IRREVOCABLE REFUNDING INSTRUCTIONS
Relating to
$35,015,000
City of Palo Alto
Water Revenue Bonds, 2009 Series A
These IRREVOCABLE REFUNDING INSTRUCTIONS (these “Instructions”), dated October 6, 2026, are given by the CITY OF PALO ALTO, a charter city and municipal corporation organized and existing under the Constitution and the laws of the State of California (the “City”), to U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, acting as trustee (the “2009 Bonds Trustee”) for the captioned bonds (the “2009 Bonds”);
WlTNESSETH:
WHEREAS, the City operates facilities for the collection, transmission, transportation, treatment and distribution of water (the “Water System”); and
WHEREAS, the City previously issued the 2009 Bonds pursuant to an Indenture of Trust, dated as of October 1, 2009 (the “2009 Indenture”), by and between the City and the 2009 Bonds Trustee for the purpose of financing certain improvements to the Water System; and
WHEREAS, the 2009 Bonds are subject to prior redemption on any date without a redemption premium pursuant to Section 2.02(a)(i) of the 2009 Indenture; and
WHEREAS, the City, after due investigation and deliberation, has determined that it is in the interests of the City at this time to issue its City of Palo Alto Water Revenue Refunding Bonds, 2026 Series A (the “2026 Refunding Bonds”) pursuant to an Indenture of Trust, dated as of October 1, 2026 (the “2026 Refunding Indenture”), by and between the City and U.S. Bank Trust Company, National Association, as trustee (the “2026 Refunding Trustee”), for the purpose of refunding the 2009 Bonds; and
WHEREAS, the City desires to give these Instructions to the 2009 Bonds Trustee for the purpose of providing the terms and conditions relating to the deposit and application of moneys to provide for the payment and redemption of all of the 2009 Bonds pursuant to Section
2.03(a)(i) of the 2009 Indenture; and
WHEREAS, together, these Instructions and the 2009 Indenture constitute an escrow deposit agreement for purposes of Section 9.03 of the 2009 Indenture.
NOW, THEREFORE, the City hereby irrevocably instructs the 2009 Bonds Trustee as follows:
Section 1 . 2009 Bonds Debt Service Fund; Redemption Account. Pursuant to Section 4.03 of the 2009 Indenture, the City established an account held by the 2009 Bonds Trustee known as the “Debt Service Fund” (the “2009 Bonds Debt Service Fund”), and within
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the 2009 Bonds Debt Service Fund a Reserve Account and Redemption Account. All cash and securities deposited in or transferred to the 2009 Bonds Debt Service Fund and the Redemption Account and the Reserve Account therein pursuant to these Instructions are hereby irrevocably pledged as a special trust fund for the redemption of all of the 2009 Bonds on October 23, 2026 (the “Redemption Date”), in accordance with the 2009 Indenture. The 2009 Bonds Trustee shall have no lien upon or right of set off against the securities and cash at any time on deposit in the 2009 Bonds Debt Service Fund or the accounts therein, and such amounts shall be applied only as provided herein.
Section 2 . Deposit and Transfer into 2009 Bonds Service Fund and Redemption Account therein; Investment of Amounts. Concurrently with delivery of the 2026 Refunding Bonds, the City shall cause to be transferred to the 2009 Bonds Trustee the amount of $_______ in immediately available funds to be derived from a portion of the proceeds of sale of the 2026 Refunding Bonds, which amount the 2009 Bonds Trustee shall then deposit in the 2009 Bonds Debt Service Fund for the 2009 Bonds in the amount of $_______ (to pay accrued interest on the 2009 Bonds on the Redemption Date) and the Redemption Account for the 2009 Bonds in the amount of $_______ (to pay principal of the 2009 Bonds on the Redemption Date).
