Yreka City Council
November 1, 2022

YREKA CITY COUNCIL MEETING AGENDA
November 1, 2022
Closed Session: 5:30 PM
Regular Session: 6:30 PM
Yreka City Council Chamber, 701 Fourth Street, Yreka, CA Regular Meetings of the Yreka City Council are held the 1st and 3rd Tuesday of every month.

The full agenda packet can be found on the City’s website: www.ci.yreka.ca.us/AgendaCenter

1. CALL TO ORDER:

2. PUBLIC COMMENT ON CLOSED SESSION:

3. CLOSED SESSION:

The City Council will recess to Closed Session to discuss the following item(s). At the conclusion of the Closed Session, Open Session will reconvene and reportable action, if any, will be announced:
a. Conference with Labor Negotiator Government Code § 54957.6(a) Agency negotiators: City Manager Ledbetter, Assistant City Manager Hogan, Human Resources Director Elsnab
Employee Organization: Yreka Police Officers Association, Yreka Employees Association, and Yreka Management Association

4. OPTIONAL RECESS IF DESIRED:

5. RETURN TO OPEN SESSION AT 6:30 PM:

Join this meeting via Zoom:

Link: https://us02web.zoom.us/j/6194957056
Meeting ID# 619-495-7056
Members of the public may also remotely listen to and participate in the meeting via teleconference. If you wish to listen or participate in this meeting through teleconference, simply dial into the conference number below, and enter the meeting ID#.

Conference call in Number: 669-900-6833 (Toll-Free 888 788 0099) “RAISE YOUR HAND” to provide public comment for your desired item. Speakers will be asked to identify themselves.
• Online: If you are online, click on “raise hand” on the bottom of your screen. • Mobile App: In the mobile app, you can raise your hand by tapping the "Raise Hand" option in the "More" tab.
• Telephone: If you are calling in via telephone, to raise your hand, dial *9 (star-nine). Speakers will be called on by the last four digits of their phone number. To unmute yourself dial *6 (star-six). 1

Announcement of any action taken by the City Council in Closed Session required by the Ralph M. Brown Act. (Government Code § 54950 et. seq.)

6. CALL TO ORDER REGULAR SESSION AND PLEDGE OF ALLEGIANCE:

7. SPECIAL PRESENTATIONS AND/OR ANNOUNCEMENTS:

This time slot is for informational presentations, appointments, or awards to be presented by the City Council or to the City Council.

Proclamation – 15th Annual Read Across Siskiyou (RAS) 2022

8. PUBLIC COMMENTS:

Public participation is welcomed and invited at all City Council meetings. Time is reserved at each regular meeting for those in the audience who wish to address the City Council. The City requests that persons addressing the City Council refrain from making personal, slanderous, profane, or disruptive remarks.

Councilmembers, when recognized by the Mayor, may ask questions of presenter but no action may be taken by the City Council during the public comment section of the meeting. Under the Brown Act, the City Council is prohibited from discussing or taking action on any item not listed on the posted agenda. • Please speak into the microphone from the podium. The podium electronically adjusts up and down to accommodate speaker. (Should you need an additional special accommodation, e.g., remote microphone, please notice the City Clerk prior to the start of meeting for arrangements). • Please state your name for the record prior to providing your comments. • Please address the Council as a whole.
• If you have documents to present, please provide a minimum of seven (7) copies. • Please limit your remarks to five (5) minutes.

Public comments period is not intended to be a “Question and Answer” period or conversations with the Council or City staff.

9. PUBLIC COMMENT FOLLOW-UP:

This is the time for City Council or the City Manager to respond to public comments and may direct staff to prepare a report or place an item on a future agenda.

10. CONSENT AGENDA:

All matters listed under the consent agenda are considered routine and non-controversial and will be enacted by one motion unless any member of the Council wishes to remove an item for discussion, a. Approval of Minutes of the Regular Meeting held October 18, 2022. b. Water Permit Extension Environmental Review: Motion to adopt a Class 1 “Existing Facilities” Categorical Exemption pursuant to CEQA §15301 for the Water Permit Extension Project. c. Continuation of Urgency Ordinance #864: Fireworks.
d. Continuation of Urgency Resolution #2021-51: Remote Public Meetings. e. Waive Full Text Reading of All Ordinances on the Agenda. Ordinances shall be introduced and adopted by title only.

Recommended City Council Action (after the Mayor’s request for public comment): Motion to Adopt the Consent Agenda of the City Council of the City of Yreka as presented. 2

11. PUBLIC HEARINGS:

Public Hearing Protocol:
i. Mayor will describe the purpose of the Public Hearing. ii. City Staff will provide the Staff Report.
iii. City Staff will respond to questions from the City Council. iv. Mayor will open the Public Hearing.
v. Public wanting to comment will come to the podium, provide the City Clerk with their name and address, and provide their comments.
vi. Mayor will close the Public Hearing.
vii. City Council will deliberate and act on the item.

Finance Director
a. Agenda Title: Yreka Transfer’s request to the Yreka City Council to approve residential rates for the collection of garbage in the City of Yreka.

Yreka Transfer, as required within their franchise agreement with the City of Yreka, is required to submit requests for residential services increases for approval by the City Council. Yreka Transfer has submitted a request for a rate increase.

Recommended City Council Action: Motion to Adopt a Resolution 2022-41 of the City Council of the City of Yreka Consenting to an Increase of Residential Rates for the Collection of Garbage in the City of Yreka.
b. Agenda Title: Rate Increase for Dog Licensing Fees.

The services provided by Animal Control offer both private and public benefits for the city. Animal Control assists private owners in locating their dogs if dogs stray from private property. The public also benefits, as the Animal Control Unit maintains community safety by ensuring that stray, and potentially dangerous, dogs are removed from public places. Due to the combination of public and private benefits that the Animal Control Unit provides, the costs of the program are divided between user fees (licensing and shelter fees) and City funds. In the face of rising costs (wages, fuel, and supplies) the City started raising fees to fund at least 50% of Animal Control’s annual costs. The last increase of fees was in 2017. Current rates for dog licenses are $30/year for altered, and $60/year for unaltered.

Yreka Municipal Code Section Fee or Charge
YMC 8.8.050 - License and Registration
Year Effective 2023 2024 2025 2026 2027
Altered $35 $37 $41 $43 $45
Un-Altered $105 $111 $123 $129 $135
Low-Income Community
Service Hours (hrs)
Altered 3 hrs 3 hrs 4 hrs 4 hrs 4 hrs
Un-Altered 9 hrs 9 hrs 12 hrs 12 hrs 12 hrs
Recommended City Council Action: Motion to Adopt a Resolution 2022-42 of the City Council of the City of Yreka Establishing Fees Relating to Dogs, Pursuant to Ordinance 806, effective December 31, 2022.

12. OLD BUSINESS
City Treasurer
a. Agenda Title: Issuance of Certificates of Participation Series 2022 Wastewater Revenue Certificates 3

The construction of the Main Street Sewer Interceptor Project is now complete, and it is therefore necessary and appropriate for the City to follow through with the long-term “take-out” financing of the Project. The take-out financing is coming from the United States Department of Agriculture (USDA) in the form of Series 2022 Wastewater Revenue Certificates of Participation in an aggregate amount of not to exceed $5,700,000 (the “Certificates”). The Certificates will bear interest at a rate of 1.75% and will be repaid semi-annually over a 40-year fully amortizing term, which equates to annual debt service of approximately $197,000.

Recommended City Council Action: Motion to Adopt:
(1) Resolution 2022-43 Authorize the Issuance of Certificates of Participation Series 2022 Wastewater Revenue Certificates of Participation, Approving and Authorizing and Directing Execution of a Trust Agreement, Installment Sale Agreement, Assignment Agreement and Purchase Offer, and Providing for Other Matters Properly Related Thereto, and
(2) Resolution 2022-44 Approving, Authorizing and Directing Approving and Adopting USDA RUS Bulletin 1780-27 Loan Resolution Providing for the Incurrence of Indebtedness for the Purpose of Providing a Portion of the Cost of Acquiring, Constructing, Enlarging, Improving and/or Extending the Main Street Sewer Interceptor Improvement Project

13. NEW BUSINESS :

City Manager/Fire Chief
a. Agenda Title: Purchase of a Class 6 Fire Apparatus
The Finance Committee met on Thursday, October 27, 2022, and evaluated the business needs and benefits of having this type of apparatus available for initial “quick strike attack, QTAC”. The committee unanimously recommended bringing this to the City Council for consideration. The committee recommends appropriating $275,000 from Fire Equipment reserves (mutual aid strike team equipment reserves) and Measure H funds for the purchase.

Recommended City Council Action: Motion to Approve Resolution 2022-45 Approving and Authorizing Acquisition of Equipment and Execution of all necessary documents for the Acquiring of Equipment for the Yreka Volunteer Fire Department.

City Manager/Siskiyou County
b. Agenda Title: Syringe Exchange Program Kiosks
Recommended City Council Action: Discussion and possible direction of Syringe Exchange Program Kiosks in the City.

Finance
c. Agenda Title: Payments/disbursements issued from September 27, through October 23, 2022.

Recommended City Council Action: Approval/ratification of payments issued from September 27, through October 23, 2022.

14. CITY MANAGER/STAFF REPORTS:

City Manager and Staff may make brief announcements or reports at this time.

15. COUNCILMEMBER STATEMENTS AND REQUESTS:
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Members of the Council may make brief announcements, reports, or request staff to report to Council on any matter at a subsequent meeting.

16. ADJOURNMENT:

In compliance with the requirements of the Brown Act, notice of this meeting has been posted in a publicly accessible place, 72 hours in advance of the meeting.

All documents produced by the City which are related to an open session agenda item and distributed to the City Council are made available for public inspection in the City Clerk’s Office during normal business hours.

Public Hearings: If, in the future, you wish to challenge in court any of the matters on an agenda for which a public hearing is to be conducted, you may be limited to raising only those issues which you (or someone else) raised orally at the public hearing or in written correspondence received by the City at or before the hearing. Any person seeking to challenge a City Council decision made as a result of a proceeding in which by law a hearing is required to be given, evidence is required to be taken, and the discretion in the determination of facts is vested in the City Council, shall be required to commence that action 90 days following the date on which the decision becomes final as provided in Code of Civil Procedure Section 1094.6. Please refer to Code of Civil Procedure 1094.6 to determine how to calculate when a decision becomes “final.”
"CHALLENGING DECISIONS OF CITY ENTITIES The time limit within which to commence any lawsuit or legal challenge to any quasi-adjudicative decision made by the City of Yreka is governed by Section 1094.6 of the Code of Civil Procedure, unless a shorter limitation period is specified by any other provision, including without limitation Government Code section 65009 applicable to many land use and zoning decisions, Government Code section 66499.37 applicable to the Subdivision Map Act, and Public Resources Code section 21167 applicable to the California Environmental Quality Act (CEQA). Under Section 1094.6, any lawsuit or legal challenge to any quasi-adjudicative decision made by the City must be filed no later than the 90th day following the date on which such decision becomes final. Any lawsuit or legal challenge, which is not filed within that 90-day period, will be barred. Government Code section 65009 and 66499.37, and Public Resources Code section 21167, impose shorter limitations periods and requirements, including timely service in addition to filing. If a person wishes to challenge the above actions in court, they may be limited to raising only those issues they or someone else raised at the meeting described in this notice, or in written correspondence delivered to the City of Yreka, at or prior to the meeting. In addition, judicial challenge may be limited or barred where the interested party has not sought and exhausted all available administrative remedies." The City of Yreka does not discriminate on the basis of race, color, national origin, religion, age, gender, sexual orientation, disability, or any other legally protected classes in employment or provision of services. In compliance with the Americans with Disabilities Act, those requiring accommodations for this meeting should notify the City Clerk 48 hours prior to the meeting at (530) 841-2386 or by notifying the Clerk at [email protected].

AFFIDAVIT OF NOTIFICATION AND POSTING

STATE OF CALIFORNIA )

COUNTY OF SISKIYOU ) SS

CITY OF YREKA )
I, Rhetta Hogan, City Clerk for the City of Yreka, hereby declare under penalty of perjury that a copy of the above Agenda of the Regular Meeting of the City Council of the City of Yreka, California, was delivered and/or notice by email not less than 72 hours, before the hour of 5:30 p.m. on November 1, 2022 to the members of the governing agency, and caused the agenda to be posted on the City’s website at www.ci.yreka.ca.us and posted at Yreka City Hall, 701 Fourth St., Yreka, California. /s/: Rhetta Hogan
5 Signed ________________________
Mayor Duane Kegg, City of Yreka
Siskiyou County
PROCLAMATION of the 15th ANNUAL “READ ACROSS SISKIYOU” event Sponsored By First 5 Siskiyou Children and Families Commission WHEREAS, the ultimate goal of the First 5 Siskiyou Children and Families Commission is that all of Siskiyou’s children from prenatal through 5 years of age will be healthy, ready to learn, and supported in safe, nurturing families and communities; and WHEREAS, children in Siskiyou County from prenatal through 5 years of age have a successful start in life through daily reading with supportive and nurturing families, caregivers, educators and community leaders; and WHEREAS, early literacy is the foundation for academic, social emotional, and economic success; and WHEREAS, First 5 Siskiyou, in partnership with Siskiyou County Library and the Family/ Community Resource Centers, dedicates one day each year to promote early literacy by providing the same titled book to be read by guest readers to children in various preschools, kindergartens, child care settings, libraries and online events throughout Siskiyou County on the same day and provide each child with a copy of that book to take home.

THEREFORE, The City of Yreka hereby proclaims November 9, 2022 as the 15th anniversary of “Read Across Siskiyou” and be it that this body enthusiastically endorses daily reading, singing and playing with children as a critical foundation for healthy development and life-long success.
6

YREKA CITY COUNCIL

MEETING MINUTES
October 18, 2022
Yreka City Council Chamber, 701 Fourth Street, Yreka, CA On October 18, 2022 the City Council of Yreka, met for a Special meeting at 5:30 p.m. and Regular Meeting at 6:30 p.m. and upon roll call, the following Councilmembers were present: Deborah Baird, Joan Smith Freeman, Duane Kegg, Paul McCoy, and Corey Middleton.

1. CALL TO ORDER:

2. PUBLIC COMMENT ON CLOSED SESSION:

3. CLOSED SESSION:

The City Council will recess to Closed Session to discuss the following item(s). At the conclusion of the Closed Session, Open Session will reconvene and reportable action, if any, will be announced:
a. Conference with Labor Negotiator Government Code § 54957.6(a) Agency negotiators: City Manager, Assistant City Manager, and Human Resources Director.

Employee Organization: Yreka Police Officers Association, Yreka Employees Association

4. OPTIONAL RECESS IF DESIRED:

5. RETURN TO OPEN SESSION AT 6:30 PM:

Announcement of any action taken by the City Council in Closed Session required by the Ralph M. Brown Act. (Government Code § 54950 et. seq.)

6. CALL TO ORDER REGULAR SESSION AND PLEDGE OF ALLEGIANCE:

Mayor Kegg announced there was no reportable action from the Closed Session.

7. SPECIAL PRESENTATIONS AND/OR ANNOUNCEMENTS:

This time slot is for informational presentations, appointments, or awards to be presented by the City Council or to the City Council.

Presentation, Siskiyou Economic Development Council-- Carnegie Library Planning Progress
Tonya Dowse with the Siskiyou Economic Council gave an update on this project. Kory Hayden and Alia Roca-Lezra were also present and presented.

8. PUBLIC COMMENTS:

Public Comment: (Jason Ledbetter, read a statement from) Dawnmarie Autry, Steve Radford, Jerry Stalker, and Tryes Cha.
7

Council addressed Agenda item 12.d at this time.

Heather Dodds spoke about this event, giving an update on the process and introducing Jeremy Flynn, with 22avenue Entertainment Logistics from Redding, who showed a video of event possibilities. Amanda Harris also addressed the City Council providing details about funding.

Public Comment: Jerry Stalker and Kory Hayden.

Recommended City Council Action: A motion to subsidize the Night of Lights event at the financial obligation of $____ to the Siskiyou Economic Development Council and directing City Manager to use the funds from General Fund (not previously allocated).

City Manager Ledbetter gave information on this event and history.

Motion to approve Agenda item 12.d with a financial obligation of up to $15,000 and next year planning this with more lead time.

MOTIONED: Councilmember Smith Freeman
Motion dies for lack of a second.

Motion to approve Agenda item 12.d with a financial obligation of $10,000 from General Fund.

MOTIONED: Mayor Kegg
SECOND: Councilmember Middleton
AYES: Councilmembers: Baird, Smith Freeman, Kegg, McCoy, and Middleton ABSTAIN: None
ABSENT: None
Council took a recess at approximately 7:55 p.m.

9. PUBLIC COMMENT FOLLOW-UP:

10. CONSENT AGENDA:

All matters listed under the consent agenda are considered routine and non-controversial and will be enacted by one motion unless any member of the Council wishes to remove an item for discussion, a. Approval/ratification of payments issued from September 26, through October 9, 2022. b. Approval of Minutes of the Regular Meeting held October 4, 2022. c. Continuation of Urgency Ordinance #864: Fireworks.
d. Continuation of Urgency Resolution #2021-51: Remote Public Meetings. e. Waive Full Text Reading of All Ordinances on the Agenda. Ordinances shall be introduced and adopted by title only.

Public Comment: None
Recommended City Council Action: Motion to Adopt the Consent Agenda of the City Council of the City of Yreka as presented.

Motion to approve the Consent Calendar as submitted.

MOTIONED: Mayor Pro Tempore Baird
SECOND: Councilmember McCoy
8

AYES: Councilmembers: Baird, Smith Freeman, Kegg, McCoy, and Middleton ABSTAIN: None
ABSENT: None

11. OLD BUSINESS
City Manager
a. Agenda Title: City of Yreka Proclamation United Against Hate The City Council considered at the September 20, 2022, a Proclamation Designating November 13-19, 2022, as United Against Hate Week. The Proclamation is being brought forth for Council’s consideration.

Recommended City Council Action: A motion to adopt the Proclamation that supports and names the City of Yreka in joining the Motion in Proclaiming November 13-19, 2022, as United Against Hate Week, and authorizing the City Manager to advertise the Proclamation in the Siskiyou Daily Newspaper, draft an Op-Ed to be published in the Siskiyou Daily Newspaper, order posters and establish a poster pick up location at City Hall, and provide a copy of the Proclamation in the upcoming quarterly utility bill newsletter.

City Manager Ledbetter presented the report. Councilmembers made comments about the topic.

Public Comment: Jan Osborn, Debbie Bacigalupi, Steve Radford, Abigail VanAllen, Donna Bacigalupi, Jennifer Silveira, Connie Meek, and Colleen Baker.

Council edited the text of the proclamation.

City Council Action: A motion to adopt the Proclamation that supports and names the City of Yreka in joining the Motion in Proclaiming November 13-19, 2022, as United Against Hate Week with some edited wording in two areas.

MOTIONED: Councilmember Middleton
SECOND: Councilmember Smith Freeman
AYES: Councilmembers: Baird, Smith Freeman, Kegg, and Middleton.

NOES: Councilmember McCoy
ABSTAIN: None
ABSENT: None
City Manager/Finance Director
b. Agenda Title: Dog License Fee Update
Finance Director Aldrich presented the report.

Public Comment: None
Recommended City Council Action: Motion to direct staff to prepare dog license fee option two for City Council fee resolution approval.

MOTIONED: Mayor Kegg
SECOND: Councilmember Middleton
AYES: Councilmembers: Smith Freeman, Kegg, and Middleton.

NOES: Councilmembers McCoy, Baird
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ABSTAIN: None
ABSENT: None
Councilmember Smith Freeman made a motion to reconsider the matter.

Motion to reconsider the previously passed motion on dog fees.

MOTIONED: Councilmember Smith Freeman
SECOND: Mayor Pro Tempore Baird
AYES: Councilmembers: Baird, Smith Freeman, Kegg, McCoy NOES: Councilmember Middleton
ABSTAIN: None
ABSENT: None
Recommended City Council Action: Motion to direct staff to prepare dog license fee option two for City Council fee resolution approval.

Public Comment: Lorenzo Love
MOTIONED: Mayor Kegg
SECOND: Councilmember Middleton
AYES: Councilmembers: Baird, Kegg, McCoy, Middleton
NOES: Councilmember Smith Freeman
ABSTAIN: None
ABSENT: None

12. NEW BUSINESS :

City Manager
a. Agenda Title: Approval of the School Resource Officer Agreement Recommended City Council Action: Motion to Authorize the City Manager to execute the agreement for the School Resource Officer Agreement between the Yreka Union High School District, Yreka Union School District, and the City of Yreka Police Department.

Public Comment: None
MOTIONED: Councilmember McCoy
SECOND: Councilmember Middleton
AYES: Councilmembers: Baird, Smith Freeman, Kegg, McCoy, Middleton NOES: None
ABSTAIN: None
ABSENT: None
City Manager
b. Agenda Title: Discussion/Possible Action: Project Homekey Program Recommended City Council Action: Motion to direct the City Manager to move forward on directing Housing Tools to facilitate a Homekey grant application.

City Manager Ledbetter presented the report.

Public Comment: None
MOTIONED: Mayor Kegg
10

SECOND: Mayor Pro Tempore Baird
AYES: Councilmembers: Baird, Smith Freeman, Kegg, McCoy, Middleton NOES: None.

ABSTAIN: None
ABSENT: None
City Manager
c. Agenda Title: Discussion/Possible Action: Emergency Warming Center Recommended City Council Action: Motion to direct the City Manager to create an MOU with the County of Siskiyou for providing Social Worker staff to manage the emergency Warming Center at the City of Yreka Council Chambers.

City Manager Ledbetter presented the report with the pros and cons for each option.

Chief Gilman provided some additional information regarding last years’ needs.

Public Comment: Lorenzo Love, Sarah Springfield, Ben Woodruff By Council consensus have the City Manager look at buildings the City owns, and start an MOU with the County, investigating three options with the following priority:

Community Center Conference Room and Community Theater, Council Chambers, in addition, discussion opportunities with the non-profit, the Yreka Community Resource Center 201 S Broadway, Yreka, CA for space.

City Manager – this item was addressed earlier in the meeting. d. Agenda Title: Discussion/Possible Actions: Discuss the Siskiyou Economic Development Scope of Work for the Night of Lights event and determine what financial obligation the City would like to make to financially support the Night of Lights Event.

Recommended City Council Action: A motion to subsidize the Night of Lights event at the financial obligation of $____ to the Siskiyou Economic Development Council and directing City Manager to use the funds from General Fund (not previously allocated).

City Manager
e. Agenda Title: Discussion/Possible Actions: Discuss the proposed interest from the Yreka Elks Lodge No. 1980 to manage the Yreka Holiday Parade and determine the financial obligation the City would like to make to support the Elks managing this event.

Recommended City Council Action: A motion to subsidize the Holiday Parade event at the financial obligation of $5,500 to the Yreka Elks Lodge No. 1980 and directing the City Manager to use funds from General Fund (not previously allocated).

City Manager Ledbetter presented the report.

Public Comment: None
Recommended City Council Action: A motion to subsidize the Holiday Parade event at the financial obligation of $5,500 to the Yreka Elks Lodge No. 1980 and directing the City Manager to use funds from General Fund (not previously allocated).

MOTIONED: Mayor Pro Tempore Baird
SECOND: Councilmember Middleton
AYES: Councilmembers: Baird, Smith Freeman, Kegg, McCoy, Middleton 11

NOES: None.

ABSTAIN: None
ABSENT: None

13. CITY MANAGER/STAFF REPORTS:

City Manager Ledbetter reported on attending the Siskiyou Gardens, Parks and Greenway Association (SGPGA) in Yreka. He also met with members of the Elks Club. He attended the patriots meeting, and the candidates’ forum. He also met with the new Dunsmuir City Manager and welcomed him to the area. He spoke about a grant opportunity and an upcoming meeting. He also announced the upcoming League of Local Agencies (LOLA) meeting and he said there were two felony arrests for arson in Yreka.

14. COUNCILMEMBER STATEMENTS AND REQUESTS:

Councilmember Smith Freeman reported on the candidates’ forum, and two other events that took place downtown Yreka.

15. ADJOURNMENT:

There being no further business before the Council the meeting was adjourned at 11:02 p.m. ______________________
Duane Kegg, Mayor
Minutes approved by Council,
Motion November 1, 2022
___________________________
Rhetta Hogan, City Clerk
12 CITY OF YREKA

CITY COUNCIL AGENDA MEMORANDUM

Prepared by: City Attorney and Planning Director
Agenda Title: Consent Agenda: Water Permit Extension Environmental Review
Meeting date: November 1, 2022
Recommended Action:

Motion to adopt Class 1 “Existing Facilities” Categorical Exemption pursuant to Section 15301 of the California Environmental Quality Act for the Water Permit Extension Project
Summary:

The City of Yreka (City) provides domestic water for utility rate payers within the City of Yreka Water Services Area (WSA). In an effort to continue to provide reliable and high-quality water, the City is requesting that the time for it to put the full amount of its authorized diversion (i.e., 6,300 afy) to beneficial use be extended until the year 2032. The extension requires review under the California Environmental Quality Act (CEQA) to consider whether any significant environmental effect caused by an extension of the present water permit would have a direct environmental impact from the continued diversion of Yreka’s water supply from Fall Creek.

The extension is not a "project" as that term is defined by CEQA. An activity is a "project" subject to CEQA only if it has the potential to result in either a direct physical change to the environment or a reasonably foreseeable indirect change in the environment. (State CEQA Guidelines § 15378). The extension will have no potential to cause any direct or reasonably foreseeable indirect change in the environment.

Even if the extension were deemed to be a project within CEQA's meaning, the Extension is exempt under the Class 1 categorical exemption for existing facilities (State CEQA Guidelines § 15301) and the catch-all “common sense,” general rule exemption (State CEQA Guidelines §15061(6)(3)).

Background:

The City of Yreka was incorporated in 1857. Prior to 1970, the City’s water sources included a number of wells and local reservoirs. The Greenhorn dam and reservoir was a major source of water. Also, water was pumped to storage reservoirs or directly into the distribution system from sources such as the North Well and Boston 13 Shaft Well (which were actually infiltration galleries). However, the quantity of water available during drought conditions was unpredictable and unreliable.

Droughts and water shortages began to have greater impacts as the City of Yreka grew. In a series of summers (e.g., in the years 1944, 1955, 1957, 1959, 1966), the City experienced critical water shortages. In 1966, the City commissioned a feasibility study for the development of new and more reliable water sources. The study report recommended that the City install a water conduit from Fall Creek, which is located north of the Klamath River approximately 23 miles northeast of the City.

To obtain water for the new system, the City applied to the State Water Board (Application 22551) and was issued a Permit for Diversion and Use of Water (Permit 15379) on May 17, 1967. The Permit specifies that the water appropriated shall not exceed 15 cubic feet per second (which equates to 9.7 million gallons per day), and that the maximum amount to be diverted shall not exceed 6,300 acre-feet per year. Under the Permit, all construction work of the water facilities and diversion to the authorized uses was to be completed by December 31, 2005.

The Fall Creek water system was completed by the City in 1968, which included diversion and intake structures, a 24-inch pipeline from Fall Creek, a pump station, new water treatment facilities, and small reservoirs (i.e., Evergreen, City Ranch, and Klamath Pass).

On December 18, 2003, the City of Yreka updated of its General Plan. Along with the other elements of a general plan, the City of Yreka General Plan, 2002-2022, contains a Land Use Element that provides policy guidance for the physical form and development of the community, and a Public Facilities Element that describes public services within the planning area. These two elements are closely connected in that, while the Land Use Element includes projections about the anticipated future growth of the City and the land use designations and patterns needed to accommodate that growth, the Public Facilities Element addresses the facilities and services needed to serve the city and accommodate development and growth. The Public Facilities Element includes Goal PF.3, “Ensure an ample water supply for the City of Yreka”. More will be said about the General Plan and related water supply needs in this Initial Study.

It is also noted that the City of Yreka prepared and, when it adopted the General Plan Update in December 2003, certified an Environmental Impact Report (EIR) concerning the update to comply with the California Environmental Quality Act (CEQA). The EIR addressed the range of impacts that could result from buildout pursuant to the General Plan. In the context of the relationship of the “Water Rights Service Boundary” to the future growth of the City as contemplated in the 14 General Plan and the EIR, this Initial Study observes that the impacts that might be said to be “induced” in any way by the water rights permit timeframe issue have already been evaluated in the General Plan EIR. In other words, although the area within the water rights service boundary may be said to be a component of the project site in that this area constitutes the “place of use” of the water to be diverted from Fall Creek, the related impacts concerning the place of use of the water have already been addressed in the General Plan EIR and need not be again evaluated in the context of the requested extension of time concerning the water permit.

While, under the 1967 Permit, complete application of diverted water to authorized uses was to be completed by December 31, 2022, the City’s records indicate that it diverted 2,414 afy from Fall Creek in 2021. Thus, 2,414 afy is the appropriate “baseline” for the maximum amount of annual diversion through 2021. Since the permitted amount under the 1967 Permit was 6,300 acre-feet per annum, the City is requesting to have the permit extended to enable the City to reexamine in the year 2032 whether the City has fully 6,300 afy to beneficial use to the point that a license would replace the City’s right to divert pursuant to its permit. The extension would not create new water management measures, alter the existing authority to build new facilities or modify existing facilities, or change water allocation provisions of the permitted water diversion.

