Attachment C - Indenture of Trust by and between the City and U.S. Bank Trust Company, National Association, as Trustee — Palo Alto City Council, September 14, 2026

Agenda draft INDENTURE OF TRUST by and between the CITY OF PALO ALTO and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee Dated as of October 1, 2026 Relating to $[Principal Amount] City of Palo Alto Water Revenue Refunding Bonds, 2026 Series A - i -
TABLE OF CONTENTS ARTICLE I: DEFINITIONS; AUTHORIZATION AND PURPOSE OF 2026 BONDS; EQUAL SECURITY: SECTION 1.01. Definitions. ................................................................................................................................3 SECTION 1.02. Rules of Construction. ...........................................................................................................10 SECTION 1.03. Authorization and Purpose of 2026 Bonds .........................................................................10 SECTION 1.04. Equal Security. ........................................................................................................................10 ARTICLE II: ISSUANCE OF 2026 BONDS: SECTION 2.01. Terms of 2026 Bonds. .............................................................................................................11 SECTION 2.02. Redemption of 2026 Bonds. ..................................................................................................12 SECTION 2.03. Form of 2026 Bonds. ...............................................................................................................13 SECTION 2.04. Execution of 2026 Bonds. .......................................................................................................14 SECTION 2.05. Transfer of 2026 Bonds. .........................................................................................................14 SECTION 2.06. Exchange of 2026 Bonds. .......................................................................................................14 SECTION 2.07. Temporary Bonds. ..................................................................................................................14 SECTION 2.08. Bond Registration Books. ......................................................................................................14 SECTION 2.09. 2026 Bonds Mutilated, Lost, Destroyed or Stolen. .............................................................15 SECTION 2.10. Book Entry System ..................................................................................................................15 ARTICLE III: ISSUE OF 2026 BONDS; PARITY DEBT: SECTION 3.01. Issuance of 2026 Bonds ..........................................................................................................17 SECTION 3.02. Application of Proceeds of Sale of 2026 Bonds. .................................................................17 SECTION 3.05. Cost of Issuance Fund. ...........................................................................................................17 SECTION 3.06. Issuance of Parity Bonds. ......................................................................................................17 SECTION 3.08. Subordinate Debt ....................................................................................................................18 SECTION 3.09. Validity of 2026 Bonds ...........................................................................................................18 ARTICLE IV: PLEDGE OF NET REVENUES; FUNDS AND ACCOUNTS: SECTION 4.01. Pledge of Net Revenues, Water Revenue Fund. ................................................................19 SECTION 4.02. Receipt and Deposit of Revenues. ........................................................................................19 SECTION 4.03. Establishment of Funds and Accounts and Allocation of Revenues Thereto. ..............19 SECTION 4.04. Application of Debt Service Fund. .......................................................................................20 SECTION 4.05. Application of Redemption Account. ..................................................................................20 SECTION 4.06. Surplus. ....................................................................................................................................21 SECTION 4.07. Investments. ............................................................................................................................21 SECTION 4.08. Valuation .................................................................................................................................21 SECTION 4.09. Rate Stabilization Fund .........................................................................................................21 ARTICLE V: COVENANTS OF THE CITY; SPECIAL TAX COVENANTS: SECTION 5.01. Punctual Payment; Compliance With Documents. ...........................................................23 SECTION 5.02. Against Encumbrances. .........................................................................................................23 SECTION 5.03. Discharge of Claims. ..............................................................................................................23 SECTION 5.04. Acquisition, Construction or Financing of any Improvement to the Water System ....23 SECTION 5.05. Maintenance and Operation of Water System in Efficient and Economical Manner. ...................................................................................................................................................23 SECTION 5.06. Against Sale, Eminent Domain. ............................................................................................23 SECTION 5.07. Insurance. ................................................................................................................................24 SECTION 5.08. Records and Accounts. ..........................................................................................................25 SECTION 5.09. Protection of Security and Rights of Owners. ....................................................................25 SECTION 5.10. Against Competitive Facilities. ............................................................................................25 SECTION 5.11. Payment of Taxes, Etc. ...........................................................................................................25 SECTION 5.12. Rates and Charges. .................................................................................................................25 SECTION 5.13. No Priority for Additional Obligations ...............................................................................26 - ii -
SECTION 5.14. Tax Covenants ........................................................................................................................26 SECTION 5.15. Further Assurances ................................................................................................................27 SECTION 5.16. Continuing Disclosure ...........................................................................................................27 ARTICLE VI: THE TRUSTEE: SECTION 6.01. Appointment of Trustee. .......................................................................................................28 SECTION 6.02. Acceptance of Trusts. .............................................................................................................28 SECTION 6.03. Fees, Charges and Expenses of Trustee. .............................................................................30 SECTION 6.04. Notice to Bond Owners of Default. ......................................................................................30 SECTION 6.05. Intervention by Trustee. ........................................................................................................30 SECTION 6.06. Removal of Trustee. ...............................................................................................................30 SECTION 6.07. Resignation by Trustee. .........................................................................................................31 SECTION 6.08. Appointment of Successor Trustee. .....................................................................................31 SECTION 6.09. Merger or Consolidation. ......................................................................................................31 SECTION 6.10. Concerning any Successor Trustee. .....................................................................................31 SECTION 6.11. Appointment of Co-Trustee. .................................................................................................31 SECTION 6.12. Indemnification; Limited Liability of Trustee. ...................................................................32 ARTICLE VII: MODIFICATION AND AMENDMENT OF THE INDENTURE: SECTION 7.01. Amendment by Consent of Bond Owners..........................................................................33 SECTION 7.02. Amendment Without Consent of Bond Owner. ................................................................33 SECTION 7.03. Disqualified Bonds. ................................................................................................................33 SECTION 7.04. Endorsement or Replacement of 2026 Bonds After Amendment. ..................................33 SECTION 7.05. Amendment by Mutual Consent. ........................................................................................34 ARTICLE VIII: EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS: SECTION 8.01. Events of Default and Acceleration of Maturities. ............................................................35 SECTION 8.02. Application of Funds Upon Acceleration. ..........................................................................35 SECTION 8.03. Other Remedies; Rights of Bond Owners. ..........................................................................36 SECTION 8.04. Power of Trustee to Control Proceedings. ..........................................................................36 SECTION 8.05. Appointment of Receivers. ...................................................................................................37 SECTION 8.06. Non-Waiver. ............................................................................................................................37 SECTION 8.07. Rights and Remedies of Bond Owners. ...............................................................................37 SECTION 8.08. Termination of Proceedings. .................................................................................................38 ARTICLE IX: MISCELLANEOUS: SECTION 9.01. Limited Liability of City. .......................................................................................................39 SECTION 9.02. Benefits of Indenture Limited to Parties. ............................................................................39 SECTION 9.03. Discharge of Indenture. .........................................................................................................39 SECTION 9.04. Successor Is Deemed Included in All References to Predecessor. ..................................40 SECTION 9.05. Content of Certificates. ..........................................................................................................40 SECTION 9.06. Execution of Documents by Bond Owners. ........................................................................40 SECTION 9.07. Waiver of Personal Liability. ................................................................................................41 SECTION 9.08. Partial Invalidity. ....................................................................................................................41 SECTION 9.09. Destruction of Cancelled 2026 Bonds ..................................................................................41 SECTION 9.10. Funds and Accounts. .............................................................................................................41 SECTION 9.11. Notices. ....................................................................................................................................42 SECTION 9.12. Unclaimed Moneys. ...............................................................................................................42 SECTION 9.13. Execution in Several Counterparts ......................................................................................42 SECTION 9.14. Governing Law .......................................................................................................................42 SECTION 9.15. Payment on Business Days ...................................................................................................42 EXHIBIT A: FORM OF 2026 BOND EXHIBIT B: DESCRIPTION OF 2009 WATER PROJECT 1 INDENTURE OF TRUST THIS INDENTURE OF TRUST, dated as of October 1, 2026, by and between the CITY OF PALO ALTO, a chartered city and municipal corporation organized and existing under the constitution and laws of the State of California (the "City"), and U.S. Bank Trust Company, National Association, a national banking association organized and existing under the laws of the United States of America, with a corporate trust office in San Francisco, California, and being qualified to accept and administer the trusts hereby created, as trustee (the "Trustee"); RECITALS: WHEREAS, the City previously issued the $35,015,000 initial principal amount City of Palo Alto Water Revenue Bonds, 2009 Series A (the “2009 Bonds”) under Chapter 12.28 of the Palo Alto Municipal Code to finance the improvements to the City’s water system (as defined more completely herein, the "Water System") described in Exhibit B attached hereto and incorporated herein (“2009 Water Project”); WHEREAS, the City is authorized pursuant to the provisions of Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code to issue its revenue bonds for the purpose of refunding any revenue bonds of the City; WHEREAS, the City, after due investigation and deliberation, has determined that it is in the public interest of the City at this time to issue bonds under the Refunding Law for the purpose of refunding the outstanding 2009 Bonds and to pay certain costs of issuing the 2026 Bonds, and to that end the City Council, on ____, 2026, adopted its Resolution No. _____, authorizing the issuance of its City of Palo Alto Water Revenue Refunding Bonds, 2026 Series A (the “2026 Bonds”) for such purposes; WHEREAS, in order to provide for the authentication and delivery of the 2026 Bonds, to establish and declare the terms and conditions upon which the 2026 Bonds are to be issued and secured and to secure the payment of the principal thereof and of the interest and premium, if any, thereon, the City Council has authorized the execution and delivery of this Indenture; WHEREAS, the 2026 Bonds will be secured by a pledge of the Net Revenues, as defined herein, on a parity basis with the pledge securing any Parity Debt (as defined herein) issued by the City from time to time in accordance with the conditions set forth herein; and WHEREAS, all acts and proceedings required by law necessary to make the 2026 Bonds, when executed by the City, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special obligations of the City, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth, in accordance with its terms, have been done and taken; and the execution and delivery of this Indenture have been in all respects duly authorized; NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the principal of and the interest and premium (if any) on all 2026 Bonds at any time issued and Outstanding under this Indenture, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the 2026 Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the 2026 Bonds by the Owners thereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, the City does hereby 2 covenant and agree with the Trustee, for the benefit of the respective Owners from time to time of the 2026 Bonds, as follows:
