AGENDA Tuesday, November 24, 2015

Transcription

1 BOARD OF DIRECTORS EAST BAY MUNICIPAL UTILITY DISTRICT th Street, Oakland, CA Office of the Secretary: (510) AGENDA Tuesday, November 24, 2015 REGULAR CLOSED SESSION 11:00 a.m., Board Room ROLL CALLU: UPUBLIC COMMENTU: The Board of Directors is limited by State law to providing a brief response, asking questions for clarification, or referring a matter to staff when responding to items that are not listed on the agenda. ANNOUNCEMENT OF CLOSED SESSION AGENDA: 1. Significant exposure to litigation pursuant to Government Code section (d)(2): one matter. 2. Initiation of litigation pursuant to Government Code section (d)(4): one matter. ROLL CALL: (The Board will hold Closed Session in Conference Room 8A/B) BOARD OF DIRECTORS: Pledge of Allegiance REGULAR BUSINESS MEETING 1:15 p.m., Board Room ANNOUNCEMENTS FROM CLOSED SESSION: PUBLIC COMMENT: The Board of Directors is limited by State law to providing a brief response, asking questions for clarification, or referring a matter to staff when responding to items that are not listed on the agenda.

2 Regular Meeting of November 24, 2015 Page 2 of 4 CONSENT CALENDAR: (Single motion and vote approving 11 recommendations, including 4 Resolutions.) 1. Approve the Regular Meeting Minutes of November 10, File correspondence with the Board. 3. Award a contract to the lowest responsive/responsible bidder, Hallsten Corporation, in an amount, after the addition of taxes, not to exceed $196,593, for supplying a fully functional dock system to the District under Request for Quotation No. 1604A. 4. Award a contract to the lowest responsive/responsible bidder, Stat Delivery Service, Inc. in the estimated annual amount of $39,600 for supplying courier services during the twoyear period, beginning on or after December 1, 2015, with three options to renew for an additional one-year period for a total amount not to exceed $198,000 under Request for Quotation No Authorize a cost sharing agreement beginning on or after November 24, 2015, with the City of Orinda for Phase II of the North Lane Storm Water Mitigation Project. The cost sharing agreement states that City of Orinda and EBMUD will evenly divide the 25 percent local match share (or 12.5 percent each) of the construction costs up to $365,000 each. 6. Consider the June 2015 and November 2015 Addenda to the Main Wastewater Treatment Plant (MWWTP) Land Use Master Plan Environmental Impact Report, determine that no further environmental review is required under the California Environmental Quality Act, and authorize an amendment to the existing preliminary engineering services agreement with Harvest Power Tulare, LLC to increase the agreement value by $596,879 to $857,879 for the provision of preliminary engineering design services for food waste preprocessing facilities at the MWWTP. 7. Cancel the December 22, 2015 Closed Session and Regular Meetings of the Board of Directors. 8. Reauthorize the Accounting Systems Supervisor, Manager of Security and Emergency Preparedness, and Controller to execute for and on behalf of the District, all documents required for the purpose of obtaining federal and/or state financial assistance, through the California State Office of Emergency Services; form 130 Designation of Applicant s Agent Resolution for three years starting with the date of this resolution and designate the Accounting Systems Supervisor as the primary contact. (Resolution) 9. Approve revisions to the following District policies: Policy 3.01 Annexations; Policy 3.02 California Environmental Quality Act Implementation; and Policy 7.01 Aqueduct Integrity and Rights-of-Way Maintenance. (Resolution) 10. Appoint Sophia D. Skoda to the position of Director of Finance effective November 30, 2015 with the signatory authority of the Treasurer and the Accountant as set forth in the Municipal Utility District Act. (Resolution)

3 Regular Meeting of November 24, 2015 Page 3 of 4 CONSENT CALENDAR: (Continued) 11. Appoint Xanthe M. Berry to the position of Assistant General Counsel effective December 14, (Resolution) DETERMINATION AND DISCUSSION: 12. Authorize and approve the issuance of Commercial Paper Notes and related Bank Notes; approve the form, and authorize the execution, of certain documents in connection with the issuance, securing and sale of such Commercial Paper Notes and Bank Notes, and approve certain actions related thereto. (Resolution) 13. Introduction and first reading of an ordinance amending the East Bay Municipal Utility District Employees Retirement System Ordinance (Ordinance No. 40) to update Section 7 in accordance with guidance from the Internal Revenue Service. (Introduction and First Reading Ordinance No ) 14. General Manager s Report: Butte Fire Update 2015 Critical Drought Action Plan Update REPORTS AND DIRECTOR COMMENTS: 15. Committee Reports: Planning Legislative/Human Resources Finance/Administration 16. Other Items for Future Consideration. 17. Director Comments. ADJOURNMENT: The next Regular Meeting of the Board of Directors will be held at 1:15 p.m. on Tuesday, December 08, 2015 in the Administration Center Board Room, 375 Eleventh Street, Oakland, California. Disability Notice If you require a disability-related modification or accommodation to participate in an EBMUD public meeting please call the Office of the Secretary (510) We will make reasonable arrangements to ensure accessibility. Some special equipment arrangements may require 48 hours advance notice. Document Availability Materials related to an item on this Agenda that have been submitted to the EBMUD Board of Directors within 72 hours prior to this meeting are available for public inspection in EBMUD s Office of the Secretary at th Street, Oakland, California, during normal business hours W:\Agendas\Agendas 2015\2015_Regular Agenda\112415_regular_agenda.docx