Even though growth and demand may not have necessitated full beneficial use of 6,300 afy by December 2022 as contemplated when the latest extension to permit 15379 was approved, the City will have undisputed need of additional water from Fall Creek as the City grows in future years. This need is further demonstrated by the lack of other surface water sources and the constraints and limitations of using ground water resources in the vicinity. An extension of time to put the full amount of the authorized diversion from Fall Creek to beneficial use is necessary for the City to continue to support implementation of its adopted General Plan by encouraging and accommodating urban growth and development. The Klamath River Basin Compact, Public Law 85-222, State of Oregon’s KORS 542.610 and California’s Water Code §5900, et seq defines “Domestic use” as the use of water for human sustenance, sanitation and comfort; for municipal purposes; … and for other like purposes. The compact provides when there is insufficient water to satisfy all such applications, each state shall give preference to applications for a higher use over applications for a lower use in accordance with Domestic use being classed as the highest water use. In addition, California Water Code §106 provides: “It is hereby declared to be the established policy of this State that the use of water for domestic purposes is the highest use of water ...”
15 Further, The State of California and its Department of Water Resources Department of Water Resources (through the agreement by the Natural Resources Agency), the United States Department of the Interior, United States Department of Commerce’s National Marine Fisheries Service, California Natural Resources Agency (which is the umbrella agency for Department of Water Resources, Department of Fish and Wildlife, Department of Conservation), California Department of Fish and Wildlife, the State of Oregon, Oregon State of Environmental Quality, Oregon Department of Fish and Wildlife, Oregon Water Resources Department and the permittee/owner PacifiCorp (a subsidiary of Berkshire Hathaway) as well as 35 other tribal, fish and conservation related NGOs, irrigation entities and water users entitled the Klamath Hydroelectric Settlement Agreement, dated February 18, 2010, as amended April 6, 2016 and November 30, 2016 (AKSA) which related to an application to the Federal Energy Regulatory Commission to decommission four hydroelectric dams on the lower Klamath river.

Because the applicants recognized that this decommissioning project could impact Yreka’s water supply, the AKSA contains ¶ 7.2.3(A) which was intended to protect Yreka’s municipal water supply. The provision relating to the protection of Yreka’s municipal water permit and its water conveyance infrastructure is as follows:

A. The Parties collectively and each Party individually shall agree not to oppose the City of Yreka’s continued use of California State Water Right Permit 15379, which provides for the diversion of up to 15 cfs for municipal uses by the City of Yreka.

Project Location:

The place of diversion on Fall Creek which the City of Yreka obtains water for its municipal water system is located approximately 23 miles northeast of the City.

Fall Creek is a tributary to the Klamath River, flowing into the river at a point below where the river enters Iron Gate Reservoir. The intake to the City’s water system is located approximately one mile north and upstream of the point where Fall Creek enters the reservoir/river. The location is north of, and is accessed by, Copco Road. The location may generally be described as the NW ¼ of Section 30, T48N, R4W, Mt. Diablo Meridian.

Environmental Review:

The Water Permit Extension Project is considered a “Project” under CEQA due to the potential impacts to the environment of drawing water from Fall Creek. Here, the Class 1 categorical exemption and the "common sense" exemption apply because:
16 1. The permit extension does not propose the change the present water intake facilities or level of water consumption;

2. The extension will not create new water management measures, alter existing authority to build new facilities or modify existing facilities, or change water allocation provisions to any extraterritorial contracts the city has with others;

3. The extension will not change hydrology, regulations, or the water supply; and

4. Although a benefit of the extension could be the ability to continue to supply future projects, including repair and maintenance projects, such future projects, if any, are too speculative to allow for meaningful analysis at this time and if and when any such project is actually proposed, it would be subject to CEQA review as required by law.

Staff Recommendation:

The City Attorney recommends the City Council adopt a Class 1 Categorical Exemption for the Water Permit Extension Project due to no physical changes in the water provision. The request to extend the permit would allow the City to continue to utilize the water rights granted under Permit No. 15379 would allow the City to extend the city’s permit to divert water for consumptive use for ten additional years. The project would not change the annual yield or require any changes to the provision of water services at the water intake facility.

Attachments:

1. Notice of Exemption Form
17 Statutory Exemptions. State code number:

_______________________________________________
Print Form
Notice of Exemption Appendix E
To: Office of Planning and Research From: (Public Agency): ____________________________ P.O. Box 3044, Room 113 _______________________________________________ Sacramento, CA 95812-3044 County Clerk
(Address)
___________________________
___________________________
County of: __________________
Project Title: ____________________________________________________________________________ Project Applicant: ________________________________________________________________________ Project Location - Specific:

Project Location - City: ______________________ Project Location - County:

Description of Nature, Purpose and Beneficiaries of Project:
_____________________
Name of Public Agency Approving Project: _____________________________________________________ Name of Person or Agency Carrying Out Project: ________________________________________________ Exempt Status: (check one):

Ministerial (Sec. 21080(b)(1); 15268);
Declared Emergency (Sec. 21080(b)(3); 15269(a));
Emergency Project (Sec. 21080(b)(4); 15269(b)(c));
Reasons why project is exempt:

Lead Agency
Contact Person: ____________________________ Area Code/Telephone/Extension: _______________ If filed by applicant:

1. Attach certified document of exemption finding.

2. Has a Notice of Exemption been filed by the public agency approving the project? Yes No Signature: ____________________________ Date:

Signed by Lead Agency Signed by Applicant
Authority cited: Sections 21083 and 21110, Public Resources Code. Date Received for filing at OPR:

Reference: Sections 21108, 21152, and 21152.1, Public Resources Code. _______________
Categorical Exemption. State type and section number: ____________________________________ ______________________________________________
______________ Title: _______________________
Revised 2011

CITY OF YREKA

CITY COUNCIL AGENDA MEMORANDUM
To:

Prepared By:

Agenda Title:

Meeting date:

Yreka City Council
City Clerk
Discussion/Possible Action: Continuation of Urgency Ordinance 864.

November 1, 2022
Discussion:

The drought, prevailing climatic temperatures, and the allocation of Yreka Fire Resources to mutual aid to suppress wildfires was found to constitute an immediate threat to the public safety.

Ordinance 864 delays the sale of fireworks and the use of fireworks and public displays of pyrotechnics until the threat to public safety is abated.

Recommendation:

That the Council continue Urgency Ordinance 864.
19 SUMMARY OF ADOPTED URGENCY ORDINANCE No. 864
Please take notice that the Yreka City Council adopted, at an emergency meeting held on July 29, 2021, a temporary urgency ordinance, number 864, entitled: “AN UNCODIFIED URGENCY

ORDINANCE OF THE CITY OF YREKA DECLARING A LOCAL EMERGENCY, AND AUTHORIZING THE

DELAY OF THE SALE AND USE OF FIREWORKS WHICH MAY CREATE A THREAT TO PUBLIC SAFETY

DEEMED TO BE ARISING FROM THE INCIDENCE OF THE LAVA FIRE AND SETTING FORTH THE FACTS CONSTITUTING SUCH URGENCY AND FINDING THE ORDINANCE EXEMPT FROM CEQA REVIEW” This urgency ordinance generally provides:

1. The factual background of the Lava Fire, the drought, the prevailing climatic temperatures and the fact that Yreka’s Fire Resources are engaged in mutual aid to suppress the Lava Fire as well as the allocation of law enforcement resources in traffic control and the fact that without Yreka’s normally available police and fire resources, the use of fireworks and pyrotechnics fire may not be able to be suppressed which was found to constitute the basis for the urgency nature of the ordinance and the City Council determined that there existed an immediate threat to the public health, safety and/or welfare and a need for immediate preservation of the public peace, health, or safety that warrants the adopted urgency measures.

2. The ordinance delays the sale of fireworks and the use of fireworks and public displays of pyrotechnics until the threat to public safety is abated and the urgency ordinance is terminated.

3. The city council determined that a local emergency now exists and shall continue to exist until its termination is ordained by the City Council. The need for continuance of the urgency measures will be regularly reviewed by City Council until it is terminated. The ordinance will be terminated at the earliest possible time.

4. The ordinance vests in the City Manager, Chief of Police and the Fire Chief with the discretion to take such acts as may be necessary to effectuate the intent of the ordinance.

5. The Council determined that the ordinance complies with a categorical exemption from CEQA review.

By roll call vote the following councilmembers voted in favor of the ordinance: Duane Kegg, Deborah Baird, Paul McCoy and Corey Middleton.

This summary is not intended to be a comprehensive statement of all of the provisions of the Ordinance, but constitutes only a fair summary of the Ordinance. The complete text of the Ordinance and the minutes of the emergency session is available for review online in Yreka’s City Council Agenda section or through a public records request as an in-person review of it is not available because City Hall is not currently open to the public.

Yreka City Clerk
20 BUSINESS OF THE COUNCIL OF THE CITY OF YREKA

AGENDA REPORT
For meeting of: November 1, 2022
TO: Honorable Mayor and City Council
FROM: Dohn Henion, Yreka City Attorney
TITLE: RESOLUTION TO CONTINUE HOLDING PUBLIC MEETINGS REMOTELY (AB 361) RECOMMENDATION:

In accordance with Assembly Bill 361, adopt a resolution to continue conducting the City’s Council, Commission, and Committee meetings remotely due to health and safety concerns to the public due to COVID-19.

FISCAL IMPACT:

There is no fiscal impact associated with this item.

BACKGROUND:

On March 4, 2020, Governor Newsom declared a State of Emergency to make additional resources available, formalize emergency actions already underway across multiple state agencies and departments, and help the state prepare for a broader spread of COVID-19.

Thereafter, on March 17, 2020, Governor Newsom issued Executive Order N-2920, which suspended certain provisions of the Ralph M. Brown Act to allow local legislative bodies to conduct meetings telephonically or by other means. Additionally, the State implemented a shelter-in-place order, requiring all non-essential personnel to work from home.

Staff quickly worked to set up remote meetings via Zoom for all City Council and Planning Commission meetings. The Zoom meetings have allowed the Council, Commissions, and Committees to continue to conduct City business from the safety of members’ homes. The City has been utilizing Zoom for the past 18 months to conduct nearly all public meetings. The usage of Zoom for public meetings has allowed the City to ensure the public’s continued access to government meetings while also ensuring the public’s safety.

On June 11, 2021, Governor Newsom issued Executive Order N-08-21, which extended the ability of agencies to hold remote meetings through September 30, 2021, after which agencies anticipated transitioning back to public meetings held in full compliance with the Brown Act. In preparation for the return to in-person meetings, staff has been working on acquiring audio and visual upgrades for City facilities to conduct hybrid meetings. Although hybrid meetings would help to keep the public safe by allowing them to continue accessing the meetings from their own home, Councilmembers, Commissioners, Committee members, and staff would need to meet in person.
21 Since the Governor issued Executive Order N-08-21, the Delta variant has emerged, causing a spike in cases throughout the state.

On September 16, 2021, Governor Newson signed Assembly Bill 361 (AB 361), which allows cities to continue to meet remotely during proclaimed states of emergency under modified Brown Act requirements that are similar but not identical to the rules and procedures established by the previous Executive Orders.

AB 361 authorizes local agencies to use teleconferencing without complying with the teleconferencing requirements imposed by the Ralph M. Brown Act during a declared state of emergency, when state or local health officials have imposed or recommended measures to promote social distancing during the proclaimed state of emergency, or when there is an imminent risk to the health or safety of attendees.

DISCUSSION:

AB 361 will allow local legislative bodies to continue to meet remotely after the September 30, 2021 expiration of the Governor’s executive orders. A local agency will be allowed to continue to meet remotely when:
• The local agency holds a meeting during a declared state of emergency • State or local health officials have imposed or recommended measures to promote social distancing
• Legislative bodies declare the need to meet remotely due to present imminent risks to the health or safety of attendees
The City meets the requirements to continue holding meetings remotely to ensure the health and safety of the public due to the following:
• The City is still under a local state of emergency;
• County health orders require that all individuals in public spaces maintain social distancing and wear masks;
• The City can’t maintain social distancing requirements for the public, staff, Councilmembers, Commissioners, and Committee Members in their meeting spaces; The City cannot ensure social distancing requirements are met inside City facilities where the City Council, Planning Commission, Parks and Recreation Commission, Redistricting Advisory Committee, Bicycle and Pedestrian Advisory Committee, and Main Street Bridge Advisory Committee meet.

Moreover, the indoor mask order is still in effect, making it difficult to hear what Councilmembers, Commissioners, Committee Members, staff, and public speakers are saying.

Furthermore, while speaking through masks may be understandable in person, picking up speech on microphones for those attending remotely and those watching any livestreams would be difficult.
22 Per AB 361, the City Council would need to declare every 30 days that the City’s legislative bodies must continue to meet remotely to ensure the health and safety of the public. Staff recommends that the City Council declare these findings are true so these bodies can continue to meet remotely. Staff will return with this resolution for re-ratification at the Council’s 1st Tuesday meeting each month, at which time the Council can reassess as various health orders and COVID-19 parameters change.
23 RESOLUTION NO. 2021- 51
2 3
4 5
6 7
8 A RESOLUTION OF THE YREKA CITY COUNCIL OF THE CITY OF

YREKA PROCLAIMING A LOCAL EMERGENCY, RATIFYING THE

PROCLAMATION OF A STATE OF EMERGENCY BY GOVERNOR
NEWSOM ON MARCH 4, 2020, AND AUTHORIZING REMOTE

TELECONFERENCE MEETINGS OF THE LEGISLATIVE BODIES OF
CITY OF YREKA FOR THE PERIOD SUCCESSIVE 30-DAY PERIODS
PURSUANT TO ASSEMBLY BILL 361
9 WHEREAS, the City of Yreka is committed to preserving and nurturing IO public access and participation in meetings of the Yreka City Council; and 11 WHEREAS, all meetings of City of Yreka's legislative bodies are open and 12 public, as required by t.he Ralph M. Brown Act (Cal. Gov. Code§ 54950 13 54963), so that any member of the public may attend, participate, and watch the 14 City's legislative bodies conduct their business; and 15 16 WHEREAS, the Brown Act, Government Code section 54953(e), makes 17 provisions for remote teleconferencing paiiicipation in meetings by members of 18 a legislative body, without compliance with the requirements of Government 19 Code section 54953(b )(3), subject to the existence of certain conditions; and 20 WHEREAS, a required condition is that a state of emergency is declared by the 21 Governor pursuant to Government Code section 8625, proclaiming the existence 22 of conditions of disaster or of extreme peril to the safety of persons and property 23 within the state caused by conditions as described in Government Code section 24 8558;and
25 WHEREAS, a proclamation is made when there is an actual incident, threat of 26 disaster, or extreme peril to the safety of persons and prope1iy within the 27 jurisdictions that are within the City's boundaries, caused by natural, 28 technological, or human-caused disasters; and
29 WHEREAS, it is further required that state or local officials have imposed or 30 recommended measures to promote social distancing, or, the legislative body 24 31 meeting in person would present imminent risks to the health and safety of 32 attendees; and
33 WHEREAS, such conditions now exist in the City, specifically, in Executive Order 34 N-29-20 the Governor of the State of California declared a state of emergency to 35 exist as a result of the threat of COVID-19; and
36 WHEREAS, said order suspended provisions of celiain provisions of the Brown 37 Act relating to teleconference meetings and creating the ability for viliual meetings 38 to keep the public and our public officials safer from exposure to the pandemic; and 39 WHEREAS, that suspension of the Brown Act requires expired on September 30, 40 2021; and
41 WHEREAS, On September 16,2021 Assembly Bill 361 was passed into law 42 permitting the extension of virtual meetings so long as the state of emergency 43 exists and is reviewed every thirty days by the Yreka City Council; and 44 WHEREAS, the delta variant of COVID-19 has resulted in Siskiyou County 45 having experienced 4,382 confirmed COVID-19 amongst the local population 46 cases, 54 deaths, 56 new cases reported in the last 24 hours with 271 active cases 47 and 23 persons presently hospitalized and, accordingly, social distancing and 48 masking is required for attendees' health and safety to mitigate the imminent risk 49 of COVID-19 being transmissible during public, in-person meetings of the City of 50 Yreka; and
51 WHEREAS, virtual meetings further mitigate the public's health and safety while 52 still providing the opportunity for public input on the people's business; and 53 WHEREAS, the City Council has reconsidered the circumstances of the state of 54 emergency; and
55 WHEREAS, the state of local emergency continues to directly impact the ability of 56 the City Council, Commissions, and Committees, as well as staff and members of 57 the public, from meeting safely in person; and
58 WHEREAS, the Yreka City Council does hereby find that prevalence of COVID-19 59 amongst the local population and, accordingly, social distancing and masking is 2 25
60 required for attendees health and safety to mitigate the imminent risk of COVID-19 61 being transmissible during public, in-person meetings of the City of Yreka, its 62 commissions and committees may cause, and may continue to cause, conditions of 63 peril to the safety of persons within the City that are likely to be beyond the control of 64 services, persOlmel, equipment, and facilities of the City, healthcare providers and 65 local hospitals, and desires to proclaim a local emergency and ratify the 66 proclamation of state of emergency by the Governor of the State of California; and 67 68 WHEREAS, as a consequence of the local emergency, the Yreka City Council 69 does hereby find that the City of Yreka's governing body, its commissions and 70 committees shall conduct their meetings without compliance with paragraph (3) of 71 subdivision (b) of Government Code section 54953, as authorized by subdivision 72 (e) of section 54953, and that such legislative bodies shall comply with the 73 requirements to provide the public with access to the meetings as prescribed in 74 paragraph (2) of subdivision (e) of section 54953; and 75 WHEREAS, meetings are posted on the City's website providing the necessary 76 information for the public to virtually provide input to the governing body on the 77 people's business.
78 NOW, THEREFORE, THE YREKA CITY COUNCIL OF THE CITY OF 79 YREKA DOES HEREBY RESOLVE AS FOLLOWS:
80 Section 1. Recitals. The Recitals set forth above are true and correct and are 81 incorporated into this Resolution by this reference. 82 Section 2. Proclamation of Local Emergency. The City Council hereby proclaims 83 that a local emergency now exists throughout the City, and prevalence of COVID84 19 amongst the local population and, accordingly, social distancing and masking is 85 required for attendees health and safety to mitigate the imminent risk of COVID-19 86 being transmissible during public, in-person meetings of the City of Yreka has 87 caused, and will continue to cause, conditions of peril to the safety of persons within 88 the City that are likely to be beyond the control of services, personnel, equipment, and 89 facilities of the City, healthcare providers and local hospitals. 3 26
90 Section 3. Ratification of Governor's Proclamation ofa State of Emergency. The 91 City Council hereby ratifies the Governor of the State of California's Proclamation 92 of State of Emergency, effective as of its issuance date of March 4, 2021. 93 Section 4. Remote Teleconference Meetings. The staff and legislative bodies of 94 City of Yreka are hereby authorized and directed to take all actions necessary to 95 cany out the intent and purpose of this Resolution including, conducting open and 96 public meetings in accordance with Government Code section 54953(e) and other 97 applicable provisions of the Brown Act.
98 Section 5. Effective Date of Resolution. This Resolution shall take effect 99 immediately upon its adoption and shall be effective until the earlier of (i) 30 days 100 from adoption of resolution, and 30 days from each successive affirmation that the 101 state of emergency continues to exist or such time the Yreka City Council adopts a 102 subsequent resolution in accordance with Government Code section 54953( e)(3) to 103 extend the time during which the governing body of the City of Yreka may continue 104 to teleconference without compliance with paragraph (3) of subdivision (b) of 105 section 54953.
106 PASSED AND ADOPTED by the Yreka City Council of the City of Yreka, this 5th 107 day of October, 2021, by the following vote:
108 AYES: FREEMAN, MIDDLETON, BAIRD, KEGG
109 NOES:
110 ABSENT: MCCOY
111 ABSTAIN:
112
113 DuaneK
114 Attest:
115
116
4 27
28 29
30 31
32 33
34 35
36 37
38 AGENDA MEMORANDUM
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CITY OF YREKA

CITY COUNCIL AGENDA MEMORANDUM
To: Yreka City Council
Prepared by: Rhetta Hogan, Assistant City Manager
Agenda title: Approval of (i) Resolution 2022-43 Approving, Authorizing and Directing Execution of Certain Series 2022 Certificates of Participation, and Approving the Forms of Certain Related Financing Documents for the Financing of the Wastewater System Improvement Project, and Providing for other Matters Properly Related Thereto; and (ii) Resolution 2022-44 Approving, Authorizing and Directing Approving and Adopting USDA RUS Bulletin 1780-27 Loan Resolution Providing for the Incurrence of Indebtedness for the Purpose of Providing a Portion of the Cost of Acquiring, Constructing, Enlarging, Improving and/or Extending the Main Street Sewer Interceptor Improvement Project
Meeting date: November 1, 2022

DISCUSSION
On June 1, 2021, City Council (the “Council”) adopted Resolution No. 2021-25 authorizing and directing the execution and delivery of Series 2021 Bond Anticipation Notes (the “BANs”) to finance the Main Street Sewer Interceptor Improvement Project (the “Project”). Subsequently, on September 2, 2021, the BANs were issued by the City and sold to Banner Ban in an amount not to exceed $6,098,000 on a draw-down basis.

The construction of the Project is now complete, and it is therefore necessary and appropriate for the City to follow through with the long-term “take-out” financing of the Project. The take-out financing is coming from the United States Department of Agriculture (USDA) in the form of Series 2022 Wastewater Revenue Certificates of Participation in an aggregate amount of not to exceed Five Million Seven Hundred Thousand Dollars (the “Certificates”). The Certificates will bear interest at a rate of 1.75%, and will be repaid semi-annually over a 40-year fully amortizing term, which equates to annual debt service of approximately $197,000.

The subject resolutions authorize and approve the form of all the foundational legal documents (the “Financing Documents”) necessary to provide for the successful issuance of the Certificates.

The adoption of the Resolution is a legal prerequisite to allow for the completion of the appropriate documentation necessary for the USDA/COP finalization. The accompanying Financing Documents comprise a financing structure that is considered standard for California government agencies to legally incur debt secured by wastewater enterprise fund revenues, and is acceptable to USDA, as the purchaser of the Certificates.
39 AGENDA MEMORANDUM
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In using this financing structure, an installment sale arrangement must be established with a thirdparty nonprofit entity experienced in tax-exempt debt transactions in California. The Great Northern Services (the “Corporation”) is being recommended as such independent nonprofit entity for this financing transaction.

The Certificates will be repaid from Net Revenues of the Wastewater Enterprise. “Net Revenues” means for any Fiscal Year (or other designated twelve (12) calendar month period), the Gross Revenues (i.e., all revenues generated by the Wastewater Enterprise) during such Fiscal Year (or designated twelve (12) calendar month period) less the Operation and Maintenance Costs during such period.

The proposed Certificates are to be issued as limited obligation bonds, payable only from Net Revenues of the Wastewater Enterprise, and therefore the City’s general fund, water fund (or any other funds other the Wastewater Enterprise fund to the extent of Net Revenues) will be not be exposed to repayment risk.

The Financing Documents are being presented to the Council as “form-only documents.” The subject resolutions authorize and direct City officers and staff to finalize the Financing Documents as and when appropriate, and to do all things necessary to provide for the issuance of the Certificates, which is expected to occur sometime towards the middle of December (assuming that USDA is ready at that time). This method of approval is the normal method of approving a bond issue.

While the Financing Documents are complex and contain legal terminology, they can be succinctly summarized as follows: the City sells the Certificates directly to USDA and uses the proceeds of the Certificates to pay off the 2022 BANs that were issued by the City to finance the acquisition and construction of the Project and pay costs of issuance. Pursuant to the Installment Sale Agreement, the City is “selling” to, and then “purchasing” the Project from, the Corporation in exchange for making the semi-annual Installment Payments which are assigned to the “Trust Administrator” (which role is being served by the Finance Director), who then makes corresponding semi-annual debt service payments directly to USDA. Based upon the revenue stream of Installment Payments, the City issues the Certificates pursuant to the Trust Agreement, which are sold to USDA in exchange for cash to the City. The proposed Certificates are structured to be tax-exempt and are pre-payable at any time without penalty.

A brief description of each of the Financing Documents is as follows:

Installment Sale Agreement: This agreement provides for the sale of the Project to the Corporation, and then back to the City in exchange for the City’s promise to make future semi-annual Installment Payments to the Corporation, which semi-annual payments are commensurate with the debt service on the Certificates. This agreement also requires the City to maintain Net Revenues in excess of 120% total annual debt service on the Certificates as well as any new parity debt issued in the future. In addition to making the Installment Payments, the City covenants to deposit (i) in the Debt Service Reserve Fund each month an amount equal to $1,778, until a total of $213,309 has accumulated therein, and (ii) in the Short-Lived Assets Reserve Fund each month an amount equal to at least $118,667 annually.
40 AGENDA MEMORANDUM
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The Installment Sale Agreement also requires the City to maintain the Project throughout the term of the Certificates, to pay taxes, if any, and to maintain various forms of insurance, among other things.

Trust Agreement: This document provides for execution and delivery of the Certificates to USDA in exchange for proceeds in the par amount thereof, and further establishes the covenants and specifics of the Certificates, including (i) the application of proceeds to pay for the reimbursement, acquisition and construction costs of the proposed Project (as well as payment of the costs of issuance for the Certificates), (ii) the establishment of a debt service reserve fund, (iii) the establishment of a short-lived assets reserve fund, (iv) the Trust Administrator’s duties, (v) repayment mechanisms, (vi) default and remedies provisions, and (vii) the COP Owners (i.e., USDA) rights and remedies.

Assignment Agreement: This document provides the terms and conditions under which the Corporation assigns the City’s Installment Payments to the Trust Administrator, for ultimate payment to USDA.

Purchase Offer: The City will sell the Certificates to USDA pursuant to the terms of the Purchase Offer. The Purchase Offer states the conditions under which USDA will purchase the Certificates and requires the City to deliver all the duly authorized and executed documents and opinions at closing. The City also covenants that there is no material litigation against the City which would impair its ability to make Installment Payments or affect the Certificates. The sale is scheduled in accordance with the parameters described above.

Irrevocable Payment Instructions: These are irrevocable instructions pursuant to which the proceeds of the Certificates will be sent to Banner Bank and used exclusively for the purpose of prepaying and defeasing the BANs.

FISCAL IMPACT
The attached Resolutions authorize the City to issue tax-exempt debt for purposes of completing the take-out financing for the Project. Pursuant to the Installment Sale Agreement, the City promises the owners of the Certificates (i.e., USDA) to annually budget and appropriate from the Wastewater Enterprise Fund sufficient funds to make all Installment Payments pursuant to the Installment Sale Agreement.

RECOMMENDATION
It is recommended: that the Council adopt (i) Resolution No. 2022-43, thereby approving the form of all financing documents, and directing staff to work with Bond Counsel and USDA to finalize the issuance of the Certificates, the proceeds of which will be used to repay the BANs that was established to finance the Main Street Sewer Interceptor Improvement Project, and (ii) Resolution No. 2022-44, thereby adopting and approving the USDA Resolution (USDA Form RD 1780-27), as an additional necessary prerequisite to the issuance of the Certificates. 41 AGENDA MEMORANDUM
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ATTACHMENTS
Resolution No. 2022-43
Resolution No. 2022-44
Draft Form of Trust Agreement
Draft Form of Installment Sale Agreement
Draft Form of Assignment Agreement
Draft Form of Purchase Offer
Draft Form of Irrevocable Payment Instructions

NOTE: ALL DOCUMENTS MENTIONED IN THIS STAFF REPORT ARE ON FILE WITH THE CITY CLERK’S OFFICE.
42 RESOLUTION NO. 2022-43

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF YREKA
AUTHORIZING THE ISSUANCE OF SERIES 2022 WASTEWATER REVENUE

CERTIFICATES OF PARTICIPATION, APPROVING AND AUTHORIZING AND

DIRECTING EXECUTION OF A TRUST AGREEMENT, INSTALLMENT SALE

AGREEMENT, ASSIGNMENT AGREEMENT AND PURCHASE OFFER, AND

PROVIDING FOR OTHER MATTERS PROPERLY RELATED THERETO
WHEREAS, the City of Yreka (the “City”) desires to work with the Great Northern Services, a nonprofit entity duly organized and existing under and by virtue of the laws of the State of California (the “Corporation”), for the purpose of, among other things, providing take-out financing for the City’s Series 2021 Bond Anticipation Notes that were issued on September 2, 2021 in the aggregate principal amount of not to exceed $6,098,000 on a draw-down basis (the “BANs”) for the purpose of constructing the City’s Main Street Sewer Interceptor Improvement Project, all as more particularly described in Exhibit A to the hereinafter described Installment Sale Agreement (the “Project”); and
WHEREAS, for the purpose of providing financing for the payoff of the BANs (the “Financing”), the City is hereby requesting the Corporation to assist in the issuance of Series 2022 Wastewater Revenue Certificates of Participation, in the aggregate principal amount of not to exceed $5,700,000 (the “COPs”), all pursuant to and secured by a Trust Agreement (the “Trust Agreement”), dated as of December 1, 2022, by and among the City, the Corporation and the Finance Director, as trust administrator (the “Trust Administrator”); and WHEREAS, the City proposes to purchase the Project from the Corporation pursuant to a certain Installment Sale Agreement (the “Installment Sale Agreement”), dated as of December 1, 2022, by and between the Corporation and the City, whereby the City will make prescribed installment payments (the “Installment Payments”) from the wastewater enterprise fund, commensurate with the debt service scheduled for the repayment of the COPs; and WHEREAS, to further implement the foregoing, the Corporation and the Trust Administrator propose to execute and enter into an Assignment Agreement (the “Assignment Agreement”), dated as of December 1, 2022, whereby the Corporation will assign to the Trust Administrator all of its rights and entitlements under the Installment Sale Agreement, including but not limited to the entitlement to receive the Installment Payments from the City; and WHEREAS, the City and Corporation propose to sell the COPs to the United States of America, Acting Through Rural Utility Service, United States Department of Agriculture (hereafter referred to as “USDA”), pursuant to USDA’s Purchase Offer (the “Purchase Offer”), all on the terms and conditions herein set forth and as provided in the Trust Agreement and Installment Sale Agreement, so long as the aggregate principal amount of the COPs does not exceed $5,700,000, and the average interest rate does not exceed three percent (2%) per annum; and WHEREAS, to properly transact the Financing, it is now appropriate and necessary for the City to approve the form of Irrevocable Payment Instructions (the “Payment Instructions”), pursuant 43 2
to which the City will irrevocably agree to transfer a designated portion of the proceeds of the COPs directly to Banner Bank for the payoff of the BANs in accordance with the specific terms of the Payment Instructions; and
WHEREAS, the City Council desires to designate the COPs as a “Qualified Tax-Exempt Obligation;” for purposes of Paragraph (3) of Section 265(b) of the Code; and WHEREAS, Section 5852.1 of the Government Code of the State of California (“Section 5852.1”) provides that the City Council obtain and disclose, in a meeting open to the public, prior to authorization of the COPs, good faith estimates of: (a) the true interest cost of the COPs, (b) the finance charge of the COPs, meaning the sum of all fees and charges paid to third parties, (c) the amount of proceeds of the COPs received less the finance charge described above and any reserves or capitalized interest paid or funded with proceeds of the COPs and (d) the sum total of all debt service payments on the COPs calculated to the final maturity of the COPs plus the fees and charges paid to third parties not paid with the proceeds of the COPs; and WHEREAS, in accordance with Section 5852.1, the City Council has obtained such good faith estimates, and such estimates are disclosed in Section 10 hereof; and WHEREAS, the City, with the aid of its staff, has reviewed the Trust Agreement, the Installment Sale Agreement, the Assignment Agreement, the Payment Instructions and the Purchase Offer (collectively, the “Financing Documents”), the forms of which are on file with the City Clerk, and the City Council wishes at this time to approve the foregoing in the public interests of the City; and
WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of such Financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the City is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such Financing in the manner and upon the terms herein provided; and WHEREAS, the City Council wishes at this time to authorize all proceedings relating to the Financing and the issuance of the COPs and the execution and delivery of all agreements and documents relating thereto; and

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF YREKA DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS:

Section 1. Recitals and Findings. The City Council hereby specifically finds and declares that each of the statements, findings and determinations of the City set forth in the recitals set forth above and in the preambles of the documents approved herein are true and correct and that the Financing will result in significant public benefits for the residents of the City.