3 ARTICLE I DEFINITIONS; AUTHORIZATION AND PURPOSE OF 2026 BONDS; EQUAL SECURITY SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes of this Indenture and of the 2026 Bonds and of any certificate, opinion, request or other documents herein mentioned have the meanings herein specified. "Authorized Investments" means any of the following, but only to the extent that the same are acquired at Fair Market Value, which at the time of investment are legal investments under the laws of the State of California and permitted under the City’s investment policy for the moneys proposed to be invested therein: (a) Federal Securities; (b) senior debt obligations rated "Aaa" by Moody’s and "AAA" by S&P issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, and obligations of the Resolution Funding Corporation (REFCORP); (c) U.S. dollar denominated deposit accounts, federal funds and banker’s acceptances with domestic commercial banks (including the Trustee and its affiliates) which have a rating on their short term certificates of deposit on the date of purchase of "P-1" by Moody’s and "A-1" or "A-1+" by S&P and maturing no more than 360 days after the date of purchase, provided that ratings on holding companies are not considered as the rating of the bank; (d) commercial paper which is rated at the time of purchase in the single highest classification, "P-1" by Moody’s and "A-1+" by S&P, and which matures not more than 270 days after the date of purchase; (e) investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P, including any such money market fund from which the Trustee or its affiliates receive fees for services to such fund; (f) pre-refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (i) which are rated, based upon an irrevocable escrow account or fund (the "escrow"), in the highest rating category of Moody’s and S&P or any successors thereto; or (ii)(A) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (a) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (B) which escrow is sufficient, as verified by a nationally recognized Independent Certified Public Accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate; 4 (g) general obligations of states with a rating of at least "A2/A" or higher by both Moody’s and S&P; (h) any investment agreement with, or guaranteed by, a financial institution the long-term unsecured obligations or the financial strength of which is rated A or better by S&P at the time of initial investment; (i) the Local Agency Investment Fund maintained by the State of California, to the extent any investments of moneys held by the Trustee may be made and withdrawn directly by, and in the name of, the Trustee; and (j) the California Asset Management Program (CAMP). “Authorized Official” means the City Manager, Assistant City Manager, Director of Administrative Services, or any other officer of the City duly authorized by the Council for that purpose. "Bond Counsel" means Jones Hall LLP, and any attorney at law or firm of attorneys, of nationally recognized standing in matters pertaining to the federal tax exemption of interest on bonds issued by states and political subdivisions, and duly admitted to practice law before the highest court of any state of the United States of America. "Bond Registration Books" means the books maintained by the Trustee pursuant to Section 2.08 for the registration and transfer of ownership of the 2026 Bonds. "Bonds" the 2026 Bonds at any time Outstanding hereunder. "Bond Year" means the twelve-month period beginning on June 2 in each year and ending on the following June 1 except that the first Bond Year shall begin on the Closing Date. "Business Day" means any day other than a Saturday, Sunday or a day on which the Trustee is authorized by law to remain closed. "Certificate of the City" means a certificate in writing signed by an Authorized Official. "Charges" means fees, tolls, assessments, rates and rentals prescribed by the Council for the services and facilities of the Water System furnished by the City. "City" means the City of Palo Alto, a chartered city and municipal corporation organized and existing under the Constitution and laws of the State, and any successor thereto. "Closing Date" means the date upon which there is an exchange of the 2026 Bonds for the proceeds representing the purchase of such 2026 Bonds by the Original Purchaser. "Cost of Issuance Fund" means the Fund by that name established pursuant to Section 3.03. "Costs of Issuance" means all expenses incurred in connection with the authorization, issuance, sale and delivery of the 2026 Bonds, including but not limited to compensation, fees and expenses of the City and the Trustee and their respective counsel, compensation to any financial consultants and underwriters, legal fees and expenses, filing and recording costs, rating agency fees, costs of preparation and reproduction of documents and costs of printing. 5 "Council" means the Council of the City or any other legislative body of the City hereafter provided for pursuant to law. "Debt Service" means, as of any date, with respect to the 2026 Bonds and any Parity Debt and, in the case of the additional debt tests, any Parity Debt that is proposed to be outstanding, the aggregate amount of principal and interest scheduled to become due (either at maturity or by mandatory redemption), on the 2026 Bonds or Parity Debt, calculated with the following assumptions: a. Principal payments (unless a different subdivision of this definition applies for purposes of determining principal maturities or amortization) are made in accordance with any amortization schedule published for such principal, including any minimum sinking fund payments; b. Interest on a variable rate Parity Debt that is not subject to a swap agreement and that is issued or will be issued as a tax-exempt obligation under federal law, is the average of the SIFMA Municipal Swap Index, or its successor index, during the 24 months preceding the date of such calculation; c. Interest on a variable rate Parity Debt that is not subject to a swap agreement and that is issued or will be issued as a taxable obligation under federal law, is the average of SOFR, or its successor index, during the 24 months preceding the date of such calculation; d. Interest on a variable rate Parity Debt that is subject to a swap agreement is the fixed swap rate or cap strike rate, as appropriate, if the variable rate has been swapped to a fixed rate or capped pursuant to an interest rate cap agreement or similar agreement; e. Interest on a fixed rate Parity Debt that is subject to a swap agreement such that all or a portion of the interest has been swapped to a variable rate shall be treated as variable rate debt under subdivisions (b) or (c) of this definition of Debt Service; f. Payments of principal and interest on a Parity Obligation are excluded from the calculation of Debt Service to the extent such payments are to be paid from amounts then currently on deposit with a trustee or other fiduciary and restricted for the defeasance of such Parity Obligations; g. If 25% or more of the principal of a Parity Debt is not due until its final stated maturity, then principal and interest on that Parity Debt may be projected to amortize over the lesser of 30 years or the useful life of the financed asset, and interest may be calculated according to subdivisions (b)-(e) of this definition of Debt Service, as appropriate. "Debt Service Fund" means the fund by that name established and held by the Trustee for the 2026 Bonds pursuant to Section 4.03. "Defeasance Obligations" means (a) cash, (b) non-callable direct obligations of the United States of America ("Treasuries"), (c) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated or (d) pre-refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody’s, respectively (or any combination thereof). 6 "Depository" means (a) initially, DTC, and (b) any other Securities Depositories acting as Depository pursuant to Section 2.10. "Depository System Participant" means any participant in the Depository's book-entry system. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. "Event of Default" means any of the events described in Section 8.01. "Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Tax Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, (iii) the investment is a United States Treasury Security--State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the City and related parties do not own more than a ten percent (10%) beneficial interest therein if the return paid by the fund is without regard to the source of the investment. "Federal Securities" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (a) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America); and (b) obligations of any department, agency or instrumentality of the United States of America the timely payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America. "Fiscal Year" means the period commencing on July 1 of each year and terminating on the next succeeding June 30. "Gross Revenues" means, for any period of computation, all gross charges received for, and all other gross income and revenues derived by the City from, the ownership or operation of the Water System or otherwise arising from the Water System during such period, including but not limited to (a) all Charges received by the City for use of the Water System, (b) all receipts derived from the investment of funds held by the City or the Trustee under this Indenture, (c) transfers from any Rate Stabilization Fund into the Water Revenue Fund, and (d) all moneys received by the City from other public entities whose inhabitants are served pursuant to contracts with the City. Gross Revenues for a period of computation shall not include amounts deposited into the Rate Stabilization Fund during such period of computation, but only to the extent such deposits are made from amounts that would otherwise constitute Gross Revenues that were received by the City during such period of computation. 7 "Improvement" means any addition, extension, improvement, equipment, machinery or other facilities to or for the Water System. "Indenture" means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended pursuant to the provisions hereof. "Independent Certified Public Accountant" means any certified public accountant or firm of such accountants appointed and paid by the City, and who, or each of whom- (a) is in fact independent and not under domination of the City; (b) does not have any substantial identity of interest, direct or indirect, with the City; and (c) is not and no member of which is connected with the City as an officer or employee of the City, but who may be regularly retained to make annual or other audits of the books of or reports to the City. "Information Services" means in accordance with then-current guidelines of the Securities and Exchange Commission, the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Board (at http://emma.msrb.org), or such service or services as the City may designate in a certificate delivered to the Trustee. "Interest Payment Date" means June 1 and December 1 in each year, beginning December 1, 2026. "Interest Requirement" means, as of any particular date of calculation, the amount equal to any unpaid interest then due and payable, plus an amount which will on the next succeeding Interest Payment Date be equal to the interest to become due and payable on the 2026 Bonds on such next succeeding Interest Payment Date. "Maintenance and Operation Costs" means the reasonable and necessary costs spent or incurred by the City for maintaining and operating the Water System, calculated in accordance with sound accounting principles, including the cost of supply of water, gas and electric energy under contracts or otherwise, the funding of reasonable operating reserves, and all reasonable and necessary expenses of management and repair and other expenses to maintain and preserve the Water System in good repair and working order, and including all reasonable and necessary administrative costs of the City attributable to the Water System and the 2026 Bonds, such as salaries and wages and the necessary contribution to retirement of employees, overhead, insurance, taxes (if any), expenses, compensation and indemnification of the Trustee, and fees of auditors, accountants, attorneys or engineers, and including all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms of this Indenture or any Parity Debt Instrument, but excluding depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. "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, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency selected by the City. 8 "Net Proceeds" means the gross proceeds from the sale of property or insurance or condemnation award with respect to which that term is used remaining after payment of all expenses (including attorneys' fees and any extraordinary expenses of the Trustee) incurred in the collection of such gross proceeds. "Net Revenues" means, with respect to the Water System, for any period of computation, the amount of the Gross Revenues received from the Water System during such period, less the amount of Maintenance and Operation Costs of the Water System becoming payable during such period. "Original Purchaser" means the first purchaser of the 2026 Bonds from the City. "Outstanding", when used as of any particular time with reference to 2026 Bonds, means (subject to the provisions of Section 7.03) all 2026 Bonds theretofore executed, issued and delivered by the City under this Indenture except - (a) 2026 Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (b) 2026 Bonds paid or deemed to have been paid within the meaning of Section 9.03; and (c) 2026 Bonds in lieu of or in substitution for which other 2026 Bonds shall have been executed, issued and delivered by the City pursuant to this Indenture. "Owner" or "Bond Owner" or "Bondowner", when used with respect to any 2026 Bond, means the person in whose name the ownership of such Bond shall be registered on the Bond Registration Books. "Parity Debt" means all bonds, notes or other obligations (including without limitation long-term contracts, loans, sub-leases or other legal financing arrangements) of the City payable from and secured by a pledge of and lien upon any of the Net Revenues, issued or incurred pursuant to Section 3.04. "Parity Debt Instrument" means the resolution, trust indenture or installment sale agreement adopted, entered into or executed and delivered by the City, and under which Parity Debt is issued. "Principal Installment" means with respect to any particular Principal Installment Date, an amount equal to the sum of (i) the aggregate principal amount of Outstanding Serial Bonds payable on such Principal Installment Date (but not including Sinking Fund Installments) and (ii) the aggregate of Sinking Fund Installments with respect to all Outstanding Term Bonds payable on such Principal Installment Date. "Principal Installment Date" means the date on which Principal Installments are required to be made pursuant to Section 2.01. “Rate Stabilization Fund” has the meaning given that term in Section 4.09 of this Indenture. "Record Date" means, with respect to the 2026 Bonds, the fifteenth (15th) calendar day of the month immediately preceding an Interest Payment Date. "Redemption Account" means the Account by that name established and held by the Trustee pursuant to Section 4.03. 9 "Redemption Price" means, with respect to any 2026 Bond, the principal amount thereof, plus the applicable premium, if any, payable upon redemption thereof pursuant to this Indenture. "Refunding Law" has the meaning given that term in the Recitals. "Request of the City" means a request in writing signed by an Authorized Official. "S&P" means Standard & Poor's Corporation, a corporation duly organized and existing under and by virtue of the laws of the State of New York, and its successors or assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term "S&P" shall be deemed to refer to any other nationally recognized securities rating agency selected by the City. "Serial Bonds" means all 2026 Bonds other than Term Bonds. "Sinking Fund Installment" means, with respect to any particular date, the amount of money required by this Indenture to be paid by the City on such date toward the retirement of any particular Term Bonds prior to their respective stated maturities. “SOFR” means the Secured Overnight Financing Rate. "State" means the State of California. "Tax Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the 2026 Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the 2026 Bonds, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under the Tax Code. "Term Bonds" means such 2026 Bonds which are payable prior to their stated maturity by operation of Sinking Fund Installments. "Trust Office" means the corporate trust office of the Trustee at St. Paul, MN, or such other or additional offices as may be specified to the City by the Trustee in writing. "Trustee" means U.S. Bank Trust Company, National Association, appointed by the City to act as trustee hereunder pursuant to Section 6.01, and its assigns or any other corporation or association which may at any time be substituted in its place, as provided in Section 6.01. "Water Revenue Fund" means the Fund by that name established and held by the City and referred to in Section 4.02. “Water System” means the existing water system of the City, comprising all facilities for the obtaining, conserving, treating, distributing, storing and supplying of water for domestic use, irrigation, sanitation, industrial use, fire protection, recreation, or any other public or private uses. "2026 Bonds" means the City of Palo Alto Water Revenue Refunding Bonds, 2026 Series A, issued and at any time Outstanding hereunder. “2009 Indenture” means that certain Indenture of Trust, dated as of October 1, 2009, by and between the City and the 2009 Trustee. “2009 Trustee” means U.S. Bank Trust Company, National Association, as trustee under the 2009 Indenture. 10 “2009 Water Project” means the extensions and improvements to the City's Water System more particularly described in Exhibit B. SECTION 1.02. Rules of Construction. All references in this Indenture to "Articles," "Sections," and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture; and the words "herein," "hereof," "hereunder," and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof. Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders. Unless the context shall otherwise indicate, words importing the singular number shall include the plural number and vice versa, and words importing persons shall include corporations and associations, including public bodies, as well as natural persons. SECTION 1.03. Authorization and Purpose of 2026 Bonds. The City has reviewed all proceedings heretofore taken relative to the authorization of the 2026 Bonds and has found, as a result of such review, and hereby finds and determines that all things, conditions, and acts required by law to exist, happen and/or be performed precedent to and in the issuance of the 2026 Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and the City is now authorized, pursuant to the Refunding Law and each and every requirement of law, to issue the 2026 Bonds in the manner and form provided in this Indenture. Accordingly, the City hereby authorizes the issuance of the 2026 Bonds pursuant to the Refunding Law and this Indenture for the purpose of providing funds to refund the 2009 Bonds and to pay Costs of Issuance of the 2026 Bonds. SECTION 1.04. Equal Security. In consideration of the acceptance of the 2026 Bonds by the Owners thereof, this Indenture shall be deemed to be and shall constitute a contract among the City, the Trustee and the Owners from time to time of the 2026 Bonds; and the covenants and agreements herein set forth to be performed on behalf of the City shall be for the equal and proportionate benefit, security and protection of all Owners of the 2026 Bonds without preference, priority or distinction as to security or otherwise of any of the 2026 Bonds over any of the others by reason of the number or date thereof or the time of sale, execution or delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein or herein. 11 ARTICLE II ISSUANCE OF 2026 BONDS SECTION 2.01. Terms of 2026 Bonds. The 2026 Bonds authorized to be issued by the City under and subject to the Refunding Law and the terms of this Indenture shall be designated the "City of Palo Alto Water Revenue Refunding Bonds, 2026 Series A", and shall be issued in the original principal amount of _____________ Dollars ($[Principal Amount]). The 2026 Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof, so long as no 2026 Bond shall have more than one maturity date. The 2026 Bonds shall mature on June 1 in each of the years and in the amounts, and shall bear interest at the rates, as follows: Maturity Date (June 1) Principal Amount Interest Rate Per Annum Interest on the 2026 Bonds shall be payable on each Interest Payment Date to the person whose name appears on the Bond Registration Books as the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check or draft of the Trustee mailed by first class mail to the Owner or, at the option of any Owner of at least $1,000,000 aggregate principal amount of the 2026 Bonds with respect to which written instructions have been filed with the Trustee prior to the Record Date, by wire transfer, at the address of such Owner as it appears on the Bond Registration Books. Principal of and premium (if any) on any 2026 Bond shall be paid upon presentation and surrender thereof at the Trust Office of the Trustee in St. Paul, Minnesota. Both the principal of and interest and premium (if any) on the 2026 Bonds shall be payable in lawful money of the United States of America. The 2026 Bonds shall be dated the Closing Date and bear interest based on a 360-day year comprised of twelve 30-day months from the Interest Payment Date next preceding the date of authentication thereof, unless said date of authentication is an Interest Payment Date, in which event such interest is payable from such date of authentication, and unless said date of authentication is on or before November 15, 2026, in which event such interest is payable from the Closing Date; provided, however, that if, as of the date of authentication of any 2026 Bond, interest thereon is in default, such 2026 Bond shall bear interest from the date to which interest has previously been paid or made available for payment thereon in full. 12 SECTION 2.02. Redemption of 2026 Bonds. (a) No Optional Redemption. The 2026 Bonds are not subject to optional redemption prior to their stated maturity date. (b) Mandatory Redemption. (i) Mandatory Sinking Fund Redemption. 2026 Bonds maturing on June 1, _____ are subject to mandatory redemption in part from Sinking Fund Installments to be made by the City on June 1, ____ and on each June 1 thereafter up to and including June 1, ___, at a redemption price equal to 100 percent of the principal amount thereof plus accrued interest, if any, to the redemption date without premium, as follows: June 1 Principal Amount (ii) Special Mandatory Redemption From Insurance or Condemnation Proceeds. The 2026 Bonds shall also be subject to redemption as a whole on any date, or in part on any Interest Payment Date in inverse order of maturity and by lot within a maturity, to the extent of the Net Proceeds of hazard insurance not used to repair or rebuild the Water System or the Net Proceeds of condemnation awards received with respect to the Water System to be used for such purpose pursuant to Sections 5.06 or 5.07, at a Redemption Price equal to the principal amount of the 2026 Bonds plus interest accrued thereon to the date fixed for redemption, without premium. (c) Notice of Redemption. Unless waived by any Owner of 2026 Bonds to be redeemed, notice of any redemption of 2026 Bonds shall be given, at the expense of the City, by the Trustee by mailing a copy of a redemption notice by first class mail at least 20 days and not more than 60 days prior to the date fixed for redemption to the Owner of the 2026 Bond or 2026 Bonds to be redeemed at the address shown on the Bond Registration Books; provided, that neither the failure to receive such notice nor any immaterial defect in any notice shall affect the sufficiency of the proceedings for the redemption of the 2026 Bonds. (d) Contents of Notice. All notices of redemption shall be dated and shall state: (i) the redemption date, (ii) the Redemption Price, (iii) if fewer than all Outstanding 2026 Bonds are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the 2026 Bonds to be redeemed, (iv) that on the redemption date the Redemption Price will become due and payable with respect to each such 2026 Bond or portion thereof called for redemption, and that interest with respect thereto shall cease to accrue from and after said date, and 13 (v) the place or places where such 2026 Bonds are to be surrendered for payment of the Redemption Price, which places of payment may include the Trust Office of the Trustee. (e) Deposit of Money. On or prior to any redemption date, the City shall deposit with the Trustee an amount of money sufficient to pay the Redemption Price of all the 2026 Bonds or portions of 2026 Bonds which are to be redeemed on that date. (f) Consequences of Notice. Notice of redemption having been given as aforesaid, the 2026 Bonds or portions of 2026 Bonds so to be redeemed shall, on the redemption date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the City shall default in the payment of the Redemption Price) such 2026 Bonds or portions of 2026 Bonds shall cease to have interest accrue thereon. Upon surrender of such 2026 Bonds for redemption in accordance with said notice, such 2026 Bonds shall be paid by the Trustee at the Redemption Price. Installments of interest due on or prior to the redemption date shall be payable as herein provided for payment of interest. Upon surrender for any partial redemption of any 2026 Bond, there shall be prepared for the Owner a new 2026 Bond or 2026 Bonds of the same maturity in the amount of the unredeemed principal. All 2026 Bonds which have been redeemed shall be cancelled and destroyed by the Trustee and shall not be redelivered. Neither the failure of any Bond Owner to receive any notice so mailed nor any defect therein shall affect the sufficiency of the proceedings for redemption of any 2026 Bonds nor the cessation of accrual of interest thereon. (g) Partial Redemption of 2026 Bonds. In the event only a portion of any 2026 Bond is called for redemption, then upon surrender of such 2026 Bond redeemed in part only, the City shall execute and the Trustee shall authenticate and deliver to the Owner, at the expense of the City, a new 2026 Bond or 2026 Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2026 Bond or 2026 Bonds. (h) Manner of Redemption. Whenever any 2026 Bonds are to be selected for redemption, the Trustee shall determine, by lot, the numbers of the 2026 Bonds to be redeemed, and shall notify the City thereof. (i) Purchase of 2026 Bonds in lieu of Redemption. In lieu of redemption of 2026 Bonds as provided in subsection (b)(i)) above, amounts in the Redemption Account of the Debt Service Fund may also be used and withdrawn by the Trustee at any time, upon the Request of the City filed with the Trustee no later than April 15 in any year, for the purchase of 2026 Bonds at public or private sale as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Debt Service Fund) as the City may in its discretion determine, but not to exceed the principal amount of such 2026 Bonds. The City shall, at the time of any such purchase, pay to the Trustee for deposit in the Debt Service Fund the amount of any deficiency in such Fund which may be caused by such purchase. All 2026 Bonds purchased pursuant to this Section shall be cancelled. All 2026 Bonds redeemed pursuant to this Section and all 2026 Bonds purchased by the City pursuant to this subsection shall be cancelled and destroyed pursuant to Section 9.09. SECTION 2.03. Form of 2026 Bonds. The 2026 Bonds, the Trustee's certificate of authentication, and the assignment to appear thereon, shall be substantially in the respective forms set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Indenture. 14 SECTION 2.04. Execution of 2026 Bonds. The 2026 Bonds shall be signed in the name and on behalf of the City with the manual or facsimile signatures of its Mayor and its Director of Administrative Services and attested by the manual or facsimile signature of its City Clerk under the seal of the City. Such seal may be in the form of a facsimile of the City's seal and shall be imprinted or impressed upon the 2026 Bonds. The 2026 Bonds shall then be delivered to the Trustee for authentication by it. In case any officer who shall have signed any of the 2026 Bonds shall cease to be such officer before the 2026 Bonds so signed shall have been authenticated or delivered by the Trustee or issued by the City, such 2026 Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the City as though the individual who signed the same had continued to be such officer of the City. Also, any 2026 Bond may be signed on behalf of the City by any individual who on the actual date of the execution of such 2026 Bond shall be the proper officer although on the nominal date of such 2026 Bond such individual shall not have been such officer. Only such of the 2026 Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee shall be conclusive evidence that the 2026 Bonds so authenticated have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture. SECTION 2.05. Transfer of 2026 Bonds. Any 2026 Bond may, in accordance with its terms, be transferred upon the Bond Registration Books by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2026 Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee, fully executed. Whenever any 2026 Bond shall be surrendered for transfer, the City shall execute and the Trustee shall thereupon authenticate and deliver to the transferee a new 2026 Bond or 2026 Bonds of like tenor, maturity and aggregate principal amount. No 2026 Bonds the notice of redemption of which has been mailed pursuant to Section 2.02(d) shall be subject to transfer pursuant to this Section. SECTION 2.06. Exchange of 2026 Bonds. 2026 Bonds may be exchanged at the Trust Office of the Trustee, for 2026 Bonds of the same tenor and maturity and of other authorized denominations. No 2026 Bonds the notice of redemption of which has been mailed pursuant to Section 2.02(d) shall be subject to exchange pursuant to this Section. SECTION 2.07. Temporary Bonds. The 2026 Bonds may be issued initially in temporary form exchangeable for definitive 2026 Bonds when ready for delivery. The temporary 2026 Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the City and may contain such reference to any of the provisions of this Indenture as may be appropriate. Every temporary 2026 Bond shall be executed by the City and be registered and authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive 2026 Bonds. If the City issues temporary 2026 Bonds, it will execute and furnish definitive 2026 Bonds without delay, and thereupon the temporary 2026 Bonds may be surrendered, for cancellation, in exchange therefor at the Trust Office of the Trustee, and the Trustee shall authenticate and deliver in exchange for such temporary 2026 Bonds an equal aggregate principal amount of definitive 2026 Bonds of authorized denominations. Until so exchanged, the temporary 2026 Bonds shall be entitled to the same benefits under this Indenture as definitive 2026 Bonds authenticated and delivered hereunder. SECTION 2.08. Bond Registration Books. The Trustee will keep or cause to be kept at its Trust Office sufficient Bond Registration Books for the registration and transfer of the 2026 Bonds, which shall at all times during regular business hours be open to inspection by the City; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as 15 it may prescribe, register or transfer or cause to be registered or transferred, on said books, 2026 Bonds as hereinbefore provided. SECTION 2.09. 2026 Bonds Mutilated, Lost, Destroyed or Stolen. If any 2026 Bond shall become mutilated, the City, at the expense of the Owner of said 2026 Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new 2026 Bond of like maturity and principal amount in exchange and substitution for the 2026 Bond so mutilated, but only upon surrender to the Trustee of the 2026 Bond so mutilated. Every mutilated 2026 Bond so surrendered to the Trustee shall be cancelled by it and delivered to, or upon the order of, the City. If any 2026 Bond issued hereunder shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the City and the Trustee and, if such evidence be satisfactory to them and indemnity satisfactory to them shall be given, the City, at the expense of the Bond Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new 2026 Bond of like maturity and principal amount in lieu of and in substitution for the 2026 Bond so lost, destroyed or stolen (or if any such 2026 Bond shall have matured or shall have been called for redemption, instead of issuing a substitute 2026 Bond the Trustee may pay the same without surrender thereof upon receipt of indemnity satisfactory to the Trustee). The City may require payment of a reasonable fee for each new 2026 Bond issued under this Section and of the expenses which may be incurred by the City and the Trustee. Any 2026 Bond issued under the provisions of this Section in lieu of any 2026 Bond alleged to be lost, destroyed or stolen shall constitute an original contractual obligation on the part of the City whether or not the 2026 Bond alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Indenture with all other 2026 Bonds secured by this Indenture. SECTION 2.10. Book Entry System. (a) Original Delivery. The 2026 Bonds shall be initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for each maturity of the 2026 Bonds. Upon initial delivery, the ownership of each such 2026 Bond shall be registered on the Bond Registration Books maintained by the Trustee pursuant to Section 2.08 hereof in the name of the Nominee. Except as provided in subsection (c), the ownership of all of the Outstanding 2026 Bonds shall be registered in the name of the Nominee on such Bond Registration Books. With respect to 2026 Bonds the ownership of which shall be registered in the name of the Nominee, the City and the Trustee shall have no responsibility or obligation to any Depository System Participant or to any person on behalf of which the City holds an interest in the 2026 Bonds. Without limiting the generality of the immediately preceding sentence, the City and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee or any Depository System Participant with respect to any ownership interest in the 2026 Bonds, (ii) the delivery to any Depository System Participant or any other person, other than a Bond Owner as shown in the Registration Books, of any notice with respect to the 2026 Bonds, including any notice of redemption, (iii) the selection by the Depository of the beneficial interests in the 2026 Bonds to be redeemed in the event the City elects to redeem the 2026 Bonds in part, (iv) the payment to any Depository System Participant or any other person, other than a Bond Owner as shown in the Registration Books, of any amount with respect to principal, premium, if any, or interest represented by the 2026 Bonds or (v) any consent given or other action taken by the Depository as Owner of the 2026 Bonds. The City and the Trustee may treat and consider the person in whose name each 2026 Bond is registered as the absolute owner of such 2026 Bond for the purpose of payment of principal, premium, if any, and interest represented by such 2026 Bond, for the purpose of giving notices of redemption and other matters with respect to such 2026 Bond, for the purpose of registering transfers of ownership of such 2026 Bond, and for all other purposes whatsoever. The Trustee shall pay the principal, interest and premium, if any, represented by the 2026 Bonds only to the respective Owners or their respective 16 attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to payment of principal, interest and premium, if any, represented by the 2026 Bonds to the extent of the sum or sums so paid. No person other than a Bond Owner shall receive a 2026 Bond evidencing the obligation of the City to make payments of principal, interest and premium, if any, pursuant to this Trust Indenture. Upon delivery by