4 BOARD CALENDAR Date Meeting Time/Location Topics Tuesday November 24 Thursday and Friday, November Finance/Administration Committee Patterson {Chair}, Katz, Young Board of Directors Thanksgiving Holiday Observed 9:45 a.m. Training Resource Center 11:00 a.m. 1:15 p.m. Implementation of a Traditional Commercial Paper Program to Refinance Water System Extendable Commercial Paper Review of Revisions to District Policies FY15 Annual Power Sales Report Food Waste Program Update District Offices Closed Tuesday, December 8 Tuesday, December 22 Planning Committee McIntosh {Chair}, Linney, Young Legislative/Human Resources Committee Coleman {Chair}, McIntosh, Patterson Board of Directors Finance/Administration Committee Patterson {Chair}, Katz, Young 9:15 a.m. Training Resource Center 10:15 a.m. Training Resource Center 11:00 a.m. 1:15 p.m. 10:00 a.m. Training Resource Center Board of Directors 11:00 a.m. 1:15 p.m. Closed Session Regular Meeting Friday, December 25 Friday, January 1 Christmas Holiday Observed New Year s Holiday Observed District Offices Closed District Offices Closed Tuesday, January 12 Planning Committee McIntosh {Chair}, Linney, Young Legislative/Human Resources Coleman {Chair}, McIntosh, Patterson Board of Directors 9:15 a.m. Training Resource Center 10:15 a.m. Training Resource Center 11:00 a.m. 1:15 p.m.

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75 Norton Rose Fulbright US LLP Draft of 11/16/15 ISSUING AND PAYING AGENT AGREEMENT by and between EAST BAY MUNICIPAL UTILITY DISTRICT and U.S. BANK NATIONAL ASSOCIATION, as Issuing and Paying Agent Dated as of December 1, 2015 Relating To EAST BAY MUNICIPAL UTILITY DISTRICT COMMERCIAL PAPER NOTES (WATER SERIES) AND COMMERCIAL PAPER NOTES (WASTEWATER SERIES)

76 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; CONSTRUCTION... 2 ARTICLE II SECTION 1.01 Definitions... 2 SECTION 1.02 Construction GENERAL AUTHORIZATION AND ISSUANCE; THE COMMERCIAL PAPER NOTES SECTION 2.01 Authorization and Amount of Commercial Paper Notes SECTION 2.02 Designation and Purpose of Commercial Paper Notes SECTION 2.03 Terms of the Commercial Paper Notes SECTION 2.04 Form of Commercial Paper Notes SECTION 2.05 Execution and Authentication of Commercial Paper Notes SECTION 2.06 Registration and Transfer of Notes SECTION 2.07 Commercial Paper Notes Mutilated, Lost, Destroyed or Stolen SECTION 2.08 Cancellation of Commercial Paper Notes SECTION 2.09 Master Note; Registration of Notes; Book-Entry Provisions ARTICLE III ISSUANCE AND SALE OF COMMERCIAL PAPER NOTES SECTION 3.01 Issuance and Sale of Commercial Paper Notes ARTICLE IV BANK NOTES SECTION 4.01 Authorization and Terms of Bank Notes SECTION 4.02 Issuance of Bank Notes SECTION 4.03 Form of Bank Notes and Authentication Certificate SECTION 4.04 No Transfers of Bank Notes ARTICLE V FUNDS AND ACCOUNTS; APPLICATION OF NOTE PROCEEDS ARTICLE VI SECTION 5.01 Establishment and Designation of Funds and Accounts; Pledge of Certain Funds SECTION 5.02 Proceeds Fund SECTION 5.03 Commercial Paper Note Payment Account SECTION 5.04 Deposits of Available Water Revenues and Available Wastewater Revenues in Bank Note Payment Accounts SECTION 5.05 Moneys in Funds and Accounts; Investments Authorized PLEDGE OF AVAILABLE REVENUES; LIMITED LIABILITY OF DISTRICT SECTION 6.01 Pledge of Available Revenues SECTION 6.02 Limited Obligations i-

77 TABLE OF CONTENTS (continued) Page ARTICLE VII COVENANTS OF THE DISTRICT SECTION 7.01 Punctual Payment SECTION 7.02 Further Assurances SECTION 7.03 Liquidity Facility; Substitute Liquidity Facility SECTION 7.04 Tax Covenants SECTION 7.05 Rebate to United States SECTION 7.06 Taxable Commercial Paper Notes SECTION 7.07 Amounts of Rates and Charges ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF OWNERS SECTION 8.01 Events of Default SECTION 8.02 Remedies SECTION 8.03 Remedies Not Exclusive ARTICLE IX THE ISSUING AND PAYING AGENT ARTICLE X SECTION 9.01 Appointment and Acceptance of Issuing and Paying Agent SECTION 9.02 Reports, Records and Accounts SECTION 9.03 Duties of the Issuing and Paying Agent SECTION 9.04 Compensation of Issuing and Paying Agent SECTION 9.05 Liability of Issuing and Paying Agent SECTION 9.06 Right of Issuing and Paying Agent to Rely on Documents SECTION 9.07 Indemnification of Issuing and Paying Agent SECTION 9.08 Resignation and Removal of Issuing and Paying Agent SECTION 9.09 Merger or Consolidation MODIFICATION OR AMENDMENT OF THIS ISSUING AND PAYING AGENT AGREEMENT SECTION Amendments or Modifications Without Consent of Owners SECTION Amendments or Modifications With Consent of Owners SECTION Effect of Supplement SECTION Amendment of Particular Notes ARTICLE XI DEFEASANCE SECTION Payment of Notes SECTION Discharge of Liability on Commercial Paper Notes SECTION Deposit of Money or Securities with Issuing and Paying Agent SECTION Payment of Commercial Paper Notes After Discharge of Agreement ii-