Section 2. Authorized Representatives. The Mayor, Mayor Pro Tem, City Manager, Assistant City Manager, Finance Director, City Clerk or Acting City Clerk, and any other person authorized by the City Council to act on behalf of the City shall each be an “Authorized 44 3
Representative” of the City for the purposes of structuring and providing for the issuance of the COPs, and are hereby authorized, jointly and severally, for and in the name of and on behalf of the City, to execute and deliver any and all documents and certificates that may be required to be executed in connection with the sale of the COPs (including the investment of proceeds of the COPs), and to do any and all things and take any and all actions which may be necessary or advisable, in their discretion, to effectuate the actions which the City has approved in this Resolution.

Section 3. Approval Great Northern Services. The City Council hereby authorizes and approves Great Northern Services to serve as the counter party to the Financing Documents as set forth and provided for in the Financing Documents. The City Council hereby further authorizes the payment of $4,000 as reasonable compensation for such services.

Section 4. Approval of the Issuance of the COPs; Significant Public Benefits. The City Council hereby approves the issuance of the COPs by the City in a principal amount of not to exceed $5,700,000, all as set forth herein and in the Financing Documents. The City Council hereby finds and determines that the issuance and sale of the COPs by the City to USDA will result in savings in effective interest rates, underwriting costs and issuance costs and thereby result in significant public benefits to the City.

Section 5. Appointment of Trust Administrator. The Finance Director is hereby appointed to act as Trust Administrator under the Trust Agreement unless and until replaced in accordance with the provisions of the Trust Agreement.

Section 6. Approval of Installment Sale Agreement. The City Council hereby authorizes and approves the purchase of the Project by the City pursuant to the Installment Sale Agreement.

The City Council hereby approves the Installment Sale Agreement in substantially the form on file with the City Clerk together with any additions thereto or changes therein (including, but not limited to, the final amount of the sale price for the Project and the final debt service payment schedule) deemed necessary or advisable by an Authorized Representative of the City. Any Authorized Representative of the City is hereby authorized and directed to execute, and the City Clerk is hereby authorized and directed to attest and affix the seal of the City to, the final form of the Installment Sale Agreement for and in the name and on behalf of the City and the execution thereof shall be conclusive evidence of the City Council’s approval of any such additions and changes. The City Council hereby authorizes the delivery and performance of the Installment Sale Agreement.

Section 7. Approval of Trust Agreement. The City Council hereby approves the Trust Agreement in substantially the form on file with the City Clerk and consents to such revisions, amendments and completions as shall be approved by an Authorized Representative of the City.

Any Authorized Representative of the City is hereby authorized and directed to execute, and the City Clerk is hereby authorized and directed to attest and affix the seal of the City to, the final form of the Trust Agreement for and in the name and on behalf of the City and the execution thereof shall be conclusive evidence of the City Council’s approval of any such additions and changes. The City Council hereby authorizes the delivery and performance of the Trust Agreement. 45 4
Section 8. Approval of Assignment Agreement. The form of the Assignment Agreement presented to this meeting and on file with the City Clerk, is hereby approved. The Finance Director, as Trust Administrator, is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Corporation the Assignment Agreement in substantially said form, with such changes therein as the Trust Administrator may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof by the Trust Administrator. The City Council hereby authorizes the delivery and performance of the Assignment Agreement.

Section 9. Sale of COPs. The form of the Purchase Offer made by USDA, in substantially the form presented at this meeting and on file with the City Clerk, is hereby ratified and approved, and each of the Authorized Representatives are each hereby authorized and directed to indicate the City’s acceptance of such offer by the execution thereof, with such changes, insertions, and omissions as may be approved by such official, so long as the aggregate principal amount of the COPs does not exceed $5,700,000, and the interest rate does not exceed two percent.

Section 10. Good Faith Estimates. Set forth below are good faith estimates of the City’s financial advisor, as required under Section 5852.1 of the California Government Code (the “Code”) for the COPs. The following estimates have no bearing on, and should not be misconstrued as, any not-to-exceed financial parameters authorized by this resolution. (a) The true interest cost of the COPs is estimated at 1.75%, calculated as provided in Section 5852.1(a)(1)(A) of the Code.
(b) The finance charge of the COPs, including all fees and charges paid to third parties, is estimated at $37,000.
(c) Proceeds of the COPs received by the City of $5,700,000 (estimated) less the finance charge set forth in (b) above, is equal to $5,663,000. (d) The total payment amount calculated as provided in Section 5852.1(a)(1)(D) of the Code is estimated at $7,910,728.

The foregoing are estimates and the final costs will depend on market conditions at the time of closing, and can be expected to vary from the estimated amounts set forth above.

Section 11. Full Compliance. The City Council hereby finds and determines that it has taken all of the foregoing actions, and made all of the foregoing findings, in full compliance with the law, and that all prior proceedings taken with respect to the Financing and issuance of COPs were duly considered, and are hereby considered valid and in conformity with the requirements of law.

Section 12. Qualified Tax-Exempt Obligation. The City Council hereby designates the Installment Sale Agreement and the COPs for purposes of Paragraph (3) of Section 265(b) of the Code as a “Qualified Tax-Exempt Obligation” and covenants that the Installment Sale Agreement and the COPs do not constitute a private activity bond as defined in Section 141 of the Code and that the aggregate face amount of all tax-exempt obligations issued by the City (including all subordinate entities of the City and all entities which may issue obligations on behalf of the City) 46 5
during the calendar year 2022 is not reasonably expected to exceed $10,000,000, excluding, however, private activity bonds, as defined in Section 141 of the Code (other than qualified 501(c)(3) bonds as defined in Section 145 of the Code) and current refunding obligations having a principal amount not in excess of the refunded obligation.

Section 13. Official Actions. Each Authorized Representative is hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all actions, including execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they, or any of them, may deem necessary or advisable in order to consummate any of the transactions contemplated by the documents approved pursuant to this Resolution.

Section 14. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption.

Passed and adopted on November 1, 2022, by the following vote:

AYES:

NAYS:

ABSENT:

_________________________________
Duane Kegg
Mayor of the City of Yreka
Attest:____________________________
Rhetta Hogan, City Clerk

47 1
RESOLUTION NO. 2022-43

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF YREKA
APPROVING AND ADOPTING USDA RUS BULLETIN 1780-27 LOAN

RESOLUTION PROVIDING FOR THE INCURRENCE OF INDEBTEDNESS FOR

THE PURPOSE OF PROVIDING A PORTION OF THE COST OF ACQUIRING,

CONSTRUCTING, ENLARGING, IMPROVING AND/OR EXTENDING THE MAIN

STREET SEWER INTERCEPTOR IMPROVEMENT PROJECT
WHEREAS, the City Council (the “City Council”) of the City of Yreka (the “City”), working together with the Great Northern Services, a nonprofit entity duly organized and existing under and by virtue of the laws of the State of California (the “Corporation”), have agreed to enter into certain contractual relations for the purpose, among other things, of providing financing for public capital improvements of the City; and
WHEREAS, the United States of America, Acting Through Rural Utility Service, United States Department of Agriculture, California (hereafter referred to as “USDA”) has issued a Letter of Conditions to fund the City’s Main Street Sewer Interceptor Improvement Project (the “Project”), that includes a not-to-exceed $6,098,000 loan component; and WHEREAS, as part of the Letter of Conditions, the USDA requires that the City Council adopt a RUS Bulletin 1780-27 Loan Resolution Authorizing and Providing for the Incurrence of Indebtedness for the Purpose of Providing for a Portion of the Cost of Acquiring, Constructing, Enlarging, Improving and/or Extending the City’s Main Street Sewer Interceptor Improvement Project (the “USDA Loan Resolution No. 1780-27”); and

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF YREKA DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS:

Section 1. Recitals and Findings. The City Council hereby specifically finds and declares that each of the statements, findings and determinations of the City set forth in the recitals set forth above and in the preambles of the USDA Loan Resolution No. 1780-27 approved herein are true and correct.

Section 2. Authorized Representatives. The Mayor, Mayor Pro Tem, City Manager, Assistant City Manager, Finance Director, City Clerk or Acting City Clerk, and any other person authorized by the City Council to act on behalf of the City shall each be an “Authorized Representative” of the City for the purposes of USDA Loan Resolution No. 1780-27, and are hereby authorized, jointly and severally, for and in the name of and on behalf of the City, to execute and deliver any and all documents and certificates that may be required, and to do any and all things and take any and all actions which may be necessary or advisable, in their discretion, to effectuate the actions which the City has approved in this Resolution and USDA Loan Resolution No. 1780-

27. 48
2 Section 3. Approval and Adoption of USDA Loan Resolution No. 1780-27. The City Council hereby approves and adopts USDA Loan Resolution No. 1780-27, attached hereto and made a part hereof, on behalf of the City of Yreka.

Section 4. Official Actions. Each Authorized Representative is hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all actions, including execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they, or any of them, may deem necessary or advisable in order to consummate any of the transactions contemplated by the documents approved pursuant to this Resolution and USDA Loan Resolution No. 1780-27.

Section 5. Effective Date. This Resolution and USDA Loan Resolution No. 1780-27 shall take effect from and after the date of their passage and adoption.

Passed and adopted on November 1, 2022, by the following vote:

AYES:

NAYS:

ABSENT:

_________________________________
Duane Kegg
Mayor of the City of Yreka
Attest:____________________________
Rhetta Hogan, City Clerk

49 Position 5
RUS BULLETIN 1780-27 APPROVED
OMB. No. 0572-0121

LOAN RESOLUTION
(Public Bodies)

A RESOLUTION OF THE

OF THE

AUTHORIZING AND PROVIDING FOR THE INCURRENCE OF INDEBTEDNESS FOR THE PURPOSE OF PROVIDING A

PORTION OF THE COST OF ACQUIRING, CONSTRUCTING, ENLARGING, IMPROVING, AND/OR EXTENDING ITS

FACILITY TO SERVE AN AREA LAWFULLY WITHIN ITS JURISDICTION TO SERVE.

WHEREAS, it is necessary for the _______________________________________________________________________________ (Public Body)
(herein after called Association) to raise a portion of the cost of such undertaking by issuance of its bonds in the principal amount of __________________________________________________________________________________________________________ pursuant to the provisions of _______________________________________________________________________________; and WHEREAS, the Association intends to obtain assistance from the United States Department of Agriculture, (herein called the Government) acting under the provisions of the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.) in the planning. financing, and supervision of such undertaking and the purchasing of bonds lawfully issued, in the event that no other acceptable purchaser for such bonds is found by the Association:

NOW THEREFORE, in consideration of the premises the Association hereby resolves:

1. To have prepared on its behalf and to adopt an ordinance or resolution for the issuance of its bonds containing such items and in such forms as are required by State statutes and as are agreeable and acceptable to the Government.

2. To refinance the unpaid balance, in whole or in part, of its bonds upon the request of the Government if at any time it shall appear to the Government that the Association is able to refinance its bonds by obtaining a loan for such purposes from responsible cooperative or private sources at reasonable rates and terms for loans for similar purposes and periods of time as required by section 333(c) of said Consolidated Farm and Rural Development Act (7 U.S.C. 1983(c)).

3. To provide for, execute, and comply with Form RD 400-4, "Assurance Agreement," and Form RD 400-1, "Equal Opportunity Agreement," including an "Equal Opportunity Clause," which clause is to be incorporated in, or attached as a rider to, each construction contract and subcontract involving in excess of $10,000.

4. To indemnify the Government for any payments made or losses suffered by the Government on behalf of the Association.

Such indemnification shall be payable from the same source of funds pledged to pay the bonds or any other legal ly permissible source.

5. That upon default in the payments of any principal and accrued interest on the bonds or in the performance of any covenant or agreement contained herein or in the instruments incident to making or insuring the loan, the Government at its option may (a) declare the entire principal amount then outstanding and accrued interest immediately due and payable, (b) for the account of the Association (payable from the source of funds pledged to pay the bonds or any other legally permissible source), incur and pay reasonable expenses for repair, maintenance, and operation of the facility and such other reasonable expenses as may be necessary to cure the cause of default, and/or (c) take possession of the facility, repair, maintain, and operate or rent it. Default under the provisions of this resolution or any instrument incident to the making or insuring of the loan may be construed by the Government to constitute default under any other instrument held by the Government and executed or assumed by the Association, and default under any such instrument may be construed by the Government to constitute default hereunder.

6. Not to sell, transfer, lease, or otherwise encumber the facility or any portion thereof, or interest therein, or permit others to do so, without the prior written consent of the Government.

7. Not to defease the bonds, or to borrow money, enter into any contractor agreement, or otherwise incur any liabilities for any purpose in connection with the facility (exclusive of normal maintenance) without the prior written consent of the Government if such undertaking would involve the source of funds pledged to pay the bonds.

8. To place the proceeds of the bonds on deposit in an account and in a manner approved by the Government. Funds may be deposited in institutions insured by the State or Federal Government or invested in readily marketable securities backed by the full faith and credit of the United States. Any income from these accounts will be considered as revenues of the system.

9. To comply with all applicable State and Federal laws and regulations and to continually operate and maintain the facility in good condition.

10. To provide for the receipt of adequate revenues to meet the requirements of debt service, operation and maintenance, and the establishment of adequate reserves. Revenue accumulated over and above that needed to pay operating and maintenance, debt service and reserves may only be retained or used to make prepayments on the loan. Revenue cannot be used to pay any expenses which are not directly incurred for the facility financed by USDA. No free service or use of the facility will be permitted.

According to the Paperwork Reduction Act of 1995, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number. The valid OMB control number for this information collection is 0572-0121. The time required to complete this information collection is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. 50 -2-

11. To acquire and maintain such insurance and fidelity bond coverage as may be required by the Government.

12. To establish and maintain such books and records relating to the operation of the facility and its financial affairs and to provide for required audit thereof as required by the Government, to provide the Government a copy of each such audit without its request, and to forward to the Government such additional information and reports as it may from time to time require.

13. To provide the Government at all reasonable times access to all books and records relating to the facility and access to the property of the system so that the Government may ascertain that the Association is complying with the provisions hereof and of the instruments incident to the making or insuring of the loan.

14. That if the Government requires that a reserve account be established, disbursements from that account(s) may be used when necessary for payments due on the bond if sufficient funds are not otherwise available and prior approval of the Government is obtained. Also, with the prior written approval of the Government, funds may be withdrawn and used for such things as emergency maintenance, extensions to facilities and replacement of short lived assets.

15. To provide adequate service to all persons within the service area who can feasibly and legally be served and to obtain USDA’s concurrence prior to refusing new or adequate services to such persons. Upon failure to provide services which are feasible and legal, such person shall have a direct right of action against the Association or public body.

16. To comply with the measures identified in the Government's environmental impact analysis for this facility for the purpose of avoiding or reducing the adverse environmental impacts of the facility's construction or operation.

17. To accept a grant in an amount not to exceed $
under the terms offered by the Government; that the
and of the Association are hereby authorized and empowered to take all action necessary or appropriate in the execution of all written instruments as may be required in regard to or as evidence of such grant; and to operate the facility under the terms offered in said grant agreement(s).

The provisions hereof and the provisions of all instruments incident to the making or the insuring of the loan, unless otherwise specifically provided by the terms of such instrument, shall be binding upon the Association as long as the bonds are held or insured by the Government or assignee. The provisions of sections 6 through 17 hereof may be provided for in more specific detail in the bond resolution or ordinance; to the extent that the provisions contained in such bond resolution or ordinance should be found to be inconsistent with the provisions hereof, these provisions shall be construed as controlling between the Association and the Government or assignee.

The vote was: Yeas Nays Absent
IN WITNESS WHEREOF, the of the
has duly adopted this resolution and caused it
to be executed by the officers below in duplicate on this , day of

(SEAL) By
Attest: Title

Title
51 -3-

CERTIFICATION TO BE EXECUTED AT LOAN CLOSING
I, the undersigned, as of the
hereby certify that the of such Association is composed of members, of whom , constituting a quorum, were present at a meeting thereof duly called and held on the day of ; and that the foregoing resolution was adopted at such meeting by the vote shown above, I further certify that as of , the date of closing of the loan from the United States Department of Agriculture, said resolution remains in effect and has not been rescinded or amended in any way.

Dated, this day of

Title
52 TRUST AGREEMENT
by and among the

CITY OF YREKA
and

GREAT NORTHERN SERVICES
and the

FINANCE DIRECTOR

OF THE CITY OF YREKA,
as Trust Administrator
Dated as of December 1, 2022
Relating to
$5,700,000

CITY OF YREKA
SERIES 2022 WASTEWATER REVENUE CERTIFICATES OF PARTICIPATION (WASTEWATER SYSTEM IMPROVEMENT PROJECT)

BANK QUALIFIED
DRAFT 53
i

TABLE OF CONTENTS
Page

ARTICLE I
DEFINITIONS; AUTHORIZATION; EXHIBITS
Section 1.01. Definitions ............................................................................................................................ 2 Section 1.02. Authorization ...................................................................................................................... 10 Section 1.03. Content of Written Certificates .......................................................................................... 10 Section 1.04. Exhibits ............................................................................................................................... 11

ARTICLE II
THE CERTIFICATES OF PARTICIPATION:

Section 2.01. Authorization ...................................................................................................................... 11 Section 2.02. Date .................................................................................................................................... 11 Section 2.03. Maturity; Interest Rates ...................................................................................................... 11 Section 2.04. Interest ................................................................................................................................ 12 Section 2.05. Form of Certificate; Legends ............................................................................................. 13 Section 2.06. Execution and Authentication ............................................................................................ 13 Section 2.07. Transfer and Exchange ....................................................................................................... 13 Section 2.08. Certificate Mutilated, Lost, Destroyed or Stolen ............................................................... 14 Section 2.09. Payment .............................................................................................................................. 14 Section 2.10. Execution of Documents and Proof of Ownership ............................................................. 15 Section 2.11. Certificate Register ............................................................................................................. 15 Section 2.12. CUSIP Numbers ................................................................................................................. 15

ARTICLE III

CONSTRUCTION FUND
Section 3.01. Construction Fund .............................................................................................................. 16 Section 3.02. Payment of Construction Costs .......................................................................................... 16 Section 3.03. Payment of Delivery Costs ................................................................................................... 7 Section 3.04. Transfers of Unexpended Proceeds .................................................................................... 17

ARTICLE IV
PREPAYMENT OF CERTIFICATES:

Section 4.01. Prepayment ......................................................................................................................... 17 Section 4.02. Selection of Certificates for Prepayment ............................................................................ 18 Section 4.03. Notice of Prepayment ......................................................................................................... 18 Section 4.04. Partial Prepayment of Certificates ...................................................................................... 19 Section 4.05. Effect of Notice of Prepayment .......................................................................................... 19 Section 4.06. Purchase of Certificates ...................................................................................................... 19

ARTICLE V
INSTALLMENT PAYMENTS; INSTALLMENT PAYMENT FUND
Section 5.01. Assignment of Rights in Installment Sale Agreement ....................................................... 20 Section 5.02. Establishment of Installment Payment Fund ...................................................................... 20 Section 5.03. Deposits .............................................................................................................................. 20 DRAFT 54
ii
Section 5.04. Application of Moneys ....................................................................................................... 20 Section 5.05. Surplus ................................................................................................................................ 21

ARTICLE VI

RESERVE FUND
Section 6.01. Establishment of Reserve Fund .......................................................................................... 21 Section 6.02. Deposits .............................................................................................................................. 21 Section 6.03. Transfers ............................................................................................................................. 22 Section 6.04. Application in Event of Deficiency in the Installment Payment Fund .............................. 22 Section 6.05. Transfer to Make All Installment Payments ....................................................................... 22 Section 6.06. Replenishment of Reserve Fund ......................................................................................... 22 Section 6.07. Establishment and Application of Short-Lived Assets Reserve Fund ................................ 22

ARTICLE VII
INSURANCE AND CONDEMNATION FUND; INSURANCE; EMINENT DOMAIN Section 7.01. Establishment of Insurance and Condemnation Fund; Application of Net Proceeds of Insurance Award ............................................................................................................ 23 Section 7.02. Application of Net Proceeds of Eminent Domain Award .................................................. 23 Section 7.03. Excess Net Proceeds ........................................................................................................... 24 Section 7.04. Cooperation ........................................................................................................................ 24 ARTICLE VIII:

MONEYS IN FUNDS; INVESTMENT
Section 8.01. Held in Trust ....................................................................................................................... 24 Section 8.02. Investments Authorized ...................................................................................................... 24 Section 8.03. Allocation of Earnings........................................................................................................ 25 Section 8.04. Accounting ......................................................................................................................... 25 Section 8.05. Acquisition, Disposition and Valuation of Investments ..................................................... 25

ARTICLE IX

THE TRUST ADMINISTRATOR
Section 9.01. Appointment of Trust Administrator .................................................................................. 25 Section 9.02. Liability of Trust Administrator ......................................................................................... 26 Section 9.03. Merger or Consolidation .................................................................................................... 26 Section 9.04. Protection and Rights of the Trust Administrator .............................................................. 27 Section 9.05. Appointment of Trustee...................................................................................................... 28

ARTICLE X

MODIFICATION OR AMENDMENT OF AGREEMENTS
Section 10.01. Amendments Permitted .................................................................................................... 29 Section 10.02. Procedure for Amendment with Written Consent of Certificate Owners ........................ 30 Section 10.03. Disqualified Certificates ................................................................................................... 30 Section 10.04. Effect of Supplemental Agreement .................................................................................. 31 Section 10.05. Endorsement or Replacement of Certificates Delivered After Amendments .................. 31 Section 10.06. Amendatory Endorsement of Certificate .......................................................................... 31 DRAFT 55
iii

ARTICLE XI

COVENANTS
Section 11.01. Compliance With and Enforcement of Installment Sale Agreement ............................... 31 Section 11.02. Payment of Taxes ............................................................................................................. 31 Section 11.03. Observance of Laws and Regulations .............................................................................. 32 Section 11.04. Prosecution and Defense of Suits ..................................................................................... 32 Section 11.05. Further Assurances ........................................................................................................... 32 Section 11.06. Filing ................................................................................................................................ 32 Section 11.07. Private Activity Bond Limitation ..................................................................................... 32 Section 11.08. Federal Guarantee Prohibition .......................................................................................... 32 Section 11.09. Rebate Requirement ......................................................................................................... 32 Section 11.10. No Arbitrage ..................................................................................................................... 33 Section 11.11. Maintenance of Tax-Exemption ....................................................................................... 33 Section 11.12. Small Issuer Exemption from Bank Nondeductibility Restriction ................................... 33

ARTICLE XII

LIMITATION OF LIABILITY
Section 12.01. Limited Liability of City .................................................................................................. 33 Section 12.02. No Liability of the Corporation for Trust Administrator Performance ............................ 33 Section 12.03. Indemnification of Trust Administrator ........................................................................... 33 Section 12.04. Limitation of Rights to Parties and Certificate Owners ................................................... 34

ARTICLE XIII

EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
Section 13.01. Assignment of Rights ....................................................................................................... 34 Section 13.02. Remedies .......................................................................................................................... 35 Section 13.03. Application of Funds ........................................................................................................ 35 Section 13.04. Institution of Legal Proceedings ....................................................................................... 35 Section 13.05. Non-waiver ....................................................................................................................... 36 Section 13.06. Remedies Not Exclusive .................................................................................................. 36 Section 13.07. Power of Trust Administrator to Control Proceedings ..................................................... 36 Section 13.08. Limitation on Certificate Owners’ Right to Sue .............................................................. 36 Section 13.09. Parties Interested Herein .................................................................................................. 37

ARTICLE XIV

MISCELLANEOUS
Section 14.01. Discharge .......................................................................................................................... 37 Section 14.02. Records ............................................................................................................................. 38 Section 14.03. Notices .............................................................................................................................. 38 Section 14.04. Governing Law ................................................................................................................. 39 Section 14.05. Binding Effect; Successors ............................................................................................... 39 Section 14.06. Execution in Counterparts ................................................................................................ 39 Section 14.07. Destruction of Canceled Certificates ................................................................................ 39 Section 14.08. Headings ........................................................................................................................... 39 Section 14.09. Limitation of Rights to Parties and Certificate Owners ................................................... 39 Section 14.10. Waiver of Notice .............................................................................................................. 40 DRAFT 56
iv
Section 14.11. Payments Due on Other than Business Day ..................................................................... 40 Section 14.12. Payment of Unclaimed Moneys ....................................................................................... 40 Section 14.13. Separability of Invalid Provisions .................................................................................... 40 Exhibit A Form of Certificate ...................................................................................................... A-1 Exhibit B Form of Disbursement Requisition from Construction Fund ...................................... B-1 DRAFT 57

TRUST AGREEMENT
THIS TRUST AGREEMENT, dated as of December 1, 2022, is by and among GREAT NORTHERN SERVICES, a California not-for-profit corporation organized and existing under the laws of the State of California (the “Corporation”), the CITY OF YREKA, a municipal corporation and general law city duly organized and existing under and by virtue of the constitution and laws of the State of California (the “City”), and THE FINANCE DIRECTOR OF THE CITY OF YREKA, as Trust Administrator (the “Trust Administrator”);
W I T N E S S E T H:

WHEREAS, the City and the Corporation propose to undertake the acquisition and financing of certain capital improvements described herein (the “Project”) to the City’s municipal wastewater system (the “Wastewater System”); and
WHEREAS, to help finance the Project, the City has agreed to purchase the Project from the Corporation pursuant to, and in accordance with the terms set forth in an Installment Sale Agreement, dated as of December 1, 2022, by and between the City and the Corporation (the “Installment Sale Agreement”); and
WHEREAS, concurrently with the execution of this Trust Agreement, it is contemplated that the Trust Administrator will authenticate and deliver the City of Yreka, Series 2022 Wastewater Revenue Certificates of Participation (Wastewater System Improvement Project), Bank Qualified, in the aggregate principal amount of $5,700,000 (the “Certificates”), evidencing a direct, undivided fractional interest in certain Installment Payments to be made by the City, pursuant to the terms and conditions of the Installment Sale Agreement (the “Installment Payments”); and WHEREAS, all rights to receive the Installment Payments have been assigned without recourse by the Corporation to the Trust Administrator, for the benefit of the Owners of the Certificates, pursuant to an Assignment Agreement, dated as of December 1, 2022, by and between the City and the Corporation (the “Assignment Agreement”); and
WHEREAS, in consideration of such assignment, concurrently with the execution of this Trust Agreement, the Trust Administrator will authenticate and deliver the Certificates to the United States of America, acting through the Rural Utilities Service (interchangeably, the “USDA” or “Government”), as the initial purchasers thereof, each evidencing a direct, fractional undivided interest in the Installment Payments; and
WHEREAS, the City and Corporation after due investigation and deliberation have each adopted respective resolutions authorizing the financing of the Project through the execution and delivery of the Certificates; and
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and entering into of this Trust Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Trust Agreement; and DRAFT 58

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WHEREAS, the City has determined that all acts and proceedings required by law necessary to make the Certificates, when executed, authenticated and delivered by the Trust Administrator and duly issued, the valid, binding and legal special obligations of the City, and to constitute this Trust Agreement 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 Trust Agreement have been in all respects duly authorized; and
NOW, THEREFORE, in consideration of the above premises and of the mutual covenants hereinafter contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS; AUTHORIZATION; EXHIBITS
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section

1.01 shall, for all purposes of this Trust Agreement and of any trust agreement supplemental hereto and of any certificate, opinion or other document herein mentioned, have the meanings herein specified. In addition, all terms defined in the Installment Sale Agreement and not otherwise defined herein shall have the respective meanings specified in the Installment Sale Agreement.
“Additional Revenues” means, with respect to the issuance of any Parity Debt, an allowance for Net Revenues (i) arising from any increase in the charges made for service from the Wastewater System, adopted prior to the incurring of such Parity Debt and effective within eighteen (18) months following the date of incurring such Parity Debt, in an amount equal to the total amount by which the Net Revenues for the Wastewater System would have been increased if such increase in charges had been in effect during the whole of the most recent completed Fiscal Year or during any more recent twelve (12) month period selected by the City, and (ii) arising from any increase in service connections to the Wastewater System, prior to the incurring of such Parity Debt, in an amount equal to the total amount by which the Net Revenues for the Wastewater System would have been increased if such connections had been in existence during the whole of the most recent complete Fiscal Year or during any more recent twelve (12) month period selected by the City, all as shown by the certificate or opinion of an Independent Financial Consultant. “Assignment Agreement” means the Assignment Agreement, dated as of December 1, 2022, by and between the Corporation and the Trust Administrator, together with any amendments or supplements thereto. “Bond Counsel” means (a) Weist Law LLP, and (b) any other attorney or firm of attorneys of nationally recognized expertise with respect to legal matters relating to municipal obligations, the interest on which is excludable from gross income pursuant to Section 103 of the Tax Code. “Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which the City offices are authorized or obligated by law or executive order to be closed. “Certificate Maturity Date” means December 1, 2062, which is the date on which the final principal component of the Installment Payments evidenced and represented thereby shall become due and payable.