the Depository to the Nominee of written notice to the effect that the Depository has determined to substitute a new Nominee in its place, such new nominee shall become the Nominee hereunder for all purposes; and upon receipt of such a notice the City shall promptly deliver a copy of the same to the Trustee. (b) Representation Letter. In order to qualify the 2026 Bonds for the Depository's book-entry system, the City shall execute and deliver to such Depository a letter representing such matters as shall be necessary to so qualify the 2026 Bonds. The execution and delivery of such letter shall not in any way limit the provisions of subsection (a) above or in any other way impose upon the City or the Trustee any obligation whatsoever with respect to persons having interests in the 2026 Bonds other than the Bond Owners. Upon the written acceptance by the Trustee, the Trustee shall agree to take all action reasonably necessary for all representations of the Trustee in such letter with respect to the Trustee to at all times be complied with. In addition to the execution and delivery of such letter, the City may take any other actions, not inconsistent with this Trust Indenture, to qualify the 2026 Bonds for the Depository's book-entry program. (c) Transfers Outside Book-Entry System. In the event that either (i) the Depository determines not to continue to act as Depository for the 2026 Bonds, or (ii) the City determines to terminate the Depository as such, then the City shall thereupon discontinue the book-entry system with such Depository. In such event, the Depository shall cooperate with the City and the Trustee in the execution of replacement 2026 Bonds by providing the Trustee with a list showing the interests of the Depository System Participants in the 2026 Bonds, and by surrendering the 2026 Bonds, registered in the name of the Nominee, to the Trustee on or before the date such replacement 2026 Bonds are to be issued. The Depository, by accepting delivery of the 2026 Bonds, agrees to be bound by the provisions of this subsection (c). If, prior to the termination of the Depository acting as such, the City fails to identify another Securities Depository to replace the Depository, then the 2026 Bonds shall no longer be required to be registered in the Registration Books in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging 2026 Bonds shall designate, in accordance with the provisions hereof. In the event the City determines that it is in the best interests of the beneficial owners of the 2026 Bonds that they be able to obtain certificated 2026 Bonds, the City may notify the Depository System Participants of the availability of such certificated 2026 Bonds through the Depository. In such event, the Trustee will execute, transfer and exchange 2026 Bonds as required by the Depository and others in appropriate amounts; and whenever the Depository requests, the Trustee and the City shall cooperate with the Depository in taking appropriate action (y) to make available one or more separate certificates evidencing the 2026 Bonds to any Depository System Participant having 2026 Bonds credited to its account with the Depository, or (z) to arrange for another Securities Depository to maintain custody of a single certificate evidencing such 2026 Bonds, all at the City's expense. (d) Payments to the Nominee. Notwithstanding any other provision of this Indenture to the contrary, so long as any 2026 Bond is registered in the name of the Nominee, all payments with respect to principal, interest and premium, if any, represented by such 2026 Bond and all notices with respect to such 2026 Bond shall be made and given, respectively, as provided in the letter described in subsection (b) of this Section or as otherwise instructed by the Depository. 17 ARTICLE III ISSUE OF 2026 BONDS; PARITY DEBT SECTION 3.01. Issuance of 2026 Bonds. Upon the execution and delivery of this Indenture, the City shall execute and deliver 2026 Bonds in the aggregate principal amount of _____________ Dollars ($[Principal Amount]) to the Trustee for authentication and delivery to the Original Purchaser thereof upon the Request of the City. SECTION 3.02. Application of Proceeds of Sale of 2026 Bonds. Upon the receipt of payment for the 2026 Bonds on the Closing Date in the amount of $____________ (being an amount equal to the principal amount of the 2026 Bonds ($[Principal Amount]), less underwriter’s discount ($________), plus [net] original issue premium ($______), less the good faith deposit of $_______ held by the City), the Trustee shall apply the proceeds of sale thereof as follows: (a) The Trustee shall transfer to the 2009 Trustee for deposit in the Redemption Account established and held by the 2009 Trustee under the 2009 Indenture, as set forth in the Irrevocable Refunding Instructions, the amount of $_______ to provide for the defeasance and redemption of the 2009 Bonds. (b) The Trustee shall deposit in the Cost of Issuance Fund the remainder of such proceeds, in an amount equal to $________. The Trustee may establish a temporary fund or account in its records to facilitate such deposits and transfers. SECTION 3.03. Cost of Issuance Fund. There is hereby created a fund to be known as the "City of Palo Alto Water Revenue Refunding Bonds, 2026 Series A Cost of Issuance Fund" (the "Cost of Issuance Fund"), which the City hereby covenants and agrees to cause to be maintained and which shall be held in trust by the Trustee. The moneys in the Cost of Issuance Fund shall be used in the manner provided by law solely for the purpose of the payment of Costs of Issuance upon receipt by the Trustee of Requests of the City therefor, on or after the Closing Date. Any funds remaining in the Cost of Issuance Fund on January 1, 2027, shall be transferred by the Trustee to the Debt Service Fund. SECTION 3.04. Issuance of Parity Debt. In addition to the 2026 Bonds, the City may, by Parity Debt Instrument, issue or incur other loans, advances or indebtedness payable from Net Revenues to be derived from the Water System, in such principal amount as shall be determined by the City. The City may issue or incur any such Parity Debt pursuant to a Parity Debt Instrument subject to the following specific conditions, which are hereby made conditions precedent to the issuance and delivery of such Parity Debt: (a) The City shall be in compliance with all covenants set forth in this Indenture. (b) The Net Revenues for the last audited Fiscal Year of the City, or for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of adoption by the City Council of the resolution authorizing the issuance of such Parity Debt or the date of the execution of such Parity Debt (the “Test Year”), shall have produced a sum equal to at least 125% of the Debt Service on the 2026 Bonds and outstanding Parity Debt for such Test Year. 18 (c) The Net Revenues for the Test Year, including adjustments to give effect as of the first day of such Test Year to increases or decreases in Charges for the service provided by the Water System approved and in effect as of the date of calculation, shall have produced a sum equal to at least 125% of: (i) the Debt Service on the 2026 Bonds and any Parity Debt outstanding in such Test Year; plus (ii) the Debt Service which would have accrued on any Parity Debt issued since the end of such Test Year, assuming that such Parity Debt had been executed or issued at the beginning of such Test Year; plus (iii) the Debt Service which would have accrued had such proposed additional Parity Debt been issued at the beginning of such Test Year. Notwithstanding the foregoing, Parity Debt issued to refund the 2026 Bonds or any outstanding Parity Debt may be delivered without satisfying the conditions set forth above if total Debt Service on the 2026 Bonds or any outstanding Parity Debt after the issuance of such refunding Parity Debt is not greater than total Debt Service would have been prior to the issuance of such refunding Parity Debt. (d) The Parity Debt Instrument providing for the issuance of such Parity Debt under this Section 3.04 shall provide that the proceeds of such Parity Debt shall be applied to the acquisition, construction, improvement, financing or refinancing of additional facilities, improvements or extensions of existing facilities within the Water System, or otherwise for facilities, improvements or property which the City determines are of benefit to the Water System, or for the purpose of refunding any Bonds or Parity Debt in whole or in part, including all costs (including costs of issuing such Parity Debt and including capitalized interest on such Parity Debt during any period which the City deems necessary or advisable) relating thereto. SECTION 3.05. Subordinate Debt. Nothing in this Indenture shall prohibit or impair the authority of the City to issue bonds or other obligations secured by a lien on Net Revenues which is subordinate to the lien established hereunder, upon such terms and in such principal amounts as the City may determine. SECTION 3.06. Validity of 2026 Bonds. The validity of the authorization and issuance of the 2026 Bonds shall not be affected in any way by any proceedings taken by the City for the refunding of the 2009 Bonds, or by any contracts made by the City in connection therewith, and the recital contained in the 2026 Bonds that the same are issued pursuant to the Refunding Law shall be conclusive evidence of their validity and of the regularity of their issuance. 19 ARTICLE IV PLEDGE OF NET REVENUES; FUNDS AND ACCOUNTS SECTION 4.01. Pledge of Net Revenues, Water Revenue Fund. (a) The City hereby transfers, places a charge upon, assigns and sets over to the Trustee, for the benefit of the Owners, the Net Revenues of the Water System. The Net Revenues of the Water System shall not be used for any other purpose while any of the 2026 Bonds remain Outstanding, except that out of Net Revenues of the Water System there may be apportioned and paid such sums for such purposes, as are expressly permitted by this Article. Said pledge shall constitute a first, direct and exclusive charge and lien on the Net Revenues of the Water System for the payment of the principal or Redemption Price of and interest on the 2026 Bonds in accordance with the terms thereof. (b) The Net Revenues of the Water System constitute a trust fund for the security and payment of the principal or Redemption Price of and interest on the 2026 Bonds. The general fund of the City is not liable and the credit or taxing power of the City is not pledged for the payment of the principal or Redemption Price of and interest on the 2026 Bonds. The Owner of the 2026 Bonds shall not compel the exercise of the taxing power by the City or the forfeiture of its property. The principal or Redemption Price of and interest on the 2026 Bonds are not a debt of the City, nor a legal or equitable pledge, charge, lien or encumbrance, upon any of its property, or upon any of its income, receipts, or revenues except the Net Revenues of the Water System. SECTION 4.02. Receipt and Deposit of Revenues. The City covenants and agrees that all Gross Revenues, when and as received, will be received and held by the City in trust hereunder and will be deposited by the City in the Water Revenue Fund (which has heretofore been created and now exists in the City Treasury) and will be accounted for through and held in trust in the Water Revenue Fund, and the City shall only have such beneficial right or interest in any of such money as in this Indenture provided. All such Gross Revenues shall be transferred, disbursed, allocated and applied solely to the uses and purposes hereinafter in this Article set forth, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the City. SECTION 4.03. Establishment of Funds and Accounts and Allocation of Revenues Thereto. The Debt Service Fund, as a special fund, and the Redemption Account, as a special account therein, are hereby created for the 2026 Bonds. The Debt Service Fund and the Redemption Account therein shall be held and maintained by the Trustee. All Gross Revenues shall be held in trust by the City in the Water Revenue Fund and shall be applied, transferred, used and withdrawn only for the purposes hereinafter authorized in this Article. (a) Operating Costs. The City shall first pay from the moneys in the Water Revenue Fund the budgeted Maintenance and Operation Costs as they become due and payable. (b) Debt Service. On or before the third Business Day prior to each Interest Payment Date, the City shall transfer from the Water Revenue Fund to the Trustee for deposit in the Debt Service Fund (i) an amount equal to the aggregate amount of interest to become due and payable on all Outstanding 2026 Bonds on the next succeeding Interest Payment Date, plus (ii) beginning on the third Business Day prior to the initial Sinking Fund Installment set forth in Article II, an amount 20 equal to the aggregate amount of Principal Installments (including any Sinking Fund Installments) becoming due and payable on all Outstanding 2026 Bonds on the next succeeding Principal Installment Date. All interest earnings and profits or losses on the investment of amounts in the Debt Service Fund shall be deposited in or charged to the Debt Service Fund and applied to the purposes thereof. No transfer and deposit need be made into the Debt Service Fund if the amount contained therein, taking into account investment earnings and profits, is at least equal to the Interest Requirement or Principal Installments to become due on the next Interest Payment Date or Principal Installment Date upon all Outstanding 2026 Bonds. Following the issuance of Parity Debt, moneys shall be transferred from the Water Revenue Fund to the Debt Service Fund and the debt service fund for any Parity Debt without preference or priority and, in the event of any insufficiency of such moneys, shall be transferred on a pro rata basis based on the amount due on the 2026 Bonds and any Parity Debt on such Interest Payment Date and without regard to moneys available in a debt service reserve account. (c) Debt Service Reserve Accounts. After making the payments, allocations and transfers provided for in subsection (b) above, if the balance in a debt service reserve account for any Parity Debt is less than the required level, the deficiency shall be restored by transfers from the first moneys which become available in the Water Revenue Fund. In the event of any insufficiency of such moneys, shall be transferred on a pro rata basis to the debt service reserve accounts for any Parity Debt based on the amount required to be deposited into the debt service reserve account. (d) Surplus. As long as all of the foregoing payments, allocations and transfers are made at the times and in the manner set forth above, any moneys remaining in the Water Revenue Fund may at any time be treated as surplus and applied as provided in Section 4.06. SECTION 4.04. Application of Debt Service Fund. (a) The Trustee shall withdraw from the Debt Service Fund, prior to each Interest Payment Date, an amount equal to the Interest Requirement payable on such Interest Payment Date, and shall cause the same to be applied to the payment of said interest when due and is hereby authorized to apply the same to the payment of such interest by check or draft (or by wire transfer, as the case may be), as provided in Section 2.01. (b) The Trustee shall withdraw from the Debt Service Fund, prior to each Principal Installment Date, an amount equal to the principal amount of the Outstanding Serial Bonds, if any, maturing on said Principal Installment Date, and shall cause the same to be applied to the payment of the principal of said 2026 Bonds when due, and is hereby authorized to apply the same to such payment upon presentation and surrender of the 2026 Bonds as they become due and payable, as provided in Section 2.01. (c) All withdrawals and transfers under the provisions of subsection (a) or subsection (b) of this Section shall be made not earlier than one (1) day prior to the Interest Payment Date or Principal Installment Date to which they relate, and the amount so withdrawn or transferred shall, for the purposes of this Indenture, be deemed to remain in and be part of the appropriate Account until such Interest Payment Date or Principal Installment Date. SECTION 4.05. Application of Redemption Account. On or before the date which is at least forty-five (45) days prior to any Interest Payment Date on which 2026 Bonds are subject to redemption pursuant to Section 2.02(a), as applicable, the City shall transfer from the Water Revenue Fund to the Trustee for deposit in the Redemption Account an amount at least equal to the Redemption Price (excluding accrued interest, which is payable from the Debt Service Fund) of such Bonds to be redeemed on such Interest Payment Date. In addition, the City shall transfer to the Trustee for deposit in the Redemption Account all amounts required to redeem any 2026 21 Bonds which are subject to redemption pursuant to Section 2.02 (b), when and as such amounts become available. Amounts in the Redemption Account shall be applied by the Trustee solely for the purpose of paying the Redemption Price of 2026 Bonds to be redeemed pursuant to Sections 2.02 (a) or (b), as applicable. If after all of the 2026 Bonds have been paid or deemed to have been paid, there are moneys remaining in the Redemption Account, such moneys shall be transferred by the Trustee to the City for deposit in the Water Revenue Fund. SECTION 4.06. Surplus. Moneys remaining in the Water Revenue Fund after making the payments, allocations