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13. Final Official Statement Dated November 8, 2007
NEW ISSUE -- BOOK -ENTRY ONLY RATINGS: S &P: "AAA" Fitch: "AAA" UNDERLYING RATINGS: S & P: "AA -" (See "RATINGS" herein.) In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. See "TAX EXEMPTION" herein with respect to tax consequences of the Bonds. $20,685,000 R.E. BADGER WATER FACILITIES FINANCING AUTHORITY 2007 WATER REVENUE REFUNDING BONDS Dated: Date of Delivery Due: October 1, As Shown Below The Bonds are being issued pursuant to an Indenture of Trust between the R.E. Badger Water Facilities Financing Authority (the "Authority ") and The Bank of New York Trust Company, N.A., Los Angeles, California (the "Trustee "), and will be secured as described herein. The Bonds are being issued (i) to refund on a current basis the Authority's outstanding 1999 Water Revenue Bonds (the "Prior Bonds "), (ii) to fund in whole or in part, a Reserve Account for the Bonds, and (iii) to pay certain costs of issuing the Bonds. (See "FINANCING PLAN," herein.) The Bonds will be issued in book -entry form, initially registered in the name of Cede & Co., New York, New York, as nominee of The Depository Trust Company ( "DTC "), New York, New York. Interest on the Bonds will be payable on October 1 and April 1 of each year, commencing April 1, 2008. Purchasers will not receive certificates representing their interest in the Bonds. Individual purchases will be in principal amounts of $5,000 or in any integral multiples of $5,000. Payments of principal and interest will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Bonds. The Bonds are payable from revenues of the Authority, consisting principally of Installment Payments to be paid by the San Dieguito Water District ( "San Dieguito") and Santa Fe Irrigation District ( "Santa Fe," and together with San Dieguito, the "Districts ") pursuant to an Installment Purchase Agreement (collectively, the "Installment Purchase Agreements ") between the Authority and each District. The Authority has assigned, among other things, its right to receive Installment Payments to the Trustee. The Installment Payments are a special limited obligation of each of the Districts, payable from and secured by a pledge of and first lien on all Net Revenues of each District in the Water Enterprise Fund held by each District in trust under the related Installment Purchase Agreement. The lien on each Water Enterprise Fund is subject to the parity lien, if any, of any additional obligations as provided for in the related Installment Purchase Agreement. The payment of Installment Payments by San Dieguito is on parity with its obligation to pay debt service on the Water Revenue Refunding Bonds, Series 2004, currently outstanding in the aggregate principal amount of $11,635,000. Installment Payments from Santa Fe are calculated to pay approximately 60% of total debt service on the Bonds, and Installment Payments from San Dieguito are calculated to pay the approximate remaining 40% of total debt service. Neither District is responsible for the Installment Payments owed by the other District, and a default under one Installment Purchase Agreement will not result in a default under the other Installment Purchase Agreement. Payment of the principal of and interest on the Bonds when due will be guaranteed by a municipal bond insurance policy issued simultaneously with the issuance of the Bonds by MBIA Insurance Corporation ( "MBIA'). [�Mibla EMCEE AN ACTIM MATURITY SCHEDULE (See Inside Cover Page) The Bonds are subject to redemption prior to maturity as set forth herein. (See "THE BONDS -- Redemption of the Bonds" herein.) THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED SOLELY BY THE REVENUES PLEDGED THEREFOR IN THE INDENTURE AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE OR LIEN UPON ANY PROPERTY OF THE AUTHORITY OR THE DISTRICTS, OR ANY OF THE AUTHORITY'S INCOME OR RECEIPTS, EXCEPT THE REVENUES. THE BONDS ARE NOT A DEBT OF THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS. NEITHER THE FAITH AND CREDIT OF THE DISTRICTS, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE PLEDGED TO THE PAYMENT OF THE BONDS, AND NEITHER THE AUTHORITY OR THE DISTRICTS ARE OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION THEREFOR. NEITHER THE DISTRICTS, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE LIABLE THEREFOR, NOR IN ANY EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREON BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AUTHORITY AS SET FORTH IN THE INDENTURE. NEITHER THE BONDS NOR THE OBLIGATION TO MAKE INSTALLMENT PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE DISTRICTS, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. This cover page contains information for general reference only. It is not a summary of the security or terms of this issue. Investors must read the entire Official Statement, including the section entitled "RISK FACTORS ", for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the Bonds. Capitalized terms used on this cover page and not otherwise defined shall have the meanings set forth herein. The Bonds are offered when, as and if sold, executed and delivered, subject to the approval as to their legality by Best Best & Krieger LLP Riverside, California, Bond Counsel. Certain legal matters will be passed upon for the Authority by Best Best & Krieger LLP general counsel and as disclosure counsel. It is anticipated that the Bonds in book -entry form, will be available for delivery to DTC in New York, New York, on or about November 20, 2007. Date: November 8, 2007 MATURITY SCHEDULE $20,685,000 Serial Bonds Maturity Principal Interest Price or Maturity Principal Interest Price or (October 1 ) Amount Rate Yield (October 1 ) Amount Rate Yield 2008 $1 3.500% 3.250% 2017 $1 4.000% 3.850% 2009 1 3.750 3.270 2018 1 4.000 4.000 2010 1 4.000 3.300 2019 1 4.000 4.100 2011 1 4.000 3.350 2020 525 4.125 4.220 2012 1 4.000 3.370 2021 545 4.125 4.280 2013 1 4.000 3.450 2022 570 4.250 4.350 2014 1 4.000 3.500 2023 595 4.375 4.430 2015 1 4.000 3.620 2024 620 4.500 4.500 2016 1 4.000 3.750 R.E. BADGER WATER FACILITIES FINANCING AUTHORITY (San Diego County, California) BOARD OF DIRECTORS & STAFF Robert M. Irvin, Chair Maggie Houlihan, Vice Chair Kenneth B. Dunford, Secretary/Treasurer Teresa Barth, Member Michael J. Bardin, Executive Director SAN DIEGUITO WATER DISTRICT SANTA FE IRRIGATION DISTRICT BOARD OF DIRECTORS BOARD OF DIRECTORS Jerome Stocks, President Robert M. Irvin, President Maggie Houlihan, Vice President Kenneth B. Dunford, Vice President James Bond, Director Augustus B. Daddi, Director Teresa Barth, Director Michael T. Hogan, Director Dan Dalager, Director John S. Ingalls, Director SAN DIEGUITO WATER DISTRICT SANTA FE IRRIGATION DISTRICT OFFICIALS OFFICIALS Larry Watt, General Manager Michael J. Bardin, General Manager Victor Graves, Assistant General Manager Jeanne L. Deaver, Administrative Manager Jennifer Smith, Finance Director Cor Shaffer, Plant Manager Jay Lembach, Finance Manager Glenn Sabine, City Attorney SPECIAL SERVICES Authority General Counsel Best Best & Krieger LLP San Diego, California Bond Counsel and Disclosure Counsel Best Best & Krieger LLP Riverside, California Financial Advisor Fieldman, Rolapp & Associates Irvine, California Trustee The Bank of New York Trust Company, N.A. Los Angeles, California [THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS INTRODUCTION ........................... ..............................1 Post Retirement Health Benefits .............................. 46 General ....................................... ............................... 1 Prior Period Adjustments ............ .............................47 The Authority and the Districts ... ..............................1 Investment of City Funds ......................................... 47 Purpose ........................................ ..............................1 THE SANTA FE ENTERPRISE .... .............................49 The Bonds; Security for the Bonds 1 Santa Fe Facilities ....................... .............................49 RiskFactors ................................. ..............................2 Service Area ............................... .............................49 Limited Obligations ..................... ..............................2 Santa Fe Rates and Charges ..................................... 49 CONTINUING DISCLOSURE ....... ..............................3 Collection Procedure .................. .............................52 Summaries Not Definitive ........... ..............................3 Future Santa Fe Enterprise Improvements ............... 53 FINANCING PLAN ........................ ..............................4 Outstanding Santa Fe Indebtedness .........................53 The 1999 Project .......................... ..............................4 Water Sources and Supply; Water Purchases The Refunding Plan ..................... ..............................4 Water Demand ......................................................... 55 Estimated Sources and Uses of Funds .......................5 Service Connections ................... .............................55 DEBT SERVICE ............................. ..............................5 Largest Customers ...................... .............................56 THE BONDS .................................. ............................... 7 Historic Water Sales Revenues ... .............................56 Description of the Bonds ............. ..............................7 Projected Water Sales Revenues .............................57 Redemption of the Bonds ............ ..............................7 Historic Debt Service Coverage . .............................57 Exchange of Bonds ...................... ..............................8 Fiscal Year 2007 -2008 Budget ... .............................58 Issuance of Parity Obligations ..... ..............................8 Projected Operating Results and Debt Service Book -Entry Only System ........... ..............................1 l Coverage .................................................................. 59 SECURITY FOR THE BONDS ..... .............................13 Risk Management .................................................... 59 General ....................................... .............................13 Defined Benefit Pension Plan ..... .............................60 Installment Payments .................. .............................15 Retiree Health Care Benefits ...... .............................61 Bond Insurance ........................... .............................15 Investment Policy ....................... .............................61 Rate Covenant ............................ .............................16 RISK FACTORS ............................ .............................63 Reserve Account ......................... .............................16 Net Revenues; Rate Covenants ................................ 63 Application of Revenues ............. .............................17 District Expenses ........................ .............................63 Covenant to Provide Continuing Disclosure ............ 18 Limitations on Remedies Available to Bondowners63 Additional Covenants ............... ............................... 18 Seismic Considerations ............... .............................63 BOND INSURANCE ..................... .............................21 Loss of Tax - Exemption .............. .............................64 The MBIA Insurance Corporation Insurance Policy2l Enterprise Demand and Growth . .............................64 MBIA Insurance Corporation ... ............................... 22 Enterprise Expenses .................... .............................64 Regulation................................... .............................22 Proposition 218........................... .............................64 Financial Strength Ratings of MBIA .......................22 Constitutional Limit on Appropriations, Fees and MBIA Financial Information ...... .............................22 Charges ....................................... .............................65 Incorporation of Certain Documents by Reference .23 No Obligation to Tax .................. .............................66 THEDISTRICTS ......................... ............................... 24 Change in Law ............................ .............................66 General ....................................... .............................24 Availability of Water .................. .............................66 Management and Personnel ........ .............................25 Natural Disasters ...................................................... 66 Audited Financial Statements ..... .............................26 THE AUTHORITY ........................ .............................66 Joint Facilities ............................. .............................26 TAX EXEMPTION 67 ...................... ............................... Water Quality Compliance ......... .............................27 NO LITIGATION ........................................................ 68 Water Sources and Supply .......... .............................28 RATINGS ....................................... .............................68 THE SAN DIEGUITO ENTERPRISE ........................33 FINANCIAL ADVISOR ............................................. 68 San Dieguito Facilities ................ .............................33 PROFESSIONAL FEES .............................................. 68 Service Area ............................... .............................33 APPROVAL OF LEGALITY ........ .............................68 San Dieguito Rates and Charges . .............................34 UNDERWRITING 68 ....................... ............................... Collection Procedure .................. .............................37 ADDITIONAL INFORMATION .. .............................69 Future San Dieguito Improvements .........................3 8 Outstanding San Dieguito Indebtedness ..................38 APPENDIX A -- SUMMARY OF CERTAIN DEFINED Water Sources and Supply; Water Purchases ..........38 TERMS AND PRINCIPAL LEGAL DOCUMENTS .... A -1 Water Demand ............................ .............................41 APPENDIX B -- GENERAL DEMOGRAPHIC AND Service Connections 41 FINANCIAL INFORMATION ...... ............................... B -1 Largest Customers ...................... .............................42 APPENDIX C -- FORM OF FINAL OPINION OF BOND Historic Water Sales Revenues ................................ 42 COUNSEL ...................................... ............................... C -1 APPENDIX D -- FORM OF CONTINUING Historic Debt Service Coverage . .............................43 DISCLOSURE CERTIFICATE D -1 ..... ............................... Fiscal Year 2007 -2008 Budget ... .............................44 APPENDIX E -- SPECIMEN INSURANCE POLICY ........ E -1 Projected Operating Results and Debt Service APPENDIX F — AUDITED FINANCIAL STATEMENTS Coverage..................................... .............................44 OF SDWD AND SFID ................... ............................... F -1 Risk Management ....................... .............................45 Retirement Plan .......................... .............................46 1 [THIS PAGE INTENTIONALLY LEFT BLANK] No dealer, broker, salesperson or other person has been authorized by the Authority or the Districts to give any information or to make any representations other than those contained herein and, if given or made, such other information or representations other than those contained herein must not be relied upon as having been authorized by the Authority or the Districts. The Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The information set forth in this Official Statement has been obtained from official sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Authority or the Districts. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Authority or the Districts since the date hereof. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. [THIS PAGE INTENTIONALLY LEFT BLANK] OFFICIAL STATEMENT $20 R.E. BADGER WATER FACILITIES FINANCING AUTHORITY 2007 WATER REVENUE REFUNDING BONDS INTRODUCTION General The purpose of this Official Statement of the R.E. Badger Water Facilities Financing Authority (the "Authority ") is to furnish information regarding the issuance and sale of $20,685,000 principal amount of R.E. Badger Water Facilities Financing Authority 2007 Water Revenue Refunding Bonds (the "Bonds ") pursuant to the provisions of an Indenture of Trust, dated as of November 1, 2007 (the "Indenture ") between the Authority and The Bank of New York Trust Company, N.A. (the "Trustee "). The Authority and the Districts The Authority was established pursuant to a Joint Exercise of Powers Agreement dated September 22, 1999 by and among the San Dieguito Water District ( "San Dieguito ") and the Santa Fe Irrigation District ( "Santa Fe ") (collectively, the "Districts "). The Authority was created for the purpose of providing financing for public capital improvements jointly owned and operated by the Districts. Santa Fe was incorporated in 1923 under the provisions of the Irrigation District Law (California Water Code Section 20500 et seq.). It currently serves an area of approximately 16.3 square miles, and provides water to Solana Beach, Rancho Santa Fe and portions of Fairbanks Ranch. Population in both Districts is fairly stable, in Santa Fe population was approximately 20,491 residents in Fiscal Year 1998/99 and has increased slightly to approximately 21,353 residents in Fiscal Year 2005/06. See "THE DISTRICTS" herein. San Dieguito was formed in 1922 under the provisions of the Irrigation District Law (California Water Code Section 20500 et seq.) and is governed by a five- person board elected for four -year terms. San Dieguito is a subsidiary district of the City of Encinitas (the "City ") and a separate and distinct entity from the City, although its five- person governing board is the elected city council of the City. San Dieguito currently serves an area of approximately 8.9 square miles, and provides water to the coastal portion of the City. Population in San Dieguito has grown from approximately 34,343 residents in calendar year 1999 to approximately 37,918 residents in Fiscal Year 2007. See "THE DISTRICTS" herein. The Districts are located in the northern portion of San Diego County, California, approximately twenty -five miles north of the City of San Diego, and approximately one hundred miles south of downtown Los Angeles. Purpose The Bonds are being issued (i) to refund on a current basis the Authority's Outstanding 1999 Water Revenue Bonds (the "Prior Bonds "), (ii) to fund, in whole or in part, a Reserve Account for the Bonds, and (iii) to pay certain costs of issuance of the Bonds. See "THE FINANCING PLAN" herein. See "THE SANTA FE ENTERPRISE" and "THE SAN DIEGUITO ENTERPRISE" herein for a description of each District's Enterprise (collectively, the "Enterprises "). The Bonds; Security for the Bonds The Bonds will be issued pursuant to the Marks -Roos Local Bond Pooling Act of 1985 (Article 4, Chapter 5, Division 7, Title 1 of the California Government Code) (the "Bond Law "). The Bonds are payable from amounts received by the Authority from each of the Districts, consisting principally of Installment Payments to be paid by each District pursuant to separate Installment Purchase Agreements, each dated as of 1 November 1, 2007 (collectively, the "Installment Purchase Agreements ") between the Authority and each District. The Authority has assigned to the Trustee, pursuant to the Indenture, among other things, its right to receive Installment Payments. The Installment Payments are a special limited obligation of each of the Districts, payable from and secured by a pledge of and first lien on all Net Revenues of each District in the Water Enterprise Fund held by each District in trust under the related Installment Purchase Agreement. The lien on each Water Enterprise Fund is subject to the parity lien, if any, of any additional obligations as provided for in the related Installment Purchase Agreement. The payment of Installment Payments by San Dieguito is on parity with its obligation to pay debt service on its Water Revenue Refunding Bonds, Series 2004, currently outstanding in the aggregate principal amount of $11,635,000. See "SECURITY FOR THE BONDS" herein. The Installment Payments are calculated to be an amount sufficient to permit the Authority to pay all scheduled debt service on the Bonds when due. See "APPENDIX A - SUMMARY OF CERTAIN DEFINED TERMS AND PRINCIPAL LEGAL DOCUMENTS" herein. Installment Payments from Santa Fe are calculated to pay approximately 60% of total scheduled debt service on the Bonds, and Installment Payments from San Dieguito are calculated to pay the approximate remaining 40% of total scheduled debt service. Neither District is responsible for the Installment Payments owed by the other District, and a default under one Installment Purchase Agreement will not result in a default under the other Installment Purchase Agreement. Payment of the principal and interest on the Bonds when due will be guaranteed by a municipal bond insurance policy (the "Insurance Policy ") issued simultaneously with the issuance of the Bonds by MBIA Insurance Corporation ( "MBIA" or the "Insurer "). See "BOND INSURANCE" herein. Risk Factors There can be no assurance that the local demand for the services provided by each District's Enterprise will be maintained at levels described in this Official Statement, or that the expenses for each Enterprise will be consistent with the levels described in this Official Statement. Changes in technology, decreased demand, new regulatory requirements, increases in the cost of energy or other expenses would reduce Net Revenues from one or both Districts, and could require substantial increases in rates or charges in order to comply with the rate covenant in each District's Installment Purchase Agreement. Such rate increases could increase the likelihood of nonpayment, and could also further decrease demand. If a District defaults on its obligation to make payments under the related Installment Purchase Agreement, the Trustee has the right to accelerate the total unpaid principal amount of the Bonds relating only to such District's Installment Payments. However, in the event of a default and such acceleration there can be no assurance that such defaulting District will have sufficient Net Revenues to pay the accelerated Installment Payments. Furthermore, amounts on deposit in a Reserve Account relating to one District are not available to pay delinquent Installment Payments of the other District. See "THE SANTA FE ENTERPRISE" and "THE SAN DIEGUITO ENTERPRISE" herein for a discussion of the water sources of each District. Any significant reduction or limitation on each Districts' water sources could reduce the Net Revenues of a District and adversely affect the security of the Bonds. See "RISK FACTORS" herein for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in considering the investment quality of the Bonds, including a discussion of the impact of Proposition 218, constitutional limits on fees and charges, seismic considerations, limitation on remedies and changes in law. Limited Obligations The obligations of the Districts to make the Installment Payments and the Additional Payments from the Net Revenues and to perform and observe the other agreements contained in the respective Installment Purchase Agreement shall be absolute and unconditional and shall not be subject to any defense or any right of setoff, 2 counterclaim or recoupment arising out of any breach of the Districts, the Authority or the Trustee of any obligation to the Districts or otherwise with respect to the Project or out of indebtedness or liability at any time owing to the Districts by the Authority or the Trustee THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED SOLELY BY THE REVENUES PLEDGED THEREFOR IN THE INDENTURE AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE OR LIEN UPON ANY PROPERTY OF THE AUTHORITY OR THE DISTRICTS, OR ANY OF THE AUTHORITY'S INCOME OR RECEIPTS, EXCEPT THE REVENUES. THE BONDS ARE NOT A DEBT OF THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS. NEITHER THE FAITH AND CREDIT OF THE DISTRICTS, THE COUNTY OF SAN DIEGO, THE CITY OF ENCINITAS, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE PLEDGED TO THE PAYMENT OF THE BONDS, AND NEITHER THE AUTHORITY OR THE DISTRICTS ARE OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION THEREFOR. NEITHER THE DISTRICTS, THE COUNTY OF SAN DIEGO, THE CITY OF ENCINITAS, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE LIABLE THEREFOR, NOR IN ANY EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREON BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AUTHORITY AS SET FORTH IN THE INDENTURE. NEITHER THE BONDS NOR THE OBLIGATION TO MAKE INSTALLMENT PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE DISTRICTS, THE COUNTY OF SAN DIEGO, THE CITY OF ENCINITAS, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. CONTINUING DISCLOSURE The Authority has covenanted for the benefit of owners of the Bonds to provide certain financial information relating to the Bonds, and the Districts have covenanted for the benefit of owners of the Bonds to provide certain financial information and operating data relating to their respective Enterprises, by not later than January 1 following after the end of their respective fiscal year (presently June 30) in each year commencing with its report for the 2007 /08 fiscal year (the "Annual Report ") and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed, or caused to be filed, by the Authority and the Districts with each Nationally Recognized Municipal Securities Information Repository. The notices of material events will be filed, or cause to be filed, by the Authority and the Districts with the Municipal Securities Rulemaking Board. These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2- 12(b)(5). The specific nature of the information to be contained in the Annual Report or the notices of material events by the Authority and the Districts is contained in "APPENDIX D - FORM OF CONTINUING DISCLOSURE CERTIFICATE." Failure of the Authority and the Districts to provide the required ongoing information may have a negative impact on the value of the Bonds in the secondary market. Neither the Authority nor the Districts have failed to comply in all material respects with any previous undertakings with respect to said rule to provide annual reports or notices of material events. Summaries Not Definitive Definitions of certain capitalized terms herein are contained in APPENDIX A hereto, and are incorporated herein by reference. Definitions of certain terms used in this Official Statement, and the summaries of and references contained herein to the Indenture, the Bonds, the Installment Purchase Agreements, the Continuing Disclosure Agreements, statutes and other documents do not purport to be comprehensive or definitive and are qualified by reference to each such document, instrument or statute. Additional copies of this Official Statement and copies of the Indenture and the Installment Purchase Agreements may be obtained during the initial offering period from the Financial Advisor. After delivery of the Bonds, copies of these documents may be obtained from the Authority at 5920 Linea Del Cielo, Rancho Santa Fe, California 92067. 3 FINANCING PLAN The 1999 Project In 1999, the Authority issued the Prior Bonds in the aggregate original principal amount of $27,505,000 for the purpose of financing improvements jointly owned by the Districts (together, the "1999 Project "). The objective of installing and constructing the 1999 Project was to improve system reliability, system yield, water quality and emergency storage. The 1999 Project was constructed over the five year period from 2000 to 2005. Additionally, each District entered into a separate Installment Purchase Agreement to finance the 1999 Project, each between the related District and the Authority (the "1999 Installment Payments "). The projects completed and the total costs are set forth in the table below: Project Cost Lake Hodges Outlet, RCPL & Flume $12 Raw Water Pump Station 2 Solids Handling Facility 5 54 Inch Pipeline 5 San Dieguito Reservoir 1 Wash Water Reclamation 34 Mitigation Services 24 Master Plan Repairs 194,907 Grand Total — Jointly Owned Projects $27 The Refunding Plan A portion of the proceeds of the Bonds will be used to prepay and defease the outstanding obligations of the 1999 Installment Payments of each District, which will cause the Prior Bonds to be defeased and redeemed. Proceeds of the Bonds, together with certain funds made available through the defeasance of the Prior Bonds, will be deposited into an escrow account with the Escrow Bank and used for the purposes of defeasing the Prior Bonds. Amounts so deposited, which will be invested in Federal Securities and will be verified by Grant Thornton LLP, Certified Public Accountants, Minneapolis, Minnesota (the "Verification Agent "), to be sufficient to pay the redemption price of the Prior Bonds upon their optional redemption on December 20, 2007. Assuming the accuracy of the Verification Agent's computations, as a result of the deposit and application of funds as provided in the escrow account, the Prior Bonds will be defeased and all obligations thereunder discharged. 4 Estimated Sources and Uses of Funds The estimated sources and uses of funds relating to the Bonds are as follows: Sources Principal Amount of Bonds $20 Plus Net Original Issue Premium 243 Less Underwriter's Discount (146,205.72) Plus Funds Relating to the Prior Bonds 2,279,764.06 Total Sources $23 Uses Deposit to Escrow Fund $20 Deposit to Reserve Account 2 Deposit to Costs of Issuance Fund (2) 292,049.86 Total Uses $23 Equal to the Reserve Requirement with respect to the Bonds. See "SECURITY FOR THE BONDS — Reserve Account." (2) Costs of Issuance include Bond Insurance Premium, legal fees, printing costs, rating agency fees and other miscellaneous expenses. DEBT SERVICE The Installment Purchase Agreements require the Districts to make Installment Payments March 15 and September 15 of each year, beginning March 15, 2008, and continuing until the end of the term of the Installment Purchase Agreement. The following is a schedule of annual debt service on the Bonds for each year until maturity. 5 R.E. BADGER WATER FACILITIES FINANCING AUTHORITY ANNUAL DEBT SERVICE SCHEDULE Period Ending Total Annual (October 1 ) Principal Interest Debt Service 2008 $1,29500 $713,523.63 $208,523.63 2009 1,23000 780,618.76 2,01018.76 2010 1,27500 734,493.76 209,493.76 2011 1,33000 683,493.76 2,013,493.76 2012 1,38000 630,293.76 2,010,293.76 2013 1,43000 575,093.76 205,093.76 2014 1,49000 517,893.76 207,893.76 2015 1,55000 458,293.76 2,008,293.76 2016 1,61500 396,293.76 2,011,293.76 2017 1,67500 331,693.76 206,693.76 2018 1,74500 264,693.76 2,009,693.76 2019 1,81500 194,893.76 2,009,893.76 2020 52500 122,293.76 647,293.76 2021 54500 10037.50 645,637.50 2022 57000 78,156.26 648,156.26 2023 59500 53,931.26 648,931.26 2024 620,000 27,900.00 647,900.00 Total $200500 $6,664,198.77 $27,349,198.77 6 THE BONDS Description of the Bonds The Bonds will be issued as fully registered bonds in the denomination of $5,000 (an "Authorized Denomination "), or any integral multiple of $5,000. The Bonds will be dated the date of delivery to the original purchaser thereof. The Bonds will bear or accrue interest at the rates per annum and will mature, subject to the redemption provisions set forth below, on the dates and in the principal amounts, all as set forth on the cover page hereof. Interest on the Bonds is payable semiannually on April 1 and October 1 of each year (commencing April 1, 2008) (each, an "Interest Payment Date ") to the person whose name appears on the Bond registration books of the Trustee as the registered owner thereof on the Record Date. If the Book -Entry System is not then in effect, such interest will be paid by check mailed by the Trustee on such Interest Payment Date, by first class mail, to such registered owner at the address which appears on such books; provided however, that payment of interest may be by wire transfer in immediately available funds to an account in the continental United States of America to any Owner of Bonds in the aggregate principal amount of $1,000,000 or more who shall furnish written wire instructions to the Trustee prior to the applicable Record Date. Interest on the Bonds shall be payable in lawful money of the United States of America and shall be calculated on the basis of a 360-day year consisting of twelve 30 -day months. See "Book -Entry Only System" below for a description of how interest and principal will be paid while the Book -Entry System is in effect. Principal of and redemption premium, if any, on the Bonds will be payable at the Trust Office of the Trustee in Los Angeles, California. Principal of, redemption premium, if any, and interest on the Bonds shall be paid in lawful money of the United States of America. Redemption of the Bonds Optional Redemption. The Bonds maturing on or before October 1, 2017 are not subject to optional redemption prior to maturity. The Bonds maturing on October 1, 2018 and thereafter are subject to redemption prior to their stated maturity at the option of the Authority, as a whole or in part on any date, by such maturities as are selected by the Authority from any available source of funds on or after October 1, 2017 at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption. Special Mandatory Redemption. The Bonds shall also be subject to redemption as a whole or in part on any date, among maturities in a manner determined by the Authority to the extent insurance proceeds received with respect to an Enterprise are not used by the applicable District to repair, rebuild or replace such Enterprise pursuant to the related Installment Purchase Agreement, or to the extent of condemnation proceeds received with respect to an Enterprise and elected by the respective District to be used for such purpose pursuant to the related Installment Purchase Agreement, at a redemption price equal to the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. Selection of Bonds for Redemption. Whenever provision is made for the redemption of less than all of the Bonds, the Trustee shall select the Bonds to be redeemed from all Bonds or such given portion thereof not previously called for redemption, pro rata among maturities and by lot within a maturity in any manner which the Trustee in its sole discretion shall deem appropriate and fair, provided, however, that if less than all of the Bonds are called for redemption at any one time, the Trustee shall specify a reduction in any pending account installments required to be made hereunder which, to the extent practicable, results in Debt Service which will approximately equal annual Installment Payments remaining to be paid under the Installment Purchase Agreements after such redemption. For purposes of such selection, the Trustee shall treat each Bond as consisting of separate $5,000 portions and each such portion shall be subject to redemption as if such portion were a separate Bond. 7 Notice of Redemption. Notice of redemption shall be mailed by first class mail, postage prepaid, not less than thirty (30) nor more than sixty (60) days before any redemption date, to the Bond Insurer and to respective Owners of any Bonds designated for redemption at their addresses appealing on the Registration Books. Each notice of redemption shall state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the Bonds (or all Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (if less than all Bonds are redeemed) Bond numbers of the Bonds to be redeemed, the maturity or maturities of the Bonds to be redeemed and in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on the redemption date there will become due and payable on each of said Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered. Neither the failure to receive any notice nor any defect therein shall affect the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Effect of Redemption. Notice of redemption having been duly given, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Exchange of Bonds Bonds may be exchanged at the Trust Office of the Trustee for a like aggregate principal amount of Bonds of other Authorized Denominations of the same maturity. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee shall not be required to register the transfer or exchange of any Bond (i) during the fifteen (15) day period preceding the selection of Bonds for redemption, or (ii) which has been selected for redemption in whole or in part. Issuance of Parity Obligations The Districts have covenanted in their respective Installment Purchase Agreements not to issue or incur evidences of indebtedness or other obligations (other than Maintenance and Operation Expenses) having any priority in payment over their respective Installment Payments. Each District shall have the right, from time to time, to issue Parity Obligations in any Fiscal Year, upon such terms and conditions as such District shall deem advisable, but only upon compliance with the following conditions which are conditions precedent to the issuance of any such Parity Obligations. San Dieguito Parity Obligations Test. The following covenants apply to the issuance by San Dieguito of any parity obligations: (a) San Dieguito shall not be in default under the terms of its Installment Purchase Agreement; (b) The Net Revenues, calculated in accordance with generally accepted accounting principles, as shown by the books of San Dieguito for the most recent twelve (12) month period selected by San Dieguito ending not more than sixty (60) days prior to the adoption of the Parity Obligations Instrument, pursuant to which such Parity Obligations are issued, as shown by the books of San Dieguito, plus, at the option of San Dieguito, any or all of the items hereinafter in this paragraph designated (i) and (ii), shall at least equal One Hundred Fifteen percent (115 %) of Maximum Annual Debt Service, with Maximum Annual Debt Service calculated on all Bonds or Obligations to be Outstanding immediately subsequent to the issuance of such Parity Obligations which have a lien on Net Revenues. The items any or all of which may be added to such Net 8 Revenues for the purpose of issuing or incurring Parity Obligations under the Installment Purchase Agreement are the following: (i) An allowance for Net Revenues from any additions to or improvements or extensions of the Enterprise to be made with the proceeds of such Parity Bonds, and also for Net Revenues from any such additions, improvements or extensions which have been made from moneys from any source but in any case which, during all or any part of such Fiscal Year or such twelve (12) month period, were not in service, all in an amount equal to ninety percent (90 %) of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first thirty -six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown in the written report of an Independent Consultant engaged by San Dieguito; and (ii) An allowance for earnings arising from any increase in the Charges which has become effective prior to the incurring of such additional indebtedness but which, during all or any part of such Fiscal Year or such twelve (12) month period, was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in Charges had been in effect during the whole of such Fiscal Year or such twelve (12) month period, all as shown in the written report of an Independent Consultant engaged by the District. (c) The Parity obligations Instrument providing for the issuance of such Parity Obligations under this provision shall provide that: (i) The proceeds of such Parity Obligations shall be applied to the acquisition, construction, improvement, financing or refinancing of additional facilities, improvements or extensions of existing facilities within the Enterprise, or otherwise for facilities, improvements or property which San Dieguito determines are of benefit to the Enterprise, or for the purpose of refunding any Obligations in whole or in part, including all costs (including costs of issuing such Parity Obligations and including capitalized interest on such Parity Obligations during any period which San Dieguito deems necessary or advisable) relating thereto; (ii) Interest on such Parity Obligations shall be payable on an Interest Payment Date; (iii) The principal of such Parity Obligations shall be payable on October 1 in any year in which principal is payable; and (iv) Money or a Qualified Surety Bond as authorized by the issuing document shall be deposited in a reserve account for such Parity Obligations from the proceeds of the sale of such Parity Obligations or otherwise equal to the Reserve Requirement. State Loans San Dieguito may borrow money from the State to finance improvements to the Enterprise, without complying with the provisions of paragraphs (c) (ii), (iii) or (iv) above, relating to the issuance of Parity Obligations, and the obligation of the District to make payments to the State under the loan agreement memorializing said loan (the "State Loan ") may be treated as Parity Obligations for purposes of the Installment Purchase Agreement; provided that San Dieguito shall not make a payment on such State Loan (except as hereinafter expressly provided) to the extent it would have the effect of causing San Dieguito to fail to make a timely payment on the Installment Payments and any Parity Obligations. In the event San Dieguito's Water Fund does not contain sufficient funds to make the full amount of payments on the Installment Payments and any Parity Obligations and such State Loan, San Dieguito shall make payments on the Installment Payments and any Parity Obligations and such State Loan on a pro rata basis. Subordinate Obligations Nothing in the Installment Purchase Agreement shall prohibit or impair the authority of San Dieguito to issue bonds or other obligations secured by a lien on Net Revenues which is subordinate to the lien established under the Installment Purchase Agreement, upon such terms and in such principal amounts as San Dieguito may determine; provided, that San Dieguito may issue or incur any such 9 Subordinate Obligations subject to the following specific conditions which are hereby made conditions precedent to the issuance and delivery of such Subordinate Obligations: (a) San Dieguito shall be in compliance with all covenants set forth in the Installment Purchase Agreement. (b) The Net Revenues calculated on sound accounting principles, as shown by the books of San Dieguito for the latest Fiscal Year or any more recent twelve (12) month period selected by San Dieguito ending not more than sixty (60) days prior to the adoption of the Subordinate Obligations Instrument pursuant to which such Subordinate Obligations are issued, as shown by the books of San Dieguito, plus, at the option of San Dieguito, any or all of the items hereinafter in this paragraph designated (i) and (ii), shall at least equal One Hundred percent (100 %) of Maximum Annual Debt Service, with Maximum Annual Debt Service calculated on all Obligations to be Outstanding immediately subsequent to the issuance of such Subordinate Obligations which have a lien on Net Revenues. The items any or all of which may be added to such Net Revenues for the purpose of issuing or incurring Subordinate Obligations under the Installment Purchase Agreement are the following: (i) An allowance for Net Revenues from any additions to or improvements or extensions of the Enterprise to be made with the proceeds of such Subordinate Obligations, and also for Net Revenues from any such additions, improvements or extensions which have been made from moneys from any source but in any case which, during all or any part of such Fiscal Year or such twelve (12) month period, were not in service, all in an amount equal to ninety percent (90 %) of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first thirty -six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown in the written report of an Independent Consultant engaged by San Dieguito; and (ii) An allowance for earnings arising from any increase in the Charges which has become effective prior to the incurring of such additional indebtedness but which, during all or any part of such Fiscal Year or such twelve (12) month period, was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in Charges had been in effect during the whole of such Fiscal Year or such twelve (12) month period, all as shown in the written report of an Independent Consultant engaged by the District. (c) The Subordinate Bonds Instrument providing for the issuance of such Subordinate Obligations under the Indenture shall provide that: (i) The proceeds of such Subordinate Obligations shall be applied to the acquisition, construction, improvement, financing or refinancing of additional facilities, improvements or extensions of existing facilities within the Enterprise, or otherwise for facilities, improvements or property which San Dieguito determines are of benefit to the Enterprise, or for the purpose of refunding any Obligations in whole or in part, including all costs (including costs of issuing such Subordinate Obligations and including capitalized interest on such Subordinate Obligations during any period which San Dieguito deems necessary or advisable) relating thereto; (ii) Interest on such Subordinate Obligations shall be payable on an Interest Payment Date; and (iii) The principal of such Subordinate Bonds shall be payable on October 1 in any year in which principal is payable. 10 Santa Fe Parity Obligations Test. The following covenants apply to the issuance by Santa Fe of any parity obligations: (a) No event of Default shall have occurred and be continuing under the Installment Purchase Agreement or any Parity Obligations. (b) The Net Revenues calculated in accordance with generally accepted accounting principles, as shown by the books of Santa Fe for the most recent completed Fiscal Year for which audited financial statements are available, or for any more recent consecutive twelve (12) month period selected by Santa Fe at its option, in either case verified by a certificate or opinion of an Independent Accountant or Fiscal Consultant, plus the Additional Revenues, are at least equal to one hundred fifteen percent (115%) of the amount of Maximum Annual Debt Service. "Additional Revenues" means, with respect to the issuance of any Parity Obligations, any or all of the following amounts: (i) An allowance for Net Revenues from any additions or improvements to or extensions of the Enterprise to be made with the proceeds of such Parity Obligations or from any other source, all in an amount equal to ninety percent (90 %) of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first thirty -six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown by the certificate or opinion of a qualified independent consultant employed by SFID. (ii) An allowance for Net Revenues arising from any increase in the charges made for service from the Enterprise which have been adopted prior to the incurring of such Parity Obligations, in an amount equal to the total amount by which the Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year or during any more recent twelve (12) month period selected by SFID, all as shown by the certificate or opinion of a qualified independent consultant. (c) Upon the issuance of such Parity Obligations a reserve fund shall be established for such Parity Obligations in an amount at least equal to the lesser of (i) Maximum Annual Debt Service on such Parity Obligations, or (ii) the maximum amount then permitted under the Code. (d) Such Parity Obligations shall be payable on the Installment Payment Dates. These provisions shall not apply to any Parity Obligations if all of the proceeds of which (other than proceeds applied to pay costs of issuing such Parity Obligations and to make the reserve fund deposit) shall be deposited in an irrevocable escrow for the purpose of paying the principal of and interest and premium (if any) of the Installment Payments or on any outstanding Parity Obligations. Book -Entry Only System General. The Depository Trust Company, New York, New York ( "DTC ") will act as securities depository for the Bonds. The Bonds will be issued as fully- registered certificates registered in the name of Cede & Co. (DTC's partnership nominee). One fully- registered Bond will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC is a limited - purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (the "Participants ") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through 11 electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the "Indirect Participants "). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (the "Beneficial Owner ") is in turn recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book -entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, mandatory redemption and interest payments on the Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on payment dates in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the date payable. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form of registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Authority and the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be responsibility of Direct and Indirect Participants. The Trustee and the Authority cannot and do not give any assurances that DTC, DTC Participants or others will distribute payments of principal, interest or any premium with respect to the Bonds paid to DTC or 12 its nominee as the registered owner, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The Trustee and the Authority are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto. The foregoing description of the procedures and record - keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. Discontinuance of Book - Entry. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Trustee and discharging its responsibilities with respect thereto under applicable law, or the Authority may terminate participation in the system of book -entry transfers through DTC or any other securities depository at any time. In the event that the book -entry only system is discontinued, payments of principal and interest with respect to the Bonds shall be payable as described herein under the caption "THE BONDS - Description of the Bonds." Transfer Fees. For every transfer and exchange of Bonds, Beneficial Owners may be charged a sum sufficient to cover any tax, governmental charge or transfer fees that may be imposed in relation thereto, which charge may include transfer fees imposed by the Trustee, DTC or the DTC Participant in connection with such transfers or exchanges. SECURITY FOR THE BONDS General THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED SOLELY BY THE INSTALLMENT PAYMENTS PLEDGED THEREFOR IN THE INDENTURE AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE OR LIEN UPON ANY PROPERTY OF THE AUTHORITY OR THE DISTRICTS, OR ANY OF THE AUTHORITY'S INCOME OR RECEIPTS, EXCEPT THE INSTALLMENT PAYMENTS. THE BONDS ARE NOT A DEBT OF THE COUNTY OF SAN DIEGO, THE CITY OF ENCINITAS, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS. NEITHER THE FAITH AND CREDIT OF THE DISTRICTS, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE PLEDGED TO THE PAYMENT OF THE BONDS, AND NEITHER THE AUTHORITY OR THE DISTRICTS ARE OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION THEREFOR. NEITHER THE DISTRICTS, THE COUNTY OF SAN DIEGO, THE CITY OF ENCINITAS, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS ARE LIABLE THEREFOR, NOR IN ANY EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREON BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AUTHORITY AS SET FORTH IN THE INDENTURE. NEITHER THE BONDS NOR THE OBLIGATION TO MAKE INSTALLMENT PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE DISTRICTS, THE COUNTY OF SAN DIEGO, THE CITY OF ENCINITAS, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. The Authority shall pay to the Trustee all Installment Payments, which the Trustee shall deposit in the Bond Fund to be used: first for payment of debt service (including mandatory sinking account redemptions), and second for replenishment of the Reserve Account in the event its balance is less than the Reserve Requirement, as and to the extent required by the Indenture. See "APPENDIX A" herein. The Authority, pursuant to the Indenture, has assigned to the Trustee its right to receive all Installment Payments from the Districts under the Installment Purchase Agreements and, effective immediately on default by a District under 13 its Installment Purchase Agreement and without any further act on the part of the Authority, any and all of the other rights of the Authority under such Installment Purchase Agreement as may be necessary to enforce payment of such Installment Payments when due or otherwise to protect the interests of the Owners of the Bonds. All Net Revenues of each District (defined below) are irrevocably pledged by such District to the payment of the applicable Installment Payments and debt service on Parity Obligations of such District as provided in the related Installment Purchase Agreement, and such Net Revenues shall not be used for any other purpose while any of the related Installment Payments remain unpaid; provided, however, that out of the Net Revenues there may be apportioned such sums for such purposes as are expressly permitted by the Installment Purchase Agreements, including payment of debt service on any Parity Obligations. This pledge shall constitute a first lien on the Net Revenues for the payment of the Installment Payments and debt service on any Parity Obligations in accordance with the Installment Purchase Agreement. The payment of Installment Payments by San Dieguito is on parity with its obligation to pay debt service on the 2004 Refunding Bonds, currently outstanding in the aggregate principal amount of $11,635,000. Santa Fe currently has no outstanding parity debt. The Bonds are not secured by a direct lien on the Project, the Enterprises or any other property of the Authority or the Districts. Installment Payments from Santa Fe are calculated to pay approximately 60% of total scheduled debt service on the Bonds, and Installment Payments from San Dieguito are calculated to pay the approximate remaining 40% of total scheduled debt service. Neither District is responsible for the Installment Payments owed by the other District, and a default under one Installment Purchase Agreement will not result in a default under the other Installment Purchase Agreement. The obligations of each District to make the related Installment Payments and the Additional Payments from the applicable Net Revenues and to perform and observe the other agreements contained in the related Installment Purchase Agreement shall be absolute and unconditional and shall not be subject to any defense or any right of setoff, counterclaim or recoupment arising out of any breach such District, Authority or the Trustee of any obligation to such District or otherwise with respect to the Project or out of indebtedness or liability at any time owing to such District by the Authority or the Trustee. The Districts are authorized to issue additional Parity Obligations secured by their respective Net Revenues with a lien on a parity basis with the lien of their Installment Payments, provided they comply with certain provisions in the respective Installment Purchase Agreement. See "THE BONDS - Issuance of Parity Obligations" herein. The Districts are also authorized to issue subordinate debt secured by their respective Net Revenues. "Net Revenues" of each District are Gross Revenues of such District less the Maintenance and Operation Expenses of such District's Enterprise, as such terms are defined below. The "Enterprise" of each District means the entire water supply, treatment, storage and distribution system owned, controlled or operated by such District, including but not limited to all facilities, properties and improvements at any time owned or operated by such District for the collection, treatment and supply of water to residents served thereby, and reclaimed water, whether within or without such District, and any necessary lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto hereafter acquired, constructed or installed by such District. In the case of San Dieguito, recycled and reclaimed water is not included in the Enterprise for purpose of determining Gross Revenues or Net Revenues. The Districts have covenanted to fix, prescribe and collect rates and charges for their respective Enterprise sufficient to annually provide Net Revenues equal to 115% of their respective Installment Payments and the payment of debt service on any of their Parity Obligations, plus certain reserves. See "Rate Covenant" below. "Maintenance and Operation Expenses" for each District means the reasonable and necessary costs spent or incurred by each District, respectively, for maintaining and operating the Enterprise, calculated in 14 accordance with sound accounting principles, including the cost of supply of water, gas and electric energy under contracts or otherwise, the funding of reasonable reserves, and all reasonable and necessary expenses of management and repair and other expenses to maintain and preserve the Enterprise in good repair and working order, and including all reasonable and necessary administrative costs of the District attributable to the Enterprise and the Obligations, such as salaries and wages and the necessary contribution to retirement of employees, overhead, insurance, taxes (if any), expenses, compensation and indemnification of the Trustee, and fees of auditors, accountants, attorneys or engineers, and including all other reasonable and necessary costs of each District or charges required to be paid by it to comply with the terms of the Obligations of each District, but excluding depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. "Gross Revenues" with respect to each District means, for any period of computation, all gross charges received for, and all other gross income and receipts derived by the District from, the ownership and operation of its Enterprise or otherwise arising from such Enterprise, including but not limited to (a) all Charges received by each District for use of the Enterprise, (b) all receipts derived from the investment of funds held by each District or the Trustee under any issuing document, (c) transfers from (but exclusive of any transfers to) any stabilization reserve accounts, and (d) all moneys received by each District from other public entities whose inhabitants are served pursuant to contracts with each District. "Charges" means fees, tolls, assessments, rates and charges for the services and facilities of the Enterprise furnished by each District. In the Installment Purchase Agreements, the Districts covenant that, so long as any Bonds are outstanding, the Districts will not issue or incur any obligations payable from their Net Revenues superior to the payment of the related Installment Payments. The Districts have the right to issue or incur indebtedness or other obligations on a parity with or subordinate to the related Installment Payments. (See "THE BONDS - Issuance of Parity Obligations" herein). Installment Payments Each Installment Purchase Agreement requires the related District to make Installment Payments on March 15 and September 15 of each year, commencing March 15, 2008, and continuing thereafter during the term of the Bonds, in amounts as specified in the related Installment Purchase Agreement (see "Application of Revenues" below). The Installment Payments shall be paid directly to the Trustee, and if received by the Authority shall be deposited with the Trustee within one (1) Business Day thereof. Installment Payments from Santa Fe are calculated to pay approximately 60% of total scheduled debt service on the Bonds, and Installment Payments from San Dieguito are calculated to pay the approximate remaining 40% of total scheduled debt service. Neither District is responsible for the Installment Payments owed by the other District, and a default under one Installment Purchase Agreement will not result in a default under the other Installment Purchase Agreement. The Districts' obligation to make Installment Payments are a special obligation of each District payable solely from their respective Net Revenues and other funds provided for in the related Installment Purchase Agreement. Neither the Bonds nor the obligation of the Districts to make Installment Payments constitutes a debt of the Authority, the Districts or of the State of California or of any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction or an obligation for which the Authority, the Districts or the State of California is obligated to levy or pledge any form of taxation or for which the Authority, the Districts or the State of California has levied or pledged any form of taxation. Bond Insurance Payment of the principal and interest on the Bonds will be guaranteed by a municipal bond insurance policy issued simultaneously with the issuance of the Bonds by the Insurer. See "BOND INSURANCE" below. 15 Rate Covenant Each District covenants in its Installment Purchase Agreement to fix, prescribe, revise and collect rates and charges for the services and facilities furnished by its Enterprise during each Fiscal Year which are at least sufficient, after making allowances for contingencies and errors in estimates, to pay the following amounts in the following order: (i) All Maintenance and Operation Expenses of its respective Enterprise estimated by such District to become due and payable in such Fiscal Year; (ii) Its Installment Payments and payments on any Parity Obligations becoming due and payable during such Fiscal Year; (iii) All other payments required for compliance with the Indenture and Installment Purchase Agreement and the instruments pursuant to which any Parity Bonds relating to the Enterprise shall have been issued; and (iv) All amounts, if any, required to restore the balance in the Reserve Account to the full amount of the District's share of the Reserve Requirement; and (v) All Additional Payments and other payments required to meet any other obligations of the District which are charges, liens, encumbrances upon, or which are otherwise payable from, Revenues or Net Revenues during such Fiscal Year. With respect to San Dieguito, the following shall apply: (a) San Dieguito shall fix, prescribe, revise and collect Charges for the Enterprise (exclusive of connection fees and transfers to the Water Revenue Fund from a rate stabilization fund, should one be established) during each Fiscal Year which are sufficient to yield Net Revenues of the Enterprise at least equal to one hundred percent (100 %) of the amounts payable under the preceding clause (a)(ii) and (a)(iii) in such Fiscal Year for Obligations which have a lien on such Net Revenues. (b) Additionally, San Dieguito shall fix, prescribe, revise and collect Charges for the Enterprise during each Fiscal Year which are sufficient to yield Net Revenues of the Enterprise at least equal to one hundred fifteen percent (115 %) of the amounts payable under the preceding clause (a)(ii) and (a)(iii) in such Fiscal Year for Bonds which have a lien on such Net Revenues. With respect to Santa Fe, the following shall apply: Santa Fe shall fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise during each Fiscal year which are sufficient to yield Net Revenues, including revenues received by SFID from connection fees, which, are at least equal to one hundred fifteen percent (115 %) of the aggregate amount described in the preceding clause (a)(ii) of this Section. Reserve Account The Authority has agreed to establish and maintain so long as any Bonds are outstanding a separate account in the Bond Fund, to be held by the Trustee for and on behalf of the Authority, to be known as the Reserve Account, which will be composed of two sub - accounts designated the "SFID Reserve Account" and the "SDWD Reserve Account." The Authority is initially funding the Reserve Account from proceeds of the Bonds. All amounts in the Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on or principal of the Bonds, when due and payable to the extent that moneys deposited in the Interest Account or Principal Account, respectively, are not sufficient for such purpose, and making the final payments of principal of and interest on the Bonds, subject to the following limitations: if the insufficiency was caused by a delinquency in payment of all Installment Payments under an Installment Purchase Agreement, then 16 the moneys necessary to make up the deficiency in the Interest Account, Principal Account or Sinking Account caused by the delinquency with respect to such Installment Purchase Agreement shall be transferred from the applicable subaccount of the Reserve Account which was established for the District causing such delinquency. If there is a deficiency in a Reserve Account, then the Trustee shall not draw moneys from the other Reserve Account. On the date on which all Bonds shall be retired or provision made therefor pursuant to the Indenture, all moneys then on deposit in each District's Reserve Account shall be withdrawn by the Trustee and paid to such District, as a refund of overpaid Installment Payments. If as of the first (1st) day of the month preceding any Interest Payment Date there shall be any deficiency in a Reserve Account (whether due to a payment therefrom or due to the fluctuation in market value of securities credited thereto, or otherwise), the Trustee shall promptly notify the applicable District and the Bond Insurer in writing of the amount of such deficiency and such District shall pay to the Trustee the amount of such deficiency as provided in their related Installment Purchase Agreement. Any amounts on deposit in the Reserve Account on or before each Interest Payment Date in excess of the Reserve Requirement shall be transferred to the Bond Fund. Amounts in a subaccount of the Reserve Account may be transferred to the Interest Account, Principal Account or Sinking Account only to the extent necessary to cure any default under an Installment Purchase Agreement or for final payment, as described above, and may not be transferred to cure any default on any other Installment Purchase Agreement. The Authority may fund all or a portion of the Reserve Requirement with one or more Reserve Account Credit Devices in lieu of cash and which are accompanied by an opinion of Bond Counsel stating that neither the release of funds from the Reserve Account nor the deposit of the Reserve Account Credit Device will cause interest on the Bonds to be included in gross income for purposes of federal income taxation. "Reserve Requirement" means, as of any date of calculation by the Authority, an amount equal to the least of (i) 10% of the principal amount of the Bonds (less original issue discount if in excess of two percent of the stated redemption amount at maturity), (ii) maximum annual Debt Service payable by the Authority on the Bonds, or (iii) 125% of average annual Debt Service payable on the Bonds under the Indenture, all as computed by the Authority. The initial deposit into the Reserve Account is as described in "ESTIMATED SOURCES AND USES OF FUNDS" above. Application of Revenues The Districts have covenanted that all their respective Revenues, when and as received, will be received and held by each District in trust for the benefit of Bondholders and payments with respect to any Parity Obligations, and will be deposited by each District in the respective Water Enterprise Fund, which each District has covenanted to establish and maintain throughout the term of the Bonds. All Net Revenues of a District shall be disbursed, allocated and applied solely to the uses and purposes set forth in the related Installment Purchase Agreement, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of such District. All Revenues of a District in its Water Enterprise Fund shall be set aside by the District and applied in the following order of priority: (1) Maintenance and Operation Expenses. The Districts have covenanted to pay all Maintenance and Operation Expenses of their respective Enterprise (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operation Expenses of such Enterprise, the payment of which is not then immediately required) as they become due and payable. (2) Installment Payments. All of the Revenues of a District shall be deposited immediately upon receipt in its Water Enterprise Fund. Each District covenants and agrees that its Net Revenues will be held in its Water Enterprise Fund. On or before each Installment Payment Date (commencing March 15, 2008) each District shall withdraw from its Water Enterprise Fund and transfer to the Trustee, for deposit in the Bond Fund, an amount which, together with such District's share of the balance then on deposit in the Bond Fund, the Interest Account, the Sinking Account and the Principal Account, is equal to the aggregate amount of such 17 District's Installment Payment coming due and payable on the next succeeding Interest Payment Date. Payment by a District of its Installment Payment and all other payments relating to principal and interest on or with respect to Parity Obligations of such District shall be paid in accordance with the terms of the Installment Purchase Agreement and of such Parity Obligations without preference or priority, and in the event of any insufficiency of such moneys, ratably without any discrimination or preference. (3) Reserve Account. On or before each Installment Payment Date, each District will, from the remaining money on deposit in its Water Enterprise Fund, transfer to the Trustee for deposit in the Reserve Account that sum necessary to restore the Reserve Account to the District's allocable portion of the Reserve Requirement. Payments to replenish debt service reserve accounts established for the Bonds or a District's Parity Obligations shall be made in accordance with the terms of the respective Installment Purchase Agreement and the agreement for such Parity Obligations, without preference or priority, and in the event of any insufficiency of such moneys, ratably without any discrimination or preference. (4) General Expenditures. All Revenues of a District not required to be withdrawn pursuant to the provisions of (1) through (3) above may be expended by the District at any time for any lawful purpose of such District, including, but not limited to, deposit in the Rebate Fund or for payment of any subordinate obligation. Covenant to Provide Continuing Disclosure Each District has covenanted, pursuant to its Installment Purchase Agreement, to comply with the provisions of the Continuing Disclosure Certificate. The specific nature of the information to be contained in the Annual Report or the notices of material events is summarized below under the caption "APPENDIX D - FORM OF CONTINUING DISCLOSURE CERTIFICATE." See also "CONTINUING DISCLOSURE" herein Additional Covenants Additional covenants of each District contained in the respective Installment Purchase Agreement include, but are not limited to, the following: Maintenance, Utilities, Taxes and Assessments. Throughout the Term of the Installment Purchase Agreements, all improvement, repair and maintenance of each District's Enterprise shall be the responsibility of such District, and each District shall maintain and repair its Enterprise or cause such Enterprise to be maintained and repaired and shall pay for, or otherwise arrange for the payment of, utility services, if any, supplied to such Enterprise all costs of operation of the Enterprise and all costs of repair and replacement of the Enterprise resulting from ordinary wear and tear or want of care. Each District will pay or cause to be paid all taxes, assessments and other governmental charges, if any, that may be levied, assessed or charged upon its Enterprise promptly as and when the same shall become due and payable, provided, however, that a District shall not be required to pay any such tax, assessment, or charge, if the validity thereof shall concurrently be contested in good faith by appropriate proceedings, if such District shall set aside reserves in a form and amount which is adequate with respect thereto; and provided further, that such District, upon the commencement of any proceedings to foreclose the lien of any such tax, assessment, or charge, forthwith pay, or cause to be paid, any such tax, assessment or charge, unless contested in good faith as aforesaid. Each District will not suffer its Enterprise, or any part thereof, to be sold for any taxes, assessments or other charges whatsoever, or to be forfeited therefor. Nothing herein contained shall be deemed to impose any liability to pay taxes, assessments or charges where none is imposed by law. Operation of Enterprise. Each District covenants and agrees to operate, maintain and preserve, or to cause to be operated, maintained and preserved, its Enterprise in good repair and working order and will operate or cause to be operated such Enterprise in an efficient and economical manner. 