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“Certificate Register” means the Certificate Register relating to the Certificates maintained by the Trust Administrator in accordance with Section 2.11 of this Trust Agreement. “Certificates” means the $5,700,000 Series 2022 Wastewater Revenue Certificates of Participation (Wastewater System Improvement Project), Bank Qualified, dated the Closing Date, executed and delivered pursuant to this Trust Agreement.
“City” means the City of Yreka, a municipal corporation and general law city duly organized and existing under and by virtue of the constitution and laws of the State of California. “City Council” means the City Council as the legislative body of the City. “City Representative” means the Mayor, Mayor Pro Tem, City Manager, Assistant City Manager, Finance Director, City Clerk or Acting City Clerk, or any other official of the City authorized by the City Council to act for, and on behalf of, the City.
“Closing Date” means the date upon which there is a physical delivery of the Certificates in exchange for the amount representing the purchase price of all or the first advance of a portion of the purchase price of the Certificates by the Original Purchaser.
“Construction Costs” means the costs of the acquisition, construction, rehabilitation, equipping, improvement or financing and refinancing of improvements to, or part of, the Wastewater System constituting the Project.
“Construction Fund” means the fund of that name established pursuant to Article III of this Trust Agreement and held by the Trust Administrator.
“Corporation” means the Great Northern Services, a California not-for-profit corporation organized and existing under the laws of the State of California. “Corporation Board” means the Board of Directors of the Corporation. “Corporation Representative” means the President, Vice-President, Executive Director, Treasurer or Secretary of the Corporation, or any other person authorized by resolution of the Corporation Board to act on behalf of the Corporation under or with respect to this Trust Agreement. “County” means the County of Siskiyou, California.
“Debt Service” means, for any Fiscal Year, the sum of (l) the interest falling due during such Fiscal Year on all Parity Debt (that are outstanding under the documents or agreements pursuant to which they were issued), assuming that all outstanding serial Parity Debt are retired as scheduled and that all outstanding term Parity Debt are redeemed from sinking fund payments as scheduled (except to the extent that such interest has been fully capitalized and is invested in Federal Securities that mature at times and in such amounts as are necessary to pay the interest to which such amounts are pledged), (2) the principal amount of all serial Parity Debt (that are outstanding under the documents or agreements pursuant to which they were issued) falling due by their terms during such Fiscal Year, and (3) the minimum amount of term Parity Debt (that are DRAFT 60

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outstanding under the documents or agreements pursuant to which they were issued) required to be paid or called and redeemed during such Fiscal Year, together with the redemption premiums, if any, thereon; provided that, whenever interest as described herein accrues at other than a fixed rate, such interest shall be assumed to be a rate equal to the greater of (i) the actual rate on the date of calculation, or if the Parity Debt are not yet outstanding, the initial rate (if established and binding), (ii) if the Parity Debt have been outstanding for at least twelve months, the average rate over the twelve months immediately preceding the date of calculation, and (iii) (x) if interest on the Parity Debt is excludable from gross income under the applicable provisions of the Code, the most recently published The Bond Buyer Bond Revenue Index (or comparable index if no longer published) plus one hundred fifty (150) basis points, or (y) if interest is not so excludable, the interest rate on direct U.S. Treasury Obligations with comparable maturities, plus one hundred fifty (150) basis points.
“Delivery Costs” means all items of expense directly or indirectly payable by or reimbursable to the City or the Corporation relating to the financing and refinancing of the Project from the proceeds of the Certificates, including but not limited to filing and recording costs, settlement costs, printing costs, reproduction and binding costs, initial fees and charges and first year’s administration fee of the Trust Administrator, Trust Administrator’s counsel fees and expenses, financing discounts, legal fees and charges, financial and other professional consultant fees, costs of rating agencies or credit ratings, fees for execution, transportation and safekeeping of the Certificates, travel expenses and charges and fees in connection with the foregoing.
“Denomination Amount” means the minimum denomination of each Certificate which is One Thousand Dollars ($1000).
“Discharge Obligations” means (a) cash, or (b) non-callable Federal Securities. “Event of Default” means an event of default under Section 7.01 of the Installment Sale Agreement. “Fair Market Value” means for purposes of valuing the Permitted Investments, 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 if the return paid by such fund is without regard to the source of investment. The Trust Administrator shall have no duty in connection with the determination of Fair Market Value other than to follow the investment directions of a City Representative in any written directions of a City Representative.

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“Federal Securities” means direct general obligations of (including obligations issued or held in book entry form on the books of the Department of the Treasury) the United States of America, or obligations the timely payment of principal of and interest on which are guaranteed by, the United States of America. “Fiscal Year” means any period of twelve (12) consecutive months established by the City as its fiscal year and shall initially mean the period commencing July 1 of one year and ending on June 30 of the following year.
“Generally Accepted Accounting Principles” means the uniform accounting and reporting procedures prescribed by the California State Controller or his or her successor for cities in the State of California, or failing the prescription of such procedures means generally accepted accounting principles as presented and recommended by the American Institute of Certified Public Accountants or its successor, or by any other generally accepted authority on such procedures, and includes, as applicable, the standards set forth by the Governmental Accounting Standards Board or its successor. “Finance Director” means the person who is the City’s Finance Director or his or her deputy or assistant.
“Government” means the United States of America, acting through the Rural Utilities Service (or successor agency, bureau or division).
“Gross Revenues” means all gross charges received for, and all other gross income and receipts received or receivable by the City from, the ownership or operation of the Wastewater System or otherwise arising from the Wastewater System, including but not limited to amounts transferred from a Rate Stabilization Fund, and all rates, fees and charges (including connection fees and charges), as well as all investment earnings on such charges, income and receipts. Gross Revenues shall not include (i) customers’ wastewater related deposits or any other wastewater related deposits subject to refund until such deposits have become the property of the City, (ii) the proceeds of any ad valorem property taxes, (iii) loan or grant proceeds that are designated by the grantor for a specific wastewater purpose and are therefore not available for other purposes, (iv) any specific charges levied for the express purpose of reimbursing others for all or a portion of the cost of the acquisition or construction of specific wastewater facilities, and (v) the proceeds of any special assessments or special taxes levied upon real property within any improvement district served by the City for the purpose of paying special assessment bonds or special tax obligations of the City relating to the Wastewater System.
“Independent Certified Public Accountant” means any firm of certified public accountants appointed by the City that is independent according to the Statement of Auditing Standards No. 1 of the American Institute of Certified Public Accountants.
“Independent Counsel” means an attorney or a firm of attorneys duly admitted to the practice of law before the highest court of the state in which he or such firm maintains an office and who is not an employee of the Corporation, the Trust Administrator or the City. “Independent Engineer” means any registered engineer or firm of engineers generally recognized to be well-qualified in engineering matters relating to wastewater systems similar to the Wastewater System, appointed and paid by the City, and who or each of whom:

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(1) is in fact independent and not under the domination of the City; (2) does not have a substantial financial interest, direct or indirect, in the City; and (3) is not connected with the City as a council member, officer or employee of the City, but may be regularly retained to make reports to the City.
“Independent Financial Consultant” means a financial consultant qualified in the field of municipal finance, appointed and paid by the City, and who:
(1) is in fact independent and not under the domination of the City or any member thereof; (2) does not have a substantial financial interest, direct or indirect, in the operations of the City; and
(3) is not connected with the City as an officer or employee of the City or any member thereof, but may be regularly retained to audit the accounting records of and make reports thereon to the City. “Installment Payment” means any payment required to be paid by the City to the Corporation pursuant to Section 3.05 of the Installment Sale Agreement. “Installment Payment Date” means each Interest Payment Date. “Installment Payment Fund” means the fund designated “City of Yreka, Project Installment Payment Fund” established and held by the Trust Administrator pursuant to Article III of this Trust Agreement.
“Installment Sale Agreement” means the Installment Sale Agreement, dated as of December 1, 2022, by and between the Corporation and the City, and any duly authorized and executed amendment or supplement thereto.
“Insurance and Condemnation Fund” means the fund by that name established pursuant to Article VII of this Trust Agreement and held by the Trust Administrator. “Interest Fund” means the fund by that name established in Section 5.04 herein. “Interest Payment Date” means January 1 and July 1 of each year, commencing July 1, 2023. “Interest Rate” means the rate of interest to be paid on the Certificate which is 1.75% per annum. “Maximum Annual Debt Service” means the greatest amount of Debt Service with respect to the Parity Debt to which reference is made coming due in any Fiscal Year including the Fiscal Year in which the calculation is made or any subsequent Fiscal Year.
“Net Proceeds” means any insurance proceeds or condemnation award paid with respect to the Project, remaining after payment therefrom of all expenses incurred in the collection thereof.

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“Net Revenues” means Gross Revenues less Operation and Maintenance Expenses. “Operation and Maintenance Expenses” means the reasonable and necessary costs paid or incurred by the City for maintaining and operating the Wastewater System, determined in accordance with Accounting Standards, including all reasonable expenses of management and repair and all other expenses necessary to maintain and preserve the Wastewater System in good repair and working order, and including all administrative costs of the City that are charged directly or apportioned to the operation of the Wastewater System, such as salaries and wages of employees, overhead, taxes (if any) and insurance premiums (including payments required to be paid into any self-insurance funds), and including all other reasonable and necessary costs of the City or charges required to be paid by it to comply with the terms hereof or of any resolution authorizing the execution of any Parity Debt; but excluding in all cases (i) payment of Parity Debt and Subordinate Debt, (ii) costs of capital additions, replacements, betterments, extensions or improvements which under Accounting Standards are chargeable to a capital account, and (iii) depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles and other bookkeeping entries of a similar nature.
“Original Purchaser” means the Government as the first purchaser of the Certificates (evidenced by a single fully registered Certificate) upon their delivery by the Trust Administrator on the Closing Date. “Outstanding,” when used as of any particular time with respect to Certificates, means (subject to the provisions of Section 10.03 of this Trust Agreement) all Certificates theretofore executed and delivered by the Trust Administrator under this Trust Agreement except:
(a) Certificates theretofore canceled by the Trust Administrator or surrendered to the Trust Administrator for cancellation;
(b) Certificates for the payment or prepayment of which funds or eligible securities in the necessary amount, including accrued interest thereon, shall have theretofore been deposited with the Trust Administrator (whether upon or prior to the maturity or prepayment date of such Certificates), provided that, if such Certificates are to be prepaid prior to maturity, notice of such prepayment shall have been given as provided in Section 4.03 of this Trust Agreement or provision satisfactory to the Trust Administrator shall have been made for the giving of such notice; and (c) Certificates in lieu of or in exchange for which other Certificates shall have been executed and delivered by the Trust Administrator pursuant to Section 2.09 of this Trust Agreement. “Owner” or “Certificate Owner” or “Registered Owner,” or any similar term, means the person or entity in whose name a Certificate shall be registered. “Parity Debt” means the Certificates and any other indebtedness or other obligation (including bonds, certificates, leases and installment sale agreements) hereafter issued or incurred in accordance with Section

3.09(b) of the Installment Sale Agreement and secured by a pledge of and lien on Net Revenues equally and ratably with the Installment Payments.

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“Permitted Investments” means any of the following which at the time of investment are legal investments under the laws of the State of California for the moneys proposed to be invested therein, provided that the same are of appropriate maturity and acquired at Fair Market Value:
(i) Federal Securities and any investment fund, including money market funds or other investment policy arrangement which purchases and holds exclusively Federal Securities; (ii) Obligations issued by federal land banks or federal home loan banks; or obligations, participations, or other instruments issued by, or fully guaranteed as to principal and interest by, the Federal National Mortgage Association; or obligations, participations, or other instruments issued by a federal agency or a United States government-sponsored enterprise; (iii) Investments in repurchase agreements under the terms of which the underlying collateral is transferred to the possession of the Trust Administrator of any securities authorized by paragraphs (i) and (ii) above which have a fair market value (valued at cost) at least equal to 105% of the amount invested in the repurchase agreement and are free of third party claims; (iv) Nonnegotiable certificates of deposit issued by a nationally chartered bank, a bank chartered by the State of California or a foreign banking corporation, authorized pursuant to Section 1756 of the California Financial Code to transact business in the State of California by accepting deposits, or a State of California or federal savings and loan association, provided that such certificates of deposit are fully collateralized in the manner required for collateralization of trust funds;
(v) Any investment agreement, guarantee or other investment vehicle or security issued by, secured by or otherwise representing the general obligations of a financial institution whose longterm unsecured, uninsured and unguaranteed obligation or claims-paying ability is rated AA or better by any Rating Agency at the time of its issuance, provided that: (a) the agreement is not subordinated to any other obligations of such financial institution; and (b) if the financial institution fails to maintain a rating of AA or better (without regard to gradations), the City and/or the Corporation shall have the right to demand collateral in the form of securities authorized by paragraphs (i) and (ii) above pledged to secure the investment agreement. Such collateral shall be pledged through the Trust Administrator and shall have a fair market value (valued at cost) of at least 105% of the value of funds remaining in the investment agreement. Further, the City and/or the Corporation shall have the right to withdraw all funds without penalty should the financial institution fail to provide collateral as required under this paragraph;
(vi) Investments otherwise defined in Section 53601 of the California Government Code, as amended from time to time; provided that the Trust Administrator shall not be obligated to invest in any form of investment pursuant to this subparagraph (vi) except upon receipt of a certificate of a City Representative that any directed investment to be made pursuant to this subparagraph (vi) meets this definition as set forth in this subparagraph (vi); and (vii) The Local Agency Investment Fund of the State or any state administered pool investment fund in which the City is statutorily permitted or required to invest will be deemed a permitted investment.

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“Prepayment” means any payment applied towards the prepayment of the Installment Payments, in whole or in part, pursuant to Article IV of the Installment Sale Agreement. “Principal Amount” means the aggregate authorized principal amount of the Certificates which is $__________.
“Principal Component Payment” means each principal portion of each Installment Payment made pursuant to Section 2.03 hereof.
“Principal Fund” means the fund by that name established in Section 5.04 herein. “Principal Payment Date” means July 1 of each year, commencing with July 1, 2023, and ending on July 1, 2062.
“Proceeds” when used with reference to the Certificates, means the face amount of the Certificates, plus accrued interest and premium, if any, and less original issue discount, if any. “Project” means the improvements to the Wastewater System described in Exhibit A to the Installment Sale Agreement.
“Rating Category” means, with respect to any Permitted Investment, one or more of the generic categories of rating by S&P applicable to such Permitted Investment, without regard to any refinement or gradation of such rating category by a plus or minus sign. “Regular Record Date” means the close of business on the fifteenth (15th) day of the month preceding each Interest Payment Date, whether or not such fifteenth (15th) day is a Business Day. “Reserve Fund” means the fund of that name established under Article VI of this Trust Agreement and held by the Trust Administrator.
“Reserve Installment Payments” means the amount required to be paid by the City to the Trust Administrator from Net Revenues pursuant to Section 3.11 of the Installment Sale Agreement, and which shall be applied to the Reserve Fund as set forth in Sections 6.01 through 6.06 herein. “Reserve Requirement” means an amount equal to the monthly City deposits required pursuant to Section 3.11 of the Installment Sale Agreement, ultimately accumulating to a total of $________. “S&P” means Standard & Poor’s Ratings Group, a division of McGraw-Hill, Inc., New York, New York, or its successors.
“Short-Lived Assets Reserve Fund” means the fund by that name established and maintained pursuant to Section 6.07 herein.
“State” means the State of California.

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“Subordinate Debt” means indebtedness or other obligations (including leases and installment sale agreements) hereafter issued or incurred and secured by a pledge of and lien on Net Revenues subordinate to the Installment Payments.
“Tax Code” means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced in the Installment Sale Agreement or this Trust Agreement) as it may be amended to apply to obligations issued on the Closing Date, together with applicable temporary and final regulations promulgated under the Tax Code.
“Term of the Installment Sale Agreement” means the time during which the Installment Sale Agreement is in effect which begins on the Closing Date and ends on July 1, 2062, unless sooner terminated pursuant to the terms of the Installment Sale Agreement. “Trust Administrator” means the Finance Director of the City, or any successor thereto, acting as Trust Administrator pursuant to this Trust Agreement.
“Trust Agreement” means this Trust Agreement, dated as of December 1, 2022, by and among the Trust Administrator, the Corporation and the City, together with any amendments or supplements thereto permitted to be made thereunder.
“Trust Office” means the office of the Trust Administrator at the offices of the City in Clearlake Oaks, California, or at such other address designated by the Trust Administrator by written notice filed with the City and the Corporation.
“Wastewater System” means the whole and each and every part of the wastewater system of the City serving the City and its residents and other customers served thereby, whether within or without the City, for the collection, treatment and disposal of wastewater, including but not limited to all buildings, facilities, properties, lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto at any time acquired, constructed or installed by the City. “Written Certificate” of the City means a written certificate signed in the name of the City by a City Representative as contemplated by and containing the elements required by Section 1.03 of this Trust Agreement and Section 1.03 of the Installment Sale Agreement.

Section 1.02. Authorization. Each of the parties hereby represents and warrants that it has full legal authority and is duly empowered to enter into this Trust Agreement, and has taken all actions necessary to authorize the execution of this Trust Agreement by the officers and persons signing it.

Section 1.03. Content of Written Certificates.
(a) Contents. Every Written Certificate provided for in this Trust Agreement with respect to compliance with any provision hereof, except Written Certificates delivered on the Closing Date and the certificate of destruction pursuant to Section 14.07, shall include (a) a statement that the person making or giving such Written Certificate or opinion has read such provision and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the Written Certificate is based; (c) a statement that, in the opinion of such person, he has made or caused to be made such examination or investigation as is necessary to enable him to express an informed opinion with respect DRAFT 67

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to the subject matter referred to in the instrument to which his signature is affixed; (d) a statement of the assumptions upon which such Written Certificate is based, and that such assumptions are reasonable; and (e) a statement as to whether, in the opinion of such person, such provision has been complied with. (b) Reliance. Any such Written Certificate made or given by a City Representative may be based, insofar as it relates to legal or accounting matters, upon a certificate or opinion of or representation by counsel or an accountant, unless such City Representative knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which such Written Certificate may be based, as aforesaid, is erroneous. Any such certificate or opinion made or given by counsel or an accountant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the City, as the case may be) upon a certificate or opinion of or representation by a City Representative, unless such counsel or accountant knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which such person’s certificate or opinion or representation may be based, as aforesaid, is erroneous. The same City Representative, or the same counsel or accountant, as the case may be, need not certify to all of the matters required to be certified under any provision of this Trust Agreement, but different officers, counsel or accountants may certify to different matters, respectively.

Section 1.04. Exhibits. The following Exhibits are attached to, and by this reference are made a part of, this Trust Agreement: Exhibit A (Form of Certificate) and Exhibit B (Form of Disbursement Requisition from Construction Fund).

ARTICLE II

THE WASTEWATER REVENUE CERTIFICATES
Section 2.01. Authorization. The Trust Administrator is hereby authorized and directed upon written request from either the City or the Corporation to execute and deliver, to the Original Purchaser, a single Certificate in the Principal Amount evidencing undivided fractional interests in the Installment Payments and the Prepayments. The aggregate principal amount of the Certificates shall not in any case exceed the aggregate payments by the Original Purchaser therefor, as such payments and the dates thereof are endorsed on the single, fully registered Certificate. No provision is made for the Certificates to be executed and delivered in blocks or phases as the Original Purchaser’s regulations for single delivery have been satisfactorily met.

Section 2.02. Date. Each Certificate shall be dated as of the date of delivery thereof.

Section 2.03. Principal; Interest; Maturity. The Certificates shall mature on July 1 in the years and in the principal amounts as shown below (each, a “Principal Component Payment”). Interest with respect thereto shall be computed at the Interest Rate of 1.75% per annum, calculated on the basis of a 365-day year.

The annual Principal Component Payments are as follows:

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Maturity
Date
Principal
Due
Maturity
Date
Principal
Due
07/01/2023 07/01/2043
07/01/2024 07/01/2044
07/01/2025 07/01/2045
07/01/2026 07/01/2046
07/01/2027 07/01/2047
07/01/2028 07/01/2048
07/01/2029 07/01/2049
07/01/2030 07/01/2050
07/01/2031 07/01/2051
07/01/2032 07/01/2052
07/01/2033 07/01/2053
07/01/2034 07/01/2054
07/01/2035 07/01/2055
07/01/2036 07/01/2056
07/01/2037 07/01/2057
07/01/2038 07/01/2058
07/01/2039 07/01/2059
07/01/2040 07/01/2060
07/01/2041 07/01/2061
07/01/2042 07/01/2062
Section 2.04. Interest. The interest evidenced and represented by the Certificates shall be payable on January 1 and July 1 of each year (each, an “Interest Payment Date”), commencing on July 1, 2023 and continuing to and including the Certificate Maturity Date or upon prepayment prior thereto, and shall evidence and represent the sum of the portions of the Installment Payments designated as interest components (each, an “Interest Component Payment”) coming due on the Interest Payment Dates during the interest period immediately preceding each of the Interest Payment Dates. Interest shall be calculated with respect to the Original Purchaser’s aggregate payments for the single Certificate from the respective date(s) of advances thereof, as such payments and dates thereof are endorsed on the single Certificate and computed on the basis of a 365-day year (and actual days elapsed). Each Interest Component Payment shall be computed by multiplying the portion of Installment Payments designated as principal with respect to such Certificate by the rate of interest applicable to such Certificate.

Interest on any Certificate shall be payable from the Interest Payment Date next preceding the date of execution thereof, unless (i) such Certificate is executed on an Interest Payment Date, in which event interest shall be payable from such Interest Payment Date, or (ii) such Certificate is executed after the close of business on the fifteenth (15th) day of the month immediately preceding the following Interest Payment Date and prior to such Interest Payment Date, in which event interest shall be payable from such Interest Payment Date, or (iii) such Certificate is executed on or before June 15, 2023, in which event interest shall be payable from the date of delivery thereof; provided, however, that if at the time of execution of any Certificate, interest with respect thereto is in default, interest with respect thereto shall be payable from the Interest Payment Date to which interest has previously been paid or made available for payment. Payment of interest with respect to any Certificate shall be made to the person appearing on the Certificate Register of the Trust Administrator as the Owner thereof as of the fifteenth (15th) day of the month preceding such Interest Payment Date, such interest to be paid as specified in Section 2.09 hereof.

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Section 2.05. Form of Certificate; Legends. The Certificates shall be delivered in the form of a fully registered Certificate, without coupons, in the Denomination Amount or any integral multiple thereof, except that one annual amount may be any odd amount, and no Certificate may have principal maturing in more than one year. The Certificates shall be numbered in such manner as the Trust Administrator deems appropriate. At the option of the Original Purchaser of the Certificates, a single, fully-registered Certificate may be executed and delivered, in lieu of serial, registered Certificates, which single Certificate shall mature in installments of the same principal amounts and on the same dates as the registered Certificates it represents.

The single Certificate shall be substantially in the form set forth in Exhibit A attached hereto and by this reference incorporated herein. The Certificates may contain or have endorsed thereon such provisions, specifications and descriptive words not inconsistent with the provisions of this Trust Agreement as may be necessary or desirable to comply with custom, or otherwise.

Section 2.06. Execution and Authentication. The Certificates shall be signed in the name and on behalf of the Corporation with the manual or facsimile signature of its Chair, Vice Chair or Treasurer, and shall be delivered to the Trust Administrator for authentication. In case any officer of the Corporation who shall have signed any of the Certificates shall cease to be such officer before the Certificates so signed shall have been authenticated or delivered by the Trust Administrator or issued by the Corporation, such Certificates may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Corporation as though the individual who signed the same had continued to be such officer of the Corporation.

Only such of the Certificates as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A, manually or by facsimile signature authenticated on behalf of the Trust Administrator, shall be valid or obligatory for any purpose or entitled to the benefits of this Trust Agreement, and such certificate of the Trustee shall be conclusive evidence that the Certificates so authenticated have been duly authenticated and delivered hereunder and are entitled to the benefits of this Trust Agreement.

Section 2.07. Transfer and Exchange. The following shall apply to transfers and exchanges of Certificates, provided that no transfer or exchange of Certificates shall be required to be made during the fifteen (15) days prior to the date of selection of Certificates for prepayment, or of any Certificate selected for prepayment:
(a) Transfer of Certificates. Any Certificate may, in accordance with its terms, be transferred upon the books required to be kept pursuant to the provisions of Section 2.11 hereof by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Certificate for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trust Administrator, duly executed. Whenever any Certificate shall be surrendered for transfer, the Trust Administrator shall deliver a new Certificate or Certificates of the same maturity, interest rate and aggregate principal amount in authorized denominations to the transferee thereof. The Trust Administrator may require the payment by the Certificate Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer.
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maturity. The Trust Administrator may require the payment by the Certificate Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.

Notwithstanding anything herein or elsewhere to the contrary, there shall be not any transfers or exchanges while Government is owner, unless requested by the Government.

Section 2.08. Certificate Mutilated, Lost, Destroyed or Stolen. If any Certificate shall become mutilated, the Trust Administrator, at the expense of the Owner of said Certificate, shall execute and deliver a new Certificate of like maturity and principal amount in authorized denominations in exchange and substitution for the Certificate so mutilated, but only upon surrender to the Trust Administrator of the Certificate so mutilated. Every mutilated Certificate so surrendered to the Trust Administrator shall be canceled by it and destroyed in accordance with Section 14.07 hereof, and the Trust Administrator shall deliver a certificate of destruction to the City. If any Certificate shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trust Administrator and, if such evidence is satisfactory to the Trust Administrator and if an indemnity satisfactory to the Trust Administrator and the Corporation shall be given, the Trust Administrator, at the expense of the Certificate Owner, shall execute and deliver a new Certificate of like tenor and maturity and numbered as the Trust Administrator shall determine in lieu of and in substitution for the Certificate so lost, destroyed or stolen. The Trust Administrator may require payment of an appropriate fee for each new Certificate delivered under this Section 2.08 and of the expenses which may be incurred by the Trust Administrator in carrying out the duties under this Section 2.08. Any Certificate delivered under the provisions of this Section 2.08 in lieu of any Certificate alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits of this Trust Agreement with all other Certificate secured by this Trust Agreement. The Trust Administrator shall not be required to treat both the original Certificate and any substitute Certificate as being Outstanding for the purpose of determining the principal amount of Certificate which may be executed and delivered hereunder or for the purpose of determining any percentage of Certificate Outstanding hereunder; the Trust Administrator shall consider only the substitute Certificate as Outstanding for such purpose. Notwithstanding any other provision of this Section

2.08, in lieu of delivering a new Certificate which has been mutilated, lost, destroyed or stolen, and which has matured, the Trust Administrator may make payment with respect to such Certificate upon receipt of indemnity satisfactory to the Trust Administrator.

Section 2.09. Payment. Except as otherwise provided herein, payment of interest due with respect to any Certificate on any Interest Payment Date shall be made to the person appearing on the Certificate Register as the Owner thereof as of the Regular Record Date immediately preceding such Interest Payment Date, such interest to be paid by check mailed on the Interest Payment Date by first class mail to such Owner at his address as it appears on the Certificate Register as of such Regular Record Date. The principal and prepayment price with respect to a Certificate at maturity or upon prior prepayment shall be payable by check denominated in lawful money of the United States of America upon surrender of the Certificate at the Trust Office. If the Government is the Owner of the single, fully-registered Certificate, surrender shall not be required for payment, except for final payment, and payment of principal shall be made on each Principal Payment Date and payment of interest shall be made on each Interest Payment Date to the Registered Owner, unless otherwise requested by the Registered Owner, by the Pre-Authorized Debit (PAD) payment process (i.e., the City’s payments shall be electronically debited from the Installment Payment Fund on each Interest Payment Date in accordance with the PAD process established by Form SF-5510 and Form RD 3550-28, both entitled “Authorization Agreement for Pre-Authorized Payments”).

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Section 2.10. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Trust Agreement to be signed or executed by Certificate Owners may be in any number of concurrent instruments of similar tenor, and may be signed or executed by such Owners in person or by their attorneys or agents appointed by an instrument in writing for that purpose, or by any bank, trust company or other depository for such Certificate.

Proof of the execution of any such instrument, or of any instrument appointing any such attorney or agent, and of the holding and ownership of Certificates shall be sufficient for any purpose of this Trust Agreement (except as otherwise herein provided), if made in the following manner:
(a) The fact and date of the execution by any Owner or such Owner’s attorney or agent of any such instrument and of any instrument appointing any such attorney or agent, may be proved by a certificate, which need not be acknowledged or verified, of an officer of any bank or trust company located within the United States of America, or of any notary public, or other officer authorized to take acknowledgments of deeds to be recorded in such jurisdictions, that the persons signing such instruments acknowledged before such notary or officer the execution thereof. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such certificate shall also constitute sufficient proof of the authority of such officer or member. (b) The fact of the holding of a Certificate by any Owner and the amount, the maturity and the numbers of such Certificate and the date of the Owner’s holding the same may be proved by reference to the Certificate Register maintained by the Trust Administrator provided for in Section

2.11 hereof. The Trust Administrator may conclusively assume that such ownership continues until transfer as provided in Section 2.07(a) hereof.
(c) Nothing contained in this Article II shall be construed as limiting the Trust Administrator to such proof, it being intended that the Trust Administrator may accept any other evidence of the matters herein stated which the Trust Administrator may deem sufficient. Any request or consent of the Owner of any Certificate shall bind every future Owner of the same Certificate in respect of anything done or suffered to be done by the Trust Administrator in pursuance of such request or consent.

