority or the Trustee by the City pursuant to the Master Installment Sale Agreement, or extend the time for making such Payments, or permit the creation of any lien prior to or on a parity with the lien created by the Master Installment Sale Agreement on the Payments without the written consent of all of the holders of all Obligations then Outstanding and of all Bond Insurers acting unanimously.
SECTION 18.04. Successor Is Deemed Included in all References to Predecessor. Whenever either the Authority or the City is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Authority or the City, and all agreements and covenants required hereby to be performed by or on behalf of the Authority or the City shall bind and inure to the benefit of the respective successors thereof whether so expressed or not.
SECTION 18.05. Waiver of Personal Liability. No director, officer or employee of the City shall be individually or personally liable for the payment of the Payments, but nothing contained herein shall relieve any director, officer or employee of the City from the performance of any official duty provided by any applicable provisions of law or hereby.
SECTION 18.06. 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,” “Exhibits” and other subdivisions or clauses are to the corresponding articles, sections, exhibits, subdivisions or clauses hereof; and the words “hereby,” “herein,” “hereof,” “hereto,” “herewith” and other words of similar import refer to the Master Installment Sale Agreement as a whole and not to any particular article, section, exhibit, subdivision or clause hereof.
SECTION 18.07. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the Authority or the City shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants or portions thereof and shall in no way affect the validity hereof. The Authority and the City hereby declare that they would have executed the Master Installment Sale 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 18.08. Net Contract. The Contracts shall be deemed and construed to be net contracts, and the City shall pay absolutely net during the term hereof the Payments and all other payments required hereunder, free of any deductions and without abatement, diminution or set-off whatsoever.
SECTION 18.09. California Law. The Contracts shall be construed and governed in accordance with the laws of the State.
SECTION 18.10. Indemnification. The City shall, to the full extent then permitted by law, indemnify, protect, hold harmless, save and keep harmless the Authority and its officers and employees and the Trustee and its directors, officers and employees from and against any and all liability, obligations, losses, claims and damages whatsoever, regardless of the cause thereof, and expenses in connection therewith, including, without limitation, counsel fees and expenses, penalties and interest arising out of or as the result of (i) the entering into of the Contracts, the acquisition or construction and use of any of the Water Projects and each portion thereof or any accident in connection with the operation, use, condition or possession of any of the Water Projects or any portion thereof resulting in damage to property or injury to or death to any person including, without limitation, any claim alleging latent and other defects, whether or not discoverable by the City, the Authority or the Trustee, (ii) any claim for patent, trademark or copyright infringement, (iii) any claim arising out of strict liability in tort, (iv) the Trustee’s acceptance or administration of the trust under any Issuing Document, or the exercise or performance of any of its powers or duties thereunder or hereunder; or (v) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading in any official statement or other offering circular utilized in connection with the sale of any bonds or other obligations issued under any Issuing Document. The indemnification arising under this section shall continue in full force and effect notwithstanding the full payment of all obligations hereunder or the termination hereof for any reason. The City agrees not to withhold or abate any portion of the payments required pursuant hereto by reason of any defects, malfunctions, breakdowns or infirmities of any of the Water Projects. The City, the Authority and the Trustee mutually agree to promptly give notice to each other of any claim or liability hereby indemnified against following either’s learning thereof. The rights to indemnification from the City hereunder shall survive the termination hereof or the resignation or removal of the Trustee.
SECTION 18.11. Funds. Any fund required to be established and maintained herein by the Director of Finance may be established and maintained in the accounting records of the Director of Finance either as an account or a fund, and may, for the purpose of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund; but all such records with respect to any such fund shall at all times be maintained in accordance with sound accounting practice.
SECTION 18.12. 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 City:

City of Brentwood
150 City Park Way
Brentwood, CA 94513
Attention: Director of Finance and Information Systems

If to the Authority:

Brentwood Infrastructure Financing Authority
150 City Park Way
Brentwood, CA 94513
Attention: Treasurer/Controller

SECTION 18.13. Assignment. The Master Installment Sale Agreement and/or any Supplemental Installment Sale Agreements and any rights hereunder and thereunder may be assigned by the Authority, as a whole or in part, without the necessity of obtaining the prior consent of the City. The assignment of the Master Installment Sale Agreement and/or any Supplemental Installment Sale Agreements or rights hereunder or under a Supplemental Contact to the Trustee is solely in its capacity as Trustee and the duties, powers and liabilities of the Trustee in acting hereunder or under a Supplemental Installment Sale Agreement shall be subject to the provisions of the Issuing Document.
SECTION 18.14. Effective Date. The Master Installment Sale Agreement shall become effective upon its execution and delivery, and shall terminate when the Payments provided herein shall have been fully paid (or provision for the payment thereof shall have been made pursuant to Article VI).
SECTION 18.15. Execution in Counterparts. The Master Installment Sale 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.

IN WITNESS WHEREOF, the parties hereto have executed and attested the Master Installment Sale Agreement by their officers thereunto duly authorized as of the day and year first written above.
CITY OF BRENTWOOD



By
Treasurer, Director of Finance
& Information Systems

Attest:




City Clerk


BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY



By
Treasurer/Controller

Attest:




Secretary

EXHIBIT A

FORM OF REQUEST OF THE CITY
FOR IMPROVEMENT FUND REQUISITION

REQUISITION NO. __
PAYMENT FROM THE
CITY OF BRENTWOOD
WATER IMPROVEMENT FUND

The undersigned authorized representative of the City of Brentwood (the “City”) hereby requests the Director of Finance (the “Director”) under that certain Master Installment Sale Agreement, dated as of October 1, 2008 (the “Sale Agreement”), between the Brentwood Infrastructure Financing Authority and the City, pursuant to Section 2.04 of the Sale Agreement, to pay to the persons or entities listed on Schedule I attached hereto, the amounts shown for the purposes indicated from the indicated and related Water Project Account in the Improvement Fund.
The City hereby certifies that obligations in the stated amounts have been incurred by the City and are presently due and payable and each item is a proper charge against the related Water Project Account in the Improvement Fund and has not been the subject of a previous Request of the City.
The City hereby certifies that the costs paid or to be paid by this Requisition relate to the [City To Enter Series Designation of Related Water Project]_______ Water Project.
Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Sale Agreement.

Dated: ___________, _____.


CITY OF BRENTWOOD



By:
Authorized Representative

Schedule I

(IMPROVEMENT FUND REQUISITION)


ITEM NO. RELATED WATER
PROJECT ACCOUNT
PAYEE
(NAME/ADDRESS)

AMOUNT

PURPOSE




OH&S Draft
8/27/08

______________________________________________________________________________
______________________________________________________________________________




FIRST SUPPLEMENTAL INSTALLMENT SALE AGREEMENT
by and between the
CITY OF BRENTWOOD
and the
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY

for the

CITY OF BRENTWOOD WATER PROJECT






Dated as of October 1, 2008

Relating to
$[_______]
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY
WATER REVENUE BONDS,
SERIES 2008




______________________________________________________________________________
______________________________________________________________________________

ARTICLE I
DEFINITIONS
Section 1.01. Definitions 2
ARTICLE II
TERMS OF THE FIRST SUPPLEMENTAL INSTALLMENT SALE AGREEMENT
Section 2.01. Authority for the First Supplemental Installment Sale Agreement 4
Section 2.02. Purpose of the First Supplemental Installment Sale Agreement 4
Section 2.03. Payment of 2008 Payments 5
Section 2.04. Prepayment of 2008 Payments 6
Section 2.05. Compliance with Master Installment Sale Agreement 6
Section 2.06. Tax Covenants 6
Section 2.07. Continuing Disclosure 7
Section 2.08. First Supplemental Installment Sale Agreement Subject to the Master Installment Sale Agreement 7
Section 2.09. Reserve Account 7


FIRST SUPPLEMENTAL INSTALLMENT SALE AGREEMENT
This First Supplemental Installment Sale Agreement (the “First Supplemental Installment Sale Agreement”), dated as of October 1, 2008, by and between City of Brentwood, a municipal Authority duly organized and existing under and by virtue of the laws of the State of California (the “City”), and the Brentwood Infrastructure Financing Authority, a joint exercise of powers entity duly organized and existing under and by virtue of the laws of the State of California (the “Authority”);
W I T N E S S E T H:
WHEREAS, the City and the Authority have executed and entered into a Master Installment Sale Agreement (the “Master Installment Sale Agreement”) as of October 1, 2008, for the acquisition and construction from time to time of additions, betterments and improvements to the Water System (as that term is defined in the Master Installment Sale Agreement, and herein the “Water System”) of the City;
WHEREAS, the Authority has agreed to assist the City by acquiring and constructing those certain improvements for the water system of the City described herein (the “2008 Water Project”) and by selling the 2008 Water Project to the City as provided herein and by refunding the unpaid installment payments due by the City for the purchase of those certain improvements for the water system of the City acquired under that certain 1996 Installment Sale Agreement (the “1996 Installment Sale Agreement”) executed and entered into as of December 1, 1996, by and between the City and the Authority, as provided herein; and
WHEREAS, the City and the Authority have determined that the acquisition by the City from the Authority of the 2008 Water Project and the refunding the unpaid installment payments due by the City for the purchase of those certain improvements for the water system of the City acquired under that certain 1996 Installment Sale Agreement is necessary and proper for the purposes of the City;
WHEREAS, the Authority has determined to design, acquire and construct the 2008 Water Project for, and sell the 2008 Water Project to, the City;
WHEREAS, the City has determined to make payments to the Authority for the repayment of the costs of the acquisition of the 2008 Water Project and the refunding the unpaid installment payments due by the City for the purchase of those certain improvements for the water system of the City acquired under that certain 1996 Installment Sale Agreement and the incidental costs and expenses related thereto paid by the City;
WHEREAS, in order to implement the foregoing, the City and the Authority executed and entered into the 2008 Installment Sale Agreement;
WHEREAS, the City has determined that significant public benefits will accrue from the financing of the 2008 Water Project and the refunding the unpaid installment payments due by the City for the purchase of those certain improvements for the water system of the City acquired under that certain 1996 Installment Sale Agreement, all in the manner described herein, and the Authority is willing to assist the City in effecting such financing; and
WHEREAS, the City and the Authority have determined that 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 entering into of the First Supplemental Installment Sale 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 the First Supplemental Installment Sale Agreement;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:
ARTICLE XIX

DEFINITIONS
SECTION 19.01.Definitions. Unless the context otherwise requires, the terms defined in Section 1.01 of the Master Installment Sale Agreement and in this section shall for all purposes hereof and of any certificate, opinion, report, request 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:
Continuing Disclosure Certificate
“Continuing Disclosure Certificate” means that certain Continuing Disclosure Certificate, executed by the City and dated the date of the original issuance of the Series 2008 Bonds as originally executed and as it may be amended from time to time in accordance with the terms thereof.
Escrow Agent
“Escrow Agent” means [Escrow Agent], as Escrow Agent under the Escrow Agreement.
Escrow Agreement
“Escrow Agreement” means that certain Escrow Agreement executed and entered into as of _________ 1, 2008, by and between the Authority and the Escrow Agent relating to the payment of the interest on and the payment and prepayment of the principal of a portion of the outstanding Series 1996 Bonds as provided therein.
First Supplemental Installment Sale Agreement
“First Supplemental Installment Sale Agreement” means this First Supplemental Installment Sale Agreement executed and entered into as of October 1, 2008, by and between the City and the Authority supplemental to the Master Installment Sale Agreement.
1996 Installment Sale Agreement
“1996 Installment Sale Agreement” means that certain 1996 Waster Installment Sale Agreement executed and entered into as of December 1, 1996, by and between the City and the Authority, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance therewith.
1996 Installment Sale Payments
“1996 Installment Sale Payments” means the Installment Sale Payments scheduled to be paid by the City under and pursuant to the 1996 Installment Sale Agreement.
Master Installment Sale Agreement
“Master Installment Sale Agreement” means that certain Master Installment Sale Agreement executed and entered into as of October 1, 2008, by and between the City and the Authority, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance with the terms thereof.
2008 Payments
“2008 Payments” means the Payments scheduled to be paid by the City under Section 2.03.
Purchase Price
“Purchase Price” means the principal amount plus the interest thereon owed by the City to the Authority under the conditions and terms hereof as provided in Section 2.02.
Refunding Price
“Refunding Price” means the portion of the principal amount of the 2008 Payments plus the interest thereon owed by the City to the Authority for the refunding a portion of the 1996 Installment Sale Payments under the terms hereof pursuant to Section 2.02.
Reserve Account
“Reserve Account” means that Account within the Reserve Fund held under the Trust Agreement relating to this First Supplemental Installment Sale Agreement.
Reserve Account Requirement
“Reserve Account Requirement” has the meaning assigned in the Trust Agreement.
Series 1996 Bonds
“Series 1996 Bonds” means the Brentwood Infrastructure Financing Authority Water and Sewer Revenue Bonds, 1996 Series A.
Series 2008 Bonds
“Series 2008 Bonds” means the Brentwood Infrastructure Financing Authority Water Revenue Bonds, Series 2008 issued and outstanding under the Trust Agreement.
1996 Trust Agreement
“1996 Trust Agreement” means that certain Trust Agreement executed and entered into as of December 1, 1996, by and among First Trust of California, National Association, as original Trustee thereunder and the Authority relating the Series 1996 Bonds, as originally executed and entered into and as it may from time to time be amended or supplemented in accordance with its terms.
Trust Agreement
“Trust Agreement” means that certain Trust Agreement executed and entered into as of October 1, 2008, by and between the Authority and the Trustee.
Trustee
“Trustee” means U.S. Bank National Association, or any other banking Authority that may at any time be substituted in its place as provided in the Trust Agreement.
1996 Water Project

“1996 Water Project” means those improvements to the Water System acquired by the City pursuant to the 1996 Installment Sale Agreement.
2008 Water Project
“2008 Water Project” means those certain additions, betterments, extensions and improvements to the Water System which may include, but are not limited to, the installation or replacement of certain water mains, the replacement of certain water meters and upgrades to various undersized water mains constituting a “Water Project” under the Master Installment Sale Agreement, together with such additions thereto or substitutions therefor or deletions therefrom as shall be specified by the City to the Authority in a Certificate of the City stating that such additions and/or substitutions henceforth shall constitute a part of the 2008 Water Project and/or that such deletions henceforth shall not constitute a part of the 2008 Water Project.
2008 Water Project Account
“2008 Water Project Account” means the account by that name within the Improvement Fund established under Section 2.10.
ARTICLE XX

TERMS OF THE FIRST SUPPLEMENTAL INSTALLMENT SALE AGREEMENT
SECTION 20.01.Authority for the First Supplemental Installment Sale Agreement. The City has reviewed all proceedings heretofore taken relative to the authorization of the First Supplemental Installment Sale Agreement and has found, as a result of such review, and hereby finds and determines that all acts, conditions and things required by law to exist, happen or be performed precedent to and in connection with the execution and entering into hereof do exist, have happened and have been performed in due time, form and manner as required by law, and the City is now duly authorized, pursuant to each and every requirement of law and the Master Installment Sale Agreement, to execute and enter into the First Supplemental Installment Sale Agreement in the manner and form provided herein for the financing of the 2008 Water Project.
SECTION 20.02.Purpose of the First Supplemental Installment Sale Agreement.
(1) The purposes of this First Supplement Installment Sale Agreement are to provide for the City’s purchase from the Authority of the 2008 Water Project and the refunding the unpaid 1996 Installment Sale Payments.
(2) In consideration of the obligation of the City to pay the Purchase Price as provided in Section 2.02 hereof, the Authority hereby sells, assigns and transfers to the City, and the City hereby purchases from the Authority, all of the Authority’s right, title and interest in the 2008 Water Project. Immediately upon completion of each separate component of the 2008 Water Project, all right, title and interest in and to each such completed component of the 2008 Water Project shall vest in the City without any further action by the City or the Authority.
(3) The City agreed under the terms of the 1996 Installment Sale Agreement to acquire the 1996 Water Project from the Authority, and the Authority agreed under the terms of the 1996 Installment Sale Agreement to sell the 1996 Water Project to the City, which agreements shall remain in full force and effect, and the Authority hereby agrees to cause the Trustee to deliver to the Escrow Agent so much of the proceeds of the sale of the Series 2008 Bonds as may be necessary for the payment and prepayment of the principal components of the unpaid 1996 Installment Sale Payments, together with the interest components thereon, as provided in the Escrow Agreement, and in consideration thereof the City agrees to pay to the Authority the Refunding Price as provided herein.
(4) The Authority hereby agrees to design, acquire and construct the 2008 Water Project for the City. In order to implement this provision, the Authority hereby appoints the City as its agent for the purpose of such design, acquisition and construction, and the City hereby agrees to enter into such engineering, design and construction contracts and purchase orders as may be necessary, as agent for the Authority, to provide for the complete design, acquisition and construction of the 2008 Water Project. The City hereby agrees that as such agent it will cause the acquisition and construction of the 2008 Water Project to be diligently completed after the deposit of funds in the 2008 Water Project Account for such purpose pursuant to Section 2.11 of the Trust Agreement.
(5) As consideration for the sale, assignment and transfer by the Authority to the City of all of the Authority’s right, title and interest in the 2008 Water Project pursuant to Section 2.02, the City agrees to pay to the Authority the Purchase Price. The Purchase Price and Refunding Price to be paid by the City to the Authority hereunder is the sum of the principal amount of the City’s obligation hereunder plus the interest to accrue on the unpaid balance of such principal amount from the date hereof over the term hereof, subject to prepayment as provided in Section 2.04.
(6) The principal amount of the Purchase Price and the Refunding Price to be paid by the City to the Authority hereunder is ____________________________ dollars ($__________).
(7) The interest to accrue on the unpaid balance of the principal amount of the Purchase Price and the Refunding Price shall be paid by the City as and shall constitute interest paid on the principal amount of the City’s Purchase Price and Refunding Price hereunder. Said interest shall accrue from ________, 2008, on the principal component of each 2008 Payment at the following rates:
Principal Component
Payable
([July] 1)

Principal Amount
Interest Rate
(per annum)

