18 Payment of Additional Payments. In addition to the Installment Payments, each District shall pay when due its pro -rata portion of all costs and expenses incurred by the Authority to comply with the provisions of the Indenture, and shall pay to the Trustee upon request therefor its pro -rata portion of all compensation for fees due to the Trustee and all of its costs and expenses payable as a result of the performance of and compliance with its duties, together with its pro -rata portion of all amounts required to indemnify the Trustee, and its pro -rata portion of all related costs and expenses of attorneys, auditors, engineers and accountants. Insurance. Each District shall maintain or cause to be maintained the following policies of insurance (which may be maintained in whole or in part in the form of a pooled insurance program): (1) Insurance against loss or damage to any structures constituting any part of its Enterprise, as is customarily maintained with respect to works and properties of a like character, which may be carried in conjunction with any other policies of fire and extended coverage insurance; (2) Public Liability and Property Damage the minimum coverages of which shall be $1,000,000 for personal injury or death per person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and property damage insurance in the minimum coverage of $100,000 per event, respectively, the property damage being subject to a maximum $10,000 deductible per accident. Such insurance may be maintained in the form of a minimum $3,000,000 single limit policy covering all such risks; (3) Workers' compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure employers against liability for compensation under the Workers' Compensation Insurance and Safety Act now in force in California, or any act hereafter enacted as an amendment or supplement thereto or in lieu thereof, such worker's compensation insurance to cover all persons employed in connection with its Enterprise and to cover full liability for compensation under any such act aforesaid, based upon death or bodily injury claims made by, for or on behalf of any person incurring or suffering injury or death during or in connection with its Enterprise or the business of such District. Insurance Net Proceeds. Any Net Proceeds of any such insurance required by the respective Installment Purchase Agreement relating to the loss or destruction of any part of a District's Enterprise which is collected by such District shall be applied and disbursed as set forth below: (a) If a District determines that such Net Proceeds are sufficient to repair, reconstruct or replace the damaged or destroyed portion of its Enterprise, then such District shall cause such portion of the Enterprise to be repaired, reconstructed or replaced to at least the same good order, repair and condition as it was in prior to the damage or destruction, insofar as the same may be accomplished by the use of said Net Proceeds, and the District shall direct the Trustee to disburse said Net Proceeds for said purpose. Any balance of said Net Proceeds not required for such repair, reconstruction or replacement shall be transferred by the Trustee to the Bond Fund and the District shall direct the Trustee that said balance be applied as a prepayment of its Installment Payments, except that no such prepayment shall be in an amount less than $5,000. Such District shall be obligated to continue to make Installment Payments required by its Installment Purchase Agreement notwithstanding accident to or destruction of all or a portion of its Enterprise unless and until the Bonds relating to its Installment Payment and all amounts owed thereunder and under the Indenture by such District are paid in full. (b) In the event that such Net Proceeds are not sufficient to repair, reconstruct or replace the damaged or destroyed portion of the applicable Enterprise, the District shall direct the Trustee to apply such Net Proceeds to the prepayment in full, on the next succeeding Installment Payment Date, of the balance of such District's Installment Payments, or if such Net Proceeds are insufficient to prepay the balance of such Installment Payments in full then such District shall direct the Trustee to apply such Net Proceeds to prepayment of its Installment Payments except that no such prepayment shall be in an amount less than $5,000. (c) If a District is unable to obtain or maintain insurance on reasonable terms, either as to amounts or as to risks, the failure to maintain such insurance shall not constitute a default under the related Installment 19 Purchase Agreement if such District shall cause the employment of an independent insurance consultant for the purpose of reviewing such insurance requirements and making recommendations respecting the types, amounts and provisions of reasonably obtainable insurance, or the establishment of other generally accepted forms of alternative protection that should be carried in lieu thereof, or the infeasibility of obtaining insurance, and if such District shall comply with the recommendations made in such report; provided that in any such case the District shall be required to self - insure in lieu of such other insurance and use the best efforts to establish and maintain reserves in connection with such self - insurance in such amounts as may be determined by such independent insurance consultant or the District's risk manager. Eminent Domain. All Net Proceeds received in any condemnation proceeding undertaken by any governmental authority relating to all or a portion of a Enterprise shall be paid by the related District to the Trustee for deposit in the Bond Fund and such District shall assure that such Net Proceeds are applied and disbursed as set forth below: (a) If the District determines that such condemnation has not materially affected the operation of its Enterprise or the ability of such District to meet any of its obligations hereunder, and if such Net Proceeds are insufficient to enable such District to prepay its Installment Payments in full on the next succeeding Installment Payment Date, the District shall direct the Trustee to retain such Net Proceeds in the Bond Fund and to cause such Net Proceeds to be applied as a credit against its next succeeding Installment Payments. The District shall be obligated to continue to make its Installment Payments required by the related Installment Purchase Agreement notwithstanding condemnation of all or a portion of its Enterprise unless and until the Bonds relating to its Installment Payments and all amounts owed hereunder and under the Indenture by District are paid in full. (b) If a District determines that such condemnation has materially affected the operation of its Enterprise or the ability of such District to meet any of its obligations, or if such Net Proceeds are sufficient to enable the District to prepay its Installment Payments in full on the next succeeding Installment Payment Date, the District shall direct the Trustee to apply such Net Proceeds to the prepayment in full or (to the extent that such condemnation pertains only to a portion of its Enterprise) in part on the next succeeding Installment Payment Date of its Installment Payments except that no such prepayment shall be in an amount less than $5,000. Records and Accounts. Each District shall keep proper books of record and accounts of its Enterprise, separate from all other records and accounts, in which complete and correct entries shall be made of all transactions relating to such Enterprise. Said books shall, upon prior request, be subject to the reasonable inspection by the Owners of not less than ten percent (10 %) in aggregate principal amount of the Outstanding Bonds, or their representatives authorized in writing. Each District shall cause the books and accounts of its Enterprise to be audited annually by an Independent Accountant, not more than one hundred eighty (180) days after the close of each Fiscal Year, and shall make a copy of such report available for inspection by the Bond Owners at the office of the District. Further Assurances. Whenever and so often as requested so to do by the Authority or its assignee, each District will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things, as may be necessary or reasonably required in order to further and more fully vest in the Authority or its assignee all rights, interest, powers, benefits, privileges and advantages conferred or intended to be conferred upon the Authority and its assignee by the respective Installment Purchase Agreement. Against Encumbrances or Sales. Each District covenants not to create or suffer to be created any mortgage, pledge, lien, charge or encumbrance upon its Enterprise, or upon any real or personal property essential to the operation of such Enterprise, other than as permitted in the related Installment Purchase Agreement. Neither District will sell or otherwise dispose of any property essential to the proper operation of its Enterprise, except as otherwise permitted by the respective Installment Purchase Agreement. 20 Maintenance of Tax - Exemption. The Districts and the Authority shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Bonds until the expiration of the term of the respective Installment Purchase Agreement, as provided in the Indenture. BOND INSURANCE The following information has been furnished by MBIA Insurance Corporation ( "MBIA" or the "Insurer ") for use in this Official Statement. Reference is made to Appendix E for a specimen of MBIA's policy (the "Policy'). The MBIA Insurance Corporation Insurance Policy MBIA does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Policy and MBIA set forth under the heading "BOND INSURANCE ". Additionally, MBIA makes no representation regarding the Bonds or the advisability of investing in the Bonds. The MBIA Policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the Authority to the Paying Agent or its successor of an amount equal to (i) the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Bonds as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the Policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless MBIA elects in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner of the Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law (a "Preference "). MBIA's Policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Bonds. MBIA's Policy does not, under any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis; (iii) payments of the purchase price of Bonds upon tender by an owner thereof; or (iv) any Preference relating to (i) through (iii) above. MBIA's Policy also does not insure against nonpayment of principal of or interest on the Bonds resulting from the insolvency, negligence or any other act or omission of the Paying Agent or any other paying agent for the Bonds. Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by MBIA from the Paying Agent or any owner of a Bond the payment of an insured amount for which is then due, that such required payment has not been made, MBIA on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such insured amounts which are then due. Upon presentment and surrender of such Bonds or presentment of such other proof of ownership of the Bonds, together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Bonds as are paid by MBIA, and appropriate instruments to effect the appointment of MBIA as agent for such owners of the Bonds in any legal proceeding related to payment of insured amounts on the Bonds, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners or the Paying Agent payment of the insured amounts due on such Bonds, less any amount held by the Paying Agent for the payment of such insured amounts and legally available therefor. 21 MBIA Insurance Corporation MBIA Insurance Corporation ( "MBIA ") is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange listed company (the "Company "). The Company is not obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the State of New York and licensed to do business in and subject to regulation under the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United States and the Territory of Guam. MBIA, either directly or through subsidiaries, is licensed to do business in the Republic of France, the United Kingdom and the Kingdom of Spain and is subject to regulation under the laws of those jurisdictions. In February 2007, MBIA Corp. incorporated a new subsidiary, MBIA Mexico, S.A. de C.V. ( "MBIA Mexico "), through which it intends to write financial guarantee insurance in Mexico beginning in 2007. The principal executive offices of MBIA are located at 113 King Street, Armonk, New York 10504 and the main telephone number at that address is (914) 273 -4545. Regulation As a financial guaranty insurance company licensed to do business in the State of New York, MBIA is subject to the New York Insurance Law which, among other things, prescribes minimum capital requirements and contingency reserves against liabilities for MBIA, limits the classes and concentrations of investments that are made by MBIA and requires the approval of policy rates and forms that are employed by MBIA. State law also regulates the amount of both the aggregate and individual risks that may be insured by MBIA, the payment of dividends by MBIA, changes in control with respect to MBIA and transactions among MBIA and its affiliates. The Policy is not covered by the Property /Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Strength Ratings of MBIA Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa." Standard & Poor's, a division of The McGraw -Hill Companies, Inc., rates the financial strength of MBIA "AAA." Fitch Ratings rates the financial strength of MBIA "AAA." Each rating of MBIA should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of MBIA and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold the Bonds, and such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds. MBIA does not guaranty the market price of the Bonds nor does it guaranty that the ratings on the Bonds will not be revised or withdrawn. MBIA Financial Information As of December 31, 2006 MBIA had admitted assets of $10.9 billion (audited), total liabilities of $6.9 billion (audited), and total capital and surplus of $4.0 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of June 30, 2007, MBIA had admitted assets of $10.8 billion (unaudited), total liabilities of $6.8 billion (unaudited), and total capital and 22 surplus of $4.0 billion (unaudited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. For further information concerning MBIA, see the consolidated financial statements of MBIA and its subsidiaries as of December 31, 2006 and December 31, 2005 and for each of the three years in the period ended December 31, 2006, prepared in accordance with generally accepted accounting principles, included in the Annual Report on Form 10 -K of the Company for the year ended December 31, 2006 and the consolidated financial statements of MBIA and its subsidiaries as of June 30, 2007 and for the six month periods ended June 30 2007 and June 30, 2006 included in the Quarterly Report on Form 10 -Q of the Company for the quarter ended June 30, 2007, which are hereby incorporated by reference into this Official Statement and shall be deemed to be a part hereof. Copies of the statutory financial statements filed by MBIA with the State of New York Insurance Department are available over the Internet at the Company's web site at http: / /www.mbia.com and at no cost, upon request to MBIA at its principal executive offices. Incorporation of Certain Documents by Reference The following documents filed by the Company with the Securities and Exchange Commission (the "SEC ") are incorporated by reference into this Official Statement: (1) The Company's Annual Report on Form 10 -K for the year ended December 31, 2006; and (2) The Company's Quarterly Report on Form 10 -Q for the quarter ended June 30, 2007. Any documents, including any financial statements of MBIA and its subsidiaries that are included therein or attached as exhibits thereto, filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the Company's most recent Quarterly Report on Form 10 -Q or Annual Report on Form 10 -K, and prior to the termination of the offering of the Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof from the respective dates of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No. 1-9583. Copies of the Company's SEC filings (including (1) the Company's Annual Report on Form 10 -K for the year ended December 31, 2006, and (2) the Company's Quarterly Reports on Form 10 -Q for the quarters ended March 31, 2007 and June 30, 2007) are available (i) over the Internet at the SEC's web site at http: / /www.sec.gov; (ii) at the SEC's public reference room in Washington D.C.; (iii) over the Internet at the Company's web site at http: / /www.mbia.com; and (iv) at no cost, upon request to MBIA at its principal executive offices. In the event the Insurer were to become insolvent, any claims arising under a policy of financial guaranty insurance are excluded from coverage by the California Insurance Guaranty Association, established pursuant to Article 14.2 (commencing with Section 1063) of Chapter 1 of Part 2 of Division 1 of the California Insurance Code. 23 THE DISTRICTS The following material is descriptive of San Dieguito and Santa Fe. It has been prepared by or excerpted from sources as noted herein and has not been verified by Bond Counsel, Disclosure Counsel, the Authority's Financial Advisor or the Underwriter. For further information, see "THE SANTA FE ENTERPRISE," "THE SAN DIEGUITO ENTERPRISE ", "APPENDIX B GENERAL DEMOGRAPHIC AND FINANCIAL INFORMATION", and "APPENDIX F- AUDITED FINANCIAL STATEMENTS OF SDWD AND SFID" attached hereto. General The Districts are located in the northern portion of San Diego County, California approximately twenty - five miles north of the City of San Diego, and slightly more than one hundred miles south of downtown Los Angeles. Santa Fe was formed in 1923 under the provisions of the Irrigation District Law, as amended (Division 11 of the Water Code of the State of California) (the "Irrigation District Law "). San Dieguito was formed in 1922, also under the provisions of the Irrigation District Law. In 1986, San Dieguito became a subsidiary district of the City of Encinitas (the "City ") pursuant to an incorporation election. Subsequently, San Dieguito has remained a separate and distinct entity from the City, although its five- person governing board is the elected city council of the City. The City Public Works Director acts as the District General Manager. Since June of 1995, the City has had the ability to abolish San Dieguito as a separate entity and merge it within the City, but has elected not to do so in order to preserve certain options with its relationship with the San Diego County Water Authority. The City currently has no intention to exercise this option in the foreseeable future. San Dieguito currently serves an area of approximately 8.9 square miles, and provides potable water to the coastal portions of the City, encompassing approximately 5,652 acres. Santa Fe currently serves an area of approximately 16.3 square miles, and provides water to the communities of Solana Beach, Rancho Santa Fe and portions of Fairbanks Ranch. Topographically, San Dieguito is characterized by rolling hills and mesa gently sloping toward the coastal plain to the west bordering for about five miles along the Pacific Ocean. Elevations vary from 410 feet to sea level. Mild ocean breezes maintain year -round average temperatures in the area encompassing San Dieguito of 65 to 75 degrees in the daytime and 47 to 65 degrees at night. Rainfall averages 12 inches per year, mostly in the winter months. Such a favorable climate has contributed to the area encompassing San Dieguito becoming and being one of the world's leading flower and flower seed growing centers. Although San Dieguito was originally established to provide irrigation water to surrounding farms, ranches and fruit groves, suburban residential communities have become the dominant features within San Dieguito. Population in San Dieguito has grown from approximately 34,000 residents in calendar year 1999 to approximately 38,000 residents in calendar year 2007. Population in Santa Fe has grown from approximately 20,491 residents in Fiscal Year 1998/99 to approximately 21,353 residents in Fiscal Year 2006/07. Based on 1990 U.S. Census data and the recent San Diego Association of Governments (SANDAL) Series 8 Regional Growth Forecast, San Dieguito's population is projected to increase to 43,850 in 2015, and Santa Fe's population is projected to increase to 23,500 in 2015. The Districts currently contain, and are planned for, a mixture of commercial, light industrial, and residential development, as well as agricultural usage of land. The Districts were originally formed for the purpose of developing an adequate water supply for the landowners and residents of the area. On November 15, 1948, and December 13, 1948, respectively, the residents of San Dieguito and Santa Fe voted to become a member of the San Diego County Water Authority ( "SDCWA "), the regional water supplier, and the Metropolitan Water District of Southern California ( "MWD "), thus becoming eligible to purchase water transported into San Diego County via the aqueducts of these two agencies. 24 Management and Personnel San Dieguito San Dieguito's five- person governing board is the elected city council of the City. San Dieguito has a staff of 22.7 full -time employees. There are also several City employees which support San Dieguito's operations, primarily in financial and management capacities. Following are brief biographies of San Dieguito's management personnel. Larry Watt — General Manager. Larry Watt is a veteran public works official in San Diego with over 25 years experience in the field. He has held positions at Caltrans and most recently the County of San Diego's Public Works Department where he served as the head of the Transportation Division. In that capacity, he was responsible for managing all road and channel maintenance for the County's 2000 mile road system, engineering support to field operations, traffic operations and engineering, fleet management, transportation planning and management and operations of the County's eight airports. Mr. Watt, an Encinitas resident, holds a Bachelor's Degree from the State University of New York at Binghamton and a Master's Degree from San Diego State University. He is a member of the Institute of Transportation Engineer's and the American Public Works Association. Victor Graves — Assistant District Manager. Victor Graves has been an employee of the District since 1972. He has worked in all aspects of the water operations and has been in his current position as Assistant Manager since 2003. Mr. Graves is responsible for managing San Dieguito's Engineering and Operations Divisions and also works closely with Santa Fe on issues related to the operation, maintenance and improvement of the jointly owned Filtration Plant and its appurtenant facilities. Mr. Graves holds a current State of California Department of Health Services Grade 5 Distribution operator certificate, and a California Department of Health Services Grade 2 Treatment operator certificate. In addition, Mr. Graves holds an Associate of Science Degree in Water Technology from Palomar College. Jennifer Smith — Finance Director. Jennifer Smith joined the City of Encinitas in 1997 after working for the Town of Chapel Hill, North Carolina's City Manager's Office and Town of Cary, North Carolina's Finance Department. Ms. Smith has held managerial positions with the City for the past nine years as a Management Analyst, the Assistant to the City Manager and the Finance Director. During that time, Ms. Smith has coordinated the City's Capital Improvement Program, developed and monitored City budgets, served as project manager for controversial and high - profile community projects, and has performed and /or overseen complex organizational, financial and operational analyses. Ms. Smith is a member of the Government Finance Officers Association and the California Society of Municipal Finance Officers. Ms. Smith has a Bachelor of Arts, Magna Cum Laude, from the University of Delaware and a Masters of Public Administration from the University of North Carolina, Chapel Hill, with a concentration in municipal government and finance. Jay Lembach - Finance Manager. Jay Lembach is the Finance Manager for the City of Encinitas and serves as the Finance Manager for the San Dieguito Water District. Mr. Lembach as been employed with the City for ten years, serving as the City's investment officer and manages a portfolio of $100 million. His duties include debt management, finance reporting, and general accounting. He was previously employed with Arthur Young & Company, Mr. Lembrach received his B.S. in business Administration, Finance from Portland State University and is a certified public accountant. Santa Fe . Santa Fe is governed by a five- member Board of Directors elected for staggered four -year terms, with each Director being elected from a specific district area (3 from Solana Beach and 2 from Rancho Santa Fe). Santa Fe has a staff of 49 full -time employees supervised by the General Manager. Following are brief biographies of Santa Fe's management personnel. Michael J. Bardin, General Manager. Michael Bardin has served as the General Manager of the Santa Fe Irrigation District in Rancho Santa Fe, California since October 2004. Prior to that, he held the positions of General Manager and Assistant General Manager, respectively, at the Leucadia Wastewater District for five years each. Mr. Bardin has over twenty -five years experience in the public utility industry, overseeing the administration, management and operations of water and wastewater services. He has degrees in Business 25 Administration /Management and Environmental Science. He is a certified Special District Administrator through the California Special District Association's Special District Leadership Foundation. Mr. Bardin's professional affiliations include the American Water Works Association, Water Environment Foundation, California Special District Association, and the Association of California Water Agencies. Jeanne Deaver, Administrative Manager. Jeanne Deaver was hired in September 2005 as the Administrative Manager for the District. Her career has been either working with or as a staff member of public sector organizations. She began her water district experience in 1990 at the Carlsbad Municipal Water District, where she was an administrative analyst and then the administrative manager. She left CMWD in 1995 and served as project manager for a financial system implementation for the City of Carlsbad until January 1998. From 1998 to 2005, Ms. Deaver was a partner with a small management consulting firm in San Diego. She worked predominantly with public sector agencies (school districts, cities, and counties). Ms. Deaver holds a master's degree in business administration from the San Diego State University and is a member of the Government Finance Officers' Association and the California Society of Municipal Finance Officers. Cor Shaffer, Treatment Plant Manager. Cor Shaffer is the Santa Fe Irrigation District's Plant Manager for the R. E. Badger Filtration Plant. Mr. Shaffer has over 15 years of engineering, management, regulatory, water operations, design, training, and construction experience in the water industry. Mr. Shaffer is a Registered Civil Engineer and a certified Grade 5 Water Treatment Plant Operator. He graduated with honors from San Diego State University with a Bachelor and Master of Science degree in Civil Engineering and teaches advanced water treatment classes at local community colleges. Mr. Shaffer began working at the District in December 2004. Prior to December 2004, he was the District Engineer for the California Department of Health Services, Drinking Water Field Operations Branch in Orange County, was the construction supervisor /plant manager of Helix Water District's R. M. Levy water treatment plant expansion project, and an independent consulting engineer. Mr. Shaffer is a member of the American Water Works Association. Audited Financial Statements The financial statements of San Dieguito for the Fiscal Year ended June 30, 2006 have been examined by Diehl, Evans & Company, LLP Carlsbad, California. The financial statements of Santa Fe for the Fiscal Year ended June 30, 2006 have been examined by Diehl, Evans & Company, LLP, Carlsbad, California. Each District's audited financial statements for Fiscal Year 2005 -2006 are attached hereto in Appendix F. Joint Facilities Since their respective formations, Santa Fe and San Dieguito have worked together to develop and maintain a cost - effective local water supply in a normally and environment. During this period, the Districts have benefited significantly from this unique partnership. The primary shared benefit has been water rights in Lake Hodges, established when the City of San Diego ( "San Diego ") purchased Lake Hodges from a local developer in 1924. A requirement of that transaction was a commitment by San Diego to retain certain water rights in Lake Hodges for the Districts. Various contract amendments have been adopted over the years as events dictated. In the late 1960's, the Districts purchased the 4.5 mile Flume and San Dieguito Reservoir from San Diego. As Federal and state laws were enacted that required filtration of the water supply before it was sold to customers, the Districts jointly funded construction of the 40 mgd Filtration Plant completed in 1970. Annual operating costs for the Filtration Plant are apportioned between the Districts based upon the proportionate amount of water deliveries to each Agency. The Districts pay the City of San Diego $31 per acre -foot for water from Lake Hodges. The cost to pump this water to the treatment plant and treat it is approximately $194 per acre -foot. The Districts expect that the price of untreated water will increase in calendar year 2007. Maintenance and Operation Expenses are reviewed annually. The Districts also purchase untreated water from the SDCWA for $425 per acre -foot plus 26 additional fixed charges based on historical purchases. The Districts may also purchase treated water from SDCWA for $572 per acre -foot plus additional fixed charges based on historical purchases. The San Dieguito's and Santa Fe's rights to water stored in Lake Hodges were renegotiated in 1998 with San Diego, in anticipation of the Emergency Storage Project under development by SDCWA. Lake Hodges is now a component of the region's emergency storage infrastructure with the addition of large 110 mgd capacity pumps and connecting pipelines to the Olivenhain Water Storage Project (the " Olivenhain Project "), located approximately 1 mile from Lake Hodges. The Olivenhain Project is a 20,000 acre foot reservoir which provides essential water storage in North San Diego County for use in an aqueduct- severing emergency event. The Olivenhain Dam was dedicated in the summer of 2003. As member agencies of SDCWA, the Districts are entitled to a portion of water stored in the Olivenhain Project. In 2008, a pipeline connecting the Olivenhain Reservoir to Lake Hodges will be completed. The pipeline will allow SDCWA to transfer water between the reservoir and the lake, and withdraw water into the SDCWA aqueduct in order to optimize water storage. Based on the 1998 agreement negotiated among the Districts and San Diego, the Districts are entitled to all water stored in Lake Hodges until the Olivenhain Project is complete. After completion of the Olivenhain Project or one similar to it, all local water collected in the system will be split 50 % -50% between the Districts and San Diego. Given the potential increase in the yield of local water after the completion of the Olivenhain Project, the potential exists for San Dieguito and Santa Fe to receive much larger quantities of water from Lake Hodges in times of high runoff due to the construction of the large 110 mgd pump station and the provision in the agreement enabling the Districts to carry over their 50% allocation from year to year for use during dry years. As imported water rates increase over time, the avoided cost of purchasing imported water will increase proportionately. The Districts recently upgraded the flume with a new pipeline which was completed early in 2004. San Dieguito and Santa Fe jointly own the 1,100 acre -foot San Dieguito Reservoir, which provides storage for unfiltered water. The San Dieguito Reservoir is located in the northeastern portion of Rancho Santa Fe, California, and receives water from Lake Hodges (which is located approximately four miles east of the San Dieguito Reservoir). Unfiltered water is pumped from the San Dieguito Reservoir to the Filtration Plant for processing and delivery. Additionally, San Dieguito and Santa Fe have installed a 54" pipeline to provide water directly from Lake Hodges to the Filtration Plant. The treated water is transported from the Filtration Plant to one 30 -inch pipeline and one 36 -inch pipeline owned by the San Dieguito, and to Santa Fe's two 30 -inch pipelines for delivery to the San Dieguito's transmission mains and final delivery to the respective service areas of San Dieguito and Santa Fe. In total, the Filtration Plant operation entails a pump station, a 40 million gallon /day filtration plant, an electrical co- generation facility with 800 KW and 600 KW generators, a covered treated water reservoir with a capacity of 13 million gallons, and certain connections and pipelines as described herein. Water Quality Compliance The kind and degree of water treatment which is effected through the Districts' Enterprises is regulated, to a large extent, by the federal government. Clean water standards set forth in the Safe Drinking Water Act and the Environmental Protection Act continue to set standards for the operations of the Enterprises and to mandate its use of technology. In the event that the Federal government, either acting through the Environmental Protection Agency or by adoption of additional legislation, should impose stricter quality standards upon the Enterprises, their respective expenses would increase accordingly and rates and charges would have to be increased to offset those expenses. It is not possible to predict the direction which Federal regulation will take with respect to water treatment. In 1968 Santa Fe, in partnership with San Dieguito, planned, financed, and constructed the Filtration Plant, a 40 million gallons per day ( "mgd ") conventional filtration plant completed in 1970. The Filtration Plant filters a blend of raw water purchased from the SDCWA and local source water from Lake Hodges. Lake Hodges boasts a 350 square mile watershed to capture as much of the annual rainfall as possible, which the Districts then transport through a 36" pipeline to the Filtration Plant or through an 18" pipeline via the San 27 Dieguito Reservoir. While maintaining an emergency water supply in the reservoir, the Districts pump an estimated 30% of their customers' demand from the reservoir to the Filtration Plant for multi - barrier treatment and distribution to its customers. In addition to the Districts' ability to deliver high quality, treated water, the Filtration Plant also has a highly efficient co- generation facility that generates clean power to energize the Filtration Plant. Any excess energy from the 1450 kw generators is sold to San Diego Gas & Electric via a 30- year purchasing contract. The Districts have negotiated for and constructed a number of interconnections with neighboring districts to insure a secure flow of potable water throughout its service area and to assist neighboring suppliers. In January of 1994 the Filtration Plant underwent a $6,500,000 rehabilitation in response to regulatory changes brought about by the Surface Water Treatment Rule (Chapter 17, Title 22, California Code of Regulations), State Fire Code 80, State Earthquake Standards, Haz Mat, and Air Quality Control Board. The changes included adding an extra row of flocculaters, 2 new filters, upgrades in electrical and mechanical equipment, new chlorinators, and a computer operating system. Water Sources and Supply The following information concerning SDCWA and MWD has been obtained from publicly available information which the San Dieguito and Santa Fe believe to be reliable; however, the Districts take no responsibility as to the accuracy or completeness thereof and have not independently verified such information. The information and expressions of opinion set forth under this caption are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of SDCWA and MWD since the date hereof. Although certain information set forth under this caption has been obtained front SDCWA and MWD, the Districts have not requested SDCWA and MWD to consent to the inclusion of such information and SDCWA and MWD have not approved this Official Statement and are not responsible for the accuracy or completeness of any of the statements contained in this Official Statement. The principal and interest with respect to the Bonds are payable solely from the Installment Payments of each respective District. Neither the Bonds nor the Installment Payments are a debt of SDCWA or MWD, and SDCWA and MWD are not liable in any way therefore. In 2006, the Districts obtained 25% of their respective domestic water demands from local supplies, and 75% from imported supplies. See "THE SAN DIEGUITO ENTERPRISE - Water Sources and Supply; Water Purchases" and "THE SANTA FE ENTERPRISE - Water Sources and Supply; Water Purchases" herein. Santa Fe and San Dieguito obtain a portion of their water supply through, and as members of, the SDCWA and the MWD. While the Districts' water supplies have historically been reliable, there can be no guarantee that such supplies will remain reliable in the future. The MWD is a public corporation organized in 1928 under the authority of the Metropolitan Water District Act. This Act provides a means whereby groups of cities and certain other governmental subdivisions such as irrigation water districts, not necessarily contiguous, may join together for the development of a water supply. The SDCWA was formed in 1944 under the County Water Authority Act for the purpose of transporting Colorado River water to supplement the local water supply. The SDCWA also delivers State Water Project water to its member agencies through five separate pipelines. The SDCWA built its first aqueduct in 1947 and completed its second one, which runs through Santa Fe, in 1959. The Districts joined the SDCWA in order to supplement local water sources. The SDCWA acquires water and water rights and sells such water to its member agencies, which include all of the major water purveyors in San Diego County. The SDCWA's facilities consist primarily of extensions of certain MWD pipelines, which deliver untreated and treated water to the Districts. In the event of limited water supply, as one of 24 members of the SDCWA, each of the Districts has the statutory right to purchase its pro rata share of the available water based upon the portion each has paid toward the capital cost of the works of SDCWA. Santa Fe's pro rata share is 1.50% of SDCWA capacity, and San Dieguito's share is 1.19 %. 28 SDCWA's Service Area Water Supply. The area served by SDCWA receives its water supply from two sources: (i) local supplies (local runoff, groundwater, reclamation and, prospectively, desalination), and (ii) water imported by the SDCWA from MWD is currently SDCWA's largest source of imported water, with a smaller proportion coming from the SDCWA /IID water transfer. Since 1990, an average of approximately 18% of the water supply for the SDCWA's service area has come from local sources. Such sources are heavily dependent upon rainfall and area cyclical in nature. The remaining portion of the SDCWA's service area water supply has historically come through SDCWA purchases from MWD. The SDCWA has begun to diversify its water supply portfolio with the signing of the SDCWA /IID water transfer and the commencement of the water deliveries. A number of the member agencies have storage facilities for the impounding of local runoff and water purchase from the SDCWA. The total capacity of such storage is approximately 595,500 acre -feet. (Quantities of water are expressed in terms of acre -feet. An acre -foot is the amount of water which will cover one acre to a depth of one foot and is equivalent to approximately 326,000 gallons, which is approximately the average annual water use of two households.) Such storage is generally only available to the member agencies operating such facilities and is generally not available for use by other member agencies, since the storage facilities are currently not interconnected. Some of the member agencies are able to sell water to certain other member agencies under separate arrangements. The completion of the Olivenhain Dam and Reservoir in October 2003 has provided the SDCWA approximately 20,000 acre -feet of new storage capacity. The SDCWA also has capacity rights in certain reservoirs owned by its member agencies. Once of the purposes of the Capital Improvement Program is to interconnect a number of member agency storage facilities. Another purpose is to enhance the SDCWA's own storage capacity. The SDCWA currently purchases its water supplies from MWD and the Imperial Irrigation District ( "IID "). The SDCWA is the largest purchaser of water from MWD. In the fiscal year ended June 30, 2004, the SDCWA's estimated water purchases from MWD represented approximately 26% of MWD's total deliveries. MWD obtains its water supply from two primary sources: the Colorado River via the Colorado Aqueduct and the State Water Project ( "SWP ") via the Edmund G. Brown California Aqueduct. The supplies from IID are conveyed through MWD's Colorado River Aqueduct by exchange agreement with MWD. On average, the SDCWA receives about 75 -80% of its supply from the Colorado River; the remaining 20 -25% is from the SWP. The SDCWA began receiving transfer water from IID in December 2003. Starting with the initial delivery of 10,000 acre -feet, the amount of water to be delivered will be increased according to an agreed -upon schedule until the maximum transfer yield of 200,000 acre -feet per year is achieved. In addition, the SDCWA will receive about 77,700 acre -feet of imported water per year from the All - American and the Coachella canal lining projects. This water is expected to be available by the end of 2008. Water Purchases from the Metropolitan Water District of Southern California. The SDCWA is a member agency of MWD. MWD was created in 1928, by vote of the electorates of eleven Southern California cities, to provide a supplemental supply of wholesale water for domestic and municipal uses to its constituent agencies. The MWD service area comprises approximately 5,200 square miles and includes portions of the six counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura. There are 26 member agencies of MWD, consisting of 14 cities, 11 municipal water districts and the SDCWA. A Board of Directors, currently numbering 37 members, governs MWD. Each constituent agency has at least one representative on the MWD Board. Representation and voting rights are based upon the assessed valuation of property within each constituent agency. The SDCWA has four members on the MWD Board. The total population of the MWD service area is currently estimated to be over 17 million. Supply deficiencies can occur during periods of drought. Increased use of MWD water, coupled with a reduction of MWD's existing water supplies could reduce the amount of water available to MWD to supply the SDCWA. The Metropolitan Water District Act, California Statutes 1969, Chapter 209, as amended (the "MWD Act ") provides a preferential entitlement for the purchase of water by each of the MWD constituent agencies. 29 This preferential right is based upon a ratio of all payments made to MWD by each constituent agency compared to total payments made by all constituent agencies on tax assessments and otherwise, except purchases of water, toward the capital cost and operating expense of MWD. State Water Project. One of MWD's two major sources of water is the State Water Project, which is owned by the State of California (the "State ") and operated by the State Department of Water Resources (the "Department of Water Resources "). This project transports Feather River water stored in and released from Oroville Dam and unregulated flows diverted directly from San Francisco Bay /Sacramento -San Joaquin River Delta ( "Bay- Delta ") south via the California Aqueduct to four delivery points near the northern and eastern boundaries of MWD. The total length of the California Aqueduct is approximately 444 miles. MWD is one of 29 agencies that have long -term contracts for water service from the Department of Water Resources, and is the largest agency in terms of the number of people it serves (over 18 million), the share of State Water Project water to which it is entitled (approximately 46 percent), and the percentage of total annual payments made to the Department of Water Resources by agencies with State water contracts (approximately 57 percent in 2006). In 1960, MWD signed a contract (as amended, the "State Water Contract ") with the Department of Water Resources. The State Water Resources Control Board ( "SWRCB ") is the agency responsible for setting water quality standards and administering water rights throughout California. Decisions of the SWRCB can affect the availability of water to MWD and other users of State Water Project water. The SWRCB exercises its regulatory authority over the Bay -Delta by means of public proceedings leading to regulations and decisions. These include the Bay -Delta Water Quality Control Plan ( "WQCP "), which establishes the water quality objectives and proposed flow regime of the estuary, and water rights decisions, which assign responsibility for implementing the objectives of the WQCP to users throughout the system by adjusting their respective water rights. The SWRCB is required by law to periodically review its WQCP to ensure that it meets the changing needs of this complex system. On August 28, 2000, the federal government and the State issued a Record of Decision ( "ROD ") and related documents approving the final programmatic environmental documentation for the CALFED Bay -Delta Program. The CALFED Bay -Delta Program is a collaborative effort among 23 State and federal agencies to improve water supplies in California and the health of the Bay -Delta watershed. The ROD includes, among other things, pledges to restore the Bay -Delta ecosystem, improve water quality, enhance water supply reliability, and assure long -term protection for Bay -Delta levees. Three lawsuits were filed in the fall of 2000 challenging the CALFED Bay -Delta Program Environmental Impact Report ( "EIR "). One case was settled, and the other two cases, one brought by the California Farm Bureau and the other brought by the Regional Council of Rural Counties and the Central Delta Water Agency, were coordinated for trial in the Sacramento Superior Court. The EIR was upheld by the trial court, but invalidated by the Court of Appeal. The Court of Appeal decision was largely based on the notion that in the EIR the CALFED agencies failed to consider a project alternative of reducing exports from the Bay - Delta that, in the Court of Appeal's view, was feasible because it would curb population growth in Southern California. MWD, along with the State of California, the State Water Contractors and Westlands Water District, petitioned the Supreme Court for review of the Court of Appeal's decision, and in January 2006 the California Supreme Court granted review of these coordinated cases. If the Court of Appeal decision is upheld, invalidation of the Program EIR is not expected to adversely impact the CALFED Bay -Delta Program because individual actions are being implemented through separate, project -level EIRs that are not tied to the validity of the programmatic document. On September 15, 2000, the Third District Court of Appeal for the State of California issued its decision in Planning and Conservation League; Citizens Planning Association of Santa Barbara County and Plumas County Flood Control District v. California Department of Water Resources and Central Coast Water Authority. This case was an appeal of (i) a challenge to the selection of the Central Coast Water Authority as lead agency with respect to the preparation of environmental documentation with respect to certain amendments to the State 30 Water Contract (the "Monterey Agreement," which agreement reflects the settlement of disputes regarding the allocation of State Water Project water), (ii) the adequacy of the environmental documentation prepared with respect to the Monterey Agreement, and (iii) the transfer by the Department of Water Resources of the Kern County Water Bank from the State to the Kern County Water Agency. The Court of Appeal agreed with the trial court that the Department of Water Resources should have been the lead agency with respect to the preparation of environmental documentation for the amendments to the State Water Contract. However, it reversed the trial court's holding that the environmental documentation was adequate. The Court of Appeal held that the environmental documentation was defective in failing to analyze the environmental effects of the Monterey Agreement's elimination of the permanent shortage provisions of the State Water Contract. The listing of several fish species as threatened or endangered under the federal and /or California Endangered Species Acts (respectively, the "Federal ESA" and the "California ESA" and, collectively, the "ESAs ") have impacted State Water Project operations and limited the flexibility of the State Water Project. An annual environmental water account established under the CALFED Bay -Delta Program as a means of meeting environmental flow requirements and export limitations has helped to mitigate these impacts. Currently, five species, the winter -run and spring -run Chinook salmon, Delta smelt, North American green sturgeon and Central Valley steelhead are listed under the ESAs. The Federal ESA requires that before any federal agency authorizes, funds or carries out an action it must consult with the appropriate federal fishery agency to determine whether the action would jeopardize the continued existence of any threatened or endangered species, or adversely modify habitat critical to the species' needs. The result of the consultation is known as a "biological opinion." In the biological opinion the federal fishery agency determines whether the action would cause jeopardy to a threatened or endangered species or adverse modification to critical habitat and recommends reasonable and prudent alternatives or measures that would allow the action to proceed without causing jeopardy or adverse modification. The biological opinion also includes an "incidental take statement." The incidental take statement allows the action to go forward even though it will result in some level of "take," including harming or killing some members of the species, incidental to the agency action, provided that the agency action does not jeopardize the continued existence of any threatened or endangered species and complies with reasonable mitigation and minimization measures recommended by the fishery agency. The United States Fish and Wildlife Service and National Marine Fisheries Service have issued biological opinions and incidental take statements that govern operations of the State Water Project and Central Valley Project with respect to the Delta smelt, the winter -run and spring -run Chinook salmon and the Central Valley steelhead. An additional biological opinion will be required for the green sturgeon, which was listed in April 2006. Litigation filed by several environmental interest groups (NRDC v. Kempthorne; Pacific Coast Federation of Fishermen's Association v. Gutierrez) in the United States District Court for the Eastern District of California alleges that these biological opinions and incidental take statements violate the Federal ESA. The court's ruling on plaintiff's motion for summary judgment in NRDC v. Kempthorne, heard by the court on April 26 2007, is pending. The Bureau of Reclamation initiated consultations with the United States Fish and Wildlife Service and National Marine Fisheries Service for new biological opinions with respect to the coordinated operations of the State Water Project and Central Valley Project in July 2006, following the filing of these challenges to the biological opinions and incidental take statements. In addition to this litigation under the Federal ESA, other environmental groups sued the Department of Water Resources on October 4, 2006 in the Superior Court of the State of California for Alameda County alleging that the Department of Water Resources was taking listed species without authorization under the California ESA. This litigation (Watershed Enforcers, a project of the California Sportfishing Protection Alliance v. California Department of Water Resources) requests that the Department of Water Resources be mandated to either cease operation of the State Water Project pumps, which deliver water to the California Aqueduct, in a manner that results in such "taking" of listed species or obtain authorization for such "taking" under the California ESA. On April 18, 2007, the Alameda County Superior Court issued its Statement of Decision in Watershed Enforcers v. California Department of Water Resources. The Statement of Decision finds that the Department of Water Resources is illegally "taking" listed fish through operation of the State 31 Water Project export facilities. The Court ordered the Department of Water Resources to "cease and desist from further operation" of those facilities within 60 days unless it obtains take authorization from the California Department of Fish and Game. The Department of Water Resources appealed the Alameda County Superior Court's order on May 7, 2007. This appeal automatically stays the order pending the outcome of the appeal, unless the plaintiff obtains an order from the trial or appellate court that the appeal not act as a stay based on a showing of irreparable injury. Watershed Enforcers filed a notice that it would not oppose a stay of the Court's order pending appeal with the Alameda County Superior Court on May 2, 2007. Also on May 7, 2007, the Department of Water Resources withdrew its application to the Department of Fish and Game for a determination that the existing federal biological opinions are consistent with requirements for incidental take under the California ESA, which was filed on April 9, 2007, and executed a memorandum of understanding ( "MOU ") with the Department of Fish and Game to assist in reinitiated consultations with the United States Fish and Wildlife Service and National Marine Fisheries Service for new biological opinions on the coordinated operations of the State Water Project and Central Valley Project as they relate to the listed species of fish. In the MOU, the Department of Water Resources and the Department of Fish and Game agree that the biological assessment and resulting biological opinions under the Federal ESA should be developed to include State Water Project operations that are consistent with the California ESA and MOU set goals for completion of the biological assessment by October 2007 to facilitate completion of the biological opinions by April 2008. After the new biological opinions and incidental take statements for the listed species of fish are completed, the Department of Water Resources will apply to the Department of Fish and Game for a consistency determination under the California ESA based on the new biological opinions and incidental take statements. In August 2007, the U.S. District Court ordered the curtailment of water deliveries by 30 percent for 2008 and possibly into the future as well depending upon the findings in the biological opinions. MWD staff is analyzing the ramifications for MWD's State Water Project supplies and its options for mitigating any reduction of State Water Project supplies that may result from the ruling. In the event of a shutdown of the State Water Project pumping plant that stopped deliveries of State Water Project water for an extended period of time, MWD would undertake extraordinary measures to minimize the possibility of extreme water shortages within its service area. These include calling for additional extraordinary conservation through an extensive public outreach campaign, curtailing all deliveries for groundwater replenishment, cutting agricultural deliveries by 30 percent, calling on additional withdrawals from groundwater conjunctive use and storage programs and calling for additional voluntary fallowing in MWD's agricultural land management program. If all of these measures were successfully undertaken, MWD estimates that it would be able to maintain water deliveries through the 2008 calendar year. However, MWD would have exhausted substantial supply reserves, leaving its region vulnerable for years to come in the event of a major earthquake, drought, forced infrastructure outages, or a similar situation. Assuming normal hydrology for the future, MWD estimates that it would take six years or more for its water storage to recover to the levels MWD currently has in reserve. The Department of Water Resources has already altered the operations of the State Water Project to accommodate the listed species. This change in project operations has influenced the manner in which water is diverted from the Bay -Delta and State Water Project deliveries. Additional changes in project operations could result from the consultation process for new biological opinions for listed species under the Federal ESA or from the Department of Water Resources' future application for a consistency determination under the California ESA. Decisions in these cases or future litigation, listings of additional species or new regulatory requirements could adversely affect State Water Project operations in the future by requiring additional export reductions, releases of additional water from storage or other operational changes impacting water supply operations. MWD cannot predict the ultimate outcome of any of the litigation or regulatory processes described above at this time or whether such outcome will result in any materially adverse impact on the operation of the State Water Project pumps, MWD's State Water Project supplies or MWD's water reserves. Additional information regarding MWD's operations and financial performance, and other documents and other information are available upon request and payment to the District of a charge for copying, mailing 32 and handling. Requests for such information should be addressed to Santa Fe, at Post Office Box 409, Rancho Santa Fe, California 92067, Attention: Michael J. Bardin, General Manager. THE SAN DIEGUITO ENTERPRISE San Dieguito Facilities San Dieguito has a service area of approximately 8.9 square miles. In addition to the facilities jointly owned with Santa Fe, San Dieguito owns /operates approximately 140 miles of pipelines, and 16 pressure reducing stations. In addition, San Dieguito has 2 potable water reservoirs, with a total water storage capacity of 10 million gallons, and a 225 -horse power pump station that is used as a supplemental water feed for the higher pressure zones. Historically, San Dieguito has been proactive with its Enterprise capital improvement projects. Staff and the Board of Directors have been supportive of projects necessary to eliminate deficiencies in the system, and the Enterprise is currently considered to be in very good operational condition, with few known problem areas. San Dieguito's headquarters are co- located with the City in the Civic Center at 505 S. Vulcan Avenue in Encinitas. The operations facility is located 160 Calle Magdalena, Encinitas, CA 92024. San Dieguito initially depended upon water from limited surface runoff into Lake Hodges (which is owned by the City of San Diego). Since the 1948 completion of the first San Diego Aqueduct by the SDCWA, San Dieguito has purchased water from SDCWA. While San Dieguito continues to purchase water from the City of San Diego (Lake Hodges), San Dieguito also is dependent upon water purchased from SDCWA, which purchases water from MWD. Water purchased from SDCWA and MWD is imported from the Colorado River and the California State Water Project. San Dieguito is the sole owner of a 2.5 million gallon and a 7.5 million gallon underground reservoir. San Dieguito also has a one -third ownership interest in a 3 million gallon storage reservoir, with the remaining two - thirds ownership interest being held by the Olivenhain Municipal Water District ( "OMWD "). San Dieguito and Santa Fe are cooperating with OMWD, the City of San Diego and the SDCWA to explore the feasibility of a project which would increase the operational capability of the 33,000 acre foot Lake Hodges and increase the quality of the unfiltered water contained therein. Service Area San Dieguito is the sole provider of water service for residential, commercial, agricultural and industrial enterprises within San Dieguito. San Dieguito's current population is estimated to be approximately 38,000 people. San Dieguito currently includes a total of approximately 11,338 connections, including approximately 10,294 residential service connections, approximately 181 agricultural service connections, approximately 519 commercial service connections, approximately 123 public and government connections and approximately 221 irrigation service connections. Currently, San Dieguito delivers recycled water to some users in its service area, however, the recycled water users are not a part of the water system. which generates Net Revenues available to pay Installment Payments. The following table illustrates estimated use of the San Dieguito Enterprise. 