Section 2.11. Certificate Register. The Trust Administrator will keep or cause to be kept, at the Trust Office, sufficient books for the registration and transfer of the Certificates which shall be open at all reasonable times with reasonable prior notice during normal business hours of the Trust Administrator to inspection by the City and the Corporation; and, upon presentation for such purpose, the Trust Administrator shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, Certificates as hereinbefore provided.

Section 2.12. CUSIP Numbers. The Trust Administrator, the City and the Corporation shall not be liable for any defect or inaccuracy in any CUSIP number that appears on any Certificate or in any prepayment notice. The Trust Administrator may, in its discretion, include in any prepayment notice a statement to the effect that any CUSIP numbers on the Certificate have been assigned by an independent service and are included in such notice solely for the convenience of the Owners and that neither the Trust Administrator, the City nor the Corporation shall be liable for any inaccuracies in such numbers. CUSIP numbers shall not be required if the Government is the Original Purchaser of a single, fully registered Certificate.

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ARTICLE III

CONSTRUCTION FUND

Section 3.01. Construction Fund. The Trust Administrator shall establish the Construction Fund and shall keep such fund separate and apart from all other funds and moneys held by the Trust Administrator; and shall administer such fund and account as provided herein. There shall be deposited in the Construction Fund all of the proceeds of sale of the Certificates, including an initial advance received from the Original Purchaser on the Closing Date, and any other funds from time to time deposited with the Trust Administrator for such purpose.

Section 3.02. Payment of Construction Costs.
(a) Except as provided in subsection (b) below and in Section 3.03, amounts in the Construction Fund shall be disbursed for Construction Costs. Disbursements from the Construction Fund shall be made by the Trust Administrator upon receipt of a sequentially numbered requisition, a form of which is attached as Exhibit B, requesting disbursement executed by a City Representative and by the Government as the Certificate Owner. Each such requisition shall:
(i) set forth the amounts to be disbursed for payment or reimbursement of previous payments of Construction Costs and the person or persons to whom said amounts are to be disbursed;
(ii) state that the amounts to be disbursed constitute Construction Costs, that said amounts are required to be disbursed pursuant to a contract entered into therefor by or on behalf of the Corporation or the City, or were necessarily and reasonably incurred, and that said amounts are not being paid in advance of the time, if any, fixed for payment; (iii) state that no amount set forth in the requisition was included in any requisition requesting disbursement previously filed with the Trust Administrator pursuant to this Section 3.02;
(iv) state that there has been compliance with Section 11.07 hereof relating to the use of the Construction Fund;
(v) state that insofar as such requisition relates to payment for work, materials, equipment or supplies, such work was actually performed, or such materials, equipment or supplies were actually installed in furtherance of the construction of the Project or delivered to the appropriate site for such purpose, or delivered for storage or fabrication at a place approved by the City; and
(vi) if such requisition relates to payment to a contractor, state that no liens have been imposed on the Project as a result of said construction except liens that have not yet ripened or that would attach by operation of law.

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(b) The Trust Administrator shall be responsible for the safekeeping and investment (in accordance with Section 8.02 hereof) of the moneys held in the Construction Fund and the payment thereof in accordance with this Section 3.02, but the Trust Administrator shall not be responsible for such requisitions.

Section 3.03. Payment of Delivery Costs.
(a) Amounts in the Construction Fund shall also be disbursed by the Trust Administrator to pay the Delivery Costs.
(b) The Trust Administrator shall disburse moneys in the Construction Fund to pay the Delivery Costs only upon a receipt of a sequentially numbered requisition, with bills, invoices or statements attached, signed by a City Representative (and, if required, by the Government as the Certificate Owner) setting forth the amounts to be disbursed for payment or reimbursement of Delivery Costs and the name and address of the person or persons to whom said amounts are to be disbursed, stating that the amounts to be disbursed are for Delivery Costs properly chargeable to the Construction Fund as Delivery Costs.

Section 3.04. Transfers of Unexpended Proceeds. The Trust Administrator is hereby directed that all unexpended moneys remaining in the Construction Fund and not identified in writing by a City Representative and by the Owner to be required for payment of Construction Costs or other capital improvements (the “Unexpended Proceeds”) shall, on the date of completion of the Project or as soon thereafter as the Trust Administrator is so notified, be transferred to the Installment Payment Fund and applied to the prepayment of the Certificates.

ARTICLE IV

PREPAYMENT OF CERTIFICATES
Section 4.01. Prepayment.
(a) Generally. The Certificates shall not be subject to prepayment prior to maturity, except in the manner, at the times and in all respects in accordance with the provisions of this Article IV.
(b) Prepayment from Net Proceeds of Insurance and Condemnation and from Unexpended Proceeds. The Certificates are subject to prepayment in whole on any date and in part on any Interest Payment Date from the (i) Net Proceeds of any insurance or condemnation award and (ii) Unexpended Proceeds, which are, in either case deposited in the Installment Payment Fund and credited towards the prepayment made by the City pursuant to Section 4.03 of the Installment Sale Agreement, at a prepayment price equal to the principal amount thereof, together with accrued interest to the date fixed for prepayment, without premium. (c) Optional Prepayment. In addition, the Certificates are subject to prepayment in whole or in part at any time, at the principal amount with respect thereto, without premium, and with accrued interest to the date fixed for prepayment from the proceeds of optional prepayments made by the City pursuant to the Installment Sale Agreement:

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Section 4.02. Selection of Certificates for Prepayment. Whenever provision is made in this Trust Agreement for the prepayment of Certificates and less than all Outstanding Certificates are called for prepayment, the Trust Administrator shall select Certificates for prepayment in inverse order of maturity, unless otherwise requested by City and agreed to by Original Purchaser in its reasonable discretion. The Trust Administrator shall promptly notify the City and the Corporation in writing of the Certificates so selected for prepayment, and the City or the Corporation shall immediately thereafter revise Exhibit B of the Installment Sale Agreement to reflect such prepayment and shall be and become for all purposes thereafter the “Amended Exhibit B to the Installment Sale Agreement.”
Section 4.03. Notice of Prepayment.
(a) General. Notice of any such prepayment shall be given by the Trust Administrator on behalf and at the expense of the City by mailing a copy of a prepayment notice by first class mail at least thirty (30) days and not more than sixty (60) days prior to the date fixed for prepayment to such Owner of the Certificate or Certificates to be redeemed at the address shown on the Certificate Register maintained by the Trust Administrator; provided, however, that neither the failure to receive such notice nor any defect in any notice shall affect the sufficiency of the proceedings for the prepayment of the Certificates.
(b) Contents. All notices of prepayment shall be dated and shall state: (i) the prepayment date, (ii) the prepayment price, (iii) if less than all Outstanding Certificates are to be prepaid, the identification (and, in the case of partial prepayment, the respective principal amounts) of the Certificates to be prepaid, (iv) that on the prepayment date the prepayment price will become due and payable with respect to each such Certificate or portion thereof called for prepayment, and that interest with respect thereto shall cease to accrue from and after said date, (v) the place where such Certificates are to be surrendered for payment of the prepayment price, which place of payment shall be the Trust Office.
(c) Deposit. Prior to the mailing of any prepayment notice (other than a prepayment notice relating to Certificates that are to be refunded with the proceeds of refunding Certificates or other refunding obligations), the City shall deposit, or cause to be deposited, with the Trust Administrator an amount of money sufficient to pay the prepayment price of all the Certificates or portions of Certificates which are to be prepaid on the applicable prepayment date. In the case of a prepayment notice relating to Certificates that are to be refunded, the City shall deposit, or cause to be deposited, with the Trust Administrator on or prior to the applicable prepayment date, an amount of money sufficient to pay the prepayment price of all the Certificates or portions of Certificates which are to be prepaid on such prepayment date.
(d) Prepayment. Notice of prepayment having been given as aforesaid, the Certificates or portions of Certificates so to be redeemed shall, on the prepayment date, become due and payable at the prepayment price therein specified, and from and after such date (unless the City shall default in the payment of the prepayment price) interest with respect to such Certificates or portions of Certificates shall cease to be payable. Upon surrender of such Certificates for prepayment in accordance with said notice, such Certificates shall be paid by the Trust Administrator at the prepayment price. Installments of interest due on or prior to the prepayment date shall be payable as herein provided for payment of interest. Upon surrender for any partial prepayment of any Certificate, there shall be executed and delivered for the Owner a new Certificate or Certificates of the same DRAFT 75

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maturity in the amount of the unprepaid principal. All Certificates which have been prepaid shall be canceled by the Trust Administrator, shall not be reissued, and shall be destroyed pursuant to Section

14.07. If the Government is the Owner, prepayment shall be endorsed on the single, fully registered Certificate registered to the Government.
(e) CUSIP. The Trust Administrator shall have no responsibility for a defect in any CUSIP number that appears on any Certificate or in the prepayment notice. The prepayment notice may provide that the CUSIP numbers have been assigned by an independent service and are included in the notice solely for the convenience of Certificate Owners and that the Trust Administrator and the City shall not be liable in any way for inaccuracies in said numbers.

Section 4.04. Partial Prepayment of Certificates. Upon surrender of any Certificate prepaid in part only, the Trust Administrator shall execute and deliver to the Owner thereof, at the expense of the City, a new Certificate or Certificates of authorized denominations equal in aggregate principal amount to the unprepaid portion of the Certificate surrendered and of the same interest rate and the same maturity.

Section 4.05. Effect of Notice of Prepayment. After notice has been given and the moneys for the prepayment, including interest to the applicable Interest Payment Date and premium, if any, having been set aside in the Installment Payment Fund, the Certificate to be redeemed shall become due and payable on the Interest Payment Date, and, upon presentation and surrender thereof at the Trust Office specified in such notice, such Certificate shall be paid at the unpaid principal amount with respect thereto, and any unpaid and accrued interest to the Interest Payment Date.

If, on the Interest Payment Date, moneys for the prepayment of all of the principal of the Certificate to be prepaid, together with interest to such Interest Payment Date, shall be held by the Trust Administrator so as to be available therefor on such Interest Payment Date, and, if notice of prepayment thereof shall have been given, then, from and after such Interest Payment Date, interest with respect to the Certificate to be prepaid shall cease to accrue and become payable. If such moneys shall not be so available on the Interest Payment Date, interest with respect to such Certificate shall continue to be payable at the same rates as it would have been payable had the Certificate not been called for prepayment. All moneys held by or on behalf of the Trust Administrator for the prepayment of a particular Certificate shall be held in trust for the account of the Owner of the Certificate so to be prepaid. The Trust Administrator shall not be liable for any interest earned on the amounts so held.

Section 4.06. Purchase of Certificates. In lieu of prepayment of Certificates as provided in this Article IV, amounts held by the Trust Administrator for such prepayment may also be used on any Interest Payment Date, upon receipt by the Trust Administrator at least ninety (90) days prior to the next scheduled Interest Payment Date of the written request of a City Representative, for the purchase of Certificates at public or private sale as and when and at such prices (including brokerage, accrued interest and other charges) as the City may in its discretion direct, but not to exceed the prepayment price which would be payable if such Certificates were prepaid; provided, however, that no Certificate shall be purchased in lieu of prepayment with a trade settlement date less than seventy-five (75) days prior to the relevant prepayment date. The aggregate principal amount of Certificates of the same maturity purchased in lieu of prepayment pursuant to this Section 4.06 shall not exceed the aggregate principal amount of Certificates of such maturity which would otherwise be subject to such prepayment. Remaining moneys, if any, shall be deposited in the Installment Payment Fund.

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ARTICLE V
INSTALLMENT PAYMENTS; INSTALLMENT PAYMENT FUND
Section 5.01. Assignment of Rights in Installment Sale Agreement. The Corporation has, pursuant to the Assignment Agreement, transferred, assigned and set over to the Trust Administrator all of its rights, title and interest in the Installment Sale Agreement (excepting only its rights under Sections 5.08, 6.03 and

7.04 thereof), including but not limited to all of the Corporation’s rights to receive and collect all of the Installment Payments, any Prepayment and all other amounts required to be deposited in the Installment Payment Fund pursuant to the Installment Sale Agreement or pursuant hereto. All Installment Payments, any Prepayment and such other amounts which the Corporation may at any time be entitled, shall be paid directly to the Trust Administrator and, in the event of the receipt or collection of Installment Payments by the Corporation, such payments shall be deemed to be held or to have been collected or received by the Corporation as agent of the Trust Administrator.

Section 5.02. Establishment of Installment Payment Fund. The Trust Administrator shall establish the Installment Payment Fund. All moneys at any time deposited by the Trust Administrator in the Installment Payment Fund shall be held by the Trust Administrator in trust for the benefit of the Owners of the Certificates. So long as any Certificates are Outstanding, neither the City nor the Corporation shall have any beneficial right or interest in the Installment Payment Fund or the moneys deposited therein, except only as provided in this Trust Agreement, and such moneys shall be used and applied by the Trust Administrator as hereinafter set forth.

Section 5.03. Deposits. There shall be deposited in the Installment Payment Fund all Installment Payments, Reserve Installment Payments and Prepayments received by the Trust Administrator, including any moneys received by the Trust Administrator for deposit therein pursuant to Sections 4.01, 5.05, 6.02, hereof or Article IV of the Installment Sale Agreement, and any other moneys required to be deposited therein pursuant to the Installment Sale Agreement or pursuant to this Trust Agreement.

Section 5.04. Application of Moneys in the Installment Payment Fund. All amounts in the Installment Payment Fund shall be used to (i) pay any billed delinquent interest, (ii) pay any past due interest installments, (iii) pay any past due principal installments, and (iv) to deposit in the following respective funds (each of which is hereby created and each of which the Trust Administrator, the Corporation or the City hereby covenants and agrees to cause to be maintained so long as any Certificates are Outstanding) at the following times and in the following order of priority, and the moneys in each of such funds shall be applied, used and withdrawn only for the purposes and uses hereinafter authorized. (1) Interest Fund;
(2) Principal Fund;
(3) Reserve Fund; and
(4) Short-Lived Assets Reserve Fund.

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(a) Interest Fund. The Trust Administrator shall transfer from the Installment Payment Fund and deposit in the Interest Fund for receipt before January 1 and July 1 of each year, beginning on July 1, 2023, an amount of money from the Installment Payment Fund which is equal to the aggregate amount of the interest becoming due and payable on all Outstanding Certificates on such Interest Payment Date. No deposit need be made into the Interest Fund if the amount contained therein is at least equal to the amount of the interest becoming due and payable on all Outstanding Certificates on such Interest Payment Date. All money in the Interest Fund shall be used and withdrawn by the Trust Administrator solely for the purpose of paying the interest on the Outstanding Certificates; provided that any earnings on deposit in the Interest Fund after payment of interest on Certificates on an Interest Payment Date shall be transferred to the Installment Payment Fund.
(b) Principal Fund. The Trust Administrator shall deposit in the Principal Fund before July 1 of each year, an amount of money from the Installment Payment Fund equal to the Principal Component Payment payable on such Principal Payment Date. All money in the Principal Fund shall be used by the Trust Administrator to pay or purchase the Certificates in accordance with Article IV hereof; provided that any earnings on deposit in the Principal Fund after payment of Principal Component Payment of the Certificates on a Principal Payment Date shall be transferred to the Installment Payment Fund. (c) Reserve Fund. All moneys at any time on deposit in the Reserve Fund shall be held by the Trust Administrator in trust for the benefit of the Owners of the Certificates, and applied solely as provided in Article VI herein.
(d) Short-Lived Assets Reserve Fund. All moneys at any time on deposit in the Short-Lived Assets Reserve Fund shall be held by the Trust Administrator, and applied solely as provided in Article VI herein.

Section 5.05. Surplus. Any surplus remaining in the Installment Payment Fund, after payment of all Certificates after each Principal Payment Date, and accrued interest (if any) and payment of any applicable fees, costs and expenses to the Trust Administrator, or provision for such prepayment or payment having been made to the satisfaction of the Trust Administrator, shall be withdrawn by the Trust Administrator and remitted to the City; provided, however, that so long as the Government is the Owner of the Certificates, revenue accumulated over and above that needed to pay operating and maintenance, debt service and reserves may only be retained or used to make prepayments on the indebtedness evidenced by the Certificates.

ARTICLE VI

RESERVE FUNDS
Section 6.01. Establishment of Reserve Fund. The Trust Administrator shall establish the Reserve Fund and shall keep such fund separate and apart from all other funds and moneys held by the Trust Administrator. All moneys at any time on deposit in the Reserve Fund shall be held by the Trust Administrator in trust for the benefit of the Owners of the Certificates, and applied solely as provided herein.

Section 6.02. Deposits. There shall be deposited in the Reserve Fund the amounts specified in Section

3.11 of the Installment Sale Agreement.

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Section 6.03. Transfers. The Trust Administrator shall, on or before each January 1 and July 1, transfer any moneys in the Reserve Fund in excess of the Reserve Requirement as provided in Section 8.03 hereof.

Section 6.04. Application in Event of Deficiency in the Installment Payment Fund. If, on any Interest Payment Date, the moneys available in the Installment Payment Fund do not equal the amount of the principal, interest and prepayment premium (if any) with respect to the Certificates then coming due and payable, with prior written concurrence from the Government first had and obtained, the Trust Administrator shall apply the moneys available in the Reserve Fund to make delinquent Installment Payments on behalf of the City and transfer the amount necessary for this purpose to the Installment Payment Fund. Upon receipt of any delinquent Installment Payment with respect to which moneys have been advanced from the Reserve Fund such Installment Payment shall be deposited in the Reserve Fund to the extent of such advance.

Section 6.05. Transfer to Make All Installment Payments. If on any Installment Payment Date, the moneys on hand in the Reserve Fund and the Installment Payment Fund are sufficient to pay all Outstanding Certificates, including all principal and interest the Trust Administrator shall, upon the written direction of a City Representative, accompanied by all amounts then on hand in the Reserve Fund, deposit such funds in the Installment Payment Fund to be applied to the payment of the Installment Payments or Prepayments on behalf of the City, and such moneys shall be distributed to the Owners of the Certificates in accordance with Article II and Article IV of this Trust Agreement.

Section 6.06. Replenishment of Reserve Fund. The City shall maintain or cause to be maintained in the Reserve Fund an amount equal to the amounts required to be deposited therein pursuant to Section 3.11 of the Installment Sale Agreement, and thereafter the amount of the Reserve Requirement. If, on any date of computation, amounts on hand in the Reserve Fund are less than such required amounts because of a transfer therefrom made in accordance with Section 6.04 hereof, the City shall pay to the Trust Administrator, within one (1) year from the date of such deficiency if caused by a deficiency in Net Revenues, an amount necessary to bring the amounts on deposit in the Reserve Fund to the amount required to be maintained therein; provided, however, that the period of time permitted herein for the replenishment of the Reserve Fund by the City shall not affect any other provision of this Trust Agreement.

Section 6.07. Establishment and Application of Short-Lived Assets Reserve Fund. The Trust Administrator shall establish and maintain a separate “Short-Lived Assets Reserve Fund” as a special reserve fund for repair and/or replacement of short-lived assets of the Wastewater System, and shall keep such fund separate and apart from all other funds and moneys held by the Trust Administrator.

In accordance with Section 3.12 of the Installment Sale Agreement, the Trust Administrator shall deposit an initial amount of $14,825 into the Short-Lived Assets Reserve Fund on or before the Closing Date, and maintain for as long as any of the Certificates remain outstanding to pay for repairs and/or replacement of major system assets.

The City may withdraw amounts on deposit in the Short-Lived Assets Reserve Fund from time to time to pay for timely replacement of “short-lived assets” of the Wastewater System, which for purposes of this Section shall mean any component or assets of the Wastewater System, including without limitation pumps, paint and small equipment, that will need to be repaired or replaced over a one to fifteen-year period, the cost of which is not included within the definition of Operation and Maintenance Costs.

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Notwithstanding the foregoing, before each June 30 the City shall evaluate the status and condition of short-lived assets of the Wastewater System and, if such evaluation suggests that a lesser or greater deposit is required in order to provide for the timely replacement of any short-lived assets, the City may upon consultation by the City with the Government decrease the amount of the annual deposit into the Short-Lived Assets Reserve Fund if a lesser amount is indicated, but shall increase the amount of the annual deposit in to the Short-Lived Assets Reserve Fund if a greater amount is indicated.

Upon the redemption in full of all outstanding Certificates, the City shall close the Short-Lived Assets Reserve Fund and the balance therein shall be released to the City and used for any legally permissible purpose of the Wastewater System.

ARTICLE VII
INSURANCE AND CONDEMNATION FUND; INSURANCE; EMINENT DOMAIN Section 7.01. Establishment of Insurance and Condemnation Fund; Application of Net Proceeds of Insurance Award. Any Net Proceeds of insurance against accident to or destruction of any structure constituting any part of the Project collected by the City in the event of any such accident or destruction shall be transferred by the City to the Trust Administrator pursuant to Section 5.07 of the Installment Sale Agreement and the Trust Administrator shall deposit such moneys in a special fund designated as the “Insurance and Condemnation Fund” to be applied and disbursed by the Trust Administrator as provided in Section 5.07(a) of the Installment Sale Agreement.

Section 7.02. Application of Net Proceeds of Eminent Domain Award. If all or any part of the Project shall be taken by eminent domain (or sold to a government threatening to exercise the power of eminent domain) the Net Proceeds therefrom shall be transferred by the City to the Trust Administrator for deposit in the Insurance and Condemnation Fund pursuant to Section 5.07(b) of the Installment Sale Agreement and shall be applied and disbursed by the Trust Administrator as follows:
(a) If the City determines that such eminent domain proceedings have not materially affected the operation of the Project, or the ability of the City to meet any of its obligations under the Installment Sale Agreement, and if the City determines that such proceeds are: (i) not needed for repair, replacement or rehabilitation of the Project, upon receipt of a Written Certificate from the City the Trust Administrator shall transfer such proceeds to the Installment Payment Fund to be credited towards the prepayments required to be paid pursuant to Section 4.03 of the Installment Sale Agreement and applied to the prepayment of Certificates in the manner provided in Article IV hereof, or (ii) needed for repair or rehabilitation of the Project, upon receipt of a Written Certificate from the City the Trust Administrator shall pay to the City, or to its order, from said proceeds such amounts as the City may expend for such repair or rehabilitation, upon the filing of requisitions of the City Representative, substantially in the form described in Section 3.02 in connection with the payment of Construction Costs.
(b) If (i) less than all of the Project shall have been taken in such eminent domain proceedings, and if the City determines that such eminent domain proceedings have materially affected the operation of the Project or the ability of the City to meet any of its obligations under the Installment Sale Agreement or (ii) all of the Project shall have been taken in such eminent domain DRAFT 80

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proceedings, then upon receipt of written instruction from the City the Trust Administrator shall transfer such proceeds to the Installment Payment Fund to be credited toward the prepayment required to be paid pursuant to Section 4.03 of the Installment Sale Agreement and applied to the prepayment of Certificates in the manner provided in Article IV hereof.

Section 7.03. Excess Net Proceeds. After all of the Certificates have been retired and the entire amount of principal and interest with respect to the Certificates and any remaining fees and expenses of the Trust Administrator have been paid in full, the Trust Administrator shall transfer any remaining funds to the City.

Section 7.04. Cooperation. The Corporation shall cooperate with the City at the expense of the City in filing any proof of loss with respect to any insurance policy maintained pursuant to Article V of the Installment Sale Agreement and in the prosecution or defense of any prospective or pending condemnation proceeding with respect to the Project or any part thereof.

ARTICLE VIII
MONEYS IN FUNDS; INVESTMENT
Section 8.01. Held in Trust. The moneys and investments held by the Trust Administrator under this Trust Agreement, except for those held in the Construction Fund, are irrevocably held in trust for the benefit of the Owner(s) of the Certificates, and for the purposes herein specified, and such moneys, and any income or interest earned thereon, shall be expended only as provided in this Trust Agreement, and shall not be subject to levy or attachment or lien by or for the benefit of any creditor of either the Corporation, the Trust Administrator or the City or any Owner of a Certificate, or any of them until after the Certificates have been paid in full.

Section 8.02. Investments Authorized. Moneys held by the Trust Administrator hereunder shall be invested and reinvested by the Trust Administrator, to the maximum extent practicable, in Permitted Investments. Unless otherwise directed, the Trust Administrator shall invest the affected moneys in Permitted Investments described in paragraph (vii) of the definition thereof. A City Representative may, by written order filed with the Trust Administrator, direct investment of moneys held by the Trust Administrator in specific Permitted Investments. Investments purchased with moneys on deposit in the Reserve Fund shall have a term not greater than five years. Investments, if registrable, shall be registered in the name of and held by the Trust Administrator or the Trust Administrator’s nominee. Such investments and reinvestments shall be made giving full consideration to the time at which funds are required to be available. The Trust Administrator may act as principal or agent in the making or disposing of any investment. The Trust Administrator shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with this Article VIII. The Trust Administrator shall be entitled to rely conclusively upon the written instructions of a City Representative directing investments as to the fact that each investment is permitted by the laws of the State and constitutes a Permitted Investment hereunder, and the Trust Administrator shall not be required to make further investigation with respect thereto. To the extent that any of the requirements concerning any Permitted Investment embodies a legal conclusion, the Trust Administrator shall be entitled to conclusively rely upon a Written Certificate or certificate from the appropriate party or an opinion of counsel to such party that such requirement has been met.

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Section 8.03. Allocation of Earnings. All interest or income received by the Trust Administrator on investment of the Construction Fund and Installment Payment Fund shall, as received, be retained in the applicable fund. Amounts retained in the Installment Payment Fund pursuant to this Section 8.03 shall be applied as a credit against the Installment Payment due by the City pursuant to the Installment Sale Agreement on the Installment Payment Date following the date of deposit. All interest or income received by the Trust Administrator on investment of the Reserve Fund shall be retained in the Reserve Fund in the event that amounts on deposit in the Reserve Fund are less than the Reserve Requirement. Pursuant to Section 6.03 hereof, in the event that amounts then on deposit in the Reserve Fund equal or exceed the Reserve Requirement, such excess shall be transferred to the Installment Payment Fund and shall be applied as a credit against the Installment Payment due by the City pursuant to the Installment Sale Agreement on the Installment Payment Date following the date of deposit. Transfers to the Installment Payment Fund from the Reserve Fund shall be made by the Trust Administrator on or prior to each Installment Payment Date.

Section 8.04. Accounting. The Trust Administrator shall furnish to the City a semi-annual accounting of all investments, transactions and disbursements made by the Trust Administrator.

Section 8.05. Acquisition, Disposition and Valuation of Investments. (a) Except as otherwise provided in subsection (b) of this Section 8.05, the City covenants that all investments of amounts deposited in any fund or account created by or pursuant to this Trust Agreement, or otherwise containing gross proceeds of the Certificates (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 Trust Agreement or the Tax Code) at Fair Market Value. (b) Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code and (unless valuation is undertaken at least annually) investments in the Reserve Fund shall be valued at their present value (within the meaning of section 148 of the Tax Code).

ARTICLE IX

THE TRUST ADMINISTRATOR
Section 9.01. Appointment of Trust Administrator. The Trust Administrator is hereby appointed by the Corporation and the City for the purpose of receiving all moneys required to be deposited with the Trust Administrator hereunder and to allocate, use and apply the same as provided in this Trust Agreement. (a) General. The Trust Administrator is hereby authorized to pay or redeem the Certificates when duly presented for payment at maturity, or on prepayment, and to cancel all Certificates upon payment thereof. The Trust Administrator shall keep accurate records of all funds administered by it and of all Certificates paid and discharged. The Trust Administrator shall be compensated for its services rendered pursuant to the provisions of this Trust Agreement and shall be reimbursed for costs and expenses, including attorney’s fees, incurred in connection therewith, subject to the provisions of any written agreement between the Trust Administrator and the City. (b) Successor. So long as no Event of Default shall have occurred and be continuing, the City may, with the written consent of the Owners, remove the Trust Administrator initially DRAFT 82

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appointed, and any successor thereto, on thirty (30) days written notice and may appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company which shall be a corporation organized and doing business under the laws of any state, the City or the United States of America, authorized under such laws to exercise corporate trust powers, which shall have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority, so long as any Certificates are Outstanding. If such corporation 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 9.01 the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any removal of the Trust Administrator shall not be effective until written acceptance of appointment by the successor Trust Administrator.
(c) Resignation. The Trust Administrator may at any time resign by giving written notice to Corporation and the City and by providing notice by first class mail, postage prepaid, to the Owners at their addresses as shown on the Certificate Register maintained by the Trust Administrator.

Said mailing shall be made prior to the proposed effective date of resignation. Upon receiving such notice of resignation, the City, with the written consent of the Owners, shall promptly appoint a successor Trust Administrator by an instrument in writing; provided, however, that in the event that the City does not appoint a successor Trust Administrator within thirty (30) days following receipt of such notice of resignation, the Corporation may appoint a successor Trust Administrator and in the event that Corporation does not appoint such successor Trust Administrator, the resigning Trust Administrator, at the expense of the City, may petition any appropriate court having jurisdiction to appoint a successor Trust Administrator. Any resignation or removal of the Trust Administrator and appointment of a successor Trust Administrator shall become effective upon acceptance of appointment by the successor Trust Administrator and receipt by the Trust Administrator of any fees and expenses due and payable to it.

Section 9.02. Liability of Trust Administrator. The recitals of facts, covenants and agreements herein and in the Certificates contained shall be taken as statements, covenants and agreements of Corporation and the City, and the Trust Administrator neither assumes any responsibility for the correctness of the same, nor makes any representations as to the validity or sufficiency of this Trust Agreement or of the Certificates nor shall incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Certificates assigned to or imposed upon the Trust Administrator.

Section 9.03. Merger or Consolidation. Any company into which the Trust Administrator may be merged or converted or with which any of them may be consolidated or any company resulting from any merger, conversion or consolidation to which any of them shall be a party or any company to which the Trust Administrator may sell or transfer all or substantially all of its corporate trust business, provided that such company shall be eligible under Section 9.01, shall be the successor to the Trust Administrator without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding.