78 TABLE OF CONTENTS (continued) Page ARTICLE XII MISCELLANEOUS EXHIBITS: SECTION Successor Is Deemed Included in All References to Predecessor SECTION Notices SECTION Notice to Rating Agencies SECTION Waiver of Notice SECTION Authorized Representatives SECTION Evidence of Rights of Owners SECTION Disqualified Notes SECTION Limitation on Bank Rights SECTION Destruction or Delivery of Canceled Notes SECTION Money Held for Particular Notes SECTION Funds and Accounts SECTION Waiver of Set-off, Offset Lien or Counterclaims SECTION Payments or Actions on Non-Business Days SECTION Waiver of Personal Liability SECTION Benefit of Agreement SECTION Severability of Invalid Provisions SECTION Governing Law SECTION Execution in Counterparts Exhibit A Forms of Commercial Paper Notes Exhibit B Forms of Master Notes Exhibit C Certificate Agreement Exhibit D Form of Issuance Request Exhibit E Certificate of Incumbency of Authorized Representatives Exhibit F Series and Subseries of Commercial Paper Notes, Dealers, Liquidity Facilities and applicable Banks iii-

79 ISSUING AND PAYING AGENT AGREEMENT This ISSUING AND PAYING AGENT AGREEMENT, dated as of December 1, 2015 (the Issuing and Paying Agent Agreement ), is by and between the EAST BAY MUNICIPAL UTILITY DISTRICT (the District ), a municipal utility district duly organized and validly existing under the laws of the State of California, and U.S. BANK NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws of the United States of America as issuing and paying agent (the Issuing and Paying Agent ). RECITALS: WHEREAS, the Board of Directors (the Board ) of the District, by Resolution No , adopted on April 28, 2015 ( Resolution No ), declared its intention to authorize successive issues of bonds, notes or other evidences of short-term indebtedness, including bank credit, under Article 1 of Chapter 7.5 of the Municipal Utility District Act (the Act ); and WHEREAS, pursuant to Article 1 of Chapter 7.5 of the Act and Resolution No , adopted on March 10, 2009 (the EMCP Note Resolution ), the Board has authorized and the District has heretofore established a program for the issuance of short-term indebtedness in the form of Extendable Municipal Commercial Paper Notes (Water Series) and Extendable Municipal Commercial Paper Notes (Wastewater Series) (collectively, the EMCP Notes ), payable solely from revenues of the District, which EMCP Note Resolution was ratified, confirmed and continued by Resolution No ; and WHEREAS, pursuant to Article 1 of Chapter 7.5 of the Act and Resolution No , the District is authorized to issue or incur other forms of bonds, notes or other evidences of short-term indebtedness for any or all of the purposes set forth in Resolution No and Chapter 7.5 of the Act, and to arrange for bank credit for any and all of such purposes or to provide an additional source of repayment for any indebtedness incurred under Chapter 7.5; and WHEREAS, the District has determined to enter into this Issuing and Paying Agent Agreement to provide for the issuance of such other or additional short-term indebtedness in the form of Commercial Paper Notes (Water Series) (which Commercial Paper Notes (Water Series) shall constitute Water Note Parity Debt as such term is defined in the EMCP Note Resolution) and Commercial Paper Notes (Wastewater Series) (which Commercial Paper Notes (Wastewater Series) shall constitute Wastewater Note Parity Debt as such term is defined in the EMCP Note Resolution) and the authentication and delivery thereof (the Commercial Paper Notes (Water Series) and the Commercial Paper Notes (Wastewater Series) being herein collectively referred to as the Commercial Paper Notes ), to declare the terms and conditions upon and subject to which such Commercial Paper Notes shall be issued, and to secure the payment of the principal thereof and interest thereon, including from available bank credit that may be secured by the District therefor; and WHEREAS, pursuant to Article 1 of Chapter 7.5 of the Act and Resolution No , the maximum principal amount of all indebtedness outstanding pursuant to Chapter 7.5, including all EMCP Notes issued and outstanding pursuant to the EMCP Note Resolution, all Commercial Paper Notes issued and outstanding pursuant to this Issuing and Paying Agent Agreement and all amounts drawn on or advanced under available bank credit related thereto, if any (which amounts will be evidenced by Bank Notes (as defined herein) to be issued hereunder), shall not exceed the lesser of either (1) the annual average of the total revenue for the three preceding years or (2) 25 percent of the District s total outstanding bonds issued pursuant to Chapters 6, 7 and 8 of the Act; and

80 WHEREAS, the District has determined that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and the entering into of this Issuing and Paying Agent Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Issuing and Paying Agent Agreement; NOW, THEREFORE, THE PARTIES TO THIS ISSUING AND PAYING AGENT AGREEMENT HEREBY AGREE that, in order to provide the terms, conditions, covenants and agreements with respect to the Commercial Paper Notes, to secure the payment of the principal of and the interest on all Commercial Paper Notes at any time issued, authenticated and delivered hereunder and the payment of the Bank Notes, and to secure the performance and observance of the terms, conditions, covenants and agreements hereinafter expressed, and in consideration of the premises and of the covenants and agreements herein contained and of the purchase and acceptance of the Commercial Paper Notes by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the District does hereby agree and covenant with the Issuing and Paying Agent for the benefit of the respective Owners from time to time of the Commercial Paper Notes and the Bank, as follows: ARTICLE I DEFINITIONS; CONSTRUCTION SECTION 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Issuing and Paying Agent Agreement and of any Supplement and of any certificate, opinion or other document herein mentioned, have the meanings herein specified. Act Act means the Municipal Utility District Act, constituting Division 6 of the Public Utilities Code of the State of California, and all laws of the State of California amendatory thereof or supplemental thereto. Advance Advance means an advance of funds (including, without limitation, in the form of a revolving loan, a term loan, a payment under a letter of credit or other borrowing) in accordance with the terms of the applicable Liquidity Facility. Authorized Representative Authorized Representative means any of the President or the Vice President of the Board of Directors of the District, the General Manager of the District, the Director of Finance of the District, the Treasurer or any Assistant Treasurer of the District, the Secretary of the District, the General Counsel of the District and such other person(s) or officer(s) of the District designated by the Board as an Authorized Representative. Available Wastewater Revenues Available Wastewater Revenues for any fiscal period means the sum of (a) the Wastewater Revenues for such fiscal period plus (b) the amounts, if any, withdrawn by the District from the Rate Stabilization Fund referenced in the Wastewater Bond Indenture for treatment as Wastewater Revenues for such fiscal period, less the sum of (1) all Wastewater operation and maintenance costs for such fiscal