33 TABLE I SAN DIEGUITO WATER DISTRICT ENTERPRISE ESTIMATED WATER USE (Fiscal Year 2006/2007) Types of Use Percentage of Total Residential 67% Commercial /Industrial 8% Agricultural 6% Public /Other 11% Recycled 8% TOTAL 100% Source: San Dieguito Water District. San Dieguito Rates and Charges General. San Dieguito annually updates its five -year financial plan and capital improvement program. Utility rates and charges are reviewed annually as part of this budgetary process. Once results of operations for the various funds are known, a determination is made as to whether and when it is appropriate for rate adjustments to be made. The timing of rate adjustments may or may not coincide with the budget adoption process, but the implications of any rate adjustments are considered in budget development. The process used to set rates follows State regulations concerning the operation of local government utilities. Typically, several duly noticed public hearings are held to review staff studies and recommendations concerning rate adjustments before final adoption of rate changes including recycled water. The last approved rate change was November 29, 2006. Each year prior to June 1, the General Manager submits to San Dieguito's Board of Directors a proposed preliminary budget for the fiscal year commencing the following July 1 and the following fiscal year. The proposed budget includes expected expenditures (or expenses, as appropriate) and the means of financing them. Typically, extensive review occurs during May, and public hearings are conducted in June to obtain public comments. The budget is legally adopted prior to July 1. Neither San Dieguito nor the San Dieguito Enterprise is subject to the jurisdiction of, or regulation by, the California Public Utilities Commission or any other regulatory body in connection with the establishment of charges and fees related to the San Dieguito Enterprise. See "RISK FACTORS -- Proposition 218" herein for a discussion of the treatment of San Dieguito's rates and charges in light of Proposition 218. The following table discloses the current schedule of water rates and charges of San Dieguito in effect on January 1, 2007 levied pursuant to Resolution No. 2006 -11 adopted on November 29, 2006. The rates are charged on a per unit basis, with a unit equal to 100 cubic feet ( "HCF ") or 748 gallons. 34 TABLE 2 SAN DIEGUITO WATER DISTRICT SCHEDULE OF WATER RATES ) (As of January 1, 2007) Customer Class Residential Rate Tier Rate Recycled Water Rates Single Family Residential 0 -6 HCF 1.70 7 -20 HCF 2.04 21+ HCF 2.77 Single Family with Agriculture 0 -6 HCF 1.70 7 -20 HCF 2.04 21+ HCF 2.00 Multifamily Residential 0 -4 HCF 1.70 5-12 HCF 2.04 13+ HCF 2.77 Multifamily with Agriculture 0 -4 HCF 1.70 5-120 HCF 2.04 13+ HCF 2.00 Agriculture 2.00 1.70 Commercial 2.20 1.87 Landscaping 2.77 2.35 Excess Use (drought condition) 2.77 2.35 Construction 2.77 2.35 Source: San Dieguito Water District. Per Unit. San Dieguito additionally charges a bi- monthly service availability charge. The service availability charge is for maintenance of meters, water lines and storage facilities to assure that water is available upon demand. The service availability charge also includes customer service costs for meter reading and billing. TABLE 3 SAN DIEGUITO WATER DISTRICT BI- MONTHLY METER SERVICE AVAILABILITY CHARGES (As of July 1, 2007) Meter Service Availability Size Char e 5/8 & 3/4" 25.84 1 41.35 1 -1/2" 77.58 2 134.37 3 248.08 4 423.80 8 1 Source: San Dieguito Water District. 35 Monthly water usage per residence in San Dieguito, on average, is generally less than the average monthly use per residence in Santa Fe, as Santa Fe residences are on larger lots. The table below sets forth a comparison of a monthly bill for a single family residential unit using 17 units of water in San Dieguito to those of surrounding communities (a unit contains 748 gallons): TABLE 4 SAN DIEGUITO WATER DISTRICT MONTHLY BILL COMPARISON (As of June 30, 2007) Aunc Monthly Residential Bill Del Mar, City of $60.63 Rainbow MWD 59.73 Escondido, City of 58.49 Padre Dam MWD West — EC 58.17 Fallbrook PUD 57.91 Sweetwater Authority 55.16 Ramona MWD 54.62 Vista Irrigation District 53.40 San Dieguito WD 53.25 Valley Center MWD 52.30 San Diego, City of 51.77 Helix Water District 50.84 Rincon Del Diablo MWD 50.76 Poway, City of 48.96 Olivenhain MWD 45.96 Oceanside, City of 45.48 Vallecitos Water District 45.24 Otay Water District 44.67 Santa Fe ID 39.37 Carlsbad MWD 38.80 Average $51.28 Source: San Dieguito Water District Commodity costs and meter service availability charges are currently under review by San Dieguito for the next three year period. Connection Fees. Connection fees are charged to new service applicants for service to recover the cost of the facilities needed to meet capacity requirements for growth. Such fees are intended to recover an equitable share of the value of capacity in the facilities that are (or will be) available to serve new applicants for service. Connection fees are pledged to the payment of Installment Payments to the extent such fees relate to the Project. San Dieguito previously adopted capacity fees following the completion of its 2000 Water Master Plan and subsequent rate study. Capacity fees were intended to recover costs for capital improvements planned for system expansion including transmission and distribution line extension, expanded water storage, and upgrading and expansion of the R.E. Badger Filtration Plant. In 2007, San Dieguito adopted new capacity fees that focused the conversion of the San Dieguito's capacity charge from an incremental to a buy -in -basis in recognition of the limited potential for additional development, the limited number of future capital projects related to growth, and the fact that the water system has been constructed with the sufficient reserve capacity to serve additional development. This conversion to a buy -in- charge increased the capacity fee for a 3 /4 inch meter to $3,300.00. Effective September 1, 2007, capacity fees range from $3,300 (5/8 or 3 /4 inch meter) to $171,600 (8 inch meter)." 36 The table below sets forth a comparison of San Dieguito Enterprise capacity fees for a single family residential unit to those of surrounding communities: TABLE 5 SAN DIEGUITO WATER DISTRICT CAPACITY FEE COMPARISON (As of January 1, 2007) Aunc Residential Connection Fee (1) Fallbrook PUD $11 Rainbow MWD 9 Padre Dam MWD 8 Santa Fe ID 7 Ramona MWD 7 Olivenhain MWD 5 Poway, City of 5 Otay WD 4 Escondido, City of 4 Vallecitos WD 4 Oceanside, City of 3 Carlsbad MWD 3 San Dieguito WD 3 Rincon del Diablo MWD 3 Valley Center MWD 3 Vista Irrigation District 2 San Diego, City of 2 Sweetwater Authority 2 Yuima MWD 2 Del Mar, City of 1 Average $4 Source: San Dieguito Water District. (1) Assumes 3/4" meter installation and reflects September 1, 2007 fees for SDWD. Collection Procedure San Dieguito is on a bi- monthly billing cycle. There are eight billing cycles during each two -month period. San Dieguito sends bills out weekly for four "no- bill" weeks per year. The Administrative Code of San Dieguito provides that bills are due and payable when mailed and delinquent if not paid within 25 days from the date of mailing. If a bill becomes delinquent, San Dieguito sends the customer, by first -class mail, a notice that water service will be discontinued unless the bill is paid within 15 days. Any residential customer can make a request for extension of payment, or arrangements for payment of charges, over a reasonable period of time not to exceed 12 months. If the bill remains unpaid at the end of the 15 days, service is discontinued. At least 2 working days prior to the termination of service, San Dieguito shall deliver to the property a written notice of intent to terminate service. Before a turn -off, San Dieguito makes a reasonable good faith effort to contact an adult residing at the premises by telephone, or in person. The water is turned off upon expiration of three days following posting and not turned on until the water bill, together with penalties, is brought current. San Dieguito may assign a delinquent water bill to an agency for collection, and if it does so, an additional dollar amount shall be added to the amount due and owing. Unpaid bills become a lien against the property to be collected with general taxes. Accounts that remain unpaid are submitted to the County Assessor, whenever possible, for inclusion on the tax rolls. Currently a negligible number of accounts are considered uncollectible. 37 Future San Dieguito Improvements In June 2000, PBS & J, Inc. performed the most recent update to the Water Master Plan. The report evaluated the District existing and future water distribution system and capital improvement needs, made recommendations to meet those needs, and prepare a preliminary estimated cost for each of the proposed improvements. The evaluation included the major "treated water" transmission lines, and all distribution and storage facilities owned by the District, exclusive of the Filtration Plant itself. The recommended projects were categorized into two priority designations. A "high priority" project deemed necessary to correct existing system deficiencies and as needed in areas where there is limited fire flow capacity requiring distribution system improvements. A "low priority" project generally needed to correct deficiencies that will appear only as long term future growth takes place, and projects where it is anticipated that funding will be provided by specific developments, based on their own water requirements. Since the completion of the 2000 Water Master Plan, the District has completed numerous Capital Improvement Projects (CIP's). Included in these projects was construction of a parallel 54" joint SDWD /SFID transmission main at RE Badger Treatment Plant and about half the recommended high priority projects to improve system capacity and reliability. All of the new facilities have had a positive impact on the operation of the Enterprise. Historically, the last three Master Plans were completed by the District in 10 year spans. It is anticipated the next Master Plan will take place in the year 2010. The purpose of a Master Plan is to evaluate the District's existing water distribution and storage system and to recommend future improvements. This information will help the District update and plan for future capital improvement projects and system modifications in a fiscally responsible manner. The District anticipates the most urgent need will be to increase the level of reliability in the existing Enterprise, in fire flow, and fire hydrant installation. San Dieguito has a current six year plan to fund $6.0 million for construction of upgrades to the Enterprise. Outstanding San Dieguito Indebtedness Upon execution and delivery of the Bonds, the payment of Installment Payments by San Dieguito will be on parity with its obligation to pay debt service on the 2004 Bonds. As of October 1, 2007, the outstanding principal for the 2004 Bonds was $11,635,000. Other than the 2004 Bonds, there are no other obligations currently outstanding which are payable on a senior or parity basis to the San Dieguito Installment Payments (see "THE BONDS — Issuance of Parity Obligations" herein). In fiscal year 2002/2003, the City advanced San Dieguito the amount of $741,123 to fund the water meter exchange and automation program. The advance is payable over ten years together with interest at the underlying rate of the City's 2002 financing through the Association of Bay Area Governments. At the end of fiscal year 2007, the amount of $515,000 will remain outstanding. This advance is payable on a subordinate basis to the Installment Payments to be made by San Dieguito. Water Sources and Supply; Water Purchases The total production capacity of all water facilities at the Badger Filtration Plant is currently 40 million gallons per day (mgd) which 45% (18 mgd) is allocated to San Dieguito and 55% (22 mgd) allocated to Santa Fe based on ownership. The San Dieguito 2000 Water Master Plan indicates ultimate maximum day demands at build out will be 14 mgd which is less than San Dieguito's current production capacity. 38 In 1997, San Dieguito signed an agreement with the San Elijo Joint Powers Authority ( "SEJPA ") to purchase and resell reclaimed water. SEJPA operates a wastewater treatment facility that has recently completed an upgrade to reclaim and recycle water from raw wastewater. This water is to be used to supplement growing water demand within San Dieguito and other members of the Authority. TABLE 6 SAN DIEGUITO WATER DISTRICT ENTERPRISE SUMMARY OF WATER PRODUCTION BY SOURCE (As of June 30) Fiscal Local Total Total Year Water Imported Domestic Recycled Production 2003 1 5 7 427 7 2004 454 6 7 711 8 2005 1 5 7 595 7 2006 2 5 7 600 8 2007 2 5 8 708 9 Source: San Dieguito Water District. In acre -feet. Historical water purchases by San Dieguito from the SDCWA over the 5 -year period ending in Fiscal Year 2006/07 disclose that San Dieguito has relatively stable water purchases from 5,543 acre feet in Fiscal Year 2002/03 to 5,692 acre feet in Fiscal Year 2006/07, as shown below: TABLE 7 SAN DIEGUITO WATER DISTRICT WATER PURCHASES FROM THE SDCWA (Acre -Feet) Year Ended June 30 Total 2003 5,543 2004 6,867 2005 5,602 2006 5,093 2007 5,692 Source: San Dieguito Water District. In the event of a drought, water sales are reduced and operating revenue decreases. San Dieguito has options available to ensure expenses are funded during a drought. SDWD maintains various reserves which are set as part of the annual operating and capital budget review. A Water Rate Study is currently being commissioned that will formalize the District's Reserve policies and set minimum and target levels of reserves to be utilized when calculating and adopting water rates. The following reserves are currently maintained: (1) Operating Reserve — Utilized as a Cash -Flow Reserve, since the District bills every two months. The amount is set at $750,000, which is approximately 1.5 times monthly receivables. (2) Rate Stabilization — This reserve is intended to be utilized to cushion the impact of unexpected temporary declines in operating revenues or unforeseen expenditures such as increases in rates for purchased 39 water. Board action is required to draw on this reserve, which is set at 1.0 times annual debt service, or approximately $1.8 million. (3) Capital Reserves — Capital Reserves, principally for replacement in infrastructure, total $6.0 million at June 30, 2007, against a target minimum of $7.5 million. The following table shows the projected water production and purchases by San Dieguito during the next 5 fiscal years. Recycled Water deliveries are shown for purposes of information only, however, the recycled water sales are not included in Net Revenues for San Dieguito. TABLE 8 SAN DIEGUITO WATER DISTRICT WATER PRODUCTION AND PURCHASES 5 YEAR PROJECTION (Acre Feet) Fiscal Local Total Total Year Water Imported Domestic Recycled Production 2008 2 5 7 705 8 2009 2 5 7 710 8 2010 2 5 7 715 8 2011 2 5 7 720 8 2012 2 5 7 725 8 Source: San Dieguito Water District. 40 Water Demand San Dieguito records the volume of water delivered by the San Dieguito Enterprise. Over the past five years, San Dieguito has delivered, on average, 7,200 acre -feet of treated potable water. The following table summarizes treated water deliveries for the most recent five Fiscal Years. TABLE 9 SAN DIEGUITO WATER DISTRICT HISTORIC TREATED WATER DELIVERIES (As of June 30) Total Acre Percent of Five Change Over Year Feet Delivered Year Average Previous Year 2003 7 102 -1.8 2004 7 102 .08 2005 6 95 -6.8 2006 7 101 8.4 2007 7 105 4.3 Source: San Dieguito Water District. Service Connections The following tables present a summary of service connections of San Dieguito for the most recent five fiscal years. TABLE 10 SAN DIEGUITO WATER DISTRICT HISTORIC SERVICE CONNECTIONS (As of June 30) Year Service Connections Percent Increase 2003 11 1.5% 2004 11 0.2% 2005 11 0.9% 2006 11 0.1% 2007 11 0.6% Source: San Dieguito Water District. 41 Largest Customers The following table presents certain information relating to the ten largest customers of exclusive of recycled San Dieguito based on estimated usage as of June 30, 2007, and excluding recycled water use: TABLE 11 SAN DIEGUITO WATER DISTRICT TEN LARGEST CUSTOMERS (As of June 30, 2007) Customer Acre Feet Percent of Water Sold Paul Ecke 211 2.8% City of Encinitas 149 2.0% Park Place Bluffs 89 1.2% Scripps Memorial Hospital 73 1.0% Foxpoint Farms 68 0.9% Cardiff by the Sea Apartments 67 0.9% Leaucadia Seabluff Village 52 0.7% Seacrest Village 46 0.6% Cardiff Cove HOA 46 0.6% James T. Bashor 45 0.6% Source: San Dieguito Water District. Non - construction water use. The ten largest customers of the San Dieguito Enterprise accounted for approximately 11.1 % of total water sales in Fiscal Year 2005/06. Historic Water Sales Revenues The following table shows San Dieguito's annual Enterprise Revenues for the five most recent Fiscal Years, excerpted from its audited financial statements. TABLE 12 SAN DIEGUITO WATER DISTRICT HISTORIC REVENUES (As of June 30) Water Percent Meter Availability Percent Year Sales Chan a Charges Chan e 2003 5 0.5 1 3.9 2004 5 8.0 1 10.5 2005 5 8.8 1 2.7 2006 6 23.1 2 9.8 2007 7 14.6 2 9.1 Source: San Dieguito Water District. Estimated and unaudited. 42 Historic Debt Service Coverage The following table is a summary of the historic debt service coverage of the Enterprise for the last five years. Fiscal years 2002/03 through 2006/07 are based on audited financial statements of the District. TABLE 13 SAN DIEGUITO WATER DISTRICT HISTORIC DEBT SERVICE COVERAGE For Fiscal Years Ended June 30 2002 -03 2003 -04 2004 -05 2005 -06 2006 -07 Revenues: Operating Revenues $7 $8 $8 $9 $10 Connection Fee Revenue 491 372 160 104 56 Non - Operating Revenues 2 995 1 1 1 Capitalized Interest Income" 325,535 - - - - Gross Revenues 10,829,218 9,371,428 9,246,493 10,745,457 12,289,052 Total Operating & Non - Operating Expenses $9 $10 $9 $10 $11 Net Income add back..... 1 (636,599) (89,030) 50 802 Interest Expense 758 1 1 969 943 Depreciation & Amortization 1 1 1 1 1 Costs of Issuance on 2004 Revenue Bonds - 282 - - Amortization of Bond Issuance Costs 49,175 618,646 - - - Net Revenues Available for Debt Service 3 2 2 2 3 Debt Service 1993 Water Refunding Bonds - Interest Charges 365 293 - - Principal Repayment 240 400 - - 1993 Water Revenue Bonds — Interest Charges 374 - - - Principal Repayment 140 - - - 1999 Badger Bonds — Interest Charges 473 460 452 441 429 Principal Repayment 225 235 245 255 265 2004 Water Refunding Bonds — Interest Charges - 245 545 527 513 Principal Repayment - - 655,000 505,000 520,000 Total Debt Service $1 $1 $1 $1 $1 Net Revenues Available for Debt Service 207.01% 149.80% 116.89% 145.83% 187.81% (including connection fees) Less Connection Fees (491,264) (372,206) (160,002) (104,798) (56,400) Net Revenues Available for Debt Service (excluding connection fees) 180.0% 127.0% 108.5% 139.8% 184.55% (1) Estimated results, unaudited. Source: San Dieguito Water District. ** Interest Income on Bond Proceeds has been capitalized as Construction Period Interest on accompanying Financial Statements. During fiscal years 2004/05 and 2005/06, San Dieguito Water District's allocation of general property tax revenues was reduced by approximately 75% by the State of California to assist in the fiscal recovery plan of the State. SDWD lost approximately $750,000 over the two -year period, which is a permanent takeaway that will not be recovered. The full allocation was restored in fiscal year 2006/07, and no further takeaways are anticipated. However, the State has the power under certain emergency circumstances to divert local property tax revenues to the State General Fund or the Educational Relief Augmentation Fund (ERAF). 43 Fiscal Year 2007 -2008 Budget San Dieguito adopted its budget for Fiscal Years 2007 -08 and 2008 -09 on May 23, 2007. the budget anticipates the increased costs be purchasing, treating and delivering water, and increased personnel costs. The budget assumes modest increases of 2% annually. SAN DIEGUITO WATER DISTRICT BUDGETED REVENUE AND EXPENDITURE SUMMARY BY FUND SOURCE FISCAL YEAR 2007 -2008 Budget 2007 -08 OPERATING FUND (531) Revenue $11 Expenditures (Summary) 9 Net Revenues less Expenditures 2 Transfer from or (to) Other Funds (2 Increase (Decrease) in Fund Balance 0 CAPITAL REPLACEMENT FUND (534) Revenue 386 Expenditures (Summary) 1 Net Revenue less Expenditures (748,786) Transfer from or (to) Other Funds 1 Increase (Decrease) in Fund Balance 900,754 CAPITAL EXPANSION FUND (533) Revenue 0 Expenditures (Summary) 0 Net Revenue less Expenditures 0 Transfer from or (to) Other Funds (1 Increase (Decrease) in Fund Balance (1 RATE STABILIZATION FUND (535) Revenue 64 Expenditures (Summary) 0 Net Revenue less Expenditures 64 Transfer from or (to) Other Funds 0 Increase (Decrease) in Fund Balance 64,038 Projected Operating Results and Debt Service Coverage San Dieguito's estimated projected operating results for the Enterprise for the Fiscal Years ending June 30 2008 through June 30, 2012 are set forth below. Actual revenues and expenses may vary materially from these projections, and the projections are based on the following assumptions. General Assumptions: Water consumption was projected from a two year average using data for Fiscal Years 2005 and 2006 and the assumption that projected growth in San Dieguito will be minimal, .2% to .4% annually. Additionally, water consumption is estimated to be 20% local source water and 80% imported water. This ratio assumes more use of imported water than has occurred in previous years. 44 Overall water consumption was projected to increase 1 -2% in each Fiscal Year. This includes consumption of potable and recycled water. Recycled water will be purchased from the San Elijo Joint Powers Authority and resold by San Dieguito to certain commercial, landscape, and agricultural customers. Recycled water is delivered by the San Elijo Joint Powers Authority. Billing for recycled water is conducted by San Dieguito on behalf of the San Elijo Joint Powers Authority and payments for recycled water are delivered by San Dieguito to the San Elijo Joint Powers Authority. The delivery of recycled water does not result in income and expenses to San Dieguito. TABLE 14 SAN DIEGUITO WATER DISTRICT PROJECTED OPERATING RESULTS AND DEBT SERVICE COVERAGE For Fiscal Years Ended June 30 2007 -08 2008 -09 2009 -10 2010 -11 2011 -12 Revenues: Operating Revenues — Including Connection Fees $11,453,834 $11 $12 $12 12 Non - Operating Revenues 1,046,941 1,011,383 1,052,065 1,094,267 1,085,578 Gross Revenues 12 12 13 13 13 Total Operating & Non - Operating Expenses $12,365,373 $12,732,427 $12,953,786 $13,201,405 13,461,846 Net Income $135 $66 $228 $376 523 Add back..... Interest Expense and Other 917 890 859 827 793 Depreciation & Amortization 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 Net Revenues Available for Debt Service 2 2 2 2 2 Debt Service 1999 Badger Bonds — Interest Charges 417 404 390 375 359 Principal Repayment 280 290 305 320 335 2004 Water Revenue Bonds — Interest Charges 500 485 469 452 433 Principal Repayment 530,000 540,000 560,000 575,000 595,000 Total Debt Service $1 $1 $1 $1 $1 Net Revenues Available for Debt Service 147.77% 142.81% 148.37% 156.99% 163.46% (including connection fees) Less Connection Fees (100,000) (100,000) (50,000) (50,000) (50,000) Net Revenues Available for Debt Service 141.98% 136.99% 145.50% 154.09% 160.56% (excluding connection fees) Source: San Dieguito Water District. Risk Management Insurance Programs. San Dieguito Water District is a member of the Association of California Water Agencies — Joint Powers Insurance Authority (JPIA). The Coverage includes general liability, property, and workers' compensation, with self - insured retention levels of $10,000 to $25,000. As of June 30, 2006, in the opinion of San Dieguito's management, there were no material claims, which would require accrual in the accompanying financial statements. Additionally, as of the date of this Official Statement, there are no claims which would materially adversely impact the revenues of San Dieguito. 45 Retirement Plan San Dieguito's defined benefit pension plan, the Miscellaneous Plan of the San Dieguito Water District (the Plan), provides retirement and disability benefits, annual cost -of- living adjustments, and death benefits to plan members and beneficiaries. The Plan is part of the Public Agency portion of the California Public Employees Retirement System (CalPERS), an agent multiple- employer plan administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State of California. A menu of benefit provisions as well as other requirements are established by State statutes within the Public Employees' Retirement Law. San Dieguito selects optional benefit provisions from the benefit menu by contract with CalPERS and adopt those benefits through actions of the San Dieguito's Board of Directors. CalPERS issues a separate comprehensive annual financial report. Copies of the CalPERS' annual financial report may be obtained from the CalPERS Executive Office — 400 P Street, Sacramento, California 95814. Funding Policy. Employee contribution obligations for the year are expressed as a percentage of payroll. These percentages are set by statute and generally remain unchanged from year to year. San Dieguito currently pays a portion of the employee contributions on behalf of its employees. San Dieguito is required to contribute the remaining amounts necessary to fund the benefits for its members based on actuarially determined rates calculated as a percentage of covered payroll. Rates for fiscal year 2006 -2007 are detailed below: Category Employee Contributions Employer Contributions Local Non - Safety SDWD Members 2% 14.6% Annual Pension Cost. For Fiscal Year June 30, 2006, the San Dieguito's annual pension cost was $166,682. The required contributions were determined as part of the June 30, 2003 actuarial valuation using the entry- age - normal -cost method with the contributions determined as a percentage of estimated pay. The actuarial assumption includes a 7.75% investment rate of return and a 3.0% inflation component. The actuarial value of Plan assets was determined using a 15 Year Smoothed Market technique that smoothes the effect of short -term volatility in the market value of investments. The Plan's unfunded actuarial accrued liability (or excess assets) is being amortized over a closed 20 -year period. There are 16 years remaining in the period. Post Retirement Health Benefits San Dieguito has approximately 22 full -time equivalent employees, and also receives management and administrative support from the City of Encinitas. SDWD employees are members of the California Public Employees retirement system (CalPERS) and they receive their health care coverage through CalPERS. Retirees are responsible for payment of their health care premiums, with the employer paying only the minimum State - mandated contribution (currently $80 per month). The City has initiated an actuarial study to calculate the unfunded liability and the annual required contributions for both the City and SDWD. The results of that study are expected in Fall 2007. It is likely that SDWD will begin to fund some portion of the unfunded liability, which is expected to be minimal, beginning in fiscal year 2008 -09. In June 2004, the Governmental Accounting Standards Board ( "GASB ") issued Statement No. 45 ( "GASB 45 "), which addresses how state and local governments should account for and report their costs and obligations related to post- employment health care and other non - pension benefits ( "OPEB "). GASB 45 generally requires that employers account for and report the annual cost of OPEB and the outstanding obligations and commitments related to OPEB in essentially the same manner as they currently do for pensions. Annual OPEB costs for most employers will be based on actuarially determined amounts that, if paid on an ongoing basis, generally would provide sufficient resources to pay benefits as they come due. The provisions of GASB 45 may be applied prospectively and do not require governments to fund their OPEB plans. An employer may establish its OPEB liability at zero as of the beginning of the initial year of implementation. However, the unfunded actuarial liability is required to be amortized over future periods on the income statement. GASB 45 also established disclosure requirements for information about the plans in which an employer participates, the funding policy followed, the actuarial valuation process and assumptions, and for certain employers, the extent to which the plan has been funded over time. The City of Encinitas is in the 46 process of evaluating the amount of its OPEB liability for itself and other agencies under its control. These disclosure requirements will be effective for the City's Fiscal Year ending June 30, 2008. Additionally, San Dieguito will have some shared obligation for employees of the Badger Filtration Plant which is operated by Santa Fe. Prior Period Adjustments During fiscal year 2005 -2006, San Dieguito became aware of several accounts and transactions related to prior year activity that based on reevaluation or new information required adjustment to the financial statements. The adjustments are detailed below: Increase (Decrease) to Net Assets Recording of unbilled water sales $1 Write -off capital assets (1,121,317) Adjustment for Seasonal Storage Credits (685, Net decrease to Net Assets ($784,811) Unbilled water sales are sales of water used before the end of the fiscal year, but not billed until after the end of the fiscal year. The recording of unbilled water sales is a change in accounting method. Previously, San Dieguito had not recorded unbilled water sales because the difference between the beginning and ending accounts receivable amounts were immaterial. During the year, San Dieguito performed an evaluation of all capital assets including construction in progress, and determined that certain assets should not have been capitalized in prior years because they did not have significant long -term value to San Dieguito. In fiscal year 2003 and 2004, San Dieguito began participation in a seasonal water storage credits program with the San Diego County Water Authority. Under the terms of the program, San Dieguito was credited the full cost of Water Authority water plus transportation costs in exchange for a commitment to utilize an equivalent amount of local water during specified peak periods. When San Dieguito used the local water, they would pay the Water Authority for cost of water and transportation minus a $70 per acre -foot credit. Because of local drought conditions, San Dieguito was not able to utilize that amount of local water. It was later determined that San Dieguito would have to repay the Water Authority for the unused water. Payments of $420,000 were made in the current year. The remaining balance of $265,000 was expected to be repaid by December 2006 from reserves. Investment of City Funds The City of Encinitas performs all the accounting and financial functions for San Dieguito. San Dieguito funds, except cash held by fiscal agents, are invested in the City's investment pool, the market value of which is an average for all investments held by the pool. See "SUMMARY OF CERTAIN DEFINED TERMS AND PRINCIPAL LEGAL DOCUMENTS." San Dieguito has an equity interest in that pool equal to its share of the invested cash. Disclosures regarding the investments made by the City investment pool are made in the City's Annual Financial Report. State law limits the types of investments in which local agencies, including cities, may invest their funds. Pursuant to State law, the chief fiscal officer of each local agency must annually provide to the legislative body a statement of investment policy, which the legislative body of the local agency must consider at a public meeting. The City's investment policy limits the investment of the City's funds to the following investments: 47 O bIJ 4 4-j Cld to �' o � 3 E _� a ,r 7 a � � ct 4-1 U 7:� 7� a o p �••, Q� p L/1 V1 a� M .� bA bb U V ,� U O c O U bA U U- bJ) bb ct ct tp bb a� ,•• N �' , r --, �" r --, O ct ct R Eb a ct cr t c �4 v 0 0 O 7� + v� u -C� 7� bb 0 cn ° ': 7� ct CIA Z 7:$ N N DC k W O � O O °° U U -� U a wW a 7� 7� CLq -c�a -Goq ct ct ct En En cr 4-4 cn O O O Ct O O O O O c ¢° ct .d u ct +j U U U U 4 o , N 'd a� N a� a� ,� s� o - cn ct 0> 0 rA O O rA 0 0 O o O 0 ct � c o 7� .� p cn ct ct ct cr > U U o 0 0 O cr U U O ct °' � r" cr ct cn ct ct cr ct 4-4 cn ct bb E ct 4-4 bO 1-0 bb ct cn ct -2 Q ' o bb U ct ct v U ct cn ct ct bb ct O '� The requirements of the City's policy regarding these investments are either the same as or more restrictive than the requirements of State law. The City has elected not to permit other types of investments which are permitted by State law. THE SANTA FE ENTERPRISE Santa Fe Facilities Santa Fe has a service area of approximately 16.3 square miles. In addition to the facilities jointly owned with San Dieguito, Santa Fe owns /operates approximately 160 miles of pipelines, and 15 pressure zones. In addition, Santa Fe has one potable water reservoir, with a total water storage capacity of 6 million gallons. Santa Fe operates from its headquarters /corporate yard facility located at 5920 Linea Del Cielo in the community of Rancho Santa Fe. Service Area Santa Fe is the sole provider of water service for residential, commercial, agricultural and industrial enterprises within Santa Fe. Santa Fe's current population is estimated to be approximately 21,353 people. Santa Fe currently includes a total of approximately 7,155 connections, including approximately 5,898 residential service connections, approximately 69 agricultural service connections and approximately 302 industrial and commercial service connections. The following table illustrates estimated water use in Santa Fe's service area. TABLE 15 SANTA FE IRRIGATION DISTRICT ESTIMATED WATER USE (Fiscal Year 2006/07) Types of Use Percentage of Total Residential 83.6% Commercial /Industrial 3.9% Agricultural 2.7% Irrigation 5.0% Public & Other 1.2% Recycled 3.5% Source: Santa Fe Irrigation District. Santa Fe Rates and Charges General. In accordance with California law, Santa Fe may, from time to time, fix, alter or change fixed monthly system access fees, commodity charges and other fees related to the Santa Fe Enterprise. Consequently, Santa Fe periodically reviews water rates. In accordance with California law, Santa Fe reviews such charges and fees to determine if they are sufficient to cover Maintenance and Operation Expenses, capital improvement expenditures and debt service requirements. Such charges and fees are set by Santa Fe for the services provided by the Santa Fe Enterprise after a public hearing is held, generally at the time of adoption of the annual budget. Neither Santa Fe nor the Santa Fe Enterprise is subject to the jurisdiction of, or regulation by, the California Public Utilities Commission or any other regulatory body in connection with the establishment of charges and fees related to the Santa Fe Enterprise. See "RISK FACTORS — Proposition 218" herein for a discussion of the treatment of Santa Fe's rates and charges in light of Proposition 218. Santa Fe staff annually determines the accuracy of the rate structure after full consideration of expected operations, maintenance and capital costs. In accordance with its policy, operating surpluses may be added to Santa Fe's unrestricted reserves, or returned to ratepayers through mitigation of future rate increases. 49 Pursuant to Resolution No. 06 -05 of Santa Fe adopted on May 1, 2006, the following table discloses the current schedule of water rates and charges of Santa Fe in effect on July 1, 2006. The rates are charged on a per unit basis, with a unit equal to 100 cubic feet ("cf ') or 748 gallons. TABLE 16 SANTA FE IRRIGATION DISTRICT SCHEDULE OF WATER RATES AND CHARGES (As of January 1, 2007) Bi- Monthly Block Bi- Monthly Block Water Rater Customer Class in Units (hcf) in Units (hcf) per Unit Single Family Residential (SFR) 1 -15 1.17 16 -300 2.07 greater than 300 2.49 Multi - Family Residential 2.07 Non - Residential 2.00 Irrigation 2.17 Unauthorized Fire Use 2.49 Temporary 2.49 Agricultural 1 -52 1 -126 2.07 greater than 52 greater than 126 1.78 Residential Surplus Same as SFR Same as SFR plus $0.40 per block Recycled -Basic 1.96 Recycled -Rate 2 2.17 Source: Santa Fe Irrigation District. The rate is shown for Agricultural customers with houses. Customers without houses qualify for the lower rate. Santa Fe also charges a bi- monthly system access charge. The system access charge is for maintenance of meters, Santa Fe water lines and storage facilities to assure that water is available upon demand. The system access charge also includes customer service costs for meter reading and billing. Meters installed for automatic fire sprinkler services pay an additional system charge which is shown in the table below. TABLE 17 SANTA FE IRRIGATION DISTRICT BI- MONTHLY METER SYSTEM ACCESS CHARGES (As of January 1, 2007) Meter Size Meter Fees Private Fire Service Charge 5/8" 31.21 - 3/4" 31.21 8.00 1 49.35 10.75 1-1/2 94.71 17.25 2 149.14 25.00 3 276.14 44.00 4 457.58 70.00 6 911.16 135.00 8 1 213.00 10" 2 304.00 Source: Santa Fe Irrigation District. 50 Monthly water usage in the Santa Fe Irrigation District is generally higher on average because residential lots are one or more acres. The table below sets forth a comparison of a typical San Fe Irrigation District monthly bill for a single family residential unit in Santa Fe to those of surrounding communities (a typical bill is for 63 units of 748 gallons each): TABLE 18 SANTA FE IRRIGATION DISTRICT MONTHLY BILL COMPARISON (As of June 30, 2007) Aunc Monthly Residential Bill Del Mar, City of $240.86 Sweetwater Authority 186.97 San Diego, City of 184.22 San Dieguito Water District 170.79 Otay Water District 167.54 Padre Dam MWD (East) 166.06 Helix Water District 164.70 Ramona MWD 163.16 Olivenhain MWD 152.27 Rincon Del Diablo MWD 148.81 Poway, City of 148.41 Rainbow MWD 147.84 Escondido, City of 147.73 Vista Irrigation District 147.44 Valley Center MWD 142.59 Vallecitos Water District 140.82 Fallbrook Public Utility District 140.70 Santa Fe Irrigation District 132.52 Yuima MWD 131.93 Lakeside Water District 129.41 Oceanside, City of 128.03 Carlsbad, City of 118.19 Average $154.59 Source: Santa Fe Irrigation District. Rates charged by Santa Fe are dependent upon a wide variety of factors, and represent a "pass- through" of expenses for acquisition of imported water from the SDCWA, via MWD, and treatment charges incurred at the Filtration Plant. The SDCWA is projecting a $5 /acre foot increase per year for the next eight years to fund capital improvements. MWD also projects small increases in the next few years to fund capital projects. The Filtration Plant expenses are expected to remain relatively constant into the foreseeable future. Santa Fe currently projects water rates, including all of the aforementioned components to increase to an average per unit rate of $2.44 per unit, effective January 1, 2008. Connection Fees. Connection fees are charged to new applicants for service to recover the cost of the facilities needed to meet the capacity requirements for growth. Such fees are intended to recover an equitable share of the value of capacity in the facilities that are (or will be) available to serve new applicants for service. Connection fees are pledged to payment of Installment Payments only to the extent such fees relate to the Proj ect. After a public hearing, Santa Fe can approve additional increases in connection fees for Santa Fe hook- up permits as long as the increase does not exceed the reasonable cost of providing the service. In light of the varied hydrology within its boundaries, and the resulting differences in benefits to developments throughout the 51 area, Santa Fe has adopted a connection fee program based on the cost of providing service to new development. The current connection fees range from $7,057 to $873,327 depending on the size of the meter. The table below sets forth a comparison of Santa Fe Enterprise connection fees for a single family residential unit to those of surrounding communities: TABLE 19 SANTA FE IRRIGATION DISTRICT CONNECTION FEE COMPARISON (As of January 1, 2007) Community Residential Connection Fee (1) Fallbrook PUD $11 Rainbow MWD 9 Padre Dam MWD 8 Santa Fe ID 7 Ramona MWD 7 Olivehain MWD 5 Poway, City of 5 Otay WD 4 Escondido, City of 4 Vallecitos WD 4 Oceanside, City of 3 San Dieguito 3 Carlsbad MWD 3 Rincon del Diablo MWD 3 Valley Center MWD 3 Vista Irrigation District 2 San Diego, City of 2 Sweetwater Authority 2 Yuima MWD 2 Del Mar, City of 1,992 Average $4 Source: Santa Fe Irrigation District. (1) Assumes 3/4" meter installation. Excludes MWD and SDCWA charges. Collection Procedure Santa Fe is on a bi- monthly billing cycle, and sends bills out by the first day of the month following the end of the billing cycle. Payment is due within 20 days following the mailing of the original bill. Accounts are charged a delinquency fee of 10% of the unpaid balance. At least 15 days prior to discontinuance of service due to non - payment of water bills, Santa Fe mails delinquent notices to customers with past due water bills. On the 16th, Santa Fe posts a 48 -hour shut -off notice in a conspicuous location on the property. A final attempt to contact the customer by telephone is made at least 24 hours prior to actual discontinuance of service. Service will not be discontinued if there are any known life threatening consequences, or during payment negotiations when a customer has requested, within 5 days of receipt of bill, an extension of the normal payment period. Once service has been discontinued, service is reinstated only after the customer pays the past due balance plus a service charge of $25. For closed accounts, Santa Fe sends a closing bill outside of the current billing cycle. A second notice is sent after the closing bill becomes delinquent. Accounts which remain unpaid are submitted to the County Assessor for inclusion on the tax rolls. Currently a negligible number of accounts are considered uncollectible. 52 Future Santa Fe Enterprise Improvements In November 2001 Powell /PBS & J performed the most recent update to the Water Master Plan. The report evaluated Santa Fe's existing and future water distribution system and capital improvement needs, made recommendations to meet those needs and prepared a preliminary estimated cost for each of the proposed improvements. The projects recommended were to primarily increase reliability and fire flow within the existing system. The recommended projects were categorized as either high, medium or low priority. "High Priority" projects were designated as such to increase fire flow capability. "Low Priority" projects generally are needed to correct deficiencies that appear as long term future growth takes place. All of the priority projects identified in the report have been completed. Santa Fe is focusing primarily on regular maintenance and replacement projects that are incorporated into the current budget. The Engineering Department is currently developing an Asset Management Plan that will identify future capital projects to serve as the base for a long -term system master plan. Outstanding Santa Fe Indebtedness Upon execution and delivery of the Bonds, there will be no other obligations currently outstanding which are payable on a senior or parity basis to the Santa Fe Installment Payments (see "THE BONDS — Issuance of Parity Obligations" herein). Water Sources and Supply; Water Purchases Santa Fe obtains water from two principal sources: local water and imported water (see "THE DISTRICTS - Water Sources and Supply" above). Imported water has historically been the primary source of supply. Historical production from each water source for the last five fiscal years is summarized in Table 20. The total production capacity of all water facilities is currently 40 million gallons per day ( "mgd "), which is approximately 63% of the current daily usage for Santa Fe. TABLE 20 SANTA FE IRRIGATION DISTRICT SUMMARY OF WATER PRODUCTION BY SOURCE ) (As of June 30) Local Total Fiscal Year Water Imported Reclaimed Production 2003 3 10 402.6 13 2004 910.7 12 508.8 14 2005 1 9 420.2 11 2006 2 9 452.5 13 2007 3 10 520.1 14 Source: Santa Fe Irrigation District. In acre -feet. 53 Historical water purchases by Santa Fe from the SDCWA over the 5 -year period ending in Fiscal Year 1996/97 disclose that Santa Fe water purchases have been stable from 10,070.7 acre feet in Fiscal Year 2002/03 to 10,678.1 acre feet in Fiscal Year 2006/07, as shown below: TABLE 21 SANTA FE IRRIGATION DISTRICT WATER PURCHASES FROM THE SDCWA (Acre -Feet) Year Ended June 30 Total 2003 10 2004 12 2005 9 2006 9 2007 10 Source: Santa Fe Irrigation District. Santa Fe adopted a Reserve Funds Policy in September 2006. This policy was established to ensure sufficient funding for operating, capital and debt service needs and to prevent the fluctuation of rates. Santa Fe established two types of reserve funds, restricted and unrestricted. The restricted funds include the Capacity Charge Funds governed by the state law. The District collects capacity charge revenue and allocates expenditures in accordance with Government Code Section §66013. The sources of funds are Capacity Charges, interest income and prior year balances. Unrestricted funds include the Capital Improvement Fund, the Operating Fund, and the Rate Stabilization Fund. The Capital Improvement Fund is designated for capital improvements to meet regulatory requirements, system reliability, facility replacement projects, and future infrastructure upgrades. These capital improvements are identified in the 2001 Master Plan and Long Range Financial Plan. These funds are accumulated and drawn down in a manner consistent with the District's Long Range Financial Plan. The Board of Directors approves utilization of the Capital Improvement Funds. The Capital Improvement Fund balance will not exceed 100% of the next five (5) year capital improvement expenditure projections (inclusive of the current fiscal year's expenses) identified in the District's current fiscal year budget. The Capital Improvement Fund balance shall at all times exceed both: 1) the current one year capital improvement expenditure projections, and 2) 40% of the next five year capital improvement expenditures projections (inclusive of the current fiscal year's expenses) as identified in the District's current fiscal year budget. The Operating Fund is designated to maintain working capital for current operations and to meet routine cash flow needs. The Operating Fund balance shall be a sixty (60) day average of the prior fiscal year's operating budget. The Rate Stabilization /Emergency Fund is utilized to avoid unacceptable rate increases and fund unanticipated operation and capital expenditures. The Rate Stab ilization/Emergency Fund balance shall not exceed 130% of a four (4) year running average of total water sales revenue and shall at all times exceed 50% of the four (4) year running average of total water sales revenue. The current balance in the Operating Reserve is $2.2 million, the balance in the Rate Stabilization Fund is $7.2 million, and the balance in the Capital Fund is $15.2 million. MWD and the SDCWA are planning large storage reservoirs and connection pipelines to reduce the potential for a dramatic reduction of supply in times of an emergency. If a reduction in supplies was experienced, retail customers would be given an allocation based on a percentage of historic consumption. The following table shows the projected water production and purchases by Santa Fe during the next 5 fiscal years: 54 TABLE 22 SANTA FE IRRIGATION DISTRICT 5 YEAR PROJECTION OF WATER PRODUCTION AND PURCHASES (Acre Feet) Fiscal Local Total Year Water Imported Production 2008 3 9 12 2009 3 9 12 2010 3 9 12 2011 3 9 12 2012 3 10 13 Source: Santa Fe Irrigation District. Water Demand Santa Fe records the volume of water delivered by Santa Fe. Over the past ten years, Santa Fe has delivered, on average, 12,219 acre -feet of treated water. The following table summarizes treated water deliveries for the most recent five calendar years. TABLE 23 SANTA FE IRRIGATION DISTRICT HISTORIC TREATED WATER DELIVERIES (Calendar Year) Total Acre Percent of Ten Change Over Year Feet Delivered Year Average Previous Year 2003 12 97.9 (8.4) 2004 12 100.5 7.5 2005 12 98.1 (6.0) 2006 12 103.2 4.4 2007 13 106.2 5.9 Source: Santa Fe Irrigation District. Service Connections The following tables present a summary of service connections of Santa Fe for the most recent six fiscal years, and a projection of service connections for the next five fiscal years: TABLE 24 SANTA FE IRRIGATION DISTRICT HISTORIC SERVICE CONNECTIONS (As of June 30) Year Service Connections Percent Increase 2003 6 -0.1% 2004 6 0.8% 2005 6 1.5% 2006 7 0.8% 2007 7 1.9% Source: Santa Fe Irrigation District. 55 Largest Customers The following table presents certain information relating to the fifteen largest customers of Santa Fe based on estimated usage as of June 30, 2007 TABLE 25 SANTA FE IRRIGATION DISTRICT FIFTEEN LARGEST CUSTOMERS (As of June 30, 2007) Customer Acre Feet % AF Rancho Santa Fe Association 434.1 3.1% Lomas Santa Fe Country Club 293.8 2.1% Wygod, Pamela & Martin 167.7 1.2% Friedkin, Thomas H 117.8 0.8% LSF Executive Golf Course 90.1 0.6% City of Solana Beach 66.8 0.5% S.D. County Gen. Service 62.4 0.4% Spindriff Del Mar HOA 61.1 0.4% St. Francis Ct HOA 59.9 0.4% The Inn at Rancho Santa Fe 56.3 0.4% Sahm, Roland, R 55.7 0.4% Lomas Santa Fe Villas 55.0 0.4% H G Fenton Company 54.0 0.4% City of San Diego 53.1 0.4% International Farm Ltd 53.0 0.4% Top 15 1 12.0% Source: Santa Fe Irrigation District. The fifteen largest customers of Santa Fe accounted for approximately 12% of water sales in Fiscal Year 2006/07. Historic Water Sales Revenues The following table shows Santa Fe's annual Water Revenues for the five most recent Fiscal Years, excerpted from Santa Fe's audited financial statements. TABLE 26 SANTA FE IRRIGATION DISTRICT HISTORIC WATER SALES REVENUES (As of June 30) Percent Monthly System Percent Year Water Sales Chan a Access Charge Chan e 2003 8 -1.8% 1 -0.8% 2004 9 6.7% 1 14.9% 2005 9 0.9% 1 9.1% 2006 10 10.7% 1 2.5% 2007 12 21.5% 1 36.9% Source: Santa Fe Irrigation District. 56 Projected Water Sales Revenues The following table projects annual water sales revenues of Santa Fe (including monthly meter access charges) for the current and next four Fiscal Years. The projections of water sales revenues set forth below are based on the assumptions and increases in projected water deliveries described under "Projected Operating Results and Debt Service Coverage" below and may vary from actual water sales revenues for the reasons described thereunder. In the event that Santa Fe increases or decreases rates and charges, actual sales revenues will vary from those projected below. Historic Debt Service Coverage The following table shows historic debt service coverage over the last five fiscal years. TABLE 27 SANTA FE IRRIGATION DISTRICT HISTORIC DEBT SERVICE COVERAGE For Fiscal Years Ended June 30 2003 2004 2005 2006 2007 Operating Revenues Water Sales $8,512,549 $9,082,385 $9,166,059 $10,149,366 $12,334,275 Base Meter Fees 1,062,392 1,221,720 1,333,614 1,367,491 1,872,118 Property Taxes 662,015 681,857 119,378 997,598 1,765,373 Storage Credits - - - - - Investment Income 1,001,615 409,817 746,854 905,297 1,323,078 Capacity Fees 81,700 129,280 109,130 129,188 98,091 Hydroelectric Revenue - - - - - Other Revenue - - 1,26500 7,630 248,458 Other 149,272 121,219 173,621 252,055 26,460 Total Revenues $11,469,543 $11,646,278 $12,913,656 $130025 $1707,853 Operating Expenses Water Purchased $4,755,276 $4,818,070 $4,524,790 $5,98303 $6,497,503 Water Treatment 1,372,580 1,167,867 1,589,242 1,881,718 2,349,297 Ready to Serve Charges 25104 193,421 200,633 - - Transmission and Distribution 1,958,095 2,137,986 2,377,850 2,358,054 2,46206 Administration and General 1,430,134 1,614,301 1,810,045 1,787,627 2,262,693 Total Expenses $9,767,969 $9,931,645 $10,502,560 $12,010,402 $13,572,179 Net Revenues $1,701,574 $1,714,633 $2,411,096 $1,798,223 $4,095,674 Debt Service $1,459,472 $1,456,009 $1,456,309 $1,455,259 $1,457,746 Coverage Ratio 117% 118% 165% 124% 281.0% Source: Santa Fe Irrigation District. (1) Santa Fe transferred $1,265,000 from the rate stabilization fund in Fiscal Year ending 2005 to cover the operating loss in that Fiscal Year. See Table 28, "Historic Operating Results," herein. (2) Preliminary, unaudited. The State of California began shifting property tax from various local agencies in 1992 to fund the ERAF (Education Augmentation Revenue Fund) ( "ERAF ") Santa Fe's property tax income was not affected until fiscal year 2005. During that fiscal year, property tax revenue was reduced by more than $500,000. The following fiscal year, 2006, property tax revenues returned to full levels. 57 Fiscal Year 2007 -2008 Budget The Fiscal Year 2007 -08 budget, as adopted by the Board of Directors on June 21, 2007 and illustrated below, reflects rate increases which will become effective January 1, 2008. The rates will increase revenues from water sales by 20 %, 15% and 15% for three consecutive years. SANTA FE IRRIGATION DISTRICT Adopted Budget Fiscal Year 2007/08 Operating Revenues: 2008 Water sales $12 Recycled Water Sales 466 Base Meter Fees 2,3 87,693 Hydroelectric Revenue 190 SDWD Local Water Reimbursement 201 SDWD Treatment Reimbursement 1 Misc. Operating Revenue 191,000 Total Operating Revenues $17 Non - Operating Revenues: Capacity Charges $100 Income Interest 1 Property Tax 1 SDWD Capital Reimbursement 474 Misc. Non - Operating Revenue 43,040 Total Non - Operating Revenues $3 TOTAL REVENUE $20 Other Sources of Funds: Transfer from Rate Stabilization Fund $1 Transfer from Capital Improvement Fund - Total Other Sources of Funds $1 TOTAL FUNDS AVAILABLE $22 Operating Expenses: Imported Water Purchases $5 Local Water Purchases 270 Recycled Water Purchases 401 Salary & Benefits 5 Administrative Expenses 656 Engineering Expenses 135 Operations & Maintenance 525 Water Filtration Plant Operation 2 Depreciation & Amortization 1,665,576 Total Operating Expenses $18 Long Term Debt Expenses: Long Term Debt Service — 1999 Bonds $1,453,771 Total Long Term Debt Expenses $1 Capital Expenditures: Capital Acquisitions $553 Capital Improvements 1,943,106 Total Capital Expenditures $2 TOTAL EXPENSES $21 Reserve Contribution: Transfer to Capital Improvement Fund $627,557 Total Reserve Contribution $627 TOTAL USES OF FUNDS $22 Source: Santa Fe Irrigation District. 58 Projected Operating Results and Debt Service Coverage The table below shows the projected operating results for Santa Fe for the Fiscal Years ending June 30, 2008 through June 30, 2012, and excluding depreciation. The following table includes the most recently approved rate increases of 20% in Fiscal Year 2008, with 15.0% rate increase in Fiscal Years 2009 and 2010, with no increase in rates for fiscal years 2011 and 2012. Actual revenues and expenses may vary materially from these projections. TABLE 28 SANTA FE IRRIGATION DISTRICT PROJECTED OPERATING RESULTS (Fiscal Year) 2008 2009 2010 2011 2012 Operating Revenues Charges for Water Sold $15,140,295 $17,755,495 $20,418,795 $21,843,295 $21,843,295 Misc. Operating Revenue 2,071,637 2,17603 2,253,169 2,321,842 2,372,454 Property Taxes 1,765,373 1,765,373 1,765,373 1,765,373 1,765,373 Capacity Fees 98,091 98,091 98,091 98,091 98,091 Interests Earnings 1,082,813 1,086,520 1,090,025 1,131,870 1,145,855 TOTALS $20 $22 $25 $27 $27 EXPENSES O & M Expenses (less water) $80708 $9,987,528 $11,382,560 $11,872,383 $12,375,040 Water Purchase Costs 5,878,900 6,298,511 6,695,422 7,178,819 7,701,872 Total $14 $16 $18 $19 $20 Net Revenues $5 $6 $7 $8 $7 Projected Debt Services $1,400,000 $1,400,000 $1,400,000 $1,400,000 $1,400,000 Operating Income $4,191,610 $5,196,322 $6,147,470 $6,709,269 $5,748,157 Income Projected Coverage 399% 471% 539% 579% 511% Reserves $21 $22 $23 $24 24 Source: Santa Fe Irrigation District. Risk Management Santa Fe is a member of the Association of California Water Agencies Joint Powers Insurance Authority ( "Authority "). The Insurance Authority is a risk - pooling self - insurance authority, created under provisions of California Government Code Section 6500 et. seq. The purpose of the Insurance Authority is to arrange and administer programs of insurance for the pooling of self - insured losses and to purchase excess insurance coverage. At June 30, 2006 Santa Fe participated in the self - insurance program of the Insurance Authority as follows: Property — Insured from $50,000 to $50,050,000 insurable value with a $25,000 deductible; the Insurance Authority is self - insured up to $50,000 per occurrence and excess insurance coverage has been purchased. General and Auto Liability — Insured from $500,000 to $40,000,000 with no deductible; the Insurance Authority is self - insured up to $500,000 and excess insurance coverage has been purchased. 59 Public Officials' Liability — Insured from $500,000 to $40,000,000; the insurance Authority is self - insured up to $500,000 and excess insurance coverage has been purchased. Fidelity Bonds — The Insurance Authority is self - insured up to $100,000 with a $1,000 deductible. Workers' Compensation — Insured for statutory limits. Workers' Compensation is self - insured up to $2,000,000 and employer's liability is self - insured up to $5,000,000 and excess insurance coverage has been purchased. Santa Fe pays annual premiums for these coverages. They are subject to retrospective adjustments based on claims experience. The nature and amounts of these adjustments cannot be estimated and are charged to expense as invoiced. Santa Fe's insurance expense for the years ended June 30, 2006 and 2005 were $182,236 and $190,113, respectively. There were no instances in the past three years where a settlement exceeded Santa Fe's coverage. Defined Benefit Pension Plan Plan Description Santa Fe's defined benefit pension plan, the Miscellaneous Plan of the Santa Fe Irrigation District (the "Plan "), provides retirement and disability benefits, annual cost -of- living adjustments, and death benefits to plan members and beneficiaries. The Plan is part of the Public Agency portion of the California Public Employees Retirement System (CalPERS), an agent multiple- employer plan administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State of California. A menu of benefit provisions as well as other requirements are established by State statutes within the Public Employees' Retirement Law. Santa Fe selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through actions of Santa Fe's Board of Directors. CalPERS issues a separate comprehensive annual financial report. Copies of the CalPERS' annual financial report may be obtained from the CalPERS Executive Office — 400 P Street, Sacramento, California 95814. Funding Policy Active plan members in the Plan are required to contribute 8% of their annual covered salary. Santa Fe makes 7.5% of the contributions required of Santa Fe employees on their behalf for their account. Santa Fe is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The contribution requirements of the plan members are established by State statute, and the employer contribution rate is established and may be amended by CalPERS. Annual Pension Cost For fiscal year ended June 30, 2006, Santa Fe's annual pension cost was $572,149 and Santa Fe actually contributed $572,149. The required contribution for fiscal year ended June 30, 2006 was determined as part of the June 30, 2005 actuarial valuation using the entry age normal actuarial cost method with the contributions determined as a percent of pay. The actuarial assumption included a 7.75% investment rate of return (net of administrative expenses) and included an inflation component of 3.0 %. The actuarial value of Plan assets was determined using a 15 Year Smoothed Market technique that smoothes the effect of short -term volatility in the market value of investments. The Plan's unfunded actuarial accrued liability (or excess assets) is being amortized over a closed 20 -year period. There are 14 years remaining in the period. 60 Funded Status of Plan The following information provided by PERS represents the District's and Plant's combined amounts attributable to the Plan. Entry Age Normal Actuarial Unfunded Annual Unfunded Valuation Accrued Value Liability/ Funded Coverage Liability as Date Liability of Assets (Excess Assets) Status Pay roll a % Payroll 6/30/03 $16,269,967 $13,167,042 $3,102,925 80.9% $3,03300 102.3% 6/30/04 $981,517,006 $580,960,891 $100,556,115 85.2% $160,107,449 62.8% 6/30/05 $872,346,612 $729,55609 $142,789,803 83.6% $203,995,039 70.0% After June 30, 2003, PERS combined Santa Fe and Plant's plan into a risk pool with other agencies of fewer than 100 employees. The funding status for June 30, 2004 is the status for the risk pool. Individual District /Plant funding status is not available. Retiree Health Care Benefits Santa Fe provides post- retirement health benefits established by Santa Fe ordinance to all qualifying employees. Health care insurance is available at the Santa Fe group rate for retired employees and their dependents. Retirees and their dependents must pay the portion of the coverage, if any, not covered by their benefits. The benefits are funded on a pay -as- you -go basis. At June 30, 2006, Santa Fe had 25 retirees and dependents under this plan. The total cost to Santa Fe was $103,468 in Fiscal Year ending 2006. Santa Fe has received a report dated June 26, 2007, from Demsey Filliger & Associates, evaluating Santa Fe's actuarial liability of retiree benefits. The report concludes that the amount of actuarial liability represented in present value for current and future retirees (being 23 current retirees and 45 active employees) is $10,088,343. The annual expense for fiscal year 2007 -08 under GASB 45, if adopted early, would be $842,409. The report estimates that Santa Fe will pay $202,719 for 2007 -08 fiscal year in healthcare premiums on behalf of its retirees, so the change to the accrual accounting would represent a first year increase in annual expenses of $639,690. Santa Fe is considering the conclusions of the report and evaluating different alternatives to address the report's conclusions. Investment Policy The Investment Policy was reviewed and adopted by the Board of Directors of Santa Fe on September 21, 2006. All cash shall be pooled for investment purposes. The investment income derived from the pooled investment account shall be allocated to the contributing funds based upon the proportion of the respective average balances relative to the total pooled balance in the investment portfolio. Interest earnings shall be distributed to the individual funds on a monthly basis. The principal investment objects of Santa Fe are: (i) preservation of capital and protection of investment principal; (ii) maintenance of sufficient liquidity to meet anticipated cash flows; (iii) attainment of a market value rate of return; (iv) diversification to avoid incurring unreasonable market risks; and (v) conformance with all applicable California statutes and Federal regulations. The standard of prudence to be used for managing Santa Fe's investments is California Government Code Section 53600.3, the prudent investor standard which states, "When investing, reinvesting, purchasing, acquiring, exchanging, selling or managing public funds, a trustee shall act with care, skill, prudence and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency." Santa Fe's overall investment program is designed and managed with a degree of professionalism that is worthy of the public trust. Santa Fe recognizes that no investment is totally riskless and that the investment activities of Santa Fe are a matter of public record. Accordingly, Santa Fe recognizes that occasional measured 61 losses are inevitable in a diversified portfolio and shall be considered within the context of the overall portfolio's return, provided that adequate diversification has been implemented and that the sale of a security is in the best long -term interest of Santa Fe. Authorized investment and the percentage of the Santa Fe portfolio which may be invested are as follows: Investment Type Limitations* District Policy US Treasuries No limits 5 -year maximum Federal Agencies No limits 5 -year maxi, GNMA only Federal Instrumentalities No limits 5 -year max, FHLB, FNMA, FFCB & FHLMC only State & Local Agencies: District's own bonds No limits 10% of portfolio, 5 -year max, AA State Instruments Warrants, notes & bonds rate Other Local Agencies Within CA only Repurchase Agreements One year or less in any security Market value 102% of transaction, allowed for purchase for one year or one -year max to termination, less; 20% of portfolio collateralized by Federal securities Prime Commercial Paper 25 ?% of portfolio; 270 -day term; 25% of portfolio, 10% of 10% of outstanding paper of any outstanding paper of any core. core. issuer issuer; 270 -day max; A or A -1 rate; US only Banker's Acceptances 40% of portfolio; 180 days 15% of portfolio; 180 -day max; A or maximum; no more than 30% in any A2 rate one bank Certificate of Deposits (CDs): Non - Negotiable No limits 25% of portfolio; 5 -year max Negotiable 30% of portfolio Not allowed Medium -Term Notes 30% of portfolio; 5 -year max; AA 20% of portfolio; 5 -year max; AA- rate or Aa3 rate Designated Mutual Funds 20% of portfolio; 10% in any one Not allowed mutual fund Secured Notes, etc. Depends on security Not allowed Mortgage- Backed Securities/ 20% of funds; 5 -year max; AA rate Not allowed Collateralized Mtg Obligations Futures No limits Not allowed LAIF Currently $40,000,000 max 20% of portfolio Money Market Funds 20% of portfolio 20% of portfolio, 10% of any one issuer; no -load; AAAm, AAA or AAA /V I+ rate *California Government Code Section 53601 limits investment maturities to five years from date of purchase, unless the Board, at least three months prior to the investment, has granted authority to exceed the five year limit, either specifically or as part of an investment program. 