Section 9.04. Protection and Rights of the Trust Administrator. The following provisions shall apply to the Trust Administrator in the event the Trust Administrator is not then an officer or employee of the City and shall also apply to the Trust Administrator in the event the Trust Administrator is then an officer or DRAFT 83

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employee of the City, but only to the extent that such provisions do not conflict with such Trust Administrator’s duties as a City officer or employee.
(a) Good Faith. The Trust Administrator shall be protected and shall incur no liability in acting or proceeding in good faith upon any resolution, notice, telegram, request, consent, waiver, certificates, statement, affidavit, voucher, bond, requisition or other paper or document which it shall in good faith believe to be genuine and to have been passed or signed by the proper board or person or to have been prepared and furnished pursuant to any of the provisions of this Trust Agreement, and the Trust Administrator shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. (b) Ownership Claims. The Trust Administrator shall not be bound to recognize any person as an Owner of any Certificate or to take any action at such Owner’s request unless such Certificate shall be deposited with the Trust Administrator or satisfactory evidence of the ownership of such Certificate shall be furnished to the Trust Administrator. (c) Counsel. The Trust Administrator may consult with counsel, who may be counsel to the City, with regard to legal questions and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith in accordance therewith.
(d) Proof. Whenever in the administration of its duties under this Trust Agreement, the Trust Administrator shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) shall be deemed to be conclusively proved and established by the Written Certificate of the City Representative or Corporation Representative and such Written Certificate shall be full warranty to the Trust Administrator for any action taken or suffered under the provisions of this Trust Agreement upon the faith thereof, but in its discretion the Trust Administrator may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.
(e) Owner. The Trust Administrator may become the Owner of Certificates with the same rights it would have if it were not Trust Administrator; 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 Trust Administrator; and may act as a depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Owners of Certificates, whether or not such committee shall represent the Owners of the majority in principal amount of the Certificate then Outstanding.
(f) Powers and Liability. The Trust Administrator may execute any of the powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or receivers, and shall be entitled to advice of counsel concerning all matters of its duty hereunder, and the Trust Administrator shall not be liable for the default or misconduct of any such attorney, agent, or receiver selected by it with reasonable care. The Trust Administrator shall not be liable for the exercise of any DRAFT 84

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discretion or power under this Trust Agreement or for anything whatever in connection with the funds and accounts established hereunder, except only for its own willful misconduct or negligence. (g) Limits of Liability. The Trust Administrator undertakes to perform such duties, and only such duties as are specifically set forth in this Trust Agreement and no implied duties or obligations shall be read into this Trust Agreement against the Trust Administrator. No provision in this Trust Agreement shall require the Trust Administrator to risk or expend its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not assured to it. In accepting the duties hereby enumerated, the Trust Administrator acts solely as Trust Administrator for the Owners and not in its individual capacity and all persons, including without limitation the Owners and the City or Corporation having any claim against the Trust Administrator arising from this Trust Agreement shall look only to the funds and accounts held by the Trust Administrator hereunder for payment except as otherwise provided herein. Under no circumstances shall the Trust Administrator be liable in its individual capacity for the obligations evidenced by the Certificates. The Trust Administrator shall not be liable in its individual capacity with respect to any action taken or omitted to be taken by the Trust Administrator in good faith in accordance with the written request of the Owners of the Certificates. (h) No Representations. The Trust Administrator makes no representation or warranty, express or implied as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose or fitness for the use contemplated by the City of the Project. In no event shall the Trust Administrator be liable for incidental, indirect, special or consequential damages in connection with or arising from the Installment Sale Agreement or Trust Agreement for the existence, furnishing or use of the Project. (i) Enforcement; Knowledge. The Trust Administrator shall not be responsible for the sufficiency or enforceability of the Installment Sale Agreement or the assignment under the Assignment Agreement of its rights to receive Installment Payments. The Trust Administrator shall not be deemed to have knowledge of any Event of Default hereunder or under the Installment Sale Agreement except failure by the City to make Installment Payments unless the Trust Administrator shall be specifically notified in writing of such Event of Default. (j) Released and Unclaimed Funds. The Trust Administrator shall not be accountable for the use or application by the City or any other party of any funds which the Trust Administrator has released under this Trust Agreement. Subject to applicable escheat laws, any amounts unclaimed two (2) years after the final prepayment or maturity date of the Certificate, whichever occurs first, shall be paid by the Trust Administrator to the City, and thereafter, the Owner of any Certificate remaining unpaid shall look to the City for the payment of such Certificate.

Section 9.05. Appointment of Trust Administrator. In the event that an Event of Default shall occur or if it shall otherwise be necessary for the Trust Administrator to enforce payment of the Installment Payments, Prepayments or any other amount required to be deposited into the Installment Payment Fund or the Insurance and Condemnation Fund, or to exercise any of the remedies set forth in Article XIII hereof, or if it is determined that the Trust Administrator is unable to perform any of the other duties hereunder, the City, with the written consent of the Government as the Owner, shall appoint a bank or trust company as Trust DRAFT 85

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Administrator hereunder (the “Trust Administrator”) to succeed to the duties and responsibilities of the Trust Administrator hereunder, such appointment to be effective immediately upon written notice thereof to the Trust Administrator. Any Trust Administrator appointed in such circumstances shall meet the requirements of Section 9.01(b) hereof. Upon such appointment, the term “Trust Administrator” in this Agreement shall also refer to such Trust Administrator.

ARTICLE X

MODIFICATION OR AMENDMENT OF AGREEMENTS
Section 10.01. Amendments Permitted.
(a) With Consent. This Trust Agreement and the rights and obligations of the Owners of the Certificates and the Installment Sale Agreement and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplemental agreement which shall become effective when the written consent of the Owners of at least sixty percent (60%) in aggregate principal amount of the Certificates then Outstanding, exclusive of Certificates disqualified as provided in Section 10.03, shall have been filed with the Trust Administrator. No such modification or amendment shall (1) extend or have the effect of extending the fixed maturity of any Certificate or reducing the interest rate with respect thereto or extending the time of payment of interest, or reducing the amount of principal thereof or reducing any premium payable upon the prepayment thereof, without the express consent of the Owner of such Certificate, or (2) reduce or have the effect of reducing the percentage of Certificates required for the affirmative vote or written consent to an amendment or modification of the Installment Sale Agreement, or (3) modify any of the rights or obligations of the Trust Administrator without its written assent thereto. Any such supplemental agreement shall become effective as provided in Section 10.02. (b) Without Consent. This Trust Agreement and the rights and obligations of the Owners of the Certificates and the Installment Sale Agreement and the rights and obligations of the parties thereto, may be modified or amended at any time by a supplemental agreement, without the consent of any such Owners, but only to the extent permitted by law and only (1) to cure, correct or supplement any ambiguous or defective provision contained herein or therein, or (2) in regard to questions arising hereunder or thereunder, as the parties hereto or thereto may deem necessary or desirable and which shall not, in the opinion of nationally recognized bond counsel, materially adversely affect the interest of the Owners of the Certificates, or (3) if and to the extent specified in an opinion of nationally recognized bond counsel filed with the City, the Corporation and the Trust Administrator, to make such additions, deletions or modifications as may be necessary to assure compliance with section 148(f) of the Tax Code or otherwise as may be necessary to assure exclusion from gross income for purposes of federal income taxation of the interest component of Installment Payments. Any such supplemental agreement shall become effective upon its execution and delivery by the parties hereto or thereto as the case may be.
(c) Counsel. The Trust Administrator may obtain an opinion of Independent Counsel that any amendment entered into hereunder complies with the provisions of this Article X and the Trust Administrator may rely conclusively on such opinion.

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Section 10.02. Procedure for Amendment with Written Consent of Certificate Owners. (a) General. This Trust Agreement or the Installment Sale Agreement may be amended by supplemental agreement as provided in this Section 10.02 in the event the consent of the Owners of the Certificates is required pursuant to Section 10.01. A copy of such supplemental agreement, together with a request to the Certificate Owners for their consent thereto, shall be mailed by the Trust Administrator to the Owner of each Certificate at his address as set forth in the Certificate Register, but failure to mail copies of such supplemental agreement and request shall not affect the validity of the supplemental agreement when assented to as provided in this Section 10.02. (b) Effective. Such supplemental agreement shall not become effective unless there shall be filed with the Trust Administrator the written consent of the Owners of at least sixty percent (60%) in aggregate principal amount of the Certificates then Outstanding (exclusive of Certificates disqualified as provided in Section 10.03) and a notice shall have been mailed as hereinafter provided in this Section 10.02. Each such consent shall be effective only if accompanied by proof of ownership of the Certificate for which such consent is given, which proof shall be such as is permitted by Section

2.11. Any such consent shall be binding upon the Owner of the Certificate giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Trust Administrator within five (5) Business Days of the date when the notice of consent hereinafter in this Section 10.02 provided for has been mailed. Any revocation received by the Trust Administrator later than five (5) Business Days after such notice has been mailed shall be of no force and effect.
(c) Notice. After the Owners of the required percentage of Certificates shall have filed their consents to such supplemental agreement, the Trust Administrator shall mail a notice to the Owners of the Certificates in the manner hereinbefore provided in this Section 10.02 for the mailing of such supplemental agreement at the notice of adoption thereof, stating in substance that such supplemental agreement has been consented to by the Owners of the required percentage of Certificates and will be effective as provided in this Section 10.02 (but failure to mail copies of said notice shall not affect the validity of such supplemental agreement or consents thereto). A record, consisting of the papers required by this Section 10.02 to be filed with the Trust Administrator, shall be conclusive proof of the matters therein stated until the contrary is proved. Such supplemental agreement shall be deemed conclusively binding upon the parties hereto and the Owners of all Certificates at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty (60) day period.

Section 10.03. Disqualified Certificates. Certificates owned or held by or for the account of the City or by any person directly or indirectly controlled or controlled by, or under direct or indirect common control with the City (except any Certificate held in any pension or retirement fund) shall not be deemed Outstanding for the purpose of any vote, consent, waiver or other action or any calculation of Outstanding Certificates provided for in this Trust Agreement, and shall not be entitled to vote upon, consent to, or take any other action provided for in this Trust Agreement.

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Section 10.04. Effect of Supplemental Agreement. From and after the time any supplemental agreement becomes effective pursuant to this Article X, this Trust Agreement or the Installment Sale Agreement, as the case may be, shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations of the parties hereto or thereto and all Owners of Certificates Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any supplemental agreement shall be deemed to be part of the terms and conditions of this Trust Agreement or the Installment Sale Agreement, as the case may be, for any and all purposes.

The City may adopt appropriate regulations to require each Certificate Owner, before such Owner’s consent provided for in this Article X shall be deemed effective, to reveal whether the Certificate as to which such consent is given is disqualified as provided in Section 10.03.

Section 10.05. Endorsement or Replacement of Certificates Delivered After Amendments. The City may determine that Certificates delivered after the effective date of any action taken as provided in this Article X shall bear a notation, by endorsement or otherwise, in form approved by the Trust Administrator, as to such action. In that case, upon demand of the Owner of any Certificate Outstanding at such effective date and presentation of his or her Certificate for the purpose at the Trust Office, a suitable notation shall be made on such Certificate. The City may determine that new Certificate, so modified as in the opinion of the City is necessary to conform to such Certificate Owners’ action, shall be prepared, executed and delivered.

In that case, upon demand of the Owner of any Certificate then Outstanding, such new Certificate shall be exchanged at the Trust Office, without cost to such Owner, for a Certificate of the same character then Outstanding, upon surrender of such Certificate.

Section 10.06. Amendatory Endorsement of Certificate. The provisions of this Article X shall not prevent any Certificate Owner from accepting any amendment as to the particular Certificate held by him, provided that due notification thereof is made on such Certificate.

ARTICLE XI

COVENANTS
Section 11.01. Compliance With and Enforcement of Installment Sale Agreement. The City and the Corporation covenant and agree with the Owners of the Certificates to perform all obligations and duties imposed on them under the Installment Sale Agreement and this Trust Agreement. The City or the Corporation, immediately upon receiving or giving any notice or communication or other document in any way relating to or affecting their respective interests in the Project which may or can in any manner affect such interest, will deliver the same, or a copy thereof, to the Trust Administrator. The City and the Corporation will not do or permit anything to be done, or omit or refrain from doing anything, in any case where any such act done or permitted to be done, or any such omission of or refraining from action, would or might be a ground for cancellation or termination of the Installment Sale Agreement.

Section 11.02. Payment of Taxes. The City will, subject to any right of challenge thereof, pay or cause to be paid all taxes, assessments and other governmental charges, if any, that may be levied, assessed or charged upon the Project or any part thereof, promptly as and when the same shall become due and payable; and the City will keep the Trust Administrator advised in writing of such payments. The City will not suffer DRAFT 88

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the Project, or any part thereof, to be sold for any taxes, assessments or other charges whatsoever, or to be forfeited therefor.

Section 11.03. Observance of Laws and Regulations. The City will well and truly keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on it with respect to the Wastewater System by contract, or prescribed by any law of the United States, or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of any and every right, privilege or franchise now owned or hereafter acquired by the City with respect to the Wastewater System to the end that such rights, privileges and franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any manner impaired.

Section 11.04. Prosecution and Defense of Suits. The City shall promptly, upon request of the Trust Administrator or any Certificate Owner holding at least 25% in principal amount of the Certificates from time to time, take such action as may be necessary or proper to remedy or cure any defect in or cloud upon the title to the Project, whether now existing or hereafter developing and shall, to the extent permitted by law, prosecute all such suits, actions and other proceedings as may be appropriate for such purpose and shall indemnify and save the Trust Administrator and every Certificate Owner harmless from all loss, cost, damage and expense, including attorneys’ fees, which they or any of them may incur by reason of any such defect, cloud, suit, action or proceeding.

Section 11.05. Further Assurances. The Corporation, the City and the Trust Administrator (at the cost and request of the City or the Corporation) will 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 Trust Agreement, and for the better assuring and confirming unto the Owners of the Certificates the rights and benefits provided herein.

Section 11.06. Filing. The City shall be responsible for the filing of any supplemental instruments or documents of further assurance as may be required by law in order to perfect or renew the security interests created by this Trust Agreement. Neither the Trust Administrator nor the Corporation shall be responsible for such filing.

Section 11.07. Private Activity Bond Limitation. The City and the Corporation shall assure that proceeds of the Certificates are not so used as to cause the Certificates or the Installment Sale Agreement 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.

Section 11.08. Federal Guarantee Prohibition. The City and the Corporation shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the Certificates or the Installment Sale Agreement to be “federally guaranteed” within the meaning of section 149(b) of the Tax Code.

Section 11.09. Rebate Requirement. The City and the Corporation shall 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 Certificates and the Installment Sale Agreement.

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Section 11.10. No Arbitrage. The City and the Corporation shall not take, or permit or suffer to be taken by the Trust Administrator or otherwise, any action with respect to the proceeds of the Certificates which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Certificates or the Installment Sale Agreement to be “arbitrage bonds” within the meaning of section 148 of the Tax Code.

Section 11.11. Maintenance of Tax-Exemption. The City and the Corporation shall take all actions necessary to assure the exclusion of interest with respect to the Certificates from the gross income of the Owners of the Certificates to the same extent as such interest is permitted to be excluded from gross income under the Tax Code as in effect on the Closing Date.

Section 11.12. Small Issuer Exemption from Bank Nondeductibility Restriction. The City and Corporation hereby designate the Installment Sale Agreement and Certificates for purposes of paragraph (3) of section 265(b) of the Tax Code and represents that not more than $10,000,000 aggregate principal amount of obligations the interest on which is excludable (under section 103(a) of the Code) from gross income for federal income tax purposes (excluding (i) private activity bonds, as defined in section 141 of the Code, except certain qualified 501(c)(3) bonds as defined in section 145 of the Code and (ii) current refunding obligations to the extent the amount of the refunding obligation does not exceed the outstanding amount of the refunded obligation), has been or will be issued by the City and Corporation, including all subordinate entities of the City, during the calendar year 2022.

ARTICLE XII

LIMITATION OF LIABILITY
Section 12.01. Limited Liability of City. Except for the payment of Installment Payments and Prepayments when due in accordance with the Installment Sale Agreement and the performance of the other covenants and agreements of the City contained in said Agreement, the City shall have no pecuniary obligation or liability to any of the other parties or to the Owners of the Certificates with respect to this Trust Agreement or the terms, execution, delivery or transfer of the Certificates, or the distribution of Installment Payments to the Owners by the Trust Administrator except as expressly set forth herein.

Section 12.02. No Liability of the Corporation for Trust Administrator Performance. In the event that a Trust Administrator shall be appointed pursuant to Section 9.05 to perform the duties of Trust Administrator hereunder, neither the City nor the Corporation shall have any obligation or liability to the other party or to the Owners of the Certificates with respect to the performance by such Trust Administrator of any duty imposed upon such Trust Administrator under this Trust Agreement.

Section 12.03. Indemnification of Trust Administrator. In the event that a Trust Administrator shall be appointed pursuant to Section 9.05 to perform the duties of Trust Administrator hereunder, the City shall to the extent permitted by law indemnify and save such Trust Administrator, its officers, employees, directors and agents harmless from and against all claims, losses, costs, expenses, liability and damages, including legal fees and expenses, arising out of:
(a) the use, maintenance, condition or management of, or from any work or thing done on, the Project by the Corporation or the City;
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(b) any breach or default on the part of the Corporation or the City in the performance of any of their respective obligations under the Installment Sale Agreement, this Trust Agreement and any other agreement made and entered into for purposes of the Project; (c) any act of the Corporation or the City or of any of their respective agents, contractors, servants, employees or licensees with respect to the Project; (d) any act of any assignee of, or purchaser from the Corporation or the City or of any of its or their respective agents, contractors, servants, employees or licensees with respect to the Project;
(e) the acquisition, construction, installation and equipping of the Project or the authorization of payment of Construction Costs or Delivery Costs; (f) the actions of any other party, including but not limited to (i) the ownership, operation or use of the Project by the Corporation or the City, (ii) the Trust Administrator’s exercise and performance of its powers and duties hereunder, or (iii) the offering and sale of the Certificates.

No indemnification will be made under this Section 12.03 or elsewhere in this Trust Agreement for willful misconduct or negligence under this Trust Agreement by such Trust Administrator, its officers or employees. The City’s obligations hereunder shall remain valid and binding notwithstanding maturity and payment of the Certificates or resignation or removal of such Trust Administrator.

Section 12.04. Limitation of Rights to Parties and Certificate Owners. Nothing in this Trust Agreement or in the Certificates expressed or implied is intended or shall be construed to give any person other than the City, the Corporation, the Trust Administrator and the Owners of the Certificates, any legal or equitable right, remedy or claim under or in respect of this Trust Agreement or any covenant, condition or provision hereof; and all such covenants, conditions and provisions are and shall be for the sole and exclusive benefit of the City, the Corporation, the Trust Administrator and said Owners.

ARTICLE XIII

EVENTS OF DEFAULT AND REMEDIES OF CERTIFICATE OWNERS
Section 13.01. Assignment of Rights. Pursuant to the Assignment Agreement, the Corporation transfers, assigns and sets over to the Trust Administrator all of the Corporation’s rights under the Installment Sale Agreement (excepting only the Corporation’s rights under Sections 6.03 and 7.04 thereof), including without limitation the Corporation’s rights to exercise such rights and remedies conferred on the Corporation pursuant to the Installment Sale Agreement as may be necessary or convenient (i) to enforce payment of the Installment Payments, Prepayments and any other amounts required to be deposited in the Installment Payment Fund or the Insurance and Condemnation Fund, and (ii) otherwise to exercise the Corporation’s rights and take any action to protect the interests of the Trust Administrator or the Certificate Owners in an Event of Default.

Section 13.02. Remedies. If an Event of Default shall happen, then and in each and every such case during the continuance of such Event of Default, the Trust Administrator may exercise any and all remedies available hereunder pursuant to law or granted pursuant to the Installment Sale Agreement.

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Upon the occurrence of an Event of Default, the Trust Administrator may, and shall, at the written direction of the Owners of a majority of the principal amount of Certificates then Outstanding, by written notice to the City, declare the principal of the Installment Payments to be immediately due and payable, whereupon that portion of the principal of the Installment Sale Agreement thereby coming due and the interest thereon accrued to the date of payment shall, without further action, become and be immediately due and payable, anything in this Trust Agreement or in the Installment Payments to the contrary notwithstanding.

Remedies shall be cumulative with respect to the Trust Administrator and the Owners. If any remedial action is discontinued or abandoned, the Trust Administrator and the Owners shall be restored to their former positions.

Section 13.03. Application of Funds. All moneys received by the Trust Administrator pursuant to any right given or action taken under the provisions of this Article XIII or of Article VII of the Installment Sale Agreement, shall be applied by the Trust Administrator in the order following upon presentation of the several Certificates and the stamping thereon of the payment if only partially paid or upon the surrender thereof if fully paid:
(a) First, to the payment of the costs and expenses of the Trust Administrator hereunder (including, but not limited to, the costs and expenses of itself and its counsel) and, after such payment to the Trust Administrator, of the Certificate Owners in declaring such Event of Default, including reasonable compensation to its or their agents, attorneys and counsel, together with interest on all such amounts advanced as provided in the Installment Sale Agreement;
(b) Second, to the payment of the whole amount then owing and unpaid with respect to the Certificates for principal and interest, with interest on the overdue principal and installments of interest at the rate or rates specified in the respective Certificates (but such interest on overdue installments of interest shall be paid only to the extent funds are available therefor following payment of principal and interest and interest on overdue principal, as aforesaid), and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid with respect to the Certificates, then to the payment of such principal and interest without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest.

Section 13.04. Institution of Legal Proceedings. If one or more Events of Default shall happen and be continuing, the Trust Administrator in its discretion may, and upon the written request of the Owners of a majority in principal amount of the Certificates then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Owners of Certificates by a suit in equity or action at law, for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or by mandamus or other appropriate proceeding for the enforcement of any other legal or equitable remedy as the Trust Administrator shall deem most effectual to enforce any of its rights or duties hereunder.

Section 13.05. Non-waiver. Nothing in this Article XIII or in any other provision of this Trust Agreement, or in the Certificates, shall affect or impair the obligation of the City, which is absolute and unconditional subject to Section 3.06 of the Installment Sale Agreement, to pay or prepay the Installment Payments as provided in the Installment Sale Agreement, or affect or impair the right of action, which is also absolute and unconditional, of the Certificate Owners to institute suit to enforce such payment. No delay or DRAFT 92

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omission of the Trust Administrator or of any Owner of any of the Certificates to exercise any right or power arising upon the happening of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein, and every power and remedy given by this Article XIII to the Trust Administrator or to the Owners of Certificates may be exercised from time to time and as often as shall be deemed expedient by the Trust Administrator or the Certificate Owners.

Section 13.06. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trust Administrator or to the Certificate Owners is intended to be exclusive of any other remedy, and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise.

Section 13.07. Power of Trust Administrator to Control Proceedings. In the event that the Trust Administrator, 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 Certificates then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Certificates, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trust Administrator shall not, unless there no longer continues an Event of Default hereunder, 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 at least a majority in principal amount of the Certificates Outstanding hereunder opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation.

Section 13.08. Limitation on Certificate Owners’ Right to Sue. No Owner of any Certificate shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Trust Agreement, unless (a) such Owner shall have previously given to the Trust Administrator written notice of the occurrence of an Event of Default hereunder; (b) the Owners of at least a majority in aggregate principal amount of all the Certificate then Outstanding shall have made written request upon the Trust Administrator 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 Trust Administrator reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trust Administrator 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 Trust Administrator.

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 Certificates of any remedy hereunder; it being understood and intended that no one or more Owners of Certificate shall have any right in any manner whatever by his or their action to enforce any right under this Trust Agreement, except in the manner herein provided, and that all proceedings at law or in equity with respect to an Event of Default shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Certificates.

The right of any Owner of any Certificate to receive payment of said Owner’s proportionate interest in the Installment Payments as the same become due, or to institute suit for the enforcement of such payment, shall not be impaired or affected without the consent of such Owner, notwithstanding the foregoing provisions of this Section 13.08 or any other provision of this Trust Agreement.

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Section 13.09. Parties Interested Herein. Nothing in this Trust Agreement expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the City, the Corporation, the Trust Administrator and the Owners any right, remedy or claim under or by reason of this Trust Agreement, or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Trust Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the City, the Corporation, the Trust Administrator and the Owners.

ARTICLE XIV

MISCELLANEOUS
Section 14.01. Discharge. The Outstanding Certificates may be paid and discharged in any one or more of the following ways:
(a) Payment. By paying or causing to be paid the principal with respect to and interest with respect to all Certificates Outstanding, as and when the same become due and payable; (b) Deposit. By depositing with the Trust Administrator, in trust, at or before maturity, money which, together with the amounts then on deposit in the Installment Payment Fund and the Reserve Fund, is fully sufficient to pay all Certificates Outstanding, including all principal and interest;
(c) Escrow. By irrevocably depositing with the Trust Administrator or an escrow agent, in trust, cash or Discharge Obligations in such amount as an independent nationally recognized certified public accountant shall determine in a written report delivered to the Trust Administrator or escrow agent will, together with the interest to accrue thereon and moneys then on deposit in the Installment Payment Fund and the Reserve Fund, if required, together with the interest to accrue thereon, be fully sufficient to pay and discharge all Certificates (including all principal and interest) at or before their respective maturity dates; or
(d) Security Deposit. By depositing with the Trust Administrator, under an escrow deposit and trust agreement, security for the payment of Installment Payments as more particularly described in Section 4.05 of the Installment Sale Agreement, said security to be held by the Trust Administrator, as agent for City, and to be applied by the Trust Administrator to Installment Payments representing the obligation of the City under the Installment Sale Agreement, as described in Section

4.05 of the Installment Sale Agreement;
(e) Effect. Notwithstanding that any Certificates shall not have been surrendered for payment, all rights hereunder of the Owners of the Certificates and all obligations of the Corporation, the Trust Administrator and the City under this Trust Agreement with respect to all Outstanding Certificates shall cease and terminate, except only the obligation of the Trust Administrator to pay or cause to be paid, from Installment Payments paid by or on behalf of the City from deposits pursuant to paragraphs (b) through (d) of this Section 14.01, to the Owners of the Certificates not so surrendered and paid all sums due with respect thereto, and in the event of deposits pursuant to paragraphs (b) through (d) of this Section 14.01, the Certificates shall continue to represent direct, DRAFT 94

TRUST AGREEMENT
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undivided and fractional interests of the Owners thereof in Installment Payments under the Installment Sale Agreement.
(f) Payment Date. All monies held or deposited pursuant to subsections (b) through (d), above, shall be used to pay and prepay Certificates on the earliest possible date. (g) Surplus Funds. Any funds held by the Trust Administrator, at the time of one of the events described above in subsections (a) through (d) above, which are not required for the payment to be made to Owners, or for payments to be made to the Trust Administrator by the City (including attorneys’ fees), shall be paid over to the City.

Notwithstanding any contrary provision contained herein, so long as the Government is the Owner of the Certificates, the Certificates may not be defeased.

Section 14.02. Records. The Trust Administrator shall keep complete and accurate records of all moneys received and disbursed under this Trust Agreement, which shall be available for inspection by the City, the Corporation, and the Owners of not less than 10% in aggregate principal amount of the Certificates Outstanding, or the agent of any of them, upon reasonable prior notice and during regular business hours.

Section 14.03. Notices. All written notices to be given under this Trust Agreement shall be given by mail first class, postage prepaid, to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other parties in writing from time to time. Any such notice shall be deemed to have been received 48 hours after deposit in the United States mail, with postage fully prepaid.

If to the City: City of Yreka
701 Fourth Street
Yreka, CA 96097
Attention: City Manager
If to the Corporation: Great Northern Services
310 Boles Street
Weed, CA 96094
Attention: Executive Director
If to the Trust Administrator: Finance Director
City of Yreka
701 Fourth Street
Yreka, CA 96097
Attention: Finance Director

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TRUST AGREEMENT
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If to the Government: Rural Development, United States
Department of Agriculture
215 Executive Court, Suite B
Yreka, CA 96097-2667
Attention: Area Specialist
And
Rural Development, United States
Department of Agriculture
430 G Street, Suite 4169
Davis, CA 95616
Attention: Community Programs Specialist
Section 14.04. Governing Law. This Trust Agreement shall be construed and governed in accordance with the laws of the State.

Section 14.05. Binding Effect; Successors. This Trust Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Whenever in this Trust Agreement the Corporation, the City or the Trust Administrator is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Trust Agreement contained by or on behalf of the Corporation, the City or the Trust Administrator shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.

Section 14.06. Execution in Counterparts. This Trust Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same agreement.

Section 14.07. Destruction of Canceled Certificates. Whenever in this Trust Agreement provision is made for the surrender to or cancellation by the Trust Administrator and the delivery to the City of any Certificate, the Trust Administrator may, in lieu of such cancellation and delivery, destroy such Certificate and deliver a certificate of such destruction to the City.

Section 14.08. Headings. The headings or titles of the several Articles and Sections hereof, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not affect the meaning, construction or effect of this Trust Agreement. All references herein to “Articles,” “Sections,” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Trust Agreement; and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or subdivision hereof.

Section 14.09. Limitation of Rights to Parties and Certificate Owners. Nothing in this Trust Agreement or in the Certificates expressed or implied is intended or shall be construed to give to any person other than the Corporation, the City, the Trust Administrator and the Owners of the Certificates, any legal or equitable right, remedy or claim under or in respect of this Trust Agreement or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Corporation, the City, the Trust Administrator and the Owners of the Certificates delivered hereunder.

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Section 14.10. Waiver of Notice. Whenever in this Trust Agreement the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

Section 14.11. Payments Due on Other than Business Day. If the date for making any payment as provided in this Trust Agreement is not a Business Day, such payment must be made on the previous Business Day.