and transfers provided for in subsections (b) and (c) of Section 4.03 shall be applied by the City as required by applicable law. SECTION 4.07. Investments. All moneys in the Water Revenue Fund may be invested by the City from time to time in any investments permitted under State law. All moneys in the Debt Service Fund and Cost of Issuance Fund shall be invested by the Trustee solely in Authorized Investments, as directed pursuant to a Request of the City. In the absence of any such Request of the City, the Trustee shall hold such moneys uninvested. Obligations purchased as an investment of moneys in any Fund or Account shall be deemed to be part of such Fund or Account, and all interest or gain derived from the investment of amounts in any of the Funds or Accounts established hereunder shall be deposited in the Fund or Account from which such investment was made; and shall be accounted for and applied as provided in Section 4.04 (with respect to the Debt Service Fund). For purposes of acquiring any investments hereunder, the Trustee may commingle funds held by it hereunder with the written approval of the City. The Trustee may act as principal or agent in the acquisition of any investment. The Trustee shall incur no liability for losses arising from any investments made pursuant to this Section. The City acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the City the right to receive brokerage confirmations of security transactions as they occur, the City will not receive such confirmations to the extent permitted by law. The Trustee will furnish the City periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. The Trustee may make any investments hereunder through its own bond or investment department or trust investment department, or those of its parent or any affiliate. The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee hereunder. The Trustee may rely upon any investment direction of the City as a certification to the Trustee that such investment is a legal investment for purposes of this Indenture. SECTION 4.08. Valuation . (a) Method of Valuation, Frequency of Valuation. In computing the amount in any Fund or Account, Authorized Investments shall be valued at the market price, exclusive of accrued interest. With respect to all Funds and Accounts, valuation shall occur annually. (b) Additional Limitations. Except as otherwise provided in the following sentence, the City covenants that all investments of amounts deposited in any fund or account created by or pursuant to this Indenture, or otherwise containing gross proceeds of the 2026 Bonds (within the meaning of section 148 of the Tax Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by this Indenture or the Tax Code) at Fair Market Value. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code. SECTION 4.09. Rate Stabilization Fund . The City has the right at any time to establish a rate stabilization fund (the “Rate Stabilization Fund”) to be held by it and administered in accordance with this Section 4.09, for the purpose of stabilizing the rates and charges imposed by the City with respect to the Water System. From time to time the City may deposit amounts in 22 the Rate Stabilization Fund, from any source of legally available funds, including but not limited to Net Revenues which are released from the pledge and lien which secures the 2026 Bonds and any Parity Debt, as the City may determine. The City may, but is not required to, withdraw from any amounts on deposit in a Rate Stabilization Fund and deposit such amounts in the Water Revenue Fund. Amounts so transferred from a Rate Stabilization Fund to the Water Revenue Fund shall be applied for the purposes of the Water Revenue Fund. Amounts on deposit in a Rate Stabilization Fund shall not be pledged to or otherwise secure the 2026 Bonds or any Parity Debt. The City has the right at any time to withdraw any or all amounts on deposit in a Rate Stabilization Fund and apply such amounts for any lawful purposes of the City. 23 ARTICLE V COVENANTS OF THE CITY; SPECIAL TAX COVENANTS SECTION 5.01. Punctual Payment; Compliance With Documents. The City shall punctually pay or cause to be paid the interest and principal to become due with respect to all of the 2026 Bonds in strict conformity with the terms of the 2026 Bonds and of this Indenture, and will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and all Parity Debt Instruments. SECTION 5.02. Against Encumbrances. The City will not mortgage or otherwise encumber, pledge or place any charge upon the Water System or any part thereof, or upon any of the Net Revenues, except as provided in the Indenture; provided, however, that nothing in this Section 5.02 nor elsewhere in this Indenture shall be construed to prevent the City from entering into long-term contracts to finance supplies of water, gas, or electric energy, payments under which are accounted for as Maintenance and Operation Costs under the definition thereof in Section 1.01. SECTION 5.03. Discharge of Claims. The City covenants that in order to fully preserve and protect the priority and security of the 2026 Bonds the City shall pay from the Net Revenues and discharge all lawful claims for labor, materials and supplies furnished for or in connection with the Water System which, if unpaid, may become a lien or charge upon the Net Revenues prior or superior to the lien of the 2026 Bonds and impair the security of the 2026 Bonds. The City shall also pay from the Net Revenues all taxes and assessments or other governmental charges lawfully levied or assessed upon or in respect of the Water System or upon any part thereof or upon any of the Net Revenues therefrom. SECTION 5.04. Acquisition, Construction or Financing of any Improvement to the Water System. The City will acquire, construct, or finance any Improvement to the Water System to be financed with the proceeds of any Parity Debt with all practicable dispatch, and such Improvement will be made in an expeditious manner and in conformity with laws so as to complete the same as soon as possible. SECTION 5.05. Maintenance and Operation of Water System in Efficient and Economical Manner. The City covenants and agrees to maintain and operate the Water System in an efficient and economical manner and to operate, maintain and preserve the Water System in good repair and working order. SECTION 5.06. Against Sale, Eminent Domain. (a) The City will not sell, lease or otherwise dispose of the Water System or any part thereof essential to the proper operation of the Water System or to the maintenance of the Net Revenues except as herein expressly permitted. The City will not enter into any lease or agreement which impairs the operation of the Water System or any part thereof necessary to secure adequate Net Revenues for the payment of the interest on and principal or Redemption Price, if any, on the 2026 Bonds, or which would otherwise impair the rights of the Holders with respect to the Net Revenues or the operation of the Water System. Any real or personal property which has become non-operative or which is not needed for the efficient and proper operation of the Water System, or any material or equipment which has worn out, may be sold at not less than the market value thereof without the consent of the Holders if such sale will not reduce Net Revenues and if all of the Net Proceeds of such sale are deposited in the Water Revenue Fund. 24 (b) If all or any part of the Water System shall be taken by eminent domain proceedings, the Net Proceeds thereof shall be deposited in an Insurance and Condemnation Fund established and held by the City and applied as follows: (a) If the City has determined that it needs to use the Net Proceeds to make Improvements to the Water System in order for the City to comply with Section 5.05, the City shall use such Net Proceeds to make such additions, betterments, extensions or improvements. If such Net Proceeds shall exceed the costs of such additions, betterments, extensions or improvements that are required for the City to comply with Section 5.05, the excess shall be applied to any lawful purpose of the Water System, including (i) the payment of Debt Service on the 2026 Bonds and payments on any Parity Debt, (ii) the early redemption of the 2026 Bonds in accordance with Section 2.02(b) and prepayments of any Parity Debt in accordance with the related Parity Debt Instrument and (iii) the payment of capital costs of Improvements to the Water System. Until such time as the 2026 Bonds have been redeemed or paid at maturity, any such use of the Net Proceeds shall comply with Section 5.14. (b) If the City has determined that it does not need to use the Net Proceeds to make Improvements to the Water System in order for the City to comply with Section 5.05, the City shall use such Net Proceeds for any lawful purpose of the Water System, including including (i) the payment of Debt Service on the 2026 Bonds and payments on any Parity Debt, (ii) the early redemption of the 2026 Bonds in accordance with Section 2.02(b) and prepayments of any Parity Debt in accordance with the related Parity Debt Instrument and (iii) the payment of capital costs of Improvements to the Water System. Until such time as the 2026 Bonds have been redeemed or paid at maturity, any such use of the Net Proceeds shall comply with Section 5.14 SECTION 5.07. Insurance. (a) The City covenants that it shall at all times maintain such insurance on the Water System as is customarily maintained with respect to works and properties of like character against accident to, loss of or damage to such works or properties. Any such insurance shall be in the form of policies or contracts for insurance with insurers of good standing and shall be payable to the City, or may be in the form of self-insurance by the City. The City shall establish such fund or funds or reserves as are necessary to provide for its share of any such self-insurance. (b) In the event of any damage to or destruction of the Water System caused by the perils covered by such insurance, the Net Proceeds of such insurance shall be deposited by the City in an Insurance and Condemnation Fund to be established and held by the City and applied to the repair, reconstruction or replacement of the damaged or destroyed portion of the Water System to the extent required for the City to comply with Section 5.05. The City shall cause such repair, reconstruction or replacement to begin promptly after such damage or destruction shall occur and to continue and to be properly completed as expeditiously as possible, and shall pay out of the Net Proceeds of such insurance all costs and expenses in connection with such repair, reconstruction or replacement so that the same shall be completed and the Water System shall be free and clear of all liens and claims. If the Net Proceeds received by reason of any such loss shall exceed the costs of such repair, reconstruction or replacement that is required for the City to comply with Section 5.05, the excess shall be applied to any lawful purpose of the Water System, including (i) the payment of Debt Service on the 2026 Bonds and payments on any Parity Debt, (ii) the early redemption of the 2026 Bonds in accordance with Section 2.02(b) and prepayments of any Parity Debt in accordance with the related Parity Debt Instrument and (iii) the payment of capital costs of Improvements to the Water System. Until such time as the 2026 Bonds have been redeemed or paid at maturity, any such use of the Net Proceeds shall comply with Section 5.14. 25 If the City has determined that any Net Proceeds received by reason of a loss are not required to be applied to the repair, reconstruction or replacement of the damaged or destroyed portion of the Water System in order for the City to comply with Section 5.07, then the City shall apply the Net Proceeds to any lawful purpose of the Water System, including (i) the payment of Debt Service on the 2026 Bonds and payments on any Parity Debt, (ii) the early redemption of the 2026 Bonds in accordance with Section 2.02(b) and prepayments of any Parity Debt in accordance with the related Parity Debt Instrument and (iii) the payment of capital costs of Improvements to the Water System. Until such time as the 2026 Bonds have been redeemed or paid at maturity, any such use of the Net Proceeds shall comply with Section 5.14. SECTION 5.08. Records and Accounts. The City covenants that it shall keep proper books of record and accounts of the Water System, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to the Water System. Said books shall, upon reasonable request, be subject to the inspection of the Owners of not less than ten percent (10%) of the Outstanding 2026 Bonds or their representatives authorized in writing. The City covenants that it will cause the books and accounts of the Water System to be audited annually by an Independent Certified Public Accountant and will make available for inspection by the Bond Owners, upon reasonable request, a copy of the report of such Independent Certified Public Accountant. The City covenants that it will cause to be prepared annually, not more than two hundred seventy (170) days after the close of each Fiscal Year, as a part of its regular annual financial report, a summary statement showing the amount of Gross Revenues and the amount of all other funds collected which are required to be pledged or otherwise made available as security for payment of principal of and interest on the 2026 Bonds, the disbursements from the Gross Revenues and other funds in reasonable detail, and a general statement of the financial and physical condition of the Water System. The City shall furnish a copy of the statement to the Trustee, and upon written request, to any Bond Owner. The Trustee shall have no duty to review such statement. SECTION 5.09. Protection of Security and Rights of Owners. The City will preserve and protect the security of the 2026 Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the sale and delivery of the 2026 Bonds by the City, such 2026 Bonds shall be incontestable by the City. SECTION 5.10. Against Competitive Facilities. The City will not acquire, construct, operate or maintain any system or utility within the service area of the City that would be competitive with the Water System. SECTION 5.11. Payment of Taxes, Etc. 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 or upon any Revenues when the same shall become due. The City will duly observe and conform with all valid requirements of any governmental authority relative to the Water System or any part thereof, and will comply with all requirements with respect to any state or federal grants received to assist in paying for the costs of the acquisition, construction or financing of any Improvements to the Water System. SECTION 5.12. Rates and Charges. (a) To the fullest extent permitted by law, the City shall fix and prescribe, at the commencement of each Fiscal Year, Charges for the Water System which are reasonably expected to be at least sufficient to yield during such Fiscal Year Net Revenues (including amounts 26 transferred from the Rate Stabilization Fund to the Water Revenue Fund during such Fiscal Year) equal to one hundred twenty-five percent (125%) of Debt Service on the 2026 Bonds and all Parity Debt payable in such Fiscal Year. (b) The City may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but shall not reduce the rates and charges then in effect unless the Net Revenues, from such reduced rates and charges are reasonably expected to be sufficient to meet the requirements of this section. (c) So long as the City has complied with its obligations set forth in clause (a) and (b) above, the failure of Net Revenues to equal one hundred twenty-five percent (125%) of Debt Service at the end of a Fiscal Year shall not constitute a default or an Event of Default hereunder. SECTION 5.13. No Priority for Additional Obligations. The City covenants that no additional bonds or other obligations shall be issued or incurred having any priority in payment of principal or interest out of the Net Revenues over the 2026 Bonds. SECTION 5.14. Tax Covenants. (a) Private Activity Bond Limitation. The City will assure that the proceeds of the 2026 Bonds are not so used as to cause the 2026 Bonds to satisfy the private business tests of section 141(b) of the Tax Code or the private loan financing test of section 141(c) of the Tax Code. (b) Federal Guarantee Prohibition. The City will not take any action or permit or suffer any action to be taken if the result of such action would be to cause any of the 2026 Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Tax Code. (c) Rebate Requirement. The City will take any and all actions necessary to assure compliance with section 148(f) of the Tax Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the 2026 Bonds. (d) No Arbitrage. The City will not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the 2026 Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the 2026 Bonds would have caused the 2026 Bonds to be "arbitrage bonds" within the meaning of section 148 of the Tax Code. (e) Maintenance of Tax-Exemption. The City will take all actions necessary to assure the exclusion of interest on the 2026 Bonds from the gross income of the Owners of the 2026 Bonds to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the date of issuance of the 2026 Bonds. (f) Record Retention. The City will retain its records of all accounting and monitoring it carries out with respect to the 2026 Bonds for at least 3 years after the 2026 Bonds mature or are redeemed (whichever is earlier); however, if the 2026 Bonds are redeemed and refunded, the City will retain its records of accounting and monitoring at least 3 years after the earlier of the maturity or redemption of the obligations that refunded the 2026 Bonds. (g) Compliance with Tax Certificate. The City will comply with the provisions of the Tax Certificate and the Use of Proceeds Certificate with respect to the 2026 Bonds, which are incorporated herein as if fully set forth herein. The covenants of this Section will survive payment in full or defeasance of the 2026 Bonds. 