81 period, (2) the amounts, if any, withdrawn by the District from Wastewater Revenues for such fiscal period for deposit in such Rate Stabilization Fund, and (3) all amounts required to be paid with respect to all Prior Wastewater Obligations under the Prior Wastewater Obligation Documents as the same become due and payable. Available Water Revenues Available Water Revenues for any fiscal period means the sum of (a) the Water Revenues for such fiscal period plus (b) the amounts, if any, withdrawn by the District from the Rate Stabilization Fund referenced in the Water Bond Indenture for treatment as Water Revenues for such fiscal period, less the sum of (1) all Water operation and maintenance costs for such fiscal period, (2) the amounts, if any, withdrawn by the District from Water Revenues for such fiscal period for deposit in such Rate Stabilization Fund, and (3) all amounts required to be paid with respect to all Prior Water Obligations under the Prior Water Obligation Documents as the same become due and payable. Bank Bank means the provider or providers of a Liquidity Facility supporting all or any portion of the applicable Commercial Paper Notes. Bank Note Bank Note means a promissory note or notes issued by the District pursuant to Article IV hereof and the terms of the applicable Liquidity Facility, having the terms and characteristics as provided herein and therein. Bank Notes payable from Available Water Revenues shall be designated as East Bay Municipal Utility District Bank Notes (Water Series), Subseries [insert applicable letter and number designation] [insert name of applicable Bank]. Bank Notes payable from Available Wastewater Revenues shall be designated as East Bay Municipal Utility District Bank Notes (Wastewater Series), Subseries [insert applicable letter and number designation] [insert name of applicable Bank]. Bank Note Payment Account Bank Note Payment Account means the account by that name established within the related Payment Fund pursuant to Section 5.01 hereof. Bank Note Payment Date Bank Note Payment Date means a date on which principal of or interest on a Bank Note is due and payable, including both scheduled principal and interest and principal and interest payable upon prepayment of a Bank Note. Bank Rate Business Day Bank Rate shall have the meaning assigned to that term in the applicable Liquidity Facility. Business Day means any day other than (i) a Saturday, Sunday or other day on which commercial banks in New York, New York, San Francisco, California, the city in which the Corporate Trust Office of the Issuing and Paying Agent is located, or the city in which is located the office of the Bank from which an Advance under the Liquidity Facility will be made, are authorized or required by law to close, (ii) a legal holiday of the District or any other day the District is authorized to be closed for

82 official business or (iii) a day on which the New York Stock Exchange of the Federal Reserve Bank of New York is closed. Certificate Agreement Certificate Agreement means the Money Market Instrument Certificate Agreement, dated as of November 6, 2003, between the Issuing and Paying Agent and DTC, a copy of which is attached as Exhibit C. Certificate of the District Certificate of the District means a written certificate signed in the name of the District by an 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. Co-Bond Counsel Co-Bond Counsel means Norton Rose Fulbright US LLP and Curls Bartling P.C. or an attorney or other firm or firms of attorneys, appointed by the District, having nationally recognized expertise in municipal finance law, including matters related to validity of, and tax-exempt status of interest on, obligations of states and their political subdivisions. Code Code means the Internal Revenue Code of 1986, as amended. Commercial Paper Note Commercial Paper Note means any of the Commercial Paper Notes of the District authorized and issued pursuant to the provisions of this Issuing and Paying Agent Agreement, having the terms and characteristics specified in Article II hereof. Commercial Paper Notes payable from Available Water Revenues shall be designated as East Bay Municipal Utility District Commercial Paper Notes (Water Series), [Tax-Exempt][Taxable] Subseries [insert applicable letter and number designation]. Commercial Paper Notes payable from Available Wastewater Revenues shall be designated as East Bay Municipal Utility District Commercial Paper Notes (Wastewater Series), [Tax-Exempt][Taxable] Subseries [insert applicable letter and number designation]. Commercial Paper Note Payment Account Commercial Paper Note Payment Account means the account by that name established within the related Payment Fund pursuant to Section 5.01 hereof. Commitment Commitment means an amount equal to the individual commitment of the applicable Bank to make Advances to the District pursuant to the relevant Liquidity Facility

83 Corporate Trust Office Corporate Trust Office or corporate trust office means the corporate trust office of the Issuing and Paying Agent at 100 Wall Street, 16 th Floor, New York, New York 10005, or such other or additional offices as may be designated by the Issuing and Paying Agent. Dealer Dealer means the person or persons designated by an Authorized Representative of the District as a dealer for all or a portion of the Commercial Paper Notes, or any successors or assigns approved in writing by the District, or any successor dealer or dealers appointed by the District that has entered into a Dealer Agreement with the District. Dealer Agreement Dealer Agreement means an agreement by and between the District and a Dealer providing for the appointment of and acceptance by the Dealer of the duties and obligations imposed thereby, as the same shall have been amended, supplemented or otherwise modified as permitted thereby. Depository Depository means (i) initially, DTC, and (ii) any other qualified securities depository acting as Depository pursuant to Section 2.09 hereof. District District means East Bay Municipal Utility District, a municipal utility district duly organized and validly existing under the Act. DTC DTC means The Depository Trust Company, New York, New York, and its successors and assigns. Event of Default Fitch Event of Default means any of the events specified in Section 8.01 hereof. Fitch means shall mean Fitch Ratings, Inc., a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term Fitch shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. Issuance Request Issuance Request means a request made by the District, acting through an Authorized Representative, to the Issuing and Paying Agent for the authentication and delivery of Commercial Paper Notes, a form of which is attached hereto as Exhibit D