Section 14.12. Payment of Unclaimed Moneys. Notwithstanding any provisions of this Trust Agreement, any moneys held by the Trust Administrator in trust for the payment of the principal or interest due with respect to any Certificate and remaining unclaimed two years from the date of payment or prepayment of such Certificate, or if the law shall have been changed and the City has notified the Trust Administrator of such change or the Trust Administrator notifies the City, then on the date thirty (30) days prior to the then applicable escheat provision of State law, shall, on such date, be repaid to the City free from the trusts created by this Trust Agreement, and all liability of the Trust Administrator with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the City as aforesaid, the Trust Administrator may (at the cost and request of the City) first mail to the Owners to whom such amounts have not yet been paid, at the addresses shown on the Certificate Register, a notice, in such form as may be deemed appropriate by the Trust Administrator with respect to the amounts so payable and with respect to the provisions relating to the repayment to the City of the moneys held for the payment thereof.

The Trust Administrator shall not be liable for any interest on funds held by it. The City shall not be liable for any interest on the sums paid to it pursuant to this Section 14.12 and shall not be regarded as a Trust Administrator of such money.

Section 14.13. Separability of Invalid Provisions. In case any one or more of the provisions contained in this Trust Agreement or in the Certificates shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such invalidity, illegality or unenforceability shall not affect any other provision of this Trust Agreement, and this Trust Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The parties hereto hereby declare that they would have entered into this Trust Agreement and each and every other section, paragraph, sentence, clause or phrase hereof and authorized the delivery of the Certificates pursuant hereto irrespective of the fact that any one or more sections, paragraphs, sentences, clauses or phrases of this Trust Agreement may be held illegal, invalid or unenforceable.
[Signature Page to Follow on Next Page]
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IN WITNESS WHEREOF, the parties have executed this Trust Agreement as of the date and year first above written.

CITY OF YREKA
By
Jason Ledbetter, City Manager

FINANCE DIRECTOR OF THE

CITY OF YREKA,
as Trust Administrator
By
Emily Aldrich, Finance Director

GREAT NORTHERN SERVICES
By: ____________________________
Authorized Signatory

DRAFT

98 TRUST AGREEMENT
Exhibit A

EXHIBIT A

FORM OF CERTIFICATE
No. R-1 ***$__________***

UNITED STATES OF AMERICA

STATE OF CALIFORNIA

CITY OF YREKA
SERIES 2022 WASTEWATER REVENUE CERTIFICATE OF PARTICIPATION (WASTEWATER SYSTEM IMPROVEMENT PROJECT)

BANK QUALIFIED

INTEREST PAYMENT DATES RATE OF INTEREST DATED DATE
January 1 and July 1
as described below 1.750% December 15, 2022
REGISTERED OWNER:

PRINCIPAL AMOUNT:

UNITED STATES OF AMERICA, ACTING THROUGH THE RURAL

UTILITIES SERVICE
_FIVE MILLION SEVEN HUNDRED THOUSAND DOLLARS
THIS IS TO CERTIFY THAT the Registered Owner identified above, or registered assigns, as the registered owner (the “Registered Owner”) of this Series 2022 Wastewater Revenue Certificate of Participation (the “Certificate”) is the owner of a direct, undivided fractional interest in installment payments (the “Installment Payments”) payable under that certain Installment Sale Agreement, dated as of December 1, 2022 (the “Installment Sale Agreement”), by and between the GREAT NORTHERN SERVICES, a California not-for-profit corporation organized and existing under the laws of the State of California (the “Corporation”), and the CITY OF YREKA (the “City”), a municipal corporation and general law city duly organized and existing under and by virtue of the constitution and laws of the State of California. The Installment Payments and certain other rights and interests under the Installment Sale Agreement have been assigned to the Finance Director of the City, as trust administrator (the “Trust Administrator”), having an office in the location described in the Trust Agreement referred to below.

The Registered Owner of this Certificate is entitled to receive, subject to the terms of the Installment Sale Agreement, on the Maturity Dates identified below, or any earlier prepayment date, the Principal Amounts identified below representing a direct, undivided fractional share of the portion of the Installment Payments designated as principal as follows:

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TRUST AGREEMENT
Exhibit A

Maturity
Date
Principal
Due
Maturity
Date
Principal
Due
07/01/2023 07/01/2043
07/01/2024 07/01/2044
07/01/2025 07/01/2045
07/01/2026 07/01/2046
07/01/2027 07/01/2047
07/01/2028 07/01/2048
07/01/2029 07/01/2049
07/01/2030 07/01/2050
07/01/2031 07/01/2051
07/01/2032 07/01/2052
07/01/2033 07/01/2053
07/01/2034 07/01/2054
07/01/2035 07/01/2055
07/01/2036 07/01/2056
07/01/2037 07/01/2057
07/01/2038 07/01/2058
07/01/2039 07/01/2059
07/01/2040 07/01/2060
07/01/2041 07/01/2061
07/01/2042 07/01/2062
and to receive on July 1, 2023, and semiannually thereafter on January 1 and July 1 of each year (each an “Interest Payment Date”) until payment in full of said principal the Registered Owner’s direct, undivided fractional share of the Installment Payments designated as interest coming due during the interest period immediately preceding each of the Interest Payment Dates. Interest represented hereby shall be payable at the above stated Rate of Interest from the Dated Date identified above.

Principal represented hereby is payable in lawful money of the United States of America upon surrender hereof at the Office of the Trust Administrator, and interest represented hereby is payable by check or draft mailed by first class mail by the Trust Administrator on each Interest Payment Date to the Registered Owner at such Owner’s address as it appears on the Certificates register of the Trust Administrator as of the preceding Record Date; provided, however, that so long as the United States of America remains the Registered Owner of the Certificates, payment of principal shall be made on each Principal Payment Date and payment of interest shall be made on each Payment Date to the Registered Owner, unless otherwise requested by the Registered Owner, by the Pre-Authorized Debit (PAD) payment process (i.e., the City’s payments shall be electronically debited from the Installment Payment Fund on each Interest Payment Date in accordance with the PAD process established by Form SF-5510 and Form RD 3550-28, both entitled “Authorization Agreement for Pre-Authorized Payments”).

This Certificate has been executed and delivered by the Trust Administrator pursuant to the terms of a Trust Agreement by and among the Trust Administrator, the Corporation and the City, dated as of December 1, 2022 (the “Trust Agreement”). The City has certified that it is authorized to enter into the Installment Sale Agreement and this Trust Agreement under the laws of the State of California, for the purpose of paying the costs of certain public capital improvements.

DRAFT 100

TRUST AGREEMENT
Exhibit A

Reference is hereby made to the Installment Sale Agreement, Trust Agreement and the Assignment Agreement (copies of which are on file at the Office of the Trust Administrator) for a description of the terms on which the Certificates are delivered, the rights thereunder of the owners of the Certificates, the rights, duties and immunities of the Trust Administrator and the rights and obligations of the City under the Installment Sale Agreement, to all of the provisions of the Assignment Agreement, Installment Sale Agreement and the Trust Agreement the Registered Owner of this Certificate, by acceptance hereof, assents and agrees.

This single, fully registered Certificate is issued by the Corporation and represents the $__________ Series 2022 Wastewater Revenue Certificate of Participation (Wastewater System Improvement Project), Bank Qualified, all of like, date, tenor and effect, but differing in amounts and maturities, authorized to be executed and delivered pursuant to the Trust Agreement.

This Certificate is transferable only to a Qualified Institutional Buyer (as such term is defined by Rule 144A of the Securities Act of 1933) or other persons with the consent of the City and the Corporation, by the Registered Owner thereof in person or by his attorney duly authorized in writing, at the Trust Office, but only in the manner, subject to the limitations and upon payment of the charges provided in the Trust Agreement, and upon surrender of this Certificate for cancellation accompanied by delivery of a duly executed written instrument of transfer in the form appearing hereon. Upon such transfer, a new Certificate or Certificates of the same Maturity Date representing the same principal amount will be issued to the transferee in exchange hereof.

Notwithstanding anything herein or elsewhere to the contrary, there shall be not any transfers or exchanges while Government is owner, unless requested by the Government.

The City is obligated under the Installment Sale Agreement to pay the Installment Payments from Net Revenues (as such term is defined in the Installment Sale Agreement) on parity with all Parity Debt (as such term is defined in the Trust Agreement) issued or incurred within the meaning of the Installment Sale Agreement.

The obligation of the City to pay the Installment Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The obligation of the City to pay Installment Payments does not constitute a debt of the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction.

The Certificate is subject to optional prepayment in whole, or in part among maturities in any manner as directed by the City in inverse order of maturity, unless otherwise requested by City and agreed to by Original Purchaser in its reasonable discretion, on any Business Day, from prepayments of the Installment Payments made at the option of the City pursuant to the Installment Sale Agreement, at a prepayment price equal to the aggregate principal components of the Installment Payments to be prepaid, together with accrued interest represented thereby to the date fixed for prepayment, without premium.

The Certificate is subject to mandatory prepayment on any date, in whole, or in part, from unexpended proceeds of the Construction Fund established under this Trust Agreement and from the net DRAFT 101

TRUST AGREEMENT
Exhibit A

proceeds of insurance or eminent domain proceedings, in either case deposited with the Trust Administrator, which are credited towards the prepayment of the Installment Payments pursuant to the Installment Sale Agreement, at a prepayment price equal to one hundred percent (100%) of the principal amount to be prepaid, together with accrued interest represented thereby to the date fixed for prepayment, without premium.

As provided in this Trust Agreement, notice of prepayment shall be mailed by the Trust Administrator by first class mail, postage prepaid, not less than thirty (30) nor more than sixty (60) days before the prepayment date, to the Registered Owner of the Certificate, but neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for prepayment or the cessation of accrual of interest represented thereby. If this Certificate is called for prepayment and payment is duly provided hereof as specified in this Trust Agreement, interest represented hereby shall cease to accrue from and after the date fixed for prepayment.

The City has designated its obligations under the Installment Sale Agreement represented by this Certificate to be a “qualified tax-exempt obligation” under Section 265(b)(3) of the Internal Revenue Code of 1986.

This Certificate is transferable by the Registered Owner hereof, in person or by his or her attorney duly authorized in writing, at the Trust Office of the Trust Administrator, but only in the manner, subject to the limitations and upon payment of the charges, if any, provided in this Trust Agreement and upon surrender and cancellation of this Certificate.

Upon such transfer a new Certificate or Certificates, of authorized denomination or denominations, representing the same aggregate principal amount and representing the same rate of interest and maturity date, will be delivered to the transferee in exchange hereof. The City, the Corporation and the Trust Administrator may treat the Registered Owner hereof as the absolute owner hereof for all purposes, whether or not this Certificate shall be overdue, and the City, the Corporation and the Trust Administrator shall not be affected by any notice to the contrary.

To the extent and in the manner permitted by the terms of the Trust Agreement, the provisions of the Trust Agreement may be amended by the parties thereto with the written consent of the owners of a majority in aggregate principal amount of the Certificates then outstanding, and may be amended without such consent under certain circumstances; provided that no such amendment shall extend the fixed maturity of any Certificate or reduce the interest or principal represented thereby, without the express consent of the owner of such Certificate.

The Trust Administrator has no obligation or liability to the registered owners of the Certificates to make payments of principal, or interest with respect to the Certificates except from amounts on deposit for such purposes with the Trust Administrator. The Trust Administrator’s sole obligations are to administer for the benefit of the registered owners of the Certificates the various funds and accounts established under the Trust Agreement and to perform the other duties expressly imposed upon it under the Trust Agreement.

The City has certified, recited and declared that all things, conditions and acts required by the laws of the State of California, the Installment Sale Agreement and this Trust Agreement to exist, to have happened and to have been performed precedent to and in the delivery of the Certificates, do exist, have happened and have been performed in due time, form and manner as required by law.

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TRUST AGREEMENT
Exhibit A

This Certificate is given as evidence of a loan to the City made by the United States of America, acting through the Rural Utilities Service, pursuant to the Consolidated Farm and Rural Development Act, and shall be subject to the present regulations of the Rural Utilities Service or any successor agency thereto and to its future regulations not inconsistent with the express provisions hereof.

IN WITNESS WHEREOF, this is one of the Certificates described in the within-mentioned Trust Agreement and registered on the Registration Books, and is hereby executed and authenticated by the manual signature of the Trust Administrator, all as of the Dated Date set forth above.

FINANCE DIRECTOR OF THE CITY OF YREKA,
as Trust Administrator
By: ____________________________
Emily Aldrich, Finance Director
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TRUST AGREEMENT
Exhibit A

ABBREVIATIONS
The following abbreviations, when used in the inscription on the face hereof, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM -- as tenants in common UNIF GIFT MIN ACT ____ Custodian

TEN ENT -- as tenants by the (Cust) _____ (Minor) _____ Entireties under Uniform Gifts to Minors
JT TEN -- as joint tenants with Act ______________________________ _____ right of survivorship (State)
_____ and not as tenants in
_____ common

ADDITIONAL ABBREVIATIONS MAY ALSO BE USED

THOUGH NOT IN THE LIST ABOVE

ASSIGNMENT
For value received the undersigned do(es) hereby sell, assign and transfer unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within registered Certificate and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the Certificate Register of the Trust Administrator with full power of substitution in the premises.

Dated:

Signature Guaranteed:

Note: Signature(s) must be guaranteed by an eligible guarantor. 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.

DRAFT 104

TRUST AGREEMENT
Exhibit A

Record of Prepayment in Advance of Maturity
of Certificates Represented by this Certificate
The Record of prepayment in advance of maturity on the registered Certificate shall be substantially as follows:

Amount Date
__________________ ___________________
__________________ ___________________
__________________ ___________________
__________________ ___________________
DRAFT 105

TRUST AGREEMENT
Exhibit B

EXHIBIT B
$__________

CITY OF YREKA
SERIES 2022 WASTEWATER REVENUE CERTIFICATES OF PARTICIPATION (WASTEWATER SYSTEM IMPROVEMENT PROJECT)

BANK QUALIFIED
WRITTEN REQUISITION NO. __ FOR

DISBURSEMENT FROM CONSTRUCTION FUND
The undersigned hereby states and certifies that:

1. the undersigned is a duly designated “City Representative”, as such term is defined in that certain Trust Agreement, dated as of December 1, 2022 (the “Trust Agreement”), by and among the Finance Director of the City of Yreka, as trust administrator (the “Trust Administrator”), the Great Northern Services (the “Corporation”), and the City of Yreka (the “City”), and as such, is familiar with the facts herein certified and is authorized and qualified to certify the same;

2. under Section 3.02 of this Trust Agreement, the Trust Administrator is hereby requested to disburse this date, from the Construction Fund established under this Trust Agreement, to the payees set forth on Attachment I attached hereto and by this reference incorporated herein, at the addresses identified thereon, the amount set forth opposite such payee for payment of Construction Costs;

3. the amounts to be disbursed constitute Construction Costs, that said amounts are required to be disbursed pursuant to a contract entered into therefor by or on behalf of the Corporation or the City, or were necessarily and reasonably incurred, and that said amounts are not being paid in advance of the time, if any, fixed for payment;

4. no amount set forth in this requisition was included in any requisition requesting disbursement previously filed with the Trust Administrator pursuant to Section 3.02 of this Trust Agreement;

5. insofar as such requisition relates to payment for work, materials, equipment or supplies, such work was actually performed, or such materials, equipment or supplies were actually installed in furtherance of the construction of the Project or delivered to the appropriate site for such purpose, or delivered for storage or fabrication at a place approved by the City;

6. if such requisition relates to payment to a contractor, that no liens have been imposed on the Project as a result of said construction except liens that have not yet ripened or that would attach by operation of law; and

7. any capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in this Trust Agreement.

Dated: December 15, 2022

CITY OF YREKA
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TRUST AGREEMENT
Exhibit B

By: ____________________________
City Representative

As Acknowledged by:

United States of America,
acting through the Rural Utilities Service
By:

Authorized Officer
DRAFT 107

TRUST AGREEMENT
Exhibit B
Attachment I

ATTACHMENT I
Payee Name and Address Purpose of Obligation Amount
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INSTALLMENT SALE AGREEMENT
Dated as of December 1, 2022
by and between the

GREAT NORTHERN SERVICES,
as Seller
and the

CITY OF YREKA,
as Purchaser
Relating to
$5,700,000

CITY OF YREKA
SERIES 2022 WASTEWATER REVENUE CERTIFICATES OF PARTICIPATION (WASTEWATER SYSTEM IMPROVEMENT PROJECT)

BANK QUALIFIED
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-iTABLE OF CONTENTS
Page

ARTICLE I

GENERAL
Section 1.01. Definitions ................................................................................................................................................. 2 Section 1.02. Representations, Covenants and Warranties. ............................................................................................. 2 Section 1.03. Written Certificates ................................................................................................................................... 2 Section 1.04. Exhibits ..................................................................................................................................................... 3

ARTICLE II
DEPOSITS; PAYMENTS ; CONSTRUCTION
Section 2.01. Deposit of Moneys .................................................................................................................................... 4 Section 2.02. Payment of Construction Costs and Delivery Costs .................................................................................. 4 Section 2.03. Unexpended Proceeds ............................................................................................................................... 4 Section 2.04. Construction of Project .............................................................................................................................. 4

ARTICLE III
PROJECT SALE AND TITLE; INSTALLMENT PAYMENTS; NET

REVENUES
Section 3.01. Sale ............................................................................................................................................................ 4 Section 3.02. Title ........................................................................................................................................................... 4 Section 3.03. Assignment by the Corporation ................................................................................................................. 4 Section 3.04. Term of the Installment Sale Agreement ................................................................................................... 5 Section 3.05. Installment Payments ................................................................................................................................ 5 Section 3.06. Special Obligation of the City ................................................................................................................... 5 Section 3.07. Pledge of Net Revenues; Transfer to Pay Installment Payments; Release from Lien ................................ 6 Section 3.08. Rate Covenant ........................................................................................................................................... 7 Section 3.09. Limitations on Future Obligations Secured by Net Revenues ................................................................... 7 Section 3.10. Additional Payments ................................................................................................................................. 8 Section 3.11. Payments to Reserve Fund ........................................................................................................................ 8 Section 3.12. Payments to Short-Lived Assets Reserve Fund ......................................................................................... 8

ARTICLE IV

PREPAYMENT OF INSTALLMENT PAYMENTS
Section 4.01. Prepayment ................................................................................................................................................ 8 Section 4.02. Optional Prepayment ................................................................................................................................. 8 Section 4.03. Mandatory Prepayment From Net Proceeds of Insurance or Condemnation and from Unexpended Proceeds .................................................................................................................................................... 9 Section 4.04. Credit for Amounts on Deposit. ................................................................................................................ 9 Section 4.05. Security Deposit ........................................................................................................................................ 9

ARTICLE V
MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS
Section 5.01. Maintenance, Taxes and Assessments, Contests. .....................................................................................11 Section 5.02. Modification of Project ............................................................................................................................11 Section 5.03. Installation of City’s Equipment. .............................................................................................................11 Section 5.04. Public Liability and Property Damage Insurance .....................................................................................12 Section 5.05. Fire and Extended Coverage Insurance. ...................................................................................................12 Section 5.06. Insurance Net Proceeds; Form of Policies ................................................................................................13 Section 5.07. Application of Net Proceeds. ....................................................................................................................13 Section 5.08. Advances ..................................................................................................................................................13 DRAFT 110
-iiARTICLE VI
DISCLAIMER OF WARRANTIES; ACCESS; INDEMNITY
Section 6.01. Disclaimer of Warranties..........................................................................................................................14 Section 6.02. Access to the Project and Records ............................................................................................................14 Section 6.03. Indemnity .................................................................................................................................................14

ARTICLE VII

EVENTS OF DEFAULT AND REMEDIES
Section 7.01. Events of Default Defined ........................................................................................................................14 Section 7.02. Remedies on Default ................................................................................................................................15 Section 7.03. No Remedy Exclusive. .............................................................................................................................15 Section 7.04. Prosecution and Defense of Suits .............................................................................................................16 Section 7.05. No Additional Waiver Implied by One Waiver ........................................................................................16 Section 7.06. Application of the Proceeds. ....................................................................................................................16 Section 7.07. Liability Limited to Net Revenues ...........................................................................................................16 Section 7.08. Trust Administrator and Certificate Owners to Exercise Rights...............................................................16 Section 7.09. Pro Rata Application of Net Revenues .....................................................................................................16

ARTICLE VIII

MISCELLANEOUS
Section 8.01. Assignment, Sale or Lease by the City .....................................................................................................17 Section 8.02. Amendment of Installment Sale Agreement .............................................................................................17 Section 8.03. Binding Effect ..........................................................................................................................................17 Section 8.04. Applicable Law ........................................................................................................................................17 Section 8.05. Severability ..............................................................................................................................................17 Section 8.06. Captions ...................................................................................................................................................17 Section 8.07. Net Contract .............................................................................................................................................18 Section 8.08. Further Assurances and Corrective Instruments .......................................................................................18 Section 8.09. Corporation and City Representatives ......................................................................................................18 Section 8.10. Notices .....................................................................................................................................................18 Section 8.11. Execution in Counterparts ........................................................................................................................19 Exhibit A Description of the Project ...................................................................................................................... A-1 Exhibit B Schedule of Installment Payments .......................................................................................................... B-1 DRAFT 111

INSTALLMENT SALE AGREEMENT
THIS INSTALLMENT SALE AGREEMENT, dated as of December 1, 2022, by and between the GREAT NORTHERN SERVICES, a California not-for-profit corporation organized and existing under the laws of the State of California, as seller (the “Corporation”), and the CITY OF YREKA, a municipal corporation and general law city duly organized and existing under and by virtue of the constitution and laws of the State of California, as purchaser (the “City”);
W I T N E S S E T H:

WHEREAS, the City wishes to finance the acquisition and construction of certain improvements to its wastewater system (the “Wastewater System”), as more particularly described in Exhibit A hereto (the “Project”); and
WHEREAS, the Corporation has been formed for the purpose, among others, of assisting municipalities such as the City in the financing of public capital improvements within or of benefit to the City; and
WHEREAS, to that end, the Corporation will cause the execution and delivery of Series 2022 Wastewater Revenue Certificates of Participation in the principal amount of $5,700,000 (the “Certificates”), and apply the proceeds of the sale thereof to the acquisition and construction of the Project; and
WHEREAS, the City has determined to purchase the Project from the Corporation pursuant to this Installment Sale Agreement; and
WHEREAS, the City will make installment payments pursuant to this Installment Sale Agreement (the “Installment Payments”) from the Net Revenues (as defined herein) of the Wastewater System in order to purchase the Project from the Corporation; and
WHEREAS, the Corporation will assign its right to receive Installment Payments to the Finance Director of the City of Yreka, as trust administrator (the “Trust Administrator”), pursuant to an Assignment Agreement, dated as of December 1, 2022 (the “Assignment Agreement”) for the benefit of the Owners (as defined herein) of the Certificates;
NOW, THEREFORE, in consideration of the above premises and of the mutual covenants hereinafter contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

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ARTICLE I

GENERAL
Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in the Trust Agreement, dated as of December 1, 2022, by and among the Finance Director of the City of Yreka, as Trust Administrator, the Corporation and the City, shall, for all purposes of this Installment Sale Agreement, have the meanings specified therein.

Section 1.02. Representations, Covenants and Warranties. The City and the Corporation represent, covenant and warrant to each other as follows:
(a) Each is validly organized and existing under the laws of the State. (b) The laws of the State authorize each to enter into this Installment Sale Agreement and the Trust Agreement and to enter into the transactions contemplated by and to carry out its obligations under each of the aforesaid agreements, and each is duly authorized to execute such agreements.
(c) The execution and delivery of this Installment Sale Agreement, the Trust Agreement, the fulfillment of or compliance with the terms and conditions hereof or thereof, and the consummation of the transactions contemplated by this Installment Sale Agreement and the Trust Agreement do not conflict with and do not result in a material breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which either is now a party or by which either is bound or constitutes a default under any such agreement or instrument. (d) Each has duly executed this Installment Sale Agreement and the Trust Agreement in accordance with the laws of the State.
(e) The Project has not been the subject of a previous conveyance by the City. (f) The City has not issued or incurred any obligations which are currently outstanding having any priority in payment out of the Gross Revenues or the Net Revenues over the payment of the Installment Payments as provided herein.

Section 1.03. Written Certificates.
(a) Contents. Every Written Certificate provided for in this Installment Sale Agreement with respect to compliance with any provision hereof (other than Written Certificates delivered on the Closing Date) shall include (a) a statement that the person making or giving such Written Certificate or opinion has read such provision and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the Written Certificate is based; (c) a statement that, in the opinion of such person, he or she has made or caused to be made such examination or investigation as is necessary to enable him or her to express an informed opinion with respect to the subject matter referred to in the instrument to which his or her signature is affixed; (d) a statement of the assumptions upon which such Written Certificate is based, DRAFT 113

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and that such assumptions are reasonable; and (e) a statement as to whether, in the opinion of such person, such provision has been complied with.
(b) Reliance. Any such Written Certificate made or given by a City Representative may be based, insofar as it relates to legal or accounting matters, upon a certificate or opinion of or representation by counsel or an accountant, unless such City Representative knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which such Written Certificate may be based, as aforesaid, is erroneous. Any such certificate or opinion made or given by counsel or an accountant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the City, as the case may be) upon a certificate or opinion of or representation by a City Representative, unless such counsel or accountant knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which such person’s certificate or opinion or representation may be based is erroneous. The same City Representative, or the same counsel or accountant, as the case may be, need not certify to all of the matters required to be certified under any provision of this Installment Sale Agreement, but different officers, counsel or accountants may certify to different matters, respectively.

Section 1.04. Exhibits. The following Exhibits are attached to, and by this reference are made a part of, this Installment Sale Agreement:

Exhibit A: Project Description
Exhibit B: Installment Payments Schedule
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ARTICLE II
DEPOSITS; PAYMENTS; CONSTRUCTION
Section 2.01. Deposit of Moneys. The Corporation shall cause to be deposited with the Trust Administrator, the amounts derived, from time to time, as advances of the proceeds of the Certificates (to be an aggregate of $5,700,000) in the funds as provided in the Trust Agreement.

Section 2.02. Payment of Construction Costs and Delivery Costs. Payment of the Construction Costs and Delivery Costs shall be made from the moneys deposited with the Trust Administrator in the Construction Fund, which moneys shall be disbursed for such purpose in accordance and upon compliance with Sections 3.02 and 3.03, respectively, of the Trust Agreement. The City hereby covenants to pay necessary Construction Costs and Delivery Costs in excess of amounts available from Certificates proceeds from any legally available source of funds.

Section 2.03. Unexpended Proceeds. In accordance with Section 3.04 of the Trust Agreement, all excess moneys remaining in the Construction Fund and not required for payment of Construction Costs shall be transferred to the Installment Payment Fund and applied to the prepayment of Certificates.

Section 2.04. Construction of Project. The Corporation hereby appoints the City as its agent to acquire and construct the Project.

ARTICLE III
PROJECT SALE AND TITLE; INSTALLMENT PAYMENTS; NET REVENUES Section 3.01. Sale. The Corporation hereby sells, bargains and conveys the Project to the City, and the City hereby purchases the Project from the Corporation upon the terms and conditions set forth in this Installment Sale Agreement.

Section 3.02. Title. The City and the Corporation agree that title to the Project, and each component thereof, shall be deemed conveyed to and vested in the City upon the completion of the acquisition, construction and installation thereof. The Corporation and its officers shall take all actions necessary to vest in the City all of the Corporation’s rights in and title to the Project.

Section 3.03. Assignment by the Corporation. The Corporation’s right, title and interest in this Installment Sale Agreement, including the right to receive and enforce payment of the Installment Payments to be made by the City under this Installment Sale Agreement, have been assigned to the Trust Administrator, subject to certain exceptions, pursuant to the Assignment Agreement, to which assignment the City hereby consents. The City understands and agrees that the Corporation has assigned its right, title and interest (but not its duties or obligations) in this Installment Sale Agreement to the Trust Administrator pursuant to the Assignment Agreement for the benefit of the Owners of the Certificates. The Corporation hereby directs the City, and the City hereby agrees, to pay to the Trust Administrator at the Trust Administrator’s Trust Office or at such other place as the Trust Administrator shall direct in writing, all payments payable by the City pursuant to this Installment Sale Agreement.

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Section 3.04. Term of the Installment Sale Agreement. The Term of the Installment Sale Agreement shall be as provided in the Trust Agreement.

Section 3.05. Installment Payments.
(a) Obligation to Pay. The City agrees to pay to the Corporation, its successors and assigns, as the purchase price of the Project, the Installment Payments, consisting of components of principal and interest, on the Installment Payment Dates and in the amounts specified in Exhibit B hereto, except such amounts shall be reduced by moneys on deposit in the Installment Payment Fund and credited to the payment of Installment Payments next due. The Installment Payments shall be payable solely from Net Revenues as hereinafter provided. (b) Reduction upon Partial Prepayment. In the event the City prepays less than all of the remaining principal components of the Installment Payments pursuant to Sections 4.02 and 4.03 hereof, the amount of such prepayment shall be applied to reduce the principal component of the subsequent remaining Installment Payments in any manner as directed by the City in a Written Certificate and the interest component of each subsequent remaining Installment Payment shall be reduced by the aggregate corresponding amount of interest which would otherwise be payable with respect to the Certificates redeemed as a result of such prepayment. (c) Rate on Overdue Payments. In the event the City should fail to make any of the payments required in this Section 3.05 so that there are insufficient moneys on hand in the Installment Payment Fund to pay any Installment Payment in full on an Installment Payment Date, the Installment Payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date thereof at the rate of interest payable with respect to the Certificates.