27 SECTION 5.15. Further Assurances. The City will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the 2026 Bonds the rights and benefits provided in this Indenture. SECTION 5.16. Continuing Disclosure. The City will provide information on the financial condition of the Water System to any Bond Owner or other interested person upon request and with payment of the City-prescribed handling costs thereof. Such information will be limited to financial statements and staff reports which have previously been distributed to the City Council. Additionally, the City will file annually with the Trustee a copy of its audited financial reports. The Trustee shall have no duty to review such reports. 28 ARTICLE VI THE TRUSTEE SECTION 6.01. Appointment of Trustee. U.S. Bank Trust Company, National Association, a national banking association organized and existing under and by virtue of the laws of the United States of America, at its corporate trust office in San Francisco, California, is hereby appointed Trustee by the City for the purpose of receiving all moneys required to be deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. The City agrees that it will maintain a Trustee having a corporate trust office in San Francisco, California, with a combined capital and surplus of at least One Hundred Million Dollars ($100,000,000), and subject to supervision or examination by federal or State authority, so long as any 2026 Bonds are Outstanding. 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 6.01 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 is hereby authorized to pay the 2026 Bonds when duly presented for payment at maturity, or on redemption or purchase prior to maturity, and to cancel all 2026 Bonds upon payment thereof. The Trustee shall keep accurate records of all funds administered by it and of all 2026 Bonds paid and discharged. SECTION 6.02. Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it by this Indenture, and agrees to perform said trusts, but only upon and subject to the following express terms and conditions: (a) The Trustee, prior to the occurrence of an Event of Default and after curing or waiver of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default hereunder has occurred (which has not been cured or waived) the Trustee may exercise such of the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in their exercise, as a prudent and reasonable man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or receivers but shall be answerable for the selection of the same in accordance with the standard specified above, and shall be entitled to advice of counsel concerning all matters of trust and its duty hereunder, and the Trustee shall not be liable for any action taken or not taken by it in good faith reliance upon the advice or opinion of such counsel. (c) The Trustee shall not be responsible for any recital herein, or in the 2026 Bonds, or for the validity of this Indenture or any of the supplements thereto or instruments of further assurance, or for the sufficiency of the security for the 2026 Bonds issued hereunder or intended to be secured hereby and the Trustee shall not be bound to ascertain or inquire as to the observance or performance of any covenants, conditions or agreements on the part of the City hereunder. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with Section 4.07. (d) The Trustee shall not be accountable for the use of any proceeds of sale of the 2026 Bonds delivered hereunder. The Trustee may become the Owner of 2026 Bonds 29 secured hereby with the same rights which it would have if not the Trustee; may acquire and dispose of other bonds or evidence of indebtedness of the City with the same rights it would have if it were not the Trustee; and may act as a depositary for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners of 2026 Bonds, whether or not such committee shall represent the Owners of the majority in principal amount of the 2026 Bonds then Outstanding. (e) In the absence of bad faith on its part, the Trustee shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken or omitted to be taken by the Trustee in good faith and without negligence pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Owner of any 2026 Bond, shall be conclusive and binding upon all future Owners of the same 2026 Bond and upon 2026 Bonds issued in exchange therefor or in place thereof. The Trustee shall not be bound to recognize any person as an Owner of any 2026 Bond or to take any action at his request unless the ownership of such 2026 Bond by such person shall be reflected on the Bond Registration Books. (f) As to the existence or non-existence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a Certificate of the City as sufficient evidence of the facts therein contained and prior to the occurrence of an Event of Default hereunder of which the Trustee has been given notice or is deemed to have notice, as provided in Section 6.02(h) hereof, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction or action is necessary or expedient, but may at its discretion secure such further evidence deemed by it to be necessary or advisable, but shall in no case be bound to secure the same. The Trustee may accept a Certificate of the City to the effect that an authorization in the form therein set forth has been adopted by the City, as conclusive evidence that such authorization has been duly adopted and is in full force and effect. (g) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and it shall not be answerable for other than its negligence or willful default. The immunities and exceptions from liability of the Trustee shall extend to its officers, directors, employees and agents. (h) 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 City to make any of the payments to the Trustee required to be made by the City pursuant hereto or failure by the City to file with the Trustee any document required by this Indenture to be so filed subsequent to the issuance of the 2026 Bonds, unless the Trustee shall be specifically notified in writing of such default by the City or by the Owners of at least twenty-five percent (25%) in aggregate principal amount of the 2026 Bonds then Outstanding and all notices or other instruments required by this Indenture to be delivered to the Trustee must, in order to be effective, be delivered at the Trust Office of the Trustee, and in the absence of such notice so delivered the Trustee may conclusively assume there is no Event of Default hereunder except as aforesaid. (i) At any and all reasonable times the Trustee, and its duly authorized agents, attorneys, experts, engineers, accountants and representatives, shall have the right (but not the duty) fully to inspect the Water System, including all books, papers and records of the City pertaining to the Water System and the 2026 Bonds, and to take such 30 memoranda from and with regard thereto as may be desired but which is not privileged by statute or by law. (j) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. (k) Notwithstanding anything elsewhere in this Indenture with respect to the execution of any 2026 Bonds, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Indenture, the Trustee shall have the right, but shall not be required, to demand any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, as may be deemed desirable for the purpose of establishing the right of the City to the execution of any 2026 Bonds, the withdrawal of any cash, or the taking of any other action by the Trustee. (l) Before taking the action referred to in Section 8.03 the Trustee may require that a satisfactory indemnity bond be furnished for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or willful default in connection with any such action. (m) All moneys received by the Trustee shall, until used or applied or invested as herein provided, be held in trust for the purposes for which they were received but need not be segregated from other funds except to the extent required by law. The Trustee shall not be under any liability for interest on any moneys received hereunder except such as may be agreed upon. SECTION 6.03. Fees, Charges and Expenses of Trustee. The Trustee shall be paid by the City and reimbursed by the City for reasonable fees for its services rendered hereunder and all advances, counsel fees (including expenses) and other expenses reasonably and necessarily made or incurred by the Trustee in connection with such services. Upon the occurrence of an Event of Default hereunder, but only upon an Event of Default, the Trustee shall have a first lien with right of payment prior to payment of any 2026 Bond upon the amounts held hereunder for the foregoing fees, charges and expenses incurred by it respectively. SECTION 6.04. Notice to Bond Owners of Default. If an Event of Default hereunder occurs with respect to any 2026 Bonds, of which the Trustee has been given or is deemed to have notice, as provided in Section 6.02(h) hereof, then the Trustee shall promptly give written notice thereof by first-class mail to the Owner of each such 2026 Bond, unless such Event of Default shall have been cured before the giving of such notice; provided, however, that unless such Event of Default consists of the failure by the City to make any payment when due, the Trustee may elect not to give such notice if and so long as the Trustee in good faith determines that it is in the best interests of the Bond Owners not to give such notice. SECTION 6.05. Intervention by Trustee. In any judicial proceeding to which the City is a party which, in the opinion of the Trustee and its counsel, has a substantial bearing on the interests of Owners of any of the 2026 Bonds, the Trustee may intervene on behalf of such Bond Owners, and subject to Section 6.02 (l) hereof, shall do so if requested in writing by the Owners of at least twenty-five percent (25%) in aggregate principal amount of such 2026 Bonds then Outstanding. SECTION 6.06. Removal of Trustee. The Owners of a majority in aggregate principal amount of the Outstanding 2026 Bonds may at any time, and the City may, so long as no Event of Default shall have occurred and then be continuing, remove the Trustee initially appointed, and any successor thereto, by an instrument or concurrent instruments in writing delivered to the Trustee (where applicable), whereupon the City or such Owners, as the case may be, shall 31 appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company meeting the requirements set forth in Section 6.01 hereof. SECTION 6.07. Resignation by Trustee. The Trustee and any successor Trustee may at any time resign by giving thirty (30) days' written notice by registered or certified mail to the City. Upon receiving such notice of resignation, the City shall promptly appoint a successor Trustee. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. Upon such acceptance, the City shall cause notice thereof to be given by first class mail to the Bond Owners at their respective addresses set forth on the Bond Registration Books. No resignation of the Trustee shall take effect until a successor is appointed and has accepted. SECTION 6.08. Appointment of Successor Trustee. In the event of the removal or resignation of the Trustee pursuant to Sections 6.06 or 6.07, respectively, the City shall promptly appoint a successor Trustee. In the event the City shall for any reason whatsoever fail to appoint a successor Trustee within forty-five (45) days following the delivery to the Trustee of the instrument described in Section 6.06 or within forty-five (45) days following the receipt of notice by the City pursuant to Section 6.07, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee meeting the requirements of Section 6.01 hereof. Any such successor Trustee appointed by such court shall become the successor Trustee hereunder notwithstanding any action by the City purporting to appoint a successor Trustee following the expiration of such forty-five-day period. SECTION 6.09. Merger or Consolidation. Any company into which the Trustee may be merged or converted or which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided that such company shall be eligible under Section 6.01, shall be the successor to the Trustee and vested with all of the title to the trust estate and all of the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. SECTION 6.10. Concerning any Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the City an instrument in writing accepting such appointment hereunder and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessors; but such predecessor shall, nevertheless, on the Request of the City, or of its successor, execute and deliver an instrument transferring to such successor all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and moneys held by it as the Trustee hereunder to its successor. Should any instrument in writing from the City be required by any successor Trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the City. SECTION 6.11. Appointment of Co-Trustee. It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction (including particularly the law of the State) denying or restricting the right of banking corporations or associations to transact business as Trustee in such jurisdiction. It is recognized that in the case of litigation under this Indenture, and in particular in case of the enforcement of the rights of the Trustee on default, or in the case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as herein granted, or take any other action which may be desirable or 32 necessary in connection therewith, it may be necessary that the Trustee appoint an additional individual or institution as a separate or co-trustee. The following provisions of this Section 6.11 are adopted to these ends. In the event that the Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them. Should any instrument in writing from the City be required by the separate trustee or co-trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the City. In case any separate trustee or co-trustee, or a successor to either, shall become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate trustee or co-trustee. SECTION 6.12. Indemnification; Limited Liability of Trustee. The City shall indemnify and hold the Trustee harmless from and against all claims, losses, costs, expenses, liabilities and damages including legal fees and expenses arising from the exercise and performance of its duties hereunder. Such indemnity shall survive the resignation or removal of the Trustee hereunder. No provision in this Indenture shall require the Trustee to risk or expend its own funds or otherwise incur any financial liability hereunder if it shall have reasonable grounds for believing repayment of such funds or adequate indemnity against such liability or risk is not assured to it. The Trustee shall not be liable for any action taken or omitted to be taken by it in accordance with the direction of a majority (or other percentage provided herein) of the Owners of the principal amount of Bonds Outstanding relating to the exercise of any right, power or action, or the time, method and place of conducting any proceeding or remedy available to the Trustee under this Indenture. 33 ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE SECTION 7.01. Amendment by Consent of Bond Owners. This Indenture and the rights and obligations of the City and of the Owners of the 2026 Bonds may be modified or amended at any time by a supplemental indenture which shall become binding when the written consent of the Owners of a majority in aggregate principal amount of the 2026 Bonds then Outstanding exclusive of 2026 Bonds disqualified as provided in Section 7.03 hereof, are filed with the Trustee. No such modification or amendment shall (a) extend the maturity of or reduce the interest rate on any 2026 Bond or otherwise alter or impair the obligation of the City to pay the principal, interest or redemption premiums at the time and place and at the rate and in the currency provided therein of any 2026 Bond without the express written consent of the Owner of such 2026 Bond, (b) reduce the percentage of 2026 Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee. SECTION 7.02. Amendment Without Consent of Bond Owners. This Indenture and the rights and obligations of the City and of the Owners of the 2026 Bonds may also be modified or amended at any time by a supplemental indenture which shall become binding upon execution and delivery, without consent of any Bond Owners, but only to the extent permitted by law and only for any one or more of the following purposes- (a) to add to the covenants and agreements of the City in this Indenture contained, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the City; or (b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Indenture, or in any other respect whatsoever as the City may deem necessary or desirable, provided under any circumstances that such modifications or amendments shall not adversely affect the interests of the Owners of the 2026 Bonds; (c) to provide for the issuance of any Parity Debt, and to provide the terms and conditions under which such Parity Debt may be issued, including but not limited to the establishment of special funds and accounts relating to such Parity Debt and any other provisions relating solely to such Parity Debt, subject to and in accordance with the provisions of Section 3.04; or (d) to make such additions, deletions or modifications as may be necessary or desirable to assure exemption from federal income taxation of interest on the 2026 Bonds. SECTION 7.03. Disqualified Bonds. 