62 RISK FACTORS The following describes certain special considerations and risk factors affecting the payment of and security for the Bonds. The following discussion is not meant to be an exhaustive list of the risks associated with the purchase of any Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors in the Bonds are advised to consider the following special factors along with all other information in this Official Statement in evaluating the Bonds. There can be no assurance that other considerations will not materialize in the future. Net Revenues; Rate Covenants Net Revenues are dependent upon the demand for water sales, which can be affected by population factors, more stringent drinking water regulations, or problems with the District's treatment facilities. There can be no assurance that water service demand will be consistent with the levels contemplated in this Official Statement. A decrease in the demand for water could require an increase in rates or charges in order to comply with the rate covenants contained in the Indenture. The District's ability to meet its rate covenants is dependent upon its capacity to increase rates without driving down demand to a level insufficient to meet debt service on the Bonds. See "Proposition 218 ", below. District Expenses There can be no assurance that expenses of the District will be consistent with the levels contemplated in this Official Statement. Changes in technology, changes in quality standards, increases in the cost of operation or other expenses could require substantial increases in rates or charges in order to comply with the rate covenants in the Indenture. Such rate increases could drive down demand for water and related services or otherwise increase the possibility of nonpayment of the Bonds. Limitations on Remedies Available to Bondowners The ability of the District to comply with its covenants under the Indenture and to generate Net Revenues sufficient to pay principal of and interest on the Bonds may be adversely affected by actions and events outside of the control of the District, and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or payers of assessments, fees and charges. See "Proposition 218" below. Furthermore, any remedies available to the owners of the Bonds upon the occurrence of an event of default under the Indenture are in many respects dependent upon judicial actions, which are often subject to discretion and delay and could prove both expensive and time consuming to obtain. In addition to the limitations on Bondholder remedies contained in the Indenture, the rights and obligations under the Bonds and the Indenture may be subject to the following: the United States Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; usual equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the Federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State of California and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights. Seismic Considerations The District is located in a seismically active area of California. If there were to be an occurrence of severe seismic activity in the area of the District, there could be an interruption in the service provided by the 63 Enterprise, resulting in a temporary reduction in the amount of Net Revenues available to pay debt service when due on the Bonds. Loss of Tax - Exemption As discussed under the caption "TAX MATTERS," interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued, as a result of future acts or omissions of the District in violation of its covenants in the Indenture. Additionally, the United States Supreme Court will be reviewing the ability of individual states to give more favorable tax treatment to bonds of that state than to other states, which may cause interest to be included as income for state personal income taxes. Should such an event of taxability occur, the Bonds are not subject to special redemption and will remain Outstanding until maturity or until redeemed under other provisions set forth in the Indenture. Enterprise Demand and Growth There can be no assurance that the local demand for the services provided by either of the Enterprises will be maintained at levels described in this Official Statement under the heading "THE SAN DIEGUITO ENTERPRISE" and "THE SANTA FE ENTERPRISE." Reduction in the level of demand could require an increase in rates or charges in order to produce Net Revenues sufficient to comply with a District's rate covenant in the respective Installment Purchase Agreement. There can be no assurance that any other entity with regulatory authority over either Enterprise will not adopt further restrictions on operation of such Enterprise. Enterprise Expenses There can be no assurance that the Districts' expenses for their respective Enterprise will be consistent with the levels described in this Official Statement. Changes in technology, new regulatory requirements, increases in the cost of energy or other expenses would reduce Net Revenues of a District, and could require substantial increases in rates or charges in order to comply with the rate covenant. Such rate increases could increase the likelihood of nonpayment, and could also decrease demand. Proposition 218 Proposition 218, a State ballot initiative known as the "Right to Vote on Taxes Act," was approved by the voters on November 5, 1996. The initiative added Articles XIIIC and XIIID to the California Constitution, creating additional requirements for the imposition by most local governments of "general taxes," "special taxes," "assessments," "fees," and "charges." Proposition 218 became effective, pursuant to its terms, as of November 6, 1996, although compliance with some of its provisions was deferred until July 1, 1997, and certain of its provisions purport to apply to any tax imposed for general governmental purposes (i.e., "general taxes ") imposed, extended or increased on or after January 1, 1995 and prior to November 6, 1996. Article XIIID imposes substantive and procedural requirements on the imposition, extension or increase of any "fee" or "charge" subject to its provisions. A "fee" or "charge" subject to Article XIIID includes any levy, other than an ad valorem tax, special tax or assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership. Article XIIID prohibits, among other things, the imposition of any proposed fee or charge, and, possibly, the increase of any existing fee or charge, in the event written protests against the proposed fee or charge are presented at a required public hearing on the fee or charge by a majority of owners of the parcels upon which the fee or charge is to be imposed. Except for fees and charges for water, sewer and refuse collection services, the approval of a majority of the property owners subject to the fee or charge, or at the option of the agency, by a two - thirds vote of the electorate residing in the affected area, is required within 45 days following the public hearing on any such proposed new or increased fee or charge. The California Supreme Court decisions in Richmond v. Shasta Community Services District, 32 Cal. 4 th 409 (2004) ("Richmond"), and Bighorn Desert View Water Agency v. Verjil (published July 24, 2006) ("Bighorn") have clarified some of the uncertainty surrounding the applicability of Section 6 of Article XIIID to service fees and 64 charges. In Richmond, the Shasta Community Services District charged a water connection fee, which included a capacity charge for capital improvements to the Enterprise and a fire suppression charge. The Court held that both the capacity charge and the fire suppression charge were not subject to Article XIIID because a water connection fee is not a property- related fee or charge because it results from the property owner's voluntary decision to apply for the connection. In both Richmond and Bighorn, however, the Court stated that a fee for ongoing water service through an existing connection is imposed "as an incident of property ownership" within the meaning of Article XIIID, rejecting, in Bighorn, the water agency's argument that consumption -based water charges are not imposed "as an incident of property ownership" but as a result of the voluntary decisions of customers as to how much water to use. Article XIIID also provides that "standby charges" are considered "assessments" and must follow the procedures required for "assessments" under Article XIIID and imposes several procedural requirements for the imposition of any assessment, which may include (1) various notice requirements, including the requirement to mail a ballot to owners of the affected property; (2) the substitution of a property owner ballot procedure for the traditional written protest procedure, and providing that "majority protest" exists when ballots (weighted according to proportional financial obligation) submitted in opposition exceed ballots in favor of the assessments; and (3) the requirements that the levying entity "separate the general benefits from the special benefits conferred on a parcel" of land. Article XIIID also precludes standby charges for services that are not immediately available to the parcel being charged. Article XIIID provides that all existing, new or increased assessments are to comply with its provisions beginning July 1, 1997. Existing assessments imposed on or before November 5, 1996, and "imposed exclusively to finance the capital costs or maintenance and operations expenses for "among other things water" are exempted from some of the provisions of Article XIIID applicable to assessments. Article XIIIC extends the people's initiative power to reduce or repeal existing local taxes, assessments, fees and charges. This extension of the initiative power is not limited by the terms of Article XIIIC to fees, taxes, assessment fees and charges imposed after November 6, 1996 and absent other authority could result in retroactive reduction in any existing taxes, assessments, fees or charges. In Bighorn, the Court concluded that under Article XIIIC local voters by initiative may reduce a public agency's water rates and delivery charges. The Court noted, however, that it was not holding that the authorized initiative power is free of all limitations, stating that it was not determining whether the electorate's initiative power is subject to the public agency's statutory obligation to set water service charges at a level that will "pay the operating expenses of the agency, ... provide for repairs and depreciation of works, provide a reasonable surplus for improvements, extensions, and enlargements, pay the interest on any bonded debt, and provide a sinking or other fund for the payment of the principal of such debt as it may become due." Constitutional Limit on Appropriations, Fees and Charges Under Article XIIIB of the California Constitution, state and local government entities have an annual "appropriations limit" which limits their ability to spend certain moneys called "appropriations subject to limitation," which consists of tax revenues, certain state subventions and certain other moneys, including user charges to the extent they exceed the costs reasonably borne by the entity in providing the service for which it is levying the charge. In general terms, the "appropriations limit" is to be based on certain Fiscal Year 1978/79 expenditures, and is to be adjusted annually to reflect changes in the consumer price index, population, and expenditures provided by these entities. Among other provisions of Article XIIIB, if an entity's revenues in any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. The Districts are of the opinion that the rates and use charges imposed by each District in connection with their respective Enterprise do not exceed the costs it reasonably bears in providing such services. If a portion of a Enterprise's rates or connection charges were determined by a court to exceed the reasonable costs of providing service, any fee which the related District charges may be considered to be a "special tax," which under Article XIIIA or XIIID of the California Constitution must be authorized by a two - 65 thirds vote of the affected electorate. This requirement is applicable to the District's rates for service provided by their related Enterprise. The reasonable cost of service provided by each Enterprise has been determined by the State Controller to include depreciation and allowance for the cost of capital improvements. In addition, the California courts have determined that fees such as connection fees (capacity charges) will not be special taxes if they approximate the reasonable cost of constructing Enterprise improvements contemplated by the local agency imposing the fee. Such court determinations have been codified in the Government Code of the State of California (Section 66000 et seq.). No Obligation to Tax The obligation of the Authority to pay the principal of and interest on the Bonds does not constitute an obligation of the Authority for which the Authority is obligated to levy or pledge any form of taxation or for which the Authority has levied or pledged any form of taxation. The obligation of the Authority to pay principal of and interest on the Bonds does not constitute a debt or indebtedness of any Authority, the Districts, the City, the State of California or any of its political subdivisions, within the meaning of any constitutional or statutory debt limitation or restriction. Change in Law In addition to the other limitations described herein, the California electorate or Legislature could adopt a constitutional or legislative property tax decrease or an initiative with the effect of reducing revenues payable to or collected by the Districts. There is no assurance that the California electorate or Legislature will not at some future time approve additional limitations that could reduce the revenues and adversely affect the security of the Bonds. Availability of Water Approximately 30% of the water supplied by the Districts is pumped from local surface water sources, with the remainder imported from SDCWA. The inability of the Districts to secure this water in the future, or any substantial contamination of a water source, could reduce the Net Revenues of the Districts and adversely affect the security of the Bonds. See "THE SAN DIEGUITO ENTERPRISE — Water Sources and Supply; Water Purchases" and "THE SANTA FE ENTERPRISE — Water Sources and Supply; Water Purchases" herein. Natural Disasters Each District, like all California communities, may be sub j ect to unpredictable seismic activity, fires, flood or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within each District. Portions of Southern California are subject to wildfires. In October 2007, over 180,000 acres of land were burned and over 1,000 homes destroyed by wildfire in San Diego County to the areas east and north of the service area of the Districts. Within Santa Fe's service area., approximately 44 homes were damager or destroyed in the "Witch Creek" fire.. Additionally, in October 2003, thousands of acres of land were burned and homes destroyed east of the service areas of the Districts. In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the service areas of the Districts. As a result, a substantial portion of the property owners may be unable or unwilling to pay for water service. THE AUTHORITY The Authority was established pursuant to a Joint Exercise of Powers Agreement dated September 22, 1999, between the Districts. The Authority was created for the purpose of providing financing for public capital improvements for the Districts or other local agencies in the State of California, the acquisition by the Authority of such capital improvements and the purchase by the Authority of local obligations within the meaning of the 66 Act. The Authority is authorized pursuant to Article 4 of the Act to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations of, or for the purpose of making loans to, any Districts or such other local agencies to provide financing for public improvements of such Districts. TAX EXEMPTION In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds will be included as an adjustment in the calculation of the alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. Bond Counsel's opinion as to the exclusion from gross income of interest on the Bonds is based upon certain representations of fact and certifications made by the Authority, the Districts, the Underwriter and others and is subject to the condition that the Authority and the Districts comply with all requirements of the Internal Revenue Code of 1986, as amended, and United States Treasury Regulations proposed or in effect with respect thereto (the "Code ") that must be satisfied subsequent to the issuance of the Bonds to assure that interest on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Authority and the Districts have covenanted to comply with all such requirements. Bond Counsel's opinion may be affected by action taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions taken or events are taken or do occur. Although Bond Counsel has rendered an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes provided that the Authority and the Districts continue to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest on the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds all potential purchasers should consult their tax advisors with respect to collateral tax consequences of the Bonds. It is possible that subsequent to the issuance of the Bonds there might be federal, state, or local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that affect the federal, state, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur. On May 21, 2007, the U.S. Supreme Court agreed to review a Kentucky state court decision, in the matter of Kentucky v. Davis, on the issue of whether the U.S. Constitution commerce clause precludes states from giving more favorable tax treatment to state and local government bonds issued within that state than the tax treatment given bonds issued outside that state. The outcome of this or any similar case cannot be predicted, but the ultimate result could be a change in the treatment for state tax purposes of interest on the Bonds. If the Kentucky v. Davis decision is affirmed by the United States Supreme Court, states such as California may be required to eliminate the disparity between the income tax treatment of out -of -state tax - exempt obligations and the income tax treatment of in -state tax - exempt obligations, such as the Bonds. The impact of such a United States Supreme Court decision may also affect the market price for, or the marketability of the Bonds. Prospective purchasers of the Bonds should consult their tax advisors regarding this matter. See APPENDIX C hereto for the form of Bond Counsel's opinion. 67 NO LITIGATION The Districts are not aware of any pending or threatened litigation concerning the validity of the Indenture or the Installment Purchase Agreements or challenging any action taken by the Districts or the Authority in connection with execution and delivery of the Bonds. Furthermore, the Districts are not aware of any pending or threatened litigation to restrain, enjoin, question or otherwise affect their respective Installment Purchase Agreement or the Indenture or in any way contesting or affecting the validity or enforceability of any of the foregoing or any proceedings of the Authority or the Districts taken with respect to any of the foregoing. RATINGS Standard & Poor's ( "S &P ") and Fitch Ratings ( "Fitch ") have assigned their ratings of "AAA" and "AAA ", respectively, to the Bonds with the understanding that, upon delivery of the Bonds, the Policy will be issued by MBIA Insurance Corporation. In addition, S &P has assigned the Bonds an underlying rating of "AA- ". Such ratings reflect only the views of such organizations and any desire explanation of the significance of such ratings should be obtained from the rating agency furnishing the same, at the following addresses: S &P, 55 Water Street, New York, New York 10041; and Fitch Ratings, One State Street Plaza, New York, New York 10004. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agencies, if in the judgment of such rating agencies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse affect on the market price of the Bonds. FINANCIAL ADVISOR The Authority has retained Fieldman, Rolapp & Associates, Irvine, California, as Financial Advisor for the sale of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. Fieldman, Rolapp & Associates is an independent advisory firm and is not engaged in the business of underwriting, trading, or distributing municipal or other public securities. PROFESSIONAL FEES In connection with the issuance of the Bonds, fees payable to Fieldman, Rolapp & Associates, as Financial Advisor, Best Best & Krieger LLP, as Bond Counsel and Disclosure Counsel and The Bank of New York Trust Company, N.A. as Trustee are contingent upon the issuance of the Bonds. APPROVAL OF LEGALITY All legal matters in connection with the issuance of the Bonds are subject to the approval of Best Best & Krieger LLP, Riverside, California, Bond Counsel. A copy of the approving opinion of Bond Counsel will be provided to the registered owners of the Bonds, and the form of such opinion is attached hereto as APPENDIX C. Certain legal matters will be passed upon for the Authority by Best Best & Krieger LLP, its General Counsel and Disclosure Counsel, and for the Districts by their respective general counsel. UNDERWRITING The Bonds have been purchased following the receipt of competitive bids by Citigroup Global Markets, Inc. (the "Underwriter "). The original purchase price to be paid for the Bonds, upon execution and delivery thereof, is $20,782,080.18, being the principal amount of the Bonds less an Underwriter's discount of $146,205.72, and plus net original issue premium of $243,285.90. The Underwriter intends to offer the Bonds to the public initially at the prices and /or yield set forth on the cover page of this Official Statement, which prices or yields may subsequently change without any requirement of prior notice. 68 The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The Underwriter may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at prices lower than the public offering prices, and such dealers may re -allow any such discounts on sales to other dealers. In reoffering Bonds to the public, the Underwriter may over - allocate or effect transactions which stabilize or maintain the market prices for Bonds at levels above those which might otherwise prevail. Such stabilization, if commenced, may be discontinued at any time. ADDITIONAL INFORMATION All of the descriptions of the California Government Code, the California Water Code, the California Constitution, other applicable legislation, the Installment Purchase Agreements, the Indenture, the Enterprises, the Districts, the Authority, agreements and other documents are made subject to the provisions of such legislation and documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the Authority for further information in connection therewith. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or Owners of any of the Bonds. The execution and delivery of this Official Statement have been authorized by the members of the Authority. R.E. BADGER WATER FACILITIES FINANCING AUTHORITY By:_ /s/ Michael J. Bardin Michael J. Bardin, Executive Director 69 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A SUMMARY OF CERTAIN DEFINED TERMS AND PRINCIPAL LEGAL DOCUMENTS INDENTURE OF TRUST DEFINITIONS "Additional Payments" means the amounts payable by each District under Section 311 of the respective Installment Purchase Agreement. "Agreement" means that certain Joint Exercise of Powers Agreement, dated September 22, 1999, by and between Santa Fe, San Dieguito, and the Agency, creating the Authority, together with any amendments thereof and supplements thereto. "Authority means the R.E. Badger Water Facilities Financing Authority, a joint powers authority duly organized and existing under the laws of the State. "Authorized Representative" means: (a) with respect to the Authority, its Chairperson, Vice Chairperson, Executive Director, Treasurer, Secretary or any other person designated as an Authorized Representative of the Authority by a Written Certificate of the Authority signed by its Chair and filed with Santa Fe, San Dieguito and the Trustee; and (b) with respect to a District, its President, General Manager, Secretary, Treasurer, Finance Director or any other person designated as an Authorized Representative of the District by a Written Certificate of the District signed by its President, General Manager and filed with the Trustee. "Board" means the Board of Directors of the Authority. "Bond Counsel" means (a) Best Best & Krieger LLP, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Authority of nationally recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Code. "Bond Fund" means the fund by that name established and held by the Trustee pursuant to Section 5.01. "Bond Insurer" or "Insurer" means MBIA Insurance Corporation, including its successors and assigns, as issuer of the Municipal Bond Insurance Policy. "Bond Law" means the Marks Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with section 65 84) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State, as in existence on the Closing Date or as thereafter amended from time to time. "Bond Register" means the books for registration maintained by Trustee pursuant to Section 2.10 of the Indenture. "Bond Year" means each twelve -month period extending from October 2 in one calendar year to October 1 of the succeeding calendar year, both dates inclusive, the first such Bond Year commencing on the Closing Date and ending October 2, 2008. "Bonds" means the aggregate principal amount of R.E. Badger Water Facilities Financing Authority 2007 Refunding Water Revenue Bonds authorized by and at any time Outstanding pursuant to the Bond Law and this Indenture. "Book -Entry Depository shall mean DTC or any successor as Book -Entry Depository for the Bonds, appointed pursuant to Section 2.10. A -1 "Business Dam means a day (other than a Saturday or a Sunday) on which banks are not required or authorized to remain closed in the city in which the Trust Office is located. "Charges means fees, tolls, assessments, rates and charges for services and facilities of the Enterprise furnished by the Districts. "Closing Date" means November 20, 2007, being the date of delivery of the Bonds to the Original Purchaser. "Code" means the Internal Revenue Code of 1986, as amended. "Connection Fees" means any fee or fees collected by each District, respectively from property owners as a condition to each District, respectively, providing water service from the Enterprise to residential, commercial or industrial property. "Costs of Issuance" means all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds and the application of the proceeds of the Bonds, including but not limited to all compensation, fees and expenses (including but not limited to fees and expenses for legal counsel) of the Authority and the costs of each District for administration and supervision of the 1999 Project, initial fees and expenses of the Trustee, title insurance premiums, municipal bond insurance premiums, appraisal fees, compensation to any financial consultants or underwriters, legal fees and expenses, filing and recording costs, rating agency fees, costs of preparation and reproduction of documents and costs of printing. "Costs of Issuance Fund" means the fund by that name established and held by the Trustee pursuant to Section 3.03. "Date of Deliverer means the date on which the Bonds are delivered to the Original Purchaser. "Debt Service" means, during any period of computation, the amount obtained for such period by totaling the following amounts: (a) the principal amount of all Outstanding Serial Bonds coming due and payable by their terms in such period; (b) the minimum principal amount of all Outstanding Term Bonds scheduled to be redeemed by operation of mandatory sinking account deposits in such period; and (c) the interest which would be due during such period on the aggregate principal amount of Bonds which would be Outstanding in such period if the Bonds are retired as scheduled, but deducting and excluding from such aggregate amount the amount of Bonds no longer Outstanding. "District" means each of the Santa Fe Irrigation District and the San Dieguito Water District. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. "Enterprise" means the entire water supply, treatment, storage and distribution system owned, controlled or operated by the Districts, including but not limited to all facilities, properties and improvements at any time owned or operated by the Districts for the collection, treatment and supply of water to residents served thereby, and reclaimed water, whether within or without the Districts, and any necessary lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto hereafter acquired, constructed or installed by the Districts. "Escrow Agent means The Bank of New York Trust Company, N.A., acting as Escrow Agent under the Escrow Agreement. "Escrow Agreement" means that Escrow and Deposit Agreement dated as of November 1, 2007, by and among the Authority, Santa Fe, San Dieguito, and the Escrow Agent relating to the defeasance of the 1999 Bonds. A -2 "Escrow Fund" means the fund by that name established pursuant to Section 2 of the Escrow Agreement. "Event of Default" means any of the events specified in Section 7.01 and the event described in Section 601 of the Installment Purchase Agreements. "Federal Securities" means bills, certificates of indebtedness, notes, bonds, or other similar securities which are direct, non - callable obligations of the United States of America, CATS, TIGERS, STRPS, or defeased municipal bonds rated "AAA" by S &P and "Aaa" by Moody's. "Fiscal Year" means any twelve month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve month period selected and designated by the Authority as its official fiscal year period. "Gross Revenues" means all gross Charges received for, and all other gross income and receipts derived by each District from, the ownership and operation of the respective Enterprise or otherwise arising from the respective Enterprise, including but not limited to (a) all charges received by each District for use of the respective Enterprise, (b) all receipts, derived from the investment funds held by each District or the Trustee under any issuing document, (c) transfers from (but exclusive of any transfers to) any stabilization reserve accounts, and (d) all moneys received by each District from other public entities whose inhabitants are served pursuant to contracts with each respective District. "Indenture" means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture pursuant to the provisions hereof. "Independent Financial Consultant" or "Independent Certified Public Accountant" means any individual or firm engaged in the profession involved, appointed by Authority, and who, or each of whom, has a favorable reputation in the field in which his /her opinion or certificate will be given, and: (1) is in fact independent and not under domination of Authority; (2) does not have any substantial interest, direct or indirect, with Authority; and (3) is not connected with Authority as an officer or employee of Authority, but who may be regularly retained to make reports to Authority. "Information Services" means Financial Information, Inc.'s "Daily Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services' "Called Bond Service," 65 Broadway, 16th Floor, New York, New York 10006; Moody's "Municipal and Government," 99 Church Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; S &P's "Called Bond Record," 25 Broadway, 16th Floor, New York, New York 10004; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and /or such other information services providing information with respect to called bonds as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. "Installment Payment Date" means the fifteenth day of March and September or if such date is not a Business Day, the preceding Business Day. "Installment Purchase Agreements" means those certain Installment Purchase Agreements each by and between the Authority as seller and Santa Fe and San Dieguito, respectively, as purchaser of the 1999 Project, dated as of November 1, 2007, as originally executed and as it may from time to time be supplemented, modified or amended in accordance with the terms thereof and of this Indenture "Installment Payments" means the payments required to be paid by each District, respectively, pursuant to Section 305 of each Installment Purchase Agreement, including all prepayments thereof. A -3 "Interest Payment Date" means each April 1 and October 1 commencing April 1, 2008, or if such date is not a Business Day, then on the next succeeding Business Day. "Maintenance and Operation Expenses" means the reasonable and necessary costs spent or incurred by the Districts for maintaining and operating the Enterprise, calculated in accordance with sound accounting principles, including the cost of supply of water, gas and electric energy under contracts or otherwise, the funding of reasonable reserves, and all reasonable and necessary expenses of management and repair and other expenses to maintain and preserve the Enterprise in good repair and working order, and including all reasonable and necessary administrative costs of the District attributable to the Enterprise and the Obligations, such as salaries and wages and the necessary contribution to retirement of employees, overhead, insurance, taxes (if any), expenses, compensation and indemnification of the Trustee, and fees of auditors, accountants, attorneys or engineers, and including all other reasonable and necessary costs of the Districts or charges required to be paid by it to comply with the terms of the Obligations of the Districts, but excluding depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. "Minimum Rating" means a rating of "A" or better by Moody's and S &P if S &P is then rating the Bonds. In the event the rating system of Moody's and S &P with respect to any particular Permitted Investment does not include a rating category of "A ", the term "A" or better as used in the preceding sentence shall mean the highest general rating category applicable to such Permitted Investment (determined without regard to any refinement or gradation of such rating category by a numerical modifier, a plus or a minus sign, or otherwise). "Moody means Moody's Investors Service, its successors and assigns. "Municipal Bond Insurance Polio or "Policy means the insurance policy issued by the Bond Insurer and insuring the scheduled payment of the principal of and interest on the Bonds when due. "Net Proceeds" when used with respect to any insurance or condemnation award, means the gross proceeds from such insurance or condemnation award, paid with respect to the 1999 Project, remaining after payment therefrom of all expenses incurred in the collection of such gross proceeds. "Net Revenues" means for any Fiscal Year, the Revenues for such Fiscal Year less the Maintenance and Operation Expenses for such Fiscal Year. "1999 Bonds" means the $27,505,000 original principal amount of the Authority 1999 Water Revenue Bonds. "1999 Installment Purchase Agreements" means those certain Installment Purchase Agreements each by and between the Authority as seller and Santa Fe and San Dieguito, respectively, as purchaser of the 1999 Project, dated as of November 1, 1999, as originally executed and as it may from time to time be supplemented, modified or amended in accordance with the terms thereof and of this Indenture. "1999 Project" means improvements to each District's Enterprise, including equipment, all as more fully described in Exhibit A attached to each of the 1999 Installment Purchase Agreements or such improvements or betterments to the respective Enterprises as may be permitted under the 1999 Installment Purchase Agreements. "Nonpurpose Investment" means an "investment property within the meaning of Section 1.148 -8T(e) of the Regulations in which Gross Proceeds are invested other than the Installment Purchase Agreement. "Original Purchaser" means Citigroup Global Markets, Inc. as the original purchaser of the Bonds upon their delivery by the Trustee on the Closing Date. " Outstanding when used as of any particular time with reference to Bonds, means, subject to the provisions of Article X of the Indenture, all Bonds except: A -4 (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds paid or deemed to have been paid pursuant to Section 10.02 of the Indenture; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by Authority pursuant to the Indenture. "Owner" whenever used herein with respect to a Bond, means the person in whose name the ownership of such Bond is registered on the Registration Books. "Parity Instrument" means any resolution, indenture of trust, trust agreement or other instrument authorizing the issuance of any Parity Obligations. "ParityObligations" means indebtedness or other obligations (including leases and installment sale agreements) issued or incurred by each respective District and secured by a pledge of and lien on any of the Net Revenues of such District equally and ratably with its respective Installment Payments. "Participant" means a member of, or participant in, DTC. "Permitted Investments" The term "Permitted Investments" means: (A) Federal Securities (B) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by agency itself): 1. U.S. Export Import Bank (Eximbank). Direct obligations or fully guaranteed bonds of beneficial ownership. 2. Farmers Home Administration (FHMA). Certificates of beneficial ownership. 3. Federal Financing Bank. 4. Federal Housing Administration Debentures (FHA). 5. General Services Administration. Participation Certificates. 6. Government National Mortgage Association (GNMA or "Ginnie Mae "). GNMA guaranteed mortgage backed bonds; GNMA - guaranteed pass through obligations (not acceptable for certain cash flow sensitive issues). 7. U.S. Maritime Administration. Guaranteed Title XI financing. 8. U.S. Department of Housing and Urban Development (HUD). Project Notes; Local Authority Bonds; New Communities Debentures U.S. government guaranteed debentures; U.S. Public Housing Notes and Bonds U.S. government guaranteed public housing notes and bonds. (C) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by Authority itself): 1. Federal Home Loan Bank System. Senior debt obligations. A -5 2. Federal Home Loan Mortgage Authority (FHLMC or "Freddie Mac "). Participation Certificates; senior debt obligations. 3. Federal National Mortgage Association (FNMA or "Fannie Mae "). Mortgage backed securities and senior debt obligations (excluded are stripped mortgage securities which are valued greater than par on the portion of unpaid principal). 4. Student Loan Marketing Association (SLMA or "Sallie Mae "). Senior debt obligations. 5. Resolution Funding Corp. ( REFCORP). Only the interest component of REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York in book entry form are acceptable. 6. Farm Credit Banks. Consolidated system -wide bonds and notes. 7. Financing Corporation (FICO). Debt obligations. (D) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S &P of "AAAm G ", "AAAm ", or "AAm ", and, if rated by Moody's rated "Aaa," "Aa 1," or "Aa2," including such funds for which the Trustee or its affiliates act as investment advisor or provide other services. (E) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC or FSLIC. (F) Investment agreements with a domestic or foreign bank or corporation the long -term debt or claims paying ability of which, or, in the case of a guaranteed corporation the long -term debt, or, in the case of a monoline financial guaranty insurance company, claims paying ability, of the guarantor is rated in at least the double A category by Moody's and S &P; provided that, by the terms of the investment agreement: 1. interest payments are to be made to the Trustee at times and in amounts as necessary to pay debt service (or, if the investment agreement is for the construction fund, construction draws) on the Bonds; 2. the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days' prior notice; the Authority and the Trustee hereby agree to give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid; 3. the investment agreement shall state that it is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors; 4. the Authority or the Trustee receives the opinion of domestic counsel (which opinion shall be addressed to the Authority and the Insurer) that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable) in form and substance acceptable, and addressed to, the Insurer; 5. the investment agreement shall provide that if during its term A -6 (i) the provider's rating by either S &P or Moody's falls below "AA-" or "Aa3 ", respectively, the provider shall, at its option, within 10 days of receipt of publication of such downgrade, either (a) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider's books) to the Authority, the Trustee or a third party acting solely as agent therefor (the "Holder of the Collateral ") collateral free and clear of any third -party liens or claims the market value of which collateral is maintained at levels and upon such conditions as would be acceptable to S &P and Moody's to maintain an "A" rating in an "A" rated structured financing (with a market value approach); or (b) repay the principal of and accrued but unpaid interest on the investment (including such other amounts as are required to permit the Trustee to receive the initially contemplated yield through the term of the Agreement), and (ii) the provider's rating by either S &P or Moody's is withdrawn or suspended or falls below "A-" or "AY, respectively, the provider must, at the direction of the Authority or the Trustee (who shall give such direction if so directed by the Insurer), within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Authority or Trustee, and 6. The investment agreement shall state and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms of the investment agreement, at the time such collateral is delivered, that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); 7. the investment agreement must provide that if during its term (i) the provider shall default in its payment obligations, the provider's obligations under the investment agreement shall, at the direction of the Authority or the Trustee (who shall give such direction if so directed by the Insurer), be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Authority or Trustee, as appropriate, and (ii) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. ( "event of insolvency "), the provider's obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Authority or Trustee, as appropriate. (G) Commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, "Prime - 1" by Moody's and "A -1" or better by S &P. (H) Federal funds or bankers acceptances with a maximum term of one year of any bank, which may include the Trustee and its affiliates, which has an unsecured, uninsured or unguaranteed obligation rating of "Prime 1" or "AY or better by Moody's and "A 1" or "A" or better by S &P. (I) Repurchase agreements: With (i) any domestic bank, or domestic branch of a foreign bank, including the Trustee and its affiliates, the long term debt of which is rated at least "A" by S &P and Moody's; or (ii) any broker - dealer with "retail customers" or a related affiliate thereof which broker - dealer has, or the parent company (which guarantees the provider) of which has, long -term debt rated at least "A" by S &P and Moody's, which broker - A-7 dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (iii) any other entity rated "A" or better by S &P and Moody's and acceptable to the Insurer, provided that: 1. The market value of the collateral is maintained at levels and upon such conditions as would be acceptable to S &P and Moody's to maintain an "A" rating in an "A" rated structured financing (with a market value approach); 2. The Trustee or a third party acting solely as agent therefor or for the Authority (the "Holder of the Collateral ") has possession of the collateral or the collateral has been transferred to the Holder of the Collateral in accordance with applicable state and federal laws (other than by means of entries on the transferor's books); 3. The repurchase agreement shall state and an opinion of counsel shall be rendered at the time such collateral is delivered that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); 4. All other requirements of S &P in respect of repurchase agreements shall be met. 5. The repurchase agreement shall provide that if during its term the provider's rating by either Moody's or S &P is withdrawn or suspended or falls below "A-" by S &P or "A3" by Moody's, as appropriate, the provider must, at the direction of the Authority or the Trustee (who shall give such direction if so directed by the Insurer), within 10 days of receipt of such direction, repurchase all collateral and terminate the agreement, with no penalty or premium to the Authority or Trustee. Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with no evergreen provision), collateral levels need not be as specified in (1.) above, so long as such collateral levels are 103% or better and the provider is rated at least "A" by S &P and Moody's, respectively. (J) State of California Local Agency Investment Fund (LAIF). "Principal Account means the account by that name established in the Bond Fund pursuant to Section 5.02. "Principal Office" means the principal corporate trust office of the Trustee in Los Angeles, California or such other addresses as may be specified in writing by the Trustee, provided, however, that for purposes of the transfer, registration, exchange, payment and surrender of Bonds "Principal Office" means the corporate trust office of the Trustee at which, at any particular time, its corporate trust agency business shall be conducted. "Rebate Regulations" means the Proposed and Temporary Treasury Regulations issued under Section 148(f) of the Code. "Record Date" means, with respect to any Interest Payment Date, the fifteenth (15th) calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day. "Redemption Fund" means the fund by that name established pursuant to Section 5.07. "Registration Books" means the records maintained by the Trustee pursuant to Section 2.05 for the registration and transfer of ownership of the Bonds. "Representation Letter" means the letter of representations from the Authority to, or other instrument or agreement of the Authority with, a Book -Entry Depository in which the Authority, among other things, makes certain representations to such Book -Entry Depository with respect to the Bonds, the payment thereof and delivery of notices with respect thereto. A -8 "Reserve Account" means the account by that name in the Bond Fund established pursuant to Section 5.02 and including the SFID Reserve Account and the SDWD Reserve Account established thereunder. "Reserve Account Credit Device" means (a) a surety bond or insurance policy issued to the Trustee by a company licensed to issue such a bond or policy which may be deposited in the Reserve Account to meet the Reserve Requirement if the claims paying ability of the issuer thereof shall be rated "AAA" by S &P's and "Aaa" by Moody's; and (b) an unconditional irrevocable letter of credit issued to the Trustee, as agent of the Owners, by a bank which may be deposited in the Reserve Account to meet the Reserve Requirement if the issuer thereof is rated at least "AA" by S &P's and "Aa" by Moody's. The letter of credit will be for a term of not less than three years. The issuer of the letter of credit will be required to notify the Districts and the Trustee, not later than 12 months prior to the stated expiration date of the letter of credit, as to whether such expiration date will extended and if so, indicate the new expiration date. For so long as the Bonds are outstanding, the terms of each Reserve Account Credit Device not provided by the Bond Insurer shall meet the requirements set forth in the Financial Guaranty Agreement. "Reserve Account Credit Provider" means the Bond Insurer, or any other institution providing a Reserve Account Credit Device. "Reserve Requirement" means, the least of (a) 10% of the original proceeds of the Bonds; (b) Maximum Annual Debt Service on the Bonds; and (c) 125% of average annual debt service on the Bonds, as certified in writing by the Authority to the Trustee. "Revenue Fund" means the fund by that name established by each respective District into which all Gross Revenues are deposited. "S &P" means Standard & Poor's Ratings Group, its successors and assigns. "San Die ug ito" or "SDWD" means the San Dieguito Water District. "Santa Fe" or "SFID" means the Santa Fe Irrigation District. "Securities Depositories" means The Depository Trust Company, 55 Water Street, 50 Floor, New York, NY, 10041 -0099, Attn: Call Notification Department, Fax (212) 855 -7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and /or such other securities depositories as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. "Serial Bonds" means all of the Bonds excluding Term Bonds. "State" means the State of California. "Supplemental Indenture" means any indenture hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending this Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. "Tax Certificate" means that No Arbitrage and Tax Compliance Certificate executed on the Closing Date by the Authority with respect to the Bonds . "Tax Regulations" means temporary and permanent regulations promulgated under or with respect to sections 103 and 141 through 150, inclusive, of the Code. "Trustee" means The Bank of New York Trust Company, N.A., a national banking association organized and existing under the laws of the United states of America, or its successor, as Trustee hereunder as provided in Section 8.01. A -9 "Trust Office" means the corporate trust office of the Trustee at 700 S. Flower Street, Suite 500, Los Angeles, CA 90017, or at such other or additional offices as may be specified in writing to the Authority except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term shall mean the office or agency of the Trustee at which, at any particular time, its corporate agency business shall be conducted. "Written Certificate" "Written Request" and "Written Requisition" of the Authority or the District mean, respectively, a written certificate, request or requisition signed in the name of the Authority or the District by their Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. CREATION OF FUNDS AND ACCOUNTS; PLEDGE OF FUNDS Establishment and Application of Costs of Issuance Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the "Costs of Issuance Fund." The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee to pay the Costs of Issuance upon submission of Written Requisitions of the Authority stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against said fund. Each Written Requisition of the Authority shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. On March 1, 2008, or upon the earlier Written Request of the Authority, all amounts remaining in the Costs of Issuance Fund shall be transferred by the Trustee to the Authority. Validity of Bonds. The validity of the authorization and issuance of the Bonds is not dependent on and shall not be affected in any way by any proceedings taken by the Authority or the Trustee with respect to or in connection with the Installment Purchase Agreement. The recital contained in the Bonds that the same are issued pursuant to the Constitution and laws of the State shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance. Pledge and Assignment; Bond Fund (a) Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, all of the Installment Payments and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account established pursuant to this Indenture are hereby pledged to secure the payment of the principal of and interest on the Bonds in accordance with their terms and the provisions of this Indenture. Said pledge shall constitute a lien on and security interest in such assets and shall attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act. (b) The Authority hereby transfers in trust, grants a security interest in and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Installment Payments and all of the rights of the Authority (but none of its duties or obligations pursuant to the Installment Purchase Agreements) in the Installment Purchase Agreements. The Trustee shall be entitled to and shall collect and receive all of the Installment Payments, and any Installment Payments collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also shall be entitled to and shall, subject to the provisions of Article VIII, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of each respective District under the applicable Installment Purchase Agreement. The assignment of the Installment Purchase Agreements to the Trustee is solely in its capacity as Trustee under this Indenture and the duties, powers and liabilities of the Trustee in acting thereunder shall be subject to the provisions of this Indenture, including, without limitation, the provisions of Article VIII hereof. A -10 The Trustee shall not be responsible for any representations, warranties, covenants, or obligations of the Authority. (c) Subject to Section 5.08, all Installment Payments shall be promptly deposited by the Trustee upon receipt thereof in a special fund designated as the "Bond Fund" which the Trustee shall establish, maintain and hold in trust; except that all moneys received by the Trustee and required hereunder or under the Installment Purchase Agreements to be deposited in the Redemption Fund shall be promptly deposited in such Fund. All Installment Payments deposited with the Trustee shall be held, disbursed, allocated, and applied by the Trustee only as provided in this Indenture. Installment Payments. Not later than the first Business Day preceding each date on which principal of or interest on the Bonds becomes due and payable, the Trustee shall transfer from the Bond Fund and deposit into the following respective accounts (each of which the Trustee shall establish and maintain within the Bond Fund), the following amounts in the following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Installment Payments sufficient to make any earlier required deposit as provided in Section 5.06 hereof) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority: (a) The Trustee shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such date on all Bonds then Outstanding. (b) The Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds coming due and payable on such date. (c) The Trustee shall deposit in the Sinking Account an amount equal to the aggregate principal amount of the Term Bonds required to be redeemed on such date, if any, pursuant to Section 4.01(a). (d) The Trustee shall deposit in the Reserve Account (but only from the applicable District's Installment Payment and only into such District's Reserve Account) an amount, if any, required to cause the aggregate amount on deposit in the Reserve Account to be equal to the Reserve Requirement. Application of Interest Account. All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to this Indenture). Application of Principal Account. All amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds at their respective maturity dates. Application of Reserve Account. There shall be maintained in the Reserve Account an amount equal to the Reserve Requirement of which $1,374,000 shall be deposited in the SFID Reserve Account and $639,493.76 shall be deposited in the SDWD Reserve Account. All amounts in the Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of (a) paying interest on or principal of the Bonds, when due and payable to the extent that moneys deposited in the Interest Account or Principal Account, respectively, are not sufficient for such purpose; (b) paying the redemption price of any Term Bonds to be redeemed pursuant to Section 4.01(a) in the event that amounts on deposit in the Sinking Account are not sufficient for such purpose; and (c) making the final payments of principal of and interest on the Bonds, subject to the following limitations: if the insufficiency was caused by a delinquency in payment of all Installment Payments under an Installment Purchase Agreement, then the moneys necessary to make up the deficiency in the Interest Account or Principal Account caused by the delinquency with the Installment Purchase Agreement shall be transferred from the applicable sub - account of the Reserve Account which was established for the A -11 District causing such delinquency. The Trustee shall draw on a sub - account of the Reserve Account to satisfy any deficiency in the other sub - account of the Reserve Account. On the date on which all Bonds shall be retired hereunder or provision made therefor pursuant to Article X, all moneys then on deposit in the Reserve Account shall be withdrawn by the Trustee and paid to the Districts as a refund of overpaid Installment Payments according to their proportionate interests. If as of the first (1st) day of the month preceding any Interest Payment Date there shall be any deficiency in the Reserve Account (whether due to a payment therefrom or due to the fluctuation in market value of securities credited thereto, or otherwise), the Trustee shall promptly notify the Districts and the Bond Insurer in writing of the amount of such deficiency and the Districts shall pay to the Trustee the amount of such deficiency within 12 months of receipt of notice of such deficiency as provided in Section 306 of the Installment Purchase Agreements according to their proportionate interests. Amounts in a subaccount of the Reserve Account may be transferred to the Interest Account or Principal Account only to the extent necessary to cure any default under an Installment Purchase Agreement or for final payment, as described above, and may not be transferred to cure any default on any other Installment Purchase Agreement. Any amounts on deposit in the Reserve Account on or before each Interest Payment Date in excess of the Reserve Requirement shall be transferred to the Bond Fund. The Authority may fund all or a portion of the Reserve Requirement with one or more Reserve Account Credit Devices in lieu of cash and which are accompanied by an opinion of Bond Counsel stating that neither the release of funds from the Reserve Account nor the deposit of the Reserve Account Credit Device will cause interest on the Bonds to be included in gross income for purposes of federal income taxation. Additionally, the Insurer shall be provided an opinion of counsel to the effect that payments under such letter of credit would not constitute avoidable preferences under Section 547 of the U.S. Bankruptcy Code or similar state laws with avoidable preference provisions in the event of the filing of a petition for relief under the U.S. Bankruptcy Code or similar state laws by the Authority or the Districts. The Reserve Account Credit Device must be unconditional and irrevocable and may expire no earlier than the final maturity of the Bonds. Upon deposit of any substitute Reserve Account Credit Device with the Trustee, the Trustee shall pay to the Authority from cash amounts in the Reserve Account, if any, an amount equal to the principal of the Reserve Account Credit Device. In any case where the Reserve Account is funded with a combination of cash and a Reserve Account Credit Device, the Trustee shall deplete all cash balances before drawing on the Reserve Account Credit Device. With regard to replenishment, any available moneys should be used first, to reimburse the Reserve Account Credit Provider, thereby reinstating the Reserve Account Credit Device and second, to replenish the cash in the Reserve Account. If the Authority shall fail to repay any amount owing the Bond Insurer in accordance with the requirements of the Reserve Account Credit Device, then the Bond Insurer shall be entitled to exercise any and all remedies available or at law or under this Indenture other than (i) acceleration of the maturity of the Bonds or (ii) any remedies which would adversely affect the Owners of the Bonds. Application of Redemption Fund. The Trustee shall establish and maintain the Redemption Fund, amounts in which shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds to be redeemed pursuant to Sections 4.01(b) or (c); provided, however, that at any time prior to selection for redemption of any such Bonds, the Trustee may apply such amounts to the purchase of Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be directed pursuant to a Written Request of the Authority, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds. Investments. All moneys in any of the funds or accounts established with the Trustee pursuant to this Indenture shall be invested by the Trustee solely in Permitted Investments. Such investments shall be directed by the Authority pursuant to a Written Request of the Authority filed with the Responsible Trust Officer of the Trustee at least two (2) Business Days in advance of the making of such investments. In the absence of any A -12 such directions from the Authority, the Trustee shall invest any such moneys in Permitted Investments described in clause (D) of the definition thereof. Permitted Investments purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder shall be deposited in the Bond Fund from time to time on or before each Installment Payment Date, provided, however, that earnings on the investment of amounts in the Reserve Account shall be retained therein to the extent required to maintain the Reserve Requirement. For purposes of acquiring any investments hereunder, the Trustee may commingle funds held by it hereunder. The Trustee may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made pursuant to this Section 5.08. The Authority and the Districts (by their execution of the respective Installment Purchase Agreements) acknowledge that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority or the Districts the right to receive brokerage confirmations of security transactions as they occur, the Authority and the Districts specifically waive receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Authority and the Districts periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. Valuation of Investments. For the purpose of determining the amount in any fund or account, the value of Permitted Investments credited to such fund shall be valued quarterly by the Trustee at the market value thereof (excluding any accrued interest). The Trustee may utilize computer pricing services as are available to it in making such valuations. Any deficiency in a fund or account resulting from a decline in market value shall be restored by the Authority no later than the next scheduled quarterly valuation date. PARTICULAR COVENANTS Punctual Payment. The Authority shall punctually pay or cause to be paid the principal of and interest and premium (if any) on all the Bonds in strict conformity with the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof, but only out of Installment Payments and other assets pledged for such payment as provided in this Indenture. Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this Section 6.02 shall be deemed to limit the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of the Bonds. Against Encumbrances. The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Installment Payments and other assets pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by this Indenture. Subject to this limitation, the Authority expressly reserves the right to enter into one or more other indentures for any of its corporate purposes, and reserves the right to issue other obligations for such purposes. Power to Issue Bonds and Make Pledge and Assignment. The Authority is duly authorized pursuant to law to issue the Bonds and to enter into this Indenture and to pledge and assign the Installment Payments and other assets purported to be pledged and assigned, respectively, under this Indenture in the manner and to the extent provided in this Indenture. The Bonds and the provisions of this Indenture are and will be the legal, valid and binding special obligations of the Authority in accordance with their terms, and the Authority and the Trustee shall at all times, subject to the provisions of Article VIII and to the extent permitted by law, defend, A -13 preserve and protect said pledge and assignment of Installment Payments and other assets and all the rights of the Bond Owners under this Indenture against all claims and demands of all persons whomsoever. Accounting Records and Financial Statements. The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of Bonds, the Gross Revenues, the Installment Payments, the Installment Purchase Agreement and all funds and accounts established pursuant to this Indenture. Such books of record and account shall be available for inspection by the Authority and the Districts, during business hours and under reasonable circumstances. No Additional Obligations. The Authority covenants that no additional bonds, notes or other indebtedness shall be issued or incurred which are payable out of the Installment Payments in whole or in part; except as Parity Obligations may be issued pursuant to the Installment Purchase Agreements. No Arbitrage. The Authority shall not take, or permit to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Bonds would have caused the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code. Rebate Requirement. The Authority shall take any and all actions necessary to assure compliance with Section 148(f) of the Code, relating to the rebate of excess investments earnings, if any, to the federal government. Private Activity Bond Limitation. The Authority shall assure that the Proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private business tests of Section 141(b) of the Code. Private Loan Financing Limitation. The Authority shall assure that the proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private loan financing test of Section 141(c) of the Code. Federal Guaranty Prohibition. The Authority 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 Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code. Maintenance of Tax Exemption. The Authority shall take any and all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Bonds. Installment Purchase Agreements. The Trustee shall promptly collect all amounts due to the Trustee from the Districts pursuant to the respective Installment Purchase Agreements. Subject to the provisions of Article VIII, the Trustee shall enforce, and take all steps, actions and proceedings which the Trustee determines to be reasonably necessary for the enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of all of the obligations of the Districts under the respective Installment Purchase Agreements. Waiver of Laws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in this Indenture or in the Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Authority to the extent permitted by law. Protection of Security and Rights of Owners. The Authority will preserve and protect the security of the Bonds and the rights of the Bond Insurer and the Owners. From and after the date of issuance of any Bonds, such Bonds shall be incontestable by the Authority. Continuing Disclosure. The Authority hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement and provide the Bond Insurer a copy of each A -14 Annual Report. Notwithstanding any other provision of this Indenture, failure of the Authority or the Trustee to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; however, the Trustee may (and, at the request of any participating underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Bonds and upon being indemnified to its satisfaction therefor, shall) or any Owner may but shall not be obligated to seek mandamus or specific performance by court order, to cause the Authority to comply with its obligations under this Section. Further Assurances. The Authority will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Indenture. EVENTS OF DEFAULT AND REMEDIES Events of Default. The following events shall be Events of Default hereunder: (a) default in the due and punctual payment by the Authority of the principal of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise; (b) default in the due and punctual payment by the Authority of any installment of interest on any Bonds when and as the same shall become due and payable; (c) default by the Authority in the observance of any of the other covenants, agreements or conditions on its part in this Indenture or in the Bonds contained, if such default shall have continued for a period of thirty (30) days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the Authority by the Trustee; provided, however, that if in the reasonable opinion of the Authority the default stated in the notice can be corrected, but not within such thirty (30) day period, such default shall not constitute an Event of Default hereunder if the Authority shall commence to cure such default within such thirty (30) day period and thereafter diligently and in good faith cure such failure in a reasonable period of time; and (d) the occurrence and continuation of an event of default under and as defined in the Installment Purchase Agreements or any other obligation of the Authority or either District secured by a pledge of Net Revenues on a parity with the pledge made under the respective Installment Purchase Agreements; provided, however, that a default with respect to an Installment Purchase Agreement or Parity Obligation of one District shall not cause an Event of Default with respect to the other Installment Purchase Agreement or Parity Obligation of the other District. Remedies Upon Event of Default. If any Event of Default shall occur, then, and in each and every such case during the continuance of such Event of Default, the Trustee shall give immediate written notice to the Bond Insurer, and may with the consent of the Bond Insurer, or shall (i) at the written direction of the Bond Insurer, or (ii) at the written direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding with the written consent of the Bond Insurer, the Trustee, upon notice in writing to the Authority, the Bond Insurer and the Districts, to the extent of the proportionate share of the deficiency, declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this Indenture or in the Bonds contained to the contrary notwithstanding. In the event of a payment default in determining whether a payment has been made no effect shall be given to payments made under the Municipal Bond Insurance Policy. Any such declaration is subject to the condition that if, at any time after such declaration and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Authority or the Districts, to the extent of the proportionate share of the deficiency, shall deposit with the Trustee a sum A -15 sufficient to pay all the principal of and installments of interest on the Bonds payment of which is overdue, with interest on such overdue principal at the rate borne by the respective Bonds to the extent permitted by law, and the reasonable fees, charges and expenses (including those of its attorneys) of the Trustee, and any and all other Events of Default known to the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then, and in every such case, with the prior consent of the Bond Insurer, the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Authority, the Districts and the Trustee, or the Trustee if such declaration was made by the Trustee, may, on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences and waive such Event of Default; but no such rescission and annulment shall extend to or shall affect any subsequent Event of Default, or shall impair or exhaust any right or power consequent thereon. Application of Installment Payments and Other Funds After Default. If an Event of Default shall occur and be continuing, all Installment Payments and any other funds then held or thereafter received by the Trustee under any of the provisions of this Indenture shall be applied by the Trustee as follows and in the following order: (a) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds and payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under this Indenture; (b) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of this Indenture, as follows: First: To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Second: To the payment to the persons entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by acceleration or redemption, with interest on the overdue principal at the rate borne by the respective Bonds (to the extent permitted by law), and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference. Trustee to Represent Bond Owners. The Trustee is hereby irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney in fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, this Indenture and applicable provisions of any law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bond Owners, the Trustee in its discretion may, with the prior written consent of the Bond Insurer and upon the written request of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the A -16 Bonds, this Indenture or any other law; and upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the Installment Payments and other assets pledged under this Indenture, pending such proceedings. All rights of action under this Indenture or the Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions of this Indenture. Bond Owners' Direction of Proceedings. Anything in this Indenture to the contrary notwithstanding, the Bond Insurer or the Owners of a majority in aggregate principal amount of the Bonds then Outstanding with the prior written consent of the Bond Insurer, shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, and upon indemnification of the Trustee to its reasonable satisfaction, to direct the method of conducting all remedial proceedings taken by the Trustee hereunder, provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would expose it to liability. Limitation on Bond Owners' Right to Sue. Notwithstanding any other provision hereof, no Owner of any Bonds shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under this Indenture, the Installment Purchase Agreements or any other applicable law with respect to such Bonds, unless (a) such Owner shall have given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) such Owner or Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall have failed to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee; and (e) no direction inconsistent with such written request shall have been given to the Trustee during such sixty (60) day period by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Indenture or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, this Indenture, the Installment Purchase Agreements or other applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of this Indenture. Absolute Obligation of Authority. Nothing in Section 7.06 or in any other provision of this Indenture or in the Bonds contained shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest and premium (if any) on the Bonds to the respective Owners of the Bonds at their respective dates of maturity, or upon call for redemption, as herein provided, but only out of the Installment Payments and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds. Termination of Proceedings. In case any proceedings taken by the Trustee, the Bond Insurer or any one or more Bond Owners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee, the Bond Insurer or the Bond Owners, then in every such case the Authority, the Bond Insurer, the Trustee and the Bond Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights hereunder, severally and A -17 respectively, and all rights, remedies, powers and duties of the Authority, the Bond Insurer, the Trustee and the Bond Owners shall continue as though no such proceedings had been taken. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee, the Bond Insurer or to the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. No Waiver of Default. No delay or omission of the Trustee, the Bond Insurer or of any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and every power and remedy given by this Indenture to the Trustee, the Bond Insurer or the Owners of the Bonds may be exercised from time to time and as often as may be deemed expedient. Rights of Bond Insurer. Anything in this Indenture to the contrary notwithstanding, upon the occurrence and continuation of an Event of Default, the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted hereunder to the Owners of the Bonds as if it were sole Owner of the Bonds, or to the Trustee for the benefit of the Owners of the Bonds, including, but not limited to, rights and remedies granted pursuant to Section 7.02 and including but not limited to the right to approve all waivers of any Events of Default. The rights granted to the Bond Insurer hereunder shall be deemed terminated and shall not be exercisable by the Bond Insurer during any period during which the Bond Insurer shall be in default under the Municipal Bond Insurance Policy. THE TRUSTEE Duties, Immunities and Liabilities of Trustee. (a) The Trustee shall, prior to an Event of Default, and after the curing of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in this Indenture and no implied duties or covenants shall be read into this Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as responsible person would exercise or use under the circumstances in the conduct of his or her own affairs. (b) The Authority may remove the Trustee at any time unless an Event of Default shall have occurred and then be continuing, and the Authority shall remove the Trustee if at any time requested to do so by the Bond Insurer or the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with subsection (e) of this Section 8.01, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee, the Bond Insurer and the Districts and thereupon shall appoint a successor Trustee by an instrument in writing. Any such removal shall be made upon at least thirty (30) days' prior written notice to the Trustee. (c) The Trustee may at any time resign by giving written notice of such resignation to the Authority, the Bond Insurer and the Districts and by giving the Bond Owners notice of such resignation by mail at the respective addresses shown on the Registration Books at least 45 days prior to the date of resignation. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing. (d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee acceptable to the Bond Insurer. If no successor Trustee shall have been appointed and have accepted appointment within forty five (45) days of giving notice of removal or notice of resignation as aforesaid, the Authority or Trustee shall petition any federal A -18 or state court for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture, shall signify its acceptance of such appointment by executing and delivering to the Authority and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless at the Written Request of the Authority or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the Authority shall mail or cause the successor Trustee to mail a notice of the succession of such Trustee to the trusts hereunder to each rating agency which is then rating the Bonds and to the Bond Owners at the respective addresses shown on the Registration Books and to the Bond Insurer. If the Authority fails to mail such notice within fifteen (15) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Authority. (e) Any Trustee appointed under this Indenture shall be a corporation or association organized and doing business under the laws of any state or the United States of America or the District of Columbia, 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 agency, so long as any Bonds are Outstanding, and acceptable to the Bond Insurer. If such corporation or association publishes a report of condition at least annually pursuant to law or to the requirements of any supervising or examining agency above referred to then for the purpose of this subsection (e), 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. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section 8.01. (f) The Trustee shall not take the Municipal Bond Insurance Policy into account in determining whether the rights of Owners are adversely affected by actions taken pursuant to the terms and provisions of this Indenture, and the Bond Insurer shall be included as a party in interest and as a party entitled to (i) notify the Trustee of the occurrence of an Event of Default and (ii) request the Trustee to intervene in judicial proceedings that affect the Bonds or the security therefor. The Trustee shall be required to accept notice of default from the Bond Insurer. (g) The Trustee shall have no responsibility or liability with respect to any information, statements or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of these Bonds other than for statements which relate directly to the status of the Trustee's corporate trust business. Merger or Consolidation. Any bank, association or trust company into which the Trustee may be merged or converted or with which it may be consolidated or any bank, association or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any bank, association or trust company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such bank, association or trust company shall be eligible under subsection (e) of Section 8.01 shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. A -19 Liability of Trustee. (a) The recitals of facts herein and in the Bonds contained shall be taken as statements of the Authority, and the Trustee shall not assume responsibility nor liability therefore for the correctness of the same, or make any representations as to the validity or sufficiency of this Indenture, the Bonds or the Installment Purchase Agreements, nor shall the Trustee incur any responsibility nor liability therefore in respect thereof, other than as expressly stated herein in connection with the respective duties or obligations herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bond Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. (b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (c) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture. (d) The Trustee shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. (e) The Trustee shall not be deemed to have knowledge of any Event of Default hereunder, or under the Installment Purchase Agreements, or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default hereunder, or under the Installment Purchase Agreements, unless and until the responsible trust officer shall have actual knowledge thereof, or shall have received written notice thereof at its Trust Office. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the Authority or the Districts of any of the terms, conditions, covenants or agreements herein, under the respective Installment Purchase Agreements or of any of the documents executed in connection with the Bonds, or as to the existence of an Event of Default or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default. The Trustee shall not be responsible for the validity, effectiveness or priority of any collateral given to or held by it. Without limiting the generality of the foregoing, the Trustee shall not be required to ascertain or inquire as to the performance or observance by the Districts and the Authority of the terms, conditions, covenants or agreements set forth in the respective Installment Purchase Agreements, other than the covenants of the Districts to make Installment Payments to the Trustee when due and to file with the Trustee when due, such reports and certifications as the Districts are required to file with the Trustee thereunder. (f) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it is not assured to its satisfaction that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (g) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents or attorneys. (h) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of Owners or Bond Insurer pursuant to this Indenture, unless such Owners or Bond Insurer shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. No A -20 permissive power, right or remedy conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such power, right or remedy. (i) Whether or not therein expressly so provided, every provision of this Indenture and the Installment Purchase Agreements relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of Section 8.01(a), this Section 8.03 and Section 8.04 hereof. 0) The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. (k) The Trustee makes no representation or warranty, expressed 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 for the use contemplated by the Authority or the Districts of the 1999 Project. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Installment Purchase Agreement or this Indenture for the existence, furnishing or use of the 1999 Project. (1) The Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture sent by unsecured e -mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that, the Trustee shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Authority elects to give the Trustee e -mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee's understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Authority agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties. (m) The Trustee shall not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of enforced delay ( "unavoidable delay ") in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and /or occurrences beyond the control of the Trustee. Right to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, opinion, bonds or other paper or document believed by them to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Trustee may treat the Owners of the Bonds appearing in the Registration Books as the absolute Owners of the Bonds for all purposes and the Trustee shall not be affected by any notice to the contrary. Whenever in the administration of the trusts imposed upon it by this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be A -21 conclusively proved and established by a Written Certificate, Written Request or Written Requisition of the Authority or the Districts, and such Written Certificate, Written Request or Written Requisition shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of this Indenture in reliance upon such Written Certificate, Written Request or Written Requisition, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may deem reasonable. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Indenture shall be retained in their respective possession and shall be subject at all reasonable times to the inspection of the Authority, the Districts and any Bond Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions. Compensation and Indemnification. The Authority shall pay to the Trustee (solely from Additional Payments) from time to time the compensation for all services rendered under this Indenture and also all reasonable expenses and disbursements, incurred in and about the performance of its powers and duties under this Indenture. In the event the Trustee advances its own funds for the payment of the Bonds or for the protection or benefit of the Owners of the Bonds, the Authority shall promptly reimburse the Trustee for such advances with interest at the maximum rate allowed by law. The Trustee shall not be obligated to advance its own funds. The Authority shall indemnify, defend, and hold harmless the Trustee against any loss, liability or expense (including legal fees and expenses) incurred without gross negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder. The rights of the Trustee and the obligations of the Authority under this Section 8.06 shall survive the resignation or removal of the Trustee or the discharge of the Bonds and this Indenture. MODIFICATION OR AMENDMENT OF INDENTURE Amendments Permitted. (a) This Indenture and the rights and obligations of the Authority and of the Owners of the Bonds and of the Trustee may be modified or amended from time to time and at any time by an indenture or indentures supplemental thereto, which the Authority and the Trustee may enter into when the written consent of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding and the Bond Insurer, shall have been filed with the Trustee. No such modification or amendment shall (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each Bond so affected; or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or permit the creation of any lien on the Net Revenues and other assets pledged under this Indenture prior to or on a parity with the lien created by this Indenture except as permitted herein or in the Installment Purchase Agreements, or deprive the Owners of the Bonds of the lien created by this Indenture on such Net Revenues and other assets (except as expressly provided in this Indenture or in the Installment Purchase Agreements), without the consent of the Owners of all of the Bonds then Outstanding; or (iii) modify any of the rights or obligations of the Trustee hereunder without its written consent thereto. It shall not be necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. (b) This Indenture and the rights and obligations of the Authority, of the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority and the Trustee may enter into with the written consent of the Bond Insurer but without the consent of any Bond Owners, if the Trustee has been furnished an opinion of counsel that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners of the Bonds, including, without limitation, for any one or more of the following purposes: A -22 (i) to add to the covenants and agreements of the Authority in this Indenture contained other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority; (ii) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in this Indenture, or in regard to matters or questions arising under this Indenture, as the Authority may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Bond Owners; (iii) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; (iv) to modify, amend or supplement this Indenture in such manner as to cause interest on the Bonds to remain excludable from gross income under the Code; or (v) to facilitate the issuance of Parity Obligations by the Districts pursuant to each Installment Purchase Agreement. (c) The Trustee may in its discretion, but shall not be obligated to, enter into any such Supplemental Indenture authorized by subsections (a) or (b) of this Section 9.01 which adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. (d) Prior to the Trustee entering into any Supplemental Indenture hereunder, there shall be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of this Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion from gross income for purposes of federal income taxes of interest on the Bonds. (e) Notice of any modification hereof or amendment hereto shall be given by the Authority to each rating agency which then maintains a rating on the Bonds and the Bond Insurer, at least fifteen (15) days prior to the effective date of the related Supplemental Indenture. The Bond Insurer shall be provided by the Districts a full transcript of all proceedings relating to the execution of any such amendment or supplement. Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this Article Ix, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Authority, the Trustee, and all Owners of Bonds 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 such Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the Authority so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and presentation of his Bonds for the purpose at the Trust Office or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand on the Owners of any Bonds then Outstanding shall be exchanged at the Trust Office, without cost A -23 to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same series and maturity. Amendment of Particular Bonds. The provisions of this Article IX shall not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by him. DEFEASANCE Discharge of Indenture. Any portion or all of the Outstanding Bonds may be paid by the Authority in any of the following ways, provided that the Authority also pays or causes to be paid any other sums payable hereunder by the Authority with respect to such Bonds: (a) by paying or causing to be paid the principal of and interest and premium (if any) on such Bonds, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money or non - callable Federal Securities in the necessary amount (as provided in Section 10.03) to pay or redeem such Bonds; or (c) by delivering such Bonds to the Trustee for cancellation. The Authority shall defease such portion of the Bonds outstanding when so directed by a District and upon receipt of cash or securities sufficient to defease such specified amount of Bonds. If the Authority shall also pay or cause to be paid all other sums payable hereunder, including any amounts due to the Bond Insurer, then and in that case, at the election of the Authority (evidenced by a Written Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to discharge such Bonds and this Indenture with respect to such Bonds), and notwithstanding that any of such Bonds shall not have been surrendered for payment, this Indenture and the pledge of Net Revenues and other assets made under this Indenture with respect to such Bonds and all covenants, agreements and other obligations of the Authority under this Indenture with respect to such Bonds shall cease, terminate, become void and be completely discharged and satisfied. In such event, upon the Written Request of the Authority, the Trustee shall be authorized to take such actions and execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction. In the event all Outstanding Bonds are paid as provided in this Section 10.01, the Trustee shall pay over, transfer, assign or deliver to the Authority all moneys or securities or other property held by it pursuant to this Indenture which are not required for the payment or redemption of any Bonds not theretofore surrendered for such payment or redemption and after payment of amounts due to the Trustee under the Indenture. This Indenture shall not be discharged unless all amounts due or to become due to the Insurer have been paid in full or duly provided for. Discharge of Liability on Bonds. Upon the deposit with the Trustee, in trust, at or before maturity, of money or non - callable Federal Securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the Authority in respect of such Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject, however, to the provisions of Section 10.04. The Authority may at any time surrender to the Trustee for cancellation by it any Bonds previously issued and delivered, which the Authority may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. A -24 Deposit of Money or Securities with Trustee. Whenever in this Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or non - callable Federal Securities in the necessary amount to pay or redeem any Bonds, the money or non - callable Federal Securities so to be deposited or held may include money or non - callable Federal Securities held by the Trustee in the funds and accounts established pursuant to this Indenture and shall be: (a) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the principal amount of such Bonds and all unpaid interest thereon to the redemption date; or (b) non - callable Federal Securities, the principal of and interest on which when due will, in the written opinion of an Independent Accountant filed with the Authority, the Bond Insurer and the Trustee, provide money sufficient to pay the principal of and interest and premium (if any) on the Bonds to be paid or redeemed, as such principal, interest and premium become due, provided that in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice; provided, in each case, that (i) the Trustee shall have been irrevocably instructed (by the terms of this Indenture or by Written Request of the Authority) to apply such money to the payment of such principal, interest and premium (if any) with respect to such Bonds, and (ii) the Authority shall have delivered to the Trustee and the Bond Insurer an opinion of Bond Counsel to the effect that such Bonds have been discharged in accordance with this Indenture (which opinion may rely upon and assume the accuracy of the Independent Accountant's opinion referred to above). Unclaimed Funds. Notwithstanding any provisions of this Indenture, and subject to applicable provisions of State law, any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any Bonds and remaining unclaimed for two (2) years after the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in this Indenture), if such moneys were so held at such date, or two (2) years after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall be repaid to the Authority free from the trusts created by this Indenture and at the request of the Trustee an indemnification agreement acceptable to the Authority and the Trustee indemnifying the Trustee with respect to claims of Owners of Bonds which have not yet been paid, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Authority as aforesaid, the Trustee shall (at the cost of the Authority) first mail to the Owners of Bonds which have not yet been paid, at the addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Authority of the moneys held for the payment thereof. MISCELLANEOUS Liability of Authority Limited to Gross Revenues. Notwithstanding anything in this Indenture or in the Bonds contained, the Authority shall not be required to advance any moneys derived from any source other than the Installment Payments and other assets pledged under this Indenture for any of the purposes in this Indenture mentioned, whether for the payment of the principal of or interest on the Bonds or for any other purpose of this Indenture. Nevertheless, the Authority may, but shall not be required to, advance for any of the purposes hereof any funds of the Authority which may be made available to it for such purposes. Limitation of Rights to Parties; Bond Owners; Bond Insurer as Third Party Beneficiary; Limitations on Rights of Bond Insurer. Nothing in this Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any person other than the Authority, the Trustee, the Bond Insurer, the Districts and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of this A -25 Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the Bond Insurer, the Districts, and the Owners of the Bonds. To the extent that this Indenture or the Installment Purchase Agreement confers upon or gives or grants to the Bond Insurer any right, remedy or claim under or by reason of this Indenture, the Bond Insurer is hereby explicitly recognized as being a third -party beneficiary hereunder or thereunder, as applicable, and may enforce any such right remedy or claim conferred, given or granted hereunder or thereunder. Notwithstanding anything in this Indenture or the Installment Purchase Agreement to the contrary, the rights granted to the Bond Insurer under this Indenture and the Installment Purchase Agreement shall be deemed suspended and shall not be exercisable by the Bond Insurer during any period during which the Bond Insurer shall be in default under the Municipal Bond Insurance Policy. Funds and Accounts. Any fund or account required by this Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with industry standards to the extent practicable, and with due regard for the requirements of Section 6.05 and for the protection of the security of the Bonds and the rights of every Owner thereof. Waiver of Notice; Requirement of Mailed Notice. Whenever in this Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in this Indenture any notice shall be required to be given by mail, such requirement shall be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class mail. Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee shall, in lieu of such cancellation and delivery, destroy such Bonds as may be allowed by law, and, upon written request of the Authority, deliver a certificate of such destruction to the Authority. Severability of Invalid Provisions. If any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, and this Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority hereby declares that it would have entered into this Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid, or unenforceable. Evidence of Rights of Bond Owners. Any request, consent or other instrument required or permitted by this Indenture to be signed and executed by Bond Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Bond Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of Bonds transferable by delivery, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and the Authority if made in the manner provided in this Section 11.08. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by A -26 the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are known by the Trustee to be owned or held by or for the account of the Authority, or by any other obligor on the Bonds, or by any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 11.09 if the pledgee shall certify to the Trustee the pledgee's right to vote such Bonds and that the pledgee is not a person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or any other obligor on the Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request of the Trustee, the Authority shall specify to the Trustee those Bonds which are disqualified pursuant to this Section 11.09 and the Trustee may rely conclusively upon such certificate. Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest or principal due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04 hereof but without any liability for interest thereon. Waiver of Personal Liability. No member, officer, agent or employee of the Authority shall be individually or personally liable for the payment of the principal of or interest or premium (if any) on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by this Indenture. Successor Is Deemed Included in All References to Predecessor. Whenever in this Indenture either the Authority or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Indenture contained by or on behalf of the Authority or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. SAN DIEGUITO WATER DISTRICT INSTALLMENT PURCHASE AGREEMENT DEFINITIONS "Additional Payments" means the amounts payable by SDWD under Section 311 of this Installment Purchase Agreement. "Additional Revenues" means, with respect to the issuance of any Parity Obligations, any or all of the following amounts: A -27 (i) An allowance for Net Revenues from any additions or improvements to or extensions of the Enterprise to be made with the proceeds of such Parity Obligations or from any other source, all in an amount equal to ninety percent (90 %) of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first thirty -six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown by the certificate or opinion of a qualified independent consultant employed by SDWD. (ii) An allowance for Net Revenues arising from any increase in the charges made for service from the Enterprise which have been adopted prior to the incurring of such Parity Obligations, in an amount equal to the total amount by which the Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year or during any more recent twelve (12) month period selected by SDWD, all as shown by the certificate or opinion of a qualified independent consultant. "Agency greement" means that certain Agency Agreement, dated as of November 1, 1999, by and among SDWD, SFID, and the Authority. "Charges means fees, tolls, assessments, rates and charges for services and facilities of the Enterprise furnished by SDWD. "Code" means the Internal Revenue Code of 1986, as amended. "Connection Fees" means any fee or fees collected by SDWD from property owners as a condition to SDWD providing water service from the Enterprise to residential, commercial, or industrial property. "Costs of Issuance Fund" means the fund by that name established pursuant to Section 3.03 of the Indenture. "Date of Deliverer means the date on which the Bonds are delivered to the Original Purchaser. "Enterprise" means the entire water supply, treatment, storage and distribution system owned, controlled or operated by SDWD, including but not limited to all facilities, properties and improvements at any time owned or operated by SDWD for the collection, treatment, and supply of water to residents served thereby, and reclaimed water, whether within or without SDWD, and any necessary lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto hereafter acquired, constructed, or installed by SDWD. The Enterprise shall not include the systems for reclaimed and recycled water. "Fiscal Year" means any twelve -month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve -month period selected and designated by SDWD as its official fiscal year period. "Gross Revenues" means all gross Charges received for, and all other gross income and receipts derived by SDWD from, the ownership and operation of the Enterprise or otherwise arising from the Enterprise, including but not limited to (a) all charges received by SDWD for use of the Enterprise, (b) all receipts, derived from the investment funds held by SDWD or the Trustee under any issuing document, (c) transfers from (but exclusive of any transfers to) any stabilization reserve accounts, and (d) all moneys received by SDWD from other public entities whose inhabitants are served pursuant to contracts with SDWD. "Indenture" means the Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified, or amended by any Supplemental Indenture pursuant to the provisions thereof. "Installment Payment Dates" means the fifteenth day of September and March or if such date is not a Business Day, the preceding Business Day. A -28 "Installment Payments" means the payments required to be paid by SDWD pursuant to Section 305 of this Installment Purchase Agreement, including all prepayments thereof. "Installment Purchase Agreement" means this Installment Purchase Agreement. " Maintenance and Operation Expenses" means the reasonable and necessary costs spent or incurred by SDWD for maintaining and operating the Enterprise, calculated in accordance with sound accounting principles, including the cost of supply of water, gas and electric energy under contracts or otherwise, the funding of reasonable reserves, and all reasonable and necessary expenses of management and repair and other expenses to maintain and preserve the Enterprise in good repair and working order, and including all reasonable and necessary administrative costs of the District attributable to the Enterprise and the Obligations, such as salaries and wages and the necessary contribution to retirement of employees, overhead, insurance, taxes (if any), expenses, compensation and indemnification of the Trustee, and fees of auditors, accountants, attorneys or engineers, and including all other reasonable and necessary costs of SDWD or charges required to be paid by it to comply with the terms of the Obligations of SDWD, but excluding depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. "Maximum Annual Debt Service" means, as of the date of any calculation and with respect to the Installment Payments or any Parity Obligations, as the case may be, the maximum sum obtained for the current or any future Bond Year during the Term of this Installment Purchase Agreement by totaling the following amount for such Bond Year: (a) the aggregate amount of the Installment Payments coming due and payable in such Bond Year pursuant hereto, except to the extent payable from a prepayment pursuant to Section 312; (b) the principal amount of all outstanding Parity Obligations, if any, coming due and payable by their terms in such Bond Year; and (c) the amount of interest which would be due during such Bond Year on the aggregate principal amount of all outstanding Parity Obligations, if any, which would be outstanding in such Bond Year if such Parity Obligations are retired as scheduled; provided, however, that with respect to any Parity Obligations which bear interest at a variable rate, such interest shall be assumed to bear interest at the highest of: (i) the actual rate on the date of calculation, or if the indebtedness is not yet outstanding, the initial rate (if established and binding); (ii) if the indebtedness has been outstanding for at least twelve months, the average rate over the twelve months immediately preceding the date of calculation; and (iii) (A) if interest on the indebtedness is excludable from gross income under the applicable provisions of the Code, the most recently published Bond Buyer "Revenue Bond Index" (or comparable index if no longer published) plus 50 basis points, or (B) if interest is not so excludable, the interest rate on direct U.S. Treasury Obligations with comparable maturities plus 50 base points, provided, however, that for purposes of any rate covenant measuring actual debt service coverage during a test period, variable rate indebtedness shall be deemed to bear interest at the actual rate per annum applicable during the test period. " Original Purchaser has the meaning in the Indenture. "Parity Instrument" means any resolution, indenture of trust, trust agreement, or other instrument authorizing the issuance of any Parity Obligations. "ParityObligations" means indebtedness or other obligations (including leases and installment sale agreements) issued or incurred by SDWD and secured by a pledge of and lien on Net Revenues equally and ratably with the Installment Payments. "Permitted Encumbrances" means as of any particular time: A -29 (i) Liens for ad valorem taxes and assessments, if any, not delinquent or which SDWD may, pursuant to Section 413 of this Installment Purchase Agreement, permit to remain unpaid. (ii) The 2004 Bonds; (iii) The Installment Purchase Agreement and any Parity Obligation. (iv) The Agency Agreement. (v) The Indenture. (vi) Easements, rights of way and other rights, reservations, covenants, conditions, or restrictions which do not impair or impede construction or operation of the 1999 Project as evidenced by the certificate of an Authorized Representative filed with Trustee. "Project Costs" means all costs of payment of, or reimbursement for, acquisition, construction and financing of the 1999 Project, including but not limited to, architect and engineering fees, construction contractor payments, costs of environmental mitigation, costs of feasibility and other reports, inspection costs, permit fees, filing and recording costs, printing costs, reproduction and binding costs, fees and charges of the Trustee, legal fees and charges, financial and other professional consultant fees in connection with the foregoing. "Refunding Price" means the principal amount plus the interest thereon owed by SDWD to the Authority under the terms hereof as provided in Section 301. "Reserve Account" means the Reserve Account established for SDWD pursuant to Section 5.02 of the Indenture. "Revenue Fund" means the fund by that name established by SDWD into which all Gross Revenues are deposited. "SDWD" means the San Dieguito Water District. "SFID" means the Santa Fe Irrigation District. "State" means the State of California. "2004 Bonds" means the San Dieguito Water District 2004 Water Revenue Refunding Bonds. "Trustee" means The Bank of New York Trust Company, N.A., acting as Trustee under the Indenture, ESTABLISHMENT OF FUNDS; INSTALLMENT PAYMENTS Sale of 1999 Project. In consideration of the payment, or the causing of the payment, of Installment Payments and any other amounts due and owing hereunder or under the Indenture provided for in Section 305 hereof by SDWD to the Authority or its assignee, the Authority hereby grants, conveys, bargains and sells to SDWD, effective upon the date hereof, the portion of the 1999 Project, upon the terms and conditions set forth in this Installment Purchase Agreement and SDWD hereby accepts said grant, conveyance, bargain and sale upon said terms and conditions. Term of Agreement. The term of this Installment Purchase Agreement shall commence upon the date hereof and shall terminate upon the occurrence of either of the following events: (a) the later of payment in full of the Installment Payments and any other amounts due and owing hereunder or under the Indenture by SDWD pursuant to the provisions of this Installment Purchase Agreement or (b) a default by SDWD and termination pursuant to Article VI hereof. A -30 Title. From and after the Date of Delivery, title to the 1999 Project, and each and every portion thereof, shall vest in SDWD and SFID in their respective percentages; provided, however, that title to the 1999 Project and each and every portion thereof remaining in SDWD and SFID in their respective percentages shall be subject to the subsequent payment of Installment Payments as described in Section 305 hereof, to the remedies of the Authority and its assignee in the event of default as provided in Article VI hereof and to Permitted Encumbrances. Installment Payments. (a) Obligation to Pam SDWD agrees to pay to the Authority, its successors and assigns, but solely from the Net Revenues and other funds pledged hereunder as the Refunding Price of its proportionate share of the 1999 Project refunding of the 1999 Bonds which is being financed with the aggregate principal amount of $7,810,000 together with interest on the unpaid principal balance, payable in Installment Payments coming due and payable in the respective amounts and on the respective dates specified in Exhibit A. The Installment Payments shall be paid by SDWD to the Trustee, as assignee of the Authority pursuant to the Indenture, in the amounts and at the times as set forth in Section 306(b). (b) Effect of Prepay In the event that SDWD prepays all remaining Installment Payments in full pursuant to Section 312, SDWD's obligations under this Installment Purchase Agreement shall thereupon cease and terminate, including but not limited to SDWD's obligation to pay Installment Payments therefor under this Section 305; provided, however, that SDWD's obligations to compensate and indemnify the Trustee pursuant to Section 311 shall survive such prepayment. In the event that SDWD prepays the Installment Payments in part but not in whole pursuant to Section 312, the principal component of each succeeding Installment Payment shall be reduced as provided in such Sections and the interest component of each remaining Installment Payment shall be reduced by the aggregate corresponding amount of interest which would otherwise be payable on the Bonds thereby redeemed pursuant to the applicable provisions of Section 4.01 of the Indenture. (c) Rate on Overdue Payments In the event SDWD should fail to make any of the payments required in this Section 305 and Section 311, the payment in default shall continue as an obligation of SDWD until the amount in default shall have been fully paid, and SDWD agrees to pay the same with interest thereon, from the date of default to the date of payment, at the rate of eight percent (8 %) per annum. (d) Assignment. SDWD understands and agrees that all Installment Payments have been assigned by the Authority to the Trustee in trust, pursuant to the Indenture, for the benefit of the Owners of the Bonds, and SDWD hereby assents to such assignment. The Authority hereby directs SDWD, and SDWD hereby agrees to pay to the Trustee at its Office, all amounts payable by SDWD pursuant to this Section 305 and all amounts payable by SDWD pursuant to Section 311. Pledte and Application of Net Revenues. (a) Pledge of Net Revenues The Installment Payments and any Parity Obligations shall be secured by a first pledge of all of the Net Revenues. In addition, the Installment Payments and any Parity Obligations shall be secured by a pledge of all of the moneys in the Reserve Account, including all amounts derived from the investment of such moneys. Such pledge shall constitute a first lien on the Net Revenues and such other moneys for the payment of the principal of and with interest and premium (if any) on the Installment Payments and any Parity Obligations in accordance with the terms hereof. The Installment Payments and any Parity Obligations shall be equally secured by a pledge, charge and lien upon the Net Revenues and such moneys without priority for series, issue, number or date; and the payment of the interest on the principal of the Installment Payments and any Parity Obligations, and any premiums upon the redemption of any thereof shall be and are secured by an exclusive pledge, charge and lien upon the Net Revenues and such moneys. So long as any of the Installment Payments and any Parity Obligations are outstanding, the Net Revenues and such moneys shall not be used for any other purpose; except that out of the Net Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by Section 306(b) and (c). (b) Deposits Into Revenue Fund; Transfer to Make Installment Payments All of the Gross Revenues shall be deposited by SDWD immediately upon receipt in the Revenue Fund. SDWD covenants and A -31 agrees that all Net Revenues will be held by SDWD in the Revenue Fund in trust for the benefit of the Trustee (as assignee of the rights of the Authority hereunder) and the Bond Owners, and for the benefit of the owners of any Parity Obligations. On or before each Installment Payment Date, SDWD shall withdraw from the Revenue Fund and transfer to the Trustee, for deposit in the Bond Fund, an amount which, together with the balance then on deposit in the Bond Fund, the Interest Account, the Sinking Account and the Principal Account (other than amounts resulting from the prepayment of the Installment Payments pursuant to Section 312 and other than amounts required for payment of principal of or interest on any Bonds which have matured or been called for redemption but which have not been presented for payment and other than amounts needed for Installment Payments), is equal to the aggregate amount of the Installment Payment coming due and payable on the next succeeding Interest Payment Date. In addition, SDWD shall withdraw from the Revenue Fund such amounts at such times as shall be required to: (i) pay all Maintenance and Operation Expenses as they come due and payable; (ii) pay the principal of and interest on any Parity Obligations and otherwise comply with the provisions of the instruments authorizing the issuance of any Parity Obligations; (iii) pay to the Trustee the amount of any deficiency in the SDWD Reserve Account, the notice of which deficiency shall have been given by the Trustee to SDWD pursuant to Section 5.06 of the Indenture; and (iv) pay all other amounts when and as due and payable hereunder. (c) Other Uses of Net Revenues Permitted. SDWD shall manage, conserve and apply the Net Revenues on deposits in the Revenue Fund in such a manner that all deposits required to be made pursuant to the preceding subsection (b) will be made at the times and in the amounts so required. Subject to the foregoing sentence, so long as no Event of Default shall have occurred and be continuing hereunder, SDWD may use and apply moneys in the Revenue Fund for (i) the payment of Additional Payments; (ii) the payment of any subordinate obligations or any unsecured obligations; (iii) the acquisition and construction of extensions and betterments to the Enterprise; (iv) the prepayment of any obligations of SDWD relating to the Enterprise; or (v) any other lawful purposes of SDWD. (d) Budget and Appropriation of Installment Payments. During the term of this Installment Purchase Agreement, SDWD shall adopt and make all necessary budgets and appropriations of the Installment Payments from the Net Revenues, and shall furnish to the Trustee a Written Certificate stating that the Installment Payments have been included in the final budget of SDWD for the current Fiscal Year. Such Written Certificate for any Fiscal Year shall be filed with the Trustee not later than September 1 in such Fiscal Year. In the event any Installment Payment requires the adoption by SDWD of any supplemental budget or appropriation, SDWD shall promptly adopt the same. The covenants on the part of SDWD contained in this subsection (d) shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of SDWD to take such action and do such things as are required by law in the performance of the official duty of such officials to enable SDWD to carry out and perform the covenants and agreements in this subsection (d). Special Obligation of SDWD; Obligations Absolute. SDWD's obligation to pay the Installment Payments, the Additional Payments and any other amounts coming due and payable hereunder shall be a special obligation of SDWD limited solely to the Net Revenues. Under no circumstances shall SDWD be required to advance 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 and the Additional Payments, nor shall any other funds or property of SDWD be liable for the payment of the Installment Payments and the Additional Payments and any other amounts coming due and payable hereunder. The obligations of SDWD to make the Installment Payments and the Additional Payments from the 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 setoff, counterclaim or recoupment arising out of any breach of SDWD, the Authority or the Trustee of any obligation to SDWD or otherwise with respect to the Enterprise, whether hereunder or otherwise, or out of indebtedness or liability at any time owing to SDWD by the Authority or the Trustee. Until such time as all of the Installment Payments, all of the Additional Payments A -32 and all other amounts coming due and payable hereunder shall have been fully paid or prepaid, SDWD (i) will not suspend or discontinue payment of any Installment Payments, Additional Payments or such other amounts; (ii) will perform and observe all other agreements contained in this Installment Purchase Agreement; and (iii) will not terminate the term of this Installment Purchase Agreement for any cause, including, without limiting the generality of the foregoing, the occurrence of any acts or destruction of or damage to the Enterprise, sale of the Enterprise, the taking by eminent domain of title to or temporary use of any component of the Enterprise, commercial frustration of purpose, any change in the tax law or other laws of the United States of America or the State or any political subdivision of either thereof or any failure of the Authority or the Trustee to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with the Indenture or this Installment Purchase Agreement. Nothing contained in this Section 307 shall be construed to release the Authority or the Trustee from the performance of any of the agreements on its part contained herein or in the Indenture, and in the event the Authority or the Trustee shall fail to perform any such agreements, SDWD may institute such action against the Authority or the Trustee as SDWD may deem necessary to compel performance so long as such action does not abrogate the obligations of SDWD contained in the preceding paragraph. SDWD may, however, at SDWD's own cost and expense and in SDWD's own name or in the name of the Authority prosecute or defend any action or proceeding or take any other action involving third persons which SDWD deems reasonably necessary in order to secure or protect SDWD's rights hereunder, and in such event the Authority hereby agrees to cooperate fully with SDWD and to take such action necessary to effect the substitution of SDWD for the Authority in such action or proceeding if SDWD shall so request. Rates and Charges. (a) Covenant to Fix Rates and Charges. SDWD shall fix, prescribe, revise and collect charges for the services and facilities furnished by the Enterprise during each Fiscal Year, which are at least sufficient, after making allowance for contingencies and error in the estimates, to pay the following amounts in the following order: (i) all Maintenance and Operation Expenses estimated by SDWD to become due and payable in such Fiscal Year; (ii) the Installment Payments and the principal of and interest on any Parity Obligations as they become due and payable during such Fiscal Year; (iii) all other payments required for compliance with the Indenture and this Installment Purchase Agreement and the instruments pursuant to which any Parity Obligations relating to the Enterprise shall have been issued; and (iv) all amounts, if any, required to restore the balance in the Reserve Account to the full amount of SDWD's share of the Reserve Requirement; and (v) all Additional Payments and other payments required to meet any other obligations of SDWD which are charges, liens, encumbrances upon, or which are otherwise payable from, Gross Revenues or Net Revenues during such Fiscal Year. (b) Covenant Regarding Net Revenues. (i) In addition, SDWD shall fix, prescribe, revise and collect Charges for the services and facilities furnished by the Enterprise during each Fiscal year which are sufficient to yield Net Revenues, including revenues received by SDWD from Connection Fees, which, are at least equal to one hundred fifteen percent (115 %) of the aggregate amount described in the preceding clause (a)(ii) of this Section. (ii) Additionally, SDWD shall fix, prescribe, revise and collect Charges for the Enterprise (exclusive of connection fees and transfers to the Water Revenue Fund from a rate stabilization fund, should one be established) during each Fiscal Year which due sufficient to yield Net Revenues of the A -33 Enterprise at least equal to one hundred percent (100 %) of the amounts payable under the preceding clause (a)(ii) and (a)(iii) in such Fiscal Year of Obligations which have a lien on Net Revenues. Superior and Subordinate Obligations. SDWD shall not issue or incur any additional bonds or other obligations during the Term of this Installment Purchase Agreement having any priority in payment of principal or interest out of the Gross Revenues or the Net Revenues over the Installment Payments. Nothing herein is intended or shall be construed to limit or affect the ability of SDWD to issue or incur (i) Parity Obligations pursuant to Section 310 or (ii) obligations which are either unsecured or which are secured by an interest in the Net Revenues which is junior and subordinate to the pledge of and lien upon the Net Revenues established hereunder. Issuance of ParitObligations. SDWD shall have the right from time to time to issue Parity Obligations, upon such terms and conditions as SDWD shall deem advisable, but only upon compliance with the following conditions which are hereby made conditions precedent to the issuance of Parity Obligations: (a) No event of Default shall have occurred and be continuing under this Installment Purchase Agreement or any Parity Obligations. (b) The Net Revenues, calculated in accordance with generally accepted accounting principles, as shown by the books of SDWD for the most recent twelve (12) month period selected by SDWD ending not more than sixty (60) days prior to the adoption of the Parity Obligations Instrument, pursuant to which such Parity Obligations are issued, as shown by the books of SDWD, plus, at the option of SDWD, any or all of the items hereinafter in this paragraph designated (i) and (ii), shall at least equal One Hundred Fifteen percent (115 %) of Maximum Annual Debt Service, with Maximum Annual Debt Service calculated on all Bonds or Obligations to be Outstanding immediately subsequent to the issuance of such Parity Obligations which have a lien on Net Revenues. The items any or all of which may be added to such Net Revenues for the purpose of issuing or incurring Parity Obligations under the Installment Purchase Agreement are the following: (i) An allowance for Net Revenues from any additions to or improvements or extensions of the Enterprise to be made with the proceeds of such Parity Bonds, and also for Net Revenues from any such additions, improvements or extensions which have been made from moneys from any source but in any case which, during all or any part of such Fiscal Year or such twelve (12) month period, were not in service, all in an amount equal to ninety percent (90 %) of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first thirty -six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown in the written report of an Independent Consultant engaged by San Dieguito; and (ii) An allowance for earnings arising from any increase in the Charges which has become effective prior to the incurring of such additional indebtedness but which, during all or any part of such Fiscal Year or such twelve (12) month period, was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in Charges had been in effect during the whole of such Fiscal Year or such twelve (12) month period, all as shown in the written report of an Independent Consultant engaged by the District. (c) The Parity Obligations Instrument providing for the issuance of such Parity Obligations under this provision shall provide that: (i) The proceeds of such Parity Obligations shall be applied to the acquisition, construction, improvement, financing or refinancing of additional facilities, improvements or extensions of existing facilities within the Enterprise, or otherwise for facilities, improvements or property which SDWD determines are of benefit to the Enterprise, or for the purpose of refunding any Obligations in whole or in part, including all costs (including costs of issuing A -34 such Parity Obligations and including capitalized interest on such Parity Obligations during any period which SDWD deems necessary or advisable) relating thereto; (ii) Interest on such Parity Obligations shall be payable on an Interest Payment Date; (iii) The principal of such Parity Obligations shall be payable on October 1 in any year in which principal is payable; and (iv) Money or a Qualified Surety Bond as authorized by the issuing document shall be deposited in a reserve account for such Parity Obligations from the proceeds of the sale of such Parity Obligations or otherwise equal to the Reserve Requirement. (1) State Loans. SDWD may borrow money from the State to finance improvements to the Enterprise, without complying with the provisions of paragraphs (c) (ii), (iii) or (iv) above, relating to the issuance of Parity Obligations, and the obligation of the District to make payments to the State under the loan agreement memorializing said loan (the "State Loan ") may be treated as Parity Obligations for purposes of the Installment Purchase Agreement; provided that SDWD shall not make a payment on such State Loan (except as hereinafter expressly provided) to the extent it would have the effect of causing SDWD to fail to make a timely payment on the Installment Payments and any Parity Obligations. In the event SDWD's Water Fund does not contain sufficient funds to make the full amount of payments on the Installment Payments and any Parity Obligations and such State Loan, SDWD shall make payments on the Installment Payments and any Parity Obligations and such State Loan on a pro rata basis. (2) Subordinate Obligations. Nothing in the Installment Purchase Agreement shall prohibit or impair the authority of SDWD to issue bonds or other obligations secured by a lien on Net Revenues which is subordinate to the lien established under the Installment Purchase Agreement, upon such terms and in such principal amounts as SDWD may determine; provided, that SDWD may issue or incur any such Subordinate Obligations subject to the following specific conditions which are hereby made conditions precedent to the issuance and delivery of such Subordinate Obligations: (a) SDWD shall be in compliance with all covenants set forth in the Installment Purchase Agreement. (b) The Net Revenues calculated on sound accounting principles, as shown by the books of SDWD for the latest Fiscal Year or any more recent twelve (12) month period selected by SDWD ending not more than sixty (60) days prior to the adoption of the Subordinate Obligations Instrument pursuant to which such Subordinate Obligations are issued, as shown by the books of SDWD, plus, at the option of SDWD, any or all of the items hereinafter in this paragraph designated (i) and (ii), shall at least equal One Hundred percent (100 %) of Maximum Annual Debt Service, with Maximum Annual Debt Service calculated on all Obligations to be Outstanding immediately subsequent to the issuance of such Subordinate Obligations which have a lien on Net Revenues. The items any or all of which may be added to such Net Revenues for the purpose of issuing or incurring Subordinate Obligations under the Installment Purchase Agreement are the following: (i) An allowance for Net Revenues from any additions to or improvements or extensions of the Enterprise to be made with the proceeds of such Subordinate Obligations, and also for Net Revenues from any such additions, improvements or extensions which have been made from moneys from any source but in any case which, during all or any part of such Fiscal Year or such twelve (12) month period, were not in service, all in an amount equal to ninety percent (90 %) of the estimated additional average annual Net Revenues to be derived from such additions, improvements and A -35 extensions for the first thirty -six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown in the written report of an Independent Consultant engaged by SDWD; and (ii) An allowance for earnings arising from any increase in the Charges which has become effective prior to the incurring of such additional indebtedness but which, during all or any part of such Fiscal Year or such twelve (12) month period, was not in effect, in an amount equal to the amount by which the Net Revenues would have been increased if such increase in Charges had been in effect during the whole of such Fiscal Year or such twelve (12) month period, all as shown in the written report of an Independent Consultant engaged by the District. (c) The Subordinate Bonds Instrument providing for the issuance of such Subordinate Obligations under the Indenture shall provide that: (i) The proceeds of such Subordinate Obligations shall be applied to the acquisition, construction, improvement, financing or refinancing of additional facilities, improvements or extensions of existing facilities within the Enterprise, or otherwise for facilities, improvements or property which SDWD determines are of benefit to the Enterprise, or for the purpose of refunding any Obligations in whole or in part, including all costs (including costs of issuing such Subordinate Obligations and including capitalized interest on such Subordinate Obligations during any period which SDWD deems necessary or advisable) relating thereto; (ii) Interest on such Subordinate Obligations shall be payable on an Interest Payment Date; and (iii) The principal of such Subordinate Bonds shall be payable on October 1 in any year in which principal is payable. Additional Payments In addition to the Installment Payments, SDWD shall pay when due its pro -rata portion of all costs and expenses incurred by the Authority to comply with the provisions of the Indenture, including without limitation all Costs of Issuance to the extent not paid from amounts on deposit in the Costs of Issuance Fund), and shall pay to the Trustee upon request therefor its pro -rata portion of all compensation for fees due to the Trustee and all of its costs and expenses payable as a result of the performance of and compliance with its duties hereunder or under the Indenture or any related documents, together with its pro -rata portion of all amounts required to indemnify the Trustee pursuant to Section 422 hereof or Section 8.06 of the Indenture, and its pro -rata portion of all related costs and expenses of attorneys, auditors, engineers and accountants. The rights of the Trustee and the obligations of SDWD under this Section 311 shall survive the termination of this Installment Purchase Agreement and the resignation of the Trustee. Option to Prepay /Defeasance Subject to the terms and conditions of this Section, the Authority hereby grants an option to SDWD to prepay the Installment Payments in whole or in part. Said option may be exercised with respect to Installment Payments due on and after September 15, 2018, on any date commencing on September 15, 2017. Said option shall be exercised