SECTION 20.03.Payment of 2008 Payments. The City shall, subject to any rights of prepayment provided in Section 2.04, pay the Authority for the Purchase Price and the Refunding Price the sum of ___________________________ dollars ($__________), without offset or deduction of any kind, by paying the principal installments of the 2008 Payments annually in the amounts and on [July] 1 in each of the years and in accordance with Section 2.02(d) hereof, together with the interest installments of the 2008 Payments (which interest installments shall be paid semi-annually on each [January] 1 and [July] 1 and shall constitute interest paid on the principal amount of the City’s obligation to make the 2008 Payments to the Authority hereunder) and any amounts due to make up any deficiency in the Reserve Account as provided in Section 2.09 hereof.
The obligation of the City hereunder shall constitute a “Parity Obligation” under the Master Installment Sale Agreement.
The obligation of the City to make the 2008 Payments to the Authority hereunder is, subject to Section 7.01 of the Master Installment Sale Agreement, absolute and unconditional, and until such time as the 2008 Payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to Article VI of the Master Installment Sale Agreement), the City shall not discontinue or suspend any 2008 Payment required to be paid 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, curtailed or terminated in whole or in part, and such 2008 Payments shall not be subject to reduction whether by offset, abatement or otherwise and shall not be conditional upon the performance or non-performance by any party to any agreement for any cause whatsoever.
SECTION 20.04.Prepayment of 2008 Payments. The 2008 Payments due on [July] 1, 2007 through and including [July] 1, 20__, are not subject to prepayment. The City may prepay from any source of available funds on any date on or after __________ 1, 20__, all or any part of the principal amount of the unpaid 2008 Payments becoming due and payable on or after [July] 1, 201__, in such order of prepayment as the City may determine, at a prepayment price equal to the sum of the principal amount prepaid, plus accrued interest to the date of prepayment, without premium.
Before making any prepayment pursuant to this section, the City shall give written notice to the Authority describing such event and specifying the date on which the prepayment will be paid, which date shall be not less than thirty (30) nor more than sixty (60) days following the date such notice is given; provided, that notwithstanding any such prepayment, the City shall not be relieved of its obligations hereunder, including specifically its obligations under this article, until all the 2008 Payments shall have been fully paid (or provision for payment thereof shall have been pursuant to Article VI of the Master Installment Sale Agreement).
SECTION 20.05.Compliance with Master Installment Sale Agreement. The City shall pay the 2008 Payments and observe and perform all of the agreements, conditions, covenants and terms contained in the Master Installment Sale Agreement in accordance with the provisions of the Master Installment Sale Agreement.
SECTION 20.06.Tax Covenants. The City agrees and covenants that it will at all times do and perform all acts and things permitted by law and the First Supplemental Installment Sale Agreement and the Trust Agreement which are necessary in order to assure that interest paid on the Series 2008 Bonds (or any of them) will be excluded from gross income for federal income tax purposes, and that it will take no action that would result in such interest not being excluded from gross income for federal income tax purposes. Without limiting the generality of the foregoing, the City agrees and covenants to comply with the provisions of the Tax Certificate related to the Series 2008 Bonds which are incorporated herein. This covenant shall survive payment in full or defeasance of the Series 2008 Bonds.
SECTION 20.07.Continuing Disclosure. The City agrees and covenants that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of the First Supplemental Installment Sale Agreement, failure of the City to comply with the Continuing Disclosure Certificate shall not be considered an Event of Default under the Master Installment Sale Agreement or the Trust Agreement; provided that the Trustee may (and, at the request of any Participating Underwriter (as defined in the Continuing Disclosure Certificate) or the Holders of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Series 2008 Bonds and upon being provided with indemnification reasonably acceptable to it, shall) or any Holder or Beneficial Owner (as defined in the Continuing Disclosure Certificate) may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this section.
SECTION 20.08.First Supplemental Installment Sale Agreement Subject to the Master Installment Sale Agreement. Except as herein otherwise expressly provided, every condition and term contained in the Master Installment Sale Agreement shall apply hereto with the same force and effect as if the same were herein set forth at length, with such omissions, variations and modifications thereof as may be appropriate to make the same conform hereto.
SECTION 20.09.Reserve Account. Pursuant to Section 2.03(B)(3) of the Master Installment Sale Agreement, after making the deposits as set forth in Section 2.03(B)(2) of the Master Installment Sale Agreement, on or before the fifth day before the last Business Day of each month, the City shall, from the remaining moneys in the Water Revenue Fund, thereafter, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the Trustee as provided in Section 4.03 of the Trust Agreement for deposit in the Revenue Fund for application to the Reserve Account in accordance with the Trust Agreement and to the applicable trustee for such other reserve accounts, if any, as may have been established in connection with Parity Obligations that sum, if any, necessary to restore the Reserve Account to an amount equal to the Reserve Account Requirement and otherwise replenish the Reserve Account for any withdrawals (including draws upon the Reserve Policy or any credit facility) to pay the 2008 Payments due hereunder and necessary to restore such other reserve accounts to an amount equal to the amount required to be maintained therein; provided that payments to restore the Reserve Account after a withdrawal may be made in monthly installments equal to 1/12 of the aggregate amount needed to restore the Reserve Account to the Reserve Account Requirement as of the date of the withdrawal. The City’s obligation to replenish the Reserve Account shall be limited to draws on the Reserve Account relating to the Water System. To the extent that draws on the Reserve Account are from a credit facility as permitted under the definition of Reserve Account Requirement in the Trust Agreement, transfers hereunder to restore the Reserve Account shall be made to reimburse the provider of such credit facility.
In lieu of making the Reserve Account Requirement above, or in replacement of moneys then on deposit in the Reserve Account, the City may also deliver to the Trustee a Financial Guaranty securing an amount, together with moneys, Permitted Investments or letters of credit on deposit in the Reserve Account, no less than the Reserve Account Requirement. Prepayment of any draw under any such insurance policy, and any expenses and accrued interest related to such draw (collectively the “Policy Costs”) shall commence in the first month following each such draw, and shall be paid at the time specified above in an amount not less than one-twelfth (1/12th) of the aggregate of the Policy Costs related to such draw. If and to the extent that cash has also been deposited in the Reserve Account, all such cash shall be used (including any investments purchased with such cash), which shall be liquidated and the proceeds thereof applied as required hereunder) prior to any drawing under the insurance policy, and repayment of any Policy Costs shall be made prior to any replenishment of any such cash amounts. If the City shall fail to repay any Policy Costs in accordance herewith, the insurance company issuing such insurance policy shall be entitled to exercise any and all remedies available at law or hereunder, other than (i) an acceleration of the interest on or principal of the Series 2008 Bonds as provided for in Section 8.01; or (ii) any other remedy which would adversely affect Series 2008 Holders. In the event that such insurance policy for any reason lapses or expires, the City shall immediately implement the actions described above or make the required deposits to the Reserve Account.
Notwithstanding anything herein to the contrary, at any time one or more Financial Guaranties are on deposit in the Reserve Account, the Trustee shall:
(1) provide the issuer of each Financial Guaranty notice in accordance with the terms of such Financial Guaranty of any draw on such Financial Guaranty at least three days prior to the Interest Payment Date, on which the proceeds of such draw are required;
(2) withdraw and use all cash on deposit in the Reserve Account prior to using and withdrawing any amounts derived from payments under any Financial Guaranty;
(3) draw on all Financial Guaranties on a pro rata basis based on the draw limit of each such Financial Guaranty, if there is more than one Financial Guaranty on deposit in the Reserve Fund; and
(4) maintain adequate records, verified with the issuer of the applicable Financial Guaranty, as to the amount available to be drawn at any given time under each Financial Guaranty and as to the amounts paid and owing to the issuer of such Financial Guaranty under the terms of such Financial Guaranty.


IN WITNESS WHEREOF, the parties hereto have executed and entered into the First Supplemental Installment Sale Agreement by their officers thereunto duly authorized as of the day and year first written above.
CITY OF BRENTWOOD


By
Treasurer, Director of Finance
& Information Systems
Attest:



City Clerk


BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY


By
Treasurer/Controller

Attest:



Secretary

ACCEPTANCE OF APPOINTMENT
The undersigned hereby accepts the responsibilities imposed on it herein.



Treasurer, Director of Finance & Information
Systems of the City of Brentwood



$__________
Brentwood Infrastructure Financing Authority
Water Revenue Bonds,
Series 2008


BOND PURCHASE CONTRACT

_________, 2008




Brentwood Infrastructure Financing Authority
150 City Park Way
Brentwood, CA 94513

City of Brentwood
150 City Park Way
Brentwood, CA 94513


Ladies and Gentlemen:


RBC Capital Markets Corporation (the “Underwriter”) offers to enter into this Bond Purchase Contract (this “Purchase Contract”) with the Brentwood Infrastructure Financing Authority (the “Authority”) and the City of Brentwood (the “City”). This offer is made subject to the Authority’s and the City's acceptance by execution of this Purchase Contract and delivery of the same to the Underwriter on or before 11:59 p.m. on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the Authority and the City at any time prior to such acceptance. Upon the Authority’s and the City's acceptance hereof, the Purchase Contract will be binding upon the Authority, the City and the Underwriter.

Capitalized terms used in this Purchase Contract and not otherwise defined herein shall have the respective meanings set forth for such terms in the Trust Agreement (defined below).

Section 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations set forth in this Purchase Contract, the Underwriter agrees to purchase from the Authority, and the Authority agrees to sell and deliver to the Underwriter, all (but not less than all) of the bonds captioned above (the “Bonds”) at a purchase price of $[__________] (being an amount equal to the principal amount of the Bonds (__________), [plus an original issue premium of $[_______], less an underwriter’s discount of $[__________.] The obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be conditioned on the sale and delivery by the Authority to the Underwriter at Closing of the entire $________ principal amount of the Bonds authorized by the Trust Agreement. The Underwriter is not acting as a fiduciary of the Authority or the City, but rather is acting solely in its capacity as Underwriter for its own account.

Section 2. Bond Terms; Authorizing Instruments; Purposes of the Bonds. (a) The Bonds shall be dated their date of delivery and shall mature and bear interest as shown on Exhibit A attached hereto. The Bonds shall be as described in, and shall be issued and secured under, a Master Trust Agreement, dated as of October 1, 2008 (the “Master Trust Agreement”), by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by a First Supplemental Trust Agreement, dated as of October 1, 2008 (the “First Supplemental Trust Agreement” and, together with the Master Trust Agreement, the “Trust Agreement”). The Bonds are payable and subject to prepayment as provided in the Trust Agreement and as described in the Official Statement. The Bonds are payable from and secured by the Authority’s pledge of Revenues under the Trust Agreement, consisting generally of all payments required to be paid by the City on any date under the Master Installment Sale Agreement dated as of October 1, 2008, between the City and the Authority (the “Master Installment Sale Agreement”) and the First Supplemental Installment Sale Agreement dated as of October 1, 2008, between the City and the Authority (the “First Supplemental Installment Sale Agreement” and, together with the Master Installment Sale Agreement, the “Installment Sale Agreement”).

(b) The proceeds of the sale of the Bonds will be used to (i) finance and refinance various capital improvements to the City’s Water System (ii) refund a portion of the Authority’s Water and Sewer Revenue Bonds, 1996 Series A, (iii) fund the Reserve Requirement, and (vi) pay costs of issuance incurred in connection with the issuance, sale and delivery of the Bonds.

Section 3. Public Offering. The Underwriter agrees to make an initial bona fide public offering of all of the Bonds, at not in excess of the initial public offering yields or prices set forth on Exhibit A attached hereto. Following the initial public offering of the Bonds, the offering prices may be changed from time to time by the Underwriter.

Section 4. Official Statement; Continuing Disclosure. (a) The Authority and the City have delivered to the Underwriter the Preliminary Official Statement dated September [__], 2008 (the “Preliminary Official Statement”) and will deliver to the Underwriter the final Official Statement dated the date of this Purchase Contract (as amended and supplemented from time to time pursuant to Section 5(i) of this Purchase Contract, the “Official Statement”).

(b) The Authority and the City hereby authorize the use of the Official Statement and the information contained therein by the Underwriter in connection with the public offering and the sale of the Bonds. The Authority and the City consent to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Bonds. The Underwriter hereby agrees that they will not send any confirmation requesting payment for the purchase of any Bonds unless the confirmation is accompanied by or preceded by the delivery of a copy of the Official Statement. The Underwriter agrees to: (1) provide the Authority and the City with final pricing information on the Bonds on a timely basis prior to the Closing and (2) take any and all other actions necessary to comply with applicable Securities and Exchange Commission rules and MSRB rules governing the offering, sale and delivery of the Bonds to ultimate purchasers.

(c) In connection with issuance of the Bonds, and in order to assist the Underwriter with complying with the provisions of Securities and Exchange Commission Rule 15c2-12 (“Rule 15c2-12”), the City will execute a continuing disclosure certificate countersigned by U.S. National Association, as dissemination agent (the “Continuing Disclosure Certificate”), under which the City, on behalf of itself and the Authority, will undertake to provide certain financial and operating data as required by Rule 15c2-12. The form of the Continuing Disclosure Certificate will be attached as an appendix to the Preliminary and Final Official Statements.

Section 5. Representations, Warranties and Covenants of the Authority. The Authority hereby represents, warrants and agrees with the Underwriter that:

(a) The board of directors (the “Board”) of the Authority has taken official action by resolution (the “Authority Resolution”) adopted by a majority of the members of the Board at meetings duly called, noticed and conducted, at which a quorum was present and acting throughout, on [September 9, 2008], all action necessary to be taken by it for the execution, delivery and due performance of the Trust Agreement, the Installment Sale Agreement, a Refunding Escrow Agreement, dated as of [_______] 1, 2008 (the “Escrow Agreement”), by and between the Authority and U.S. Bank National Association, as escrow agent (the “Escrow Agent”) and this Purchase Agreement (collectively, the “Authority Agreements”) and the Official Statement and the taking of any and all such action as may be required on the part of the Authority to carry out, give effect to and consummate the transactions contemplated hereby.

(b) The Authority is a joint exercise of powers authority duly organized and existing under the laws of the State of California (the “State”) and has all necessary power and authority to adopt the Authority Resolution, to enter into and perform its duties under the Authority Agreements and, when executed and delivered by the respective parties thereto, the Authority Agreements will each constitute legal, valid and binding obligation of the Authority enforceable in accordance with its respective terms.

(c) By all necessary official action, the Authority has duly authorized the preparation and delivery of the Preliminary Official Statement and the preparation, execution and delivery of the Official Statement, has duly authorized and approved the execution and delivery of, and the performance of its obligations under, the Bonds and the Authority Agreements, and the consummation by it of all other transactions contemplated by the Authority Resolution, the Authority Agreements, the Preliminary Official Statement and the Official Statement. When executed and delivered by their respective parties, the Authority Agreements (assuming due authorization, execution and delivery by and enforceability against the other parties thereto) will be in full force and effect and each will constitute legal, valid and binding agreements or obligations of the Authority, enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors rights generally, the application of equitable principles, the exercise of judicial discretion and the limitations on legal remedies against public entities in the State.

(d) At the time of the Authority's acceptance hereof and at all times subsequent thereto up to and including the time of the Closing, the information and statements in the Official Statement do not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(e) As of the date hereof, there is no action, suit, proceeding or investigation before or by any court, public board or body pending against the Authority or, to the best knowledge of the Authority, threatened, wherein an unfavorable decision, ruling or finding would: (i) affect the creation, organization, existence or powers of the Authority, or the titles of its members or officers; (ii) in any way question or affect the validity or enforceability of Authority Agreements, or (iii) in any way question or affect the Purchase Contract or the transactions contemplated by the Purchase Contract, the Official Statement, or any other agreement or instrument to which the Authority is a party relating to the Bonds.

(f) There is no consent, approval, authorization or other order of, or filing or registration with, or certification by, any regulatory authority having jurisdiction over the Authority required for the execution and delivery of this Purchase Contract or the consummation by the Authority of the other transactions contemplated by the Official Statement or the Authority Agreements.

(g) Any certificate signed by any official of the Authority authorized to do so shall be deemed a representation and warranty by the Authority to the Underwriter as to the statements made therein.

(h) Except as previously disclosed to the Underwriter, the Authority is not in default, and at no time has the Authority defaulted in any material respect, on any bond, note or other obligation for borrowed money or any agreement under which any such obligation is or was outstanding.

(i) (1) Except as disclosed in the Official Statement or otherwise disclosed in writing to the Underwriter, there has not been any materially adverse change in the financial condition of the Authority since June 30, 2007 and there has been no occurrence, circumstance or combination thereof which is reasonably expected to result in any such materially adverse change.

(2) If any event occurs of which the Authority has knowledge between the date of this Purchase Contract and the date of the Closing that might or would cause the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Authority shall notify the Underwriter and, if in the opinion of the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Authority will cooperate with the Underwriter in causing the Official Statement to be amended or supplemented in a form and in a manner approved by the Underwriter. All expenses thereby incurred will be paid by the Authority, and the Underwriter will file, or cause to be filed, the amended or supplemented Official Statement with a nationally recognized securities information repository.

(3) After the Closing, the Authority will not participate in the issuance of any amendment of or supplement to the Official Statement to which, after being furnished with a copy, the Underwriter reasonably objects in writing. If any event relating to or affecting the Authority occurs as a result of which it is necessary, in the opinion of the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the Authority will use its best efforts to assist the Underwriter in preparing (at the expense of the Authority for 90 days after the date of the Closing, and thereafter at the expense of the Underwriter) a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to the Underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading. For the purposes of this subsection, the Authority will furnish such information with respect to itself as the Underwriter may from time to time reasonably request.

(j) Except as disclosed in the Official Statement or otherwise disclosed in writing to the Underwriter, the Authority has not previously failed to comply in all material respects with any undertakings under Rule 15c2-12.

Section 6. Representations, Warranties and Covenants of the City. The City hereby represents, warrants and agrees with the Underwriter that:

(a) The city council (the “City Council”) of the City has taken official action by Resolution (the “City Resolution”) adopted by a majority of the members of the City Council at meetings duly called, noticed and conducted, at which a quorum was present and acting throughout, on [September 9, 2008] all action necessary to be taken by it for the execution, delivery and due performance of the Installment Sale Agreement, the Continuing Disclosure Certificate and this Purchase Agreement (collectively, the “City Agreements”) and the Official Statement and the taking of any and all such action as may be required on the part of the City to carry out, give effect to and consummate the transactions contemplated hereby.

(b) The City is a municipal corporation duly organized and existing under the Constitution the laws of the State of California (the “State”) and has all necessary power and authority to adopt the City Resolution, to enter into and perform its duties under the City Agreements and, when executed and delivered by the respective parties thereto, the City Agreements will each constitute legal, valid and binding obligation of the City enforceable in accordance with its respective terms.

(c) By all necessary official action, the City has duly adopted the City Resolution, has duly authorized the preparation and delivery of the Preliminary Official Statement and the preparation, execution and delivery of the Official Statement, has duly authorized and approved the execution and delivery of, and the performance of its obligations under, the City Agreements, and the consummation by it of all other transactions contemplated by the City Resolution, the City Agreements, the Preliminary Official Statement and the Official Statement. When executed and delivered by their respective parties, the City Agreements (assuming due authorization, execution and delivery by and enforceability against the other parties thereto) will be in full force and effect and each will constitute legal, valid and binding agreements or obligations of the City, enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors rights generally, the application of equitable principles, the exercise of judicial discretion and the limitations on legal remedies against public entities in the State.

(d) At the time of the City's acceptance hereof and at all times subsequent thereto up to and including the time of the Closing, the information and statements in the Official Statement do not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(e) As of the date hereof, there is no action, suit, proceeding or investigation before or by any court, public board or body pending against the City or, to the best knowledge of the City, threatened, wherein an unfavorable decision, ruling or finding would: (i) affect the creation, organization, existence or powers of the City, or the titles of its members or officers; (ii) in any way question or affect the validity or enforceability of City Agreements, or (iii) in any way question or affect the Purchase Contract or the transactions contemplated by the Purchase Contract, the Official Statement, or any other agreement or instrument to which the City is a party relating to the Bonds.

(f) There is no consent, approval, authorization or other order of, or filing or registration with, or certification by, any regulatory authority having jurisdiction over the City required for the execution and delivery of this Purchase Contract or the consummation by the City of the other transactions contemplated by the Official Statement or the City Agreements.

(g) Any certificate signed by any official of the City authorized to do so shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein.

(h) Except as previously disclosed to the Underwriter, the City is not in default, and at no time has the City defaulted in any material respect, on any bond, note or other obligation for borrowed money or any agreement under which any such obligation is or was outstanding.

(i) (1) Except as disclosed in the Official Statement or otherwise disclosed in writing to the Underwriter, there has not been any materially adverse change in the financial condition of the City since June 30, 2007 and there has been no occurrence, circumstance or combination thereof which is reasonably expected to result in any such materially adverse change.

(2) If any event occurs of which the City has knowledge between the date of this Purchase Contract and the date of the Closing that might or would cause the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the City shall notify the Underwriter and, if in the opinion of the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will cooperate with the Underwriter in causing the Official Statement to be amended or supplemented in a form and in a manner approved by the Underwriter. All expenses thereby incurred will be paid by the City, and the Underwriter will file, or cause to be filed, the amended or supplemented Official Statement with a nationally recognized securities information repository.

(3) After the Closing, the City will not participate in the issuance of any amendment of or supplement to the Official Statement to which, after being furnished with a copy, the Underwriter reasonably objects in writing. If any event relating to or affecting the City occurs as a result of which it is necessary, in the opinion of the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the City will use its best efforts to assist the Underwriter in preparing (at the expense of the City for 90 days after the date of the Closing, and thereafter at the expense of the Underwriter) a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to the Underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading. For the purposes of this subsection, the City will furnish such information with respect to itself as the Underwriter may from time to time reasonably request.

(j) Except as disclosed in the Official Statement or otherwise disclosed in writing to the Underwriter, the City has not previously failed to comply in all material respects with any undertakings under Rule 15c2-12.

Section 7. The Closing. (a) At 8:00 A.M., San Francisco time, on October [__], 2008, or on such earlier or later time or date as may be agreed upon by the Underwriter, the Authority and the City (the “Closing”), the Authority shall deliver or cause to be delivered to the Underwriter, at a location or locations to be designated by the Underwriter in New York, New York, the duly executed Bonds (delivered through the book-entry system of The Depository Trust Company). Prior to the Closing, the Authority shall deliver, at the offices of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, in San Francisco, California, or such other place as are mutually agreed upon by the Underwriter and the Authority, the other documents described in this Purchase Contract. On the date of the Closing, the Underwriter shall pay the purchase price of the Bonds as set forth in Section 1 of this Purchase Contract in immediately available funds to the order of the Trustee.

(b) The Bonds shall be issued in fully registered form and shall be prepared and delivered as one Bond for each maturity registered in the name of a nominee of The Depository Trust Company (“DTC”). It is anticipated that CUSIP identification numbers will be inserted on the Bonds, but neither the failure to provide such numbers nor any error with respect thereto shall constitute a cause for failure or refusal by the Underwriter to accept delivery of the Bonds in accordance with the terms of this Purchase Contract.