2026 Bonds owned or held by or for the account of the City (but excluding 2026 Bonds held in any employees' retirement fund) shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding 2026 Bonds in this article provided for, and shall not be entitled to consent to, or take any other action in this article provided for. SECTION 7.04. Endorsement or Replacement of 2026 Bonds After Amendment. After the effective date of any action taken as hereinabove provided, the City may determine that the 2026 Bonds shall bear a notation, by endorsement in form approved by the City, as to such action, and in that case upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his 2026 Bond for that purpose at the Trust Office of the Trustee, a suitable 34 notation as to such action shall be made on such 2026 Bond. If the City shall so determine, new 2026 Bonds so modified as, in the opinion of the City, shall be necessary to conform to such Bond Owners' action shall be prepared and executed, and in that case upon demand of the Owner of any 2026 Bond Outstanding at such effective date such new 2026 Bonds shall be exchanged at the Trust Office of the Trustee, without cost to each Bond Owner, for 2026 Bonds then Outstanding, upon surrender of such Outstanding 2026 Bonds. SECTION 7.05. Amendment by Mutual Consent. The provisions of this Article VII shall not prevent any Bond Owner from accepting any amendment as to the particular 2026 Bond held by him, provided that due notation thereof is made on such 2026 Bond. 35 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS SECTION 8.01. Events of Default and Acceleration of Maturities. The following events shall be Events of Default hereunder: (a) Default in the due and punctual payment of the principal of any 2026 Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by declaration or otherwise; (b) Default in the due and punctual payment of any installment of interest on any 2026 Bond when and as such interest installment shall become due and payable; (c) Default by the City in the observance of any of the covenants, agreements or conditions on its part in this Indenture or in the 2026 Bonds contained, 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 Trustee; or (d) The filing by the City of a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the City, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, 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. Upon the occurrence of an Event of Default, the Trustee may, and shall, at the direction of the owners of a majority of the principal amount of the 2026 Bonds, by written notice to the City, declare the principal of the 2026 Bonds to be immediately due and payable, whereupon that portion of the principal of the 2026 Bonds thereby coming due and there interest thereon accrued to the date of payment shall, without further action, become and be immediately due and payable, anything in this Indenture or in the 2026 Bonds to the contrary notwithstanding. This provision, however, is subject to the condition that if, at any time after the principal of the 2026 Bonds shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the City shall deposit with the Trustee a sum sufficient to pay all of the principal of and interest on the 2026 Bonds having come due prior to such declaration, with interest on such overdue principal and interest calculated at the rate of interest per annum then borne by the Outstanding 2026 Bonds, and the reasonable fees and expenses of the Trustee and those of its attorneys, and any and all other defaults known to the Trustee (other than in the payment of the principal of and interest on the 2026 Bonds having come 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 Owners of a majority in aggregate principal amount of the 2026 Bonds at the time Outstanding may, by written notice to the City and to the Trustee, on behalf of the Owners of all of the Outstanding 2026 Bonds, rescind and annul such declaration and its consequences. However, no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or power consequent thereon. SECTION 8.02. Application of Funds Upon Acceleration. All amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of this 36 Indenture shall be applied by the Trustee in the following order upon presentation of the several 2026 Bonds, and the stamping thereon of the amount of the payment if only partially paid, or upon the surrender thereof if fully paid - First, to the payment of the costs and expenses of the Trustee and of Bond Owners in declaring such Event of Default, including reasonable compensation to their agents, attorneys and counsel, and to the payment of the costs and expenses of the Trustee, if any, in carrying out the provisions of this Article VIII, including reasonable compensation to its agents, attorneys and counsel; and Second, to the payment of the whole amount then owing and unpaid upon the 2026 Bonds for interest and principal, with interest on such overdue amounts to the extent permitted by law at the rate of interest then borne by the Outstanding 2026 Bonds, and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the 2026 Bonds, then to the payment of such interest, principal and interest on overdue amounts without preference or priority among such interest, principal and interest on overdue amounts ratably in proportion to the aggregate of such interest, principal and interest on overdue amounts. SECTION 8.03. Other Remedies; Rights of Bond Owners. Upon the occurrence of an Event of Default, the Trustee may pursue any available remedy, in addition to the remedy specified in Section 8.01, at law or in equity to enforce the payment of the principal of, premium, if any, and interest on the Outstanding 2026 Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture. If an Event of Default shall have occurred and be continuing and if requested so to do by the Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding 2026 Bonds and indemnified as provided in Section 6.02 (l), the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article VIII, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bond Owners. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to the Bond Owners) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bond Owners hereunder or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or acquiescence therein; such right or power may be exercised from time to time as often as may be deemed expedient. SECTION 8.04. Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of a majority in principal amount of the 2026 Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the 2026 Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in principal amount of the Outstanding 2026 Bonds hereunder opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation. Any suit, action or proceeding which any Owner of 2026 Bonds shall have the right to bring to enforce any right or remedy hereunder may be 37 brought by the Trustee for the equal benefit and protection of all Owners of 2026 Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the 2026 Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the respective Owners of the 2026 Bonds for the purpose of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the 2026 Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact. SECTION 8.05. Appointment of Receivers. Upon the occurrence of an Event of Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bond Owners under this Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Net Revenues and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment shall confer. SECTION 8.06. Non-Waiver. Nothing in this Article VIII or in any other provision of this Indenture, or in the 2026 Bonds, shall affect or impair the obligation of the City, which is absolute and unconditional, to pay the interest on and principal of the 2026 Bonds to the respective Owners of the 2026 Bonds at the respective dates of maturity, as herein provided, out of the Net Revenues and other moneys herein pledged for such payment. A waiver of any default or breach of duty or contract by the Trustee or any Bond Owners 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. No delay or omission of the Trustee or any Owner of any of the 2026 Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or Bond Owners by the Refunding Law or by this Article VIII may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Bond Owners, as the case may be. If a suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Bond Owners, the City and the Bond Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. SECTION 8.07. Rights and Remedies of Bond Owners. No Owner of any 2026 Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Indenture, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the 2026 Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity reasonably acceptable to the Trustee 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 written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of 2026 Bonds of any remedy hereunder; it being understood and intended that no one or more Owners of 2026 Bonds shall have any right in any manner whatever by his or their action to enforce any right under this Indenture, except in the manner herein provided, and that all proceedings at law or in 38 equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding 2026 Bonds. The right of any Owner of any 2026 Bond to receive payment of the principal of and interest and premium (if any) on such 2026 Bond as herein provided or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Indenture. SECTION 8.08. Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case, the City, the Trustee and the Bond Owners shall be restored to their former positions and rights hereunder, respectively, with regard to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. 39 ARTICLE IX MISCELLANEOUS SECTION 9.01. Limited Liability of City. Notwithstanding anything in this Indenture contained, the City shall not be required to advance any moneys derived from any source of income other than the Net Revenues for the payment of the principal of or interest on the 2026 Bonds, or any premiums upon the redemption thereof, or for the performance of any covenants herein contained (except to the extent any such covenants are expressly payable hereunder from the Gross Revenues). The City may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose and may be used by the City for such purpose without incurring indebtedness. SECTION 9.02. Benefits of Indenture Limited to Parties. Nothing in this Indenture, expressed or implied, is intended to give to any person other than the City, the Trustee and the Owners of the 2026 Bonds, any right, remedy or claim under or by reason of this Indenture. Any covenants, stipulations, promises or agreements in this Indenture contained by and on behalf of the City shall be for the sole and exclusive benefit of the Trustee and the Owners of the 2026 Bonds. SECTION 9.03. Discharge of Indenture. If the City shall pay and discharge any or all of the Outstanding 2026 Bonds in any one or more of the following ways: (a) by well and truly paying or causing to be paid the principal of and interest and premium (if any) on such 2026 Bonds, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the available amounts then on deposit in the funds and accounts established pursuant to this Indenture, is fully sufficient to pay such 2026 Bonds, including all principal, interest and redemption premiums; or (c) by depositing with a qualified escrow holder, in trust, Defeasance Obligations in such amount as the City (verified by an Independent Certified Public Accountant) shall determine will, together with the interest to accrue thereon and available moneys then on deposit in the Funds and Accounts established pursuant to this Indenture, be fully sufficient to pay and discharge the indebtedness on such 2026 Bonds (including all principal, interest and redemption premiums, if any) at or before their respective maturity dates; and if such 2026 Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been mailed pursuant to Section 2.02(d) or provision satisfactory to the Trustee shall have been made for the mailing of such notice, then, at the election of the City, and notwithstanding that any of such 2026 Bonds shall not have been surrendered for payment, the pledge of the Net Revenues and other funds provided for in this Indenture with respect to such 2026 Bonds, and all other pecuniary obligations of the City under this Indenture with respect to all such 2026 Bonds, shall cease and terminate, except only the obligation of the City to pay or cause to be paid to the Owners of such 2026 Bonds not so surrendered and paid all sums due thereon from amounts set aside for such purpose as aforesaid, and all expenses and costs of the Trustee. Notice of such election shall be filed with the Trustee. Any funds thereafter held by the Trustee, which are not required for said purposes, shall be paid over to the City. 40 Refunding bonds may be issued at any time without regard to whether an Event of Default exists. To accomplish defeasance the City shall cause to be delivered (i) a report of an Independent Certified Public Accountant verifying the sufficiency of the escrow established to pay the 2026 Bonds in full on the maturity or earlier redemption date ("Verification"), (ii) an escrow deposit agreement, and (iii) an opinion of nationally recognized bond counsel to the effect that the 2026 Bonds are no longer "Outstanding" under this Indenture; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the City and the Trustee. SECTION 9.04. Successor Is Deemed Included in All References to Predecessor. Whenever in this Indenture the City is named or referred to, such reference shall be deemed to include the successor to the powers, duties and functions, with respect to the management, administration and control of the affairs of the City, that are presently vested in the City, and all the covenants, agreements and provisions contained in this Indenture by or on behalf of the City shall bind and inure to the benefit of its successors whether so expressed or not. SECTION 9.05. Content of Certificates. Every certificate with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person or persons making or giving such certificate have read such covenant or condition 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 or opinions 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 covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of the signers, such condition or covenant has been complied with. Any such certificate made or given by an officer of the City may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate may be based, as aforesaid, are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Any such certificate or opinion or representation made or given by counsel may be based, insofar as it relates to factual matters, on information with respect to which is in the possession of the City, upon the certificate or opinion of or representations by an officer or officers of the City, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his certificate, opinion or representation may be based, as aforesaid, are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. SECTION 9.06. Execution of Documents by Bond Owners. Any request, consent or other instrument required by this Indenture to be signed and executed by Bond Owners may be in any number of concurrent writings of substantially similar tenor and may be signed or executed by such Bond Owners in person or by agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and of the City if made in the manner provided in this Section 9.06. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument or writing acknowledged to him the execution thereof. 