by SDWD by giving written notice to the Trustee, as the Authority's assignee, of the exercise of such option at least thirty -five (35) but not more than sixty (60) days prior to said date. Such option shall be exercised in the event of prepayment in whole; or in part by depositing with said notice cash or investment securities which together with interest earned thereon which will provide an amount sufficient to pay the unpaid principal amount of the Bonds to be prepaid (but not less than $5,000) together with the interest component to be paid to the date of prepayment. In the event of prepayment in part, the partial prepayment shall be applied by the Authority or its assignee against Installment Payments in the manner directed by SDWD, and SDWD shall cause to be provided to the Trustee a revised schedule of Installment Payments reflecting said partial prepayment. A -36 Subject to Section 307 hereof, the prepayment of all of the Installment Payments from the proceeds of refunding bonds or other debt obligations to pay and discharge the outstanding Bonds as provided in Section 10.02 of the Indenture shall relieve and defease SDWD's obligation make further Installment Payments hereunder; provided, however, that all of the requirements of Section 10.03 of the Indenture shall have been met. Payment of Rebatable Amounts. SDWD agrees to furnish all information to, and cooperate fully with, the Authority, and its officers, employees, agents and attorneys, in order to assure compliance with the provisions of Section 6.08 of the Indenture. In the event that the Authority shall determine, pursuant to Section 6.08 of the Indenture, that any amounts are due and payable to the United States of America thereunder and that neither the Authority nor the Trustee has on deposit under the Indenture an amount of available moneys (excluding moneys on deposit in the funds and accounts established for the payment of the principal of or interest or redemption premium, if any, on the Bonds) to make such payment, the Authority shall promptly notify SDWD of such fact. Upon receipt of any such notice, SDWD shall promptly pay to the United States of America from any source of legally available funds, its pro -rata portion of the amounts determined by the Authority to be due and payable to the United States of America under such Section 6.08. COVENANTS Maintenance and Utilities SDWD shall maintain and repair the 1999 Project or cause the 1999 Project to be maintained and repaired and shall pay for, or otherwise arrange for the payment of, utility services, if any, supplied to the 1999 Proj ect (which services shall include power, gas, telephone and all other utility services), all costs of operation of the 1999 Project and all costs of repair and replacement of the 1999 Project resulting from ordinary wear and tear or want of care. Provisions Ret!ardint! Insurance SDWD shall maintain or cause to be maintained the following policies of insurance: (a) insurance against loss or damage to any structures constituting any part of the Enterprise, as is customarily maintained with respect to works and properties of a like character, which may be carried in conjunction with any other policies of fire and extended coverage insurance; (b) public liability and property damage the minimum coverages of which shall be $1,000,000 for personal injury or death per person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and property damage insurance in the minimum coverage of $100,000 per event, respectively, the property damage being subject to a maximum $10,000 deductible per accident. Such insurance may be maintained in the form of a minimum $3,000,000 single limit policy covering all such risks; (c) worker's compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure employers against liability for compensation under the Worker's Compensation Insurance and Safety Act now in force in California, or any act hereafter enacted as an amendment or supplement thereto or in lieu thereof, such worker's compensation insurance to cover all persons employed in connection with the Enterprise and to cover full liability for compensation under any such act aforesaid, based upon death or bodily injury claims made by, for or on behalf of any person incurring or suffering injury or death during or in connection with the Enterprise or the business of SDWD. Form of Insurance Policies; Delivery (a) All policies of insurance required by Section 402 of this Installment Purchase Agreement shall provide that all proceeds thereunder relating to that portion of the Enterprise damaged or destroyed shall be payable to the Trustee. The Trustee may collect and receive all moneys relating to the Enterprise which may become due and payable under any such policies and shall apply the Net Proceeds of such insurance as provided in this Installment Purchase Agreement. All policies of insurance required by Section 402 of this Installment Purchase Agreement shall provide that the Authority or its assignee and SDWD, shall be given thirty (3 0) days' notice of any intended cancellation thereof or reduction of the coverage provided thereby. A -37 (b) SDWD shall deliver, or cause to be delivered, to the Authority and the Trustee no later than July 1 st in each year a certificate, in such detail as the Authority or the Trustee may reasonably request, stating that SDWD has complied with Section 402 this Installment Purchase Agreement. If so requested in writing by the Authority or the Trustee, SDWD shall also deliver, or cause to be delivered to the Authority or the Trustee duplicate originals or certified copies of each insurance policy described in such certificate, provided, however, that delivery of the insurance policies under the provisions of this Section shall confer no responsibility upon the Authority or the Trustee as to the sufficiency of coverage or amounts of said policies. In the event of failure of SDWD to obtain or cause to be obtained the insurance required by Section 402 hereof, the Authority or its assignee may obtain such insurance on behalf of SDWD and may collect premiums thereof from SDWD which SDWD shall be obligated to pay hereunder with interest at the rate of eight percent (8 %) on unpaid premiums. (c) Any insurance required by this Installment Purchase Agreement, may be maintained by SDWD in the form of self - insurance. Such self - insurance shall be maintained on a basis which is actuarially sound as established by SDWD's risk manager or an independent insurance consultant which determination shall be made annually. SDWD shall file with the Trustee annually, within 90 days following the close of each Fiscal Year, a statement of an independent actuarial consultant identifying the extent of such self insurance and stating the determination that SDWD maintains sufficient reserves with respect thereto. Any deficiency determined by the independent actuarial consultant shall be corrected within 60 days of SDWD becoming aware of such deficiency. Inability to Obtain Insurance Notwithstanding the provisions of Section 402 of this Installment Purchase Agreement, if at any time SDWD shall be unable to obtain or maintain insurance to the extent required by Section 402 on reasonable terms, either as to amounts or as to risks, the failure to maintain such insurance shall not constitute a default under this Installment Purchase Agreement if SDWD shall cause the employment of an independent insurance consultant having a favorable reputation for skill and experience in such matters., for the purpose of reviewing such insurance requirements and making recommendations respecting the types, amounts and provisions of reasonably obtainable insurance, including self - insurance, or the establishment of other generally accepted forms of alternative protection that should be carried in lieu thereof, or the infeasibility of obtaining insurance, and if SDWD shall comply with the recommendations made in such report. A signed copy of the report of the insurance consultant shall be filed with the Trustee and the Authority, and the insurance requirements specified in Section 402 shall be deemed to be modified to conform with the recommendations in such report. Application of Net Proceeds of Insurance Any Net Proceeds, together with other available funds of the District, of any such insurance required by Section 402 of this Installment Purchase Agreement relating to the loss or destruction of any part of the Enterprise which is collected by SDWD on behalf of the Trustee shall be paid, or cause to be paid by SDWD to the Trustee for deposit in a special fund to be held separate from all other funds and accounts of the Trustee and SDWD shall assure that such Net Proceeds are and shall be applied and disbursed as set forth below: (a) If SDWD determines that such Net Proceeds, together with other available funds of the District, are sufficient to repair, reconstruct or replace the damaged or destroyed portion of the Enterprise, which determination shall be evidenced by a certificate executed by an Authorized Representative of SDWD and filed with the Trustee, as assignee of the Authority, then SDWD shall cause such portion of the Enterprise to be repaired, reconstructed or replaced to at least the same good order, repair and condition as it was in prior to the damage or destruction, insofar as the same may be accomplished by the use of said Net Proceeds, and SDWD shall direct the Trustee to disburse said Net Proceeds for said purpose. Any balance of said Net Proceeds not required for such repair, reconstruction or replacement shall be transferred by the Trustee to the Bond Fund and SDWD shall direct the Trustee that said balance be applied as a prepayment of Installment Payments in accordance with Section 312 of this Installment Purchase Agreement and Section 4.01(c) of the Indenture, except that no such prepayment shall be in an amount less than $5,000. SDWD shall be obligated to continue to make Installment Payments required by this Installment Purchase Agreement notwithstanding accident to or destruction of all or a portion of the 1999 Project unless and until the Bonds and all amounts owed hereunder and under the Indenture by SDWD are paid in full. A -38 (b) In the event that such Net Proceeds are not sufficient to repair, reconstruct, or replace the damaged or destroyed portion of the Enterprise, as evidenced by a certificate executed by an Authorized Representative of SDWD and filed with the Trustee, SDWD shall direct the Trustee to apply such Net Proceeds, to the prepayment in full, on the next succeeding Installment Payment Date, of the balance of the Installment Payments, or if such Net Proceeds are insufficient to prepay the balance of the Installment Payments in full then SDWD shall direct the Trustee to apply such Net Proceeds to prepayment of Installment Payments except that no such prepayment shall be in an amount less than $5,000. Application of Net Proceeds of Condemnation All Net Proceeds received in any condemnation proceeding undertaken by any governmental authority relating to all or a portion of the Enterprise shall be paid by SDWD or cause to be paid by SDWD to the Trustee for deposit in the Bond Fund and SDWD shall assure that such Net Proceeds are applied and disbursed as set forth below: (a) If SDWD determines that such condemnation has not materially affected the operation of the Enterprise or the ability of SDWD to meet any of its obligations hereunder, as set forth in a certificate executed by an Authorized Representative of SDWD and filed with the Trustee, as assignee of the Authority, and if such Net Proceeds are insufficient to enable SDWD to prepay Installment Payments in full on the next succeeding Installment Payment Date, SDWD shall direct the Trustee to retain such Net Proceeds in the Bond Fund and to cause such Net Proceeds to be applied as a credit against the next succeeding Installment Payments. SDWD shall be obligated to continue to make Installment Payments required by this Installment Purchase Agreement notwithstanding condemnation of all or a portion of the Enterprise unless and until the Bonds and all amounts owed hereunder and under the Indenture by SDWD are paid in full. (b) If SDWD determines that such condemnation has materially affected the operation of the 1999 Project or the ability of SDWD to meet any of its obligations hereunder as set forth in a certificate executed by an Authorized Representative of SDWD and filed with the Trustee, as assignee of the Authority, or if such Net Proceeds are sufficient to enable SDWD to prepay Installment Payments in full on the next succeeding Installment Payment Date, SDWD shall direct the Trustee to apply such Net Proceeds to the prepayment in full or (to the extent that such condemnation pertains only to a portion of the Enterprise) in part on the next succeeding Installment Payment Date of Installment Payments except that no such prepayment shall be in an amount less than $5,000. Payment of Installment Payments SDWD shall duly and punctually pay or cause to be paid the Installment Payments, at the dates and places and in the manner provided in this Installment Purchase Agreement according to the true intent and meaning hereof and shall not directly or indirectly extend or assent to the extension of the Installment Payment Dates of any Installment Payments. Compliance with this Installment Purchase Agreement The Authority and SDWD will faithfully observe and perform or cause to be faithfully observed and performed all the covenants, conditions and requirements of this Installment Purchase Agreement, and will not suffer or permit any default to occur hereunder, or do or permit to be done in, upon or about the Enterprise or any part thereof, anything that might in any way weaken, diminish or impair the operation thereof. Neither the Authority nor SDWD will 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 this Installment Purchase Agreement. Payment of Taxes SDWD will pay or cause to be paid all taxes, assessments and other governmental charges, if any, that may be levied, assessed or charged upon the Enterprise promptly as and when the same shall become due and payable; provided, however, that SDWD shall not be required to pay any such tax, assessment, or charge, if the validity thereof shall concurrently be contested in good faith by appropriate proceedings, if SDWD shall set aside, or cause to be set aside, reserves in a form and amount which is adequate with respect thereto and if SDWD shall hold the Authority and its assignee harmless as to any loss or forfeiture which might arise from the nonpayment of any such item; and provided further, that SDWD, upon the commencement of any proceedings to foreclose the lien of any such tax, assessment, or charge, forthwith pay, or A -39 cause to be paid, any such tax, assessment or charge, unless contested in good faith as aforesaid. SDWD will not suffer the Enterprise or any part thereof, to be sold for any taxes, assessments or other charges whatsoever, or to be forfeited therefor. Nothing herein contained shall be deemed to impose any liability to pay taxes, assessments or charges where none is imposed by law. Observance of Laws and Reiulations. SDWD will well and truly keep, observe and perform or cause to be kept, observed and performed all valid and lawful obligations or regulations now or hereafter imposed on it by contract, or prescribed by any law of the United States, or of the State of California, 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 SDWD, including its right to exist and carry on business as a public body, corporate and political, 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. Maintain and Preserve the Enterprise SDWD will operate, maintain and preserve, or will cause to be operated, maintained and preserved, the 1999 Project and the Enterprise in good repair and working order and will operate or cause to be operated the 1999 Project and the Enterprise, in an efficient and economical manner. Other Liens SDWD shall keep or cause to be kept, the 1999 Project and all parts thereof free from judgments, from mechanics and material men's liens (except those arising from construction of the 1999 Project) and free from all liens, claims, demands and encumbrances of whatsoever nature or character, other than Permitted Encumbrances, and SDWD shall keep or cause to be kept the 1999 Project and the Enterprise free from any claim or liability which might impair or impede the operations of the 1999 Project and the Enterprise; provided, however, that SDWD shall not be required to pay any such liens, claims or demands if the validity thereof shall concurrently be contested in good faith by appropriate proceedings, and if SDWD shall set aside, or cause to be set aside, reserves deemed by it to be adequate with respect thereto and provided further, that SDWD upon the commencement of any proceedings to foreclose the lien of any such charge or claim, will forthwith pay, or cause to be paid, any such charge or claim unless contested in good faith as aforesaid. The Authority, or its assignee, may, (after first giving SDWD ten (10) days' written notice to comply therewith and failure of SDWD to so comply within said ten -day period) defend against any and all actions or proceedings in which the validity of this Installment Purchase Agreement is or might be questioned, or may pay or compromise any claim or demand asserted in any such actions or proceedings; provided, however, that in defending against such actions or proceedings or in paying or compromising such claims or demands, the Authority shall not in any event be deemed to have waived or released SDWD from liability for or on account of any of its covenants and warranties contained herein, or from its liability hereunder to defend the validity of this Installment Purchase Agreement and the pledge herein made and to perform such covenants and warranties. Against Encumbrances or Sales. SDWD shall not create or suffer to be created any mortgage, pledge, lien, charge or encumbrance upon the 1999 Project, or upon any real or personal property essential to the operation of the 1999 Project and the Enterprise, other than Permitted Encumbrances. Except as expressly provided in this Article IV, SDWD shall promptly, at its own expense, take such action as may be necessary to discharge or remove any such mortgage, pledge, lien, charge or encumbrance for which it is responsible, if the same shall arise at any time. SDWD will not sell or otherwise dispose of any property essential to the proper operation of the 1999 Proj ect and the Enterprise, except as otherwise permitted by this Installment Purchase Agreement. Prosecution and Defense of Suits. SDWD shall, promptly upon request of the Authority or the Trustee, or their assignees, from time to time take such action, or cause such action to be taken, as may be necessary or proper to remedy or cure any defect in or cloud upon the title to the 1999 Project whether now existing or hereafter developing and shall prosecute, or cause to be prosecuted, all such suits, actions and other proceedings as may be appropriate for such purpose and shall, to the extent permitted by law, indemnify and save the Authority and the Trustee and its assignee harmless from all loss, cost, damage and expense, including attorneys' fees, which they or either of them may incur by reason of any such defect, cloud, suit, action or proceedings. A -40 To the extent permitted by law, SDWD shall defend against every suit, action or proceeding at any time brought against the Authority, or its assignee, upon any claim arising out of the rights of the Authority, or its assignee, under this Installment Purchase Agreement; provided, that the Authority, or its assignee, at its election may appear in and defend any such suit, action or proceeding. SDWD shall, to the extent permitted by law, indemnify and hold harmless the Authority or the Trustee against any and all liability claimed or asserted by any person, arising out of the rights of the Authority or Trustee under this Installment Purchase Agreement. Recordation and Filing. SDWD shall record and file, or shall cause to be recorded and filed, this Installment Purchase Agreement and all such documents as may be required by law (together with whatever else may be necessary or be reasonably required by the Authority or its assignee), in such manner, at such times and in such places as may be required by law in order fully to preserve and protect the rights of the Authority and its assignee under this Installment Purchase Agreement. Waiver of Laws. SDWD shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, or suffer, any stay or extension of any law now or at anytime hereafter in force which may adversely affect the covenants and agreements contained in this Installment Purchase Agreement and the benefit and advantage of any such law is hereby expressly waived to the extent that SDWD may legally make such waiver. Compliance with Conditions Precedent Upon the date of delivery of this Installment Purchase Agreement, all conditions, acts and things required by law or by this Installment Purchase Agreement to have happened or to have been performed precedent to or in the execution of this Installment Purchase Agreement shall exist, have happened and have been performed, and this Installment Purchase Agreement shall be within every limit prescribed by law. Power to Enter Into Agreements (a) SDWD is duly authorized to enter into this Installment Purchase Agreement. The provisions of this Installment Purchase Agreement are and will be the valid and legally enforceable obligations of SDWD in accordance with their terms and the terms of this Installment Purchase Agreement. (b) The Authority is duly authorized to enter into this Installment Purchase Agreement, the Agency Agreement and the Indenture and to enter into the transactions contemplated by this Installment Purchase Agreement, the Agency Agreement and the Indenture. The Authority has duly authorized and executed this Installment Purchase Agreement, the Agency Agreement and the Indenture. Further Assurances. Whenever and so often as requested so to do by the Authority or its assignee, SDWD will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things, as may be necessary or reasonably required in order further and more fully to vest in the Authority or its assignee all rights, interest, powers, benefits, privileges and advantages conferred or intended to be conferred upon the Authority and its assignee by this Installment Purchase Agreement. Financial Reports. Within one hundred eighty (180) days of the end of each Fiscal Year SDWD will furnish, or cause to be furnished, to the Authority, the Bond Insurer and its assignee detailed certified reports of audit, based on an examination sufficiently complete, prepared by an independent certified public accountant, covering the operations of SDWD and its general fund and of the 1999 Project and Enterprise for said fiscal year Such audit report shall include statements of the status of each account pertaining to the 1999 Project, showing the amount and source of deposits therein, the amount and purpose of the withdrawals therefrom and the balance therein at the beginning and end of said fiscal year. The Authority Not Liable. Neither the Authority nor its assignee nor its members, officers, agents or employees shall be liable to SDWD or to any other person whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the 1999 Project. SDWD shall, to the extent permitted by law, indemnify, or cause indemnification of, and hold the Authority and the A -41 Trustee, its and their members, officer, agents and employees harmless from, and defend each of them against, any and all claims, liens and judgments for death of or injury to any person or damage to property whatsoever occurring in, on or about the 1999 Project. Indemnification Due to Trustee. SDWD shall pay, or cause to be paid, to the Authority and the Trustee as assignee of the Authority, fees, compensation and expenses due under the Indenture upon periodic billing therefor by the Authority and the Trustee as assignee of the Authority. In addition, SDWD shall and hereby agrees to indemnify, or cause indemnification of, and hold, or cause to be held, the Authority and the Trustee as assignee of the Authority harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from any work or thing done on, the 1999 Project by SDWD; (ii) any breach or default on the part of SDWD in the performance of any of its obligations under this Installment Purchase Agreement; (iii) any act of negligence of SDWD, or of any of its or their agents, contractors, servants, employees or licensees with respect to the 1999 Project; (iv) the authorization of payment of the Project Costs by SDWD; (v) the Trustee's acceptance or administration of the Trust Indenture, or the exercise or performance of any of its power or duties hereunder; (vi) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading in any official statement or other offering circular utilized in connection with the sale of the Bonds; or (vii) the defense (pursuant to Section 414 hereof) against actions or proceedings in which the validity of this Installment Purchase Agreement is or might by questioned and the payment or compromise of claims or demands asserted in any such actions or proceedings, all to the extent permitted by law. Indemnification for any tort mentioned in this Section shall be limited to the extent and in the amounts provided for by California law. No indemnification will be made under this Section or elsewhere in this Installment Purchase Agreement for willful misconduct or negligence by the Trustee, its officers, agents, employees, successors or assigns. Such indemnification shall survive termination of this Installment Purchase Agreement and payment of the Bonds and the resignation and removal of the Trustee. The Authority to Operate the 1999 Project SDWD shall assure that the 1999 Project is operated pursuant to complete and lawful authority. No permits, rights, franchises or privileges relating thereto shall be allowed to lapse or be forfeited so long as the same shall be necessary for the ownership or operation of the 1999 Project and the Enterprise. SDWD shall procure, or cause to be procured, the renewal of each and every permit, right, franchise or privilege so expiring and necessary or desirable for the ownership or operation of the 1999 Project and the Enterprise. Furnishing Additional Information. SDWD shall, from time to time, furnish or cause to be furnished to the Authority or to the Trustee as assignee of the Authority such data regarding the 1999 Project and the Enterprise as shall be reasonably requested in order to enable whichever shall be requesting the information to determine whether there has been compliance with the covenants, terms and provisions of this Installment Purchase Agreement and of the Indenture. Quiet Enjoyment. The parties hereto mutually covenant that SDWD, so long as it shall keep and perform the covenants and agreements herein contained, shall at all times during the term of this Installment Purchase Agreement peaceably and quietly, have, hold and enjoy the 1999 Proj ect without suit, trouble or hindrance from the Authority subject to the Authority's rights as set forth in Sections 602 and 603 hereof. Restriction Against Pledte. The Authority shall not pledge Installment Payments or other amounts derived from the Enterprise or from rights of the Authority under this Installment Purchase Agreement nor shall the Authority encumber or place any lien upon the 1999 Project or the real or personal property comprising the Enterprise, except as otherwise provided in this Installment Purchase Agreement and the Indenture. Assignment by the Authority Except pursuant to the Indenture and except as otherwise set forth herein, the Authority shall not assign this Installment Purchase Agreement, its rights to receive Installment Payments or its duties and obligations hereunder. A -42 No Violation of Other Agreements. (a) SDWD hereby represents that neither the execution and delivery of this Installment Purchase Agreement and the Indenture, nor the fulfillment of and compliance with the terms and conditions hereof and thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of terms or violation of any other agreement to which SDWD is a party or by which SDWD is bound, or constitutes a default under any of the foregoing, or will result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of SDWD, or upon the 1999 Project, which is not a Permitted Encumbrance. (b) The Authority hereby represents that neither the execution and delivery of this Installment Purchase Agreement, the Agency Agreement and the Indenture, nor the fulfillment of and compliance with the terms and conditions hereof and thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of terms or violation of any other agreement to which the Authority is a party or by which the Authority is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Authority, or upon the 1999 Project, which is not a Permitted Encumbrance. Private Activity Bond Limitation. SDWD and the Authority shall assure that the proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private business tests of section 141(b) of the Code. Private Loan Financing Limitation. SDWD and the Authority shall assure that the proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private loan financing test of section 141(c) of the Code. Federal Guarantee Prohibition SDWD and the Authority 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 Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Code. No Arbitrage SDWD and the Authority shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Bonds would have caused the Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code. Maintenance of Tax - Exemption. SDWD and the Authority shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Bonds. Disclaimer of Warranties Neither the Authority nor its assignee make any 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 SDWD of the 1999 Project or any portion thereof, or any other representation or warranty with respect to the 1999 Proj ect or any portion thereof. In no event shall the Authority or its assignee be liable for incidental, indirect, special or consequential damages in connection with this Installment Purchase Agreement or the existence, furnishing, or functioning of the 1999 Project or SDWD's use of the 1999 Project, except such damages as may arise by reason of a breach of this Installment Purchase Agreement by the Authority or its assignee. Authority Access to the 1999 Project SDWD agrees that each of SDWD, SDWD and the Authority and its assignee shall have such rights of access to the 1999 Project as may be reasonably necessary to cause the proper maintenance of the 1999 Project and otherwise to have right of access to the 1999 Project in the event of failure by SDWD to perform its obligations hereunder. A -43 EVENTS OF DEFAULT AND REMEDIES Events of Default Defined The following shall be "Events of Default" under this Installment Purchase Agreement and the terms "Event of Default" and "default" shall mean, whenever they are used in this Installment Purchase Agreement, with respect to the 1999 Project, any one or more of the following events, namely: (a) failure by SDWD to pay any Installment Payment or other payment required to be paid hereunder at the time specified herein; (b) failure by SDWD to pay any Additional Payment when due and payable hereunder, and the continuation of such failure for a period of ten (10) days. (c) failure by SDWD to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in clause (a) or (b) of this Section, for a period of sixty (60) days after written notice specifying such failure and requesting that it be remedied has been given to SDWD by the Authority or its assignee; provided, however, that the Authority or its assignee may, upon written request of SDWD prior to the expiration of such sixty (60) day period, consent to an extension of such time in order to cure such failure if corrective action has been instituted by SDWD and is being diligently pursued and will, in the judgment of the Authority or its assignee, be diligently pursued until the default is corrected; (d) SDWD shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or shall consent to an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of SDWD for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due or shall take any corporate action in furtherance of any of the foregoing; or (e) default by SDWD under the terms of any obligation secured by a pledge of Net Revenues on a parity with the pledge hereunder. Any default by SDWD hereunder shall not cause a default under any other installment purchase agreement to which SDWD is not a party. Remedies on Default Whenever any Event of Default shall have happened and be continuing the Authority shall promptly give written notice thereof to the Bond Insurer. In each and every such case during the continuance of an Event of Default specified in clause (d) in Section 601 hereof, the Authority may with the prior written consent of the Bond Insurer and shall, at the direction of the Bond Insurer, and for any other such Event of Default, the Authority may, by notice in writing to SDWD, and with the prior written consent of the Bond Insurer, and shall at the direction of the Bond Insurer, declare the entire principal amount of the unpaid Installment Payments and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, anything contained herein to the contrary notwithstanding. This Section is subject to, however, the condition that if at any time after the entire principal amount of the unpaid Installment Payments and the accrued interest thereon shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered SDWD shall deposit with the Authority a sum sufficient to pay the unpaid principal amount of the Installment Payments due prior to such declaration and the accrued interest thereon, with interest on principal amount of such overdue Installment Payments, at the rate or rates applicable to the remaining unpaid principal balance of the Installment Payments, and the reasonable expenses of the Authority, and any and all other defaults known to the Authority (other than in the payment of the entire principal amount of the unpaid Installment Payments and the accrued interest thereon due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Authority or provision deemed by the Authority to be adequate shall have been made therefor, then and in every such case the Authority, by written notice to SDWD, and with the written consent of the Bond Insurer, may rescind and annul such declaration and its A -44 consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. Each and all of the remedies given to the Authority or its assignee or by any law now or hereafter enacted are cumulative and the exercise of one right or remedy and shall not impair the right of the Authority or its assignee to exercise any or all other remedies. Suits at Law or in Equity and Mandamus. In addition to the remedies set forth in Section 602 hereof, in case one or more of the Events of Default shall happen, then and in every such case, the Authority or its assignee shall be entitled to proceed to protect and enforce the rights vested in the Authority by this Installment Purchase Agreement by such appropriate judicial proceeding as the Authority or its assignee shall deem most effectual to protect and enforce any such right, either by suit in equity or by action at law. The provisions of this Installment Purchase Agreement and the duties of SDWD and of the officers, agents and employees thereof shall be enforceable by the Authority by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing, the Authority and its assignee shall have the right: (i) Accounting. By action or suit in equity to require SDWD and its officers, agents and employees to account as the trustee of an express trust. (ii) Injunction. By action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Authority or its assignee. (iii) Mandamus. By mandamus or other suit, action or proceeding at law or equity to enforce its or their rights against SDWD and its and any of its officers, agents, and employees, and to compel it or them to perform and carry out its and their duties and obligations under the law and its and their covenants and agreements with SDWD as provided herein. Non - Waiver. Nothing in this Article VI or in any other provision of this Installment Purchase Agreement shall affect or impair the obligation of SDWD, which is to pay the Installment Payments, as herein provided. No delay or omission of the Authority or its assignee 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 any acquiescence therein, and every power and remedy given by this Article VI to the Authority and its assignee may be exercised from time to time and as often as shall be deemed expedient by the Authority or its assignee. Remedies Not Exclusive. No remedy herein or by law conferred upon or reserved to the Authority or the Trustee as its assignee is intended to be exclusive of any other remedy, but each such remedy is cumulative and in addition to every other remedy, and every remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise may be exercised without exhausting and without regard to any other remedy conferred hereby or by any law. Trustee, Bond Insurer and Bond Owners to Exercise Rights. Such rights and remedies as are given to the Authority under this Article VI have been assigned by the Authority to the Trustee under the Indenture, to which assignment SDWD hereby consents. Such rights and remedies shall be exercised by the Trustee, the Bond Insurer and the Owners of the Bonds as provided herein and in the Indenture and shall be considered third party beneficiaries. Ri!hts of Bond Insurer. All of the rights granted to the Bond Insurer pursuant to this Installment Purchase Agreement are subject to the condition precedent that the Bond Insurer shall not then be in default of its obligations under the Municipal Bond Insurance Policy. A -45 Status Quo. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and then discontinued or abandoned, or shall be determined adversely to the Authority and its assignee, then, and in every such case, the Authority and its assignee shall be restored to their former positions and rights and remedies as if no such suit, action or proceedings had been brought or taken. SANTA FE IRRIGATION DISTRICT INSTALLMENT PURCHASE AGREEMENT DEFINITIONS "Additional Payments" means the amounts payable by SFID under Section 311 of this Installment Purchase Agreement. "Additional Revenues" means, with respect to the issuance of any Parity Obligations, any or all of the following amounts: (i) An allowance for Net Revenues from any additions or improvements to or extensions of the Enterprise to be made with the proceeds of such Parity Obligations or from any other source, all in an amount equal to ninety percent (90 %) of the estimated additional average annual Net Revenues to be derived from such additions, improvements and extensions for the first thirty -six (36) month period in which each addition, improvement or extension is respectively to be in operation, all as shown by the certificate or opinion of a qualified independent consultant employed by SFID. (ii) An allowance for Net Revenues arising from any increase in the charges made for service from the Enterprise which have been adopted prior to the incurring of such Parity Obligations, in an amount equal to the total amount by which the Net Revenues would have been increased if such increase in charges had been in effect during the whole of such Fiscal Year or during any more recent twelve (12) month period selected by SFID, all as shown by the certificate or opinion of a qualified independent consultant. "Charges means fees, tolls, assessments, rates and charges for services and facilities of the Enterprise furnished by the District. "Code" means the Internal Revenue Code of 1986, as amended. "Connection Fees" means any fee or fees collected by SFID from property owners as a condition to SFID providing water service from the Enterprise to residential, commercial, or industrial property. "Costs of Issuance Fund" means the fund by that name established pursuant to Section 3.03 of the Indenture. "Date of Deliverer means the date on which the Bonds are delivered to the Original Purchaser. "Enterprise" means the entire water supply, treatment, storage and distribution system owned, controlled or operated by SFID, including but not limited to all facilities, properties and improvements at any time owned or operated by SFID for the collection, treatment, and supply of water to residents served thereby, and reclaimed water, whether within or without SFID, and any necessary lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto hereafter acquired, constructed, or installed by SFID. "Fiscal Year" means any twelve -month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve -month period selected and designated by SFID as its official fiscal year period. "Gross Revenues" means all gross charges received for, and all other gross income and receipts derived by SFID from, the ownership and operation of the Enterprise or otherwise arising from the Enterprise, including A -46 but not limited to (a) all charges received by SFID for use of the Enterprise, (b) all receipts, derived from the investment funds held by SFID or the Trustee under any issuing document, (c) transfers from (but exclusive of any transfers to) any stabilization reserve accounts, and (d) all moneys received by SFID from other public entities whose inhabitants are served pursuant to contracts with SFID. "Indenture" means the Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified, or amended by any Supplemental Indenture pursuant to the provisions thereof. "Installment Payment Dates" means the fifteenth day of September and March or if such date is not a Business Day, the preceding Business Day. "Installment Payments" means the payments required to be paid by SFID pursuant to Section 305 of this Installment Purchase Agreement, including all prepayments thereof. "Installment Purchase Agreement" means this Installment Purchase Agreement. "Maintenance and Operation Expenses" means the reasonable and necessary costs spent or incurred by SFID for maintaining and operating the Enterprise, calculated in accordance with sound accounting principles, including the cost of supply of water, gas and electric energy under contracts or otherwise, the funding of reasonable reserves, and all reasonable and necessary expenses of management and repair and other expenses to maintain and preserve the Enterprise in good repair and working order, and including all reasonable and necessary administrative costs of the District attributable to the Enterprise and the Obligations, such as salaries and wages and the necessary contribution to retirement of employees, overhead, insurance, taxes (if any), expenses, compensation and indemnification of the Trustee, and fees of auditors, accountants, attorneys or engineers, and including all other reasonable and necessary costs of SFID or charges required to be paid by it to comply with the terms of the Obligations of SFID, but excluding depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature. " Maximum Annual Debt Service" means, as of the date of any calculation and with respect to the Installment Payments or any Parity Obligations, as the case may be, the maximum sum obtained for the current or any future Bond Year during the term of this Installment Purchase Agreement by totaling the following amount for such Bond Year: (a) the aggregate amount of the Installment Payments coming due and payable in such Bond Year pursuant hereto, except to the extent payable from a prepayment pursuant to Section 312; (b) the principal amount of all outstanding Parity Obligations, if any, coming due and payable by their terms in such Bond Year; and (c) the amount of interest which would be due during such Bond Year on the aggregate principal amount of all outstanding Parity Obligations, if any, which would be outstanding in such Bond Year if such Parity Obligations are retired as scheduled; provided, however, that with respect to any Parity Obligations which bear interest at a variable rate, such interest shall be assumed to bear interest at the highest of: (i) the average rate that accrued on any variable rate interest contract over the preceding twelve months; or (ii) if the variable rate interest contract has not been accruing interest at a variable rate for twelve months, the average interest rate that accrued on an outstanding variable interest rate contract of SFID for which interest is computed on substantially the same basis during the preceding twelve month period; or (iii) if no such comparable variable interest rate contract was outstanding during the twelve months preceding the date of calculation, then (x) if the interest on such variable interest rate contract is excluded from gross income for purposes of federal income taxation, 90% of the average rate of interest for the Bond Buyer Revenue Bond Index over the preceding twelve months, or if that index is no longer published, a similar index selected by the District and acceptable to each credit enhancer providing credit enhancement for an Outstanding Bond, or, if SFID fails to select a replacement index, an interest rate equal to 80% of the yield for outstanding United States Treasury A -47 bonds having equivalent maturities, 80% of the prevailing prime rate of any of the five largest commercial banks in the United States, ranked by assets, and (y) if the interest on such variable interest rate contract is not excluded from gross income for purposes of federal income taxation, 110% of the yield for outstanding United States Treasury bonds having an equivalent maturity as the variable rate interest contract, or if there are no such United States Treasury bonds having equivalent maturities, 110% of the lowest prevailing prime rate of any of the five largest commercial banks in the United States, ranked by assets. "Net Proceeds" when used with respect to any insurance or condemnation award, means the gross proceeds from such insurance or condemnation award, paid with respect to the 1999 Project, remaining after payment therefrom of all expenses incurred in the collection of such gross proceeds. "Net Revenues" means for any period, the Gross Revenues for such period less the Maintenance and Operation Expenses for such period. "Original Purchaser" has the meaning in the Indenture. "Parity Instrument" means any resolution, indenture of trust, trust agreement, or other instrument authorizing the issuance of any Parity Obligations. "ParityObligations" means indebtedness or other obligations (including leases and installment sale agreements) issued or incurred by SFID and secured by a pledge of and lien on Net Revenues equally and ratably with the Installment Payments. "Permitted Encumbrances" means as of any particular time: (i) Liens for ad valorem taxes and assessments, if any, not delinquent or which SFID may, pursuant to Section 413 of this Installment Purchase Agreement, permit to remain unpaid. (ii) The Installment Purchase Agreement and any Parity Obligation. (iii) The Agency Agreement. (iv) The Indenture. (v) Easements, rights of way and other rights, reservations, covenants, conditions, or restrictions which do not impair or impede construction or operation of the 1999 Project as evidenced by the certificate of an Authorized Representative filed with Trustee. "Project Costs" means all costs of payment of, or reimbursement for, acquisition, construction and financing of the 1999 Project, including but not limited to, architect and engineering fees, construction contractor payments, costs of environmental mitigation, costs of feasibility and other reports, inspection costs, permit fees, filing and recording costs, printing costs, reproduction and binding costs, fees and charges of the Trustee, legal fees and charges, financial and other professional consultant fees in connection with the foregoing. "Refunding Price" means the principal amount plus the interest thereon owed by SFID to the Authority under the terms hereof as provided in Section 301. "Reserve Account" means the Reserve Account established for SFID pursuant to Section 5.02 of the Indenture. "Revenue Fund" means the fund by that name established by SFID into which all Gross Revenues are deposited. A -48 "SDWD" means the San Dieguito Water District. "SFID" means the Santa Fe Irrigation District. "State" means the State of California. "Trustee" means The Bank of New York Trust Company, N.A., acting as Trustee under the Indenture. ESTABLISHMENT OF ACCOUNTS; INSTALLMENT PAYMENTS Sale of 1999 Project. In consideration of the payment, or the causing of the payment, of Installment Payments and any other amounts due and owing hereunder or under the Indenture provided for in Section 305 hereof by SFID to the Authority or its assignee, the Authority hereby grants, conveys, bargains and sells to SFID, effective upon the date hereof, the portion of the 1999 Project, upon the terms and conditions set forth in this Installment Purchase Agreement and SFID hereby accepts said grant, conveyance, bargain and sale upon said terms and conditions. Term of Agreement. The term of this Installment Purchase Agreement shall commence upon the date hereof and shall terminate upon the occurrence of either of the following events: (a) the later of payment in full of the Installment Payments and any other amounts due and owing hereunder or under the Indenture by SFID pursuant to the provisions of this Installment Purchase Agreement; or (b) a default by SFID and termination pursuant to Article VI hereof. Title. From and after the Date of Delivery, title to the 1999 Project, and each and every portion thereof, shall vest in SFID and SDWD in their respective percentages; provided, however, that title to the 1999 Project and each and every portion thereof remaining in SFID and SDWD in their respective percentages shall be subject to the subsequent payment of Installment Payments as described in Section 305 hereof, to the remedies of the Authority and its assignee in the event of default as provided in Article VI hereof and to Permitted Encumbrances. Installment Payments. (a) Obligation to Pay. SFID agrees to pay to the Authority, its successors and assigns, but solely from the Net Revenues and other funds pledged hereunder as the Refunding Price of its proportionate share of the 1999 Project refunding of the 1999 Bonds which is being financed with the aggregate principal amount of $12,875,000 together with interest on the unpaid principal balance, payable in Installment Payments coming due and payable in the respective amounts and on the respective dates specified in Exhibit A. The Installment Payments shall be paid by SFID to the Trustee, as assignee of the Authority pursuant to the Indenture, in the amounts and at the times as set forth in Section 306(b). (b) Effect of Prepayment. In the event that SFID prepays all remaining Installment Payments in full pursuant to Section 312, SFID's obligations under this Installment Purchase Agreement shall thereupon cease and terminate, including but not limited to SFID's obligation to pay Installment Payments therefor under this Section 305; provided, however, that SFID's obligations to compensate and indemnify the Trustee pursuant to Section 311 shall survive such prepayment. In the event that SFID prepays the Installment Payments in part but not in whole pursuant to Section 312, the principal component of each succeeding Installment Payment shall be reduced as provided in such Sections and the interest component of each remaining Installment Payment shall be reduced by the aggregate corresponding amount of interest which would otherwise be payable on the Bonds thereby redeemed pursuant to the applicable provisions of Section 4.01 of the Indenture. (c) Rate on Overdue Payments. In the event SFID should fail to make any of the payments required in this Section 305 and Section 311, the payment in default shall continue as an obligation of SFID until the amount in default shall have been fully paid, and SFID agrees to pay the same with interest thereon, from the date of default to the date of payment, at the rate of eight percent (8 %) per annum. A -49 (d) Assignment. SFID understands and agrees that all Installment Payments have been assigned by the Authority to the Trustee in trust, pursuant to the Indenture, for the benefit of the Owners of the Bonds, and SFID hereby assents to such assignment. The Authority hereby directs SFID, and SFID hereby agrees to pay to the Trustee at its Office, all amounts payable by SFID pursuant to this Section 305 and all amounts payable by SFID pursuant to Section 311. Pledte and Application of Net Revenues. (a) Pledge of Net Revenues. The Installment Payments and any Parity Obligations shall be secured by a first pledge of all of the Net Revenues. In addition, the Installment Payments and any Parity Obligations shall be secured by a pledge of all of the moneys in the Reserve Account, including all amounts derived from the investment of such moneys. Such pledge shall constitute a first lien on the Net Revenues and such other moneys for the payment of the principal of and with interest and premium (if any) on the Installment Payments and any Parity Obligations in accordance with the terms hereof. The Installment Payments and any Parity Obligations shall be equally secured by a pledge, charge and lien upon the Net Revenues and such moneys without priority for series, issue, number or date; and the payment of the interest on the principal of the Installment Payments and any Parity Obligations, and any premiums upon the redemption of any thereof shall be and are secured by an exclusive pledge, charge and lien upon the Net Revenues and such moneys. So long as any of the Installment Payments and any Parity Obligations are outstanding, the Net Revenues and such moneys shall not be used for any other purpose; except that out of the Net Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by Section 306(b) and (c). (b) Deposits Into Revenue Fund; Transfer to Make Installment Payments. All of the Gross Revenues shall be deposited by SFID immediately upon receipt in the Revenue Fund. SFID covenants and agrees that all Net Revenues will be held by SFID in the Revenue Fund in trust for the benefit of the Trustee (as assignee of the rights of the Authority hereunder) and the Bond Owners, and for the benefit of the owners of any Parity Obligations. On or before each Installment Payment Date, SFID shall withdraw from the Revenue Fund and transfer to the Trustee, for deposit in the Bond Fund, an amount which, together with the balance then on deposit in the Bond Fund, the Interest Account, the Sinking Account and the Principal Account (other than amounts resulting from the prepayment of the Installment Payments pursuant to Section 312 and other than amounts required for payment of principal of or interest on any Bonds which have matured or been called for redemption but which have not been presented for payment and other than amounts needed for Installment Payments), is equal to the aggregate amount of the Installment Payment coming due and payable on the next succeeding Interest Payment Date. In addition, SFID shall withdraw from the Revenue Fund such amounts at such times as shall be required to: (i) pay all Maintenance and Operation Expenses as they come due and payable; (ii) pay the principal of and interest on any Parity Obligations and otherwise comply with the provisions of the instruments authorizing the issuance of any Parity Obligations; (iii) pay to the Trustee the amount of any deficiency in the SFID Reserve Account, the notice of which deficiency shall have been given by the Trustee to SFID pursuant to Section 5.06 of the Indenture; and (iv) pay all other amounts when and as due and payable hereunder. (c) Other Uses of Net Revenues Permitted. SFID shall manage, conserve and apply the Net Revenues on deposits in the Revenue Fund in such a manner that all deposits required to be made pursuant to the preceding subsection (b) will be made at the times and in the amounts so required. Subject to the foregoing sentence, so long as no Event of Default shall have occurred and be continuing hereunder, SFID may use and apply moneys in the Revenue Fund for (i) the payment of Additional Payments; (ii) the payment of any subordinate obligations or any unsecured obligations; (iii) the acquisition and construction of extensions and betterments to the Enterprise; (iv) the prepayment of any obligations of SFID relating to the Enterprise; or (v) any other lawful purposes of SFID. (d) Budget and Appropriation of Installment Payments. During the term of this Installment Purchase Agreement, SFID shall adopt and make all necessary budgets and appropriations of the Installment Payments from the Net Revenues, and shall furnish to the Trustee a Written Certificate stating that the Installment Payments have been included in the final budget of SFID for the current Fiscal Year. Such Written A -50 Certificate for any Fiscal Year shall be filed with the Trustee not later than September 1 in such Fiscal Year. In the event any Installment Payment requires the adoption by SFID of any supplemental budget or appropriation, SFID shall promptly adopt the same. The covenants on the part of SFID contained in this subsection (d) shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of SFID to take such action and do such things as are required by law in the performance of the official duty of such officials to enable SFID to carry out and perform the covenants and agreements in this subsection (d). Special Obli!ation of SFID; Obli!ations Absolute SFID's obligation to pay the Installment Payments, the Additional Payments and any other amounts coming due and payable hereunder shall be a special obligation of SFID limited solely to the Net Revenues. Under no circumstances shall SFID be required to advance 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 and the Additional Payments, nor shall any other funds or property of SFID be liable for the payment of the Installment Payments and the Additional Payments and any other amounts coming due and payable hereunder. The obligations of SFID to make the Installment Payments and the Additional Payments from the 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 setoff, counterclaim or recoupment arising out of any breach of SFID, the Authority or the Trustee of any obligation to SFID or otherwise with respect to the Enterprise, whether hereunder or otherwise, or out of indebtedness or liability at any time owing to SFID by the Authority or the Trustee. Until such time as all of the Installment Payments, all of the Additional Payments and all other amounts coming due and payable hereunder shall have been fully paid or prepaid, SFID (i) will not suspend or discontinue payment of any Installment Payments, Additional Payments or such other amounts; (ii) will perform and observe all other agreements contained in this Installment Purchase Agreement; and (iii) will not terminate the term of this Installment Purchase Agreement for any cause, including, without limiting the generality of the foregoing, the occurrence of any acts or destruction of or damage to the Enterprise, sale of the Enterprise, the taking by eminent domain of title to or temporary use of any component of the Enterprise, commercial frustration of purpose, any change in the tax law or other laws of the United States of America or the State or any political subdivision of either thereof or any failure of the Authority or the Trustee to perform and observe any agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with the Indenture or this Installment Purchase Agreement. Nothing contained in this Section 307 shall be construed to release the Authority or the Trustee from the performance of any of the agreements on its part contained herein or in the Indenture, and in the event the Authority or the Trustee shall fail to perform any such agreements, SFID may institute such action against the Authority or the Trustee as SFID may deem necessary to compel performance so long as such action does not abrogate the obligations of SFID contained in the preceding paragraph. SFID may, however, at SFID's own cost and expense and in SFID's own name or in the name of the Authority prosecute or defend any action or proceeding or take any other action involving third persons which SFID deems reasonably necessary in order to secure or protect SFID's rights hereunder, and in such event the Authority hereby agrees to cooperate fully with SFID and to take such action necessary to effect the substitution of SFID for the Authority in such action or proceeding if SFID shall so request. Rates and Charges. (a) Covenant to Fix Rates and Charges. SFID shall fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise during each Fiscal Year, which are at least sufficient, after making allowance for contingencies and error in the estimates, to yield Gross Revenues which are sufficient to pay the following amounts in the following order of priority: (i) all Maintenance and Operation Expenses estimated by SFID to become due and payable in such Fiscal Year; (ii) the Installment Payments and the principal of and interest on any Parity Obligations as they become due and payable during such Fiscal Year, without preference or priority, except to the A -51 extent such Installment Payments or such principal and interest on Parity Obligations are payable from the proceeds of the Bonds or Parity Obligations, or from any other source of legally available funds of SFID which have been deposited with the Trustee for such purpose prior to the commencement of such Fiscal Year; (iii) all amounts, if any, required to restore the balance in the Reserve Account to the full amount of SFID's share of the Reserve Requirement; and (iv) all Additional Payments and other payments required to meet any other obligations of SFID which are charges, liens, encumbrances upon, or which are otherwise payable from, Gross Revenues or Net Revenues during such Fiscal Year. (b) Covenant Regarding Net Revenues. In addition, SFID shall fix, prescribe, revise and collect rates, fees and charges for the services and facilities furnished by the Enterprise during each Fiscal year which are sufficient to yield Net Revenues, including revenues received by SFID from Connection Fees, which, are at least equal to one hundred fifteen percent (115 %) of the aggregate amount described in the preceding clause (a)(ii) of this Section. Superior and Subordinate Obligations. SFID shall not issue or incur any additional bonds or other obligations during the Term of this Installment Purchase Agreement having any priority in payment of principal or interest out of the Gross Revenues or the Net Revenues over the Installment Payments. Nothing herein is intended or shall be construed to limit or affect the ability of SFID to issue or incur (i) Parity Obligations pursuant to Section 310 or (ii) obligations which are either unsecured or which are secured by an interest in the Net Revenues which is junior and subordinate to the pledge of and lien upon the Net Revenues established hereunder. Issuance of Parity Obligations. SFID shall have the right from time to time to issue Parity Obligations, upon such terms and conditions as SFID shall deem advisable, but only upon compliance with the following conditions which are hereby made conditions precedent to the issuance of Parity Obligations: (a) No event of Default shall have occurred and be continuing under this Installment Purchase Agreement or any Parity Obligations. (b) The Net Revenues calculated in accordance with generally accepted accounting principles, as shown by the books of SFID for the most recent completed Fiscal Year for which audited financial statements are available, or for any more recent consecutive twelve (12) month period selected by SFID at its option, in either case verified by a certificate or opinion of an Independent Accountant or Fiscal Consultant, plus the Additional Revenues, are at least equal to one hundred fifteen percent (115 %) of the amount of Maximum Annual Debt Service. (c) Upon the issuance of such Parity Obligations a reserve fund shall be established for such Parity Obligations in an amount at least equal to the lesser of (i) Maximum Annual Debt Service on such Parity Obligations, or (ii) the maximum amount then permitted under the Code. (d) Such Parity Obligations shall be payable on the Installment Payment Dates. The provisions of subsection (b) of this Section shall not apply to any Parity Obligations if all of the proceeds of which (other than proceeds applied to pay costs of issuing such Parity Obligations and to make the reserve fund deposit required pursuant to subsection (c) of this Section) shall be deposited in an irrevocable escrow for the purpose of paying the principal of and interest and premium (if any) of the Installment Payments or on any outstanding Parity Obligations. Additional Payments. In addition to the Installment Payments, SFID shall pay when due its pro -rata portion of all costs and expenses incurred by the Authority to comply with the provisions of the Indenture, A -52 including without limitation all Costs of Issuance to the extent not paid from amounts on deposit in the Costs of Issuance Fund), and shall pay to the Trustee upon request therefor its pro -rata portion of all compensation for fees due to the Trustee and all of its costs and expenses payable as a result of the performance of and compliance with its duties hereunder or under the Indenture or any related documents, together with its pro -rata portion of all amounts required to indemnify the Trustee pursuant to Section 422 hereof or Section 8.06 of the Indenture, and its pro -rata portion of all related costs and expenses of attorneys, auditors, engineers and accountants. The rights of the Trustee and the obligations of SFID under this Section 311 shall survive the termination of this Installment Purchase Agreement. Option to Prepay /Defeasance Subject to the terms and conditions of this Section, the Authority hereby grants an option to SFID to prepay the Installment Payments in whole or in part. Said option may be exercised with respect to Installment Payments due on and after September 15,2018, on any date commencing on September 15, 2017. Said option shall be exercised by SFID by giving written notice to the Trustee, as the Authority's assignee, of the exercise of such option at least thirty -five (35) but not more than sixty (60) days prior to said date. Such option shall be exercised in the event of prepayment in whole; or in part by depositing with said notice cash or investment securities which together with interest earned thereon which will provide an amount sufficient to pay the unpaid principal amount of the Bonds to be prepaid (but not less than $5,000) together with the interest component to be paid to the date of prepayment. In the event of prepayment in part, the partial prepayment shall be applied by the Authority or its assignee against Installment Payments in the manner directed by SFID, and SFID shall cause to be provided to the Trustee a revised schedule of Installment Payments reflecting said partial prepayment. Subject to Section 307 hereof, the prepayment of all of the Installment Payments from the proceeds of refunding bonds or other debt obligations to pay and discharge the outstanding Bonds as provided in Section 10.02 of the Indenture shall relieve and defease SFID's obligation make further Installment Payments hereunder; provided, however, that all of the requirements of Section 10.03 of the Indenture shall have