Concurrently, the 2009 Bonds Trustee will transfer $______ from the Reserve Account for the 2009 Bonds and $_______ from the other funds and accounts held by the 2009 Bonds Trustee under the 2009 Indenture (for a total transfer by the 2009 Bonds Trustee of $________) to the Redemption Account for the 2009 Bonds. The 2009 Bonds Trustee shall hold all amounts deposited in the 2009 Bonds Debt Service Fund and Redemption Account for the 2009 Bonds in cash, uninvested, pursuant to these Instructions.
The City confirms that by making the deposits described herein, it is discharging all of the 2009 Bonds pursuant to Section 9.03(b) of the 2009 Indenture.
Section 3 . Proceedings for Redemption of 2009 Bonds. The City hereby irrevocably elects, and directs the 2009 Bonds Trustee, to redeem, on the Redemption Date, all of the 2009 Bonds pursuant to the provisions of Section 2.03(a)(i) of the 2009 Indenture. The City previously instructed the 2009 Bonds Trustee to mail a notice of redemption to the owners of the 2009 Bonds in substantially in the form attached hereto as Exhibit A. The 2009 Bonds Trustee is hereby instructed to file on the date hereof the notice substantially in the form attached hereto as Exhibit B on the Municipal Securities Rulemaking Board’s EMMA System.
Section 4. Application of Funds to Redeem the 2009 Bonds. The 2009 Bonds Trustee shall apply the amounts on deposit in the 2009 Bonds Debt Service Fund and the Redemption Account to redeem all of the 2009 Bonds on the Redemption Date, at a price equal to 100% of the principal amount thereof, plus accrued interest.
Section 5. Transfer of Remaining Funds. On the Redemption Date, following the payment and redemption of the 2009 Bonds, the 2009 Bonds Trustee shall withdraw any amounts remaining on deposit in the 2009 Bonds Debt Service Fund and the Redemption Account for the 2009 Bonds and transfer such amounts to the 2026 Refunding Bonds Trustee for deposit into the Debt Service Fund established under the Indenture for the 2026 Refunding Bonds to be used solely for the purpose of paying interest on the 2026 Refunding Bonds.
Section 6. Amendment. These Instructions shall be irrevocable by the City. These Instructions may be amended or supplemented by the City, but only if the City shall file with the 2009 Bonds Trustee (a) an opinion of nationally recognized bond counsel engaged by the City
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stating that such amendment or supplement will not, of itself, adversely affect the exclusion from gross income of interest represented by the 2009 Bonds or the 2026 Refunding Bonds under federal income tax law, and (b) a certification of an independent accountant or independent financial adviser engaged by the City stating that such amendment or supplement will not affect the sufficiency of funds invested and held hereunder to make the payments required by Section 4.
[Signature page to Irrevocable Refunding Instructions ]
Section 7. Governing Law. These Instructions shall be construed in accordance with and governed by the laws of the State of California.
CITY OF PALO ALTO
By:
Director of Administrative Services
ACCEPTED:
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as 2009 Bonds Trustee
By:
Authorized Representative
ACCEPTED with respect to Section 5:
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION
as 2026 Refunding Bonds Trustee
By:
Authorized Representative
Exhibit A
EXHIBIT A
FORM OF CONDITIONAL NOTICE OF FULL OPTIONAL REDEMPTION
Conditional Notice of Redemption
City of Palo Alto
Water Revenue Bonds, 2009 Series A
Date of Issuance: October 28, 2009
Maturity Date
(September 1)
Original Principal Amount Interest Rate
*CUSIP No. for
Redeemed Bonds
2027 $10,665,000 4.700% 697388 AK2
2030 5,170,000 5.650 697388 AL0
2035 10,815,000 5.950 697388 AM8
NOTICE IS HEREBY GIVEN that all of the above described bonds (the “Bonds“) have been called for optional redemption on October 23, 2026 (the “Redemption Date”) pursuant to that certain Indenture of Trust, dated as of October 1, 2009 (“Indenture”), by and between the City of Palo Alto (the “City”) and U.S. Bank Trust Company, National Association, as successor trustee (the Trustee”), at a redemption price equal to the principal amount thereof, plus accrued interest to the redemption date, without premium (the “Redemption Price”).