84 Issuing and Paying Agent Issuing and Paying Agent means U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, or any successor or substitute Issuing and Paying Agent appointed as provided in Article IX hereof. Issuing and Paying Agent Agreement Issuing and Paying Agent Agreement means this Issuing and Paying Agent Agreement, dated as of December 1, 2015, by and between the District and the Issuing and Paying Agent, as originally executed or as it may from time to time be supplemented or amended by any Supplement delivered pursuant to the provisions of Article X hereof. Letter of Representations Letter of Representations means a letter to the Depository from the District and/or the Issuing and Paying Agent representing such matters as shall be necessary to qualify the Commercial Paper Notes for the Depository s book-entry system. Liquidity Facility Liquidity Facility means, with respect to the applicable Series or subseries of the Commercial Paper Notes, the line of credit, letter of credit (and related reimbursement agreement), revolving credit agreement or other liquidity arrangement enabling the District to borrow for the purpose of paying such Commercial Paper Notes an amount equal to the principal amount of the Series or subseries of Commercial Paper Notes supported thereby, and the instruments pursuant to which such facility is provided. Liquidity Facility Expiration Date Liquidity Facility Expiration Date means, with respect to a Liquidity Facility, the stated expiration date thereof, taking into account any extension of such stated expiration date. Master Note Master Note means a Commercial Paper Note of the applicable Series and subseries substantially in the form attached hereto as Exhibit B. Maximum Rate Maximum Rate means, (1) in the case of Commercial Paper Notes the interest on which is Tax- Exempt, the lesser of (i) the maximum rate of interest allowable by law and (ii) twelve percent (12%) per annum, and (2) in the case of Commercial Paper Notes the interest on which is Taxable, the lesser of (i) the maximum rate of interest allowable by law and (ii) fifteen percent (15%) per annum. Moody s Moody s means Moody s Investors Service, a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term Moody s shall be deemed to refer to any other nationally recognized securities rating agency selected by the District

85 No-Issuance Notice Nominee Outstanding No-Issuance Notice has the meaning assigned to such term in the applicable Liquidity Facility. Nominee means the nominee of the Depository designated pursuant to Section 2.09 hereof. Outstanding, when used as of any particular time with reference to Commercial Paper Notes, means all Commercial Paper Notes theretofore, or thereupon being, authenticated and delivered by the Issuing and Paying Agent under this Issuing and Paying Agent Agreement except: Owner (1) Commercial Paper Notes theretofore canceled by the Issuing and Paying Agent or surrendered to the Issuing and Paying Agent for cancellation; (2) Commercial Paper Notes with respect to which all liability of the District shall have been discharged in accordance with Section hereof; and (3) Commercial Paper Notes for the transfer or exchange of or in lieu of or in substitution for which other Commercial Paper Notes shall have been authenticated and delivered by the Issuing and Paying Agent pursuant to this Issuing and Paying Agent Agreement. Owner, whenever used herein with respect to a Commercial Paper Note, means the person in whose name such Commercial Paper Note is registered. Participant Participant means those brokers-dealers, banks and other financial institutions from time to time for which the Depository holds Commercial Paper Notes as securities depository. Payment Fund Payment Fund means the fund by that name established for the related Series of Commercial Paper Notes pursuant to Section 5.01 hereof. Permitted Investments Permitted Investments means: (i) any bonds or other obligations which as to principal and interest constitute direct obligations of, or are unconditionally guaranteed by, the United States of America, including obligations of any of the federal agencies and federally sponsored entities set forth in clause (iii) below to the extent unconditionally guaranteed by the United States of America; (ii) any certificates, receipts, securities or other obligations evidencing ownership of, or the right to receive, a specified portion of one or more interest payments or principal payments, or any combination thereof, to be made on any bond, note, or other obligation described above in clause (i);

86 (iii) obligations of the Federal National Mortgage Association, the Government National Mortgage Association, Federal Home Loan Banks, and Federal Home Loan Mortgage Corporation; (iv) obligations of any state, territory or commonwealth of the United States of America or any political subdivision thereof or any agency or department of the foregoing; provided that at the time of their purchase such obligations are rated by at least two of the following Rating Agencies not lower than: Aa2 by Moody s, AA by S&P or AA by Fitch (or any comparable future rating designation); (v) any bonds or other obligations of any state of the United States of America or any political subdivision thereof (a) which are not callable prior to maturity or as to which irrevocable instructions have been given to the trustee of such bonds or other obligations by the obligor to give due notice of redemption and to call such bonds for redemption on the date or dates specified in such instructions, (b) which are secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or bonds or other obligations of the character described above in clause (i) or (ii) which fund may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the interest payment dates and the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (c) as to which the principal of and interest on the bonds and obligations of the character described above in clause (i) or (ii) which have been deposited in such fund along with any cash on deposit in such fund are sufficient to pay the principal of and interest and redemption premium, if any, on the bonds or other obligations described in this clause (v) on the interest payment dates and the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to in subclause (a) of this clause (v), as appropriate; (vi) bonds, notes, debentures or other evidences of indebtedness issued or guaranteed by any corporation which are, at the time of purchase, rated by Moody s (if Moody s is then rating the Commercial Paper Notes) and S&P (if S&P is then rating the Commercial Paper Notes) in their respective highest short-term rating categories, or, if the term of such indebtedness is longer than three (3) years, rated by at least two of the following Rating Agencies not lower than: Aa2 by Moody s, AA by S&P or AA by Fitch (or any comparable future rating designation); (vii) demand or time deposits or certificates of deposit, whether negotiable or nonnegotiable, issued by any bank or trust company organized under the laws of any state of the United States of America or any national banking association (including the Issuing and Paying Agent), provided that such certificates of deposit shall be purchased directly from such a bank, trust company or national banking association and shall be either (1) continuously and fully insured by the Federal Deposit Insurance Corporation, or (2) continuously and fully secured by such securities and obligations as are described above in clauses (i) through (iv), inclusive, which shall have a market value (exclusive of accrued interest) at all times at least equal to the principal amount of such certificates of deposit and shall be lodged with the Issuing and Paying Agent, as custodian, by the bank, trust company or national banking association issuing such certificates of deposit, and the bank, trust company or national banking association issuing each such certificate of deposit required to be so secured shall furnish the Issuing and Paying Agent with an undertaking satisfactory to it that the aggregate market value of all such obligations securing each such certificate of deposit will at all times be an amount equal to the principal amount of each such certificate of deposit and the Issuing and Paying Agent shall be entitled to rely on each such undertaking;