been met. Payment of Rebatable Amounts SFID agrees to furnish all information to, and cooperate fully with, the Authority, and its officers, employees, agents and attorneys, in order to assure compliance with the provisions of Section 6.08 of the Indenture. In the event that the Authority shall determine, pursuant to Section 6.08 of the Indenture, that any amounts are due and payable to the United States of America thereunder and that neither the Authority nor the Trustee has on deposit under the Indenture an amount of available moneys (excluding moneys on deposit in the funds and accounts established for the payment of the principal of or interest or redemption premium, if any, on the Bonds) to make such payment, the Authority shall promptly notify SFID of such fact. Upon receipt of any such notice, SFID shall promptly pay to the United States of America from any source of legally available funds, its pro -rata portion of the amounts determined by the Authority to be due and payable to the United States of America under such Section 6.08. COVENANTS Maintenance and Utilities SFID shall maintain and repair the 1999 Project or cause the 1999 Project to be maintained and repaired and shall pay for, or otherwise arrange for the payment of, utility services, if any, supplied to the 1999 Project (which services shall include power, gas, telephone and all other utility services), all costs of operation of the 1999 Project and all costs of repair and replacement of the 1999 Project resulting from ordinary wear and tear or want of care. Provisions Ret!ardint! Insurance SFID shall maintain or cause to be maintained the following policies of insurance: (a) insurance against loss or damage to any structures constituting any part of the Enterprise, as is customarily maintained with respect to works and properties of a like character, which may be carried in conjunction with any other policies of fire and extended coverage insurance; A -53 (b) public liability and property damage the minimum coverages of which shall be $1,000,000 for personal injury or death per person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and property damage insurance in the minimum coverage of $100,000 per event, respectively, the property damage being subject to a maximum $10,000 deductible per accident. Such insurance may be maintained in the form of a minimum $3,000,000 single limit policy covering all such risks; (c) worker's compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure employers against liability for compensation under the Worker's Compensation Insurance and Safety Act now in force in California, or any act hereafter enacted as an amendment or supplement thereto or in lieu thereof, such worker's compensation insurance to cover all persons employed in connection with the Enterprise and to cover full liability for compensation under any such act aforesaid, based upon death or bodily injury claims made by, for or on behalf of any person incurring or suffering injury or death during or in connection with the Enterprise or the business of SFID. Form of Insurance Policies; Delivery (a) All policies of insurance required by Section 402 of this Installment Purchase Agreement shall provide that all proceeds thereunder relating to that portion of the Enterprise damaged or destroyed shall be payable to the Trustee. The Trustee may collect and receive all moneys relating to the Enterprise which may become due and payable under any such policies and shall apply the Net Proceeds of such insurance as provided in this Installment Purchase Agreement. All policies of insurance required by Section 402 of this Installment Purchase Agreement shall provide that the Authority or its assignee and SFID, shall be given thirty (3 0) days' notice of any intended cancellation thereof or reduction of the coverage provided thereby. (b) SFID shall deliver, or cause to be delivered, to the Authority and the Trustee no later than July 1st in each year a certificate, in such detail as the Authority or the Trustee may reasonably request, stating that SFID has complied with Section 402 this Installment Purchase Agreement. If so requested in writing by the Authority or the Trustee, SFID shall also deliver, or cause to be delivered to the Authority or the Trustee duplicate originals or certified copies of each insurance policy described in such certificate, provided, however, that delivery of the insurance policies under the provisions of this Section shall confer no responsibility upon the Authority or the Trustee as to the sufficiency of coverage or amounts of said policies. In the event of failure of SFID to obtain or cause to be obtained the insurance required by Section 402 hereof, the Authority or its assignee may obtain such insurance on behalf of SFID and may collect premiums thereof from SFID which SFID shall be obligated to pay hereunder with interest at the rate of eight percent (8 %) on unpaid premiums. (c) Any insurance required by this Installment Purchase Agreement, may be maintained by SFID in the form of self - insurance. Such self - insurance shall be maintained on a basis which is actuarially sound as established by SFID's risk manager or an independent insurance consultant which determination shall be made annually. SFID shall file with the Trustee annually, within 90 days following the close of each Fiscal Year, a statement of an independent actuarial consultant identifying the extent of such self insurance and stating the determination that SFID maintains sufficient reserves with respect thereto. Any deficiency determined by the independent actuarial consultant shall be corrected within 60 days of SFID becoming aware of such deficiency. Inability to Obtain Insurance. Notwithstanding the provisions of Section 402 of this Installment Purchase Agreement, if at any time SFID shall be unable to obtain or maintain insurance to the extent required by Section 402 on reasonable terms, either as to amounts or as to risks, the failure to maintain such insurance shall not constitute a default under this Installment Purchase Agreement if SFID shall cause the employment of an independent insurance consultant having a favorable reputation for skill and experience in such matters., for the purpose of reviewing such insurance requirements and making recommendations respecting the types, amounts and provisions of reasonably obtainable insurance, including self - insurance, or the establishment of other generally accepted forms of alternative protection that should be carried in lieu thereof, or the infeasibility of obtaining insurance, and if SFID shall comply with the recommendations made in such report. A signed copy of the report of the insurance consultant shall be filed with the Trustee and the Authority, and the insurance requirements specified in Section 402 shall be deemed to be modified to conform with the recommendations in such report. A -54 Application of Net Proceeds of Insurance Any Net Proceeds of any such insurance required by Section 402 of this Installment Purchase Agreement relating to the loss or destruction of any part of the Enterprise which is collected by SFID on behalf of the Trustee shall be paid, or cause to be paid by SFID to the Trustee for deposit in a special fund to be held separate from all other funds and accounts of the Trustee and SFID shall assure that such Net Proceeds are and shall be applied and disbursed as set forth below: (a) If SFID determines that such Net Proceeds are sufficient to repair, reconstruct or replace the damaged or destroyed portion of the Enterprise, which determination shall be evidenced by a certificate executed by an Authorized Representative of SFID and filed with the Trustee, as assignee of the Authority, then SFID shall cause such portion of the Enterprise to be repaired, reconstructed or replaced to at least the same good order, repair and condition as it was in prior to the damage or destruction, insofar as the same may be accomplished by the use of said Net Proceeds, and SFID shall direct the Trustee to disburse said Net Proceeds for said purpose. Any balance of said Net Proceeds not required for such repair, reconstruction or replacement shall be transferred by the Trustee to the Bond Fund and SFID shall direct the Trustee that said balance be applied as a prepayment of Installment Payments in accordance with Section 312 of this Installment Purchase Agreement and Section 4.01(c) of the Indenture, except that no such prepayment shall be in an amount less than $5 SFID shall be obligated to continue to make Installment Payments required by this Installment Purchase Agreement notwithstanding accident to or destruction of all or a portion of the 1999 Project unless and until the Bonds and all amounts owed hereunder and under the Indenture by SFID are paid in full. (b) In the event that such Net Proceeds are not sufficient to repair, reconstruct, or replace the damaged or destroyed portion of the Enterprise, as evidenced by a certificate executed by an Authorized Representative of SFID and filed with the Trustee, SFID shall direct the Trustee to apply such Net Proceeds, to the prepayment in full, on the next succeeding Installment Payment Date, of the balance of the Installment Payments, or if such Net Proceeds are insufficient to prepay the balance of the Installment Payments in full then SFID shall direct the Trustee to apply such Net Proceeds to prepayment of Installment Payments except that no such prepayment shall be in an amount less than $5,000. Application of Net Proceeds of Condemnation. All Net Proceeds received in any condemnation proceeding undertaken by any governmental authority relating to all or a portion of the Enterprise shall be paid by SFID or cause to be paid by SFID to the Trustee for deposit in the Bond Fund and SFID shall assure that such Net Proceeds are applied and disbursed as set forth below: (a) If SFID determines that such condemnation has not materially affected the operation of the Enterprise or the ability of SFID to meet any of its obligations hereunder, as set forth in a certificate executed by an Authorized Representative of SFID and filed with the Trustee, as assignee of the Authority, and if such Net Proceeds are insufficient to enable SFID to prepay Installment Payments in full on the next succeeding Installment Payment Date, SFID shall direct the Trustee to retain such Net Proceeds in the Bond Fund and to cause such Net Proceeds to be applied as a credit against the next succeeding Installment Payments. SFID shall be obligated to continue to make Installment Payments required by this Installment Purchase Agreement notwithstanding condemnation of all or a portion of the Enterprise unless and until the Bonds and all amounts owed hereunder and under the Indenture by SFID are paid in full. (b) If SFID determines that such condemnation has materially affected the operation of the 1999 Project or the ability of SFID to meet any of its obligations hereunder as set forth in a certificate executed by an Authorized Representative of SFID and filed with the Trustee, as assignee of the Authority, or if such Net Proceeds are sufficient to enable SFID to prepay Installment Payments in full on the next succeeding Installment Payment Date, SFID shall direct the Trustee to apply such Net Proceeds to the prepayment in full or (to the extent that such condemnation pertains only to a portion of the Enterprise) in part on the next succeeding Installment Payment Date of Installment Payments except that no such prepayment shall be in an amount less than $5,000. Payment of Installment Payments SFID shall duly and punctually pay or cause to be paid the Installment Payments, at the dates and places and in the manner provided in this Installment Purchase A -55 Agreement according to the true intent and meaning hereof and shall not directly or indirectly extend or assent to the extension of the Installment Payment Dates of any Installment Payments. Compliance with this Installment Purchase Agreement The Authority and SFID will faithfully observe and perform or cause to be faithfully observed and performed all the covenants, conditions and requirements of this Installment Purchase Agreement, and will not suffer or permit any default to occur hereunder, or do or permit to be done in, upon or about the Enterprise or any part thereof, anything that might in any way weaken, diminish or impair the operation thereof. Neither the Authority nor SFID will 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 this Installment Purchase Agreement. Payment of Taxes. SFID will pay or cause to be paid all taxes, assessments and other governmental charges, if any, that may be levied, assessed or charged upon the Enterprise promptly as and when the same shall become due and payable; provided, however, that SFID shall not be required to pay any such tax, assessment, or charge, if the validity thereof shall concurrently be contested in good faith by appropriate proceedings, if SFID shall set aside, or cause to be set aside, reserves in a form and amount which is adequate with respect thereto and if SFID shall hold the Authority and its assignee harmless as to any loss or forfeiture which might arise from the nonpayment of any such item; and provided further, that SFID, upon the commencement of any proceedings to foreclose the lien of any such tax, assessment, or charge, forthwith pay, or cause to be paid, any such tax, assessment or charge, unless contested in good faith as aforesaid. SFID will not suffer the Enterprise or any part thereof, to be sold for any taxes, assessments or other charges whatsoever, or to be forfeited therefor. Nothing herein contained shall be deemed to impose any liability to pay taxes, assessments or charges where none is imposed by law. Observance of Laws and Reiulations. SFID will well and truly keep, observe and perform or cause to be kept, observed and performed all valid and lawful obligations or regulations now or hereafter imposed on it by contract, or prescribed by any law of the United States, or of the State of California, 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 SFID, including its right to exist and carry on business as a public body, corporate and political, 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. Maintain and Preserve the Enterprise SFID will operate, maintain and preserve, or will cause to be operated, maintained and preserved, the 1999 Project and the Enterprise in good repair and working order and will operate or cause to be operated the 1999 Project and the Enterprise, in an efficient and economical manner. Other Liens SFID shall keep or cause to be kept, the 1999 Project and all parts thereof free from judgments, from mechanics and materialmen's liens (except those arising from construction of the 1999 Project) and free from all liens, claims, demands and encumbrances of whatsoever nature or character, other than Permitted Encumbrances, and SFID shall keep or cause to be kept the 1999 Project and the Enterprise free from any claim or liability which might impair or impede the operations of the 1999 Project and the Enterprise; provided, however, that SFID shall not be required to pay any such liens, claims or demands if the validity thereof shall concurrently be contested in good faith by appropriate proceedings, and if SFID shall set aside, or cause to be set aside, reserves deemed by it to be adequate with respect thereto and provided further, that SFID upon the commencement of any proceedings to foreclose the lien of any such charge or claim, will forthwith pay, or cause to be paid, any such charge or claim unless contested in good faith as aforesaid. The Authority, or its assignee, may, (after first giving SFID ten (10) days' written notice to comply therewith and failure of SFID to so comply within said ten -day period) defend against any and all actions or proceedings in which the validity of this Installment Purchase Agreement is or might be questioned, or may pay or compromise any claim or demand asserted in any such actions or proceedings; provided, however, that in defending against such actions or proceedings or in paying or compromising such claims or demands, the Authority shall not in any event be deemed to have waived or released SFID from liability for or on account of any of its covenants and warranties A -56 contained herein, or from its liability hereunder to defend the validity of this Installment Purchase Agreement and the pledge herein made and to perform such covenants and warranties. Against Encumbrances or Sales SFID shall not create or suffer to be created any mortgage, pledge, lien, charge or encumbrance upon the 1999 Project, or upon any real or personal property essential to the operation of the 1999 Project and the Enterprise, other than Permitted Encumbrances. Except as expressly provided in this Article IV, SFID shall promptly, at its own expense, take such action as may be necessary to discharge or remove any such mortgage, pledge, lien, charge or encumbrance for which it is responsible, if the same shall arise at any time. SFID will not sell or otherwise dispose of any property essential to the proper operation of the 1999 Proj ect and the Enterprise, except as otherwise permitted by this Installment Purchase Agreement. Prosecution and Defense of Suits SFID shall, promptly upon request of the Authority or the Trustee, or their assignees, from time to time take such action, or cause such action to be taken, as may be necessary or proper to remedy or cure any defect in or cloud upon the title to the 1999 Project whether now existing or hereafter developing and shall prosecute, or cause to be prosecuted, all such suits, actions and other proceedings as may be appropriate for such purpose and shall, to the extent permitted by law, indemnify and save the Authority and the Trustee and its assignee harmless from all loss, cost, damage and expense, including attorneys' fees, which they or either of them may incur by reason of any such defect, cloud, suit, action or proceedings. To the extent permitted by law, SFID shall defend against every suit, action or proceeding at any time brought against the Authority, or its assignee, upon any claim arising out of the rights of the Authority, or its assignee, under this Installment Purchase Agreement; provided, that the Authority, or its assignee, at its election may appear in and defend any such suit, action or proceeding. SFID shall, to the extent permitted by law, indemnify and hold harmless the Authority or the Trustee against any and all liability claimed or asserted by any person, arising out of the rights of the Authority or Trustee under this Installment Purchase Agreement. Recordation and Filing. SFID shall record and file, or shall cause to be recorded and filed, this Installment Purchase Agreement and all such documents as may be required by law (together with whatever else may be necessary or be reasonably required by the Authority or its assignee), in such manner, at such times and in such places as may be required by law in order fully to preserve and protect the rights of the Authority and its assignee under this Installment Purchase Agreement. Waiver of Laws SFID shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, or suffer, any stay or extension of any law now or at anytime hereafter in force which may adversely affect the covenants and agreements contained in this Installment Purchase Agreement and the benefit and advantage of any such law is hereby expressly waived to the extent that SFID may legally make such waiver. Compliance with Conditions Precedent Upon the date of delivery of this Installment Purchase Agreement, all conditions, acts and things required by law or by this Installment Purchase Agreement to have happened or to have been performed precedent to or in the execution of this Installment Purchase Agreement shall exist, have happened and have been performed, and this Installment Purchase Agreement shall be within every limit prescribed by law. Power to Enter Into Agreements (a) SFID is duly authorized to enter into this Installment Purchase Agreement. The provisions of this Installment Purchase Agreement are and will be the valid and legally enforceable obligations of SFID in accordance with their terms and the terms of this Installment Purchase Agreement. (b) The Authority is duly authorized to enter into this Installment Purchase Agreement, the Agency Agreement and the Indenture and to enter into the transactions contemplated by this Installment Purchase Agreement, the Agency Agreement and the Indenture. The Authority has duly authorized and executed this Installment Purchase Agreement, the Agency Agreement and the Indenture. A -57 Further Assurances. Whenever and so often as requested so to do by the Authority or its assignee, SFID will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things, as may be necessary or reasonably required in order further and more fully to vest in the Authority or its assignee all rights, interest, powers, benefits, privileges and advantages conferred or intended to be conferred upon the Authority and its assignee by this Installment Purchase Agreement. Financial Reports. Within one hundred eighty (180) days of the end of each Fiscal Year SFID will furnish, or cause to be furnished, to the Authority, the Bond Insurer and its assignee detailed certified reports of audit, based on an examination sufficiently complete, prepared by an independent certified public accountant, covering the operations of SFID and its general fund and of the 1999 Project and Enterprise for said fiscal year Such audit report shall include statements of the status of each account pertaining to the 1999 Project, showing the amount and source of deposits therein, the amount and purpose of the withdrawals therefrom and the balance therein at the beginning and end of said fiscal year. The Authority Not Liable. Neither the Authority nor its assignee nor its members, officers, agents or employees shall be liable to SFID or to any other person whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the 1999 Project. SFID shall, to the extent permitted by law, indemnify, or cause indemnification of, and hold the Authority and the Trustee, its and their members, officer, agents and employees harmless from, and defend each of them against, any and all claims, liens and judgments for death of or injury to any person or damage to property whatsoever occurring in, on or about the 1999 Project. Indemnification Due to Trustee SFID shall pay, or cause to be paid, to the Authority and the Trustee as assignee of the Authority, fees, compensation and expenses due under the Indenture upon periodic billing therefor by the Authority and the Trustee as assignee of the Authority. In addition, SFID shall and hereby agrees to indemnify, or cause indemnification of, and hold, or cause to be held, the Authority and the Trustee as assignee of the Authority harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from any work or thing done on, the 1999 Project by SFID; (ii) any breach or default on the part of SFID in the performance of any of its obligations under this Installment Purchase Agreement; (iii) any act of negligence of SFID, or of any of its or their agents, contractors, servants, employees or licensees with respect to the 1999 Project; (iv) the authorization of payment of the Project Costs by SFID; (v) the Trustee's acceptance or administration of the Trust Indenture, or the exercise or performance of any of its power or duties hereunder; (vi) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading in any official statement or other offering circular utilized in connection with the sale of the Bonds; or (vii) the defense (pursuant to Section 414 hereof) against actions or proceedings in which the validity of this Installment Purchase Agreement is or might by questioned and the payment or compromise of claims or demands asserted in any such actions or proceedings, all to the extent permitted by law. Indemnification for any tort mentioned in this Section shall be limited to the extent and in the amounts provided for by California law. No indemnification will be made under this Section or elsewhere in this Installment Purchase Agreement for willful misconduct or negligence by the Trustee, its officers, agents, employees, successors or assigns. Such indemnification shall survive termination of this Installment Purchase Agreement and payment of the Bonds and the resignation and removal of the Trustee. The Authority to Operate the 1999 Project SFID shall assure that the 1999 Project is operated pursuant to complete and lawful authority. No permits, rights, franchises or privileges relating thereto shall be allowed to lapse or be forfeited so long as the same shall be necessary for the ownership or operation of the 1999 Project and the Enterprise. SFID shall procure, or cause to be procured, the renewal of each and every permit, right, franchise or privilege so expiring and necessary or desirable for the ownership or operation of the 1999 Project and the Enterprise. A -58 Furnishing Additional Information. SFID shall, from time to time, furnish or cause to be furnished to the Authority or to the Trustee as assignee of the Authority such data regarding the 1999 Project and the Enterprise as shall be reasonably requested in order to enable whichever shall be requesting the information to determine whether there has been compliance with the covenants, terms and provisions of this Installment Purchase Agreement and of the Indenture. Quiet Enjoyment. The parties hereto mutually covenant that SFID, so long as it shall keep and perform the covenants and agreements herein contained, shall at all times during the term of this Installment Purchase Agreement peaceably and quietly, have, hold and enjoy the 1999 Proj ect without suit, trouble or hindrance from the Authority subject to the Authority's rights as set forth in Sections 602 and 603 hereof. Restriction Against Pledge The Authority shall not pledge Installment Payments or other amounts derived from the Enterprise or from rights of the Authority under this Installment Purchase Agreement nor shall the Authority encumber or place any lien upon the 1999 Project or the real or personal property comprising the Enterprise, except as otherwise provided in this Installment Purchase Agreement and the Indenture. Assignment by the Authority Except pursuant to the Indenture and except as otherwise set forth herein, the Authority shall not assign this Installment Purchase Agreement, its rights to receive Installment Payments or its duties and obligations hereunder. No Violation of Other Agreements. (a) SFID hereby represents that neither the execution and delivery of this Installment Purchase Agreement and the Indenture, nor the fulfillment of and compliance with the terms and conditions hereof and thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of terms or violation of any other agreement to which SFID is a party or by which SFID is bound, or constitutes a default under any of the foregoing, or will result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of SFID, or upon the 1999 Project, which is not a Permitted Encumbrance. (b) The Authority hereby represents that neither the execution and delivery of this Installment Purchase Agreement, the Agency Agreement and the Indenture, nor the fulfillment of and compliance with the terms and conditions hereof and thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of terms or violation of any other agreement to which the Authority is a party or by which the Authority is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Authority, or upon the 1999 Project, which is not a Permitted Encumbrance. Private Activity Bond Limitation. SFID and the Authority shall assure that the proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private business tests of section 141(b) of the Code. Private Loan Financing Limitation. SFID and the Authority shall assure that the proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private loan financing test of section 141(c) of the Code. Federal Guarantee Prohibition SFID and the Authority 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 Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Code. No Arbitrage SFID and the Authority shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Bonds would have caused the Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code. Maintenance of Tax - Exemption. SFID and the Authority shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such A -59 interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Bonds. Disclaimer of Warranties Neither the Authority nor its assignee make any 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 SFID of the 1999 Project or any portion thereof, or any other representation or warranty with respect to the 1999 Project or any portion thereof. In no event shall the Authority or its assignee be liable for incidental, indirect, special or consequential damages in connection with this Installment Purchase Agreement or the existence, furnishing, or functioning of the 1999 Project or SFID's use of the 1999 Project, except such damages as may arise by reason of a breach of this Installment Purchase Agreement by the Authority or its assignee. Authority Access to the 1999 Project SFID agrees that each of SFID, SDWD, and the Authority and its assignee shall have such rights of access to the 1999 Project as may be reasonably necessary to cause the proper maintenance of the 1999 Project and otherwise to have right of access to the 1999 Project in the event of failure by SFID to perform its obligations hereunder. EVENTS OF DEFAULT AND REMEDIES Events of Default Defined. The following shall be "Events of Default" under this Installment Purchase Agreement and the terms "Event of Default" and "default" shall mean, whenever they are used in this Installment Purchase Agreement, with respect to the 1999 Project, any one or more of the following events, namely: (a) failure by SFID to pay any Installment Payment or other payment required to be paid hereunder at the time specified herein; (b) failure by SFID to pay any Additional Payment when due and payable hereunder, and the continuation of such failure for a period of ten (10) days. (c) failure by SFID to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in clause (a) or (b) of this Section, for a period of sixty (60) days after written notice specifying such failure and requesting that it be remedied has been given to SFID by the Authority or its assignee; provided, however, that the Authority or its assignee may, upon written request of SFID prior to the expiration of such sixty (60) day period, consent to an extension of such time in order to cure such failure if corrective action has been instituted by SFID and is being diligently pursued and will, in the judgment of the Authority or its assignee, be diligently pursued until the default is corrected; (d) SFID shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or shall consent to an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of SFID for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due or shall take any corporate action in furtherance of any of the foregoing; or (e) default by SFID under the terms of any obligation secured by a pledge of Net Revenues on a parity with the pledge hereunder. Any default by SFID hereunder shall not cause a default under any other installment purchase agreement to which SFID is not a party. Remedies on Default Whenever any Event of Default shall have happened and be continuing the Authority shall promptly give written notice thereof to the Bond Insurer. In each and every such case during the continuance of an Event of Default specified in clause (d) in Section 601 hereof, the Authority may with the A -60 prior written consent of the Bond Insurer and shall, at the direction of the Bond Insurer, and for any other such Event of Default, the Authority may, by notice in writing to SFID, and with the prior written consent of the Bond Insurer, and shall at the direction of the Bond Insurer, declare the entire principal amount of the unpaid Installment Payments and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, anything contained herein to the contrary notwithstanding. This Section is subject to, however, the condition that if at any time after the entire principal amount of the unpaid Installment Payments and the accrued interest thereon shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered SFID shall deposit with the Authority a sum sufficient to pay the unpaid principal amount of the Installment Payments due prior to such declaration and the accrued interest thereon, with interest on principal amount of such overdue Installment Payments, at the rate or rates applicable to the remaining unpaid principal balance of the Installment Payments, and the reasonable expenses of the Authority, and any and all other defaults known to the Authority (other than in the payment of the entire principal amount of the unpaid Installment Payments and the accrued interest thereon due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Authority or provision deemed by the Authority to be adequate shall have been made therefor, then and in every such case the Authority, by written notice to SFID, and with the written consent of the Bond Insurer, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. Each and all of the remedies given to the Authority or its assignee or by any law now or hereafter enacted are cumulative and the exercise of one right or remedy and shall not impair the right of the Authority or its assignee to exercise any or all other remedies. Suits at Law or in Equity and Mandamus. In addition to the remedies set forth in Section 602 hereof, in case one or more of the Events of Default shall happen, then and in every such case, the Authority or its assignee shall be entitled to proceed to protect and enforce the rights vested in the Authority by this Installment Purchase Agreement by such appropriate judicial proceeding as the Authority or its assignee shall deem most effectual to protect and enforce any such right, either by suit in equity or by action at law. The provisions of this Installment Purchase Agreement and the duties of SFID and of the officers, agents and employees thereof shall be enforceable by the Authority by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing, the Authority and its assignee shall have the right: (i) Accounting. By action or suit in equity to require SFID and its officers, agents and employees to account as the trustee of an express trust. (ii) Injunction. By action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Authority or its assignee. (iii) Mandamus. By mandamus or other suit, action or proceeding at law or equity to enforce its or their rights against SFID and its and any of its officers, agents, and employees, and to compel it or them to perform and carry out its and their duties and obligations under the law and its and their covenants and agreements with SFID as provided herein. Non - Waiver Nothing in this Article VI or in any other provision of this Installment Purchase Agreement shall affect or impair the obligation of SFID, which is to pay the Installment Payments, as herein provided. No delay or omission of the Authority or its assignee 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 any acquiescence therein, and every power and remedy given by this Article VI to the Authority and its assignee may be exercised from time to time and as often as shall be deemed expedient by the Authority or its assignee. A -61 Remedies Not Exclusive No remedy herein or by law conferred upon or reserved to the Authority or the Trustee as its assignee is intended to be exclusive of any other remedy, but each such remedy is cumulative and in addition to every other remedy, and every remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise may be exercised without exhausting and without regard to any other remedy conferred hereby or by any law. Trustee, Bond Insurer and Bond Owners to Exercise Rights Such rights and remedies as are given to the Authority under this Article VI have been assigned by the Authority to the Trustee under the Indenture, to which assignment SFID hereby consents. Such rights and remedies shall be exercised by the Trustee, the Bond Insurer and the Owners of the Bonds as provided herein and in the Indenture and shall be considered third party beneficiaries. Ri!hts of Bond Insurer. All of the rights granted to the Bond Insurer pursuant to this Installment Purchase Agreement are subject to the condition precedent that the Bond Insurer shall not then be in default of its obligations under the Municipal Bond Insurance Policy. Status Quo In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and then discontinued or abandoned, or shall be determined adversely to the Authority and its assignee, then, and in every such case, the Authority and its assignee shall be restored to their former positions and rights and remedies as if no such suit, action or proceedings had been brought or taken. A -62 APPENDIX B GENERAL DEMOGRAPHIC DATA AND FINANCIAL INFORMATION The Districts are within the County of San Diego. There is limited demographic information available with regard to the Districts themselves (except as contained herein), and much of the following information pertains to the general San Diego Metropolitan Area. The following information is presented as general background data. The Bonds are payable solely from the sources described herein (see "SECURITY FOR THE BONDS`). General The County of San Diego (the "County ") is the southernmost major metropolitan area in the State of California. The County covers 4,255 square miles, extending 70 miles along the Pacific Coast from the Mexican border to Orange County, and inland 75 miles to Imperial County. Riverside and Orange counties form the northern boundary. The County is approximately the size of the State of Connecticut. Topography of the County varies from broad coastal plains to fertile inland valleys and mountain ranges to the east, rising to an elevation of 6,500 feet. Eastern slopes of these mountains form the rim of the Anza- Borrego Desert and the Imperial Valley. The Cleveland National Forest occupies much of the interior portion of the County. The climate is equable in the coastal and valley regions where most of the population and resources are located. Average annual rainfall in the coastal areas is approximately ten inches. The County possesses a diverse economic base consisting of a significant manufacturing presence in the fields of electronics and shipbuilding, a large tourist industry attracted by the favorable climate of the region, and a considerable defense - related presence. In addition to the City of San Diego, other principal cities in the County include Carlsbad, Chula Vista, Oceanside, El Cajon, Escondido, La Mesa and National City. Most County residents live within 20 miles of the coast. Farther inland are agricultural areas, principally planted in avocados and tomatoes, while the easternmost portion of the County has a dry, desert -like topography. Population There are 18 incorporated cities in the County, and a number of unincorporated communities. For many years the population of the County has grown at a greater rate than that of either California or the nation. The County population as of January 2004 was estimated to be approximately 3,017,200, making it the third largest County by population in California and the sixteenth largest Metropolitan Statistical Area in the United States. The 2004 population increased approximately 1.9% from 2003. As of January 2004, the unincorporated population of the County was 470,000. B -1 The following table shows changes in the population in the County, the State and the United States for the years 2000 to 2006. COUNTY OF SAN DIEGO POPULATION ESTIMATES ) (In thousands) San Diego State of County Percent California Percent United Percent Year (000) Chan a 0� Chan a States (2) Chan e 2000 2 34 282 2001 2 0.014039271 34 1.59% 285 1.07% 2002 2 0.012960305 35 1.37% 288 1.02% 2003 2 0.006923827 35 1.26% 290 0.93% 2004 2 0.004147771 35 1.06% 293 0.98% 2005 2 0.000913451 36 0.87% 296 0.98% 2006 2 0.001649862 36 0.84% 299 0.98% Source: State of California Department of Finance; U.S. Bureau of the Census. (1) As of January 1 of the year shown. (2) As of July 1 of the year shown. B -2 Employment The County's total labor force, the number of persons who work or are available for work, averaged approximately 1,469,800 in 2006. The number of employed workers in the labor force averaged approximately 1,460,933. The following table sets forth information regarding the size of the labor force, employment and unemployment rates for the County, the State and the United States for the years 2003 through 2006. LABOR FORCE - EMPLOYMENT AND UNEMPLOYMENT ANNUAL AVERAGES 1999 -2003 By Place of Residence (in thousands) 2003 2004 2005 2006 State of California Civilian Labor Force 17 17 17 17 Civilian Employment 16 16 16 17 Civilian Unemployment 1 1 958 872 Civilian Unemployment Rate 6.8% 6.2% 5.4% 4.9% San Diego Labor Force 1 1 1 1 Employment 1 1 1 1 Unemployed 60 65 70 76 Unemployment Rate 4.0% 4.3% 4.7% 5.2% United States Labor Force 146 147 149 151 Employment 137 139 141 144 Unemployment Rate 6.00% 5.50% 5.10% 4.60% Sources: State Data — California Employment Development Department; National Data — U.S. Department of Labor, Bureau of Labor Statistics. Data not seasonally adjusted; March 2006 Benchmark. B -3 The following table sets forth the annual average employment within the County, by employment sector, for the fiscal years 2001 through 2006. SAN DIEGO COUNTY NON - AGRICULTURAL LABOR FORCE AND INDUSTRY EMPLOYMENT ANNUAL AVERAGES 2002 -2006 (in thousands) Employment Sector 2002 2003 2004 2005 2006 Mining 0.3 0.3 0.4 0.4 0.5 Construction 76.4 79.6 87.7 90.8 92.6 Manufacturing 112.3 105.4 104.3 104.5 103.6 Wholesale and Retail Trade 179.3 181.3 186.8 191.0 192.7 Transportation, Warehousing and Utilities 29.3 27.3 28.4 28.4 28.3 Services Information 37.7 37.1 36.6 37.4 37.2 Financial Activities 75.0 80.5 81.9 83.2 83.7 Professional and Business Services 201.7 201.6 204.5 210.4 213.8 Educational and Health Services 119.7 122.0 121.7 122.5 124.7 Leisure and Hospitality 133.8 139.9 145.7 149.6 156.2 Other Services 45.6 47.2 47.9 48.8 48.9 Government 219.7 219.8 214.3 215.1 217.7 Total, All Non -Farm Industries 1 1 1 1 1 Sources: California Employment Development Department. Regional Economy In recent years the County has enjoyed economic stability, out - pacing the State economy despite a general recession in the State. Much of this strength was evidenced by and due to outstanding employment gains, population growth, personal income increases, and high levels of commercial and industrial development. B -4 The Gross Regional Product ( "GRP ") for 2004 rose to $141.7 billion from $133.0 billion in 2003 and is forecast to rise slightly in 2005. The GRP is an estimate of the value for all goods and services produced in the region. The following table presents the County's GRP from 1996 through 2004. COUNTY OF SAN DIEGO GROSS REGIONAL PRODUCT Annual Percent Change Gross Regional Product Current Dollars Year (Billion $ ) San Diego 1996 $79.6 5.9% 1997 86.1 8.2% 1998 94.4 9.7% 1999 103.1 9.2% 2000 112.4 9.0% 2001 116.3 3.4% 2002 124.9 7.4% 2003 133.0 6.4% 2004 141.7 6.5% Source: Bureau of Economic Analysis; Economic Research Bureau of the Greater San Diego Chamber of Commerce. Economic activity and population growth in the economy are closely related. Helping to sustain the County's economy is the performance of three basic industries of the region, which consist of manufacturing, the military, and tourism. The U.S. Department of Defense contributes about $10 billion annually to the local economy, through wages paid to the uniformed military and civilian personnel, and for equipment and services purchased from local businesses. San Diego's military presence is anticipated to remain relatively stable and may even increase due to the consolidation of military operations and facilities from elsewhere in California, the West, and throughout the United States. The Department of Defense closed and vacated the Naval Training center in 1997. However, three procurement agencies have recently relocated to San Diego, including the Naval Space and Warfare Systems Command, the Naval Aviation Engineering Servicing Unit, which hires private contractors to service jets, and the Naval Aviation Technical Service Facility, which stores approximately 10 million jet blueprints. Building Activity Building permit valuation for both residential and non - residential construction in the County in 2003 increased over 2002 levels by more than 4 %. Measures limiting new housing remain in effect in areas throughout the County, resulting in a 6.0% increase in residential valuations. Non - residential valuations increased 0.06 %. B -5 Annual total building permit valuation and the annual unit total of new residential permits from 1999 through 2003 are shown in the following table. COUNTY OF SAN DIEGO BUILDING PERMIT ACTIVITY (in thousands) 1999 2000 2001 2002 2003 Valuation Residential $2 $3 $3 $3 $3 Non - Residential 1 1 1 1 1 Total $4,322,589 $4,399,700 $4,359,426 $4,643,979 $4,853,562 New Housing Units Single Family 9 9 9 9 9 Multiple Family 6,434 6,760 6 5,989 8 Total 16 15,927 15 1508 18,324 Sources: Construction Industry Research Board. Commercial Activity Consumer spending for Calendar Year 2005 resulted in approximately $46,679,471 in taxable sales in the County. The following table sets forth information regarding taxable sales in the County for Calendar Years 2003 through the first half of 2006. COUNTY OF SAN DIEGO TAXABLE SALE S Calendar Years 2003 -2006 (000's Omitted) Type of Business 2003 2004 2005 2006 Apparel Stores $1 $1 $1 $848 General Merchandise 4 5 5 2 Specialty Stores 4 4 4 2 Food Stores 1 1 1 932 Home Furnishings /Appliances 1 1 1 732 Eating and Drinking Establishments 3 4 4 2 Building Materials and Group 2 3 3 1 Automotive 8 9 9 4 All Other Retail Stores 855 961 1 514 Business and Personal Services 2 2 2 1 All Other Outlets 9 9 10,655,372 5 Total All Outlets $40,863,978 $44,470,338 $46,679,471 $23,161,709 Sources: California State Board of Equalization, Taxable Sales in California. Transportation Surface, sea, and air transportation facilities serve County residents and businesses. Interstate 5 parallels the coast from Mexico to the Los Angeles area and points north. Interstate 15 runs inland, leading to B -6 Riverside -San Bernardino, Las Vegas and Salt Lake City. Interstate 8 runs eastward through the southern United States. San Diego's International Airport (Lindbergh Field) is located approximately one mile west of the downtown area at the edge of San Diego Bay. The facilities are owned and maintained by the San Diego Regional Airport Authority and are leased to commercial airlines and other tenants. The airport is California's third most active commercial airport, served by 20 major airlines. In addition to San Diego International Airport there are two naval air stations and seven general aviation airports located in the County. Public transit in the metropolitan area is provided by the Metropolitan Transit Development Board. The San Diego Trolley, developed by the Metropolitan Transit Development Board beginning in 1979, has been expanded. A total of 17.6 miles were added to the original 108 miles; construction was completed in 1990. San Diego is the terminus of the Santa Fe Railway's main line from Los Angeles. Amtrak passenger service is available at San Diego, with stops at Solana Beach and Oceanside in the North County. San Diego's harbor is one of the world's largest natural harbors. The Port of San Diego is administered by the San Diego Unified Port District, which includes the cities of San Diego, National City, Chula Vista, Imperial Beach and Coronado. Visitor and Convention Activity An excellent climate, proximity to Mexico, extensive maritime facilities, and such attractions as the San Diego Zoo and Wild Animal Park, Sea World, Cabrillo National Monument, and Palomar Observatory allow San Diego to attract a high level of visitor and convention business each year. Contributing to the growth of visitor business has been the development of the 4,600 -acre Mission Bay Park at San Diego and the construction of meeting and convention facilities at the San Diego Community Concourse. San Diego's visitor industry is a major sector of the region's economy. Visitor revenues in San Diego County reached approximately $5.3 billion in 2003, according to an estimate by the San Diego Convention and Visitor's Bureau, an increase of approximately $249.9 million from the prior year. The County hosted 60 conventions and trade shows in 2003, attended by approximately 450,000 delegates, who spent approximately $498 Education Forty -two independent school districts provide educational programs for the elementary and secondary public school children in the County. Each school system is governed by a locally elected board of education and administered by a superintendent or other chief administrative officer appointed by the board. In the County there are three types of school districts: elementary, union high and unified. Elementary districts educate elementary students, union high districts educate for the most part secondary students, and unified districts educate both elementary and secondary students. There are currently 12 unified, 24 elementary and 6 union high school districts in the County. Community colleges in California are locally operated and administered two -year institutions of higher education. They offer Associates in Arts and Associates in Science degrees and have extensive vocational curricula. There are five community college districts in the County with students at eleven campuses and numerous adult and community centers. Among the institutions of higher education offering bachelors and graduate programs in metropolitan San Diego are San Diego State University, the University of California at San Diego, National — University, the University of San Diego, Point Loma College, California State University — San Marcos, United States International University, and the University of Phoenix. B -7 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX C FORM OF FINAL OPINION OF BOND COUNSEL [Closing Date] R. E. Badger Water Facilities Financing Authority 5290 Linea Del Cielo Street Rancho Santa Fe, CA 92067 Re: $20 R.E. Badger Water Facilities Financing Authority 2007 Water Revenue Refunding Bonds Ladies and Gentlemen: We have reviewed the Constitution and laws of the State of California and certain proceedings taken by the R.E. Badger Water Facilities Financing Authority (the "Authority ") in connection with the issuance by the Authority of the $20,685,000 R.E. Badger Water Facilities Financing Authority 2007 Water Revenue Refunding Bonds (the "Bonds "), pursuant to the provisions of Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Law ") and pursuant to an Indenture of Trust, dated as of November 1, 2007 (the "Indenture of Trust ") by and between The Bank of New York Trust Company, N.A., as trustee (the "Trustee ") and the Authority. The proceeds of the Bonds have been applied by the Authority to refinance the acquisition and construction of water system improvements for the Santa Fe Irrigation District and the San Dieguito Irrigation District (the "Districts "). The Districts have purchased the improvements under two separate Installment Purchase Agreements, each dated as of November 1, 2007, between the Districts and the Authority and shall make respective Installment Payments thereunder which have been assigned by the Authority to the Trustee. We have also examined such certified proceedings and other papers and materials as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, that: 1. The Authority is a joint powers authority duly organized and validly existing under the laws of the State of California, with power to enter into the Indenture of Trust, to perform the agreements on its part contained therein and to issue the Bonds; 2. The Bonds constitute the valid and legally binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture of Trust; 3. The Indenture of Trust has been duly approved by the Authority and constitutes the valid and legally binding obligation of the Authority enforceable against the Authority in accordance with its terms; 4. The Indenture of Trust establishes a lien on and pledge of the Installment Payments (as such term is defined in the Indenture of Trust) and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture of Trust; 5. Interest on the Bonds is exempt from California personal income taxation. 6. The Internal Revenue Code of 1986, as amended (the "Code "), sets forth certain investment, rebate and related requirements which must be met subsequent to the delivery of the Bonds for the interest C -1 received by the owners of the Bonds to be and remain excluded from gross income for purposes of federal income taxation. Noncompliance with such requirements could cause the interest on the Bonds to be subject to federal income taxation retroactive to the date of delivery of the Bonds. Pursuant to the Indenture of Trust the Authority has covenanted to comply with the requirements of the Code. Assuming compliance with the aforementioned covenant, we are of the opinion that, under existing statutes, regulations, rulings and court decisions, the interest on the Bonds is excluded from gross income for purposes of federal income taxation. Interest on the Bonds is not a specific preference item for purposes of the alternative minimum tax provisions of the Code. We observe, however, that interest on the Bonds received by corporations will be included in corporate adjusted current earnings, a portion of which may increase the alternative minimum taxable income of such corporations. Although the interest on the Bonds is excluded from gross income for purposes of federal income taxation, the accrual or receipt of interest on the Bonds, or any portion thereof, may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend on the recipient's particular tax status or other items of income or deduction. We express no opinion regarding any such consequences. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture of Trust may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity. Respectfully submitted, C -2 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Certificate dated as of November 20, 2007 (the "Disclosure Certificate ") is executed and delivered by the R.E. Badger Water Facilities Financing Authority (the "Issuer "), the San Dieguito Water District ( "SDWD ") and the Santa Fe Irrigation District ( "SFID ") (collectively, the "Districts ") in connection with the issuance of $20,685,000 principal amount of R.E. Badger Water Facilities Financing Authority 2007 Refunding Water Revenue Bonds (the "Bonds "). The Bonds are being issued pursuant to an Indenture of Trust, dated as of November 1, 2007 (the "Indenture "), by and between the Issuer and The Bank of New York Trust Company, N.A., as trustee (the "Trustee "). The proceeds of the Bonds are being used by the Issuer, in part, to refinance certain improvements to the water treatment and distribution systems operated by the Authority and the Districts (the "Project "). In connection therewith, the Issuer and Districts covenant and agrees as follows: Section 1. Purpose of the Disclosure Certificate This Disclosure Certificate is being executed and delivered by the Issuer and the Districts for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2- 12(b)(5). Section 2. Definitions In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Issuer and the Districts pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Dissemination Agent" shall mean the Authority, or any successor Dissemination Agent designated in writing by the Issuer and which has filed with the Issuer and the Trustee a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Currently, the following are National Repositories: Nationally Recognized Municipal Securities FT Interactive Data Information Repositories (NRMSIRs) Attn: NRMSIR 100 William Street, 15 Floor New York, New York 10038 Bloomberg Municipal Repository Phone: (212) 771 -6999 100 Business Park Drive Fax: (212) 771 -7390 (Secondary Market Skillman, New Jersey 08558 Information) Phone: (609) 279 -3225 (212) 771 -7391 (Primary Market Information) Fax: (609) 279 -5962 http: / /www.interactivedata.com http: / /www.bloomberg.com /markets /rates /municontacts. Email: NRMSIRginteractivedata.com html Email: MunisgBloomberg.com D -1 DPC Data Inc. Standard & Poor's J. J. Kenny Repository One Executive Drive 55 Water Street Fort Lee, NJ 07024 45th Floor Phone: (201) 346 -0701 New York, NY 10041 Fax: (201) 947 -0107 Phone: (212) 438 -4595 http: / /www.dpcdata.com Fax: (212) 438 -3975 Email: nrmsirgdpcdata.com www. jjkenny. com / jjkenny /pser_descrip_data_rep.h tml Email: nrmsir repositorygsandp.com "Official Statement" shall mean the Official Statement, dated November 8, 2007, relating to the Bonds. "Participating Underwriter" shall mean any of the original Underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule 15c2- 12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State Repository" shall mean any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement, there is no State Repository. Section 3. Provision of Annual Reports (a) The Issuer and the Districts shall, or upon written direction shall cause the Dissemination Agent to, not later than each March 1 following the end of their respective Fiscal year (which currently end June 30th), commencing with the report for the 2007/08 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than fifteen (15) Business Days prior to said date, the Issuer and the Districts shall provide the Annual Report to the Dissemination Agent (if other than the Districts). The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer and the Districts may be submitted separately from the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not available by that date. If a District's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). The Issuer and the Districts shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Issuer and the Districts and shall have no duty or obligation to review such Annual Report. (b) If the Issuer or a District is unable to provide to the Repositories an Annual Report by the date required in subsection (a), such party shall send a notice to the Municipal Securities Rulemaking Board and any appropriate State Repository in substantially the form attached hereto as Exhibit A. (c) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (ii) if the Dissemination Agent is other than the Issuer, and such information is available to it, file a report with the Issuer and the Districts certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. D -2 (d) Notwithstanding any statement to the contrary, any filing under this Certificate may be made solely by transmitting such filing to the Texas Municipal Advisory Council (the "MAC ") as provided at http: / /www.disclosureusa.org unless the United States Securities and Exchange Commission has withdrawn the interpretive advice in its letter to the MAC dated September 7, 2004. Section 4. Content of Annual Reports. (a) The Issuer and the Districts' Annual Report shall contain or incorporate by reference the Audited Financial Statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board (but only to the extent the Issuer prepares such Financial Statements). If the Issuer's or a District's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain audited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Each District shall provide the historical debt service coverage of its respective Installment Payments for the previous five (5) fiscal years. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Issuer, the Districts or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The Issuer or the Districts shall clearly identify each such other document so included by reference. Section 5. Reporting ff Significant Events. (a) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Principal and interest payment delinquencies. (2) Non - payment related defaults. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions or events affecting the tax - exempt status of the security. (7) Modifications to rights of security holders. (8) Contingent or unscheduled bond calls. (9) Defeasances. (10) Release, substitution or sale of property securing repayment of the securities. (11) Rating changes. (b) Whenever the Issuer obtains knowledge of the occurrence of a Listed Event, the Issuer shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the Issuer determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Issuer shall promptly file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository, if any. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8) and (9) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds pursuant to the Indenture. Section 6. Termination of Reporting Obligation. The Issuer's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If D -3 such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). A District's obligation under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of such District's Installment Payments. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 7. Dissemination Agent The Issuer and the Districts may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the Authority. The Dissemination Agent may resign as Dissemination Agent by providing thirty days written notice to the Issuer, the Districts and the Trustee. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the Issuer or the Districts. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the Issuer or the Districts in a timely manner and in a form suitable for filing. Section 8. Amendment; Waiver Notwithstanding any other provision of this Disclosure Certificate, the Issuer and the Districts may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived (provided no amendment that modifies or increases its duties or obligations of the Dissemination Agent shall be effective without the consent of the Dissemination Agent), provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Issuer to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 5(c). Section 9. Additional Information Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer or a District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any D -4 Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer or a District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer or such District shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default In the event of a failure of the Issuer or a District to comply with any provision of this Disclosure Certificate, any Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer or such District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture or the Loan Agreements, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer or a District to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Dissemination Agent The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Districts agree to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise of performance of its powers and duties hereunder, including the costs and expenses of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the Districts for its services provided hereunder in accordance with its schedule of fees as amended from time to time and shall be reimbursed for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Districts, the Bondholders, or any other party. Other than in the case of negligence or willful misconduct of the Dissemination Agent, the Dissemination Agent shall not have any liability to the Bondholders or any other party for any monetary damages or financial liability of any kind related to or arising from any breach of any obligation of the Dissemination Agent. The obligations of the Districts under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. D -5 Section 12. Beneficiaries This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Districts, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. R.E. BADGER WATER FACILITIES FINANCING By: General Manager SAN DIEGUITO WATER DISTRICT By: General Manager SANTA FE IRRIGATION DISTRICT By: General Manager ACCEPTANCE OF DISSEMINATION AGENT: The undersigned hereby accepts the designation of Dissemination Agent and agrees to further the duties set forth in Section 3(c) of the foregoing Continuing Disclosure Certificate R.E. BADGER WATER FACILITIES FINANCING AUTHORITY By: Authorized Signatory D -6 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: R.E. Badger Water Facilities Financing Authority Name of Bond Issue: R.E. Badger Water Facilities Financing Authority 2007 Refunding Water Revenue Bonds Date of Issuance: NOTICE IS HEREBY GIVEN that the R.E. Badger Water Facilities Financing Authority (the "Issuer "), the San Dieguito Water District and /or the Santa Fe Irrigation District (collectively, the "Districts ") have not provided an Annual Report with respect to the above -named Bonds as required by the Continuing Disclosure Certificate dated as of , between the Issuer, the Districts. The Issuer anticipates that the Annual Report will be filed by Dated: By: cc: Issuer D -7 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX E SPECIMEN INSURANCE POLICY MBIA Insurance Corporation Armonk, New York 10504 Policy No. [NUMBER] MBIA Insurance Corporation (the "Insurer "), in consideration of the payment of the premium and subject to the terms of this policy, hereby unconditionally and irrevocably guarantees to any owner, as hereinafter defined, of the following described obligations, the full and complete payment required to be made by or on behalf of the Issuer to [PAYING AGENT /TRUSTEE] or its successor (the "Paying Agent ") of an amount equal to (i) the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the Obligations (as that term is defined below) as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed hereby shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration, unless the Insurer elects, in its sole discretion, to pay in whole or in part any principal due by reason of such acceleration); and (ii) the reimbursement of a such payment which is subsequently recovered from any owner pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding sentence shall be referred to herein collectively as the "Insured Amounts." "Obligations" shall mean: [PAR] [LEGAL NAME OF ISSUE] Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in writing by registered or certified mail, or upon receipt of written notice by registered or certified mail, by the Insurer from the Paying Agent or any owner of an Obligation the payment of an Insured Amount for which is then due, that such required payment has not been made, the Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, in New York, New York, or its successor, sufficient for the payment of any such Insured Amounts which are then due. Upon presentment and surrender of such Obligations or presentment of such other proof of ownership of the Obligations, together with any appropriate instruments of assignment to evidence the assignment of the Insured Amounts due on the Obligations as are paid by the Insurer, and appropriate instruments to effect the appointment of the Insurer as agent for such owners of the Obligations in any legal proceeding related to payment of Insured Amounts on the Obligations, such instruments being in a form satisfactory to U.S. Bank Trust National Association, U.S. Bank Trust National Association shall disburse to such owners, or the Paying Agent payment of the Insured Amounts due on such Obligations, less any amount held by the Paying Agent for the payment of such Insured Amounts and legally available therefor. This policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Obligation. As used herein, the term "owner" shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent, the Issuer, or any designee of the Issuer for such purpose. The term owner shall not include the Issuer or any party whose agreement with the Issuer constitutes the underlying security for the Obligations. Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street, Armonk, New York 10504 and such service of process shall be valid and binding. This policy is non - cancellable for any reason. The premium on this policy is not refundable for any reason including the payment prior to maturity of the Obligations. In the event the Insurer were to become insolvent, any claims arising under a policy of financial guaranty insurance are excluded from coverage by the California Insurance Guaranty Association, established pursuant to Article 14.2 (commencing with Section 1063) of Chapter 1 of Part 2 of Division 1 of the California Insurance Code. IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in facsimile on its behalf by its duly authorized officers, this [DAY] day of [MONTH, YEAR]. 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'"' C . cc ,�^,, E ' C ❑ w p, E o4 E a�i_ c Cr cz A Q G4 a cc u.0 U caa 0, 00 F -12 U W 0 0 Q a � V A � CK cc LU Llj 6 to n Lij CL �y F > E co m �. by G N v w O ice. c C U U O u tw d co o a o v+ O Q av a `' 0) U Ls � •� E � a � cry `v U a� �' •� � o v cc cz .y ,..�, c� � as � • � � ctt � � D � � 0 coo a o, (U 3 . � o o L o o v coo Coo � o ' a c A m a c u J o W A u U v � a •o ;� Q o --+ u aW. >, `) v U m y w as a. a D �a� U� o CO C6 E _ A a bs U a C .Z r 3 a � 3 o Q d °� F -13 San Dieguito Water District Historic Debt Service Coverage For Fiscal Years Ended .tune 30 FY 2401 -02 FY 2002 -03 FY 2003 -04 FY 2004 -05 FY 2005 -06 Actual Actual Actual Actual Actual Revenues: Operating Revenues - Including Connection Fees $ 8,226,263 $ 8,285,861 $ 8,376,348 $ 8,219,596 $ 9,621,188 Other Operating Revenues 127,940 152,101 - - - Non- Operating Revenues 1,286,430 2,065,721 995,080 1,026,897 1,124,269 ** Capitalized Interest Income 302,235 325,535 - - Gross Revenues 9,942,868 10,829,218 9,371,428 9,246,493 10,745,457 Total Operating & Non - Operating Expenses 9,053,531 9,006,186 10,008,027 9,335,523 10,695,021 Net Income 889,337 1,823,032 (636,599) (89,030) 50,436 Add back........ Interest Expense and Other 755,690 758,610 1,044,566 1,154,483 969,098 Depreciation & Amortization 1,134,951 1,132,471 1,138,934 1,152,749 1,502,044 Costs of Issuance on 2004 Revenue Bonds 282,910 - - Amortization of Bond Issuance Costs 49,174 49,175 618,646 - - Net Revenues Available for Debt Service 2,829,152 3,763,288 2,448,457 2,218,202 2,521,578 Debt Service 1993 Water Refunding Bonds- Interest Charges 755,690 739,110 293,615 - - Principal Repayment 365,000 380,000 400,000 - - 1999 Badger Bonds - Interest Charges 483,705 473,805 460,812 452,655 441,405 Principal Repayment 215,000 225,000 235,000 245,000 255,000 2004 Water Refunding Bonds - Interest Charges 245,089 545,094 527,693 Principal Repayment 655,000 505,000 Total Debt Service 1,819,395 1,817,915 1,634,516 1,897,749 1,729,098 Coverage by Net Revenues Available for Debt Service 155.50% 207.01% 149.80% 116.89% 145.83% Debt service coverage requirement is minimum of 115% "* Interest Income on Bond Proceeds has been capitalized as Construction Period Interest on accompanying Financial Statement 21 [THIS PAGE INTENTIONALLY LEFT BLANK] F -14 � -0-' [D7 N L a) U C7 00 Vi N a 6g N W � DC 2 a7 U °C U �' � rC"7CdOQC37C7C+7C) �... 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T~~f Z., I i1 ~ U ~ ~M ~r Q~ JW+ • ~ 1.a ~ ~ Q~ ~ ~ ~ Y RI ~~j~~i~~ ~y~ C}` ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ k ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~J ~ ^ ~I ~~P;~ Cik ~Va C~ Q+ ~ V1 N ~i ~ cC1 ~ ~ ~ ~ ~G/ tt'3 : ~ s~ ~ A q G~1 ~ Cd ~y ~ +.~'i . ~ ~ 4.~ ~ c~j ' ~ v~ ~ r,~0 ~ Q ~ ~ ~ ~ ~ y,c~,, c,~ ~ v ~ q ~ ~ ~ ~ c~j ~ ' 4~'i ~ ~ 41 c~ p b~A ~ ~ ~ Q ~ ~ 4~; S~.' ~ 47 ~ U ~ ~ ~ ~ ~,s~ ~ . ~ Rt s. ^S~ ~1, ; t~., ~ ^q p O ~ ~ll N ~ N ~3" ~ ~ ~ ~ ~ ~ ~ ui ~ Q G~" 4) ~ ~ N ~ ~ "C~ ~ ~ ' ~ ~ ~ ~ ~ ' . ~ 4'" ' U Q? ~ , a~ ~3 ~ r„~"',,, v~ GL ~ ~ v, ~ ~ 4y ~ ~3 ~s U +-a~y u ~ ~ ~ ~ ~ ~ ti ~C ~ x,, ~ ~ cG ~ tG ~ . ; ~ ~ ~ ~ c~ ~ b C~ ~ `a ~ d`~} 0 4J ~ s~-, S~" s~ ~ ~ A: ~ ~ ~ ~ ~ ~y ~ 4~ T~, ~r C~'~" Q ~ Ci U ~ ~ ~ ~ ~ ~ Q1 0 ~ ~ ~ ' i:r;'.<, ~ d} ? ~ tw:, ~ N r-" tC ~ U Q ~ ~ p ~ v~i t~+d . ~ ~ ~ 3 r; ~ a +a ~ C ~ 4~ ~ y~ ~7, ~ ~ ~ ~ 0 ;f'`` ~ w,, ~ i. ~ i.~, 0.] . ~ ~3 G] ~ ° '~7 „C~ 4~i Ci1 r,~ p ~ "C3 ~ d ~ r/t b 'd • ~ iK r..~ ~ ; i u~ q~ ~ ~ ~ ~ t~ ~ ~ d~ ~ ~ .i~ ~ ~ ~ ~ C "C "'C~ ~ 0 ~ ~ s~ ~ 3 cd ~ ~ ~ ~ > ~ ~ ~t a~ ~ ~ ~ ~ ~ 3 ~ ~ ~ ~ ' ~ G ct1 p ~ ~ ~ ~w Q) ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Vf ~ ~ ~ ~ , ~ ~ ~ . ~ a 3~~i. s;.•:; ~ N s"` R.+ ~ ~ ~ 43 f'1" c~3 ~ 0 fl '"C~ N U C~J . y~.~ ~ r"" ~ ~ ~ ~~,a ~ir ~ R~-» ~ ~'i ~ ~t.+ C~ ~ ~ 4~ y,., ~ ~ U ~ i s ; F ( h f , ~ ~ v~ ~ ~i ~w !~A c~ Q} ~ ~ (3 q U N ~ G ~ ~ ct3 cd a~i ~i ~ ~ a ~ ~ a`~i n ~ n ~ c~ s~ o '~f v ~ ~ w~ y f~~~s~~;~ , ~ v ~ ~ ~ s~ a~ v ~ ~ ~ ~ ~ ~ ~ E C:~ ~ C~ ~ ~ ~i r~ v . ~ u~ x.~ c~ cG ~ s~ ~7, d ~ ~3 .~'3 . ~ "'C~ ~ s~ Q ~ ' ~ ~ ~ ~ ~ ~ ~ 0 ~ . ~ ~ U ~ ~ ~ ~ ~ ~ ~ ~ ~ c~ ~ q j' 4~ ~ , U Rl ~w ~ p ~!t te3 cd r/~ • w" ~ t„E cd N ~ 0 r..a q~ 4j Ed w:.~ +n ry „~r ~ S~" ~ ~ ~y ~ 0 } ~ U .w, ~ ~ ~'.(7 ~ C;:w ° ~ , ~ U ~ ' ~ ~ C1 ~ ~ ~ ~ ~ ~ ~ ~ ~ i' ~ ~ ~ 1,~`,, cd va ~ ~ ~ ~ ~ ~ :d ~~1 ~ ~ ~ ~ * Q ~ ~ ~i ~ , . ~ ~ ~ ~ N ~ ~ c3 Q U . ~ ~ ~ ~ c~3 ~ sci U q,~ , ~ ~ F' ~ ~ ~ ^ ~ s a~3 U N . ~ ~ ~ ~p ~ ~ ~ n ~ ~ :C ~ r,~ 0 Cj • ~ a~ ~ r..+ ~ ~ U ~ ~ a ~ v~ ~11w ~ ;~i! • ~ Ci uS t.~ Ci ~ t?; ~'i!? ~ ~ , G~ ••~w w v~ ~ ~ ~ ~ y' ~ 0 y,~,~ ~ ~ ~ ~ CJ G-: L~, a~.,+ , ~ ~ ~ ~ ~ ~ ~ W ~'~r" ~ ~ ~ a~ ~ U ~ ~ ~ ~ ~ ~ . «w r/~ •C ~ C'~ ~ c~,,, ~ U ~ ".7 C7 ~ v 0 0 ~ ~ "C3 ~ ~ 't' ~ ~ C~ ~ m cu ~i C" ~5" ~ Ci ~ ~ ~ C11 ~ c,,,d U ~p . ~ ~ ,.i~ 4~ b ~ ~ ~ ~ Q ~ ~ . ~ ~ ~ ~ „ ~ 4"' ~n ~ ~ ~ J; ~ . ~ cti q v, N ~ ~ ~ as K ~ ~ rn ~ ~ C L~ ~ s~ ~ rI~N `ll m ~ ~ ~ ~ C~d ~ ~ s? ~3 ~ ~ ~ ~ Q ~ C~S 4i ~ ~ ~ y ~ y,~ rn Q ~ . w, ~ G-. ~ ~ C~ a.~ ~,°3~ c~'~ a~ a~ ~ 3 ~ ~ ~ ~ ~ ~ a~ ~ ~ ~ ~ a~, cd ~ ~ 3; ~ ~ ~ ~ a ~ ~ •ow.:,~ r o ~~~o ~ ~i' ~ ~ 'Q ~ ~ n , ~ v~ 4.~ p a~ ~ 4~ q ~ ' ~ ~ b ~ ~ c~ , ~ ~ h u ~ ~ v ~ ~ ~ ,Y,, bA ~ c~ ~ ~ w ~ ~~I ~ 4.. s~ p,~ r..0 ~n ca ~ ~ ~ ~ cs3 . Q sW rn ~ ~ sC ~ ~...i Q ~ ~ ~ ~ ~ ~ va 4~ ~J ~ ~ ~ ~ "c7 s~ ~a "r ~ ~ , ~ ~ ~ D ~ ~ t~d ~ ~ ~ C' G~1} "C7 • ~ ~ cc~j' ~ ~ CJ1 t;~ p t,i r~ f,~ c,~ ~ d} U CU uj C~ :~j ~ v~ ~ cd vi Q ~ U 'C7 ~ ~ ~ U Q ~ Q~~] ~ ~ ~ ~ t~tl ~ 4i ~ b Cb ~i; ~ (f3 ~ ~ ii ~ p ~ td v ~ ~ ~ c~, ~ N ~ p y C~ Gi 4:~ ~ ~ ~ C,p "C~ ~L Cc~ ~ G~ ~ ~ ~ s.~ t3 ~ ~ ~ ~ y~j ~ WQ ~ ~ ~r+ Ci ~ C~C ~ U ~ c~~' ~a~„ „ s.~.~ , G C c,.., bt1 ~ i~'', c~ 4p ~1 V~ ~ c~"d cd ~ v~i ~ ~ „G rJ ' µp ~ ~ V] C1 ~ C7 Ui 0 , ~ ~ ~ ~ ~ U cU ~ ~ 0 cd ,y~„ ~ G~ ~ ~ j ~ ~fJ p • ~ ~ ~ i, Q ~1 ct3 ~ cd ~ C7" G.., C1.~ ~ GC ~ W ~ ~ ~ ~ . ~ ~ N ~j ~ ;.w, C~, ~ 4» ~ ~ d3 ~ ~ ~ c~t'i N p ~ ~ 4., f3 ~ ~ ~ ~ ~ ~ ~ ' 3E q~.~ ~ ~ b~15 S,],~ ' q cd U Q t,~,, ~ V' ~1 ~ r.,+ p~ c^ ~ ? ~ ~ 'J~ ¢~3 ~i ~U v ~ ~ ~ r~n 4~3+ G) ~ { ~ .S.j ~ ~ ' ~ . ~ ~ ~ ~ v~i S"" ~ ~ ~ 4.a a S» ~ ~ ~ 0 ~ ~ ~ ~ C~d ~ ~ ~ u~ ~ ~ ~ c~ ~ t,} 0 ~ ~ ~ ~p ~ ~ ~ ~ ~ ~ n cn U ~ Q p U ~ ~ ~ ~ ~ ~ • ~ ~ v> O ~ ~ ~ ~ ~ ~ ~ bl] ~ ct3 c~ p . „.E 5~.+ ~ ~ ~ ~ ~ ~ ~ • ~ ~ ~ ~ v~a i{; ~ ~ ~ ~ ~ ' ~ ~'~~'~a `~~~~~.,Q s ~a~~~~ v~~ ai c~io.~"~ ~•~U~w~~ s~ ~b~"~ , t 7 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ e ~ c~ N 47 Q7 ~ ~ t~' Q ~ '+w' ~ ~ ?t: ~ ~ S ~ 0] ~J r~n ~ ~ c~ 4~ ~ 4,,~ ~ a:.+ ~ r ~ ~ ~ ~ ,4 ~ ' ~ ' ~ ~ Q~ ~ ~ a'~-+ ~ ~ i~ d c~C ~ ~ ' y w.~, ~ ~,~P , e~i ~ ~ ~j ~ ~ ~ ~ v~ cCt ~ N cn U ~ ~ ca ~3 ~ ~ U N M.. c~t q~ ~a „~1 ~ ~ ~ ~ G s~, a "t~ U ~ i; ~ ~ o ~ ' 4 ~ ~ ~ "~7 "1~ ' ~ y ~ ~ \ ~ ~ "t'3 N ~ ~ ~ ~ , ~ v ~ ~ ~ w., y ~ ~ vr ~ ~ ~ ~ ~ ~ ~ ~ t17 ~ ~n ~ q s,,, ~ C7 ~ e 1 Q r~ "C7 ~ ~ ~ ~ ~ ,,,t 'b ~1. ~ ~ W' ^t~ ~ `1 • ~ ~ ~ ~ . ~ ~ ~ s q,) C~ v~ ~ D y~ 0 4~`_, ~ N 0~' A~ ~ ~ ' ~ ~ A" b ~ p ~ N t~G ~ ~ ~ r~ G ~ ~ ~ ~ ' C3 ~ S~.` f ~ ~i ~ ril M, ~ S~ ~ , ~ s , ~ ...r , ~ N p~j ~ "Ly ~ a~ ci c~"''n c~,, c~d ~:1, ~ ~ ~ ~ ~ ~ "L~ "w '~C ~ c~S i ~ ~ U ~ a..~ a ~ ~ ~ ~r, ~ V~ ' N ~ ~ ~ . ~4 ~ ~ Q p ~ fl Q Q ~ ~ , ~ ~D cn c,~ Q ~ Q R ~ ~ q~ Gfy ~ ~ ~ C~ ~ ~ ~ N ~1 ~ "~y ~ ~ ~ ~ ~ . . p31 ~~~o.:.~~> ~t;.,,~,~~a~ ~ h~~~.~ ~~h~3~ 3 _ . F-20 ~ ~ , ~ ~ ~ ~ ~ W ~ . ~ ~ ~ ~ ~ ~a~~ E: ~ ~ Q ~ ~ ~ ~ ~ a~ ~ ° ~i: ~ ~ d ~ ~ ~ ~ ~ 5: ~ ~ ~ 3: 5~; ~ ~ ~ ~ :'i: p ~ Fi U 41 ~ ~N.~~ ,J ~ ~ ~ o ~ ~ ~ ~ o s~; ~ ~i ~ ~ ~ ~ n ~ a ~ ~ ~ ~a ;~i a, ~ r~ 5; ~ p ~ ~ ~ € p ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ c~ 0 ~ ~ Ei t : ~ G~ Ci V ~ ~ C) "C7 . ~ ~ ~ ~ o ~ ~ f ~ ~i ~ ~ ~ ~ -d ~ ~ ~ ~ b ~ ~ ~ a ~ ~ ~ 4~ .~j ~ ~ ' t~d C ~ ~ ~ ~ s~ ~ ~ : 4~ ~ S~ ~ ~ C~I7 ~ . ~ va 'v ~ ~ ~ ~ Q} ~ b ~ R~ ~ ~ ~ ~ ~ , cci ttl ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~`~i p b U ~ ~ ~ ~ ~ ~ ~ s,,, N ~ i: ~ ~ p ~ ~ . ~.1 ~ ~ "~t°3 ~ U 4~ ~ ~ ~ ~ ~ v~i G'~ . ~ ~ ' ~ Q a ~ : ~ ~ ~ ~ ~ ~ ~ ~ T' ~ 0 ~ ~ 1 "C~ ~ U '"C7 ~ N "C7 s« cd ~ "t~ ~ ~ ~ p Q ~ ~y ~ ~ ~ t{; ~a ~ y„ V ~ [j t..i ~ ~ d cCS c~ n~ ~°'a°ay ' ~~a~~ , ~a . ~ c~ ~ ~ ~ ~a ~ c~ ~a ~ , ~ ~n ~ ~ ~1 cc ~ f~: v ~ ~ ~ v: ~ v ~ c~ Cj ~ v~ p ~ ~ ~rS s..~ ~ a..+ ~ ~ ~ ~ ~ ~ cU ~ c~ ~ ~ ~ a ~ o d "~7 "p ' G ; ~ ~ ~ ~ ~i ~ ~ ~ ✓a ~ ~ N ~ U ~ ~ ..C ~ ~ ~ ~ ~ ~ ~ Q) ~ ~ ~ Ca ~y ~ C1 ~ N ~ ~ ~ G~' ~ 't; ~ ~ Q yQ3, ~ ~3 ~ cc3 s~. c~ ~3 ~ ~A C ~ ~ Q7 cd 3~; ~ ,w ~i s.~ ~CS ~ ~ ~ f " ~ ~~1., ~ N ~ c~ ~ Q ~ ~ ~ p ~ rci ~ ~ v "q ~ ~ c.~ ~ ~si ~ ~ ~ .U ~ C ~ ~ ~ ~ s~; y, ~ Q ~J ~ 4~ ~ cd Q v~ t"} t~: cd ~ ~ ~ ~ ~ . ~ ~ r j ~ ~i; G,7 ~ ~ ~ U v~ ~ N cU 0 ct~ U Q ~ Q ~ VJ 't~ ' v: ~r.." ~ ~ o~•~~ ~ o~ ~ ~ a~ ~ a~ ~z od a~ U a ~ ~ ~~°o~~ ~ ° ~ " o a~d ~ ~ c~ ~ ~s ~ ~ a~ t-.E ~ ~n v~ ~a ~ Q~ ~ M ~ a C~ "'CS i „~1, UI C] Q ~ C~.+ "'C7 ~ '11 ;i; ~ 4'3 vi ~ ~ s.~ ~ V ~ +M' ~ Q i,v, b t.+ I~ ~ S~'' ~ ~w rn ~ ~ c~ ~ ~ ~ •l~.+ Sy G~1 ~ ~ n3 ~ ~ 6~ bA ~ ~ t: ~ ~ p y ~ ~ ~ ~ ~ ~ ~ r~+ a' U 0 ~ ~ C N cr~ ~ ~ ~t3 i ~ ~ ~ ~ ~ ~ ~ , ~ ~ ~ ~ z ~ ~ ~ s, ~ ~ ~ ~ ~ ~ ~ ~ c ~Q ~/'l 4} 'i~` a3 U ~ 5~., ~ cd cd ~ { ~ y ~ N G ~ ~7 ~ ~ l,' ~il N -u ~ ~n ~i ~ ~ ~ ~ b ~ ~ ~ ~ ~ ~ ~ 0 s-' ~ ~ ~t~ +a ~ y`*".., v, ~ ?3 p ~ ~ ~ ~ ~j s. ~ ~ o l` k ~ ~ vk ~ ~ ~1. r~ ~ U 4) Ct~ G~ . ry., q) ~3 ~ W.. ~ N ~ ~ ~ , C~3 ~ 43 ~ ~ ~ ~ ~ i'; '"CCS Rl sUw ~ ~ ~ ~ cd v~ ~ ~ ?i; ~ C~ ~ ~ ~ r i~ (!7 ~..M Cj 4~, cd p s., y C7 c~d .~1 ,y, va c3 ' ~3 , : U ~ ~ ~ ~ ~ ~ ~ ~ ~ 3 ~ '~5 c~3 °l`: ~ w Ri cfS ~ • ~ r/~ ~ ~ ~ y., ~ ~ ~ ~ ~ V'1 a.~i` ~ll ~ w ~ ~ ~ ~ ~ ~ .w p ~,~'j V "w ~ U s" ~ U ' ~ ~ ~ cC ~ Q ~ 'n ~ C7 J cd ~ 0 ~ ~ ~ ~ r~i~ ~ ~ • ~d ~i ' va G~j cC w ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ U ~ p ~ Q' ~ ~ ~ µC e'"j ~ ~ ~ ~ "C7 ~ ~ 0~. ~ ~ . ~ q ~ ~ Cd ~ ~ ~ ~ j'; y ~ n, • Q ~ ~ "Ci ~ ~ ~u p v~, ~ i ~ ~ ~1 O ~ ~ ~ ~n ~ ~ ~ ~ ~~1 a~ v, C~ 's:, ~ ~ aa s~ ~ ~ ~ C~ ~s o Q a~ ~ ° ~ ~ ~ b o rs e~ u~ c~ v ; , a ~ ~ ~ ~ ~ ~ ~y vz L," sW ~ 27 ~ ~ .,w ~ G~„ ~ ~ ~ ~ ~ ~ ~ . ~ ~ ~ ~ u ~ i~°o~~~~ zaa,ya~~~ p~~~~~~ ~ ~ ~ ~ ~ f ~ n ~ s~ ~ ~ . ~ ~ ~ ~ ~ ~ ~v~ ~'a o ~ v • m ~ ~ ~ ~ s~~ cp ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 3 ai v d~: Cn Y^ rn a~ ~ ~ ~E V / ~ ~ ~ ~ ~ a-~+ 4"' ~ Qi • ~ r, ~ ~ ~ ~ b" ~ ,~~2' ~ 4,3 ~ ~ ~ ~ r r.~ ,T, rr~ ~ ~ N ~ ~ ~ r~ f,T c~ ~t y V~ ~ 0 ~s„; ; : ~ ~ ~ V rd ~ 0 ~ p cc~ ~d C7~ ~ 0 ~ ~ "C7 "C7 r ~ i., ~ . c~d q] ~ `"y $ r+r ~ ~ ~ ~ ~ ct3 .;A ~ ~1 r~ O U i,,, . U a.F rr~ ~ :'~i U ~ Ga,+ ~ n ~ ~ . Q ~ ~ ~ ~ ~ ~ r~ ~ ~ ~ "C~ ~ ~ cd . ~ c,~ a ~I v~ y-+ v 7~, ~ ~ N v ~ ~i t~:, ~ ~ ~ cd ~ G~. ~ ' y;~ ~ ~ ~ p ~ ~ ~ ya~. ~1] ~ ~ s;, ~ ~ ^~j ~ r~ ~ c~ ~ 0 ~ .C~ ~ p r~ ~ ~ Q ~ ~ ~ ~ p ~ ~ ~ ~ 4~ U : ; r~ 4-: N ~,1 ~ ~ :t; 21 ~ ~C3 y ~ ~ Q' ~ ~ ~ ~ ~ ~ ril Q C~ ~ ~ :d ~ r~i s~.. ^S.7 ~r ~ 3, ~ va ~ v~ ~ ~y ~ ~ t~3 ..L7 ct3 ~ 4.. 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N ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ C~ ~ ~1, 33` N n3 ~ ~ ~ ~ EU ~ ~ ~ ~ ~ ~ ~ ww ~ ~ ,ca ~ ~ ~ a~ ~:3, U ~ ~ ~ ~ ~ v~~ a~ F-22 C~~~cr~tizatr.ra~ral ~"~rar~t : , Board ot Directors , ' ; General Gounsei ~ ~ + ; ' Genaral Manager , ~ Executlve Assislani s a.^^~ ' ~ k ~ ~ ~ W W k.1. ~ ~ 3 Mu w aM . . . . . . . ..i~;~, rw.W~.~.,~~ . . ~f~FIII€11StFa~IVL i: '.i ~7 Distribufion Fng'tneer~nq lanf M~nager Mana er ;r ' SysfemsP~anager Mana er ; , Admm~sf~ative Sr Accountant G15 Speciafisi Assistant ; . ; ~ , D~stnbut€on Syst~rn ~ ' ' Supervisor ` Metar SeruicPS ; . ` Safaty Otl3cer ' Superviscr ~'~c~hties Lvcalor! " Ch~ef perator ~ M 1~~5trihulion Crew ' p p lead8r Ins ecfor ` Utilify Worker tl {2) EI ~ Operdtor 1 Cus~l Svc Repl > (5} ~ f3dim ASSiStant li Sr lJl'~1ily Worker f~urcPi~sin l~feet ~ " Operalor Ei ! Gust 5vc C~epl = 9 , ` ~~Ilir~g Ass~stant I', Supe~vEStsf Ut~lity Worker Il (2) , . ~ MaintendnCe 5ystems ' Fleet Mecha~i3C , UEilit: Worker l 2 SupPrv~5or ~ strator ' Y 6 ) Adm€nj ' Electncaf Ar~countEng ~IdglGtounds ` ~ ~ ; , aferCOnserv~tivn InStr~in~enfTeCh TBfhn3Gtan WDri(ef , ; ` Sgecialist ' ~ ` Maintenance reeh ; , fiR Teehn~c~an ` ' Valu~ (Naintenance „ Cust SvclYUtr f~liy ~ Superv$sor Caard ; ' . . ; ; ! ` " ~ , ~ hRaanlFnance Wprker II Sr lltihty Worker {2J , , ; ` ; Water Quallty A nalyst < ' ; ; . > ~ [THIS PAGE INTENTIONALLY LEFT BLANK] F-23 a ~Tlit~~. ` ~ ~ ' ~ ~ ~ ' ~ ~`.4N'~~' ' ~ ~ ' ~ i~# ~ ~ is~ ~ ~ ; ~ ~ ; ~r~ ; ' ~ ' ~ ~ ~ ~ ~ ~ ~ ~ k~ ~ ~ ~ ~ ~ ~ 4 ~ ~ ~ ~ ~ ~ ' ~ ~ ~ ~ ~ ~ ~ ~ , ~ ~ ~ ~ < ~ ~ / ~ S ~ ~ ~ ~ S - ; ; s ~ ~ r . ~ . ~ ~ i ~.::f ~ ~ ! ~ ~ 1 F~ . " ( ~5~~(. ~ / / ( ) 1 ; , / ~ ~y / / ( / , r~'"'1 ~ ' ~ Jl ~ . a / . f %f// . S / . ! ~ 1 l /l V ~ . . ( y F.., ( ( ~ < < . ~fi Fv t Y / > 2 ~j. / II F 0 ~ ! 3 ~ ~ k! 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U ~ N t~ ~ ~ D ~n . ~ ~ ai ~ ~ ~ Q N ~ ~ Gz~ ~ Q U ~ ~ ~ S~ ~ x p ~ ~ N ~ ~y ~ ~ ~ Qj ~ ~ 4a ~ ~ ~ a~ ~ 0 ~ • ~ ~ p ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ r~ ~ S~ ~ ~1. ~ ~ ~ ~~~HU~4 U ~~OE~U»~~ U a~ ~ a~~ ~ j ~~a ~ o~~° o ~tio a~ o~'o , G~~nrnN ~~~oo ~C~~Ca ~ t~? ~ ~ ; n o~ d' C~ C~I c4 En ~n ri C7 d` r• id i ~ ~n ~ , , ~ F ~ ~ F ~ c~ ~n o ~ ~ ~ ~ ~ ~ • ~ ~ 4,~ ~ ~ tti ~ ~ Q n~: ~ ~ c~.., ~ 4] ~ r~ ~ i r-~ r-,. r~. ~ r. s,., U ~ V1 C~~ ~ C'! i~ d' ~ ~ Q ~J a 4w C~ w" t~ i r^' GQ (~l ~~n £`i ~ Cz 3n G7 v1 ~ k] ~ ,t~~" G~ Q 1~ Q~ ~ `'r " r-: ~i "~U ~ C~ s~ ~ ~ ~ " ~ ~ ~ SZ, u~ I ~ ~r w ~..J . t~d "y,,, • ~ ~Ui ~ ~ ~ ~ ~ ~ ~ ~ ~4 64 3-+ U cCj ~ r~'j~ ~ ~.3 v, e~ a r.~ ~+n r~ n F r, o ~ Q 0~"~ ~ ~ oC N t~t ~1 a ~ 04 ~ Q? ~ ~ ~ ~Y Q~ C~t ~f3 r~ ~Y G`~ V1 i„~ r~ Cti ~j ~~'J s.~ f~1 r~ ~Q C] C~ ~S" L"~ ~0 M ~ ~ ~ ~ ~ ~.~.r }A ~ Q d' ~ t`1 C~~ {n ~ ~ , ~ 43 ~ ~ ~ u~ v ' ~ ~ ~ ~ ~D i~ ~ ~ ~ ¢ tr~ ~ ~ y ^'~q `n 4~ C~ ~ ~ ~ LL ~u ~ ~q ~ C~l n~ Q ~ ~ ~ ~ ~ t~ ~ ~ . ~ G~ .S;J ~ c~ W ^ ~ Q C~7 G` C~ ~ ~ ~ ~ ` C7 ~n ~ ~ cd ~ ~ l~'~3 ~J a o ~ t~~„cs~ ~F.~~ .~w ~4° o~, bp ~ Q ra c~?~ ~ nl r, ~ci N t~a n~ ~ V~D '~J q~ S 4, ~ ctl '4~ pp s~, p r1 v~ C~ Q s.. i~.' 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'~f' ~ v~ ~ D ~ O ~ ~ a > v ~ 4~ ~ ~ "C7 v~ ~ ~ ~ U U U ~ ~ c~; ,:J Q ~ ~ ~ ~ ~ G~ "q F-27 ~ ta~ ~ ~ ~ ~q r~ ~ ~ ~ ~ "t1 's ~ ~ cd ~ En cd ~ ~ ~3 c~.~», Q ~i ~ I r ~ 00 ~ ~ c7~ b ' ~ ~ ~ ~ ~ ~ ~ s~.. p ~ ~ ~n ~ ~ ~ < ~ a C7 t~ ~ F ~ ' ~ ~ C ~y ~ q~} ~ ~ ' [C3 ~ i ~ ~ ~ ~ tr1 's:~ ~n y.. ~ r~n ~'~7,p' ~p ~ ~ U v~ c~d ~ p Q 3 G1J 43 ~y "C7 ~ ~ I N 'G' c^^~ cT E`_ ~ ~ C7 . ~ ~ , ~ p Q ~ ~ S.}., C~1 cd ~ ~ , ~ C] ~ch ~ oa tt ~ ~n C~ ~ n ~ ~ ~ "U N ~ ~ ~ ~ Q) U: 1Q V3 CS V~ v] C~ Vz • ~ ~ ~ ~ ~ ~ p ~ ~ ~ ~ ~ ~ ~ ~ L~ ~ ~ • ~ ~ ~ ~ ~ ? d '~i C~1 ~ ~ V' 'U C) ~ ' ~3 ~ ~ ~ C~R ~ E'~' ~ ~ ~ ~ 4 ~ ~ ~ ~ ~ r, f-. ~ ~ ' ~ p U r;, ~ . ~ ~ ~ y ~ ~ ~ ~ ~ N v7 fT ~t? ' ~i3 ~ Q Cil ~ q 4a tG ~ ~ GIJ , ~ 'r' w0 r~1 ~p CS ~n v> ~ ~ \ ~13 ~ "Cl ~ ~ ~ v~i ~ U ~ u3 c3~ ~1 N U CJ N ~ ~ ~ i~^, ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ s." oQ N N ~ U ~ ~ ~ ~ t~t ~ , ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ y ~ cG ~ ~L a ~ 2? ~ ~ ~ s.` ~ N ~ , ~ ~ F!~ ~ ~ v~'. Q ~j ~ ~ ~ttS' ~ ~ ~ U ~ ~ ~ ~ ~ r, ~ c~ ~ C) ~ U ~ ~ ~ ~ C3~ +Sa C6 0? ~ ~ G7 ~ ' s.+ i~ s.. ~ o ~~o rnca o ~ rn ~~~~o~~ "~~~~r~ a ~ ~ ~ m a~° ~ ~ ~ in ~ ~ ~ ~ ~ ~ ~ W q ~ ~n ~n ~!1 r*1 C7 ~ ~ ~ ~d ~ ~ ~ ~ r~ ~ ~ ^q ~j b. ~G ~J ~ ~ ~ ~ ; ~ ~ ~ (j ~ ~ ~ ~ G~ ~ ~ r~n ~ r~ • ~ c~~3 ~ ~ ~ ~ sj ~ q~j 4 ~ D Q ~ ~ ~ ~ "t7 0 ~ ~n ~ ~ Q ~ v~ ~ p ~ ~ C~ 1~ F ~ ~ ' ~ ~ ~ `f •o ~i ~ ~ ~ p iy ~ ~ ~ ~p Q ~ a ~ ,~y U ~ v~ 0 ~ Q'~~~ ~ 4,;C~ q ~ ~ ~ ~ i~ QQ' ~ ~ ~ s~ ~ G ~ U ..L} ~ ~ q ,s~~' ~ ~ ,~~j ~ S"~..1., u 6~ ~ 5~.. ~ ~ r~n ~ 4J ~ 0 ~ ~ dJ .SW' ~ '.~3 cCi ~ ~ c~d ~ ~ ~ ~ ~ ~ E ~ ~ ~ p., Ri ~ ~ c~ ~ ~ ~ ~ j A. ~ ~ ~ p ~ ~ Vi ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ , ~ ~ ~ ~ ~ ye~, v ~ ~ c`~tl ~ ~ ~ 4 r~, ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ e3 ~ rs i* ~ ~ a`~ ~ ~ ~ ~ n; ~ c~tl ~ ~ ~ ~ ~ o ~ ~n aa ~n ~ ~ ~ w ~ ~ ~ u ao~ ~ +~~~,Q~~~ s~i"''p3~°' a ~ ~ ~ o ~ ~ o ~ ~ ~ v ~ ~ ~ ~ o ~ CJ t~ ~ ~ r„~ ~ ~ ~ O S~ ~GA 'z7 r+a ~ ~ _ U S~" u ~ ~ ~ cd ~ . ~ ~ ~ . ~ E-+ 'e-+ Z U I~1 f.~,i "V Q ~ S~ ~ v.~''i ~ ~ ~ ~ s.~ i 4i ~ ~ ~ ~ ~ ~ A-~ ~ ~ ~ a~ ~ ~ ~3 .~a~~a3~~~ .~U~~~~~~ ~ E~ ~ ~ U U o U ~ E-; d' ~ ~ ~ ~ ~ ' \ ' \ 0 o n a a a n o ~ c a o a o~ o a n t~1 d~ C,~ 00 N~ 4 t'~ I C'~ C~l ~/1 i\ p,~•~ C,9 a'~ ~7 C^ f~3 C7 ~ Q ~ ~ ~I: ~ ~ c~ i ~ , ~ ; I,.. oo t~ N~P ~ e~ ~ , ~ r~ ~ 00 C> ~(7 ~ ~n cr c~ c~i c~ c~ r~ U,~ cT t~t d~ c7~ d~ N O ~ri' N ~ ~ ~L} , ~ ~ ~t N ~ ~ ~ ~ I`~ ~ ~ I~ ~ ~ V'1 C3~ 00 C CT N d' DrJ Od rn G6 r~ N E~'7 ~0 Q C`~ rA c~ 1~ ~ R1 T~ G7 p ~ tC CT r~ [`d N M ~R v7 N Crl 6a d' t~ ~r~ C4 ~'j ~3' (~i V1 ~ ~ d' (~j ~ (`d y ~ ~t ~ {tij .~.Y O ~ y~~ r, N ~ Q f^] b[} ~ "A ~ ~ Q ~ ~ G9 ff3 ~#3 ~ CJ ~ r~ t~t ~ o0 oa ~n ~ T~- W ~n o~ co o C3~ N ~t ~ ~ ~ G~ CA C'1 ~ ~ ~'1 ~ ~ ~ ~ f~} OQ C~ 1~ ~ ~ry ..C] V; ~ ~ ~ ~ ~ rt-y ,~-a (~.j ~ ~ O ..r ~j r, ty ~ ~ ~ ~ C~ ~ ~ ~ ~ N Q ~ ~ ~3 Gf3 f.~ Ffi 5Xi W ~ ~ q ~ ~ ~ ~ ~ ,.C~ '+a ~ ~ ~ • ~ ~ ~ ~ a O Q ~ ~ ¢~1 Q ~ ~ ~ ~ ~ ~ g~,, ~ ~ ~ ¢~7 C~d ~ ~ v~i N ~ ~ ~ ~ ~ ~ v x ~ ~ ~ ~ a~ x ~ cd ~ a~ W c~ m °'ti o~ W v"~i ro~~ W c~~d ~ x~.. W tl ~ ~ Q 0. ~ ~ ~ ~U ~ a Qy ~ N x" ,x~ ~ dJ N ~ ~ P~., ~ ~i ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ,~~~~-C~~~ ~~OHC7Q ~ F-28 ~ ~ ~ , . : ~t ~ ~ ~ ~ , ~ ~ v~~'~~~'r ~ ~ ~ ~ .,w ~ ~ ~ ~ ~x~a'~~ ~ ~ ; , ~ ~ ~ ~ ~ ~~o ~ a~ ~ ~ a~ vs a~ ~ ~ a~ ~ ~ ~f ~ U ~ v ~ ~ ~ c,~j ~ a~ r~.., 'z1 .C~ ~ ~ , ~ U ~ ~ ' 3 ~ t,, Q .0 ~ ~ ~ v'~i ~ U ~ ~ t~ ~ ~ ~ G C3 s.'' ~ ~ ~ j~ ~ ~ ""r~~„"S,7 ~7~ ~a~b.~ ~ . ~ p Q~J "'C~ ~ 4? ~ ~U ~ ~ d c~C , ~ ~ 3.+ ~ ~ c~G ~ G!} ~ cG ~ ;sa ~ ~ y„ ~ ~ p ~ ~ W ~ ~ ~ ~ ~ ~ ~ ;i rd p 4~' ; rh ~ ~ G] U • ~ U w,, Cr3 p..; ~ ~ ~ ~ ~ ~ ' ~ c~ ~ ~ 'C7 p ~ ~ td ~ `f U ~ ~ I~ ~ ^C~ tC cil T~ ~ fl~ ~ sf V} y~ N • ~ ; 5~: i.+[ ~ ~ ~ . r~ ~ ~ ~..y V i~.y ~~~.yy ~4/rt y ~,~,,,F ~ w Yr "~7 p U ~ ~ t"' S]. ' cd ~ ¢i 4} '`x ~ Q ~ ~ ~ ~ ~ ~ ~ w U ~ r~n ~ ~f ~ ~ s~ ~ ~ ~ ~ ~ ~ ~ v d ~ ~ ~ ~ ~ ~ v ~ Q ~ ~ w ~ ~ ~CS r~d ~ ~ ~ ~ ~ ~ Q ~ ~ ~ ~i U s~ v~ r~n 41 ~r ~ ~ 41 .fl ~ ~ ~ ~ C ~ ~ ~ D ~ ~ a3 'b v~ ~ ~ c~ ~ 0 ~ ~ ~ N ~'~'~~~~R~a~~~ ~ ~ ~ ~ ~ ~ "a o ~ ~ ~ • ~ ~ .~s , ~ ~ a ~ a,~ ~ ~ ~ a.~ ~ ~ a:~ •~n.~°a~i~~~U~ w i 3 ~o ~ o ~pb ` , ~ ~ ~ ~ ~ a~ ~ ~ ~ ~ r* w "0 ~ v U U ~ ~ ~ ~ 3.~. ~ ~ tC t~ ; C/} cC7 ~ ~ ~ ~ ~ i, ~ ~ ~ + ~3 q~ ~ ~ ~ 4,,, ~ ~ ~ a~ ~ ~7 U t~ Q ~ cCi ct~ C1~,Q ~ ~ ~ 0 ~ i;~~ ~ 'd ~ r• ~ Q ~ ~ ~ 4~ 4) 41 "~S ~ 4T• ~i ~j ~ "L~ Gs„ ~ U ~ ~ ~ ~ ~ ~ ~ ce~ 'a N 'y~ b C? ~ v~i ~'3 ~ ~ ~n ~ `n v Q} U p~ c,~ Mw . N ~ ~3„ "uU ~ ~ ~a. ~ ~ ~ rn ~ ~ ? ~ ~ ~ S~ ~ 0 ~ ~ cd ~'S ; ~ ay ~ ~ ~ N 4.., ~ ~ A" r~J .C3 ~ "t:3 C/~ ~ ~ ~ ~ ~ N O ~ ~ ~ a ~ Q ~ ~ ~ ~ ~ ~ ~ ' ~ ~ GJ . ~ C~ ~ "C1 ~ ~ "C7 ~ ~ ~ t~d ~j ~ ~ i' ~ ry ~ cC~ ~ 4~ ~ "C~ ~ ~ U ~,v~o ~ ~ao~~~ , ~a~ ~~~~~~n ~ c~~s~~a~~~ ~,w~o ~ C~;~ '~,~,o~ ~~Q~~,~~,~'~~ ~~w~~~ ~~~~r~ r,~. C!7 ~ N ~ ti ~ p 4 ~ ~ ~ ~ ~ ~ v~ ~''v, ~ ~ ~a.. , ~ Q Q ~ p ~i, ~ cq p p ' ~ . ~ ~ ~ ' s~,, ~ ~t' ~ d ~ ~ q~j ~ t~w ~ ~ ~ ~ ~ s.~ D ~ 0 ~ ~ y,,,, ~ ~ r~ ~ a 4-" C~ 0 ~ ~ c~.~ ~1^ ~ ~ ~ ~ U ~0 p td ~ S1" cn a ~ p~ 4 i`,~~` ~ ~ ~ ~ ~ U U Q ~ ~ ~ 4~, ~ 'g~ ~ ~ q ~ ~ q ~ ~"'~..U p ~ ~ ~ v1 [.w.~ ~ L,"~"~j ~ ~ ~ .t.7 ~ ~ w 'w"1. CC3 t~i t~~' q " ~ ~ ~ "'C7 ~ ' ~ c,j ~ ~ ~ ~ n U ~ ~j ~ ~ ~ ~ r-~,,, ~ ~ ~ ~ ~ ~ r"' ~ n C~ ~ s:, N c~3 r~ ~ ''`ti !ti ~i ~i , ~ ~ ~ ~ ~ ~ .0 G ~ ~ 4~ a ~ U . ~ ~ ~ ~ s ~ ~ ~i ~ C~1 i~ f~, ~ c'd Q ~ ~ ~ s.+ ~ ~ ~ ' < Z~:. , ~ ~ ' ~ ~ ~ ,'~t ~ ~ ~3 ~ ~ ~ ~ ~ ~ aI , ~ c~ Q yj G.a ~ ~0 b ' ~U cd a ~'i ~a ~ U ~ ~ ~ xa~~°.~~ ~•~a~~'" ~J~ ~ c~ ra~..~ ~ ~ u ~c~ ~'i!,~ hG~ c~~~ F-29 C~ d' G7 ~7 N C~ C7 ~ ~ ~ t~ t~ a0 Ch f#' t~ C7 u) C7 Q +0 ~ C~ oQ (~i C~ Cl~ Ct O CT C~ Q O ~ Q'~0 ~A ~ ~D N tV d' W V~ C- vi ~r'~ f~i i~ N CS o~ t~t [y f~t ~n c~t fl ~n C C ~p I~ GO ~'i ~ r~ ar1 N C,I rn c~ et 4~ ~ ~ N 'd' d' ~4 tiD rn ~ N N v~ 69 ~ CJ~ ao N~D ~11 f~l C t^3 C~ C~ (y t+~ ti` t~ fV 6Q ~ p ~ CJ Q 40 i~ C}~ ~U ' ' ~ C3 C3 ~ ' ['1 ~ ~D N v'r r*1 Ch ~ C,7 vi ~ G+ O w-i ~ ~C t1' t~ ~ GZ '~1' Op ~p ~0 'd' ~/3 Ca ~f1 ~ oo d ni r~ C~ no ~n v~ th +n V (~i rZ r~1 ~q ~/i C~l C~i (ti! ~t'~ ~ ~ "[7 rJ ~ ~ ~ ~ ~ 0 w ~ U ~ ~ r~" ~ ~ ~ ~N ~ w Q ~ ~ ~ p td W ~ ~ ~ GR ~ ~ ~ f~, G : d M W ~ p ~ ~ ~ ~ ~ 11 ~ ~ ~ p ~ ~ ~ ~ 6.1~ ~ ~s. w d ~ Q ~ ~ ~ ~ . ~ ~ ^ ~ ~ ~ ~ ~ ~ ~ y ~ A. ~ ~ ~ ~ ~ ~c~ q cd ~ aN ~ ~i ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ r-+ ~ s~. Q ~a-, va Q s. y A ~ U t7.' ~ pJ O ~ Q? ~ ~ p v ~ 'T~ r~ µ a' ~ ~ ' ~ ~f ai ~p • ~ ~ y a s~. Sy ~ll p~ L~ d' C; ~ ~ ~ a~i 'zi ~ ~ j ~n Cr1 a~ ~ ~ ti ~ a Q~" ...1 v3 t~ ~U ~ `h ¢ ~ ~ ~ ~ rll ~ ~ ~ ~ ~ Q ~ ~ ~ A ~ ~ ~ ~ ~ ~ ~ ~ w y ~ 0 ~L ~ ~ ~ 13 R. ~ ~ ~ ~ ~ C h.{ ~ fd ~ ~ y'N, N ~ . ~ ~ td ~ ~ ~il h W W...~p,°,~~°~„~o~ U ~ ~7 ~ H ~ ~v -r~ ~ ~ .cd ~ ~ ~ ~ ro ~ W ~ ~ ~ a~ w a~ ~ ~ ~ ~ ~s c w ~ a o v; ~ ~ o ~ a~ o~~~ ° i w~ E~' a. h E-~ rr~ v E~" ~ H ~ U U ~ ~W~ ~w ~ ~ a~ ~ ~ ~ Q~dd~QUc~DU ~c~ H~c~~ ~ W ~ v~ a u z ~ LGS C7 ~ f"1 t~2 ~L} [n CJ Sf1 94 C:3 rry 00 CT C~ ~fl l~ ~A N ~ ~[h VZ r1 f+l CS CS~ ~ N CT Q C: rl [+1 <1' E`~ ~D I~ d' ~ in N ~ c~ ~G r~ ~ t~ dr ca r*~ cR r~ ~ rv t~ ~ ao ~ ~ rn W v1 00 rh d' C3 v1 tT. ~ I`~ Cp M s~ c~ C7~ ~A ~ Q i`- ~n d' c0 f~i ~t vl oo ~ CT h r~l N ~ d" Q cr1 N 'w.~ a t~ cs. rr ~ er ~t r~ ~ r~ ~sa r~ oo rn r~, cv ~t, ~ C^,~ fr7 VJ Srl ~ ^ ~CJ C~ ~ C~ C~ ~ t~1 V7 1~ ~ ~ r~ cYa 0~ C~ r'~ 0o v', G~ d' C C~ oa N C C~ CT tiD En u1 Cr ~D C~i C) d" oa ~I'~ ~0 C7 N V~ ~r1 0~ C.7 ~ d' kfl 'd C'~ N'n t~ v~ C~ t~ G3 c~ ~D b Q G po ~Q kn' r*~ ~D v1 0o t~ r~1 i~ rn ~i r7 t~ t~ ~ l~ C7 ~ r- ~n r~t G7 C~ v) vl C) i~t T~LJ N ~ 04 t~1 i`~ CT. C7~ C7 ~ v'] N O N t~ C1~ t'~ EG i~ 09 d' 1~ Q I'~ N ~0 N ~'1` E'~ AtS Q t'~ Cr ~ f~d M ~i' ":f' 10 ~ V} r, v~ ~ ~ ~ ~ ~ a~ d, ~ o ~ c~ z ~ ~ ~ ~ ~ F ' ~ C? c W ~ r~ cr. ~ r,/~ ~ ~ ~ t~ d ~ ~ r, r~ ~ ~ w tn ~ r~ c ~ ~ ~ ~ o ~ v E.~ ~ tt3 ~ ~ U ~ C1 ~ ~ Q ~ a. ~ c~ ~ ~ w ~ ~ ~ ~ ~w N ~ tti ctl ~ ~ V ~ ~ ~ ~ ~ ~ ~ ~1 ~ p c~ ~ v~ ~ r.~ O V Q ~ ~ ~ G~3 ~ ~ ~ R'1 ~ ~ ~ ~ ~ ~ ~ V1 C3 ~ c~.; ~ p t~" ctif ~ ~ ~ .S", p ~ N A" ~ "t~ cwtl i"~ ~ ~ O ~ ~ ~ ~ n ~ ~ C a~ C ~ O `i' cn "O W~ O ~ ~ Cz~ Ca ~ `f' ~ ~ ~ ~ c~d 4S ~ Uy n ~ ~ ~ s~. ~ ~ ~ H ~ w, i-; ~ ~ ~ C] ~ ~ C) L. C3" ~7. vl ~y ? ~ ~ d Q+ ~ ~ " ~ W ~ ~ N ~ ~ ~ ~G ~ ~ d ~ ~ ~ ~ ~Z2 ~ ~ ~ v y ~'~.~-~d~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ i „a Q ~ ~ ~ ~ ~ ~ ~ ~ y p ~ ~ .c~ o ~ ~ ~ ~ ~ c~c ~ ~ ~ ~ ~ c " ~ ~ d ~ ~ ~ A.` ~ U ~ ~ W ~ m ..O w ~ ~ ~ ~ O ~ ~ ~ ~ "~J t~ Q Z3 ~ U ~ ~ a ~ ~ ~ a~ a~ ~ ~ ~ ~ ~ ~ ~ uw~ a-a ~ cZ ~ ~ ~ o ~ ~ o o ~ v ~~dc~0 a~'i ~ °.~U " ~U~ ~ F-~ r~ c ~ ~ ~ ~ ~ ~ ~ ~ ~ µ ~ U ~ v~ ~U~r~ ~a. ~4 U ~ a~ ~ ~ ~ ~ F-30 ~ r. ~O v~ p fy i~ DO a0 C~ (~i N~r, 0~ CJ Sfl C+t d' 60 Cl~ k? M et t`d C~ ~n G~ C~ m{~l rn Q G~ C7 C~ t7" E`- cY'i r'; rj C~ ~n ~n co ~n r~ m vz c~ r~ r~i a rn o r1 ~n ~r1 e^, ~Li N t~ ~n ,n N~A vi r+ ~t (~3 Ci CJ~ ~ ~r C~ r: ~n N oo t~ fV c0 cti -1 r7 ~ d N C3~ ~t ~G7 Q c^ ~ M c4 1~ cT v1 ~0 r+1 v1 DO ~p ~ l^~ C~1 ~ ~n ~ t" N V" C.'~ ~ ~ N 'ch fia N G~ ~L7 N ht O fil ~D s"S ~ ~ w ti.i ~ ~1? G~ r^, rr rr rr ~ r", ~ M M('~I ~D C5 N DO OQ Q ~ ~f~ C7 CT Q 00 M G7 ~ t7 ~ hl V 1 v1 ~/z Eh d' G~ GO M Gtl C~ O~ CJ 1C w^" t'J ~n d' +~1 ~p r~ CT rl I~ t`V G~ v1 ~A ~Y ~ Q N O N „ C> c~ cr oo ~n u7 t~ cT ~n ri ha t~ r?~ E~ ~ cn c,~ c~ ~i ri ~ Ca +D ~t ~a ri ~ ~n l~ ~ C3 d" C~ CT t~ M M-~ CJ ~r, CS t~ ac1 C~ ~n C~ v~ C'~ ~p ~Y ~ M C~1 r+1 N ~t N t~ C~ 08 C~ Go CJ t~ Etl CW ~ L~.I ~ ti.✓ ~ u w w ~ ~7 1'` ~ !*l (V ~ Ef~ V, ~ w b ~ ~ ~ ~ ~ ? ~ ~ ~ ~ a ~ ~ x c~r ~ U ~ ~ ~ ~ ~ ~ ~ cp ~ ~ ~ ~ U a~ a ~ ~ ~ ~ cn f.'a ~ ""~S ~ Z ~ ~ ~ U ~ ~ ~w Ql ~ ~ U ~ j ~`1t~C a~ ~ V ~ s~. ~ U W W ~ ~ ~ c'' Q ~ p ~ ~ ~ C7 Q ~ a~ > ~ w c~ ~ ~ ~ ~ 4 ~o .c ~ ~ o E~ ~ ~ ~ ~ ~ ~ W ~ ~ ,~l ~ w ~ ~ ~ F ~ ¢ ~ ~ F ~ ~ ~ ~ ~ ~ -a ~ v ~ ~ d' ~ Q ¢ ~n a~ ~ ~ ~ ~ Z w ~ ~ N nn ~ ~ > ~ ~ ~ ~ ° ~ ~ ~ W~ ~ ~ ~ ~ ~ ~ ° r~ U ~ A ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ d ~ ~ ~ ~ ~ z ~ ~ ~ ~ ~ ~ d • ~ ~ ~ F ~ ~ ~ ~ ~ U ~ ~ ~s ~ ~ C~ a U a ~ ~ ~ p a ~ ~ ~ ~ ~a ~ ~ ; -o c~ = ~ ~ ~ m ~ ~ ~ Q ~ ~ ~ F., ~ ~ r~ ~ A ~ ~ ~ ~ ~ ~ ~ F ~ ~ ~ ~ ~ ~ ~ ~ ~ ro w ~ o i ~ ~ ~ ~ a o 3 d Cy -~t ~ ~u ~ u.~ U ~ ~ ~ ~ ~ ~ ~ w 0 ~ ~ v U ~ . c ~ ~ _c Z ~ ~ ~ ~ ~ ~ . ~ ~ ~ ~ ~ • ~ ~ ~ ~ " a~'i ~ v o ~ ~ n~ ~ ~ t, U p ~ ~ ~ ~ ~ ~ ~ ~ N r h Q ~ ~ Q Q Q p ' ~ ~ ~ •N Q ~ ~N ~ O ~ ~ ~ CS M„`'"ay ~ c3 ~ ~ ~ A" ~ a' ~ ~ t~ ~ C ~ ~ ~ Q ~ ~ ~ W ~ ~ ~ °vi ~ N f~ ~ ~ tz~ a ~ ~ ~ ~ ~ U rr rr ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ w w ~ U ~ ~ ~ a~i ~ ~ ~ cQ ~cc ~ s`~.a. U ~ a ~ U p ~ ~ ~ ~ ~ ~ Y w ~ ~ ~ ~ a~ ~ : ~ a. a~ ~ ~ ~ m c~ ro ~ ~y ~ ~a. ~ ~ a~i ~ ~ ~ ~ ~ ~ ~ v m, ~ ,~.7 ~ ~ ~ ~ ~ U U ~ ~ ~~1 W ~ ~ ~ s., ~ ~ ~ ~ p ~ `V ~t,~ n1 rn ~ ~ ~ o ~ ~ ~ T ~ ~r t~C c~ u ~ ~ a ~ ' ~ x ~ ~ ~ ~ ~ ~t~~~,a~a~ ~,f~UO ~~c~Q~a, ~c ~ ~ ~ ~ ~ U~ U U U U ~ U U cn cs d~ C~ t~ o C? ~l rn C~ v~ N jC ~a n ~o c~ cC ~ a o~ a ~ C`~ ~ OC 0* t', CS< <I' r*l ~t1 '3' OGy C~ e#' t~ ~~r1 CV 09 CT ~n t~ AG N tiA C] F~ N~D CC C t~ ~n tT. ~ t~ ~ 00 ~n M C`~ ~t ',0 GO CrS E`` h ~L3 CT Q~ U frl 3/7 w^~" ~fl C31 Cn ~O ~ N CT ~f7 Vl C1~ t/~ G~ r~1 ~ ~L3 LLS CV DO b€~ ~ i~3 ~L'i C~ '1" I~ d V] V1 C1~ r+3 ~ ~p v^~ ~/1 N Cr1 00 Ct Ci~ (V k~ t~ N C~ N C~3 r~p p ~,j r, w d^ t+1 ~Il V'l E~3 ~ .~r r-. jD ar~ rd r+~ ao ~t C- N oo aa C'~ ~n oo ~ t~ ~C] C7~ vS O V) r1 l'- O~ W C7~ a0 C7~. M d" ~q T+ CA ~ L3.W r~ eh ° G~ Qt C~ €r ' O~ Cr V~ 00 tT ~ c~l ~ C7 LO M ~1? r~1 Ct t'~ C~I OG t~ ~ 00 C- p~ +r~ V~ tiD Ci~ v'~ t~ ~ C~ OS~ Q1 ~ ~ ~ ~J' ~C"J ~ 1L5 ?'J 40 ff1 40 'C~' C'~ Q tT N C7 d` CJ~ C7 VS v1 d Q r~ ('~i p~ oA M l~ vl ~rs 09 G1~ ~ c.T. C"~ C~i ~~1 ~G7 ('~I C~ vj ~j r. ~r~ .r t~1 N ~ v~ ~fl ~ ~ ~ ~ ~ ~ ~ ~ C ~ ~ ~ ~ U ~ ~ ~ Qa ~ ~ v~ r~ [il a~ ~ ~ ~ ~ ~u a~ yC -i WW a `n a ~ '~3 ti ~ C ~r3 ~ ~ ~ ~ Gr~ n W ~ ~ ~ ~ G ~ W ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ w ~ ~ ~ ~ ~ ~ • A ~ ~ ~ ~ ~ W ~ ~ w a v a a v ~n " ~ (xj ~ ~ ~ ~ ~ ~ W ~ ~ ~ ~ cHia ~ n C~ Z ~ W o W ~ v ~ ~ ~ , ~ C~ W ~ ~ ~ ~ ~ ~ ~ ~ v ~ Z cn ro ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ a~ ~ ~ W i a~i s k a~ ~ o ~n r~ ~ C~ W ra ~ ~ ~ ` ~ w ~ ~ ~ ~ v ~ ~ ~ ~ ~ ~ ~ v ~ ~ ~ C~ ~7 c~i ~ v .o ~ o .o s. ~ H ~ ~ ~ r~ o ~r ; ; r~ ~ w ~ ~ c~ ~ va ~ ~ ~ ~ ~ ~ 4. ~ a~ ~t c~d ~ ~ ~ Z~°? o,~ m,~ ~ a w v a W ~ ~ ~ ~ ~ ~ E~ ~ ~ ~ ~ ~ U W ~ ~ ~ ~ ~ U d d ~ ~ N 'T~ N[il ~ C7 ~y y, ~ v, s~, tl) t3 y y ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ro ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ C!1 0 ~ ❑ ~7 C~ w~ ~ ~ x~ ~ .-~r c~d c~C `~S ~ Aw 4 Q p p ~ ~ 0 ~ ~ E-~ F~ r~; F-31 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ M~~M , ~ ~ ~ ~ ~~+~'TI~l~r ~ . rry ~ ~ ~ ~ ~ r l~ b.L~'~' ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Q ~ o r,~ r a ~n r Cn oa o r#~ ~n 00 u7 ~7 ~ ~ ~1 r~ f~ C? V5 ~f CT Efl ~ M ~ vi G1 N~-~ ~ aa C~ ai N ~ ~ N ~0 A aCS ~ ~1 ~ n! ~t N ~ ~ d~ t~# r+ ~ c~3 ef~ ~3 N (~I ~ ~I e~t' p ~ C'j Ga PT G~ 1"~ M~ v~ ~ t~ Cti e~t ~A N a? En ~+n cT Gh ° W ~ri ~t N C7 C7 c',~ ~15 N ~La ~ ~ ~ w ~ N d~ ~ C~ p~ a s w v ~ ~ ri ~ w ~ ~ ~i F/'i ~ r. ~ ~ ~ ~ U ~ q CA C~1 ~ ~ ~ ~ v~ ~f ~ [/l ~ p ~ d ~ ~ ~ b ~ ~ ~ ~ ~ cti ~ ~ ~ rr ~ c~ ~ U ~ ~ a~ a ~ ~ ~ ~ ~ ~ ~ ~ a~ Z a~i ~ a ~ ° ~ ~ c~ N ~ ro ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ A a~ ~ ~ ~ o ~ ~ ~ ~ ~ ~ ~ ~ a~ ~ a~ s~ • ~ o U ~ ~ ~ o~~ ~ a~~i o ~ ~ ~ ~ ~ a' ~ ~ ~ a~ ~ ~ o E~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ? ~ a ~ ~ ~ ~ o a~ o w ~ r~ ~ ~ ~ ~ ~ A ° ro ar ~ u, ro ~ ~ u a ~ 4 =a ~ Z ~ A, ~ • ~ ~ y ~ ~ ~ ~ ~ ~ ~ A~ ~ ,.i ~ Q ~ Q~ ~ p ~ ~ jj ~ ~ ~ ~ ~ ~ ~ ~ ~ ~r ~ ~ . ~ ~ ~ ~ c~'a ~3 ~3 s~~" ~ ~7 Cs ~ ~ ~ ~ w~ "Cy ~ c~~' U U U s~. ~ s.~. w t~.~ ~ J s`~q rh rr ~„f ~ p "C7 ~ ~ "O "L T~ W ~ ~ ~ ~ ~ Gs" C 'C~ ~ ~ s~„ r, ~ r~ ~ '~'7 T~J `wd A. tq ~ ~ ~ p ~ ~ ~r~j N Wv~ wC ~ C U aa s.. .p Rf t~d (6 `h v ~ ~ Cd •p ~3 ~ o ~ ~ '~"~a ~ w ~ ~ U ~ ~ ~ ~ U U~ ~ ~ 'iw+ ~ Sl~ C~~S" w w..~. ~ r-~i ~ V1 ~ ~i '".'r.' itS ~ Q~ a"C C~ p C~i ~ r~ll ~ Q U C U V ~ n Q Q ~ " V 1) ~ ~ F-32 ~ ~ zi ~ "a ~ ~ TJ ~ ~ ~ ~ N ~ ~ ~ ~y ~ Q , ~ 41 t~'' ~ ~ ~ ~ a ~ ~ ~ ~ ~y ~-a ~ ~ ~ ~ ~ t~d ~ u c~~3 C1. t~ ~ v' 0 ~ ~ W ~ ~ ~ ~ ~ U ~ ~ ~ v ~ ~ ~ ~ ~ C3" ~ 'z7 ~ . ~ ~ ~ ~ ~ ~ ~ U ~ ~ cG ~ ~ ~ w ~ri Q Q u; 's, cd 0 N~ r F~+ ro b «a ~ ~ ~ ~fl 0 ~ ~ v~ ~!7 C/} ~ U ~A ~ Q ~ tl~ ~ ~ 0 r~ii ~ ~ p Q ~ ~ ~ ~ ~ ~ ~ ~ C1~ ~ ~ ~ `h r~ a~ ~ C~J c~'d ~ ~ cd ~ ~ ~ ~ ~ ~ ~ ~ n j Q "d "Cj > ~ ~ ~ ~ ~ > ~ ~ ~ ~ b ~ ~ ~ ~ r~, Q ~ 4~""'J c~ ~ ~ w ~ "C7 ~ v ~.,G ~ ~ ~ • ~ ~ ~ . U ~ ~ N h+~ ' ~ ~ ~ ~ ~ O ~ ' ~ ~ ~ v Q p ~ ~ U ~ ~ rc..^ N, ,7 C~ ~ V ~ ~ ~ ,h t~f c~6 i ~ ~ ~1 ~ ~ p ~ ~ r/} U ~ ~n fl ~ i.z~ N t? ~ ~ ~ ~ ~ CFJ'~ ~ 0 ~ Q ~ ~p C~ ~ ~ ~ ~ ~ d] ~ ~ ~ ~ ~ N n~i ~ ~ ~J s. ~ ~ ~ ~ ~ ~ ~ "Cl ~ ~ ~ cC! ~ Q ~ c~ ~ ^-q `h ~ ~ ~ ~ v U ~ U ~ S~, ~ bf1 C~ ~ ~ ~ ~ ~ •U C3" i.s~ ~ ~ v~i ~ ~ ~ v ~ ~ sv~» ~n va v~ ~ ~ s.~~ Q ~ dr ~1 r~, v: ~ ~ ~~`~cn ~ ~ v ~ ~ ~ v U ~ ~ ~p~ v w C~ r.n~^ ~ ~ ~ ~ ~ v,~~.~ ~ ~ ~ ~ a, ~ ~ ooc~o~n~n ~ ~ ~ a o ~ ~ ~ C ~ ~ ~ ~ ~ ~ ~a ~ ~ ~r, En v~~ ~ ~ p ~ ~ c~ a~ ~ ~ b b ~ F ~ ~~~a ~ ~ ~ ,,°'o~~, ~ ~ ~ q ~ r~'~~, y w ~...'3 p ~ ~ ~ a ~ t~ d" ~ ~ ~ ~ ~ cs3 ~ . ~ ~ c~ `.C ~ t,~ ~ ~ , ~ ~ cn 4, ~ ~ ~ ~ ~ N Q ~ ~ ~ ~ ~ ~ ~ q ~ ~ ~ q A ~ U ~ Q a... t) ~ N ~ ~ ~ C d ~3 ~ ~ ~ ~ ~ ~ ~ U ~ ~ q Z~,~„ Q U ~i s~ ~ ~ N ~ ~ ~ ' ~ ~ c~d ~ ~ 0 ~ N ~ ~ q ~ ~ ~ ~ y ~ ~ ~ ~ ~ , ~ U ~7 n ~ Rl ~ A t~ ~v~ ~ ~ ~ ~ v 'i~ ~ ~ ~r rJ ~ U C) ~ "~S b ~ ~ cn rn 4.+ cC ~ ~ i"~ ~ ~ tt'3 q-' ~ ~ ~ ~ U ~ G.` ~ ~ ~ C ~ ~ 0 ~ N ~ ""fl ~ ~ d~ ~ ~ ~ c~ ~ ~ ~ C!1 c~ . , v, -d ctl N c~ ~ "C3 ~ ~ ~ ~ Z ~ ~ p ~ s~' ~ rn w.,.l ~ ~3 r, ~ v} ~ p ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ q 0 C ~ Q d~l C7 ~ ~ ~ ~ ~ cr3 ~ ~1„ ~ ~ ~ ~ v 0 ~ ~3 ~ ~ ,S} ~ C~ ~ ~ ~ N s~ G • ~ ~ ~ c~ v, va ~ ~ ~ ~ ve ~ ~ ~ f~U' rri ~ ~ C~t ~ ~ ~ !1. t3 ~ ~ 4~ crS ~ ~ 0 Cj ~ ~ C7 ~ 0 v~ ~ V ~ ~ ~.~~d '~~Q ~ ~Q'~ ~ ~ ~ ° v ~ ~ ~i' G~ Q ~U~ ~ "q~'~°~ . ~a„~ ~ ~ ~ cn ~ oa ~ ~ ~ ~ a .a y ~ 3 d1 a ~ ~ • ~ ~ ~ v m Q ~ A c j ~ ~ ~ ~s.: u"t? 4 ~ ~ ~ ~ E^' ~ ~ ~ J ~ p ~ .t~ Q ~ ~ ~ ~ r~ ~ t~d ~ q) ~ ~ C.7 ~ ~ '~3 ~ ~ ~ ' ~ ~ 4~ ~n y~„~ ~ ~i tl Q y ~ ~ ~ N ~ ~ ~J t~ ~ Q ~ r~ ~ p ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~"I' ~ ~ ~ 2. t~ ~ Q a~ f~ r~ ~ ~ t`~d 'd ~ ~ ~ 0 c! ~n c~., Q ~ q Q W ~ ~ ~ ~ ~ ci._, d1 (V ~ ~ e~ ~ U ,ta ~ ~ ~ ~ -0 ~ ~ c~,d W N ~ ~ ~ v~i a ~ +s Q Vl 'd p ' ~ ~ Q ~ ~ ~ z ~ ~Q v t~ a~ ~ ~ a~ ~ :~E-~~~QW ~ ~ ~ ~ ~ ~ ~ ~Q ~ ~a.v 4 ~ ~ ~ o ~ ~ ~ 's~ q~j ~ ~ v~i ~ ~ y c`~d .p ~ U u ~ ~ ~ ~ p ~ ~ c~d -tj ~ ~ ~ ~ fi-°+ ~ ~ l„~ ~ p Cj ~ ~ ~ ~ ~ i ~ ~ ~ ~ ~ cti ~ „~7 U ~ "x7 ~1, cU e~,'` ~ r+ 0-- y,,,C3 0 'd cd C) ,n td r~.+ G ~ N ~q~!°~,'~~ ~`~a~~ ~ Q.~`Q~ ~ c~ ~o~,c~~ ~a W Z ~ °~~a~i s~,~ ~ ro ' o a > q a~~i"~ ° n~~-, ~ ~ ~ ~ ~ ~ > ~ E-~cx.~".jap~ U Uv~~ C~U ~ E~~~~ 4 7cv U~°~.~Qu U r.~,~.~ ~ W v ~ a ~ ~ ~ ~ ~ ,a ~ . ~ ~ ~ ~ ~ c•~ ~ ;,~,o~Q.~"~ ~ i~b .~~p~ ~ ~ o-~•~ ~a~ ~ ~ a~b N ~ a~ t~ ~ ~ ~ ~ ~s ~ ~ ~ ~ ~ at ~ ~ ~ ~ ~ ~ " a~, ~ ~ ° °'p ~ ~ ~ ~ m ° ~ ~ ~ ,~~•Y~~. a~ ~ G ~ ~ ~ ~ ~ ~ ~ w a~~ ~ n ~ ~ ~ ~ ~ ~ ~ w ~ a~i ~ ~o ~ ~.~a•~ ~ ~ ~ ~Q ~ ~v v° ~ v ~ ; ~ ~ ~v~Y~.~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ o ~~w ~ ~ ,w„ ~ ~ ~ p ~ "CI cn N ~ ~ ~ w~~~ ~ ~ ~ ~ ~ o ~ ~ ~a ro ~ ~ ~ ~ ' ~ ~ ~ ~ o ~ ~ ~ ~ sd ~ ~ ~ ~ ~ ~ ~ ~u n ~ ~ -q ~ ~ s.Mr ~ ~ r-, ~,~j ~ U p ~ ^ q~j ~ ~ C ~ ~ ~ ~ . ~ ~ ~ ~ ~ "~j ~ ~ ~ 41 ~ ~ ~ti ~ Q r~ Q ~ ~ ~ s.~, ~ ~ ~ ~j ~ ~ q~j ~ ~ "tj ~ ~ ~ ~ ~ U] ~ ~ ~ t`1 q G ~ .S~ p U ~ ,.C7 tCt CJ {'j ~ ~ v4~i ~ ~ ~ ~'1' ~ ~N, ~ ~ ~fi W '°Cy ~ ~ ~ r ~ j 61 v~ -w ~ ~,N„ 'sa ~ ~ ~ -CJ ~ cn ~ ~ W ~ cl~ ~ t~ ~ t~G ~ ~ ~ ~ ~ a,, ~ ° c~ Q.1 ~ ~ ~ u Q ~ ~ s. ~ ~ . ,n M",~,y' ~ ts3 ' ~ ~ ~ ~ ?G U ~ ~ Tj cd Ui +U t]., U ~ ~ a„; ~,~j Q} ~ ^C~ ~ p ~i a ~ ~ ~ ~ ~ ~ ~ ~ ~ 4~" ~ ~ ~ ~ r~ td .Q tCi cd v~ p ~ ~ ~ ~ N o ~n ~ ~ ~ ~ s~ ~ ~~a°o i ~`~~~~ar z~aa~ 3°' ~,~~y;; ~ ~ ~ a~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ w ~ ~ a~ A~ " ~ ~ ~ o o ~ ~ n~,~ ~;.a~~~~; b,~~~ '~~"a~~~ ao~~ W ~ r~i ~ ~ ~ c~ ~ ~q Q ~ ~4:: ~ ~ ~ n.,v~ c~i,~ ~ ~ i ~ v ~.~d ~ a~ ~~"~~~.,~3 u~'~ ~sa.~" *~'q~n N ~ a a, ~~pv~~ ~ ~ ~ o ro ~ ~oc~ ~ ~ro , a`" • ~c~~~, ~n ,s~ i~ ~ ~~~ro~'~ s~~ap°'~,~~, q ~ aa c~ ~ ~ ~ a~ ~ ~1 ~ ~ s~ ~ ~ ~al p ~ ~ a~ ~ a~ ~J GA • ~ c~a a ~ ~ y ~.,N U ~ ~ cd d~1 +~'r" t~r'a ~ -C3 ~ ~ n ~ w~., ~ 'Cj ~ vi C vi ~ ~ cd ~ ~ s~.~ ~ v~~ s.., ~ "Cj ~ ' G ~ ~ ~ ~ Cs c~ ~ n~ N V ~v~,, s' r~ ~ v~ ~ c., C ~ 4~ v y ~ uf? ~ ~ N ~ N ~ ,~:1 ~ td d1 `n ~ s., d ~ ~ u' n ~ U~i T7 ~ ~ ~ ,.'"~i r~' "C3 ~ f~ sn ~ ~ y...+ ~ f.~,,,, td ~ cd U ~ ~ dJ p.., 'in r Q ~ s., ~ ~ ~ "C3 ~ N • ~ ~ c'~ v ~ ~ ~ ~ ~ ~ 0~ ~ w' ~ ~ 4 ~ ~ ~ ~ ~ ~'„n, ~ p ,s, ~ ~ cn ~ ~i U ~ ~ p "~7 ~ ~ CC `E"' ~ U C~ ~ 4-+ td C(j ~ tCj sM ~ ~ "C~ C3.11 Q) C~ ~ ~ ~ ~ G~` v~i 3 ~ U s. ~ 4 ~ 0 ~ ~ ~ ~ ~ ~ , ~L ~ r*1 ~ y~., {rj ~ ~ M U va ~ ~ ~ ~ 0 ~ ~ rn ui ~ [L ~-a s" ~ Q) s. ~ ~ ~J 0 0 f~l N ~.,w ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 4~ ~ cr! s., ~'T7 ~ ~ ~w.E ~ ~ b!7 ~ ° ~ ~ o ~ ~ ~ ~ ° ~ ~ " o ~ v ~ ~ ~ ~s~,~ ~~a~ ~ ~ ~Qa~~ ~~o,~ ~ Z c~~'~ ~ a~a ~,ro~, ~io a~ a, a ~ a~ C7 r°~..~s ~ r~~-~ a ~ ~ ~ n~~~ ~a 3~-~ ~ r~~~;:~ ~ ~ ~ ~ ~~'~c~~ ~ ~ ~.~o~ ~4,~.~ ~n~ a~~ Q ~ ° n~~ ~ ~ ~ a~ ~a~ ~ ~ oA~ c~a Q ~ ~v~ ~ ~ ~ ~ro ~ ; ~ ~n`~ ~'>~i 4 M~,, d`nJ ~ ~ .M !a ^ N N 0 ~ c~ ~.~,p ~ ~ ~ ,w ~ c~7 u' q ~ a1 s., ~ ^ ~ "c;a "rJ ~ ~ ~ ~p ~ 'T., ro ~ ~ sd ~ ~ v ~ p . ~ ~ ~ ~ ~ U J > cd N ~ o ~ v~ ~ 4.~ ~ ~ ~ H ~ ~ ~ ~ ~ ~ ~ ~a ° ~ ~ ~ ~ ~ ~ ~'a~ ~ ro~~ ~ ~ ~ ~ ~ U U 4 ~ ~n 4~ q v~ ~ ~ 4~ ~ ~ a hfA ~ r ~ y~ 'C3 ~ ~ ~ ~ W 43 ~ ~ ~ N~ ~ ~ ~ ~ ~ ' `n v "CS ~ ~ U ~ uk ~ CL j fl ' a ~ ~ "Cy ~ ~5~, ~ ~ ~ C7 ~ Q ~ ~ ~ ~ ~ w ~ ~ ~ ~ c~ ~ ~ v~ ~ m 0 p v ~n Q c~ ~ ~7 ~ U ~ ~ N p p ~ ~ ur ~ * o ~ ~ Q ~ ~ 0 'd ~Q C ? ~ ~ ~ ~ "c7 ~ ~L v W U ,v~~- , v~s ~ ~ r,p ~ ~ U ~ ~ ~i ~ ~ v °~3 ~ ~ ~ G ~ cCi b a `c~~ rn U "n ~ ~ ~ ~ ~ c~3 ~ ~ ~ ~ ~ n~ ~ CJ td v} l,~ ~p ~ ~ ~ Crs ~ ~ td ~ ~ s~ } ~ ~ ~ W G3, ~y Q c3 ~ y~ ~ T1 ~ N 7, , ~ s~.~ ~n ~ N ~ "C~ s., ~ 43 ~ Q ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Q) f-' ~ ~ 0] ~ ~ ~ ~ p ~ ' ~ ~ ~ GTJ W v ~ ~ ~ ~ G~1 v3 ~y w ctl ~ U ~ ~ U a`~i ~ ~ ~ ~ ~ ~ ~ Q "~J ~ ~ ~ 'C1 ~ ~ ~ ~ ~ ~ ~ ~ c~d ~ ' ~ 0 ~ 0 4~ y.~ ,b ~ ~ 0 ~ ~ y O ~ ~ Q ~ ~ ,~i , ~ ~ v~ ~ i~ ~ ~ U «f '~l ;,L . U va ~.1, ~ll ~ ~ ~ • ~ Z ~ G~. t~3 ~ p 0 ~ "L7 61 ~ U ~ s~.~ ~ `W'' U v~ 4-` ..C N "C~ 'C7 ~ ~ N 0 ~!j ~ ~ ~ U "C~ ~ `n v 'c7 cd ~ ~ 0 ~ ca ~ ~y ~3 a~'" ~A ~ aa ~ ~ ~ ~ ~ el ~ ~ ~ ~j rr, r~ CC~ s. 'd a~ ~ ~1 ,r d "Cy ~ ~ U N N U ~IJ ~ ~ Q 's„ -~7 U 1.~ Qi ~ vl ~ Y ~ ~ tn ~ ~ ~ U ~ C7 ~ `c^ p ~ Q ~ ' ~y ~ ~+r ~ ~ ~ ~ ~ ' ~ ~ ~ cU ' ~ d~ ~ ~ ~ t~; c~ ~ ~ a ~ C!] ~ , d ~ ~ s~. v' ~ ~ w ~ U ~ ? u ~ ~ Cd ~ ~ ~ ~ p ~ 4:. u'~'i 't~ U Ql s."', p ~ ~ ~ ~ ' a . ~ ~ ~ G~w N ~ ~ U ~ " ~ cd 4-, ~ ~ ~ ~ 0 G7 ~i ~ x n s~ ~ Q U .G U ~ ~ ~ ~ ~ U v~ ~'y ~ V) ..M ~ ~ Q C~j ~ . W, ~ .,5~ U U , m. ~i Q7 bA ~ "C] ~ ~ ~ "Cl ~ Q ~1: ~ v~ ~ ~ ~ ~ ~ ~ ~ ~ N ~ ~ r ~ ♦ ~ ~ ~ ~ ~ ~ ~ ~ ~ p ~ f`^ E"w Q'~ ~ f-' Q~, c~ CG U~ 1"" ?i~ cd 'it; 4 E"" ~ u'~-~ aa ~ ~ 0 ~ .~i a ~ ~ ~ F-33 ~ ~ ~"~,o~,~~ ~ 7 a~i ~ ~ w ~ a~ b cn ~ c~ ~ ~ ~ ° ~ v~ p,~ ~ a~i v~i'~ ~ ~ ~ ~ ~ p ~ ~ ~ a~ ~ ~ va ~ ~ u, q, ~ z ~ d' ~ ~ ~ C~~"i ~ ~V7 N ~ Q U ~ r~ ~ ~i ~ ~ ~ ~ ~ p a c~ a ~ ~ ~~~~~~a~a z~z~ ~ ~ ~ U ~~~o~ ~ ~x ~ ° ' ~ ~ ~ ~ r~ u.. ca ~ ca ~r" a U~'> ~ ~ ~ ~ ~ ° r¢i ~ 4 ~ ~ ~ ~ ~ ~~;r ~ ~ ~ ~ ~ ~ ~ ~ ~ p c9~. v': ~r,( ~ >s ~v, n u~i ~ ~.G ~ D t ~ cT rn C7 t~ CT. C;` ~ „p al ~ ~ ~G C \ \ ti° ,r~ ~ 'L3 ~ N ~ ft ~c} ~rj, ~i a Q ~ a a a O ~ ~ r~ ~L? d' N C.. ~ C7 C7 CZ d C~ C~ C ji; i ~ ~ Q cn ~ ~ s.~. f~ d C3 C) .w.~ (,l C^I ~ ~ 64 6~A 4J3 1 ~ Q ~ ~ ~ ~ . W ~ 0. ~ C~ O ~ w ~ M' Cp J CA G3 e1" r~ U N c~d '~O v, ~ ~ ~ ~ ~ ~ ol~ ° ~ ~ ~ a~i ~ ~ ~ `C' ~3 `n n o Ca oo ~ ~ a Z ei ~s p n ~ o~~ ~ o o 'p ~`n~ Q ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ r~ ri ~i ~r ~ ra ~ m r~, ~ . ~ Q ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ •r~ t,l~ ~ N ~1~ ~ ~ p~ ~ ~1 ~ ~ i~ V1 u~ i~ ir'i 'f'; h ~ cCS iA ~f,i ca,,, b`i py d ~ ~ ~ ~ tJ C3 fl ~a:. N ~tt'1 ~3 ~ U1 ti ~ ~ ~ ~ ~ ~ • ~ 0 C~ ~ , ~ 'r~, ~ H y cd v~ ~ y:. v~ ~ p~ ~p i~ U C~ n ~ tC7 y.~., cn Q t~! ~ ~ Q ~ ~ ~ c~d ~ ~ p ~ ~ ~ cn '~v, ~ ~ ~ ~ ~ N ~ ~n c~, U ~ ~ p ~ ~ q) a3 ~a a~ C ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ p Q ~ ~ Q ~ ~ ~ q ~ Qy ~ 'a N td ~ ~ 4w, ~ U 's; :y r~ n1 ~ C7 ~ a] ~ G ~ ~ ~ .C~'~ G~3 p ~ ~ N ~ ~ ~ ~ ~ ~ S~7 s~ ~ V Q ~ C/] r~ ~ v~ Q1 v~ v ~ ~a ~1. p, ~ ~ ~ Q O ~ ~ ~ ~ d ~ ~ U ~ ~ ~ ~ ~ ~ j ~ ~ 4~.Y ~ ~ ~ ~ y ~ ~ N ~ U ~ ~ ~ J ~ ~ W v~ a 0 ~ ~ ~ ~ ~ ~ ~ ~ ~ p C7 ~ ~ ~ ,~l N 0 ~ 4~ ~ p CA cd ~ v~ ~ • ~ ro z ~ ~ ~ i~~ ° ~ ~ a~~~~~'~ ~ c~ ~ p ~ ~n~, s ~ ~,.~~~'~v ya ~u ~ ~ ~ Q~ ~ a~ ~b a~ ~ Q ~ ~ ~ ~ ~ ~ a~ ~2 ~ ~ ~ ~ F ~ f~ ~ i~ o ~ ~ ti~~ ~ ~ n ~ ~ ~ ~ ~ ~ ~ ~ p ~ ~ a~i ~ a~i ~ ~ ~ o > ~ ~ U ~ ~ v; ~ Q ~ ~ ~ ~ c~ ~n ~ ~ ~ ~ ~ 0 'r~ ~ ~ C3 ~ ~ ~ ~ ~ ~ ~ N ~ ~ ~u ~ u~ ~ p~ ~ 'U ~ ~ c~n ~ ~ ~ ~ ~ ~ ~ ~ ~ j a~i ~ Q ~ Q •`~'d v ~ ~ ~ ~ ~ ~ ~ U ~y ~ ~ r,~ ~ ~ ~ ~ ~ ~ i.~., ~ ~ ~ U Q ~ ~ A ~ ~ ~ ~ ~ Ctl ~ ~ ~ ~ w.l c~Ct~ ~ 0~..~ ~ ~ ~ N 41 y,,, ~Q U a~ S'"., Q` 6i ~ T} cU ~ a G w ,d ~ t~ ~ CIl ~ ~ ~ ~ ~ ~ ,p s~'~ t'~~Ci ~ ~ ~ ~N ~ ~ ~ [!l ~7 p va v y..E 0 N N ~ ~ .,a ~ F ~ ~ " ~ o ~ ~ o v ~ ~ o v~ ~ ~a ~ Q ~n 4 o ~ U ~ d U U ~ E~ U ~ ~ ~ c~ t~ ~n c~ ~ ~ ~ ~ ~i ~ U a o~ ~b ~ ~ ~ a~~ ~ E ~.w c~ oa ~ 0'~3 ~ai~ ~'n .~qc~ u ~ ~ ~ ~ ~ ~ ~ ~ u ~i ~ ~ ~ W ~ a ~ ~ tt1 ~ ~ll ~ ~ v CC1 fl ' ~ ~ ~ . , U ~ ~ ~ t~ ,C v ~J ~ ~ ~ tZ ~ y ` ~ ~ N ~ ~ ~ ~ 'CS ~ q ~G3~ d3 Q ~ r-ti ~ t, ~,fJ 43 ~ ~ ~ µf} ~ ~ ~ e~ v ~ ~ p ~ ~ ~ ~ ~ ~ cd ~ 'd ~s: ~ ~ ,~q c~,,, ~ ~t 41 U Q ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ + ~ ~a Cd ~ M ~ ~1 rn cil ~ ~ ~ ~ C"""d ~ 0 cr U ~ cd Q3 61 U~ ,Q ~ ~ ~ ~ ~ ~ U ~ ~ ~ ~ ~C ~ ~ ~ ~ d~ ~ h~l ~ ~ p > p ,...r ~ i~ ~ a3 ~ O "C1 ~ ' ~ ~.1. G~" ~ Q ~ ~ 4a r+ ~ U 4) ~ ~ ~ ~ C✓ """1 ~ ~ 4. U7 t~q ~ Q1 ~ G ~ ~ ~ ~ ~ N~ ~ ~ ~ N ~ ~ ~ o ~ v ~ ,n ~ o ~ ~ o ~ ~ ~ a ~ ~ ~ ~ ~ ~ ~ ~ ~ 3 ~ ~ ~ z7 "C~ ~f3 W C7 ~ a~ ~wud a~~'~ a-,~~•~ C z ~ G~ ~ ° ~ ~ ro~:~~ ~ d 0 ~ G f- u, , ~ 0 ~y ~ ~y ~ ~ ~ N ~ ~ ~ y N ~ a,.+ ~ p ~ ~ p , ~ ~ ~ ~ ~ rn ~ ~ ~ ~ ~ ~1 N ~,.~3 ~'p•~ ~n'~~~ ~ ~ ~p ~ ~J t~ • ~ S~. ~ ~ ~ cq w ~ •a i.~+ ~ ~ ~ ~ ~ ~ Q-~ ~ ~ " ~ ~-a E~ ~ ~-~Y~~Q ~,oo ~~`°v~ ~ 3u ~ "a~"~U ~a~ ~a ~ t., ~ ~ p N ~ ~ ..M GJ N ~ s~~. d ~ YC ~ O v7 ~ V1 G:~.~ C/~ C~ cd , ~ ~ N ~ ~ ~ G~, ~ p ~ ~~ci m td d' ~ ~ ~ ~ ~ Q ~ ~ w" ~ ~ t~' ' ~ p, ~ ~ ~ v~a ~ ~ ~ ~j ~ ~ ~ ~ a ~ ~ C ~ ~ ~ A, ~ V N Q) ~ r~ U dl 4. r!] ~ ~ ~ j, ~ vi ~ Q ~ ~ ~ ~ ~ ~ C} 6' "C3 Uc~} ~ ~ ~ ~ "C3 ' ~ a,+ ~ ~ ~ h ~ ~ ~ cci Q ~ j ~,v, ~ ~ ~ ~ ~ ~ U ~ ~ r~ ~ ~ ~ ~ U ~ o vi ~ ~O t~! ~ ~ ~ ~ ~ Q t~3 ~''R"1 . va a tn U r~ ~s ~ QQ ~ ~ 3~bfJ n~c,~°~,' ~ ~ ~ > ~v~ ?~a ~ ~ ~ Q ~ ~ ~ s. ~ p ~ ~ ~ q~ ~ ~ ' ~ b a~ ~ p ~ ~ ~ ~ ~ ~U yS . c~ 0 , . ll~ G7 U v U V ~ cil ~ ~ w ~ ~ ~ ~ a ~ Q ~1 ~s ~ ""u ~ ~ ~ ~ ~ •~a~~ d or~~ ~47a ~•~•~o~ ~ q ~ ~ o,~ ~ ~~o ~ Q Q ~tv~i ~ ~ w~~ a~i ~v o~~~~ ~ ~ ~ a ~ ~ ~ U ~ a~ ^~7 ~ ~ °j a~ v~i ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ , ~ ~ ~ m 'd cd ~ ~ ~ ~ a ~ `n a ~ ~ ~ ~ ~ 0 ~ ~ "L7 .A ~ ~ ~ ~J ~ ~ c~ aa c~ o ~ ~ U ~ ~b~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ o~~~ q ~ m W ~ ~ A ~ ~ ~ ~ ~ ~ ~ i3' ~ t~ n~ cU ~ id "C7 ~ n~ ww ~.l ~ ~ ~ ~ p ~ ~ ~ ~ ~ N~ ~ ~ ~ ~ ~ ~ v, ~ d R' ~ ~ ~ ~ w ~ ~ ~ ~ ~ ~ ~ ~ Q q p ~ ,,.~C ~ ~ cd ~ ~ cd ~ c~ v~i Q ~ p ~ ~ ~ ~ ~ ~ ~ ~ pw A, c~ ~ c~, F~ ~ < ~ o s~. C~ a o ~ F~ ~ c~ ~ ~ U ~ ~ . ~ ~ ~ ~ ~ F-34 ;/7 ~ ~l ~ ~ ~ cd ~ v v cd ~7 ~ 't'3 ~ ~ ~3 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ m3 ~E~ ~ ~i ~ i ~ ~ pp ppll ~ ~ U~ ~ 4, ~"p ~ ~ ~ c~6 ~ ~ , ~ Q ~ ~ s" ~ ~ ~ ~ ~ ~ ~ ~ ~ j ;r,^ ~ ~ ~ ~ ~ ~ ~ } ~ ~n t~ ~ ~ ~ Q c~ ~ ~ ~ n~ r W 0±~ b W Cf., ~ '"I t-' c~ 3~} ~ r Q v', ~ n ~ en r~ 7, ~ ti ~ rn j ~ ~ ~ ~ ~ ~ p C~l N( ~ ~ ~ ~ ~ Q ~ ~ ~ ~ ~ u p v ~s ~ ~ p ~ G ~ • ~ ~ ~ r~ ~ ~ n rn ~ a ~ ~aa ~ ~ ~a ~ E ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ v ~ ~ ~ c~ ~ ~ ' CF~ ~ a U +n ~ . ~ ~ ~ ~ ~ ~ p ~ ~ ~ C~ F t~ aC~ 'u ~ Ci p~ td Q7 y C? V 'i.~ ~fJ ~ ~ `n' > ti ~ ~ ~ ~ 4: ~ ~!J a3 v ~n ~ `J C a~ Q. sd ~ e~, . ~ ~ ~ ~ ~ M ~ t~~ y ~ ~ ~ ~a ~ ~ ~ ~ ~ a! ca "t~ ~ x. r, ~ N CT {`I € „q ~ ~ ~ r~ 's,~ ~ ~ , ~ i"' 'O ~ ~ j~ ~~~~„,,,C~ ~ ~ ~ Q a^' 5~+~~ '7y f~C p~~ ~ ~ Q ~ ~ ~ ~ Q Q ~ > ~ ~ ~C1 p y ~ ~ ~ ~ ~ r/~ ~ A+ O ~ Q E E 1 C.~j «~~w ~ry+Y ~ V1 SC} ~.O ~ ~ 4(~v+ r~~ ~ ~ w~ ~ f-~ V~ ~ ~ C~ ~ N ~ ~ d" 'y ~ ~ C~l C~ ~ 1-r h .p ~ ~ ~ ~ ~ ~ 5..~ W 4. ~ ~ "C~ ~ ~ ~ ~5 ~ ~ p ~ v1 ~ s., y ~ c~ ~ ~ ~ ~ 0 ~ ~ ~ ~ > QJ v~ n ~ ~ ~ wQ p ~ ~ 4 Co otl, 0~u~ va ~ D~G d~' R~ p,~ +J ~ R~ ~ N~ ~ 3 ~ w~" ~'h~ ~ N ~ °o~~~n ~ ~ ~ ro a.~ ~ ~ ~ a-~~ ~ 3 Q~ ~I; ~~r~~, ~ ~ ~a ° ~~~~s~ ~ ~~~o ~,°~Q~~~~a~~-~~. ~ ~ ~ a~ ~ a ~ ~ o ~ ~ b , ~ ~ ~ ~~.~U~~•~~,a~~,~ ~ ~ a~'~~~a~°o~b~n~ ~ ~`~~r•~ ~~•~.d~d~ a~~ ~ Z ~~'„~~~z~~ ~s~~ a~~~~ ~ w ~ ~ ~ ~ ~ o > a~ ai v ~ ° ~ fl ~ v ~ ~ ~ a„~, ~ c~ ~ ~ ~ ~ ~ Q ~ s.~., ~ ~ ~ ~ ~ ~ ~d p c3~ G7 oC~ t~l~ ~ ~ ~ ~ ~ ~ ~ p ~ ^ ~ ~ ~ ~ a.~ 'sm. V; ~ o) Vl C] ~t`. ~ ~r~-+ ~ ~v~i ~ v~ ~ ~1, ~ dJ 'r:a ~ ~ 4~ u~ r,`~ ~ j b!} d~ e~' ~ ~D lC)i u? ~ ~ ~ iw ~ ~ ~ Cd ~ s.~, ~ ~ s." ' ~ 0 4' ~ z r~ ~ CE N CA M v~ ~ 0`~ ,y Ri n1 cd r~r, t~j u!] p f,`~y ~rr. ~ ~ ~ c~t ~ ~ ~ ~ ~ ~ ~ ~ N Q) ~y `n y s. a `n ~ ~ ~ ~ ~ ^ ~ n~,~ ~ ~ ° ~s'~ ~G ~ ~ h ~ ~ Q ~ ~ ~~.Q ~ ~ ~ Q ~ ~ u, ~ ~ ~ ~ ~ ~ .p~ ~ ~ ~ ~ ~ r~ ~ u ~ ~ f.s~ ~ E-~ ~ ~ a`~i ~ ~ Q ~ o ~ C~ ~ ~s ~ ~ ~ c r~n ~ ~ •~~3`~ a ~ ~t~~ n ° o" ~ ~~°~r A ~ ~ ~ ~x~ ~'~~~a~'°p~'~ ~ ~ U ~~~a ~ d~° s ~ p ° ~v ~°.~Q~wro"'~~~n~.~:,, ~ ~ ~ v, ~ v, ~ u ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ a ~ ~ ~ ~ ~ F p, ~ ~ U oo ~ ~~,e~~• d v~, a~ o a~ ~ p ~ ~ ~ ~ ~a ~ ~ ~ a, K W ~ ~ ,u~ p~ s, ~ ^ ~ ~ ~ ~ q ~ p ~ ~ ~ C 'q ~w1 ~ ~ s., ~ ~ ~ "C~ Q ~ fti v L~ ~ N ~ V ~ r/~ C.) a3 ;l ~d ~ ~ w~ ,.C Q, y, ~ y ~ G t'1, ~ ~ ~J 'C7 ~ • U ~J ~ ~ ~ . 43 F".' ~ S.," s. U p i"' vl y,~„ Q~ 5~1, v~ RS a G:: ~ ~ ~ ~ Q ~ ~ ~ ~ ~ ~ ~ ~ ~ cd p 0 U v ~ ~ ~ ~ ~ % ~ ~ CL vr ~ ~ ~ ~ ~ ?1 ~ ' p ~ ~ ~ ~ a' ~ ~ ~ ~ ~ v~ ~ Z ~ ~ y ~ ~ ~ ~ 'r~^ ~ ~ ' ~ W v; ~ sd s, ~ ~ ~ ~ ~ ~ c~~C c~d ~ 'd 'd ~ U' a ~ ~ ~ Q ~ ~ ~ ~ C ~ ~ ~ a ~ ~ d ~ a~.7 r~.~.. i U ~ Q 4.~ N 4l 4 Q ~ ~ ~ ti ~N ~ id n,y 51~., ~ ~ ~ ~ ~ sd U? ~ p ti p p N ~ r ~ ~ ~ v ~ ~ ~ ~ ~ 0 ~ ~ t~1 "C~ ~ ~ ~ j ~ ~ Q ~7.~dU ~r~U~a ~ U ww~ U U ~C~~~b ° ~ ° ~ ~ ~ Z d~ a J~ c~i ~ ~ 3 [ € k I' ~ ~ ~ ~ ~ ~ ~ ~ ~ I ~ ~ ~ ~ ~ "(3 p ~ S~. ~ G~1 ~ ~ ~ ~ ~ ~ ~ ~ ,I~ ~ O W ~ ~~•~u ~ ~ p~ ~~~,~~~.Q a~ I ~ , F ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ai~ Q a o ~ ~ U ~ a ° ~ ~ ~ ~ ° ~ ~ ~ ° ~ F ~i ~ ~ ~ ~ ~ ~a?~~~~ oo a ' r~ . ~ ao ~~~a'~ ~ o ~ ~ U ~H ~ ~ ~ C~ 0 Ell ~ ~ „-.i ~ ~ k~ ~ ~ ~ry ~ ~ ~ ~ ~ ~ ~ ~ , ~ Cp~- ~ ~ U ~ ~ ~ ~ b4 ~ r~..G., o 0 0\° o q"~ cq ~ iw ~ ~ a~7 ~ :7 v~ ~C7 ~ ~U" ~ ~ s~ a ~ ~ ~ ~ ~ ~ ~ L7,. C d d N N+' QJ d} GO Gc3l ~ ~ ~ ~ ~ ~ N ~ n ~ ~ ~ ~ ~ 00 rA ~ ~y .w ~ M t'1~ W ~U `~N W~ ~a o ~ {r' ~ ~ ~ ~ ~ ~ ~ ~ ~ c~ c~r ~ ~ ~ ~ ~ a ~ ~ ~ ~ Q ~ ~a c~ ~ ~ ~ ~~~~~''~o ~ ~ ~ Q ~ ~ ~ a~°w~w ~ ~ ~ ~ ~ . ~ ~ ~ ' c~ t~ c~ ca r- ~ c~ n ~n in ~ En kn r c~ co~ ~ ~ ° ~ ~ ~ ~ ~ 0 ~ ~h do ~ G p ~ ~ ~ ~ ~ . ~ ~ ~ ~ ~ p~j ~ ~!S DO v1 ~I .r +ll N t~ Q G~~"fl CT ~ Ch M ~D CI'1 ~ ~ ~ ~ vNi •p q~ s„ ~ r~ ~ W ~ ~ ~ ~ p ~ 'q ~y ~ ~ ~ r~ U ~ ~ ~ ~ t~ 4~ ~ ~ 0 t~, ~ ~ ~~p ~n ~C3~~~ E-'~ ~ ~ ~ 4-. W rn 3 A~~, tt tt ^ ~C ~i ~ ~ s"` ~ u~~ id w- r~Y Co ~n Cv z L~ q a~i ~ c~d 0.~ Q aCt r~ ~D '/1 r~ Q, w c~ r~.,,, (T N d? th ,c~d ~ r, ~ ~ y,., CA ~ ~ oQ ~ N M ~ ~ ~ Q ~ ~ ~ ~ ~ ~ ~ ~ ~ N R~ u 4 4 ~ ~p ~ ~ U~ ~ Q7 ~ s.,. ~ 1~ s. ~j cti ~ `"1 ~ ~ ~ Q ~p v 'cn f " U > ~n ~ GA vi ~ ~ ~ ~ b ~ r~' N ~ ~ ~ s.47. p .tl~+ c~i ' ~ ~ ~j ~ ~ ~ ~ ~ ~a ~ 's:. ~U ~ 0 q ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~G~~~ d~ ~ a~i ~ ~ ~ ~ ~ ~ ~ ~ ( .a ~ ~ ~ ~ > ~ ~ ~ v~ p ~ y ~ ~ .L ~ ~ ~ E~ ~ ~ ~ " ~ ~ ~ .~m•~~a~~x~ ~ ~ ~ W ~ ~ .a ~ ~ w ~ ~ ~ '"c ~ ~ v ~ ~ a~i ~ ~ ~ V~` ~ a~i ~ ~ ~ ~ ° b ~ ~ ~ ~ ~ ~ ~ ~ v~ Q ~ V a 4 " ~ ~ ~~~~~Q~ ; c~ w~s d ~ ~ ~C ~ ~ ~ a~i ~ ~ ~~~~.p~~~ ~ ~ ~v ~ , U ~ Q ~ Z ~n ~ ~ ~ • ~ ~ ~ 3 ~ ~ ~ ~ ~ ~ ~ v ~ ~ d ~ ~ ~ ~ ~ ~ ~ ; ~ ro o ~ cra n p ~j ~ ~ ~ ~ n ~ ca ~ n F ~ ~ ~ ~ ¢ ~ ~ Q~] ~ N. 0 Ci ~ fil ~ ~ ~ ~ 43 ~ ~ ~ ~ p ~ ~ ~ ~.J ~ ~ U ~ ~ ~ ~ ~ ~ ~ ~ Q ~ w U a E~ ~ ~ N F-35 ~ U C,~ C~ U. u1 c~ r!" ~7 C) oo cT. N t~ ~n t`9 ~I1 5t Ch d" ~Q C~ 40 M ~f'J jnI E'"~ d' cr c~ ~~~n d~ o0 0o M v~ ~ cT r1 c~t ao <t' ~ C7 0~ r~5 C7 ot C~ ~hII ~ r*5 ~ Q N N N d° ~ oa oA r~ En c*'~ ~D ~1 ~G? C~ t5~ ti'l~ CT O cn O C~ w U~~ M i~ ~ ~D ~ el' C~ GSS 4f ~/1 CJ ~ CV d" CR ~J~ N G~i r1~ ~I1 C? ~ M[~ OQ C+1 C~I u~ ~fl ~f" DC CV trl N G Q M i/3 iI] N+'~ M Od M~ ~C} C7`; ~ p AC1 ~ M ~h N M V1 ti0 QO Ch f~ 09 C) Q V'~ Ch ~l~ ~0 t~y C7 C~ J' ~ ~ MC~ ~N*^ i~ C3`M 1~ m ~~1 ~ ~ ~ ~l ~ a ~ ~ ~ ~ .ti ~c ~ ~ ~ ~r ~ ~ ~ ~ u ~ ~ 'n ~r~ c,~ c~ c~. rn ~ ~ M M M P~t ~ ~ ~ ! 1 1! I i i I~ ~ I I 3 I I I 1 1~„ i ~w U ~ yr~ N (`3 ~ ~ ~ ~ `,D ~D ~ ~r, +r~ ~ ~~t ED Cn CT. t7T rn Q CT eh ~ ~CJ C~ ~q aq o4 p„~, c7~ r~ {n t~t d~ C7 C7 CT oq ~h oa ~ cy ~ ~ r• r, N t~ ~17 M~D t~ l~ I~ tXS ~ Cs C~ Cr I ~c? t~ ri r*~ I,~ j I ~ f c~ 4D ~7 ~r C~1 tT~ t= ~ri ~ Cr cT ~ C7~, 0 i~, ~ C G7 n1 'd' t~ c~ C` 0'~. L'~~ ~ d" cn LT ~r1 eh OQ oC~ Z ~ ~A SU ~ CT C'- N N ~rl e~ d~; ~ 4 ~T N ~ ~ b~i ~ V~ ~ p LD C~ ao t~ oa ~ w u~ tD ~n ~G ~ i~ ~i !n ~ t~~E ~ C• d' d' G9 CA ~ V l~ rn O t~ t~- ~1 N d" ~ t~ ~D c~, sn N d~ ~n ~t ~0 c~ t-~ O--~ ~ rn ~n ~p C? cJ ~ 1~ ~ ri c4 t~ 1~ ~ w a 3n r`~ ~ Lfl ~ C d' ~ri d' d° C7 tD 40 r~ I~ d~ ~ C~ d° CT ~ cn ~ ~ ~ ~ d 04 ~f' KV ~n GO cn D9 CV r's Ch ~0 1~- d' ~1" I`• d" C'7~ G7 C'R d' d" ~ +r1 04 pl M d fC N CO C7' G4 r- d~ EI'] t'1 ~Il ~D E"'- tG CT N[~ d' f ~'J ~O ~✓7 VS ~''1 N! O ~N N ~t1 Q~ r" N~^'^ hI C0 N ~ Vl Ci ~ ~ M tn w^" M ~''I ~ t`~ 5F3 Q ~ ~n ~n ~ ~N ~ : u~ r~ ~ E U ~ ~ ~ ~ 4 ~ a ~ ~ w ~ ~ ~ ~ Lx.~ ~ p~j ~ ~ ~ ~j ~ cL U p k+ ~ ~ . C7 ~ ~ a.. N ~ p, 4 ~ s~d A. QS CL ~ ~ ~ 7~ ~ ~ f.~€ Q N N V`, ~ C~ u, ~ p, ~ 't3 Q Q ~ ~ x~„, ~ ~ ~ a ¢~y U ~ ~ ~ ~ W ~ 2 p ~ p ~ ~ ~ '~1 ~ ~ ~ a`~,, "rj q~ "CS ~ Cl ~ C~ Q ~ ~ q. r~n ~ N ~ ~ ~ rn ~ N ~ ~ N ~ vk ~ ~ "~7 ~ ~ w ~ c~ ~ ~ ~ bA ~ ~ ~ ~ ~ ~ C~ ~ ~ ~ ~ ~ ~ ~ ~ W ~ W,,~Q~.~ ~ ~ Ga.. ~ ~ U va U .a ~y o ca ~ ~ ~ ~ ~ a~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ a. ~ m .w ~ U ~a~ ; ~U~ ~.~~`~m°~~°~"`"~ ~ ~ ~ ~ ~ ~ ~ ~b ~ ~ ~ aro o ~ ~ ~ ~~3 a ~w ~ U ~ ~ ~a ~ ~ Q ° ~ ~W ~a'~,~~ ~ ~ ~ ~W~, ~ ~ ~ ~ ~ ~ ~ s~ uaU~" ~'~E~~'~c~~cnQd r~ ~ ~r~c.~~~~1cn0~ ~ ~ ~ H 4 ~ ~a ~ ~ w ~ U U U ~ ~,7 ~ d ~ ~ cn ~ ~~'~o~°`~,'''a ~ ~~x w ~o° 3~~~Q°'~n~~ 0 ~ ~ ~ ~~~'~d ~ ~ n~~ ~o ~ ~ o~o~a~~a~ ~ q~j ~ ~ ~ v ~ ~ E""~ U ~ ~ ~ ~t' ~ ~ ~ t/) ~ p; j~` 4 N r~'j s, ~ t) „~4~ ~ p.Q. w+~ ;y, ~ a~. N y Q+ r~.~ . ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ v ~ vi Q 4} U ~ U qa C ~ ~ ~ ~ ~ cn ~ ~a ~ ~ ~ ~ 0 ~ ~ . ~ ~ ~ ~ ~ U.~ ~H ~ a~ ~ s~ O Q ~ ~ ~ ~ U Q± ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ D CO U > ~ cd ; 3 ~Q' a~~-y' 4 ~a a~~~~~ F ~ ~ . ~ b ~ a~, rn ~ w U ~ W ~ ~ ~ ~ ~'r=~~' ~~Q E~ ~`~o~ `~~Q~n`~°~'~ C~ ~ ~ ~ ~ ~ ~ n"~ flZ~ ~ ~ ~ ~ ~ n~ ~ ~,~a~N ~ >~'~~~,~UC~ "i~ ~ ~ ~ ~ y,, p r3~ Ca . ~ ~ ,..,~.3 r~j ~ ~ ~ CT ~ ~ ~p n v~ ~ ~ w 0 ~ ~ ~ ~ ~ ~ ~ r.,, y Y ~ a~ ~ p .,r va ~ ' ~ Q ~ ~ ~ . u ~ ~ ti ~ ~ • ~ ~ n ~ q ~ C~ C~*j ~ ~ "w4 ~ ~ 4w. ~ id ~ ~ a` ~ 'C ~ .t ~ C9 ~ d ~ a3 O U rl w a, f,, ~ a~ U a~ nA ~ ~ ~ ~ p ~ ~r s~ ~ ~ sa ~ ~ ~ ~ ~ • • r!~ o ~ ~ a~i ~ ~ a tiy" > ~ ~ ~ ~ u ~ ~ ~ ~ ~ ~ W ~ ~ ~ b ~ ai ~ ~ ~ ~~~~~"'~~~a~ ~ ~ ~ ° ~ ~ ~ ~ ~ i .n ~ a~ ~ ~ ~ ~ ~ a U ~ ~,Q ; ~ c~a ~ ~ ~ ~ Q v ~o~~a~~~~;~ ~ ~ i=H~ ~ b ~ ~ ~ > ~ ac~~o ~ ~ ~ ~ u ~ ~ a, ~ ~ a ~ ~ N ~ ~ ~ ~a A ~ ~ ~ ~ c~ ~ ~ ~ N ~ CL fl ~ ~ r~ ~ ~ ~ ~ ~ ° ~ ~ Q ~ a~ ~d E~ ~ a, ~ ~ c~i~ ~ ca ~s ~ ~ ~ ~ ~a ~ ~Li y 4~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ o ~1 ~ ( r ~ C~ U ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ffl ~ ~ ~ll ~ a ~ ~N ~ N c~~y s~, ~ CJ ~ ~3 ~ a i'a. ~:i ~ ~p ~ ~ ~ ~ ~ rJ1 ~ id U Q ~ ~ ~ ~ ~ 4 ~ ~ ~ ~ ~ n ~ ~ ~ i~ a~ ~ ~ ~ ~ .Nn ~ ~ ~ 0 ~ ~ i~ ~ ~ ~ cQj N :~'z» Cd ~ J ~Q3 ~ ~ ~ ~ ~ ~ ~ C~3 """y Uj "d ~ C Q O cd ~ `F"" ~ ~ ~ ~ ~ Q ~ ~~'o ~ ,~;~s~U n ~ ~ G~f}~ ° a~^$ ~ CJ ~ ~ ~ ~ ~ ,~w~~vv~~~a~~ p Z U U d~d~ U N°~~ °~'~u~U a ~ ~C ~ F-36 ~ ~ ~ ~+w 0 U ~ ~ ~ 4" ~ ~U ~ ~ 4] ~ ~ ~ ~ N a O W ~ ~ ~ ~ ~.~l7.~ ~ ~ c~ v "~7 ~ ~ ~ -~4.`*"`~ WQ\°~°,\\° Q '~'v, Q N W ~ p~ ~ 0 p 'n ~ CT C~] ~ ~ ~ ~ ~ p ~ ~ ~ ~ ~ ~ ~ ~ cY' c+t M a' ~ ~(7 ~r ~ ~ .~S'1, ~ Q ~ ~ ~ ~ ~ v se~. ~~`C3 7 s!~ Q'„;, vi N ~ ~ ~ ~ ~ ~ 0 ~Q~ a Q~ i-+ ~ ~ Q) ~ C/J ~ U U r~w cG ~ ' ~ d fl ~ ~ ~ ~ U ~ ~ p~ ~ ~ N ~ U ~ Q ~ • c~3 ~ ~ ~ ~ 4 ~ ~ Gl. ' s : ~ ~ ~ ~ ~ ~ e~ v; ~ ~1:.""' ~ ~ ^ ~ C3 ~ ~ , ~ ~ ~ ~ ~ ~ ~ rob ~ M wQ\`°~~ ~ Q'~'~ ra ~ u fl ~7 ~ w ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Q ~ ~ ~ ~ d ~ ~ W ~ . ~ ~ ~ ~ ~ ~ n~ Q ~ ~ H ~ ~ ~ ~ ~ ~ d ~ ~ ~ ~ ~ Q , ~ ~.~3 cd 1 ~J Q~ ~ r~ ~ Z ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ vi ~ ~ ~ t.,,j ~ ~ ~ ~7 ~ ~ .ca ~ ~ Q N ~ ~ ~ d N ~ CU1 `n ~ d1 ~ Q ~ ~ ~ 0 y~ ~ ~ 'r~' ~ c~ ~ ~ U ~ ~ ~ C ~ ~ V v~ ~ ~ ~ ° sr3 ~ ~ p ~ ~i ~ . ~ . ~ q~j ~ dy ~y ~'~7,` ~l1, ~ ~ ~ ~ t~d Q~ Q ~ p ~i ~ sJ ~ 0 0 d' ~ Q i~ 4M U ~ r.~ U~3~~ ca~ ~c~c7~~~; ~,~ac~ ~ q ~ y~ ~ ~ ~ ~ ~ ~ ~ Q ~ U v~ ~ 'c~ y~ ~ "d Gz, q~ v v~ u ~ ~ Q U ~ t~ y ~ d' ~ a.~ ~ 41 ~ ✓ ~ ~ ~ ~ CJ ~ 'U ~ ~ ~ ~ ~ ~n ~ ~ ~ ~ O ~ LCj Q ~ ~ p ~ ~ ~ s~„ ~ ~ ~ ~ v ~ 4-+ ~ ( w ~t,7 s.~ ~ ~ v~'i ~ "~13 ~ ~1„ rj ~ ~ a G. ~ p ~ ~y ~ rr~ CA Q} Q ai ~ 4~ d1 w.Uy cd ~ ~ ~ ~ ~ ~ ~ t} ~ ? ~ S'~„ ~n ~ ~C? ~ ~ ~ U ~ ~ ~a ~ ~ ~ ~ ~ ~ ~j 'O ~ 0~ ~ ~ ~ `i' ~ a" ~1' ~ ~ ~ r/~ s• d~7 'i~- s.~ ~ f~ cn CJ s. ~~~1" N q ~ ~ ~ 0 ,M 4:'~U .Q? ~'~p ~ . ~~tl ~7 ~ ~ a 4] d ~ ~ ~ ~ 'U q ~ ~ ~ ~ ~ p a ~ ~ ~ ~ Q ~ ~ ~,x„; ~ v v, ~ ~ ~ v~i ~ r~ ' W r~ ~ v~i ~n ~ ' 7 ~ p 'd ~ ~ cd ~ `v fl." e~ U f.~ , ~ a~ ~i Q U ~ ~ ~ ~ tn ~ ~ ~ u i ~ ~ n~ ~ ~ ~ ~ ~ C.~ ~ ~ ~ '~r3' ~ ~ J ~ ~ ~ ~ ~ ~ ~j ~ ~ W G.. ~ ~ ~y ~ ~ ~ ~ ~ ~ ~ n3 ~ ti3 ~r' ~ ~ q~j „G7 CS" ~ ~ G1~ ~ ~ ~ ~ 4~" ~ "CJ ~ ~ ~ U "!1 ~ ~y ~ aJ O b.... 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C~ O C7' v~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~3 ~s Q C7 ~ri C7 Q V~ ~r'i ~r~ c~ ~ ~ cd ~ ~ ~ ~ 'd ~ ~ a~ ~ ~ t~''- o~o o~t~ oo~A ~ ;n ol ~ s~ ~ ~ ~ .D ~ ~ C~ r ~ b!} RR ~ U7 ~i 0 r~ ~w ~ Q ~.t, ~ ~ ~ ~ ~ ~ s~, p i ~ ~ ~ ~~7 ~ft 4~+ ~ ~ ~ p v, J ~i m 0 U.., c~., q~ ~ , ~ ~ ~ ~ I, ~ ~ ~i ~ ~ ~ ~r '~3 ~ ~ ~ ~ Cj &4 b4'i ~ ^ ~ ~ ~ ~ ~ .3 p ~ ~ M ~ `n ~ ~ ~ Sa 0~ ~ t/~ C3 U ~ CJ ~ ~ ~ U N J~ ~ J1 ~ ~ ~ ~ a1 ~ ~ s~ ~n ~ s~ G ~ p ~ ~ ~ ~ ~ ~ ~ G,.~ tU ~ "Cy ~ ~ ~ ~ ~ ~ o ~ a~ TJ a N p ~ ~ p C~ ~ U bA c~ ~ ~ r~ ~ ~ ~ ~ ~ ~ ~ E ~ ~ C~ ~j ~ ~ ~ ~ ~ ~ ~ p ~ ~ U ~ C7 ~ Q ~ i~. 4) ~ 4J ~ N . ~ ~ ~ a c~ t'~ v~ u y ~ 'ti ~ ~ Q ~i ~n ~a, 4~ cd t~ ~ ~ N 4Y s. H ~ ~ ~ ~ a~~ ~ ~ ~ u}„~ ~ ~ ~ • s:,, t~ Q ~ 0 ~3 ~ w ~y U ~ ~ ~ ay ~ ~ ~a 's., s~ ~ ? ~ ~ o] \ ~ ~ C7 ,S"`~.. 'c~ ~ ~ ~ rn ~ Q ~p ~ s, ~°p r~r, p N N s• t~ Cj w~~ ~ ~ ~ Q Er~ p ~ E~ DO tT C7 ~ N C~ N ~ ai ~ ~ ~ J C3 4 ~ td ~ a ;n ~t ~y ~ f~" fl~ td "C7 dOGOC7c~C3 U} Ch~ ~~jry ~ Q r~ ~ ~ v+Ua 4.+ ~ 4~ t~t Cd C~ N N t`l C~1 C3~ C7 N,'~. ~ ~1.; ~ ~ (7 ~ ~ 0 i~ i p ~ CJ~ ' ~ q3 ~ ' ~ rh, k C7 CI] Yr 4/ ~ ~n ~ ~ ~ .N 1^1 ~ ~ ~ r/~ N dJ 'y" ~ t~, Z"' ~ ~ c~5 f~ ~i. ~ J~ ~ ~ a ~ ~ ~ ~ ~ ~'U~~, ° ~ ~ ~ ~ ~ ~ ~ ~ ~ ~c~~',~~~ ~ ~ W • ~ a a~ ~ ~ ~ ~ ~a ~ Q W ~ ~ ~ ,a? ~ ~ U s~."~ ~ ° a~i ~ ~ ~ ~ ~ ~ tl'~ bIJ ~ ~ t., Uj ~ ~ y ~ ~ +m' ~ p ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~s ~ ~a~i ~ E ~ U ~ .ld~ ~rn G~ U C~~nG~L c~d.~.~ Q.~ ci ~ d ~ U~ d' 1 / +f~ C/.t a o a Q ~ ~ ~ ~ ~ Q c~ p ~ ~ ~ ~ ~ wq ~ eh Go G7 v, ~ ~ ~ ~ ~ ~ ~ ~ R, ~ ~ "~J ~ ~ ~ q p~ a v 4., ~ pj' ~ ~ N'' ~ cu 4J ~1J ~ ~ NC`~C ~r W ~ ~ s.,, CJ ~G7 h ~ 'L"~ ~ ~ ~ ~ "C1 ~ ~d ~3 Q7 a~ ~ bA ~ ~ r • ~.y ,.C~ cd C~ ~ ~ ~ ~ ~ ~ A, c~ ~ ~3 q~ U ~ ~ ~ ~ ~ ~ ~ > ~ ~ ~ ~ ~ ~ ~o~ ~ 4S ~a ~s~.,~~ H ~ 3 ~a~i ~ c°~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Q ro c°~ ~r ~ ~ ~ ti , ~ , ~ ~q ~ ~ ~ ~ ~ ~ ~ ~ ~ ~n ~ na ~ ~r' ~ ~ Q -a ~r~ ~ ~ ~r, ~ ~t ~n U ~ ~ i~ u~~`~ ~ Na~ ~ ~s a~~ Z a r~ ~ ~ ~ ~ ~ ~ p C7 r~ 0 ~ ~ ~ ~ c~3 ~ ~ ~ ~ q ~ ~ ~C~7 ; Z a Q ~ a ~ ~ ~ a~ ~s ~ a~ ~s ~ ~ ~ , ~ ~ ~Fi 69 5 3 ~ G~ Q ~ ~ A u ~ p ~ ~ ~ ~ dJ ~ ~ ~ ~ ~ ~ ~ v ~ ~ x~ ~ ti Q ~ w ~ ~ ~ ct~ ~ ~ ~ p ~y ~ ~ N ~ ~ ~ ~ ~ ~ ~ ~ q'C~j ~ p ~ ~ ~ ~ c~d ~ ~ ~ ~ U ~ Q 0 ~ ~ U ~ ~ a o \ ~ 4~ ~ ~ . ~1 ~ ~O ~ ~ p ~ C~ Cr3 q +a ~ ~ W r„ ~ U ~i S~ ~ C"~ ~17 ~""4 .r~''r, ~ ~ Cj v'y t~ ~ ~ a~.. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ U s.`~, ~ ~ ~ G4 04 Do . 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C? ~ 4~i ~ ~ p Q ~ p p U ~ C) ~n ' ~ n ~ ~ p ~ C~ ~ j-+ ~ 'rn ~ ~ ~ ~ V' ~ ~ ~ O ~ tsU~ Ql ~ C~~J ~ ~11 tn ~ (,T C~ ~ Cc3 ~ ~ ~ G ~ 'd" N ~ ~ G~ t~ ~ C) ~ ~ v~ ~ 'z3 5q m ~ 0 ~ ~ ~ 'L~ ~ rJ ^ ~ ~ ~ c~n ~ cC c~j ~ ~ ~ ~ ~ C~ ~ ~ ~ M r ~ 0 ~ ~ v~i v~ ~ ~0 0~ ~ ~y ~s D. ~ ~ ~ ~ C ~ N ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ aa ~ ~.j 3n oA ~4 ~ v, ~ ~ ~ ~ C7 U Q ~ ~ ~ ,~a ~ v~ p `n t~ ~ a~ ~ 0 ~ b ~ ~ ~ ~ ~ a~i v~i ~ ~ ~ t~ rJ~ C3 N U ~ ~ 7) C~ y„ ~ s" r ~ r~~ r.; ~ ~ ' , ~ ~ tYj C~ p c~3 `n Q 4`, C~ ~ C~ ~ ~ N ' ~ rJ ~~r, c~ S~ A~1 Ul ~ ~ Ff3 l~} ffr vf 4 ~ ~ U G~-E ~ ~ ~ ~ Q ~ ~ .Q ~ ~ • ~ ~ ~ ~ d~l ~ x Q ~ ~U ~ p ~ ~ ~t ~ q 0 ~ ~ ~ ~ ~n ~ ~ ~ a,y ~ W c7~ a~ s ~ c ~ ~ ~ ~ ~ a, U ~ ca ~ ~ ~ id ~ ~ c~o o~o ~ q~i ~ h ~ p a ~va ~ ~ a ~ ~ ~ ~ ,,,~j' • ~ Ql N C7 ~ v ~ ~ ~ ~ , ~ 0 p J ~ ~ p ~ ~ ~ ~ ~ ~n ~ ~ U o ~ ~s v c~ ~ a~ v ~ ~ ~ ~ ~ ~ ~ c~ tn ~ . ~ s~ v v ~ v, ~ > ' ~ v ~ ~ Q a~ d ac~ ~~ro ~ ~ ~ ~ ~,o ~ ~ ~ o o ~ n ~ " ~ ri aa rt ~ ~ ~ ~ ~ ~ '~v, ~ u~, ~ ~ ~ U ~ ~ c'~d ~ b a~ ~n. ~ a' ~ d d ~ ~ 0 ~ '7.~ ~ ~ ~ ~ Gy c,~j ~ ~ ~ V o d a a v a'F Q~ d u ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ s~ ca ro , ~ ~ ~ a~ ~ ~ c~1 ~ . ~ ~ ~ v i~, ~ c~ a~ ~ ~i. ~ ~ ~ 0 C7 ~ , ~ cC • ~0 rn • ~ ~ ~ N ~ W ~ ~ Q v~ . w~+ V~ ~ a~ ~D O u? Aw ~ ~ ~ ~ ~ ~ ' ~ ~ a"~a p ~ ~ ~ ~ ~ ~ y ~ ~ ~i ~ ~ ~1 ~ ~ ~ ~ ~ ai 3 . el 0 y p ~ ~ sd C~ ~ ' C) ~ d~,~~~ ~n~ co~ Z ~j ~ ~ ~ u ' ~ ~ ~ a~, d E~` c~d 0 , ~ ~ U ~ r~ N ~ 5~., ~ W ~ 'vi ~ ~ rCj N ' cN„ a ~ ~n x V~ ~U ~ ~w "~i ~ ~ 4w; G~ ~ V;3 C1J I~ Q W "C5 `L~ ^Cj ~ ~ ~ a~~ r~ Q ~n ao ~ b ti a~ s~ ~ u~ a~ ~ s~ ~q ~ ~ v ai c~ ~'s= xa... ~ W ch, ~ ~U 5~3 c~ ~ ~3 ~ W ~ t~ ~3 ~ Ei3 ~ u' ~ p D ~ v~ u ~ ~ Z ° r~~ C7 ,W~U~ ~ ~ ~ ro ~ Uo.~ ~ ~ ~ W~ O r.• ~ ~ s.~ ~ c~ a G1: c~d ~ N ~ ~ t~~' ~ U ~ U r; ~ ~ ~ ~ ~ vi Q a ~ ~ ~ C~ c~C C r.a Q C7 ~ f'1 c~d 'W- s ~ s„ ~ ~ v ~ ~ ~ qj •v ~ ~ n ~a~ ~ ~ u ~ W W ~ ~ 0 ~7 C7 b" ~ qk ~ ~ ~m 's, ~ ~ ~ ~ 4~. ~ ~ ~ C7 ~ ~ ~ '~7 ~ S~, ~ b 4a ~ td C~ ~ ° u ~ Q ~ Q p ~ r~d ~ ~ ~ 4~ ~ ~ ~ "a C ~,j ~ U v: ~ N 'C ~7 ~ Q m ~ ~ ~ ~i. s~ ~ s~ A., ~ ~ ~n GL bR f.t, ~ b9 ,.~a Q ~ ~ ~ Q~ W "L." 41 ~ ~ l~ M ~ i ~ ~ ~ ~ D v~i ~ ~ f`I ~l c~ ~ ~U ~ ~ ~ Y~ r ~ C~ ts.~ E~ rd ~ ~ t~ E~- wcs h~ C~ Q ~a ~ s~3 m @ ~ ~ ~ ~ ~ ~ ~ ~b ~ ~ ~ c~ ~ ~ ~ ~ v~ ~ ~ ~ ~ w~~~o~:,~~~,.~a ~~~v~,~~ E" b c~ ~ ~ ~ „o s~ ~ ~ ~ ~ o ~ rn 'y ~ ~ ~ ~ ~ ~ ~ cn ~ 'L7 ~ ~ N ~ ~ t~ s+ y,~, ~ R~ Q ~ ~ 4w ~ ~ u ~S, ~ ~ Q Ll. ~3 d Q r~ ~ Q va ~ p ~ ~7 ~ +~ia ~ ~ W n ~ ~ Q ~ ~b Q ~ ~ ~ ~~~~~~~~a~ ~~"~~o°~,' p~ c~n ~ r~a ~ ~ ~ ~ ~,E~,~W~ ~ Q o~' ~ ~ c~ 3~~U•U ~ ° ~ ~ ~ i ~ U J~ ~a~~~a~~~, d r~ ~ ~ ~ ~ ~ ~r ~ c~ -d ~ ~ ~ ~ u ; ~a ~ ~W.~ e ~ ~ ° b a ~ a~ ~ ~ ~ ~ ~ p ~~~~,.~a~~.~G~;~ ~~~~~QV Z ~ > ~ ~s~~ ~ c! q ~ ~ ~ p ~a ~ ~ ~ a ~r w~ ~ , ~ fl ~ ~ r~ ~ ~ ~ ~ .o o m u~ ~ w ~ ~ 0.r ~ N ~ ~ 0 ~ ~ w s~', 'b ~ ~ ~ > ~ U ~ d ~ ~ ^ ~,1 b ~ , ~ C~ ~ U~ ~ "C i ~ 4~ ~ ~ ~ ~ ^ D ~ r~1 v • ~ ~ ~ ~ w ' s ~ Q h,A sd y~ ~ r~r. 64 ~ Q a t~'' 44-"~. ..G 63 ~3 H y N ~ ~d a v~ r,/~ cd ~ 4,~ ~ M U\ N~ll td ~ ~J U ° ~~`"U o~W~ ~ ~ ~ ~ ~ ~ W a~~ m ~,3~;~a ~ c; ~ ~ ~v~ H ~U~' ~ ~ ~ ~ ~ ~ ~ ~ ; p ~ti ~ ~ ~ ~U ~ ~ ~ 4~ ~ro°'~ U ~ ~U ~ ~ o ~ ~ ~ o ,z~U ~ ~~„~cn ~ ~3~~ ~ ~ ~ a~~~~ ~ w ° ~ ~ n v p ~ ~ o ~ ~ c~ ~u • ~n ~ ~ o ~ id 'cd ~ A: ~ ~ cn ~ ~ ~ ~ ~ ~ V} ~ ~ ~ "C7 ~ ~ ~ ~ +W ~ ~ A, Q ~ ~ ~ p ~ ~ ~ ~ y q ~ ~ ~ ~ 0 a~J ~ ~ a~., ~ ~°~~~~'~~aia ~ma~an~'~~ ~~~n~~~~~~'~~ ~~~~~~~~a~i ~a,.~' o ~ a~ ~ ~r~a ~ o .w., ~ ~ ~ n~~ ~..~U~» o ~ n ~ ~ ~ U ~ro~r ~ ~ ~ ~ ~ ~ ~ ° ~ p p ~.`'d p ~ v~i ~ r~j ~ ~ oo ~1~ ~ E ~ ~ ~ ~ b~l ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ a ~3 ~ ' a ~C, ~ y ONO Vr I ~ ~ ~ ~ ~ ~ D ~ ~ ~ ~ ~ u~ ~ ~ ~ ~ ~ ~ ~ t~, d t~l r~' +r; ~y S:l, ~ rn s. U ~ ~ ~ ~ TJ ..~7 ~ c0 ~ s~.~ ~ ~ N U t~ t~.,, ~ ~ Q ~ ~n ~ tn ~ ~ ~ S].~ s.. V ~ 4w N .n s,~,,. r.x",, ~ ~ ~G~ T`~,"~., ~ ~ G~„'" ~ L1.' ~ ~ ~ ~ s~. Q b ~ ~ ~ ~ ~ c~ ~ ~ ~ U ~ ~ ~ ~ ~ 4~ p . ~ ~ cJ QJ y,,,, ~ ~ C7" ~ ~ ~ N ~ ~ Q ~ Q b9 FA ~3 ~ a 'p ~ ~ Q C ~ ~ q ~ u: . ~ ~D ^c7 0 "d ~ ~ A„ f~" ~ r~: d ~ ~~I} ~ ~ ~ ~ ~Q3 ~ Q ~ ~ • ~ ~ ~ U ~ ~ Q ~i ~ Q. ~ ~ ~ c~ ~ y c~ su ~ v' ~7" cC ~ ~ c~d ~ z,. ~ ~ cd a3 cd ~ N p~ w p." ~ U C7 N,} cd C/~ t%a ~ ~ ~ ~ G~: y ~ . ~ ~ ~ ~ C3' ~s ~ s~ v, ~ s~. 'Cx ~ ~ o ~a ~w U~ N ~ ~ ~ ~ ~ ~ ~ Cl3 ~ ~ ~ y ~ ~d Q ~ c~ a~ p ~ d Z ~ ~ ~ j ~ ~ ~7 U:~ ~ Cy ~ ~ ~ c`~n ~ f `l y_, ~ ~r'~ ~fl ~ ~ "c~ ~ ~ ~ u' ~ ^0 v~ ~ ~ ~ ~ ~ ~ ai ~ v7 d3 ~ r~ ~ C_J CS G~ H N+a ~7 ' ~ cd y, U} w "L3 Ot v U~.~. ~ C~ Q C:7 ~ I~" ~ ~ ~ ~ ~ (J N ~ ~ U •a ~ d" ~ ~ 6J ~ Q ~ ~ ~r~1 f^, M f+"1 'll ~Z'" 4~ ~.t ~ 'CZ t/~ ~ ~ ,S, ~ "~i "{1 ' y~., Cff ~ r ~ "C~ iJ~ ~l. " U `C3 ~ w+ ~,y +,Q ~ '4~ W ~ f,,, ~ cd 'j ~ ~ ~ ~ ;s~ w r~ N b ~ ~ ~ ~ ~s ~ C~ ~ p b ~ f~ ~ p ~7 ~ W > ~ G q ~ ~ a ~ ~ , ~ s~ ~ tt' ~ ~ ~w,~ ~a~Ho~ ~~N~~~~~ '~n ~ ~.~~•~~,°~w ~ ° ° ~ ~ ° ~ ~ a~, ~ ° ~ ~ ~ p ~ ~ ~ ~ ~ ~ ~ a ~ ~ ~ a ~ ~ ~ ~ ~ a~ W ~ ~W~,~3 ~a~~,~sa~'~ ~~z~~~~ U~~~ n.~ ~ ~ ~ ~ ~ ~ ~ ~ ~ p ~ v ~ ti ~ ~ ~ ~ ~ c~ ,t~ ~ . ~ ~ ~ ~ ~ 4; ~J U ~ ~ A p ~ ~ ~ ~ ~ ~ q~ t1~, ~1 4~ ~ s,~ ~ d3 ~ 4~ ~ ~ Gzw ~ s.~ 47 ~ ,.t~7 S~, cYS ~n3 'i.:, ~E, ~ 5~.~` ~ d,,, L~1 N s~ 0 ~.4~, H ~ ~b ~ a~i ~,~4., ~ ~ ~,s~ ~ u a3 ~ ~v ~ ~ a o~ ~ c~ ~ c~i ~ Q~, F~~..~ac~..~nW3~na w d~~~d'a~ d t~~~~~a~a~s~m N ~ ~ F-38 ~ ~ ~ ~ ' ` •Q~ ~ ' ~ ' ; ~ d ~ ~ ~ w ` ~ ~ ~„h ~ ~ ~ ~"~.Pi'~~ • ~ ; ~ . ~ < ~ ; ' ~ ~ ~ ~ ~ ~ ~ ~ : ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ` ~ ~ .4~ ~ ~ ' ~ 1~ ~ ~ ~ ~ : ~ ~n r?~9 ~ ~~rw~w ~ ~ ; C~ ~ ~ ~ ~ ~ ~ ~ : ~ ~ ; ~ ~ ~ ; ~ ; M~ ; ~ : i~ i~: w i~ ~ ~ A~ ~ ~k' ~ . ~ , ~M ~ ~ ~ ~ ` ~ ~ ~ , ~ V1 ~ ~ ~ ~ ~ ~ ~ vi ~ h ~ ~ ~ 7 ~ ~ ~ W Q ~ ~n ~ N ~ ~ ~ ~ ~a~~~ ~ ~ ~ ~ ~ ~ U ~ ~ ~ ~ e~ ~ ~j d ~ ~ N ~Cl ~ ~ ~ ~ n~ g3 ~ N "tj GLI Er1 t"y OC~, ~ cd t~ 49 +J~ (`l~ ~ c~ ~ r~ ° ~ u ~ ~r ~ c~ ~ v ~ 3 a 4 ~ ~ 0 ~ r, v a~.. v~J c,N ~3 6~:E ~ q ~11 ~ ~ ~ U f,d ~ Q ~ Q ~ ~ ~ ~ ~ ~ Q ~ ~ N r~I -~i ~ j; ~n oc t-~~ ~ o ~ ~ f- d' N ~ 4~ rn ~ ~ M T3' ~1 . ~ ~ p ~ C~ C~J ~ ~ Ct~ t!7 S~,) ~ frl DC '~1'" ~ L~.f~ d1 fri ~ C~7 ~ C~1 G~ ~vs ~ a~-+ ~ ~E ~ ~ ~ ~ ~ ~ ~ d 'r~ ~A C~ ~ ~ ~ C'd C3 ~ ~ ~ f, ~ A r~n r~1 w ~ ~ ~ ~ ~ C p(j ~ ~ ~ ~ w v~~~~~ U c~ ~ d w ~ o*" c~~ ~ rv ~ ~ ~ ~ ~ p. Q p N ~ H ~ ~ U ~ ~ ~ ~ A ~ cn ~ U ~ ~ ~ ~ 'C3 Q ~ +n . cd A ~ ~ Z ~ ~ ~G ~ b~ 4} ~ c~n ~ ,rd ~ U s~ ~ R" ~ ~ ~ GL' c~d ~ ~ ~ ~ ~ ~t7 ~ a ~ ~ ~ ~ ~ ~ x ~ ~ ~ ~ ~ p,~ ~ ~ ~ ~ ~ ~U~ ~'p ~ G Z U ~U~ a~ d b~~~~ ~ ~ ~ U U ~ ~ ~ ~ ~ ~ ~ ~ W ~ ~ ~ ~ w ~ ~ ~ ~ ° ~ ~ H ~ N ~~~.~o~ ~ W as W C~ ~ h Z ~ ~ p~'~ d ca ~ ~ F-39 ~ ~ ~ H~~~~ ~ Net Assets i,ust "C'c~~ Fiscal Yeats ~~'iscal Ycar . . l~}~37 I498 I9{Jt? 200{) 2fIUl 20f}2 2UI}3 2~[I4 Zf1US 2()()b ~1tiSl? ('S: C:t~tt'ti~ttf~ti4t~ts ~}7,413.417 ~ 2(i,4U3,fi~l $ 21,~755,T5~ ~ 2b,644,1.(iL~ ;s ?8,93~,532 ~ 17,~t21,27i~ $ 17,394,824 ~ R,84t?,SG9 ~ I3,4R5,42G w 21,3U3,7S4 i)tla~r ~oricurrent Asse.ts 1,R35,~i48 <13R,~)7D 4)23,3~}4 1R,323,2R9 18,2iq,6R4 21~,(101,519 20,.559,8$4 ?3,R7~#,2£~~ ]fi,~}2£~,Li39 7,TfJ6,U50 'i.'ts(~itt~~ Assets 18,H71,021 l+),U54,141 21,12Z,782 ~3,153 94(7 ~4 313 77t) 2i) 939 6S7 35 ~)7~i 7S6 4(1.I75 ~ 15 ~D.?(l~) 777 ~Q (191045 'I'mt~l As~els ~ 38,fi?~1,08(+ ~ 4U,~9Ei,732 44,ODI,928 ~ fiR,i21,4[11 ~ 71,4H2,9$(i .~h 73,3fi2,454 S 73,931,~fiq $ 72,89$~94ti $ 70,Li2i,&4? ~ C~9,1(I(),'d4~7 l ,1E1E:3i1..1 l: [l:~;S. {'tirrenll,i,~l7iliti~5 ~ l,il~),40I g ~90,941 1,131,b27 ~ ?,4A4,(ilfl ti .i,477,(i?! ~ 3,:~3U;371 ~ 3,8~2,U34 $ i,(373,517 ~ 3,157,1fi1 g ?,~84,482 ?~c~E~c~~r~~nt I ia~sil.lti~s 9()3,423 ~(~'73 ~ 17,5~U,fJ{){) 16 95(} ODO 16 330.[1U(1 1~,685 U[1(1 IS f1IQ (10() 14 3p5 U00 I3 5(i5 UO(1 Ibt~ll,is~b9litius ~ ?,t)~2,$24 S 4?93,(~1~~ ~ 1,131,b27 ~ 1~9~4,(il0 ~?U,A27,b51 ~ 1y,6(i(),371 ~ I9,S77,034 ~ I8&~t,5i7 ~ti 17.4fi2,161 ~ 1(i,449,~82 NI;i iktiSE::E;S i~rve.s1e~iin('apitalAs~ets;i~et'uf~relat~cl~leht ~(f~,~71,(121 S 1~),U5~4,141 ~ 2f,122,782 ~ 2~,49f),14U S 22,664,1~1 ~ 25,942,91i ~ 27.Sbb,(i78 7,7,13{~,fiDB ~ 2b,~1~7,(}8~J ~ 27,55(),1"!.3 #~~,5ltic;i~~l - - _ - . - 4(13,(i35' R43,5S1 - - t;iirc:stricietl 67.726,2~1 20,3~R,977 ~1,7q7,519 ?5,6~6,651 ~,R 3G(i 2U~ 27,759172 2Ei 364 113 2f; 232 f)7k 2(i l8z (i0] i~l 1f)4 '!'otal'~ei:1~ti~-t.s ~ 3fi,~97,26~ S 34,4[}3,11$ ~ ~2,87U,301 $ ~R.136,791 ~ 51,U3,335 ~ ~3,7~12,083 ~ 54,354,4:iU ~ 5~,2l~,~~'f S ~3,1..59,6R1 ~ ~2,6.51,367 Sc~u~ce: y~n'~fu i G ini~,itfic3E~ I)istricl C~ha«ges in NeC ~ssets C.,ast'I'en f~ascaf l'cars 1~iscal Ycar . .}~)97 i498 1999 -'200D 2#3l1I 2t)U2 2i~(1.i 20D~ 2€K7.5 2(}(1(i ()1'E',ft~'I'Ei~Ci !ti',Vk':ivC)f:';5 VdaterSales S 78f19,?~4? ~ Ei,8(~6,~75 ~ 7,3fi8,(~1 ,4~ g,537,232 ~'l,GH6,27fi ~ 8,3G(1,93~3 ~ 8?78~?(} ~r 8,9iR,849 ~ 8,99H,?79 5 Ifl,I4~),3(ih 1:36~.SeMeter}~ee~ 1,014,381 I,U3~4,6Rb i,(}5U,[}41~' l.f)47,125 ].OS4,1.44 1,U71,bb4 i,[362,39? 1,2Z1,72~) I,3:i3,6tG 1,3ti7,G91 St~ti~~hy a~zd Itcad}-in-Serve C'har~cs 27:~,58~1 377,281 344,942 23~ (~2<) 3~2,37.3 306,24=) 233,529 IG3 5~i[i 1(+7,7H0 - f':?iPier 82,~i87 9b,713 d9~,935 ?I2,20H 4U3,(14t1 234,596 124,194 I~#2,5~55 167,{)~7 252SIS5 ,f nitjl (7pct'sttitt~} iZc;~~eruatis ~ 9,1$U C1~)9 $ $,315,255 ~ 8,$'12,571 ~ ~ 1,4)35,595 ~ 9,445,783 ~ 9,~~3,QGR ~ ~1,b~~1,135 ~ I(),4(}7,f16(} ~ 1f1,{~f €,,77{7 11,7Gk ~112 (:)1'l~~fdA'I'tN(i 1~X.P~~;~5E4: L~aterPutc.has~cl ~ 3,14~},bll ~ 2,G54,514 b 2,{~~Hi,lA2 ~ 3;5~3,3111 ~ 3,53&,41i ~ 4,U11,622 4,'155,27b $ 4,~IK,(170 ~~4,~24,'79(1 ~ 5,')£13,0U3 14atur"lreatrn~i~t l,t77,639 1,1(J.3,l45 1,2,31,62? 1,485,(11~ 1,~64,27K 1,35(~,249 1,372,5R() 1,1(a7,8C37 1,589,242 I,Sf;1,718 lte~~ciy•1c~Serve Char~;GS 215,U()4 2R7,fiD7 3~2,755 3f)2,7~5 3{12,2W0 342,755 251,BR4 1~3,~121 241(),(+33 - 'lr~t~st~issini~~n~~)i~trik~utia~i I,i~I,bAI I,727,~3'~ 1,39E;,[l76 1,1ltt,3f~~ 1,77(i~47 1,~J12,2i)3 1,958,()95 ?,i37,98fi 2,377,85() 2;3SR,()54 rld~ninistr~tion~~rid(~cncr~~l ~1G7,926 952,452 l,{I1~,S(i3 1,157,914 3,?83,13R I,U61R,7~] 1,~3i),134 1,b19,3[)l 1,K[(),fl~i5 1,7~7,fs?7 1)uprecaati~n 58~,711 {i~6,31.1 48#i;13~ b33,i)S2 797,806 777,327 937,795 1,583,f~44 4,~5'i3,7t~2 N,54~?,.<1lfi l~rnnrtic~tion 15,47('s i5,S7(= 15,57(i iS,576 15,57b 15,57G 15,57b ]S,S76 15,576 15576 fc,t~~l(14~;ratin~~~~penu.s ~ 7,2RY~,10~ ~ G,$46,y44 S 7,~(i2,&74 ~ $,52!~,4)11 $ 9,32R~96 ~ 9,37$,61; ~ 10,7~1,39[1 ~ ]1,530,865 ~ ~1,93I;918 ~ 13,57S,R4A t)~~yrati~r~? ti~c~antc (l.,oss) ~ 1,~9I,991 I,468,3I1 ~ I,409,7Q3 ~ 2,5()E,,5R4 ~ 117 387 ~ 5!~4,$34 ~ ],~12~,2~5 5(i,123,R~S) S l.t,?fiS,148) S I,SflEi,952 ~;{:)ps;-()}'~::~tA'I'ING; I2.[~:V1:iNi11~S (~~~CI'l~:lvltif;S); I'rt3p~~ty''Iaxes S~ 4i)(1,]'37 .h 53.3~$8(~ ~ 521,390 k S7G,~t~7 ~ G13,2[)3 ~ b2(i,6~4 5 Gb2,(IIS ~ fiRt,R57 $ 11~?,37$ ~ 99~,~~'t~, !~~'clruelect~ic.Revenue 211,322 93,162 6<),b93 8f,1$1 li4,98i) $3,.544 m . . 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Si ~L~'i ~C'i ~ ~ r~ rj ~ ~ ~C7 ~ ~ F , ~ 'L~ : ~ J CI ri - ~ ~ ~ 'U C:: 't ~°f in 't r*~ 0 ~ ~ ' A' w 3 ~ ~ -o ~ ~",'r~- U ~ w ~ r,`' UU, ~r, ~ ~ '7 ~ ~ v7 C7 ~ , , , U : "a ~A ~,p l Ir ov x x o9 0o cG ~ 3 v: r'1 4p s'1 rh N 1~ n in in ".t: 't ~'t 'r't p ~ 1~ :a ~G ~"r ~7 an N a ~w~i' ~ {J'j i~ ~n C •c o N a cG , ~ ~ ~ U; rT. aa C, M n~n U~ ~ ~ N r~ N t"3 S.,' ~ J J I 39 ~ ~ O ~ ~ ~ ~ ~ ~ ~ ~ •U I ~ x ~ ~ITS ~ G-. y~D t~ t~ ~a oo ~Y l^t y~, .'.f.' u', s n n rn rn N N N r c 1 L. rJ ~t fJ Cr ~ fV '.J~ M RS TI''E ~ . 41 f oa oa CJ ~~n N C~ ~n y;.• ~ ~ (~J N Cd N N N N y ~ ( ~ ~ :d U s~` _ ~ ~1 ~ ~ ~ ~ ~ ~ b w:. ~ if~ lC'i t` fT ~G ~t i~ ~G N , c~' ~J ~~.,~3. ~~j dj N C N N ~ f~l 'n ~G r~ d' SY t- ~ Ch Cq n N r'1 O cr, 00 C ~n ~ ~p M ~ A. ~ O t . , . , . . ~ ~ ~ ~ p~. c0 C O~. ~n~ C7~ r+t~ ~ r~ r~ N~'t ~0 ^h r~ ~ Q t~j ~n rj C'd ~ i ~ ~ ~ Q ~ ~ ~ ~ ' ~ I ~ ~ a.., ~n ~h O 06 m Ch C~- M~ li N ~D v~ [r GO AO CA CA CO pC y ~cr ~ ~ n ~n in ~ ~ ~ ~ ~ ~ ra ~ ~ ~i c ~t rz ~r .o ~ ~ ~ ~ L~ cT t- ao ~t c^~ ~n ~n v~~ ~ ~ N J C- O d~. ~ N oa h N n ~ w N C3 ri ~i ni r7 C~ (V ~~cJ p~ u ~ v d ~ G11 ~ ~ w ; ~ ~n ~ ro y ~ ~ ~i ~ ~ o ~r, ~ c~ ra ~r, ~ ~ ~ ~c ~c r oa x oa a~ ~ x ~ ~ ao i~ ~n t~ N-- ~n M M 3 o i ~ t~ t~ En ~n ct, Ct '~F '~S '~t ch ~ ~ c'1' C~ lG ^ ~C t~ `t, (V p ~p b . . . ~ J 5/ ~(*1 rf U C C~f M CT J,ll .,f} i w.. w.. m.. ~ ~ b rn r^, +f, N cT cT rr~ fn ^ C/; ~SJ n~S~ rh i~ ~r> v: O~ v~, ~ ~ d ~ ~ ,,T ^..G~ CO 7J q0 h- ",,J~ I~ i~~ l~ ~ r ~ r"+ N u VI ~ .Sr ~ {.S. ~ G ~3 r1 ~ ~ r~3 r~3 '/l 'J1 ra ~ ~L7 ~n r'1 N O 0~ ~o Cw j id ~ ~0 ~n ~h M N C ~ ov tw J O C C`"J C~ CT 6~ w V C CJ G~ CJ C O Q CJ` J' Q` ~ ~ Q C7 C a a C7 ~ C~ Ch ~ ~ y C> C? C C~ C C7 C U.'S Q e^J N N N N nl N-~ ^a f ~r„~, N rd N ~d N N N-~ r V7 ~(J Vi t~ E^~ r•7 rd ~n na <t ~4 C rd ~r ~i y ~p ~p ~n ~n r~ ~ ~r, ~ rl ~ ~ ~ ~ ~ ~t ~ u ~ tn ~ n ~ l ~ ~p -t wt r r ~n ~n ~ € ~ i , . ~ G ~ r~ r r~ ~ q,° ~ ~ ~ ~ € ~ 'N I € i C, i ~ (T t'3 <J~ Ci GC (`7 u E ' i : i~ ~ v q~ ~~t'~i ~i' C`~ C~S C'~~ C' 0~ n ~i . E I'. O~ E~ t~1 ~ i C` ~n ~ T,~ U E Er~ ~ i C•~1 ~d C~ G N Cd N ~ Q C ^ ! ~ ~ ~ i i, ~ r~l q ; 09 ~ ~ ~ t~- '°'1' ~ 3n ~ ~ ~n t~ :t ~p e~i : 'll J CT ~/1 ~,C.' i~ ~C.+ .`i"'+ ~ ".T ~ ~ ~ r ~ uc ~G rE r ,G :p ; ~ O r : p'r 'u t~„r,, ry,~ ~~n U~ C~ ~ , u i J C~i' ~7+ H' ~f> tl0 v ~ ~ ~ f I i^I y ~T r Cd , L~t ~S oc r.p r~ ~ ; ~ i ~ i ~ ~ i I ~ , ~ I r"~ ' ~ 3 i ~ F-' I r '~A ^,~'i r En h"1 ~ ~i ~ ~ i I ! I .^1 ; . 4` (T. i"` I`, ,,i S,, ~3`. GG M ` ' ' ' ~ 1 J J '~T,~ V~ r~ oG ~~0 r~I n r+1 cP i ' I-. ~i I~ ~T. C'~ ~,0 M~^-' t~ Vl I w i y"~„ 51 N~"..' oG *U t~~ CI r~1 .T ~ ~ ~ ~ ~ ~c ~c ~c ~ ~n ~n ~n ~r ~ ~ ; r~ ' c ; c ~ ~ ~ ~ ~ ~ ~ ~ II ~ ~ I~i ~ ~ i ; v : ~ia ~3 C ~ ~i : ~ ~ ~ ~ ~ ~ i i ~ OC U~ u G v'J 'r7 I~ I I~' f~r ~ ` ~i rv~l ~0 ^ ~7 00 Nl ^ I ^ fJ ~ ~ ,r fd h ~ v ~i ~U ;n ~ 1 C~ cp ~ ~ ~ ~ 'v~ Cf+^ "r in h~^ N ~ ~ ~ ~J G~. ~ y ni O r~! GG ct ~4 u O~ t"'+ ! I k Ci ~I ~ ~ ra r~ ~ Q 3 i ~ ``J ~ ' ~ I ~ 9 ~ ' 1 r'~ p ~ O ro I ~ ~ ~ i r,.~ r~ ~ ~ ty ~ , • ~ ~ ~ ~T Oi ' ~ ~ . ' I. , ~ ~ i, ~ G^ ~ p0 ~ ~ i k -"'u!; ~I N C" ~ N r! U ~ r ~ ~ ~ I e +sa ~ ~ ~ ~ ~ ~ ~ ~i <t ~t ~n a. ~ ~s o ~o ~ ' ' I ~ I rA rd r~ ~p ~t nl C cc ca a~ ~ ' I i , v I: ".h ~L^ P~ t+~ ~D ..w ~ +D r~ rn .C i6 ~ v ~ t`~ M ~ ~I ~ t~ Ci c1' ~t ' ' 'c1 j ~ N ~ r~~ N ~D h ~n "3' /1 M ~ ~ is. r't r~ C~k ~ G;J 'J, C7 'J~ q, r~"G µ p u ~ ~ ~i ~ m,. c~ ~ C z ~ b9 ~ ~ fx ~ i ' ' ~ } ~ ~ S(,7 U Vl CA :0 Q+ M k"i O D l~ O ~~nx~roorr~Cr~,~nm v,,.,~, m j '~I; ~ N~~,7 n~~Y~ ~ ~ ~ ~ '~~I: ~ v -r ~c oa .t7 ~ t~ t~ x ca ~ . . ~ ~ rn cr x ~ r ~ n x N ~ ~ ~ i ~ "!a ~ ~ a ~l- , : d il : F ~ ~ p ~ ~ ~ ~ ~ ~r +~a c i r~~s ,~s ~ ~ m . c~7 c+> rr1 + - . ' : ~ ~ ~c Fn ~ 'r, r~ ~ cn oe n . . ~ ~.J ~ ~ CU C~ C!, Q~. J~ a ~ ~ ~ ~ f`~1 Cl t~`J i ~ O(`~1 Q` ~T q . F-41 Arincipal Water Customers and Revenues Current and I'rior Year ~ }~~ISC'AI., YF~,~R 2006 ~~15C~1, YE~R 2005 . Sa9~s iEi Percent aT Sales ia~ ~'ercent of C'uscc~c~~r Acre-~eet ~~'ater ~nld C"ustox~~~r Acre-Feet ` u'aler Salcl Ra~~ch~ Santa ~~e Association 3~2.5 ?.7% Ra~icho Sa~~ta ~~e Associatic~n 357.2 2.9°fo l..a~r~as Santa I~'e C~c~untirg~ Club 25fi.3 1,9°/u Lo~t~as Santa ~~e Country Cluh 250,5 2.1% WY~;od, t~ainela & Martiz~ ?30.3 I.7% V4'Ygc~d, ~'a~nela Marti~~ 175.1 E.~°/q I~riedki~, "1"ha~n~s 96.1 0.7°/u I~riedkin, "I'}~c~mas ki 8~.8 0.7°~0 1,S}~ l~,xec€~tive (ioif'C;t~urse 81.3 Q.6°/u I,~1~ I;xecutive C,o1fC'~urse 72.7 D.G% C`it~! Dt~~n~a~~a [3~ach '79.1 0.G% City ofSalana t3each 60.1 0.5°I~ I3ranc~ey, C'I~arles bl .9 4.5% 5pindrif't Del M~r }-I()A 58,9 ~.5°/4 Spi~~dril~t l~~l Mar ~~~I0~1 57.Z 0.4% Lomas Santa N"~ Villas 57.~4 D.S~/o l..,omas Sa~~ta ~`c V'illas S6.S ~.4% 1~ G~~ei~ton C'ortipany 53.(~ 4.4% C'ity ()f Sa~~ C)ie~c~ 53.3 0.4% ~t Francis Court 1IOA 49.5 0.4% `I'he Inn at I~anclto Sa~~la F`e 52.9 0.4°/a Internatinnal Farn~s I~t~ 48,3 Q.4°/n li Fe~~ton {'on~~~any 50.4 0.4°/a Dawley, MIM Jamcs R 45.7 0.4% ~1p~le~ate, Fi~-ion 49.5 0.4°/a ~3randes, (th~rles H 44.4 a,4~/o A~~,1~ [J}' ~ba NIC; I.,LaC' 4G.8 ~.3% Lo~nas Sa~~ta ~~e Villas HOA 44.I 0.4% St I~r~~~cis E'aua•k I I()A 4G.5 ~.3% ~'he l~i~~ a~ ~tancho Santa Fe 44.0 [1~4% '1'c~t~l 'I'c~~ f~'ifCee~~ C'ustoE~~crs 1,580.6 (~.(°fo "1'otal "1"c~p 1~ifteen Cusl~mers 1,452.3 1 I,8% ~111 Dtk~ers l2,(~~2.7 SS.~°/a All ~chea~s 1~,9~G.G 88,2°~0 ~'~tal I~Vat~r }3illed 13 G43.3 I00.0% '1'c~tal l~aier Billed 12.358,9 lOD.O°/v ~.[]t~la f~~~r t(1~ riiuth ye~r ~r.ii~r is un~vail~bl~, z[.'sener~~lly ~cceptecl Aect~untin~ I'rinciples ((~~A[') reyuire ~~~cEUi~ts delivered E~ut nc~t billed h}~ }~v~~r e~~~i be ir~cluct~;d ati c~evei~ue i~~ tlae b~sic fin~~i~cial st~le~ne~~ts. `l'he ti~ures ia~ t11is tah[e dt~ ~~c~t inclnde adjustr~~e~~ts fi>r t.hG~t: ~ccc~ual. 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