Section 8. Conditions to Underwriter’s Obligations. The Underwriter has entered into this Purchase Contract in reliance upon the representations and warranties of the Authority and the City contained herein and to be contained in the documents and instruments to be delivered on the date of the Closing, and upon the performance by the Authority and the City of their respective obligations to be performed hereunder and under such documents and instruments to be delivered at or prior to the date of the Closing. The Underwriter's obligations under this Purchase Contract are and shall also be subject to the following conditions:

(a) The representations and warranties of the Authority and the City contained in this Agreement shall be true and correct in all material respects on the date of this Purchase Contract and on and as of the date of the Closing as if made on the date of the Closing;

(b) As of the date of the Closing, the Official Statement may not have been amended, modified or supplemented, except in any case as may have been agreed to by the Underwriter;

(c) (i) As of the date of the Closing, the Authority Resolution, the City Resolution, the Authority Agreements and the City Agreements shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to by the City and Underwriter, (ii) the Authority shall perform or have performed all of its obligations required under or specified in the Authority Resolution, the Authority Agreements and this Purchase Contract to be performed at or prior to the date of the Closing; and (iii) the City shall perform or have performed all of its obligations required under or specified in the City Resolution, the City Agreements and this Purchase Contract to be performed at or prior to the date of the Closing;

(d) As of the date of the Closing, all necessary official action of the Authority relating to the Authority Agreements, the Authority Resolution and the Official Statement, and all necessary official action of the City relating to the City Agreements, the City Resolution, and the Official Statement, shall have been taken and shall be in full force and effect and shall not have been amended, modified or supplemented in any material respect;

(e) Subsequent to the date of this Purchase Contract, up to and including the date of the Closing, there shall not have occurred any change in or particularly affecting the Authority, the City, or the City’s Water System, as these matters are described in the Official Statement, which in the reasonable professional judgment of the Underwriter materially impairs the investment quality of the Bonds;

(f) As of or prior to the date of the Closing, the Underwriter shall have received each of the following documents:

(1) Certified copies of the Authority Resolution and the City Resolution.

(2) The Trust Agreement duly executed on behalf of the Authority and the Trustee, and the Master Installment Sale Agreement and the First Supplemental Installment Sale Agreement, all duly executed on behalf of the Authority and the City.

(4) The Preliminary Official Statement and the Official Statement, with the Official Statement duly executed on behalf of the authority and the City.

(5) An approving opinion of Bond Counsel, dated as of the Closing, in the form attached as an appendix to the Official Statement.

(6) A supplemental opinion of Bond Counsel, addressed to the Underwriter, to the effect that:

(i) The Purchase Contract has been duly executed and delivered by the Authority and the City and is valid and binding upon the Authority and the City, subject to laws relating to bankruptcy, insolvency, reorganization or creditors' rights generally and to the application of equitable principles;

(ii) The Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Trust Agreement is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended; and

(iii) The statements contained in the Official Statement under the captions “THE 2008 BONDS,” “SECURITY FOR THE 2008 BONDS” and “TAX MATTERS,” in “APPENDIX B – Summary of Principal Legal Documents” and in “APPENDIX F - Proposed Form of Opinion of Bond Counsel,” excluding any material that may be treated as included under such captions by cross-reference, insofar as such statements expressly summarize certain provisions of the Trust Agreement, the Installment Sale Agreement and the form and content of the opinion of Bond Counsel are accurate in all material respects.

(iv) without passing upon or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement and making no representation that Bond Counsel has independently verified the accuracy, completeness or fairness of any such statements, based upon the information made available to Bond Counsel in the course of its participation in the preparation of the Official Statement as Bond Counsel, no facts have come to its attention that would lead it to believe that the Official Statement as of its date and as of the Closing Date (except for any CUSIP numbers, financial, accounting, statistical, economic, engineering or demographic data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, any information about feasibility, valuation, appraisals, absorption, real estate or environmental matters, or any information about book-entry, DTC, and in Appendices C, D, E and G which is expressly excluded from the scope of this paragraph and as to which no opinion or view is expressed) contained or contains an untrue statement of a material fact or omitted 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;

(7) An opinion of the City Attorney, dated as of the Closing addressed to the Authority, the City and the Underwriter, in form and substance acceptable to the Underwriter, to the effect that:

(i) The City is a municipal corporation duly organized and validly existing under the Constitution and laws of the State of California.

(ii) The Authority is a joint exercise of powers authority duly organized and existing under the laws of the State of California.

(iii) The City has full legal right, power and authority to approve and enter into and perform its obligations under the City Agreements.

(iv) The Authority has full legal right, power and authority to approve and enter into and perform its obligations under the Authority Agreements.

(v) The individuals executing the City Agreements on behalf of the City are officers of the City holding the offices set forth after their respective signatures, and are lawfully authorized to execute and deliver such documents on behalf of the City.

(vi) The individuals executing the Official Statement and the Authority Agreements on behalf of the Authority are officers of the Authority holding the offices set forth after their respective signatures, and are lawfully authorized to execute and deliver such documents on behalf of the Authority.

(vii) The City Council of the City has duly and validly adopted the City Resolution and the City Resolution is now in full force and effect, and the City Agreements have been duly authorized, executed and delivered by the City under the City Resolution.

(viii) The Board of Directors of the Authority has duly and validly adopted the Authority and the Authority Resolution is now in full force and effect, and the Official Statement and the Authority Agreements have been duly authorized, executed and delivered by the Authority under and pursuant to the Authority Resolution.

(ix) The City Agreements constitute legal, valid and binding obligations of the City enforceable against the City in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought.

(x) The Authority Agreements constitute legal, valid and binding obligations of the Authority enforceable against the Authority in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought.

(xi) To the best knowledge of the City Attorney, no action, suit, proceeding, inquiry or investigation is pending, at law or in equity, before or by any court or regulatory agency, affecting the existence of the City or the Authority, or the titles of their officers to their respective offices, or seeking to restrain or to enjoin the sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the City Resolution, the Authority Resolution, the City Agreements or the Authority Agreements, or in any way contesting or affecting the validity or enforceability of the Bonds, the City Resolution, the Authority Resolution, the City Agreements, the Authority Agreements, or any other applicable agreements referred to in the City Resolution or the Authority Resolution, or any action of the City or the Authority contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement or the powers of the City or the Authority or their respective authority with respect to the Bonds, the City Resolution, the Authority Resolution, the City Agreements, the Authority Agreements or any other applicable agreements referred to in the City Resolution and the Authority Resolution, or any action on the part of the City or the Authority contemplated by any of said documents.

(8) A certificate of the Authority and the City, dated as of the date of the Preliminary Official Statement, in the form attached as Exhibit B.

(9) A closing certificate of the Authority, dated as of the Closing, signed by the Treasurer/Controller or other authorized representative of the Authority satisfactory to the Underwriter, in the form attached as Exhibit C.

(10) A closing certificate of the City, dated as of the Closing, signed by the City Administrator or other authorized representative of the City satisfactory to the Underwriter, in the form attached as Exhibit D.

(11) The opinion of counsel of the Trustee and Escrow Agent, dated as of the Closing, addressed to the Authority, the City and the Underwriter to the effect that:

(i) The Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the State, having full powers and authority and being qualified to enter into, accept and administer the trust created under the Trust Agreement and to enter into the Trust Agreement and the Escrow Agreement.

(ii) The performance by the Trustee of the duties required under the Trust Agreement and the Escrow Agreement have been duly authorized by all necessary corporate action on the part of the Trustee, and under present law do not contravene any law or government regulation or order presently binding on the Trustee or contravene any law or governmental regulation or order presently binding on the Trustee or the articles of association/articles of incorporation/charter, as applicable, or the bylaws of the Trustee or contravene any provision of or constitute a default under any indenture, trust agreement, contract or other instrument to which the Trustee is a party or by which the Trustee is bound;

(iii) the performance by the Trustee of the duties required under the Trust Agreement and the Escrow Agreement do not require the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, any federal, state or other governmental agency or authority; and

(iv) the Trust Agreement and the Escrow Agreement have been duly authorized, executed and delivered by the Trustee, and, assuming due authorization, execution and delivery by the other parties thereto, the Trust Agreement and the Escrow Agreement constitute a legal, valid and binding agreements of the Trustee enforceable in accordance with their respective terms, subject to laws relating in bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and the application of equitable principles if equitable remedies are sought.

(12) A certificate or certificates, dated as of the Closing, in form and substance acceptable to Bond Counsel and the Underwriter, of an authorized officer of officers of the Trustee and the Escrow Agent.

(13) An arbitrage certificate duly signed on behalf of the City.

(14) Evidence of required filings with the California Debt and Investment Advisory Commission.

(15) A copy of the executed Blanket Issuer Letter of Representations by and between the City and DTC relating to the book entry system.

(16) The Escrow Agreement duly executed on behalf of the Authority and the Escrow Agent.

(17) A verification report delivered by Grant Thornton LLP.

(18) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Bond Counsel may reasonably request to evidence compliance by the Authority and the City with legal requirements, the truth and accuracy, as of the date of the Closing, of the representations of the Authority and the City herein contained and of the Official Statement and the due performance or satisfaction by the Authority and the City at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the Authority and the City.

All of the opinions, letters, certificates, instruments and other documents mentioned in this Purchase Contract shall be deemed to be in compliance with the provisions of this Purchase Contract if, but only if, they are in form and substance satisfactory to the Underwriter. If the Authority and the City are unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Purchase Contract or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter, the Authority nor the City shall be under further obligations hereunder, except that the respective obligations of the Authority, the City and the Underwriter set forth in Section 11 of this Purchase Contract shall continue in full force and effect.

Section 9. Conditions to Authority’s and City’s Obligations. The performance by the Authority and the City of their respective obligations under this Purchase Agreement are conditioned upon: (i) the performance by the Underwriter of its obligations hereunder and (ii) receipt by the Authority and the City of opinions addressed to the Authority and the City, and receipt by the Underwriter of opinions addressed to the Underwriter, and the delivery of certificates being delivered on the date of the Closing by persons and entities other than the Authority and the City.

Section 10. Termination Events. The Underwriter shall have the right to terminate the Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to pay for the Bonds by notifying the Authority and the City of its election to do so if, after the execution hereof and prior to the Closing, any of the following events occurs:

(1) the marketability of the Bonds or the market price thereof, in the opinion of the Underwriter, has been materially and adversely affected by any decision issued by a court of the United States (including the United States Tax Court) or of the State of California, by any ruling or regulation (final, temporary or proposed) issued by or on behalf of the Department of the Treasury of the United States, the Internal Revenue Service, or other governmental agency of the United States, or any governmental agency of the State of California, or by a tentative decision or announcement by any member of the House Ways and Means Committee, the Senate Finance Committee, or the Conference Committee with respect to contemplated legislation or by legislation enacted by, pending in, or favorably reported to either the House of Representatives or either House of the Legislature of the State of California, or formally proposed to the Congress of the United States by the President of the United States or to the Legislature of the State of California by the Governor of the State of California in an executive communication, affecting the tax status of the Authority or the City, its property or income, its bonds (including the Bonds) or the interest thereon or any tax exemption granted or authorized by the Internal Revenue Code of 1986, as amended;

(2) the United States becomes engaged in hostilities that result in a declaration of war or a national emergency, or any other outbreak of hostilities occurs, or a local, national or international calamity or crisis occurs, financial or otherwise, the effect of such outbreak, calamity or crisis being such as, in the reasonable opinion of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Bonds;

(3) there occurs a general suspension of trading on the New York Stock Exchange or the declaration of a general banking moratorium by the United States, New York State or California State authorities;

(4) a stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission is issued or made to the effect that the issuance, offering or sale of the Bonds is or would be in violation of any provision of the Securities Act of 1933, as then in effect, or of the Securities Exchange Act of 1934, as then in effect, or of the Trust Indenture Act of 1939, as then in effect;

(5) legislation is enacted by the House of Representatives or the Senate of the Congress of the United States of America, or a decision by a court of the United States of America is rendered, or a ruling or regulation by or on behalf of the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter is made or proposed to the effect that the Bonds are not exempt from registration, qualification or other similar requirements of the Securities Act of 1933, as then in effect, or of the Trust Indenture Act of 1939, as then in effect;

(6) in the reasonable judgment of the Underwriter, the market price of the Bonds, or the market price generally of obligations of the general character of the Bonds, might be materially and adversely affected because additional material restrictions not in force as of the date hereof is imposed upon trading in securities generally by any governmental authority or by any national securities exchange;

(7) the Comptroller of the Currency, The New York Stock Exchange, or other national securities exchange, or any governmental authority, imposes, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, or financial responsibility requirements of the Underwriter;

(8) a general banking moratorium is established by federal, New York or State authorities;

(9) any legislation, ordinance, rule or regulation is introduced in or be enacted by any governmental body, department or agency in the State or a decision of a court of competent jurisdiction within the State is rendered, which, in the opinion of the Underwriter, after consultation with the Authority and the City, materially adversely affects the market price of the Bonds;

(10) any federal or California court, authority or regulatory body takes action materially and adversely affecting the collection of Revenues under the Trust Agreement;

(11) there shall have occurred any downgrading, suspension or withdrawal or negative change in credit watch status with respect to the ratings on the Bonds by any national rating service then rating the Bonds; or

(12) an event occurs which in the opinion of the Underwriter requires a supplement or amendment to the Official Statement.

Section 11. Payment of Expenses. (a) The Underwriter shall be under no obligation to pay, and the City shall pay the following expenses incident to the performance of the Authority’s and the City's obligations hereunder:

(i) the fees and disbursements of Bond Counsel and Disclosure Counsel;

(ii) the cost of printing and delivering the Bonds, the Preliminary Official Statement and the Official Statement (and any amendment or supplement prepared pursuant to Section 4 of this Purchase Contract);

(iii) the fees and disbursements of accountants, advisers and of any other experts or consultants retained by the Authority or the City; and

(iv) any other expenses and costs of the Authority and the City incident to the performance of their respective obligations in connection with the authorization, issuance and sale of the Bonds, including out of pocket expenses and regulatory expenses, and any other expenses agreed to by the parties.

(b) The Underwriter shall pay all expenses incurred by them in connection with the public offering and distribution of the Bonds including, but not limited to:

(i) all advertising expenses in connection with the offering of the Bonds; and

(ii) all out-of-pocket disbursements and expenses incurred by the Underwriter in connection with the offering and distribution of the Bonds, except as provided in (a) above or as otherwise agreed to by the Underwriter and the City.

Section 12. Notices. Any notice or other communication to be given to the Authority or the City under this Purchase Contract may be given by delivering the same in writing to the Authority and the City at the addresses set forth on the first page of this Purchase Contract, and any notice or other communication to be given to the Underwriter under this Purchase Contract may be given by delivering the same in writing to RBC Capital Markets Corporation, 345 California Street, Suite 2800, San Francisco, CA 94104, Attention: Bob Williams.

Section 13. Survival of Representations, Warranties, Agreements. All of the Authority’s and the City's representations, warranties and agreements contained in this Purchase Contract shall remain operative and in full force and effect regardless of: (a) any investigations made by or on behalf of the Underwriter; or (b) delivery of and payment for the Bonds pursuant to this Purchase Contract. The agreements contained in this Section and in Section 11 shall survive any termination of this Purchase Contract.

Section 14. Benefit; No Assignment. This Purchase Contract is made solely for the benefit of the Authority, the City and the Underwriter (including its successors and assigns), and no other person shall acquire or have any right hereunder or by virtue hereof. The rights and obligations created by this Purchase Contract are not subject to assignment by the Underwriter, the Authority or the City without the prior written consent of the other parties hereto.

Section 15. Severability. In the event that any provision of this Purchase Contract is held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision of this Purchase Contract.

Section 16. Counterparts. This Purchase Contract may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute the Purchase Contract by signing any such counterpart.


Section 17. Effectiveness. This Purchase Contract shall become effective upon the execution of the acceptance hereof by an authorized officer of the Authority and the City, and shall be valid and enforceable as of the time of such acceptance.

Very truly yours,


RBC CAPITAL MARKETS CORPORATION



By:_____________________________
Managing Director


Accepted:


CITY OF BRENTWOOD



By:_______________________________
Treasurer, Director of Finance
& Information Systems

Attest:


__________________________________
City Clerk

BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY



By:_______________________________
Treasurer/Controller







EXHIBIT A

MATURITY SCHEDULE


Principal
Payment Date
[( )]

Principal

Coupon
Price or
Yield

























EXHIBIT B

Brentwood Infrastructure Financing Authority
Water Revenue Bonds,
Series 2008

15c2-12 CERTIFICATE

I, Pamela Ehler, Treasurer/Controller of the Brentwood Infrastructure Financing Authority (the “Authority”), hereby certify that I am authorized to execute this Certificate on behalf of the Authority.
I hereby further certify, on behalf of the Authority, that the Preliminary Official Statement dated September [___], 2008 (including the cover page and all appendices thereto, the “Preliminary Official Statement”) relating to the above-referenced bonds (the “Bonds”) is deemed to be final as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended (“Rule 15c2-12”), except for information permitted to be omitted therefrom by Rule 15c2-12, including, for example, offering prices, interest rates, selling compensation, principal amounts per maturity, aggregate principal amount, maturity dates, and ratings.
The Authority approves of the use and distribution of the Preliminary Official Statement by the underwriters of the Bonds.
Dated: September [__], 2008.
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY



By: ___________________________________
Treasurer/Controller


EXHIBIT C
Brentwood Infrastructure Financing Authority
Water Revenue Bonds,
Series 2008

CLOSING CERTIFICATE OF THE AUTHORITY

The undersigned hereby certifies and represents that he or she is the duly appointed and acting representative of the Brentwood Infrastructure Financing Authority (the “Authority”), and is duly authorized to execute and deliver this Certificate and further hereby certifies and reconfirms on behalf of the Authority as follows:

(i) The representations, warranties and covenants of the Authority contained in the Bond Purchase Contract dated as of September [__], 2008, by and among the Authority, the City of Brentwood and RBC Capital Markets Corporation (the “Purchase Contract”), are true and correct and in all material respects on and as of the date of the Closing with the same effect as if made on the date of the Closing.

(ii) The Authority Resolution is in full force and effect at the date of the Closing and has not been amended, modified or supplemented, except as agreed to by the Authority and the Underwriter.

(iii) The Authority has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied on or prior to the date of the Closing.

(iv) Subsequent to the date of the Official Statement and on or prior to the date of such certificate, there has been no material adverse change in the condition (financial or otherwise) of the authority, the City or the Water System, whether or not arising in the ordinary course of the operations of the City, as described in the Official Statement.

(v) The Official Statement does not contain any untrue or misleading statement of a material fact and does not omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading.

Capitalized terms used but not defined herein have the meanings given in the Purchase Contract.

Dated: September [__], 2008.

BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY


By:______________________________
Treasurer/Controller




EXHIBIT D
Brentwood Infrastructure Financing Authority
Water Revenue Bonds,
Series 2008

CLOSING CERTIFICATE OF THE CITY

The undersigned hereby certifies and represents that he or she is the duly appointed and acting representative of the City of Brentwood (the “City”), and is duly authorized to execute and deliver this Certificate and further hereby certifies and reconfirms on behalf of the City as follows:

(i) The representations, warranties and covenants of the City contained in the Bond Purchase Contract dated as of September [__], 2008, by and among the Authority, the City of Brentwood and RBC Capital Markets Corporation (the “Purchase Contract”) are true and correct and in all material respects on and as of the date of the Closing with the same effect as if made on the date of the Closing.

(ii) The City Resolution is in full force and effect at the date of the Closing and has not been amended, modified or supplemented, except as agreed to by the City and the Underwriter.

(iii) The City has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied on or prior to the date of the Closing.

(iv) Subsequent to the date of the Official Statement and on or prior to the date of such certificate, there has been no material adverse change in the condition (financial or otherwise) of the City or the Water System, whether or not arising in the ordinary course of the operations of the City, as described in the Official Statement.

(v) The Official Statement does not contain any untrue or misleading statement of a material fact and does not omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading.

Capitalized terms used but not defined herein have the meanings given in the Purchase Contract.

Dated: September [___], 2008.