87 (viii) taxable commercial paper or tax-exempt commercial paper, rated in their respective highest rating categories by at least two of following Rating Agencies: Moody s (if Moody s is then rating the Commercial Paper Notes), S&P (if S&P is then rating the Commercial Paper Notes) and Fitch (if Fitch is then rating the Commercial Paper Notes); (ix) variable rate obligations required to be redeemed or purchased by the obligor or its agent or designee upon demand of the holder thereof secured as to such redemption or purchase requirement by a Liquidity Facility with a corporation and as to the payment of interest and principal either upon maturity or redemption (other than upon demand by the holder thereof) thereof by an unconditional credit facility of a corporation, provided that the variable rate obligations themselves are rated in their respective highest rating categories for its short-term rating, if any, and by at least two of the following Rating Agencies not lower than: Aa2 by Moody s, AA by S&P or AA by Fitch for its long-term rating (or any comparable future rating designation), and that the corporations providing the Liquidity Facility and credit facility have, at the date of acquisition of the variable rate obligation by the Issuing and Paying Agent, an outstanding issue of unsecured, uninsured and unguaranteed debt obligations rated by at least two of the following Rating Agencies not lower than: Aa2 by Moody s, AA by S&P or AA by Fitch (or any comparable future rating designation); (x) any repurchase agreement with any bank or trust company organized under the laws of any state of the United States or any national banking association (including the Issuing and Paying Agent) having a minimum permanent capital of one hundred million dollars ($100,000,000) and with short-term debt rated by at least two of the following Rating Agencies: Moody s (if Moody s is then rating the Commercial Paper Notes), S&P (if S&P is then rating the Commercial Paper Notes) and Fitch (if Fitch is then rating the Commercial Paper Notes) in their respective four highest short-term rating categories or with government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York, which agreement is secured by any one or more of the securities and obligations described in clauses (i), (ii) or (iii) above, which shall have a market value (exclusive of accrued interest and valued at least monthly) at least equal to the principal amount of such investment and shall be lodged with the Issuing and Paying Agent or other fiduciary, as custodian for the Issuing and Paying Agent, by the bank, trust company, national banking association or bond dealer executing such repurchase agreement, and the entity executing each such repurchase agreement required to be so secured shall furnish the Issuing and Paying Agent with an undertaking satisfactory to it that the aggregate market value of all such obligations securing each such repurchase agreement (as valued at least monthly) will be an amount equal to the principal amount of each such repurchase agreement and the Issuing and Paying Agent shall be entitled to rely on each such undertaking; (xi) any cash sweep or similar account arrangement of or available to the Issuing and Paying Agent, the investments of which are limited to investments described in clauses (i), (ii), (iii), (iv) and (x) of this definition of Investment Securities and any money market fund, the entire investments of which are limited to investments described in clauses (i), (ii), (iii), (iv) and (x) of this definition of Investment Securities and which money market fund is rated by at least two of the following Rating Agencies in their respective highest rating categories: Moody s (if Moody s is then rating the Commercial Paper Notes), S&P (if S&P is then rating the Commercial Paper Notes) and Fitch (if Fitch is then rating the Commercial Paper Notes); provided that as used in this clause (xi) and clause (xii) investments will be deemed to satisfy the requirements of clause (x) if they meet the requirements set forth in clause (x) ending with the words clauses (i), (ii) or (iii) above and without regard to the remainder of such clause (x); (xii) a guaranteed investment contract with a financial institution or insurance

88 company which has at the date of execution thereof an outstanding issue of unsecured, uninsured and unguaranteed debt obligations or a claims paying ability rated by at least two of the following Rating Agencies not lower than: Aa2 by Moody s, AA by S&P or AA by Fitch (or any comparable future rating designation); (xiii) shares of beneficial interest in diversified management companies investing exclusively in securities and obligations described in clauses (i) through (xii) of this definition of Investment Securities and which companies are rated in their respective highest rating categories by at least two of the following Rating Agencies: Moody s (if Moody s is then rating the Commercial Paper Notes), S&P (if S&P is then rating the Commercial Paper Notes) and Fitch (if Fitch is then Rating the Commercial Paper Notes) or have an investment advisor registered with the Securities and Exchange Commission with not less than 5 years experience investing in such securities and obligations and with assets under management in excess of $500,000,000; and (xiv) any investment approved by the board of directors of the District for which confirmation is received from each Rating Agency then rating any of the Commercial Paper Notes that such investment will not adversely affect such Rating Agency s rating on such Commercial Paper Notes. Prior Wastewater Obligation Documents Prior Wastewater Obligation Documents means the Wastewater Bond Indenture and any other indenture, resolution or other instrument of the District providing for the issuance of indebtedness or incurrence of any other obligation of the District (including for purposes hereof, obligations under credit and liquidity facilities and obligations under interest rate swap agreements and other hedging instruments, including termination payments related thereto) secured in whole or in part by Wastewater Revenues and which by its terms is superior in right of payment to the Commercial Paper Notes (Wastewater Series) or any Wastewater Note Parity Debt. Prior Wastewater Obligations Prior Wastewater Obligations means the Wastewater Bonds and any other securities, evidences of indebtedness or obligations of the District (including for purposes hereof, obligations under credit and liquidity facilities and obligations under interest rate swap agreements or other hedging instruments, including termination payments related thereto) issued or incurred pursuant to a Prior Wastewater Obligation Document. Prior Water Obligation Documents Prior Water Obligation Documents means the Water Bond Indenture and any other indenture, resolution or other instrument of the District providing for the issuance of indebtedness or incurrence of any other obligation of the District (including for purposes hereof, obligations under credit and liquidity facilities and obligations under interest rate swap agreements and other hedging instruments, including termination payments related thereto) secured in whole or in part by Water Revenues and which by its terms is superior in right of payment to the Commercial Paper Notes (Water Series) or any Water Note Parity Debt. Prior Water Obligations Prior Water Obligations means the Water Bonds and any other securities, evidences of indebtedness or obligations of the District (including for purposes hereof, obligations under credit and liquidity facilities and obligations under interest rate swap agreements or other hedging instruments,