Section 3.06. Special Obligation of the City.
(a) Limitations. The City’s obligation to pay the Installment Payments shall be a special obligation limited solely to Net Revenues. Under no circumstances shall the City be required to advance any moneys derived from any source of income other than the Net Revenues and other sources specifically identified herein for the payment of the Installment Payments, nor shall any other funds or property of the City be liable for the payment of the Installment Payments. (b) Obligations Unconditional. Subject to Section 3.06(a), the obligations of the City to make the Installment Payments from Net Revenues and to perform and observe the other agreements contained herein shall be absolute and unconditional and shall not be subject to any defense or any right of set-off, counterclaim or recoupment arising out of any breach of the City, the Corporation or the Trust Administrator of any obligation to the City or otherwise with respect to the Project, whether hereunder or otherwise, or out of indebtedness or liability at any time owing to the City by the Corporation or the Trust Administrator.
(c) Obligations Specified. Until such time as all the Installment Payments shall have been fully paid or prepaid, the City:

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(i) will not suspend, abate, or discontinue any payments specified in Section 3.05 hereof;
(ii) will perform and observe all other agreements contained in this Installment Sale Agreement; and
(iii) will not terminate the Term of the Installment Sale Agreement for any cause, including, the occurrence of any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction, destruction of or damage to the Project, the taking by eminent domain of title to or temporary use of any or all of the Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either thereof or any failure of the Corporation or the Trust Administrator to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with the Trust Agreement, the Assignment Agreement or this Installment Sale Agreement. (d) Corporation Obligations. Nothing contained in this Section 3.06 shall be construed to release the Corporation from the performance of any of the agreements on its part herein contained, and in the event the Corporation shall fail to perform any such agreements on its part, the City may institute such action against the Corporation as the City may deem necessary to compel performance so long as such action does not abrogate the obligations of the City contained in Section 3.06(b) above. The City may, however, at the City’s own cost and expense and in the City’s own name or in the name of the Corporation prosecute or defend any action or proceeding or take any other action involving third persons which the City deems reasonably necessary in order to secure or protect the City’s right of possession, occupancy and use hereunder, and in such event the Corporation hereby agrees to cooperate fully with the City and to take such action necessary to effect the substitution of the City for the Corporation in such action or proceeding if the City shall so request.

Section 3.07. Pledge of Net Revenues; Transfer to Pay Installment Payments; Release from Lien.
(a) Pledge of Net Revenues. The City hereby agrees that the payment of the Installment Payments shall be secured by a first pledge, charge and lien upon Net Revenues which pledge, charge and lien are on a parity with any Parity Debt, and Net Revenues sufficient to pay the Installment Payments as they become due and payable are hereby pledged, charged, assigned, transferred and set over by the City to the Corporation and its assigns for the purpose of securing payment of the Installment Payments. The Net Revenues shall constitute a trust fund for the security and payment of the Installment Payments.
(b) Transfer to Pay Installment Payments. In order to provide for the payment of Installment Payments when due, the City shall, on or before each Installment Payment Date, transfer to the Trust Administrator for deposit into the Installment Payment Fund the amount indicated in Exhibit B attached hereto as required for the next occurring Installment Payment Date.

Notwithstanding Exhibit B attached hereto, the City shall be obligated to make Installment Payments sufficient to pay all principal and interest due with respect to the Certificates.

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(c) Release from Lien. Following the transfers described in paragraph (b) of this Section 3.07 with respect to Net Revenues allocable to such Fiscal Year in excess of amounts required for the payment of Parity Debt, if any issued or incurred in accordance with Section 3.09(b), and for the replenishment of the Reserve Fund in such Fiscal Year shall be released from the lien of this Installment Sale Agreement and shall be available for any lawful purpose of the City.

Section 3.08. Rate Covenant. The City hereby covenants that it shall prescribe, revise and collect such charges for the services and facilities of the Wastewater System which, after allowances for contingencies and error in the estimates, shall produce Gross Revenues sufficient in each Fiscal Year to provide Net Revenues equal to at least 1.20 times (i) the Installment Payments coming due and payable during such Fiscal Year, (ii) all payments required with respect to Parity Debt and (iii) amounts required to replenish the Reserve Fund, as required by Section 6.06 of the Trust Agreement.

Section 3.09. Limitations on Future Obligations Secured by Net Revenues. (a) No Obligations Superior to Installment Payments. In order to protect further the availability of the Net Revenues and the security for the Installment Payments and any Parity Debt, the City hereby agrees that the City shall not, so long as any Certificates are outstanding, issue or incur any obligations payable from Gross Revenues or Net Revenues superior to the Installment Payments or any Parity Debt.
(b) Parity Debt. The City further covenants that, except for obligations issued or incurred to prepay the Installment Payments in full pursuant to Section 4.02 hereof, the City shall not issue or incur any Parity Debt unless:
(i) The City is not in default under the terms of this Installment Sale Agreement;
(ii) Net Revenues, calculated on sound accounting principles, either (i) as shown by the books of the City for the latest Fiscal Year, as verified by a certificate of an Authorized Representative of the City, or (ii) as shown by the books of the City for any more recent twelve (12) month period selected by the City, as verified by a certificate or opinion of an Independent Certified Public Accountant employed by the City, plus in either case (at the option of the City) the Additional Revenues, shall be at least equal to one hundred twenty percent (120%) of the amount of Maximum Annual Debt Service on all outstanding Parity Obligations and the Parity Obligations to be issued.
(iii) At the discretion of the City, a reserve fund shall be funded for such proposed Parity Debt which may be at least equal to the amount resulting from the application on the closing date of such Parity Debt of the formula contained in the definition of “Reserve Requirement.”
(iv) So long as all of the Outstanding Certificates are held by the Original Purchaser, the prior written consent of such Original Purchaser shall have been obtained.

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Section 3.10. Additional Payments. In addition to the Installment Payments, the City shall pay, from Net Revenues, when due all costs and expenses incurred by the Corporation to comply with the provisions of the Trust Agreement and this Installment Sale Agreement, including, without limitation all Delivery Costs (to the extent not paid from amounts on deposit in the Construction Fund), compensation due to the Trust Administrator for its fees, costs and expenses incurred under the Trust Agreement and the Assignment Agreement and all costs and expenses of attorneys, auditors, engineers and accountants.

Section 3.11. Payments to Reserve Fund. In addition to the Installment Payments, the City shall pay to the Trust Administrator from Net Revenues for deposit in the Reserve Fund (a) each month an amount equal to $1,778, until a total of $ 213,309 has accumulated therein, and (b) such amounts as shall be required to replenish the Reserve Fund in the event of a draw therefrom or a valuation determines that a deficiency exists therein, all in accordance with Section 6.06 of the Trust Agreement; provided, however, that in the event the amount on deposit in the Reserve Fund reaches the Reserve Requirement, the City shall discontinue the aforesaid payments to the Reserve Fund (except to the extent necessary to replenish the Reserve Fund in the event that the balance therein drops below the Reserve Requirement) and any further interest earnings on the Reserve Fund shall be allocated under Section 8.03 of the Trust Agreement.

Section 3.12. Payments to Short-Lived Assets Reserve Fund. In addition to the Installment Payments, the City shall deposit at least $118,667 annually into the Short-Lived Assets Reserve Fund, and shall maintain for as long as any of the Certificates remain outstanding to pay for repairs and/or replacement of major Wastewater System assets in the order of priority set forth in Section 5.04 of the Trust Agreement.

The City may withdraw amounts on deposit in the Short-Lived Assets Reserve Fund from time to time to pay for timely replacement of “short-lived assets” of the Wastewater System, which for purposes of this Section shall mean any component or assets of the Wastewater System, including without limitation pumps, paint and small equipment, that will need to be repaired or replaced over a one to fifteen-year period, the cost of which is not included within the definition of Operation and Maintenance Costs.

Notwithstanding the foregoing, before each June 30 the City shall evaluate the status and condition of short-lived assets of the Wastewater System and, if such evaluation suggests that a lesser or greater deposit is required in order to provide for the timely replacement of any short-lived assets, the City may upon consultation by the City with the Government decrease the amount of the annual deposit into the Short-Lived Assets Reserve Fund if a lesser amount is indicated, but shall increase the amount of the annual deposit in to the Short-Lived Assets Reserve Fund if a greater amount is indicated.

ARTICLE IV

PREPAYMENT OF INSTALLMENT PAYMENTS
Section 4.01. Prepayment. The City shall have the right to prepay the Installment Payments, but only in the manner, at the times and in all respects in accordance with the provisions of this Article IV.

Section 4.02. Optional Prepayment. Subject to the terms and conditions of this Section 4.02, the Corporation hereby grants an option to City to prepay the Installment Payments in full, by paying the total unpaid principal component of the Installment Payments as set forth in Exhibit B or in part, but not in an amount of less than the Denomination Amount or any integral multiple thereof, at any one time. Said option DRAFT 119

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may be exercised on any date following written notice by the City to the Corporation and the Trust Administrator of the exercise of such option at least sixty (60) days prior to date designated for prepayment.

Such option shall be exercised in the event of prepayment in full, by depositing with the Trust Administrator by the applicable prepayment date cash in an amount sufficient to pay the total unpaid principal component of the Installment Payments as set forth in Exhibit B, together with any Installment Payments then due but unpaid together with accrued interest to the prepayment date, or, in the event of prepayment in part, by depositing with the Trust Administrator by the applicable date of prepayment, an amount divisible by the Denomination Amount equal to the amount desired to be prepaid together with any Installment Payments then due but unpaid together with accrued interest on the amount to be prepaid to the prepayment date.

In the event of prepayment in part, the Corporation or City shall revise the Exhibit B Schedule of Installment Payments, which schedule shall take into account such prepayment and shall be and become for all purposes thereafter the “Amended Exhibit B to the Installment Sale Agreement.” Section 4.03. Mandatory Prepayment from Net Proceeds of Insurance or Condemnation and from Unexpended Proceeds. The City shall be obligated to prepay the Installment Payments in whole or in part on any Installment Payment Date from and to the extent of (a) any Net Proceeds of any insurance or condemnation award theretofore deposited in the Installment Payment Fund for such purpose pursuant to Section 5.07 hereof or pursuant to Section 7.02 of the Trust Agreement; and (b) from any excess monies remaining in the Construction Fund and not required for payment of Construction Costs (“Unexpended Proceeds”). The City and the Corporation hereby agree that such Net Proceeds and Unexpended Proceeds shall be credited towards the City’s obligations under this Section 4.03. Except in the case of such prepayment of the Installment Payments in full, such payment shall be in addition to the Installment Payment required to be paid by the City on such date.

Section 4.04. Credit for Amounts on Deposit. In the event the City elects or is required to prepay the Installment Payments in full under this Article IV, such that the Trust Agreement shall be discharged by its terms as a result of such prepayment, all amounts then on deposit in the Installment Payment Fund, the Construction Fund or the Reserve Fund shall be credited towards the amounts required to be so prepaid.

Section 4.05. Security Deposit. Notwithstanding any other provision of this Installment Sale Agreement, the City may, on any date, secure the payment of Installment Payments by a deposit with the Trust Administrator, as escrow holder under an escrow deposit and trust agreement as referenced in Section

14.01(d) of the Trust Agreement, of:
(a) All Installment Payments. in the case of a security deposit relating to all Installment Payments, either (i) an amount which, together with amounts on deposit in the Installment Payment Fund and the Reserve Fund, is sufficient to pay all unpaid Installment Payments, including the principal and interest components thereof, in accordance with the Installment Payment schedule set forth in Exhibit B attached hereto, or (ii) Discharge Obligations, together with cash, if required, in such amount as will, in the opinion of nationally-recognized bond counsel and of an independent certified public accountant, together with interest to accrue thereon and, if required, all or a portion of moneys or Discharge Obligations then on deposit in the Installment Payment Fund and the Reserve Fund, be fully sufficient to pay all unpaid Installment Payments on their Installment Payment Date; or
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(b) Portion of Installment Payments. in the case of a security deposit relating to a portion of the Installment Payments both (i) a Written Certificate executed by a City Representative designating the portion of the Installment Payments to which the deposit pertains, and (ii) cash or Discharge Obligations, in such amount as will, together with interest to be received thereon, if any, and an allocable portion of amounts on deposit in the Installment Payment Fund and the Reserve Fund, be fully sufficient in the opinion of an independent certified public accountant, to pay the portion of the Installment Payments designated in the aforesaid City Representative’s Written Certificate.
(c) Effect. In the event of a deposit pursuant to this Section 4.05, all obligations of the City under this Installment Sale Agreement pertaining to the portion of the Installment Payments for which the deposit has been made shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, all Installment Payments, or the portion of Installment Payments to which the deposit pertains, from the deposit made by City pursuant to this Section 4.05. Such deposit shall be deemed to be and shall constitute a special fund for the payment of Installment Payments in accordance with the provisions of this Installment Sale Agreement; and further provided that any security deposit relating to the Project shall not affect the covenant of the City contained in Section

3.09 hereof in the event such security deposit is insufficient to pay or prepay all Installment Payments relating to the Project when and as the same become due and payable. Upon said deposit, the Corporation will execute or cause to be executed any and all documents as may be necessary to release the security provided hereby to the extent of such deposit. (d) Notwithstanding any contrary provision contained herein, so long as the Government is the Owner of the Certificates, the Certificates may not be defeased.

ARTICLE V
MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS
Section 5.01. Maintenance, Taxes and Assessments, Contests. (a) Operation. The City covenants to operate the Wastewater System in an efficient and economical manner and operate, maintain and preserve the Wastewater System in good repair and working order in accordance with customary standards and practices applicable to similar facilities
(b) Taxes and Assessments. The City shall also pay or cause to be paid all taxes and assessments of any type or nature charged to the Corporation or the City or levied, assessed or charged against the Wastewater System or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of the Installment Sale Agreement as and when the same become due. (c) Contest. The City may, at the City’s expense and in its name, in good faith contest any such taxes, assessments and charges and, in the event of any such contest, may permit the taxes, DRAFT 121

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assessments or charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Corporation shall notify the City that, in the opinion of Independent Counsel, by nonpayment of any such items, the Project or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Corporation with full security against any loss which may result from nonpayment, in form satisfactory to the Corporation.

Section 5.02. Modification of Project. The City shall, at its own expense, have the right to remodel the Project or to make additions, modifications and improvements thereto. All such additions, modifications and improvements shall thereafter comprise part of the Project and be subject to the provisions of this Installment Sale Agreement. Such additions, modifications and improvements shall not in any way damage the Project or cause it to be used for purposes other than those authorized under the provisions of state and federal law; and the Project, upon completion of any additions, modifications and improvements made pursuant to this Section 5.02, shall be of a value which is not substantially less than the value of the Project immediately prior to the making of such additions, modifications and improvements.

Section 5.03. Installation of City’s Equipment. The City may at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed other items of equipment or other personal property in or upon the Project. All such items shall remain the sole property of the City, in which neither the Corporation nor the Trust Administrator shall have any interest, and may be modified or removed by the City at any time provided that the City shall repair and restore any and all damage to the Project resulting from the installation, modification or removal of any such items. Nothing in this Installment Sale Agreement shall prevent the City from purchasing items to be installed pursuant to this Section 5.03 under a conditional sale or lease purchase contract, or subject to a vendor’s lien or security agreement, as security for the unpaid portion of the purchase price thereof.

Section 5.04. Public Liability and Property Damage Insurance. (a) Insurance Policies. The City shall maintain or cause to be maintained, throughout the Term of the Installment Sale Agreement, insurance policies, including a standard comprehensive general insurance policy or policies in protection of the City, its members, officers, agents and employees. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the construction or operation of the Wastewater System (but only if such insurance is available at reasonable cost on the open market from reputable insurance companies).

Such policy or policies shall afford protection in such amounts, with such deductibles, as are usually covered in connection with operations similar to the Wastewater System. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City, and may be maintained in the form of insurance maintained through a nonprofit public benefit corporation created for such purpose or in the form of self-insurance by the City. (b) Self-Insurance. If the City shall maintain self-insurance, it shall supply to the Trust Administrator a statement of sufficiency by an independent insurance consultant or the City’s risk manager on an annual basis as described in Section 5.06 hereof.

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(c) Application of Net Proceeds. The Net Proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid.

Section 5.05. Fire and Extended Coverage Insurance.
(a) Insurance Policies. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of the Installment Sale Agreement, insurance against loss or damage to any above-ground structures, including City-owned equipment and machinery housed therein, constituting any part of the Wastewater System by fire and lightning, with extended coverage insurance but not including earthquake insurance. Such insurance need not include reservoirs, standpipes and elevated tanks. Such insurance shall be in an amount which is not less than 100% of the replacement cost of the Project. Such insurance may be subject to a deductible clause of not to exceed ten percent of said replacement cost for any one loss. Such insurance may be maintained as part of or in conjunction with any other fire and extended coverage insurance carried or required to be carried by the City, and may be maintained in the form of insurance maintained through a nonprofit public benefit corporation created for such purpose or in the form of self-insurance by the City. (b) Self-Insurance. If the City shall maintain self-insurance, it will supply to the Trust Administrator a statement of sufficiency by an independent insurance consultant or the City’s risk manager on an annual basis as described in Section 5.06 hereof. (c) Application of Net Proceeds. Net Proceeds of such insurance shall be applied as provided in Section 5.07 hereof.

Section 5.06. Insurance Net Proceeds; Form of Policies. The insurance required by Section 5.05 hereof shall provide that all applicable proceeds thereunder shall be payable to the Trust Administrator for the benefit of the Certificate Owners. The City shall pay or cause to be paid when due the premiums for all insurance policies required by this Installment Sale Agreement. All such policies shall provide that the Corporation and the Trust Administrator are named as additional insureds and that the Trust Administrator shall be given thirty (30) days’ notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby. The Trust Administrator shall not be responsible for the sufficiency of any insurance herein required or for the obtaining of such insurance and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the City. The City shall cause to be delivered to the Trust Administrator annually, no later than the end of each Fiscal Year, a Written Certificate signed by a City Representative stating that the City is in compliance with Sections 5.04 and 5.05 of this Agreement. The Trust Administrator may conclusively rely on such Written Certificates.

Section 5.07. Application of Net Proceeds.
(a) From Insurance Award. The Net Proceeds of any insurance award resulting from any damage to or destruction of the Project by fire or other casualty shall be deposited in the Insurance and Condemnation Fund by the Trust Administrator promptly upon receipt thereof and, if the City Representative notifies the Trust Administrator in writing of the City’s determination that the replacement, repair, restoration, modification or improvement of the Project is not economically DRAFT 123

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feasible or in the best interest of the City, then such Net Proceeds shall be promptly transferred by the Trust Administrator to the Installment Payment Fund to be applied as provided in Section 4.03 hereof. All Net Proceeds deposited in the Insurance and Condemnation Fund and not so transferred shall be applied to the prompt replacement, repair, restoration, modification or improvement of the Project by the City, upon receipt of a requisition, signed by the City Representative and, so long as all of the Outstanding Certificates are held by the Original Purchaser, the Owner of the Certificates stating with respect to each payment to be made (i) the requisition number, (ii) the name and address of the person, firm or corporation to whom payment is due, (iii) the amount to be paid and (iv) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal, and specifying in reasonable detail the nature of the obligation. Any balance of the Net Proceeds remaining after such work has been completed shall be transferred to the Installment Payment Fund. The City covenants that it will commence such replacement, repair, restoration, modification or improvement or indicate that such replacement, repair, restoration, modification or improvement is not economically feasible within 180 days of receipt of such Net Proceeds.
(b) From Eminent Domain Award. The Net Proceeds of any eminent domain award shall be deposited in the Insurance and Condemnation Fund to be held and applied by the Trust Administrator pursuant to Section 7.02 of the Trust Agreement.

Section 5.08 Advances. If the City shall fail to perform any of its obligations under this Article V, the Corporation may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money, and the City shall be obligated to repay all such advances as soon as possible, with interest at the rate of interest with respect to the Certificates from the date of the advance to the date of repayment.

ARTICLE VI
DISCLAIMER OF WARRANTIES; ACCESS; INDEMNITY
Section 6.01. Disclaimer of Warranties. The Corporation makes no warranty or representation, either express or implied, as to the value, design, condition, merchantability or fitness for any particular purpose or fitness for the use contemplated by the City for the Project, or any other representation or warranty with respect to the Project or any item thereof. In no event shall the Corporation be liable for incidental, indirect, special or consequential damages, in connection with or arising out of this Installment Sale Agreement or the Trust Agreement for the existence, furnishing, functioning or City’s use of the Project.

Section 6.02. Access to the Project and Records. To the extent permitted by law, the City agrees that the Corporation, any Corporation Representative, and the Corporation’s successors or assigns shall have the right at all reasonable times to enter upon and to examine and inspect the Project. The City further agrees that the Corporation, any Corporation Representative, and the Corporation’s successors or assigns shall have such rights of access to the Project as may be reasonably necessary to cause the proper maintenance of the Project in the event of failure by the City to perform its obligations hereunder. In addition, the City agrees that the Corporation, any Corporation Representative, and the Corporation’s successors or assigns shall have the right at all reasonable times to inspect and examine all books, papers and records of the Corporation and DRAFT 124

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the City pertaining to the Project and the Certificates, to make copies thereof and to take non-privileged memoranda therefrom or with respect thereto as may be desired.

Section 6.03. Indemnity. The City shall and hereby agrees to indemnify and save the Corporation and its successors and assigns harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of: (a) the use, maintenance, condition or management of, or from any work or thing done on the Project by the City; (b) any breach or default on the part of the City in the performance of any of its obligations under this Installment Sale Agreement; (c) any act or negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Project; (d) any act or negligence of any assignee or sublessee of the City with respect to the Project; or (e) the construction of the Project or the authorization of payment of the Construction Costs or Delivery Costs by the City or the Corporation. No indemnification is made under this Section 6.03, or elsewhere in this Installment Sale Agreement for willful misconduct, negligence, or breach of duty under this Installment Sale Agreement by the Corporation, its officers, agents, employees, successors or assigns.

ARTICLE VII

EVENTS OF DEFAULT AND REMEDIES
Section 7.01. Events of Default Defined. The following shall be “events of default” under this Installment Sale Agreement and the terms “events of default” and “default” shall mean, whenever they are used in this Installment Sale Agreement, any one or more of the following events:
(a) Failure by the City to pay any Installment Payment by the Installment Payment Date or failure to make any other payment required to be paid hereunder at the time specified herein; or (b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed in this Installment Sale Agreement or the Trust Agreement, other than as referred to in clause (a) of this Section 7.01, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Corporation, the Trust Administrator or the Owners of not less than twenty-five percent (25%) in aggregate principal amount of Certificates then Outstanding; provided, however, if the failure stated in the notice cannot be corrected within the applicable period, the Corporation, the Trust Administrator or such Owners, as applicable, shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is corrected; or
(c) The filing by the City of a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or the approval by a court of competent jurisdiction of a petition filed with or without the consent of the City seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction assumes custody or control of the City or of the whole or any substantial part of its property; or DRAFT 125

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(d) An event of default shall have occurred and be continuing with respect to any Parity Debt.

Section 7.02. Remedies on Default. Whenever any event of default referred to in Section 7.01 hereof shall have happened and be continuing, the Corporation shall have the right, at its option and without any further demand or notice, to:
(a) declare all principal components of the unpaid Installment Payments, together with accrued interest at the rate or rates specified in the respective Outstanding Certificates from the immediately preceding Installment Payment Date on which payment was made, to be immediately due and payable, whereupon the same shall become due and payable; and (b) take whatever action at law or in equity may appear necessary or desirable to collect the Installment Payments then due or thereafter to become due during the Term of the Installment Sale Agreement, or enforce performance and observance of any obligation, agreement or covenant of the City under this Installment Sale Agreement.

Section 7.03. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Corporation is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Installment Sale Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Corporation to exercise any remedy reserved to it in this Article VII it shall not be necessary to give any notice, other than such notice as may be required in this Article VII or by law.

Section 7.04. Prosecution and Defense of Suits. The City shall promptly, upon request of the Corporation or its assignee, from time to time take or cause to be taken such action as may be necessary or proper to remedy or cure any defect in or cloud upon the title to the Project whether now existing or hereafter developing and shall prosecute all such suits, actions and other proceedings as may be appropriate for such purpose and, to the extent permitted by law, shall indemnify or cause to be indemnified the Corporation and its assignee for all loss, cost, damage and expense, including attorneys’ fees, which they or any of them may incur by reason of any such defect, cloud, suit, action or proceedings.

To the extent permitted by law, the City shall defend, or cause to be defended, against every suit, action or proceeding at any time brought against the Corporation or its assignee upon any claim arising out of the receipt, application or disbursement of any of the Net Revenues or involving the rights or duties of the Corporation or its assignee under this Installment Sale Agreement or the Trust Agreement; provided, that the Corporation and its assignee at their election may appear in and defend any such suit, action or proceeding.

The City shall indemnify or cause to be indemnified the Corporation and its assignee against any and all liability claimed or asserted by any person, arising out of such receipt, application or disbursement.

Notwithstanding any contrary provision hereof, this covenant shall remain in full force and effect, even though all Installment Payments have been fully paid and satisfied, until a date which is three (3) years following the payment of the last of the Installment Payments.

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Section 7.05. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Installment Sale Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.

Section 7.06. Application of the Proceeds. The Trust Administrator, as assignee of the Corporation, shall apply all amounts received under this Article VII as set forth in Section 3.03 of the Trust Agreement.

Section 7.07. Liability Limited to Net Revenues. Notwithstanding any provision of this Installment Sale Agreement, the City’s liability to pay the Installment Payments and other amounts hereunder shall be limited solely to Net Revenues as provided in Sections 3.06 and 3.07 hereof. In the event that Net Revenues shall be insufficient at any time to pay an Installment Payment in full, the City shall not be liable to pay or prepay such Installment Payment other than from Net Revenues.

Section 7.08. Trust Administrator and Certificate Owners to Exercise Rights. Such rights and remedies as are given to the Corporation under this Article VII have been assigned by the Corporation to the Trust Administrator under the Assignment Agreement, to which assignment the City hereby consents. Such rights and remedies shall be exercised by the Trust Administrator and the Owners of the Certificates as provided in the Trust Agreement.

Section 7.09. Pro Rata Application of Net Revenues. If, at any time, there is a deficiency in Net Revenues available to pay the Installment Payments, any amounts due with respect to Parity Debt, amounts required to replenish the Reserve Fund or amounts required to replenish any reserve fund established for Parity Debt, available Net Revenues shall be applied on a pro rata basis to the payment of such Installment Payments and to the payment of amounts due with respect to Parity Debt, then to the replenishment of the Reserve Fund and to the replenishment of any reserve fund established for Parity Debt.

ARTICLE VIII

MISCELLANEOUS
Section 8.01. Assignment, Sale or Lease by the City.
(a) Assignment or Sale. This Installment Sale Agreement may not be assigned by the City, and the Wastewater System may not be sold by the City during the Term of this Installment Sale Agreement.
(b) Lease. The City may lease the Project, or any portion thereof, with the consent of the Owner of the Certificates so long as all of the Outstanding Certificates are held by the Original Purchaser thereof, and subject to all of the following conditions:
(i) This Installment Sale Agreement and the obligation of the City to make Installment Payments hereunder shall remain obligations of the City; DRAFT 127

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(ii) The City shall, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to the Corporation and the Trust Administrator a true and complete copy of the documents accomplishing such lease;
(iii) No such lease by the City shall cause the Project to be used for a purpose other than a governmental or proprietary function authorized under the provisions of the Constitution and laws of the State; and
(iv) No such lease shall cause the interest component of the Installment Payments to become subject to federal income taxes or State personal income taxes.

Section 8.02. Amendment of Installment Sale Agreement. The City will not alter, modify or cancel or agree or consent to alter, modify or cancel this Installment Sale Agreement, except as permitted by Article X of the Trust Agreement, without the written consent of the Trust Administrator and the Corporation.

Section 8.03. Binding Effect. This Installment Sale Agreement shall inure to the benefit of and shall be binding upon the Corporation and the City and their respective successors and assigns.

Section 8.04. Applicable Law. This Installment Sale Agreement shall be governed by and construed in accordance with the laws of the State.

Section 8.05. Severability. In the event any provision of this Installment Sale Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.

Section 8.06. Captions. The captions or headings in this Installment Sale Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provision, Article or Section of this Installment Sale Agreement.

Section 8.07. Net Contract. This Installment Sale Agreement shall be deemed and construed to be a “net contract” and the City hereby agrees that the Installment Payments shall be an absolute net return to the Corporation, free and clear of any expenses, charges or set-offs whatsoever.

Section 8.08. Further Assurances and Corrective Instruments. The Corporation and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Project hereby sold or intended so to be or for carrying out the expressed intention of this Installment Sale Agreement.

Section 8.09. Corporation and City Representatives. Whenever under the provisions of this Installment Sale Agreement the approval of the Corporation or the City is required, or the Corporation or the City is required to take some action at the request of the other, such approval or such request shall be given for the Corporation by an Corporation Representative and for the City by a City Representative, and any party hereto shall be authorized to rely upon any such approval or request.

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Section 8.10. Notices. All notices, Written Certificates or other communications hereunder shall be sufficiently given and shall be deemed to have been received 48 hours after deposit in the United States mail with postage fully prepaid:

If to the City: City of Yreka
701 Fourth Street
Yreka, CA 96097
Attention: City Manager
If to the Corporation: Great Northern Services
310 Boles Street
Weed, CA 96094
Attention: Executive Director
If to the Trust Administrator: Finance Director
City of Yreka
701 Fourth Street
Yreka, CA 96097
Attention: Finance Director
If to the Government: Rural Development, United States
Department of Agriculture
215 Executive Court, Suite B
Yreka, CA 96097-2667
Attention: Area Specialist
And
Rural Development, United States
Department of Agriculture
430 G Street, Suite 4169
Davis, CA 95616
Attention: Community Programs Specialist
The Corporation, the City, the Trust Administrator and the Government, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications will be sent.

Section 8.11. Execution in Counterparts. This Installment Sale Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
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IN WITNESS, the Corporation has caused this Installment Sale Agreement to be executed in its corporate name by its duly authorized officer, and the City has caused this Installment Sale Agreement to be executed in its name by its duly authorized officer, as of the date first above written.

GREAT NORTHERN SERVICES, as Seller
By
Authorized Signatory
CITY OF YREKA, as Purchaser
By
Jason Ledbetter, City Manager
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Exhibit A