CITY OF BRENTWOOD


By:______________________________
City Administrator


PRELIMINARY OFFICIAL STATEMENT DATED __________, 2008

NEW ISSUE-FULL BOOK-ENTRY [EXPECTED] RATING: S&P: “AA”
(See “RATING” herein)

In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the 2008 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the 2008 Bonds is not a specific preference item for purposes of the federal individual and corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating federal corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the 2008 Bonds. See “TAX MATTERS” within.
$_______________*
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY
WATER REVENUE BONDS
SERIES 2008
Dated: Dated of Delivery Due: July 1, as shown on inside cover
The captioned bonds (the “2008 Bonds”) are being issued by the Brentwood Infrastructure Financing Authority (the “Authority”) to (i) finance and refinance various capital improvements to the City of Brentwood’s (the “City”) water system, as more particularly described herein, (ii) refund a portion of the Authority’s Water and Sewer Revenue Bonds, 1996 Series A, (iii) fund the Reserve Requirement, and (vi) pay costs of issuance incurred in connection with the issuance, sale and delivery of the 2008 Bonds.
The 2008 Bonds are being issued as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC. Ultimate purchasers of 2008 Bonds will not receive physical certificates representing their interest in the 2008 Bonds. So long as the 2008 Bonds are registered in the name of Cede & Co., as nominee of DTC, referenced herein to the owners shall mean Cede & Co., and shall not mean the ultimate purchasers of the 2008 Bonds. Interest on the 2008 Bonds will be payable on January]1 and July 1 of each year, commencing January 1, 2009. Payments of the principal of, premium, if any, and interest on the 2008 Bonds will be made directly to DTC, or its nominee, Cede & Co., by U.S. Bank National Association (the “Trustee”), so long as DTC or Cede & Co. is the registered owner of the 2008 Bonds. Disbursements of such payments to DTC’s Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the responsibility of DTC’s Participants and Indirect Participants, as more fully described herein. See “APPENDIX G – DTC AND THE BOOK-ENTRY SYSTEM”.
The 2008 Bonds are payable from, and secured by a lien on, certain payments received by the Authority from the City under the Installment Sale Agreement (defined herein) and from certain interest and other income derived from certain funds and accounts held under the Trust Agreement (collectively, the “Revenues,” as more fully described herein). The obligation of the City to make payments under the Installment Sale Agreement is limited solely to Net Water Revenues consisting generally of all gross income and revenue from the City’s Water System (as described herein), less the maintenance and operations costs of the Water System. See “SECURITY FOR THE 2008 BONDS - Revenues; Pledge of Revenues”.
The 2008 Bonds are subject to redemption prior to maturity as more fully described herein.
The 2008 Bonds are limited obligations of the Authority and are not secured by a legal or equitable pledge of, or charge or lien upon, any property of the Authority or any of its income or receipts, except the Revenues. The full faith and credit of neither the Authority, the City of Brentwood nor the Redevelopment Agency of the City of Brentwood is pledged for the payment of the principal of or interest or premium, if any, on the 2008 Bonds and no tax or other source of funds, other than the Revenues, is pledged to pay the principal of or interest or premium, if any, on the 2008 Bonds. The payment of the principal of or interest or premium, if any, on the 2008 Bonds does not constitute a debt, liability or obligation of the Authority, the City or the Redevelopment Agency of the City of Brentwood for which any such entity is obligated to levy or pledge any form of taxation or for which any such entity has levied or pledged any form of taxation. The Authority has no taxing power.
For a discussion of some of the risks associated with the purchase of the 2008 Bonds, see “RISK FACTORS” and “CONSTITUTIONAL LIMITATIONS ON TAXES, RATES AND CHARGES” herein.
This cover page contains information for quick reference only. It is not intended to be a summary of all factors relating to an investment in the 2008 Bonds. Investors should read the entire Official Statement before making any investment decision.

MATURITIES, AMOUNTS, INTEREST RATES, AND PRICES OR YIELDS
SEE INSIDE COVER

The 2008 Bonds are offered when, as and if delivered and received by the Underwriter, subject to the approval as to their legality by Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel to the Authority. Certain legal matters will be passed upon for the City by Orrick, Herrington & Sutcliffe LLP as Disclosure Counsel and for the Authority and the City by the City Attorney of the City. It is anticipated that the 2008 Bonds will be available for delivery to DTC on or about [____________], 2008.
RBC CAPITAL MARKETS
Dated: [_________], 2008

MATURITY SCHEDULE

Maturity Date (July 1) Principal Amount Interest
Rate Price or Yield CUSIP† Maturity Date (July 1) Principal Amount Interest
Rate Price or Yield CUSIP†













† CUSIP Copyright 2008, American Bankers Association. CUSIP data herein is provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc.
______________________
* Priced to par call on [_________].



GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
No dealer, broker, salesperson or other person has been authorized by the Authority, the City or the Underwriter to give any information or to make any representations other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by any of the foregoing. 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 2008 Bonds in any jurisdiction in which it is unlawful to make such offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the 2008 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 information set forth herein has been provided by the Authority and the City and other sources that are believed by the Authority and the City to be reliable. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibility to investors under the federal securities law as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information and expression of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in affairs of the Authority or the City since the date hereof. This Official Statement, including any supplement or amendment hereto, is intended to be deposited with one or more repositories.
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. No assurance is given that actual results will meet the forecasts of the Authority or the City in any way, regardless of the level of optimism communicated in the information. Neither the Authority nor the City is obligated to issue any updates or revisions to the forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based occur. Such forward-looking statements include, but are not limited to, certain statements contained in the information in Appendix A attached hereto.
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 AUTHORITY AND THE CITY DO NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ANY OF ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR, OTHER THAN AS DESCRIBED UNDER “CONTINUING DISCLOSURE” HEREIN

BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY
City Council and Authority Governing Bond
Robert Taylor, Mayor/Chairperson of the Authority
Robert A. Brockman, Vice Mayor/Vice-Chairperson of the Authority
Chris Becnel, Councilmember/Boardmember
Brandon Richey, Councilmember/Boardmember
Erick Stonbarger, Councilmember/Boardmember

___________________________
City Staff/Authority Officers
Donna Landeros, City Manager
Pamela Ehler, Treasurer, Director of Finance & Information Systems
Bailey Grewal, Public Works Director and City Engineer
Paul Eldredge, Assistant Director of Public Works/Assistant City Engineer
Damien Brower, City Attorney
_______________________
SPECIAL SERVICES
Bond Counsel and Disclosure Counsel
Orrick, Herrington & Sutcliffe
San Francisco, California
Trustee
U.S. Bank National Association
San Francisco, California
Financial Advisor
Del Rio Advisors, LLC
Modesto, California

Verification Agent
Grant Thornton LLP
Minneapolis, Minnesota



INTRODUCTION 1
THE 2008 BONDS 3
Description 3
Registration, Transfers and Exchanges 3
Redemption 3
Debt Service Requirements on the 2008 Bonds 5
THE PLAN OF FINANCE 5
The Project 5
Plan of Refunding 6
ESTIMATED SOURCES AND USES OF FUNDS 7
SECURITY FOR THE 2008 BONDS 7
Revenues; Pledge of Revenues 7
Installment Sale Agreement 10
THE AUTHORITY 16
THE WATER SYSTEM 16
RISK FACTORS 16
General 16
Earthquakes, Floods and Other Natural Disasters 17
Permits and Regulation 17
Investment of Funds 17
Limitations on Remedies and Bankruptcy 17
System Demand 18
System Expenses 18
Limited Obligations 18
Limitations on Remedies and Limited Recourse on Default 18
Secondary Market for Bonds 19
CONSTITUTIONAL LIMITATIONS ON TAXES, RATES AND CHARGES 19
Article XIIIA of the California Constitution 19
Article XIIIB of the California Constitution 20
Articles XIIIC and XIIID of the California Constitution 21
Other Initiative Measures 22
TAX MATTERS 22
CERTAIN LEGAL MATTERS 24
CONTINUING DISCLOSURE 25
ABSENCE OF LITIGATION 25
RATING 25
FINANCIAL STATEMENTS 26
UNDERWRITING 26
VERIFICATION 26
MISCELLANEOUS 27
APPENDIX A - INFORMATION RELATING TO THE water SYSTEM A-1
APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS B-1
APPENDIX C - FORM OF CONTINUING DISCLOSURE CERTIFICATE C-1
APPENDIX D - THE CITY OF BRENTWOOD D-1
APPENDIX E - AUDITED FINANCIAL STATEMENTS E-1
APPENDIX F - PROPOSED FORM OF OPINION OF BOND COUNSEL F-1
APPENDIX G - DTC AND THE BOOK-ENTRY SYSTEM H-1

$_____________
BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY
WATER REVENUE BONDS
SERIES 2008
INTRODUCTION
The purpose of this Official Statement (which includes the cover page and the appendices attached hereto) is to provide information concerning the issuance, sale and delivery by the Brentwood Infrastructure Financing Authority (the “Authority”) of its Water Revenue Bonds, Series 2008 (the “2008 Bonds”), in the aggregate principal amount of $___________*. The Authority is a joint exercise of powers authority organized under the laws of the State of California and composed of the City of Brentwood, California (the “City) and the Redevelopment Agency of the City of Brentwood (the “Redevelopment Agency”). The Authority was formed in 1989 to assist in the financing of various public capital improvements, including a portion of the design, acquisition and construction of additions, betterments and improvements to the City’s municipal water system (the “Water System”).
The 2008 Bonds are being issued pursuant to the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Act”), Article 11 of Chapter 3 of Division 2 of Title 5 of the Government Code of the State of California and a Master Trust Agreement, dated as of October 1, 2008 (the “Master Trust Agreement”), between the Authority and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by a First Supplemental Trust Agreement, dated as of October 1, 2008 (the “First Supplemental Trust Agreement”, and, together with the Master Trust Agreement and any supplemental trust agreements, the “Trust Agreement”). The Master Trust Agreement contemplates additional series of bonds on a parity with, or subordinate to, the 2008 Bonds, to be issued pursuant to additional supplemental trust agreements under the Master Trust Agreement. All such bonds, as well as the 2008 Bonds, are referred to herein as the “Bonds.” The proceeds of the sale of the 2008 Bonds will be used to (i) finance and refinance various capital improvements to the Water System, as more particularly described in Appendix A, (ii) refund a portion of the Authority’s Water and Sewer Revenue Bonds, 1996 Series A (the “Series 1996 Bonds”), (iii) fund the Reserve Requirement (as defined herein), and (iv) pay costs of issuance incurred in connection with the issuance, sale and delivery of the 2008 Bonds. See “THE PLAN OF FINANCE – The Project” and “ESTIMATED SOURCES AND USES OF FUNDS” herein.
The 2008 Bonds are payable from, and secured by a lien on, (1) certain payments (collectively, the “2008 Payments”) received by the Authority from the City under a Master Installment Sale Agreement, dated as of October 1, 2008 (the “Master Installment Sale Agreement”), as supplemented by a First Supplemental Installment Sale Agreement, dated as of October 1, 2008 (the “First Supplemental Installment Sale Agreement”, and, together with the Master Installment Sale Agreement and any subsequent supplemental installment sale agreements, the “Installment Sale Agreement”), and (2) from certain interest and other income derived from certain funds and accounts held under the Trust Agreement (collectively, the “Revenues”, as more fully described herein). The Master Installment Sale Agreement contemplates additional payments on a parity with, or subordinate to, the 2008 Payments, to be made pursuant to additional supplemental installment sale agreements under the Master Installment Sale Agreement. All such payments, as well as the 2008 Payments, are referred to herein as the “Payments.”
The obligation of the City to make such payments is a special obligation of the City payable solely from Net Water Revenues (as defined herein), consisting primarily of all gross income and revenue received by the City from the ownership or operation of the Water System, less the maintenance and operations costs of the Water System. See “SECURITY FOR THE 2008 BONDS - Revenues; Pledge of Revenues”.
Concurrently with the issuance of the 2008 Bonds, the Trustee is to establish, maintain and hold in trust a separate fund designated as the Reserve Fund. Moneys available to the Reserve Fund will be used and withdrawn solely for the purpose of paying principal of and interest on the 2008 Bonds in the event 2008 Payments deposited with the Trustee are insufficient therefor. For more information concerning the Reserve Fund, see “SECURITY FOR THE 2008 BONDS” herein.
THE 2008 BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE OR LIEN UPON, ANY PROPERTY OF THE AUTHORITY OR ANY OF ITS INCOME OR RECEIPTS, EXCEPT THE REVENUES. THE FULL FAITH AND CREDIT OF NEITHER THE AUTHORITY, THE CITY NOR THE REDEVELOPMENT AGENCY OF THE CITY OF BRENTWOOD IS PLEDGED FOR THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF THE 2008 BONDS AND NO TAX OR OTHER SOURCE OF FUNDS, OTHER THAN THE REVENUES, IS PLEDGED TO PAY THE INTEREST ON OR PRINCIPAL OF THE 2008 BONDS. THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE 2008 BONDS DOES NOT CONSTITUTE A DEBT, LIABILITY OR OBLIGATION OF THE AUTHORITY, THE CITY OR THE REDEVELOPMENT AGENCY OF THE CITY OF BRENTWOOD FOR WHICH ANY SUCH ENTITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH ANY SUCH ENTITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER.
The summaries and references of documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by reference to each document, statute, report, or instrument. The capitalization of any word not conventionally capitalized or otherwise defined herein, indicates that such word is defined in a particular agreement or other document and, as used herein, has the meaning given it in such agreement or document. See “APPENDIX B - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS” for summaries of certain of such definitions. The proposed form of opinion of Bond Counsel is set forth in Appendix F.
THE 2008 BONDS
Description
The 2008 Bonds will be dated their date of issuance and will bear interest at the rates set forth on the cover page of this Official Statement, payable on January 1, 2009, and semiannually thereafter on January 1 and July 1 of each year. Subject to the redemption provisions set forth herein, the 2008 Bonds will mature on the dates and in the amounts set forth on the cover page hereof. Interest on the 2008 Bonds shall be payable in lawful money of the United States of America by check mailed by first-class mail on each interest payment date to the Owner thereof as of the close of business on the fifteenth day of the calendar month immediately preceding such interest payment date; provided, that upon the written request of an Owner of one million dollars ($1,000,000) or more in aggregate principal amount of 2008 Bonds received by the Trustee prior to the applicable Record Date (which such request shall remain in effect until rescinded in writing by such Owner), interest shall be paid by wire transfer in immediately available funds. Interest on the 2008 Bonds shall be computed on the basis of a 360-day year of twelve 30-day months. The principal of and premium, if any, on the 2008 Bonds are payable when due upon presentation thereof at the [Corporate Trust Office] of the Trustee, in lawful money of the United States of America.
Registration, Transfers and Exchanges
The 2008 Bonds will be executed and delivered as fully registered bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to actual purchasers of the 2008 Bonds (the “Beneficial Owners”) in the denominations set forth above, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants (as defined herein). Beneficial Owners will not be entitled to receive physical delivery of the 2008 Bonds. In the event that the book-entry-only system is no longer used with respect to the 2008 Bonds, the 2008 Bonds will be registered and transferred in accordance with the Trust Agreement. See “APPENDIX G - DTC AND THE BOOK-ENTRY SYSTEM”.
Redemption
Optional Redemption. The 2008 Bonds are also subject to redemption prior to their respective stated maturities at the direction of the Authority, from moneys deposited by the Authority or the City from any source of available funds, as a whole or in part (in such maturities as are designated by the Authority at the direction of the City or, if the Authority fails to designate such maturities, in inverse order of maturity and by lot within a maturity) on any date on or after July 1, [20__], at the principal amount of the Bonds to be redeemed plus accrued interest thereon, without premium.
Notice of Redemption. Notice of redemption of any 2008 Bond will be mailed by the Trustee, not less than 30 nor more than 60 days prior to the redemption date, to (i) to the respective Holders of any 2008 Bonds designated for redemption at their addresses appearing on the bond registration books of the Trustee by first class mail, and (ii) to the Securities Depositories by facsimile and by first class mail. Notice of redemption to the Holders and the Securities Depositories shall be given by first class mail. Each notice of redemption shall state the date of such notice, the date of issue of the 2008 Bonds, the redemption date, the redemption price, the place or places of redemption (including the name and appropriate address or addresses of the Trustee), the CUSIP number (if any) of the maturity or maturities, and, if less than all of any such maturity, the distinctive certificate numbers of the Bonds of such maturity, if any, to be redeemed and, in the case of the 2008 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 said date there will become due and payable on each of said Bonds the redemption price thereof or of said specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, together with interest accrued thereon to the date fixed for redemption, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered at the address or addresses of the Trustee specified in the redemption notice. Neither the Authority nor the Trustee shall have any responsibility for any defect in the CUSIP number that appears on any Bond or in any redemption notice with respect thereto, and any such redemption notice may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the Authority nor the Trustee shall be liable for any inaccuracy in such CUSIP numbers. Failure by the Trustee to give notice to any one or more of the Securities Depositories or failure of any Holder or any Securities Depository to receive notice or any defect in any such notice shall not affect the sufficiency or validity of the proceedings for redemption.
Rescission of Notice of Redemption. The Authority will have the right to rescind any optional redemption by written notice of rescission. The Trustee is required to mail notice of rescission of such redemption in the same manner as the original notice of redemption was sent.
Effect of Notice of Redemption. If notice of redemption has been duly given as aforesaid, and moneys for payment of the Redemption Price of, together with interest accrued to the redemption date on, the 2008 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the 2008 Bonds (or portions thereof) so called for redemption shall become due and payable at the redemption price specified in such notice together with interest accrued thereon to the redemption date, interest on the 2008 Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security and the Holders of said Bonds shall have no rights in respect thereof except to receive payment of said redemption price and accrued interest to the date fixed for redemption from funds held by the Trustee for such payment and such funds are hereby pledged to such payment. All 2008 Bonds redeemed pursuant to the Trust Agreement shall be canceled upon surrender thereof.


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Debt Service Requirements on the 2008 Bonds
The amounts required to be set aside each fiscal year ending June 30 for principal and interest relating to the 2008 Bonds are as follows:

Fiscal Year
Ending June 30
Principal
Interest

Total





























THE PLAN OF FINANCE
The Project
A portion of the proceeds of the 2008 Bonds will be used to finance a new surface water treatment facility, pump station, distribution line, and other associated infrastructure that will be located adjacent to the Randall-Bold Water Treatment Plant, [including the refinancing of commercial paper issued by the Contra Costa Water District (“CCWD”) for certain capital costs,] as more particularly described in Appendix A (the “Water Project”). The Water Project will be jointly designed and constructed by the City and CCWD, and will be operated and maintained by CCWD under an agreement for the exclusive use of serving treated water to the City. Ownership of the Water Project is transferable to the City after all outstanding capital and operating costs incurred by CCWD for the Water Project are paid in full by the City.
Currently, the City has completed the first phase of the Water Project, which consists of a large diameter distribution line and pump station that is dedicated to conveying treated water from either the existing RBWTP or the proposed treatment facility to the City’s distribution system. The second phase of the Water Project, the proposed treatment facility, is currently under construction and is anticipated to be completed in summer 2008.
The cost of construction and associated soft costs of the Water Project is currently estimated at approximately $65 million dollars. 2008 Bond proceeds in the amount of approximately $[___] million will be allocated to the Water Project.
[The City has completed CEQA compliance procedures and all other significant regulatory approvals related to the Water Project to be financed with a portion of the proceeds of the 2008 Bonds.] [To be confirmed.]
Plan of Refunding
The Authority intends to use a portion of the proceeds of the 2008 Bonds to refund and defease a portion of the outstanding Series 1996 Bonds which will be redeemed on [January 1, 2009]. The Series 1996 Bonds were issued and delivered by the Authority in December 1996 and are currently outstanding in the aggregate principal amount of $[7,710,000.]
Upon delivery of the 2008 Bonds, a portion of the proceeds thereof, together with other available funds of the Authority, is to be deposited into an irrevocable separate escrow account, to be held by U.S. Bank National Association, as escrow agent (the “Escrow Agent”) pursuant to an Escrow Agreement, dated as of October 1, 2008 between the Authority and the Escrow Agent (the “Escrow Agreement”). The funds deposited to such escrow account are to be held in cash or used to purchase direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America, scheduled to mature on or before [January 1, 2009], the redemption date for the Series 1996 Bonds. Upon delivery of the 2008 Bonds, the arithmetical accuracy of certain computations relating to the defeasance of the Series 1996 Bonds will be verified by Grant Thornton LLP. See “VERIFICATION” below.


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ESTIMATED SOURCES AND USES OF FUNDS
The following sets forth the estimated sources and uses of funds related to the issuance of the 2008 Bonds.