41 The ownership of 2026 Bonds shall be provided by the Bond Registration Books. Any request, consent or vote of the Owner of any 2026 Bond shall bind every future Owner of the same 2026 Bond and the Owner of any 2026 Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the City in pursuance of such request, consent or vote. In determining whether the Owners of the requisite aggregate principal amount of 2026 Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, 2026 Bonds which are owned or held by or for the account of the City (but excluding 2026 Bonds held in any employees' retirement fund) shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, provided, however, that for the purpose of determining whether the Trustee shall be protected in relying on any such demand, request, direction, consent or waiver, only 2026 Bonds which the Trustee knows to be so owned or held shall be disregarded. In lieu of obtaining any demand, request, direction, consent or waiver in writing, the Trustee may call and hold a meeting of the Bond Owners upon such notice and in accordance with such rules and obligations as the Trustee considers fair and reasonable for the purpose of obtaining any such action. SECTION 9.07. Waiver of Personal Liability. No officer, agent or employee of the City shall be individually or personally liable for the payment of the interest on or principal of the 2026 Bonds; but nothing herein contained shall relieve any such officer, agent or employee from the performance of any official duty provided by law. SECTION 9.08. Partial Invalidity. If any one or more of the covenants or agreements, or portions thereof, provided in this Indenture on the part of the City (or of the Trustee) to be performed should be contrary to law, then such covenant or covenants, such agreement or agreements, or such portions thereof, shall be null and void and shall be deemed separable from the remaining covenants and agreements or portions thereof and shall in no way affect the validity of this Indenture or of the 2026 Bonds; but the Bond Owners shall retain all rights and benefits accorded to them under the Refunding Law or any other applicable provisions of law. The City hereby declares that it would have entered into this Indenture and each and every other section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the issuance of the 2026 Bonds pursuant hereto irrespective of the fact that any one or more sections, paragraphs, subdivisions, sentences, clauses or phrases of this Indenture or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. SECTION 9.09. Destruction of Cancelled 2026 Bonds. Whenever in this Indenture provision is made for the surrender to the City of any 2026 Bonds which have been paid or cancelled pursuant to the provisions of this Indenture, the Trustee shall destroy such 2026 Bonds and furnish to the City a certificate of such destruction. SECTION 9.10. Funds and Accounts. Any Fund or Account required by this Indenture to be established and maintained by the City or the Trustee may be established and maintained in the accounting records of the City or the Trustee, as the case may be, either as a Fund or an Account, and may, for the purpose of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a Fund or as an Account. All such records with respect to all such Funds and Accounts held by the City shall at all times be maintained in accordance with generally accepted accounting principles and all such records with respect to all such Funds and Accounts held by the Trustee shall be at all times maintained in accordance with 42 industry practices; in each case with due regard for the protection of the security of the 2026 Bonds and the rights of every Owner thereof. SECTION 9.11. Notices. Any notice, request, complaint, demand, communication or other paper shall be sufficiently given and shall be deemed given when delivered or mailed by registered or certified mail, postage prepaid, or sent by telegram, addressed as follows: If to the City: City of Palo Alto City Hall 250 Hamilton Avenue Palo Alto, California 94301 Attention: Director of Administrative Services If to the Trustee: Attn.: Global Corporate Trust Services One California Street, Suite 1000 San Francisco, CA 94111 The City and the Trustee may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. SECTION 9.12. Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, any moneys held by the Trustee in trust for the payment and discharge of any of the 2026 Bonds which remain unclaimed for one (1) year after the date when such 2026 Bonds have become due and payable, either at their stated maturity dates or by call for earlier redemption, if such moneys were held by the Trustee at such date, or for one (1) year after the date of deposit of such moneys if deposited with the Trustee after said date when such 2026 Bonds become due and payable, shall, at the Request of the City, be repaid by the Trustee to the City, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Bond Owners shall look only to the City for the payment of such 2026 Bonds; provided, however, that before being required to make any such payment to the City, the Trustee shall, at the expense of the City, cause to be mailed to the Owners of all such 2026 Bonds, at their respective addresses appearing on the Bond Registration Books, a notice that said moneys remain unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of mailing of such notice, the balance of such moneys then unclaimed will be returned to the City. SECTION 9.13. Execution in Several Counterparts. This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the City and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. SECTION 9.14. Governing Law. This Indenture shall be governed by and construed in accordance with the laws of the State of California. SECTION 9.15. Payment on Business Days. In any case where the date of the maturity of interest or of principal (and premium, if any) of the 2026 Bonds or the date fixed for redemption of any 2026 Bonds or the date any action is to be taken pursuant to this Agreement is other than a Business Day, the payment of interest or principal (and premium, if any) or the action need not be made on such date but may be made on the next succeeding day which is a Business Day with the same force and effect as if made on the date required and no interest shall accrue for the period from and after such date. 43 44
IN WITNESS WHEREOF, the CITY OF PALO ALTO has caused this Indenture to be signed in its name by its Director of Administrative Services and its seal to be affixed hereon and attested by its City Clerk, and U.S. Bank Trust Company, National Association, in token of its acceptance of the trust created hereunder, has caused this Indenture to be signed in its corporate name by its officer identified below, all as of the day and year first above written. CITY OF PALO ALTO By Director of Administrative Services [S E A L] Attest: By City Clerk U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By Authorized Officer A-1
EXHIBIT A FORM OF BOND UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF SANTA CLARA $[PRINCIPAL AMOUNT] CITY OF PALO ALTO WATER REVENUE REFUNDING BONDS 2026 SERIES A NO.________ $ ________________ INTEREST RATE MATURITY DATE DATED DATE CUSIP June 1, REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: DOLLARS Under and by virtue of the charter of the City of Palo Alto (the “City”) and the provisions of Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the "Refunding Law") the City, for value received will (subject to any right of prior redemption hereinafter provided for), on the Maturity Date specified above, pay to the Registered Owner named above, or registered assigns (the "Owner"), the Principal Amount stated above, in lawful money of the United States of America, and pay interest thereon in like lawful money from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this Bond (unless (i) this Bond is authenticated on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) this Bond is authenticated prior to November 15, 2026, in which event it shall bear interest from the Dated Date stated above; provided, however, that if at the time of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on this Bond) until payment of such Principal Amount in full, at the Interest Rate per annum stated above, payable on June 1 and December 1 in each year, commencing December 1, 2026 (each an "Interest Payment Date"), calculated on the basis of a 360-day year comprised of twelve 30-day months. Principal hereof and premium, if any, upon early redemption hereof are payable at the corporate trust office of U.S. Bank Trust Company, National Association (the "Trustee"). Interest hereon (including the final interest payment upon maturity or earlier redemption) is payable by check or draft of the Trustee mailed by first class mail to the Owner at the Owner's address as it appears on the registration books maintained by the Trustee as of the close of business on the fifteenth (15th) day of the month next preceding such Interest Payment Date (the "Record Date"); provided, that at the option of any Owner of at least $1,000,000 aggregate principal amount of the A-2
Bonds with respect to which written instructions have been filed with the Trustee prior to the Record Date, such interest may be paid by wire transfer. This Bond is one of a duly authorized issue of Bonds of the City designated as its "Water Revenue Refunding Bonds, 2026 Series A" (the "Bonds") issued under and pursuant to the Refunding Law and under and pursuant to an Indenture of Trust (the "Indenture") by and between the City and the Trustee, dated as of October 1, 2026, and approved by the City by Resolution No. ______, adopted by the Council of the City on ____, 2026. Copies of the Indenture are on file at the office of the City Clerk and at the above-mentioned office of the Trustee, and reference to the Indenture and any and all supplements thereto and modifications and amendments thereof and to the Refunding Law is made for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Net Revenues, as that term is defined below, and the rights of the Owners of the Bonds. All the terms of the Indenture and the Refunding Law are hereby incorporated herein and constitute a contract between the City and the Owner from time to time of this 2026 Bond, and to all the provisions thereof the Owner of this 2026 Bond, by acceptance hereof, consents and agrees. Each taker and subsequent Owner hereof shall have recourse to all of the provisions of the Refunding Law and the Indenture and shall be bound by all of the terms and conditions thereof. The Bonds are being issued for the following purposes: (i) to refund the outstanding Palo Alto Water Revenue Bonds, 2009 Series A, which were issued under Chapter 12.28 of the Palo Alto Municipal Code to finance improvements to the City’s water system (the "Water System") and (ii) to pay certain costs of issuing the Bonds. The Bonds are special obligations of the City and are secured by and payable from certain net revenues generated by the Water System (“Net Revenues”) in accordance with the Indenture. Neither the general fund, the full faith and credit, nor the taxing power of the City, the State of California or any other political subdivision thereof is pledged to the payment of the Bonds. The Bonds are not secured by a legal or equitable pledge of or charge, lien or encumbrance upon any property of the City or any of its income or receipts except the Net Revenues. No Optional Redemption. The 2026 Bonds are not subject to optional redemption prior to their stated maturity dates. Mandatory Sinking Fund Redemption. Bonds maturing on June 1, ____ are subject to mandatory redemption in part from Sinking Fund Installments to be made by the City on June 1, ________ and on each June 1 thereafter up to and including June 1, ______, at a redemption price equal to 100 percent of the principal amount thereof plus accrued interest, if any, to the redemption date without premium, as follows: June 1 Principal Amount A-3
Special Mandatory Redemption From Insurance or Condemnation Proceeds. The Bonds are also subject to redemption as a whole on any date, or in part on any Interest Payment Date in inverse order of maturity and by lot within a maturity, to the extent of the Net Proceeds of hazard insurance not used to repair or rebuild the Water System or the Net Proceeds of condemnation awards received with respect to the Water System to be used for such purpose pursuant to the Indenture, at a Redemption Price equal to the principal amount of the Bonds plus interest accrued thereon to the date fixed for redemption, without premium. Notice of Redemption. Unless waived by any Owner of Bonds to be redeemed, notice of any redemption of Bonds shall be given, at the expense of the City, by the Trustee by mailing a copy of a redemption notice by first class mail at least 20 days and not more than 60 days prior to the date fixed for redemption to the Owner of the Bond or Bonds to be redeemed at the address shown on the Bond Registration Books; provided, that neither the failure to receive such notice nor any immaterial defect in any notice shall affect the sufficiency of the proceedings for the redemption of the Bonds. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption. The Bonds are issuable as fully registered Bonds, without coupons, in denominations of $5,000 or any integral multiple thereof. Subject to the limitations and conditions and upon payment of the charges, if any, as provided in the Indenture, Bonds may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations and of the same maturity. This Bond is transferable by the Owner hereof, in person, or by his attorney duly authorized in writing, at said office of the Trustee, but only in the manner and subject to the limitations provided in the Indenture, and upon surrender and cancellation of this Bond. Upon registration of such transfer a new Bond or Bonds, of any authorized denomination or denominations, for the same aggregate principal amount and of the same maturity will be issued to the transferee in exchange herefor. The City and the Trustee may treat the Owner hereof as the absolute Owner hereof for all purposes, and the City and the Trustee shall not be affected by any notice to the contrary. The Indenture may be amended without the consent of the Owners of the Bonds to the extent set forth in the Indenture. It is hereby certified that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened or have been performed in due and regular time and manner as required by the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the City, does not exceed any limit prescribed by any laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. This Bond shall not become valid or obligatory for any purpose or be entitled to the benefits of the Indenture until the certificate of authentication and registration hereon shall have been manually signed by an authorized officer or signatory of the Trustee.

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IN WITNESS WHEREOF, the City of Palo Alto has caused this Bond to be executed in its name and on its behalf with the facsimile signatures of its Mayor and Director of Administrative Services and its seal to be reproduced hereon and attested by the facsimile signature of its City Clerk. CITY OF PALO ALTO By: Mayor By: Director of Administrative Services ATTEST: By City Clerk CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within-mentioned Indenture. Dated: ________________, as Trustee By: Authorized Signatory A-5
ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto __________________________________________ whose address and social security or other tax identifying number is ________________________, the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) _____________________________________________ attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature(s) must be guaranteed by an eligible guarantor institution (banks, stockbrokers, saving and loan associations and credit unions with membership in an approved signature medallion program) pursuant to Securities and Exchange Agency Rule 17Ad-15.

Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Certificate in every particular without alteration or enlargement or any change whatsoever.

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EXHIBIT B Description of 2009 Water Project The 8-Hour Emergency Water Supply Project is intended to correct the deficiency in the City’s emergency water supply, as specified by the California Department of Health Services (DHS). The Project, when completed, will support eight hours of normal water use at the maximum day demand level and four hours of fire suppression at the design fire duration level. The proposed project is part of the City’s Water System Capital Improvement Plan (CIP). The CIP proposes the construction of new wells, the rehabilitation of old wells, and the construction of a new storage reservoir. The City currently relies on the San Francisco Public Utilities Commission (SFPUC) for its water supply. The Project consists of improvements to and expansion of its existing water storage and supply facilities to meet the emergency needs identified in the Palo Alto 2005 Urban Water Management Plan, in the City’s Enhancing the New Century: Palo Alto 1998-2010 Comprehensive Plan, and the DHS minimum recommendations for a stand-alone Palo Alto emergency water supply system for use in the event of a SFPUC outage. The Project will help the City meet three-fold DHS recommendations for an emergency water supply: (1) a stand-alone system; (2) that supplies eight hours of maximum day water demand; (3) while maintaining fire-fighting reserves. Currently there are emergency water supply deficiencies in three of the zones in the northern half of the City. To correct this deficiency, the Project will include upgrades to five existing wells and construction of up to three new wells; construction of one new water storage reservoir with an associated pump station; and upgrade of the existing Mayfield Pump Station. The five existing wells to be upgraded are Hale, Rinconada Park, Fernando, Peers Park, and Matadero wells. Upgrade of the five existing wells and construction of new wells will provide approximately 11,000 gallons per minute (gpm) of reliable well capacity. Construction of a new reservoir and associated pump station will provide 2.5 million gallons (MG) of water storage for emergency use. The Project will allow the City to meet the emergency needs identified in the City’s 2005 Urban Water Management Plan, in the City’s Comprehensive Plan, and the California DHS minimum recommendations for a stand-alone Palo Alto emergency water supply system.

Palo Alto City CouncilSeptember 14, 2026

Palo Alto City Council
September 14, 2026