89 including termination payments related thereto) issued or incurred pursuant to a Prior Water Obligation Document. Proceeds Fund Proceeds Fund means the fund by that name established for the related Series of Commercial Paper Notes pursuant to Section 5.01 hereof. Rating Agency Rating Agency means, as of any particular date of determination, each of Moody s, Fitch and/or S&P, if such Rating Agency has at the request of the District assigned a rating to the then Outstanding Commercial Paper Notes and each other nationally recognized statistical Rating Agency that at the request of the District has assigned a rating to the then Outstanding Commercial Paper Notes. Rebate Fund Rebate Fund means the fund by that name established pursuant to Section 7.05 hereof. Request of the District Request of the District means a written request signed in the name of the District by an Authorized Representative. Series Series, whenever used herein with respect to Commercial Paper Notes, means all of the Commercial Paper Notes designated as being of the same series. Special Tax Counsel Special Tax Counsel means Orrick Herrington & Sutcliffe LLP or an attorney or other firm or firms of attorneys having nationally recognized expertise in municipal finance law, identified by the District to provide an opinion as to the tax-exempt status of interest on the Commercial Paper Notes of a Series or subseries. Standard & Poor s Standard & Poor s means Standard & Poor s Ratings Services LLC, a part of McGraw-Hill Financial, Inc., duly organized and existing under and by virtue of the laws of the State of New York, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term Standard & Poor s shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. State State means the State of California

90 Supplement Supplement means any amendment to this Issuing and Paying Agent Agreement hereafter duly executed and delivered, supplementing, modifying or amending this Issuing and Paying Agent Agreement, and entered into pursuant to the provisions hereof. Taxable Taxable means, with respect to the Commercial Paper Notes of a Series or subseries so designated, that the interest on the Commercial Paper Notes of such Series or subseries is not expected to be excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of Tax Certificate Tax Certificate means the Tax Certificate delivered by the District at the time of the authorization and initial issuance and delivery of any Series or subseries of Commercial Paper Notes with respect to which interest is expected to be Tax-Exempt, as the same may be amended or supplemented in accordance with its terms. Tax-Exempt Tax-Exempt means, with respect to the Commercial Paper Notes of a Series or subseries so designated, that the interest on the Commercial Paper Notes of such Series or subseries is expected to be excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of Wastewater Bond Indenture Wastewater Bond Indenture means the Wastewater System Subordinated Revenue Bond Indenture dated as of April 1, 1990, by and between the District and The Bank of New York Mellon Trust Company, N.A., as successor trustee (or any other trustee appointed by the District), as amended and supplemented. Wastewater Bonds Wastewater Bonds means all bonds and other obligations and securities of the District issued and secured pursuant to the Wastewater Bond Indenture. Wastewater Note Parity Debt Wastewater Note Parity Debt means any indebtedness, installment sale obligation, lease obligation or other obligation of the District for borrowed money or any interest rate swap agreement or other hedging instrument having an equal lien and charge upon all or part of the Available Wastewater Revenues and therefore payable on a parity with the Commercial Paper Notes (Wastewater Series), including but not limited to Extendable Municipal Commercial Paper Notes (Wastewater Series) of the District issued under Resolution No of the District adopted on March 10, 2009, as the same may be amended from time to time. Wastewater operation and maintenance costs Wastewater operation and maintenance costs means the reasonable and necessary costs of

91 maintaining and operating the Wastewater System, calculated on sound accounting principles, including (among other things) the reasonable expenses of management, repair and other expenses necessary to maintain and preserve the Wastewater System in good repair and working order, and reasonable amounts for administration, overhead, insurance, taxes and other similar costs, but excluding in all cases depreciation and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature, and excluding all costs paid from the proceeds of taxes received by the District. Wastewater Revenues Wastewater Revenues means all charges received for, and all other income and receipts derived by the District from, the operation of the Wastewater System, or arising from the Wastewater System, together with income from the investment of any moneys in any fund or account established under the Wastewater Bond Indenture. Wastewater System Wastewater System means the entire sewage disposal system of Special District No. 1 of the District and all of the facilities thereof, including all facilities for the disposal of sewage, sewage treatment works, waste water disposal facilities, sludge treatment facilities, intercepting and outfall sewers, power generation facilities, and other facilities necessary or convenient for the collection, treatment or disposition of sewage and waste water for Special District No. 1 of the District, together with all additions, betterments, extensions and improvements to said system or any part thereof. Water Bond Indenture Water Bond Indenture means the Water System Subordinated Revenue Bond Indenture dated as of April 1, 1990, by and between the District and The Bank of New York Mellon Trust Company, N.A., as successor trustee (or any other trustee appointed by the District), as amended and supplemented. Water Bonds Water Bonds means all bonds and other obligations and securities of the District issued and secured pursuant to the Water Bond Indenture. Water Note Parity Debt Water Note Parity Debt means any indebtedness, installment sale obligation, lease obligation or other obligation of the District for borrowed money or any interest rate swap agreement or other hedging instrument having an equal lien and charge upon all or part of the Available Water Revenues and therefore payable on a parity with the Commercial Paper Notes (Water Series), including but not limited to Extendable Municipal Commercial Paper Notes (Water Series) of the District issued under Resolution No of the District adopted on March 10, 2009, as the same may be amended from time to time. Water operation and maintenance costs Water operation and maintenance costs means the reasonable and necessary costs of maintaining and operating the Water System, calculated on sound accounting principles, including (among other things) the reasonable expenses of management, repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, the cost of purchasing water and reasonable amounts for administration, overhead, insurance, taxes and other similar costs, but excluding in all cases depreciation and obsolescence charges or reserves therefor and amortization of