Sources of Funds
Principal Amount of 2008 Bonds
Amounts released from 1996 Bond funds
Total Sources of Funds

Uses of Funds
Deposit to Water Project Account
Escrow Fund for Series 1996 Bonds to be refunded
Costs of Issuance(1)
Total Uses of Funds


____________________
(1) Includes legal fees, printing costs, rating agency fees, underwriter’s discount and other miscellaneous expenses.
SECURITY FOR THE 2008 BONDS
Revenues; Pledge of Revenues
The 2008 Bonds and the interest thereon are payable solely from, and are secured by a lien on Revenues, which are defined in the Trust Agreement as all payments received by the Authority from the City under the Installment Sale Agreement (the “2008 Payments,” as further described below) and certain interest, and other income derived from certain funds held under the Trust Agreement.
All Revenues and any other amount (including proceeds of the sale of the 2008 Bonds) held by the Trustee in any fund or account established under the Trust Agreement (other than amounts on deposit in the Rebate Fund created pursuant to the Trust Agreement) are irrevocably pledged under the Trust Agreement to the payment of the interest and premium, if any, on and principal of the 2008 Bonds as provided therein, and the Revenues may not be used for any other purpose while any of the 2008 Bonds remain Outstanding; provided, however, that out of the Revenues and other moneys there may be applied such sums for such purposes as are permitted under the Trust Agreement. This pledge constitutes a first pledge of and charge and lien upon the Revenues and all other moneys on deposit in the funds and accounts established under the Trust Agreement (other than amounts on deposit in the Rebate Fund) for the payment of the interest on and principal of the 2008 Bonds in accordance with the terms of the 2008 Bonds and the Trust Agreement. In the Trust Agreement, the Authority assigns to the Trustee all of the Authority’s rights and remedies under the Installment Sale Agreement.
Subject to the Trust Agreement, all money in the Revenue Fund shall be set aside by the Trustee in the following respective special accounts within the Revenue Fund in the following order of priority:
(a) Interest Account,
(b) Principal Account; Sinking Accounts
(c) Reserve Fund, and
(e) Fees and Expense Account.
All money in each of such accounts shall be held in trust by the Trustee and shall be applied, used and withdrawn only for the purposes hereinafter authorized in the Trust Agreement.
Interest Account. On or before the last Business Day of each month beginning in [________ 2008], the Trustee shall set aside from the Revenue Fund and deposit in the Interest Account that amount of money which is equal to (a) one-sixth of the aggregate half-yearly amount of interest becoming due and payable on the Outstanding Current Interest Bonds (except for Bonds constituting Variable Rate Indebtedness (which, under the Trust Agreement, shall be governed by subparagraph (b) below) during the next ensuing six (6) months (excluding any interest for which there are moneys deposited in the Interest Account from the proceeds of any Bonds or other source and reserved as capitalized interest to pay such interest during said next ensuing six months), until the requisite half-yearly amount of interest on all such Outstanding Current Interest Bonds (except for Bonds constituting Variable Rate Indebtedness which, under the Trust Agreement, shall be governed by subparagraph (b) below) is on deposit in such fund; provided that from the date of delivery of Bonds constituting Current Interest Bonds until the first Interest Payment Date with respect to such Bonds the amounts set aside in such fund with respect to such Bonds shall be sufficient on a monthly pro rata basis to pay the aggregate amount of interest becoming due and payable on said Interest Payment Date with respect to such Bonds, plus (b) the aggregate amount of interest to accrue during that month on Outstanding Variable Rate Indebtedness, calculated, if the actual rate of interest is not known, at the interest rate specified in writing by the Authority, or if the Authority shall not have specified an interest rate in writing, calculated at the maximum interest rate borne by such Variable Rate Indebtedness during the month prior to the month of deposit plus one hundred basis points (provided, however, that the amount of such deposit into the Interest Account for any month may be reduced by the amount by which the deposit in the prior month exceeded the actual amount of interest accrued and paid during that month on said Outstanding Variable Rate Indebtedness and provided further that the amount of such deposit into the Interest Account for any month shall be increased by the amount by which the deposit in the prior month was less than the actual amount of interest accruing during that month on said Outstanding Variable Rate Indebtedness). No deposit need be made into the Interest Account if the amount contained therein is at least equal to the interest to become due and payable on the Interest Payment Dates falling within the next six months upon all of the Bonds and then Outstanding and on January 1 and July 1 of each year any excess amounts in the Interest Account not needed to pay interest on such date (and not held to pay interest on the Bonds having Interest Payment Dates other than January 1 and July 1) shall be transferred to the Authority (but excluding, in each case, any moneys on deposit in the Interest Account from the proceeds of any Bonds or other source and reserved as capitalized interest to pay interest on any future Interest Payment Dates following such Interest Payment Dates). [All Swap Revenues received shall be deposited in the Interest Account.]
Principal Account; Sinking Accounts. On or before the last Business Day of each month beginning in [________ 2008], the Trustee shall deposit in the Principal Account as soon as practicable in such month an amount equal to at least (a) one-sixth of the aggregate semiannual amount of Bond Obligation becoming due and payable on the Outstanding Serial Bonds of all Series having semiannual maturity dates within the next six months, plus (b) one-twelfth of the aggregate yearly amount of Bond Obligation becoming due and payable on the Outstanding Serial Bonds of all Series having annual maturity dates within the next twelve months, plus (c) one-sixth of the aggregate of the Mandatory Sinking Account Payments to be paid during the next six-month period into the respective Sinking Accounts for the Term Bonds of all Series for which Sinking Accounts have been created and for which semiannual mandatory redemption is required from said Sinking Accounts, plus (d) one-twelfth of the aggregate of the Mandatory Sinking Account Payments to be paid during the next twelve-month period into the respective Sinking Accounts for the Term Bonds of all Series for which Sinking Accounts shall have been created and for which annual mandatory redemption is required from such Sinking Accounts; provided that if the Authority certifies to the Trustee that any principal payments are expected to be refunded on or prior to their respective due dates or paid from amounts on deposit in a Reserve Fund that would be in excess of the Reserve Requirement applicable to such Reserve Fund upon such payment, no amounts need be set aside towards such principal to be so refunded or paid. All of the aforesaid deposits made in connection with future Mandatory Sinking Account Payments shall be made without priority of any payment into any one such Sinking Account over any other such payment.
In the event that the Revenues shall not be sufficient to make the required deposits so that moneys in the Principal Account on any principal or mandatory redemption date are equal to the amount of Bond Obligation to become due and payable on the Outstanding Serial Bonds of all Series plus the Bond Obligation amount of and redemption premium on the Outstanding Term Bonds required to be redeemed or paid at maturity on such date, then such moneys shall be applied on a Proportionate Basis and in such proportion as said Serial Bonds and said Term Bonds shall bear to each other, after first deducting for such purposes from said Term Bonds any of said Term Bonds required to be redeemed annually as shall have been redeemed or purchased during the preceding twelve-month period and any of said Term Bonds required to be redeemed semiannually as shall have been redeemed or purchased during the six-month period ending on such date or the immediately preceding six month period. In the event that the Revenues shall not be sufficient to pay in full all Mandatory Sinking Account Payments required to be paid at any one time into all such Sinking Accounts, then payments into all such Sinking Accounts shall be made on a Proportionate Basis, in proportion that the respective Mandatory Sinking Account Payments required to be made into each Sinking Account during the then current twelve-month period bear to the aggregate of all of the Mandatory Sinking Account Payments required to be made into all such Sinking Accounts during such 12-month period.
No deposit need be made into the Principal Account so long as there shall be in such fund (i) moneys sufficient to pay the Bond Obligations of all Serial Bonds issued under the Trust Agreement and then Outstanding and maturing by their terms within the next twelve months plus (ii) the aggregate of all Mandatory Sinking Account Payments required to be made in such twelve-month period, but less any amounts deposited into the Principal Account during such twelve-month period and theretofore paid from the Principal Account to redeem or purchase Term Bonds during such twelve-month period; provided that if the Authority certifies to the Trustee that any principal payments are expected to be refunded on or prior to their respective due dates or paid from amounts on deposit in a Reserve Fund that would be in excess of the Reserve Requirement applicable to such Reserve Fund upon such payment, no amounts need be on deposit with respect to such principal payments. At the beginning of each Fiscal Year and in any event not later than [______] 1 of each year, the Trustee shall request from the Authority a Certificate of the Authority setting forth the principal payments for which deposits will not be necessary pursuant to the preceding sentence and the reason therefor. On [_____] 1 of each year or as soon as practicable thereafter any excess amounts in the Principal Account not needed to pay principal on such date (and not held to pay principal on Bonds having principal payment dates other than [_____] 1) shall be transferred to the Authority.
Reserve Fund. Upon the occurrence of any deficiency in any Reserve Fund, the Trustee shall make such deposit to such Reserve Fund as is required pursuant to the Trust Agreement, each such deposit to be made as soon as possible in each month, until the balance therein is at least equal to the applicable Reserve Requirement.
Fees and Expense Account. The Trustee shall establish, maintain and hold in trust a separate fund designated as the "Fees and Expenses Fund." At the direction of the Authority, after the transfers described in the Trust Agreement have been made, the Trustee shall deposit as soon as practicable in each month in the Fees and Expenses Fund amounts necessary for payment of fees, expenses and similar charges (including fees, expenses and similar charges relating to any Liquidity Facility or Credit Enhancement for the Bonds owing in such month or following month by the Authority in connection with the Bonds. The Authority shall inform the Trustee of such amounts, in writing, on or prior to the first Business Day of each month.
Any Revenues remaining in the Revenue Fund after the foregoing transfers described in the Trust Agreement, except as the Authority shall otherwise direct in writing or as is otherwise provided in a Supplemental Trust Agreement, shall be transferred to the Authority on the same Business Day or as soon as practicable thereafter. The Authority may use and apply the Revenues when received by it for any lawful purpose of the Authority, including the redemption of Bonds upon the terms and conditions set forth in the Supplemental Trust Agreement relating to such Bonds and the purchase of Bonds as and when and at such prices as it may determine.
If five days prior to any principal payment date, Interest Payment Date or mandatory redemption date the amounts on deposit in the Revenue Fund, the Interest Account, the Principal Account, including the Sinking Accounts therein, and, as and to the extent applicable, any Reserve Fund established in connection with a Series of Bonds with respect to the payments to be made on such upcoming date are insufficient to make such payments, the Trustee shall immediately notify the Authority, in writing, of such deficiency and direct that the Authority transfer the amount of such deficiency to the Trustee on or prior to such payment date. In the Trust Agreement, the Authority has covenanted and agreed to transfer to the Trustee from any Revenues in its possession the amount of such deficiency on or prior to the principal, interest or mandatory redemption date referenced in such notice.
Installment Sale Agreement
2008 Payments. The City is obligated to make 2008 Payments, but solely from Net Water Revenues, which are defined in the Installment Sale Agreement as, for any Fiscal Year or twelve calendar month period, the Water Revenues during such Fiscal Year or twelve calendar month period less the Maintenance and Operation Costs during such Fiscal Year or twelve calendar month period.
“Water Revenues” means, for any Fiscal Year or twelve calendar month period all income and revenue received or receivable by the City during such Fiscal Year or twelve calendar month period from the ownership or operation of the Water System, determined in accordance with generally accepted accounting principals, including:
• all rates, fees and charges (including connection fees and charges) received by the City for the Water Service and the other services of the Water System,
• all proceeds of insurance covering business interruption loss relating to the Water System,
• all connection fees and charges payable to the City for the Water Service made available or provided by the Water System,
• all payments for the lease of property comprising a part of the Water System,
• all other income and revenue howsoever derived by the City from the ownership or operation of the Water System or arising from the Water System;
and also including all Payment Agreement Receipts (as such term is defined in the Installment Sale Agreement), and including all income from the investment of amounts on deposit in the Water Revenue Fund, the Parity Obligation Fund and the Rate Stabilization Fund, but excluding in all cases any proceeds of taxes and any refundable deposits made to establish credit and any advances or contributions in aid of construction and excluding any income from the investment of amounts on deposit in the Improvement Fund and excluding any earnings of a separate utility system acquired and constructed by the City pursuant to the Installment Sale Agreement. Notwithstanding the foregoing, there shall be deducted from Water Revenues any amounts transferred into the Rate Stabilization Fund as contemplated by the Installment Sale Agreement, and there shall be added to Water Revenues any amounts transferred out of the Rate Stabilization Fund as contemplated by the Installment Sale Agreement.
“Maintenance and Operation Costs” generally means, for any Fiscal Year or twelve calendar month period, the reasonable and necessary costs paid or incurred by the City during such Fiscal Year or twelve calendar month period, for maintaining and operating the Water System, determined in accordance with generally accepted accounting principles, including all reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles.
The obligation of the City to pay the Payments is absolute and unconditional, and until such time as the Payments have been paid in full (or provision for the payment thereof shall have been made pursuant to the Trust Agreement), the City will not discontinue or suspend any Payments required to be paid by it under the Installment Sale 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, curtailed or terminated in whole or in part, 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 to any agreement for any cause whatsoever.
The City covenants in the Installment Sale Agreement to deposit all Water Revenues received by it in the City of Brentwood Water Revenue Fund (the “Water Revenue Fund”). Moneys in the Water Revenue Fund will be used:
(A) to pay all Maintenance and Operation Costs (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operation Costs the payment of which is not then immediately required) as they become due and payable and shall make such deposits in the Rate Stabilization Fund as it may determine from time to time in accordance with the Installment Sale Agreement;
(B) on or before the fifth day before the last Business Day in each month, the Director of Finance shall, from the remaining money then on deposit in the Water Revenue Fund, deposit in the “City of Brentwood Parity Obligation Payment Fund,” which fund the Director of Finance agrees to hold and maintain so long as any Parity Payments due under the Installment Sale Agreement shall be Outstanding the following amounts in the following order of priority:
(1) a sum equal to (a) the interest and principal payments becoming due and payable under all Supplemental Installment Sale Agreement that are Parity Obligations, plus (b) the net payments becoming due and payable on all Parity Payment Agreements (except any Termination Payments), plus (c) any other amounts with respect to Parity Obligations (including any letter of credit and remarketing fees), in each case, during the next succeeding month; plus
(2) (unless otherwise covered by subparagraph (B)(1) above) a sum equal to (a) one-sixth (1/6) of the amount of interest becoming due and payable under all Supplemental Installment Sale Agreement that are Parity Obligations on the next succeeding Interest Payment Date, plus (b) one-twelfth (1/12) of the amount of principal becoming due and payable under all Supplemental Installment Sale Agreement that are Parity Obligations on the next succeeding Principal Payment Date, except that no such deposit need be made if the Director of Finance then holds money in the Parity Obligation Payment Fund equal to the amount of interest becoming due and payable under all Supplemental Installment Sale Agreement that are Parity Obligations on the next succeeding Interest Payment Date plus the amount of principal becoming due and payable under all Supplemental Installment Sale Agreement that are Parity Obligations on the next succeeding Principal Payment Date plus the net payments due on all Parity Payment Agreements on such dates (except any Termination Payments) plus any other amounts becoming due and payable with respect to Parity Obligations (including any letter of credit and remarketing fees); plus
(3) all amounts due to make up any deficiency in the Reserve Funds for Parity Obligations in accordance with the provisions of the applicable Issuing Document, including all Reserve Fund Credit Facility Costs.
All money on deposit in the Parity Obligation Payment Fund shall be transferred by the Director of Finance to the Trustee or other third party payee thereof to make and satisfy the Parity Payments due on the next applicable Payment Dates.
After the payments contemplated by subparagraphs (A) and (B) above have been made, any amounts remaining in the Water Revenue Fund may from time to time be used for the payment of the interest and principal payments becoming due and payable under all Supplemental Installment Sale Agreement that are Subordinate Obligations; so long as certain conditions are met, including that all Maintenance and Operations Costs are being and have been paid and are then current.
After the required deposits have been made, any amounts thereafter remaining in the Water Revenue Fund may be used for any lawful purpose, including, but not limited to the payment of any Termination Payments on all Subordinate Payment Agreements.
Water Rate Covenant; Collection of Water Rates and Charges. The City covenants under the Installment Sale Agreement to fix, prescribe and collect rates, fees and charges for the Water Service during each Fiscal Year which are reasonably fair and nondiscriminatory and which are estimated to yield Adjusted Annual Net Water Revenues for such Fiscal Year equal to the Coverage Requirement (as defined herein). The City may make adjustments from time to time in such rates, fees and charges and may make such classification thereof as it deems necessary, but covenants not to reduce the rates, fees and charges then in effect unless the Adjusted Annual Net Water Revenues from such reduced rates, fees and charges will at all times be sufficient to meet the requirements described in this paragraph.
The City further covenants to have in effect at all times rules and regulations requiring each consumer or customer located on any premises connected with the Water System to pay the rates, fees and charges applicable to the Water Service to such premises and providing for the billing thereof and for a due date and a delinquency date for each bill. The City will not permit any part of the Water System or any facility thereof to be used or taken advantage of free of charge by any corporation, firm or person, or by any public agency (including the United States of America, the State of California and any city, county, district political subdivision, public corporation or agency of any thereof); provided, that the City may without charge use the Water Service.
Issuance of Parity Obligations. Under the terms of the Installment Sale Agreement, the City may at any time execute any obligations payable on a parity with the 2008 Payments (“Parity Obligations”), provided certain conditions are met, including that the City has demonstrated that, during the last audited Fiscal Year or any twelve month calendar month period during the immediately preceding eighteen calendar month period, the Adjusted Annual Net Water Revenues were at least equal to the Coverage Requirement for all Outstanding Supplemental Installment Sale Agreement plus the Parity Obligation proposed to be executed. Additionally, in connection with the execution of Parity Obligations, the City must deliver a certificate stating during the last audited Fiscal Year, Adjusted Annual Net Water Revenues were equal to at least one hundred percent (100%) of Maximum Annual Debt Service calculated for all Outstanding Parity Obligations and all proposed additional Parity Obligations.
“Coverage Requirement” means, for any Fiscal Year or 12 calendar month period,
(1) an amount of Adjusted Annual Net Water Revenues equal in each case to at least:
(i) 125% of the Adjusted Annual Debt Service for such Fiscal Year or 12 calendar month period,
(ii) 110% of the sum of the Adjusted Annual Debt Service plus the Adjusted Subordinate Annual Debt Service for such Fiscal Year or twelve (12) calendar month period, and
(iii) 100% of all obligations of the City payable in such Fiscal Year or 12 calendar month period;
(2) an amount of Net Operating Revenues equal to at least 100% of all obligations of the City payable in such Fiscal Year or 12 calendar month period;
provided, that for purposes of determining compliance with the Coverage Requirement, certain specific provisions with respect to variable rate and other types of debt instruments apply. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Certain Definitions of the Master Installment Agreements – Coverage Requirement”.
Additionally, instead of meeting the requirements described above, the City may also execute Parity Obligations if it receives an Engineer’s Report to the effect that that the estimated Adjusted Annual Net Water Revenues for each of the five (5) Fiscal Years next following the earlier of (i) the end of the period during which interest on the Parity Obligation proposed to be executed is to be capitalized or, if no interest is capitalized, the Fiscal Year in which the Parity Obligation proposed to be executed is executed, or (ii) the date on which substantially all Water Projects financed with the Parity Obligation proposed to be executed plus all Water Projects financed with all existing Supplemental Installment Sale Agreement are expected to commence operations, will be at least equal to the Coverage Requirement for such period.
Certain allowances are allowed for adjustments to Net Water Revenues from new connections or any increase in the rates, fees and charges fixed and prescribed for Water Service which became effective prior to the issuance of Parity Obligations, as specified in the Installment Sale Agreement. See “APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – CERTAIN PROVISIONS OF THE MASTER INSTALLMENT SALE AGREEMENT – Parity Obligations”
Notwithstanding the foregoing, there are no limitations on the ability of the City to execute any Parity Obligation at any time to refund any outstanding Obligation.
Issuance of Subordinate Obligations. The City may at any time execute any Subordinate Obligations payable as provided in the Installment Sale Agreement; provided that no Event of Default (as defined in the Installment Sale Agreement) has occurred and is continuing and the provisions relating to the conditions for the execution of Parity Obligations are satisfied for the execution of such Subordinate Obligation, assuming that the Coverage Requirement is met. See “Issuance of Parity Obligations” above.
Nothing contained in the Installment Sale Agreement shall limit the ability of the City to execute obligations payable from a lien on Net Water Revenues that is subordinate both to the lien of Net Water Revenues that secures the 2008 Payments and any Parity Obligations and the lien of Net Water Revenues that secures any Subordinate Obligations.
Rate Stabilization Fund. The Installment Sale Agreement establishes the City of Brentwood Water Rate Stabilization Fund (the “Rate Stabilization Fund”), which fund the Director of Finance will hold and maintain as directed by the City so long as any Payments are due under the Installment Sale Agreement. The City may at any time deposit in the Rate Stabilization Fund any Net Water Revenues and any other money available to be used therefor, the City may at any time withdraw from the Rate Stabilization Fund any money therein for deposit in the Water Revenue Fund and the City shall withdraw from the Rate Stabilization Fund any money therein for deposit in the Water Revenue Fund in the event there are insufficient amounts in the Water Revenue Fund to make the deposits and transfers required by the Installment Sale Agreement; provided, that any such deposits or withdrawals may be made up to and including the date that is one hundred eighty (180) days after the end of the Fiscal Year or twelve (12) calendar month period for which such deposit or withdrawal will be taken into account in determining Adjusted Annual Water Revenues; and provided further, that no deposit of Net Water Revenues shall be made into the Rate Stabilization Fund to the extent that such deposit would prevent the City from meeting the Coverage Requirement in any Fiscal Year or twelve (12) calendar month period.
Reserve Fund. The Trust Agreement establishes the Reserve Fund (the “Reserve Fund”) to cover deficiencies with respect to 2008 Payments. Pursuant to the Installment Sale Agreement, after making the deposits as set forth in the Installment Sale Agreement, on or before the fifth day before the last Business Day of each month, the City shall, from the remaining moneys in the Water Revenue Fund, thereafter, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the Trustee as provided in the Trust Agreement for deposit in the Water Revenue Fund for application to the Reserve Fund in accordance with the Trust Agreement and to the applicable trustee for such other Reserve Funds, if any, as may have been established in connection with Parity Obligations that sum, if any, necessary to restore the Reserve Fund to an amount equal to the Reserve Requirement applicable to the Reserve Fund and otherwise replenish the Reserve Fund for any withdrawals (including draws upon the Reserve Policy or any credit facility) to pay the 2008 Payments due under the Installment Sale Agreement and necessary to restore such other Reserve Funds to an amount equal to the amount required to be maintained therein; provided that payments to restore the Reserve Fund after a withdrawal may be made in monthly installments equal to 1/12 of the aggregate amount needed to restore the Reserve Fund to the Reserve Requirement applicable to the Reserve Fund as of the date of the withdrawal. The City’s obligation to replenish the Reserve Fund shall be limited to draws on the Reserve Fund relating to the Water System. To the extent that draws on the Reserve Fund are from a credit facility as permitted under the definition of Reserve Requirement in the Trust Agreement, transfers under the Trust Agreement to restore the Reserve Fund shall be made to reimburse the provider of such credit facility.