On the Redemption Date, there will become due and payable on each of the Bonds the Redemption Price. Interest will not accrue on the Bonds after the Redemption Date.
The City will pay the Redemption Price with, among other things, proceeds of its City of Palo Alto Water Revenue Refunding Bonds, 2026 Series A (the “2026 Refunding Bonds”), which the City expects to issue on or about October 6, 2026. The redemption of the Bonds is conditional upon the receipt by the Trustee on or prior to the Redemption Date of moneys that are sufficient to pay the Redemption Price on the Bonds and, if such moneys have not been so received, this notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds. In such event, the City has the right to rescind this notice.
Payment of the Redemption Price on the Bonds called for redemption will be paid upon presentation of the Bonds on and after the Redemption Date, at the following address of the Trustee.
Delivery Instructions:
U.S. Bank
Global Corporate Trust
111 Fillmore Ave E
St. Paul, MN 55107
Exhibit A
The owners of the Bonds presenting their bonds in person for same day payment must surrender their bond(s) by 1:00 P.M. CST on the Redemption Date and a check will be available for pick up after 2:00 P.M. CST. Checks not picked up by 4:30 P.M. CST will be mailed out to the bondholder via first class mail. If payment of the Redemption Price is to be made to the registered owner of the Bond, the owner of the Bond is not required to endorse the Bond to collect the Redemption Price.
For a list of redemption requirements please visit the Trustee’s website at www.usbank.com/corporatetrust and click on the “Bondholder Information” link for Redemption instructions. You may also contact the Trustee’s Bondholder Communications team at 1-800- 934-6802 Monday through Friday from 8 A.M. to 6 P.M. CST.
IMPORTANT TAX NOTICE
Under various provisions of tax related acts passed by Congress, the Trustee may be obligated to withhold a certain percentage of the interest from the payment to owners who have failed to furnish the Trustee with a valid taxpayer identification number. Owners of Bonds who wish to avoid this withholding should submit t he taxpayer identification number (for individuals the Social Security Number) or an exemption certificate when presenting their Bonds for payment.
**The City and the Trustee shall not be responsible for the selection or use of the CUSIP numbers selected, nor is any repres entation made as to their correctness indicated in the notice or as printed on any Bond. They are included solely for the convenience of the holders.
Dated: _____, 2026 U.S. Bank Trust Company,
National Association,
as Trustee
Exhibit B
EXHIBIT B
FORM OF NOTICE OF DEFEASANCE
City of Palo Alto
Water Revenue Bonds, 2009 Series A
Date of Issuance: October 28, 2009
Maturity Date
(September 1)
Original Principal Amount Interest Rate
*CUSIP No. for
Redeemed Bonds
2027 $10,665,000 4.700% 697388 AK2
2030 5,170,000 5.650 697388 AL0
2035 10,815,000 5.950 697388 AM8
NOTICE IS HEREBY GIVEN, by the City of Pa lo Alto (the “City”) with respect to the above-captioned bonds (the “Bonds”), that the Bonds have been defeased and discharged under and within the meaning of that certain Indenture of Trust, dated as of October 1, 2009 (“Indenture”), by and between the City and U.S. Bank Trust Company, National Association, as successor trustee (the “Trustee”). Funds for the payment of the Bonds have been deposited with the Trustee and are being held uninvested.
As a consequence of the foregoing actions and in accordance with the Indenture, the Bonds are no longer secured by a pledge of net revenues under the Indenture, and the Bonds are now payable solely from the moneys set aside in escrow as described above and, if necessary, from other legally available funds of the City.
The City has irrevocably elected to redeem all of the outstanding Bonds on October 23, 2026, at a redemption price equal to the principal amount thereof, plus accrued interest to the redemption date, without premium.
*The City and the Trustee shall not be responsible for the selection or use of the CUSIP numbers selected, nor is any representation made as to their correctness indicated in the notice or as printed on any Bond. They are included solely for the convenience of the holders.
Dated: _____, 2026 U.S. Bank Trust Company, National
Association
as Trustee