In lieu of funding the Reserve Requirement initially in cash, or in replacement of moneys then on deposit in the Reserve Fund, the City may also deliver to the Trustee a Financial Guaranty (as defined in the Installment Sale Agreement) securing an amount, together with moneys, Permitted Investments or letters of credit on deposit in the Reserve Fund, no less than the Reserve Requirement applicable to the Reserve Fund. Prepayment of any draw under any such insurance policy, and any expenses and accrued interest related to such draw (collectively the “Policy Costs”) shall commence in the first month following each such draw, and shall be paid at the time specified above in an amount not less than one-twelfth of the aggregate of the Policy Costs related to such draw. If and to the extent that cash has also been deposited in the Reserve Account, all such cash shall be used (including any investments purchased with such cash), which shall be liquidated and the proceeds thereof applied as required under the Trust Agreement) prior to any drawing under the insurance policy, and repayment of any Policy Costs shall be made prior to any replenishment of any such cash amounts. If the City shall fail to repay any Policy Costs in accordance herewith, the insurance company issuing such insurance policy shall be entitled to exercise any and all remedies available at law or under the Trust Agreement, other than (i) an acceleration of the interest on or principal of the Bonds as provided for in Installment Sale Agreement; or (ii) any other remedy which would adversely affect Bond Holders. In the event that such insurance policy for any reason lapses or expires, the City shall immediately implement the actions described above or make the required deposits to the Reserve Account.
THE AUTHORITY
The Authority was created by a Joint Exercise of Powers Agreement, dated as of December 1, 1989 between the City and the Redevelopment Agency. The agreement was entered into pursuant to the provisions of Articles 1, 2 and 4, Chapter 5, Division 7, Title 1 of the California Government Code. The Authority is empowered to assist in financing projects and certain public improvements, such as the design, acquisition and construction of additions, betterments and improvements to the Water System. Under the Act, the Authority has the power to issue revenue bonds to assist in the financing of public capital improvements.
THE WATER SYSTEM
See Appendix A for information concerning the operations and finances of the Water System.
RISK FACTORS
The following section describes certain risk factors affecting the payment of and security for the 2008 Bonds. The following discussion of risks is not meant to be an exhaustive list of the risks associated with the purchase of the 2008 Bonds and does not necessarily reflect the relative importance of the various issues. Potential investors are advised to consider the following factors, along with all other information in this Official Statement, in evaluating the 2008 Bonds. There can be no assurance that other risk factors will not become material in the future.
General
The payment of principal of and interest on the 2008 Bonds is secured solely by a pledge of the Revenues and certain funds under the Trust Agreement. The realization of the Revenues is subject to, among other things, the capabilities of management of the City, the ability of the City to provide water services to its users, and the ability of the City to establish and maintain water fees and charges sufficient to provide the required debt service coverage as well as pay for maintenance and operation costs.
Among other matters, drought, general and local economic conditions and changes in law and government regulations (including initiatives and moratoriums on growth) could adversely affect the amount of Net Water Revenues realized by the City.
Earthquakes, Floods and Other Natural Disasters
Earthquakes, floods or other natural disasters could interrupt operation of the Water System and cause increased costs and thereby interrupt the ability of the City to realize Net Water Revenues. The City is not obligated under the Installment Sale Agreement to have earthquake or flood insurance.
Permits and Regulation
The water operations of the City are subject to permits from state regulatory agencies. Non-compliance with such permits may result in significant penalties from such state agencies or other enforcement actions that could have a material adverse effect on the finances and operations of the City.
The kind and degree of water treatment and water quality effected through the Water System is regulated, to a large extent, by the federal government and/or the State of California. In the event that the federal government, acting through the Environmental Protection Agency, or the State of California, acting through the Department of Health Services, or additional federal or state agencies, should impose stricter water quality standards upon the Water System, the City’s expenses could increase accordingly and rates and charges would have to be increased to offset those expenses. It is not possible to predict the direction federal or state regulation will take with respect to water quality or treatment standards, although it is likely that, over time, both will impose more stringent standards with attendant higher costs.
Investment of Funds
All funds and accounts held under the Trust Agreement are required to be invested in Permitted Investments as provided under the Trust Agreement. See APPENDIX B attached hereto for a summary of the definition of Permitted Investments. All investments, including the Permitted Investments and those authorized by law from time to time for investments by public agencies, contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected, loss of market value and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held under the Trust Agreement or by the City, including but not limited to the Rate Stabilization Funds, could have a material adverse effect on the security of the 2008 Bonds.
Limitations on Remedies and Bankruptcy
The rights and remedies provided in the Trust Agreement and the Installment Sale Agreement may be limited by and 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 of California. 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 F), will be similarly qualified.
The enforcement of the remedies provided in the Trust Agreement and the Installment Sale Agreement could prove both expensive and time consuming. In addition, the rights and remedies provided in the Trust Agreement and the Installment Sale Agreement may be limited by and are subject to provisions of the federal bankruptcy laws, as now or hereafter enacted, and to other laws or equitable principles that may affect creditors’ rights. If the City were to file a petition under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), the Bondholders and the Trustee could be prohibited or severely restricted from taking any steps to enforce their rights under the Installment Sale Agreement.
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 covenants to fix rates and charges for the Water System so as to produce net revenues equal to [____]% of debt service.
System Expenses
There can be no assurance that the City’s expenses will be consistent with the descriptions in this Official Statement. Increases in expenses could require an increase in rates or charges in order to comply with the rate covenant.
Limited Obligations
The 2008 Payments are limited obligations of the City and are not secured by a legal or equitable pledge or charge or lien upon any property of the City or any of its income or receipts, except the Net Water Revenues. The obligation of the City to make the 2008 Payments does not constitute an obligation of the City to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.
The City is obligated under the Installment Sale Agreement to pay the 2008 Payments solely from the Net Water Revenues. There is no assurance that the City can succeed in operating the Water System such that the Net Water Revenues in the future amounts projected in this Official Statement will be realized.
Limitations on Remedies and Limited Recourse on Default
The ability of the City to comply with its covenants under the Installment Sale Agreement and to generate Net Water Revenues sufficient to make the 2008 Payments may be adversely affected by actions and events outside of the control of the City 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 “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, RATES AND CHARGES – Articles XIIC and XIID of the California Constitution” below. Failure by the City to pay the 2008 Payments required to be made under the Installment Sale Agreement constitutes an event of default under the Installment Sale Agreement and the Trustee is permitted to pursue remedies at law or in equity to enforce the City’s obligation to make such 2008 Payments.
The remedies available to the owners of the 2008 Bonds upon the occurrence of an event of default under the Installment Sale Agreement 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.
In addition to the limitations on remedies contained in the Installment Sale Agreement and the Trust Agreement, the rights and obligations under the Installment Sale Agreement and the Trust Agreement may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public entities in the State of California. The opinion to be delivered by Bond Counsel concurrently with the issuance 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 F – PROPOSED FORM OF OPINION OF BOND COUNSEL”.
If the City fails to comply with its covenants under the Installment Sale Agreement or fails to make the 2008 Payments, there can be no assurance of the availability of remedies adequate to protect the interest of the holders of the 2008 Bonds.
Secondary Market for Bonds
There can be no guarantee that there will be a secondary market for the 2008 Bonds or, if a secondary market exists, that any 2008 Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue 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.
CONSTITUTIONAL LIMITATIONS ON TAXES, RATES AND CHARGES
Article XIIIA of the California Constitution
Section 1(a) of Article XIIIA of the California Constitution limits the maximum ad valorem tax on real property to 1% of full cash value (as defined in Section 2 of Article XIIIA), to be collected by each county and apportioned among the county and other public agencies and funds according to law. Section 1(b) of Article XIIIA provides that the 1% limitation does not apply to ad valorem taxes to pay interest or redemption charges on (a) indebtedness approved by the voters prior to July 1, 1978 or (b) any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition. Section 2 of Article XIIIA defines “full cash value” to mean “the County Assessor’s valuation of real property as shown on the 1975/76 tax bill under full cash value or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year or to reflect a reduction in the consumer price index or comparable data for the area under the taxing jurisdiction, or reduced in the event of declining property values caused by substantial damage, destruction, or other factors. Legislation enacted by the State Legislature to implement Article XIIIA provides that notwithstanding any other law, local agencies may not levy any ad valorem property tax except to pay debt service on indebtedness approved by the voters as described above.
On June 18, 1992, following a number of challenges to the provisions of Article XIIIA, the United States Supreme Court upheld the decision in Nordlinger v. Hahn, 225 Cal. App. 3d 1259, a case involving residential property taxation decided by the State Court of Appeals. The 8 to 1 majority held that the Article XIIIA assessment method serves a rational state interest by providing certainty regarding property taxes to homeowners and therefore does not violate provisions of the Equal Protection Clause codified in the 14th Amendment of the U.S. Constitution.
The effect of Article XIIIA on the City’s finances, then, has been to restrict ad valorem tax revenues for general purposes to the statutory allocation of the 1% levy while leaving intact the power to levy ad valorem taxes in whatever rate or amount may be required to pay debt service on its general obligation bonds. The Authority and the City cannot predict whether any further challenges to the State’s present system of property tax assessment will be made, or what the outcome of impact on any of the City of any such challenge might be.
Article XIIIB of the California Constitution
An initiative amendment to the California Constitution (Article XIIIB) was approved by the California electorate on November 6, 1979. This amendment establishes limits on certain annual appropriations of state and local government entities. Initially, the limits are based generally on appropriations for the Fiscal Year 1978-79 with future adjustments permitted for changes in the cost of living, population and certain other factors. The definition of appropriations subject to limitation is stated so as to exclude, among other things, (1) appropriations of proceeds received by a government entity from user fees to the extent such proceeds do not exceed the costs reasonably borne by such entity in providing the product or service, (2) the appropriations of any special district “which did not as of the 1977-78 fiscal year levy an ad valorem tax on property in excess of 12½ cents per $100 of assessed value”, and (3) “appropriations required to pay the cost of interest and redemption charges, including the funding of any reserve or sinking fund required in connection therewith, on indebtedness existing or legally authorized as of January 1, 1979, or a bonded indebtedness thereafter approved . . .” by vote of the electors of the issuing entity. In addition, the amendment provides that nothing in it “will be construed to impair the ability of the State or any local government to meet its obligations with respect to existing or future bonded indebtedness.”
The City is of the opinion that its water fees and charges do not exceed the costs they reasonably bear in providing such services and therefore are not subject to the limits of Article XIIIB.
Articles XIIIC and XIIID of the California Constitution
Proposition 218, a State ballot initiative known as the “Right to Vote on Taxes Act,” was approved by the voters on November 5, 1996. The initiative added Articles XIIIC and XIIID to the California Constitution, creating additional requirements for the imposition by most local governments of “general taxes,” “special taxes,” “assessments,” “fees,” and “charges.” The Authority and the City may be local governments within the meaning of Articles XIIIC and XIIID. Articles XIIIC and XIIID became effective, pursuant to its terms, as of November 6, 1996, although compliance with some of its provisions were deferred until July 1, 1997, and certain of its provisions purport to apply to any tax imposed for general governmental purposes (i.e., “general taxes”) imposed, extended or increased on or after January 1, 1995 and prior to November 6, 1996.
Article XIIID imposes substantive and procedural requirements on the imposition, extension or increase of “fee” or “charge” subject to its provisions. A “fee” or “charge” subject to Article XIIID includes any levy, other than an ad valorem tax, special tax or assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership. Article XIIID prohibits, among other things, the imposition of any proposed fee or charge, and, possibly, the increase of any existing fee or charge, in the event written protests against the proposed fee or charge are presented at a required public hearing on the fee or charge by a majority of owners of the parcels upon which the fee or charge is to be imposed. Generally, voters residing within the district who do not own property within the district are not entitled to vote for any assessment, however, if a court so determines, under certain circumstances, an assessment may not be imposed unless approved by a two-thirds vote of the electorate residing in the affected area, in addition to being approved by the property owners through the required public hearing. In the view of the City Attorney, rates for water service usage charged by the City are fees or charges under Article XIIID. Furthermore, in the view of the City Attorney, connection fees likewise are subject to Article XIIID. Accordingly, the City has complied with the procedural requirements related to public hearings in connection with its fees and charges subject to Article XIIID.
Article XIIID also provides that “standby charges” are considered “assessments” and must follow the procedures required for “assessments” under Article XIIID and imposes several procedural requirements for the imposition of any assessment, which may include (1) various notice requirements, including the requirement to mail a ballot to owners of the affected property; (2) the substitution of a property owner ballot procedure for the traditional written protest procedure, and providing that “majority protest” exists when ballots (weighted according to proportional financial obligation) submitted in opposition exceed ballots in favor of the assessments; and (3) the requirement that the levying entity “separate the general benefits from the special benefits conferred on a parcel” of land. Any change to the City’s current standby charge could require notice to property owners and approval by a majority of such owners returning mail-in ballots approving or rejecting any imposition or increase of such standby charge. Article XIIID also precludes standby charges for services that are not immediately available to the parcel being charged. This could adversely impact the ability of the City to collect standby charges on undeveloped land.
Article XIIID provides that all existing, new or increased assessments are to comply with its provisions beginning July 1, 1997. Existing assessments imposed on or before November 5, 1996, and “imposed exclusively to finance the capital costs or maintenance and operations expenses for [among other things] water” are exempted from some of the provisions of Article XIIID applicable to assessments.
Article XIIIC extends the people’s initiative power to reduce or repeal previously authorized local taxes, assessments, fees and charges. This extension of the initiative power is not limited by the terms of Article XIIIC to fees, taxes, assessment fees and charges imposed after November 6, 1996 and absent other authority could result in retroactive reduction in any existing taxes, assessments, fees or charges. It is not clear what scope the courts will give the initiative provisions of Article XIIIC.
No assurance may be given that Articles XIIIC and XIIID will not have a material adverse impact on the City’s Net Water Revenues.
Other Initiative Measures
Articles XIIIA, XIIIB, XIIIC and XIIID were adopted pursuant to California’s constitutional initiative process. From time to time other initiative measures could be adopted by California voters, placing additional limitations on the ability of the City to increase revenues.
TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the 2008 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the 2008 Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel is also of the opinion that interest on the 2008 Bonds is exempt from State of California personal income taxes. Bond Counsel expects to deliver an opinion at the time of issuance of the 2008 Bonds substantially in the form set forth in Appendix F hereto, subject to the matters discussed below.
To the extent the issue price of any maturity of the 2008 Bonds is less than the amount to be paid at maturity of such 2008 Bonds (excluding amounts stated to be interest and payable at least annually over the term of such 2008 Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the 2008 Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the 2008 Bonds is the first price at which a substantial amount of such maturity of the 2008 Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the 2008 Bonds accrues daily over the term to maturity of such 2008 Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such 2008 Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such 2008 Bonds. Beneficial Owners of the 2008 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2008 Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such 2008 Bonds in the original offering to the public at the first price at which a substantial amount of such 2008 Bonds is sold to the public.
2008 Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium 2008 Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium 2008 Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium 2008 Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances.
The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the 2008 Bonds. The Issuer has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the 2008 Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the 2008 Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the 2008 Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the 2008 Bonds may adversely affect the value of, or the tax status of interest on, the 2008 Bonds.
Certain requirements and procedures contained or referred to in the Trust Agreement, the Installment Sale Agreement, the Tax Certificate, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the 2008 Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Bond or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of bond counsel other than Orrick, Herrington & Sutcliffe LLP.
Although Bond Counsel is of the opinion that interest on the 2008 Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the 2008 Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.
Future legislation, if enacted into law, or clarification of the Code may cause interest on the 2008 Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Code may also affect the market price for, or marketability of, the 2008 Bonds. Prospective purchasers of the 2008 Bonds should consult their own tax advisers regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion.
The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the 2008 Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Issuer, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Issuer has covenanted, however, to comply with the requirements of the Code.
Bond Counsel’s engagement with respect to the 2008 Bonds ends with the issuance of the 2008 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Issuer or the Beneficial Owners regarding the tax-exempt status of the 2008 Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the Issuer and their appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Issuer legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the 2008 Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the 2008 Bonds, and may cause the Issuer or the Beneficial Owners to incur significant expense.
CERTAIN LEGAL MATTERS
Upon the delivery of the 2008 Bonds, Orrick, Herrington & Sutcliffe, San Francisco, California, Bond Counsel to the Authority, will issue its opinion approving the validity of the 2008 Bonds, the proposed form of which opinion is set forth in Appendix F hereto. Certain legal matters will be passed upon for the City by Orrick, Herrington & Sutcliffe LLP as Disclosure Counsel and for the Authority and the City by the City Attorney. Orrick, Herrington & Sutcliffe LLP expresses no opinion regarding the accuracy, completeness or fairness of information contained in this Official Statement.
CONTINUING DISCLOSURE
The City has covenanted on behalf of itself and the Authority, for the benefit of the holders and beneficial owners of the 2008 Bonds, to provide certain financial information and operating data relating to the City and the 2008 Bonds (the “Annual Report”) by not later than 270 days after the end of the City’s fiscal year (presently June 30), commencing with the report for the 2006-07 Fiscal Year, and to provide notices of the occurrence of certain enumerated events, if material. The City will file, or cause to be filed, the Annual Report with each Nationally Recognized Municipal Securities Information Repository, and with the appropriate State information depository, if any. The City will file, or cause to be filed, the notices of material events with the Municipal Securities Rulemaking Board (and with the appropriate State information depository, if any). The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth below in “APPENDIX C – FORM OF CONTINUING DISCLOSURE CERTIFICATE”. These covenants have been made in order to assist the Underwriter in complying with SEC Rule 15c2-12(b)(5).
The City has never failed to comply in all material respects with its previous continuing disclosure undertakings under SEC Rule 15c2-12(b)(5).
ABSENCE OF LITIGATION
To the best knowledge of the Authority and the City, there is no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or threatened against the Authority to restrain or enjoin the authorization, execution or delivery of the 2008 Bonds, the pledge of the Revenues or the collection of the payments to be made pursuant to the Trust Agreement, the obligation of the City to pay 2008 Payments from the Net Water Revenues made pursuant to the Installment Sale Agreement, or in any way contesting or affecting validity of the 2008 Bonds, the Trust Agreement, the Installment Sale Agreement, the Escrow Agreement or the agreement for the sale of the 2008 Bonds.
In addition, there is no litigation pending or threatened against the Authority, the City or the Redevelopment Agency which, in the opinion of the City Attorney of the City, would materially adversely affect the Water System or the sources of payment for the 2008 Bonds.
RATING
S&P has assigned its underlying municipal bond rating of “[AA]” to the 2008 Bonds. Such rating reflects only the view of S&P and any desired explanation of the significance of such ratings should be obtained from S&P at the following address: 25 Broadway, New York, NY 10004. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by S&P, if in its judgment, circumstances so warrant. The Authority and the Underwriter have undertaken no responsibility either to bring to the attention of the owners of the 2008 Bonds any proposed change in or withdrawal of the rating or to oppose any such proposed revision or withdrawal. Any such downward change in or withdrawal of the rating might have an adverse effect on the market price or marketability of the 2008 Bonds.
FINANCIAL STATEMENTS
Attached as APPENDIX E are the audited financial statements of the City (the “Financial Statements”) for Fiscal Year 2006-07, which include financial statements for the Water System, prepared by the [City’s Finance Department] and audited by [_________], of [_______], California (the “Auditor”).
The Auditor’s letter concludes that the Financial Statements, as presented, are accurate in all material respects and are presented in a manner designed to fairly set forth the financial position and results of operations of the City as measured as measured by the financial activity of its various funds.
The Financial Statements include information regarding certain funds of the City, including its General Fund, which are not pledged to make 2008 Payments or to otherwise pay debt service on the 2008 Bonds. Additionally, the City has not requested nor did the City obtain permission from the Auditor to include the audited financial statements as an appendix to this Official Statement. Accordingly, the Auditor has not performed any post-audit review of the financial condition or operations of the City. In addition, the Auditor has not reviewed this Official Statement.
UNDERWRITING
The 2008 Bonds are being purchased by RBC Capital Markets Corporation (the “Underwriter”). The Underwriter has agreed to purchase the 2008 Bonds, subject to certain conditions, at a price equal to $__________ (representing the principal amount of the 2008 Bonds, less Underwriter’s discount of $[________], [less/plus] net original issue [discount/premium] of $[______]. The Underwriter is committed to purchase all of the 2008 Bonds if any are purchased.
The 2008 Bonds are offered for sale at the initial prices stated on the cover page of this Official Statement, which may be changed from time to time by the Underwriter. The 2008 Bonds may be offered and sold to certain dealers at prices lower than the public offering prices.
VERIFICATION
Upon delivery of the 2008 Bonds, the arithmetical accuracy of certain computations included in the schedules provided by the Underwriter on behalf of the Authority relating to the: (i) adequacy of forecasted receipts of principal and interest on the defeasance securities and cash to be held pursuant to the Escrow Agreement, (ii) forecasted payments of principal and interest with respect to the Series 1996 Bonds on and prior to their projected maturity and/or redemption dates; and (iii) yields with respect to the 2008 Bonds and on the obligations and other securities to be deposited pursuant to the Escrow Agreement, will be verified by Grant Thornton LLP, independent certified public accountants (the “Verification Agent”). Such verification shall be based solely upon information and assumptions supplied to the Verification Agent by the Underwriter. The Verification Agent has not made a study or evaluation of the information and assumptions on which such computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions or the achievability of the forecasted outcome.
MISCELLANEOUS
References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents and reports for full and complete statements of the contents thereof. Copies of the Trust Agreement, the Installment Sale Agreement, the Escrow Agreement and other documents referred to herein may be obtained from the Trustee or from the Authority.
Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or owners of any of the 2008 Bonds.
The execution and delivery of this Official Statement has been duly authorized by the Authority and the City.

BRENTWOOD INFRASTRUCTURE FINANCING AUTHORITY


By:________________________________
Treasurer/Controller


CITY OF BRENTWOOD


By: _________________________________
Treasurer, Director of Finance
& Information Systems

APPENDIX A

INFORMATION RELATING TO THE WATER SYSTEM

APPENDIX B

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

APPENDIX C

FORM OF CONTINUING DISCLOSURE CERTIFICATE

APPENDIX D

THE CITY OF BRENTWOOD

APPENDIX E

AUDITED FINANCIAL STATEMENTS

APPENDIX F

PROPOSED FORM OF OPINION OF BOND COUNSEL

APPENDIX G

DTC AND THE BOOK-ENTRY SYSTEM
The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the 2008 Bonds, payment of principal, interest and other payments on the 2008 Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the 2008 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. Neither the issuer of the 2008 Bonds (the “Issuer”) nor the trustee or fiscal agent appointed with respect to the 2008 Bonds (the “Trustee”) take any responsibility for the information contained in this Appendix.
No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the 2008 Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the 2008 Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2008 Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.
DTC and its Participants. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the 2008 Bonds. The 2008 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 security certificate will be issued for each maturity of the 2008 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest 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 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (respectively, “NSCC”, “GSCC”, “MBSCC”, and “EMCC”, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Book-Entry Only System. Purchases of the 2008 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2008 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Security (“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 2008 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 2008 Bonds, except in the event that use of the book-entry system for the 2008 Bonds is discontinued.
To facilitate subsequent transfers, all 2008 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 the 2008 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 2008 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2008 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the 2008 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2008 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of the 2008 Bonds may wish to ascertain that the nominee holding the 2008 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 2008 Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2008 Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the 2008 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Payments of principal of, premium, if any, and interest evidenced by the 2008 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 Issuer 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 (nor its nominee), the Issuer or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of, premium, if any, and interest evidenced by the 2008 Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the 2008 Bonds at any time by giving reasonable notice to the Issuer or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.
The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, 2008 Bond certificates will be printed and delivered.
Discontinuance of DTC Services. In the event that (a) DTC determines not to continue to act as securities depository for the 2008 Bonds, or (b) the Issuer determines that DTC will no longer so act and delivers a written certificate to the Trustee to that effect, then the Issuer will discontinue the Book-Entry Only System with DTC for the 2008 Bonds. If the Issuer determines to replace DTC with another qualified securities depository, the Issuer will prepare or direct the preparation of a new single separate, fully registered 2008 Bond for each maturity of the 2008 Bonds registered in the name of such successor or substitute securities depository as are not inconsistent with the terms of the indenture or fiscal agent agreement executed in connection with the 2008 Bonds. If the Issuer fails to identify another qualified securities depository to replace the incumbent securities depository for the 2008 Bonds, then the 2008 Bonds will no longer be restricted to being registered in the 2008 Bond registration books in the name of the incumbent securities depository or its nominee, but will be registered in whatever name or names the incumbent securities depository or its nominee transferring or exchanging the 2008 Bonds designates.
If the Book-Entry Only System is discontinued, the following provisions would also apply: (i) the 2008 Bonds will be made available in physical form, (ii) principal of, and redemption premiums, if any, on, the 2008 Bonds will be payable upon surrender thereof at the corporate trust office of the Trustee, (iii) interest on the 2008 Bonds will be payable by check mailed by first-class mail or, upon the written request of any Owner of $1,000,000 or more in aggregate principal amount of 2008 Bonds received by the Trustee on or prior to the 15th day of the calendar month immediately preceding the interest payment date, by wire transfer in immediately available funds to an account with a financial institution within the continental United States of America designated by such Owner, and (iv) the 2008 Bonds will be transferable and exchangeable as provided in the indenture or fiscal agent agreement executed in connection with the 2008 Bonds.


APPENDIX A
INFORMATION RELATING TO THE WATER SYSTEM
The Water System
The City’s water distribution system consists of a pipeline system, six water tanks with a total storage capacity of 18.8 million gallons, three pressure zones, six water booster pump stations and eight groundwater wells located within the city limits (the “Water System”). In the spring and summer, 60% of the water is from a surface water source, the Sacramento Delta, while the remaining amount is provided from the City’s groundwater wells. During periods of low demand, the storage tanks are filled for later use during peak day and hour consumption. The water is sampled and tested on a regular basis to ensure compliance with all state and federal drinking water standards, and the City’s Water Division staff performs daily site checks to ensure well productivity and to maintain the optimum operating performance of the delivery systems.

The City delivers water to more than 16,000 connections through approximately 172 miles of water mains, with the Water System being funded through user charges and impact fees. The City’s water customers are primarily residential. For example, in 2006, 94% of the City’s water accounts were residential, accounting for 76% of the City’s water uses. In 2007, the City’s wells supplied 1.3 billion gallons of water. During the same year, the City also purchased an additional 2.5 billion gallons from the Randall-Bold Water Treatment Plant (“RBWTP”).

Effects of Growth

Fueled by residential development, the City has grown rapidly with a population that increased from 23,090 in 2000 to the current population of 50,614, a 119% increase. From 2002 to 2006, there was a 32% increase in total water customers, and water usage increased 92% over that same period. The following table shows the growth in water consumption since 2004:


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TABLE 1
CITY OF BRENTWOOD
Water Consumption History
(1,000 gallons/month)
As of July 2008
2004 2005 2006 2007 2008
January 91,674 163,952 113,518 150,665 141,763
February 97,740 105,496 121,916 164,332 122,570
March 131,472 323,029 118,643 164,331 176,966
April 189,216 405,294 121,370 259,138 381,819
May 333,298 468,321 483,723 408,152 356,627
June 322,913 370,569 490,477 456,413 404,116
July 442,935 390,962 474,510 456,291 457,492
August 380,884 476,207 479,985 678,786 --
September 458,161 484,317 411,998 446,639 --
October 223,494 319,641 341,652 335,802 --
November 223,106 250,633 250,629 232,740 --
December 138,910 157,049 145,562 172,223 --
Total 3,033,803 3,915,470 3,553,983 3,925,512 --

Source: City of Brentwood.

The population growth within the City has substantially increased the demand for water collection and treatment facilities. The City has implemented the majority of the items outlined in the Interim Water Supply Plan prepared by John Carollo Engineers and dated April 1995 (the “Water Master Plan”). Camp Dresser and McKee Consulting Engineers recently updated the Water Master Plan in 2006. This update confirms the infrastructure already built and updates the required master planned facilities to reflect the City’s revised general plan.

As part of its efforts to meet increasing demand, the City entered into an agreement with the East Contra Costa Irrigation District (“ECCID”) in December 1999, which gives the City a permanent entitlement to 14,800 acre feet annually of surface water. The acquired water is pumped to the RBWTP for treatment on an interim basis under an agreement dated January 1, 2000 and amended on September 24, 2003 with the Contra Costa Water District (“CCWD”). CCWD and the Diablo Water District (“DWD”) jointly own the RBWTP. The RBWTP has a treatment capacity of 40 million gallons per day (“mgd”). Pursuant to the agreement with CCWD, the City is required to have a long-term treatment solution in place by January 2009, which will consist primarily of the new water treatment plant to be constructed adjacent to the RBWTP.

The Project
As a long-term solution, the City concluded that the most cost-effective option would be for the City to purchase 3,200 acre-feet per year (6 mgd) of existing treatment capacity from the RBWTP and to construct a scaled-down water treatment facility adjacent to the RBWTP. A portion of the proceeds of the 2008 Bonds will be used to finance a new surface water treatment facility, pump station, distribution line, and other associated infrastructure that will be located adjacent to the RBWTP site (the “Water Project”).

The City and CCWD will jointly design and construct the Water Project, and by agreement, CCWD will operate and maintain it for the exclusive use of serving treated water to the City. Ownership of the Water Project is transferable to the City after the City pays in full all outstanding capital and operating costs incurred by CCWD for the Water Project. The cost of construction and associated soft costs of the Water Project are currently estimated at approximately $65 million dollars.

Currently, the City has completed the first phase of the Water Project, which consists of a large diameter distribution line and pump station that is dedicated to conveying treated water from either the existing RBWTP or the proposed treatment facility to the City’s distribution system. The second phase of the Water Project, the proposed treatment facility, is currently under construction and is anticipated to be completed by the end of 2008. The treatment facility will initially have 12 to 15 mgd of treatment capacity and will be expandable to 30 mgd. The water treatment plant will use conventional treatment, including but not limited to settled water ozonation and granular activated carbon filters. Additionally, the City will also purchase capacity rights in shared facilities, including two new solids lagoons and back-up power facilities, as well as the already existing main power supply, back-up power facilities and RBWTP roads and access. The City will be granted a leasehold interest followed by a permanent easement for use of RBWTP land owned by CCWD and DWD and will be granted a permanent easement on land owned solely by CCWD.

As part of the Water Project, CCWD will divert the City’s ECCID water supply, up to 14,800 acre feet annually, via the Contra Costa Canal (the “Canal”) and a new turnout to the water treatment plant, as long as excess capacity in the Canal is available. When the excess capacity is no longer available (currently estimated to be 2020), either the City shall fund and CCWD will construct new conveyance facilities for the City’s benefit, or the City will participate financially in a joint project with CCWD to expand the existing canal.

While the Water Project is under its ownership, CCWD will be responsible for implementing capital improvements to the facility. Any expansion of the project or treatment facility beyond the initial capacity would be designed and constructed jointly by the City and CCWD under the same terms as the initial design and construction or by the City with CCWD’s participation, if ownership has been transferred.

Rate Structure

In accordance with California law and subject to certain constitutional restrictions, the City Council may, from time to time and at its discretion, fix, alter, change, amend or revise any connection charges, fixed monthly services fees, commodity charges and other fees related to the Water System. Consequently, the City Council periodically reviews such charges and fees to determine if they are sufficient to cover maintenance and operations costs, capital improvement expenditures and debt service requirements. Such charges and fees are set by the City Council for the services provided by the Water System after a majority protest hearing is held. Neither the City nor the Water System is subject to the jurisdiction of, or regulation by, the California Public Utilities Commission or any other regulatory body in connection with the establishment of charges and fees related to the Water System.
The water rate structure consists of a fixed monthly base rate, which varies by meter size, plus a variable tiered consumption charge based upon metered water consumption. There are four usage tiers for residential customers and two usage tiers for non-residential customers.
On September 25, 2007, the City adopted Ordinance No. 848, which provides for an increase in the monthly base rate and consumption charge during Fiscal Years 2007-08 to 2012-13, effective November 9, 2007. Annually on July 1, the monthly base rate and consumption charge will increase 3% to account for inflation.
Under the ordinance, rates per billing unit per month for water delivered or furnished within the limits of the City will be as shown below on the effective dates noted:
TABLE 2
CITY OF BRENTWOOD
Water Rates Per Billing Unit Per Month

Monthly Base Rate Rate Between
7/1/06 – 11/8/07 Effective
11/9/07 Effective
7/1/08(1)
5/8” or 3/4” meter $ 15.98 $ 16.46 $ 16.95
1” meter 24.07 24.69 25.43
1 1/2” meter 47.84 49.38 50.86
2” meter 79.79 82.30 84.77
3” meter 132.08 148.13 152.58
4” meter 212.80 213.97 220.39
6” meter 425.70 444.40 457.74
Consumption Charge (per 1,000 gallons = 1 unit)
Tier 1: Units 1-10 $ 2.50 $ 2.58 $ 2.65
Tier 2: Units 11-20 2.98 3.07 3.16
Tier 3: Units 21-30 3.57 3.68 3.79
Tier 4: Units 31+ 4.16 4.28 4.41
Non-Residential
Tier 1: Units 1-10 $ 2.50 $ 2.58 $ 2.65
Tier 2: Units 11+ 2.98 3.07 3.16
Non-Potable
Tier 1: Units 1+ n/a $ 0.949 $ 0.977

(1) Reflects annual inflation adjustment of 3%.

Source: City of Brentwood.



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Water User Accounts
The following table shows the customer accounts and percentage of service charge revenues for the fiscal years ended June 30, 2004 through June 30, 2008:
TABLE 3
CITY OF BRENTWOOD
Customer Accounts as a Percentage of Revenues
(Five Fiscal Years Ended June 30, 2008)

Fiscal Year Ended Number of Residential Accounts Percentage of Revenues Number of Other Accounts Percentage of Revenues
2004 11,976 80.45% 832 19.55%
2005 13,242 81.80% 689 18.20%
2006 14,246 77.17% 805 22.83%
2007 15,185 74.00% 966 26.00%
2008 15,346 73.00% 1028 27.00%

Source: City of Brentwood.
Account Delinquencies
Monthly utility billings by the City include both water and wastewater charges, as well as charges for solid waste disposal. All bills are due on the 25th day following the original billing date, and if not paid by the due date, the City will add a five percent delinquency penalty to the following bill. Additionally, the City will mail notices if payment is not made in time and will discontinue water service if payment is not made within 40 days of the original billing date. The delinquency rates for the solid waste, wastewater and water systems of the City (expressed as a percentage of annual total revenues received by the City with respect to the water, wastewater and solid waste disposal services combined) for the four fiscal years ended June 30, 2008 are set forth in the following table:
TABLE 4
CITY OF BRENTWOOD
Delinquency Rate of the Solid Waste, Wastewater and Water Systems
(Five Fiscal Years Ended June 30, 2008)

Fiscal Year Delinquency Rate
2004 3.39%
2005 3.67%
2006 2.77%
2007 2.58%
2008 3.46%

Source: City of Brentwood.

Water Facilities Fee
Each premise applying for new water service is charged a water facilities fee (the “Water Facilities Fee”). This fee is a calculation of pro rata fiscal responsibility development shares in the cost of providing water facilities. The calculation is based on the estimated cost of constructing water treatment facilities necessary to serve the population of the City at general plan build-out and projecting that cost over the number of residential, commercial, and industrial units estimated in the City’s general plan. The fee is reviewed periodically by the City Council, and the City Council may from time-to-time adjust the fee to reflect changes in the projected costs for the necessary improvements. Each premise must pay the fee at permit issuance based upon meter size and capacity, as shown below.
Water Facilities Fees for single and multifamily units are charged based on a per unit charge basis and, for office, commercial and industrial uses, on a square footage basis. Pursuant to its authority under Resolution No. 2005-222 of City Council dated September 13, 2005, the City imposed the following fees went effective August 1, 2007:
TABLE 5
CITY OF BRENTWOOD
Water Facilities Fees
As of August 1, 2007(1)
Use Water Facilities Fee
Single Family Residential $7,135.87/unit
Multifamily Residential 5,600.14/unit
Office 1.5387/sq. ft.
Commercial 1.5387/sq. ft.
Industrial 0.8905/sq. ft

(1) Under the 2005-2006 Development Fee Program adopted pursuant to Resolution No. 2005-222, the City may, on July 1 of each year, increase its Water Facilities Fee by the same percentage as the percentage increase in construction costs for the preceding calendar year, based on the Engineering News Record Construction Cost Index (“ENR Index”). These fees are based on a 7.2% increase in the ENR Index from the preceding year.
Source: City of Brentwood.

If a developer constructs a portion of the facilities included in the list of improvements which are the basis for the Water Facilities Fee, such developer is given a credit against its obligation to pay Water Facilities Fees. If the City’s reimbursement obligation to the developer is greater than the Water Facilities Fee payment, the City enters into a reimbursement agreement which provides for the City’s obligation to reimburse the developer when fees have been collected from other developers and the fund has a positive balance. The current average future fee after credits for water facilities constructed is $5,353.57 per unit.


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Comparative Rates
Comparative water service rates for areas in the vicinity of the City are shown in the table below.
TABLE 6
CITY OF BRENTWOOD
Comparative Water Rates Per Year
As of August 2007
City/Agency Annual Charge
Golden State Water (Bay Point) $1,113.71
Vallejo $878.64
Pittsburg $802.80
Contra Costa Water District (Concord) $766.49
Dublin San Ramon Services District $710.88
Fairfield $695.54
Diablo Water District (Oakley) $672.84
Pleasanton $657.00
Brentwood $654.48
Livermore $598.79
East Bay Municipal Utility District $581.52
Benicia $580.92
American Canyon $570.00
Antioch $522.36
Tracy $316.20

Source: City of Brentwood.

Largest Users
The ten principal users of the Water System, excluding the City, for the fiscal year ended June 30, 2008 are shown below:

TABLE 7
CITY OF BRENTWOOD
Top Water System Accounts
Based on Average Monthly Amount Paid
Fiscal Year 2007-08
User Account Amount Units Used
Marsh Creek Apartments $2,636.26 883
Towncentre Common Apartments 2,134.81 823
Ron Nunn Elementary (BUSD) 2,325.36 751
Contra Costa Housing Authority 2,117.73 742
Brentwood Garden Apartments 1,866.99 723
Arbor Ridge Apartments 1,641.13 645
LUHS Alternative Education 1,633.75 542
Woodgate Mobile Home Park 1,344.59 528
Raley’s #336 1,395.40 464
Brentwood Park Apartments 1,117.94 440

Source: City of Brentwood.

Miscellaneous Revenue
The Water System also charges other miscellaneous water charges, including service and meter installation fees, vacant parcel charges, new facility charges and fire hydrant usage charges (“Miscellaneous Water Service”). Miscellaneous Water Service charges accounted for approximately 1% of the Water Revenues in Fiscal Year 2007-08.
Historical and Projected Operating Results
The tables on the following pages show the historical and projected Net Water Revenues and debt service coverage for the years indicated.


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TABLE 8
CITY OF BRENTWOOD
Historical Net Water Revenues and Debt Service Coverage
Five Fiscal Years ended June 30, 2008
2003-04 2004-05 2005-06 2006-07 2007-08*

Charges for Services $9,270,794 $10,218,547 $11,896,327 $15,186,796 $15,717,912
Other Income 135,635 13,413 368,322 161,673 297,702
Reserve Fund Earnings 0 0 0 0 0
Interest Earnings 622,897 231,440 358,427 792,166 705,848
Total $10,029,326 $10,463,400 $12,623,076 $16,140,635 $16,721,462

Operating Expenses
Personnel Services $1,542,144 $1,739,046 $1,926,578 $2,052,155 $2,366,775
Repairs and Maintenance 576,979 370,357 355,811 588,904 432,139
Material, Supplies & Maintenance 1,898,609 2,429,703 3,902,701 3,514,126 2,592,225
Purchased Water 2,189,463 2,724,262 2,817,407 3,113,733 3,538,733
Depreciation and Amortization 896,619 1,180,584 1,246,157 1,278,603 1,352,088
Total $7,103,814 $8,443,952 $10,248,654 $10,547,521 $10,281,960

Total (excluding Depreciation) $6,207,195 $7,263,368 $9,002,497 $9,268,918 $8,929,872

CCWD Connection Fee $747,831 $747,831 $753,806 $756,913 $893,621
Debt Service 1996 (MADs) 691,500 691,500 691,500 691,500 691,500
Total $1,439,331 $1,439,331 $1,445,306 $1,448,413 $1,585,121

Connection Fees $7,384,499 $4,616,771 $5,629,901 $5,477,655 $1,008,025

Net Revenues
(without Connection Fees) $3,822,131 $3,200,032 $3,620,579 $6,871,717 $7,791,590
Net Revenues
(with Connection Fees) $11,206,630 $ 7,816,803 $9,250,480 $12,349,372 $8,799,615

Net Revenue Coverage
(Senior Debt) 16.21 11.30 13.38 17.86 12.73
Net Revenue Coverage (Senior Debt w/o Connection Fees) 5.53 4.63 5.24 9.94 11.27
Net Revenue Coverage (All Obligations w/o Connection Fees) 2.66 2.22 2.51 4.74 4.92

* Unaudited.

Source: City of Brentwood.

TABLE 9
CITY OF BRENTWOOD
Projected Net Water Revenues and Debt Service Coverage
Five Fiscal Years ending June 30, 2012
2008-09 2009-10 2010-11 2011-12 2012-13
Charges for Services $17,058,653 $18,141,807 $19,281,807 $20,496,807 $21,791,807
Other Income 150,000 150,000 150,000 150,000 150,000
Reserve Fund Earnings 121,653 162,807 162,807 162,807 162,807
Interest Earnings 475,776 462,607 442,524 439,136 466,781
Total $17,806,082 $18,917,221 $20,037,138 $21,248,750 $22,571,395

Operating Expenses
Personnel Services $2,824,925 $2,966,000 $3,114,000 $3,270,000 $3,434,000
Repairs and Maintenance 705,372 741,000 778,000 817,000 858,000
Material, Supplies & Maintenance 3,586,925 3,778,581 3,962,833 4,121,830 4,288,795
Purchased Water 4,512,500 4,738,000 4,975,000 5,224,000 5,485,000
Depreciation and Amortization 1,607,088 2,682,088 2,717,088 2,752,088 2,752,088
Total $13,236,810 $14,905,669 $15,546,921 $16,184,918 $16,817,883

Total (excluding Depreciation) $11,629,722 $12,223,581 $12,829,833 $13,432,830 $14,065,795

Debt Service Series 2008 Bonds $2,516,487 $3,128,181 $3,133,593 $4,067,743 $4,065,681
CCWD Connection Fee 794,238 818,065 842,607 867,885 893,921
Total $3,310,725 $3,946,246 $3,976,200 $4,935,628 $4,959,602

Connection Fees $443,814 $ 828,313 $380,785 $1,175,992 $506,042

Net Revenues
(without Connection Fees) $6,176,360 $6,693,640 $7,207,305 $7,815,920 $8,505,600
Net Revenues
(with Connection Fees) $6,620,174 $7,521,953 $7,588,090 $8,991,912 $9,011,642

Net Revenue Coverage
(Senior Debt) 2.63 2.40 2.42 2.21 2.22
Net Revenue Coverage
(Senior Debt w/o Connection Fees) 2.45 2.14 2.30 1.92 2.09
Net Revenue Coverage (All Obligations w/o Connection Fees) 1.87 1.70 1.81 1.58 1.71

Source: City of Brentwood.



APPENDIX D
THE CITY OF BRENTWOOD
The following information concerning the City and surrounding areas are included only for the purpose of supplying general information regarding the community. The 2008 Bonds are not a debt of the City, the State, or any of its political subdivisions and neither said City, said State, nor any of its political subdivisions is liable therefor. See “SECURITY FOR THE 2008 BONDS” in the forepart of this Official Statement.
The City is located in eastern Contra Costa County (the “County”) across the San Francisco Bay approximately 45 miles northeast of San Francisco, 65 miles southwest of Sacramento and 10 miles east of Antioch. The City contains approximately 14.8 square miles in total area and has a population which has increased significantly in recent years.
Farmers first settled in the City in 1878, and it was incorporated in 1948. Until the past decade, the City had retained its agricultural orientation. In recent years, new residential subdivisions have transformed the City into a more suburban environment, as evidenced by its rapid population growth. Land uses in and around the City are characterized by older farming districts and an original downtown area, contrasted with rapidly expanding residential neighborhoods in the peripheral areas of the City.
The City enjoys close proximity to major regional employment areas, including San Francisco and the northern Bay Area, Walnut Creek and the San Ramon corridor in the County, and the Stockton and central San Joaquin Valley area to the east. The City is also close to major regional recreation areas, including Mt. Diablo State Park approximately 25 miles to the west, the Sierra Nevada Mountains 90 miles to the east and the Sacramento Delta waterway to the north.
Municipal Government
The City was incorporated in 1948 as a general law city. The City Council is made up of four council members elected at large to serve four-year overlapping terms, with elections held every two years. The mayor is directly elected to serve a two-year term. The City Council and mayor appoint a city manager to administer daily affairs of the City and to implement policies established by the City Council.
The City’s municipal functions include police protection, water service, highways and streets, sanitation, youth services, public improvements, parks and recreation services, community development and general administrative services. The City has approximately 275 employees.

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Population
The following chart indicates historic population estimates of the City, the County and the State of California (the “State”).
TABLE 1
HISTORICAL CITY, COUNTY AND STATE POPULATION DATA
(As of January 1, 2008)

Year City of Brentwood Contra Costa County State of
California
2003 34,109 996,159 35,691,472
2004 38,395 1,008,178 36,245,016
2005 42,050 1,019,101 36,728,196
2006 45,892 1,029,377 37,172,015
2007 48,677 1,037,580 37,559,440
2008 50,614 1,051,674 38,049,462
________________________________________
Source: State of California, Department of Finance.

Effective Buying Income
Effective Buying Income is defined as personal income less personal tax and nontax payments, a number often referred to as disposable or after-tax income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance.

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The following table summarizes the median household Effective Buying Income for the County, the State and the United States for the period 2002 through 2006.
TABLE 2
EFFECTIVE BUYING INCOME
As of January 1, 2002 through 2006

Year Area Median Household Effective Buying Income

2002 Contra Costa County $54,448
California 42,484
United States 38,035

2003 Contra Costa County $54,862
California 42,924
United States 38,201

2004 Contra Costa County $56,165
California 43,915
United States 39,324

2005 Contra Costa County $56,979
California 44,681
United States 40,529

2006 Contra Costa County $58,497
California 46,275
United States 41,255


Sources: Sales & Marketing Management Survey of Buying Power (for 2002-2004) and Demographics USA (for 2005 and 2006).



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Assessed Valuation
The following table shows the assessed valuation for the City for the fiscal years ending June 30, 2002 through June 30, 2007.

TABLE 3
CITY OF BRENTWOOD
Assessed Value and Estimated Actual
Value of Taxable Property(1)
(Unaudited)

Fiscal
Year Residential
Property Commercial
Property Industrial
Property Other
Property Less:
Tax-Exempt Property Total Taxable
Assessed
Value Total
Direct
Tax Rate
2007 $ 6,113,626,591 $ 470,049,609 $ 59,128,465 $ 626,092,781 $ 96,882,748 $ 7,172,014,698 1.0038%
2006 4,154,730,562 349,720,006 36,479,015 1,151,608,684 93,209,265 5,599,329,002 1.0040%
2005 3,515,069,389 287,458,470 40,651,651 736,390,251 82,710,234 4,496,859,527 1.0051%
2004 3,042,749,265 186,451,612 36,523,807 386,365,328 80,350,496 3,571,739,516 1.0063%
2003 2,287,079,944 165,902,523 44,072,038 412,113,848 62,211,396 2,846,956,957 1.0095%
2002 1,721,900,377 132,608,274 41,585,860 349,876,930 51,909,880 2,194,061,561 1.0000%
______________________________
(1) General property taxes are calculated at 1% of total assessed value less local exemptions.

Source: City of Brentwood.

The following table identifies the ten largest property taxpayers within the City for Fiscal Year 2006-07.

TABLE 4
CITY OF BRENTWOOD
Principal Property Taxpayers
Fiscal Year 2006-2007
(Unaudited)
Taxpayer Taxable
Assessed
Value Percent of
District's Total
Taxable
Value
Sand Creek Crossing LLC $ 56,707,614 0.79%
David E. & Janet S. Meyers 55,071,943 0.77%
DS Lone Tree Plaza LLC 54,079,519 0.75%
Western Pacific Housing Inc. 48,826,895 0.68%
John Muir/Mt. Diablo Health 45,075,875 0.63%
Brentwood Union School District 36,584,208 0.51%
Richmond American Homes of California 36,088,113 0.50%
Prestige Homes Limited Partnership 28,110,490 0.39%
Brentwood Arbor Ridge Limited Partnership 27,068,080 0.38%
City of Brentwood 25,110,894 0.35%
Total $ 412,723,631 5.75%
______________________________
Source: City of Brentwood.

Commercial Activity
Total taxable sales during the first and second quarters of calendar year 2007 in the City were reported to be $209,107,000 a 5.68% increase over the total taxable sales of $197,874,000 reported during the first and second quarters of calendar year 2006. The following table presents the number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the City. Yearly figures are not yet available for 2007 and 2008.
TABLE 5
CITY OF BRENTWOOD
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
(Dollars in Thousands)
Retail Stores Total All Outlets

Number
of Permits Taxable Transactions Number
of Permits Taxable Transactions

2002 292 $169,876 561 $199,316
2003 362 198,832 687 232,542
2004 387 298,821 745 334,262
2005 426 348,694 828 388,356
2006 456 362,644 893 409,480
____________________
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).

Total taxable sales during the first and second quarters of calendar year 2007 in the County were $6,821,893,000 a 3.49% increase over the total taxable sales of $6,591,638,000 reported during the first and second quarters of calendar year 2006. The following table presents the number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the County. Yearly figures are not yet available for 2007 and 2008.




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TABLE 6
CONTRA COSTA COUNTY
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
(Dollars in Thousands)
Retail Stores Total All Outlets

Number
of Permits Taxable Transactions Number
of Permits Taxable Transactions

2002 10,836 $9,044,346 22,541 $12,159,424
2003 11,575 9,025,114 23,253 12,223,295
2004 11,717 9,697,365 23,571 12,990,538
2005 11,776 10,072,084 23,692 13,480,075
2006 11,467 10,275,907 23,249 13,867,661
____________________
Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax).








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Employment
Contra Costa County and Alameda County comprise the Oakland Metropolitan Statistical Area. The following table outlines civilian labor force, employment and unemployment statistics for the Oakland Metropolitan Statistical Area.
TABLE 7
OAKLAND METROPOLITAN STATISTICAL AREA
(Alameda and Contra Costa Counties)
Civilian Labor Force, Employment and Unemployment, Employment by Industry
(Annual Averages)
2004 2005 2006 2007 2008
Civilian Labor Force (1) 1,264,100 1,258,300 1,254,900 1,277,600 1,285,400
Employment 1,183,200 1,189,800 1,196,700 1,217,700 1,217500
Unemployment 80,900 68,500 58,200 59,900 67,900
Unemployment Rate 6.4% 5.4% 4.6% 4.7% 5.3%
Wage and Salary Employment: (2)
Agriculture 1,100 1,100 1,200 1,200 1,200
Natural Resources and Mining 1,200 1,100 1,100 1,200 1,200
Construction 63,800 67,100 69,200 69,000 67,300
Manufacturing 97,900 96,300 95,800 94,000 92,600
Wholesale Trade 47,900 48,400 48,100 48,600 48,200
Retail Trade 109,600 112,000 114,800 113,800 112,900
Transportation, Warehousing and Utilities 33,800 34,200 33,700 35,700 36,200
Information 31,600 30,900 30,000 29,600 28,700
Finance and Insurance 48,800 50,600 50,500 46,800 43,000
Real Estate and Rental and Leasing 17,900 18,300 18,500 16,700 16,000
Professional and Business Services 143,700 147,400 150,600 152,700 152,700
Educational and Health Services 115,300 115,800 118,700 121,600 124,000
Leisure and Hospitality 77,700 79,000 81,500 84,400 85,200
Other Services 35,800 34,600 34,900 35,000 35,700
Federal Government 17,900 17,200 17,300 17,300 16,800
State Government 47,500 45,900 45,200 45,000 45,500
Local Government 114,500 116,100 117,600 120,800 126,800
Total, All Industries (3) 1,006,000 1,016,000 1,028,700 1,033,400 1,034,000
_________________________________
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers,
household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers,
household domestic workers, and workers on strike.
(3) Totals may not add due to rounding.

Source: Labor Division of the California State Employment Development Department.




Major Employers
The following table lists the largest employers within the County in alphabetical order.
TABLE 8
COUNTY OF CONTRA COSTA
Major Employers
(As of January 2008)

Employer Name Location Industry
ADP San Ramon Payroll Preparation Service
BART Richmond Transit Lines
Berlex Biosciences
Richmond Pharmaceutical Preparation (Manufacturers)
Big Blow Tyre Barn
Crockett Real Estate Loans
Chevron Corporation
San Ramon Oil Refiners (Manufacturers)
Chevron Global Downstream LLC
San Ramon Service Stations-Gasoline & Oil
Concord Naval Weapons Station
Concord Federal Government-National Security
Contra-Costa Regional Medical Center
Martinez Government Offices-County
Diablo Valley College
Pleasant Hill Schools-Universities & Colleges Academic
Doctor’s Medical Center
San Pablo Hospitals
John Muir Physical Rehab
Concord Rehabilitation Services
John Muir Physician Referral Walnut Creek Hospitals
Kaiser Permanente Medical Center
Walnut Creek Hospitals
Kaiser Permanente Medical Center
Martinez Health Plans
Martinez Refining Co.
Martinez Petroleum Products-Manufacturers
Muirlab
Walnut Creek Laboratories-Medical
PMI Mortgage Insurance Co.
Walnut Creek Insurance-Mortgage
Richmond City Offices
Richmond Government Offices-City, Village & TWP
San Ramon Regional Medical Center
San Ramon Hospitals
Shell Oil Products Co.
Martinez Service Stations-Gasoline & Oil
St Mary’s College-California
Moraga Schools-Universities & Colleges Academic
Sutter Delta Medical Center
Antioch Hospitals
Tesoro Refining & Marketing
Pacheco Oil Refiners (Manufacturers)
U.S. Veterans Medical Center
Martinez Hospitals
USS-POSCO Industries
Pittsburg Steel Mills (Manufacturers)
_______________________________________
Source: California Employment Development Department, extracted from the America’s Labor Market Information System (ALMIS) Employer Database.





Construction
The following tables show a five-year summary of the valuation of building permits issued in the City and the County.
TABLE 9
CITY OF BRENTWOOD
Building Permit Valuation
(Valuation in Thousands of Dollars)

2003 2004 2005 2006 2007
Permit Valuation
New Single-family $260,659.7 $271,770.0 $301,457.8 $111,963.7 $77,304.2
New Multi-family 0.0 19,093.3 4,089.8 7,591.6 157.1
Res. Alterations/Additions 1,189.9 2,551.8 2,926.1 10,610.6 7,287.4
Total Residential 261,849.6 293,415.1 308,473.7 130,165.9 84,748.7

New Commercial 23,395.9 33,637.2 13,319.3 25,445.9 25,805.5
New Industrial 1,626.4 5,113.1 7,453.0 1,715.3 876.7
New Other 10,444.3 14,130.6 21,133.3 1,001.7 2,072.5
Com. Alterations/Additions 3,353.5 13,076.4 6,502.3 5,564.3 6,889.3
Total Nonresidential 38,820.1 65,957.4 48,407.9 33,727.2 35,644.0

New Dwelling Units
Single Family 1,361 1,306 1,413 417 254
Multiple Family 0 226 82 102 2
TOTAL 1,361 1,532 1,495 519 256
_______________________________________
Source: City of Brentwood.









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TABLE 10
CONTRA COSTA COUNTY
Building Permit Valuation
(Valuation in Thousands of Dollars)
2003 2004 2005 2006 2007
Permit Valuation
New Single-family $1,263,359.9 $1,113,572.4 $1,525,515.3 $495,289.6 $433,321.5
New Multi-family 190,449.4 123,332.9 106,511.5 11,737.7 20,633.5
Res. Alterations/Additions 230,427.8 233,108.3 293,394.4 96,617.7 80,490.7
Total Residential 1,684,237.2 1,470,013.6 1,925,421.2 603,645.0 534,445.7

New Commercial 128,738.0 102,549.3 87,900.5 26,014.8 22,197.5
New Industrial 33,047.1 17,421.4 21,155.9 98,462.2 150,441.5
New Other 53,034.2 68,104.1 122,625.7 21,444.2 26,954.5
Com. Alterations/Additions 197,298.8 187,108.9 161,187.6 1,319.7 137.4
Total Nonresidential 412,118.0 375,183.8 392,869.7 147,240.9 199,730.9

New Dwelling Units
Single Family 4,965 4,222 5,452 1,470 1,295
Multiple Family 1,930 1,261 860 5 13
TOTAL 6,895 5,483 6,312 1,475 1,308
______________________
Source: Contra Costa County.







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Utilities
Pacific Gas & Electric provides gas and electric services in the City. AT&T provides telephone service. Water is supplied by City wells and the East Bay Municipal Utility District through the City water lines and filtration plant. The City supplies sewer services.
Education
The City is part of the Brentwood and Liberty Union High School District which provide K-12 public education needs. There are three high schools, two junior highs and seven elementary schools located in the City.
Near the City are four colleges: Los Medanos Community College in Pittsburg, Diablo Valley Community College in Concord, Cal State East Bay in Concord and San Joaquin Delta Community College and University of the Pacific in Stockton.
Transportation
The City, located near the cities of Antioch and Stockton, is in close proximity to a highly developed transportation network. State Highway 4 runs in an east/west direction through the City, intersecting Interstate 680 near Martinez and Interstate 80 in Hercules. To the east, Highway 4 leads to Stockton where it intersects with Interstate 5. The highways provide the City with access to major regional workplace and recreation areas. The City is close to both regional and international airports: the Concord Airport, the Stockton Airport and the Oakland International Airport.
TABLE 11
PROXIMITY TO MAJOR URBAN CENTERS
Proximity Distance Time
Antioch to Brentwood 10 miles 15 minutes
Concord to Brentwood 26 miles 30 minutes
Oakland to Brentwood 46 miles 50 minutes
Stockton to Brentwood 37 miles 30 minutes
San Francisco to Brentwood 54 miles 80 minutes
Sacramento to Brentwood 75 miles 90 minutes
_________________
Source: City of Brentwood

The City is also served by bus lines and railroads. Bay Area Rapid Transit (“BART”) provides a bus service from Antioch connecting to the existing Concord BART station. BART stations in West Pittsburg and Pittsburg have recently opened, further extending the rapid transit system into the east County area.
Contra Costa County
Situated northeast of San Francisco, the County is bounded by the San Francisco and San Pablo Bays, the Sacramento River Delta and Alameda County. Hills effectively divide the County into three distinct regions. The western portion, with its access to water, contains much of the County’s heavy industry. The central section is rapidly developing from a suburban area into a major commercial and financial headquarters center. The eastern part is also undergoing substantial change, from a rural, agricultural area, to a suburban region. The County has extensive and varied transportation facilities including ports accessible to ocean going vessels, railroads, freeways and rapid transit lines connecting the area with Alameda County and San Francisco.
The County is home to over 1,050,000 people and thousands of businesses who are served by 18 cities, 201 special districts and the County. The County also provides municipal services for residents of unincorporated areas.





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City Administration
City of Brentwood City Council
150 City Park Way
Brentwood, CA 94513
(925) 516-5440
Fax (925) 516-5441
E-mail allcouncil@brentwoodca.gov