92 intangibles or other bookkeeping entries of a similar nature, and excluding all costs paid from the proceeds of taxes received by the District. Water Revenues Water Revenues means all charges received for, and all other income and receipts derived by the District from, the operation of the Water System, or arising from the Water System, together with income from the investment of any moneys in any fund or account established under the Water Bond Indenture. Water System Water System means the entire water system of the District and all of the facilities thereof, including all facilities for the storage, transmission or distribution of water or the generation or transmission of hydroelectric power, together with all additions, betterments, extensions and improvements to said system or any part thereof. The term Water System does not include the sewage disposal system or facilities of Special District No. 1 of the District (including any power generation facilities constituting a part of said system). SECTION 1.02 Construction. In this Issuing and Paying Agent Agreement, unless the context otherwise requires: (a) The terms hereby, hereof, hereto, herein and hereunder as used herein, refer to this Issuing and Paying Agent Agreement, and the term hereafter shall mean after, and the term heretofore shall mean before, the date of the execution and delivery of this Issuing and Paying Agent Agreement. All references herein to Articles, Sections and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof. (b) Words of any gender shall mean and include correlative words of the other and neuter genders and words importing the singular number shall mean and include the plural number and vice versa. (c) Words importing persons shall include firms, associations, partnerships (including general partnerships), trusts, corporations and other legal entities, including public bodies, as well as natural persons. (d) Any headings preceding the texts of the several Articles and Sections of this Issuing and Paying Agent Agreement, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this Issuing and Paying Agent Agreement, nor shall they affect its meaning, construction or effect. (e) With respect to this Issuing and Paying Agent Agreement, (i) each liquidity facility supporting a Series or subseries of Commercial Paper Notes in whole or in part is referred to individually as a Liquidity Facility and such liquidity facilities are referred to collectively as the Liquidity Facilities, and shall include the instruments (to the extent a separate document from such liquidity facility) pursuant to which such liquidity facility is provided, (ii) each bank providing a Liquidity Facility for all or a part of a Series or subseries of Commercial Paper Notes is referred to individually as a Bank, and all banks providing a Liquidity Facility for all or a portion of any Series or subseries of Commercial Paper Notes are referred to collectively as the Banks. The Series and subseries designations of the Commercial Paper Notes, the applicable Dealer(s) therefor, as well as the Bank(s) providing the Liquidity Facility supporting such Series or subseries of Commercial Paper Notes, are set forth in Exhibit F hereto. Subseries of Commercial Paper Notes, Banks, Liquidity Facilities and

93 Dealers may be added to, or deleted from, this Issuing and Paying Agent Agreement without the need to amend this Issuing and Paying Agent Agreement, upon delivery by an Authorized Representative of the District to the Issuing and Paying Agent of a new Exhibit F replacing the then-current Exhibit F, together with any new Dealer Agreement to be effective therefor and/or any new Liquidity Facility, new Bank Note(s) and new Master Note(s) delivered in accordance with the terms of this Issuing and Paying Agent Agreement. ARTICLE II GENERAL AUTHORIZATION AND ISSUANCE; THE COMMERCIAL PAPER NOTES SECTION 2.01 Authorization and Amount of Commercial Paper Notes. (a) There are hereby authorized to be issued for the purposes set forth in Section 2.02 hereof, Commercial Paper Notes of the District and there is hereby created a continuing pledge and lien as provided hereby to secure the payment of the principal of and interest on all the Commercial Paper Notes and the Bank Notes to the extent provided in Section 6.01 hereof. The aggregate principal amount of Commercial Paper Notes which may be executed, authenticated and delivered is not limited except that the aggregate principal amount of all Commercial Paper Notes Outstanding at any time, together with all other evidences of indebtedness of the District issued and outstanding pursuant to Article 1 of Chapter 7.5 of the Act, including all amounts drawn on available bank lines of credit related thereto, if any, shall not at any one time exceed the lesser of either (1) the annual average of the District s total revenue for the three preceding years or (2) 25 percent of the District s total outstanding bonds issued pursuant to Chapters 6, 7 and 8 of the Act, and except as otherwise provided in Section 2.02 hereof. SECTION 2.02 Designation and Purpose of Commercial Paper Notes. (a) The Commercial Paper Notes shall be designated generally as East Bay Municipal Utility District Commercial Paper Notes (Water Series) or East Bay Municipal Utility District Commercial Paper Notes (Wastewater Series) and may be issued in multiple subseries, each such subseries thereof to be designated as being either Taxable or Tax-Exempt and to bear such additional alphanumeric or other or additional designation as may be necessary or appropriate to distinguish each Series and subseries of the Commercial Paper Notes from any other Series and subseries thereof. (b) Commercial Paper Notes may be issued, and the proceeds of the sale of any Notes (net of all expenses and costs of sale and issuance) shall be applied, for any or all of the purposes (including the financing or refinancing of any costs or expenditures or obligations of the District incurred for any or all of such purposes) specified in Article 1 of Chapter 7.5 of the Act as directed by an Authorized Representative of the District. Proceeds of Commercial Paper Notes issued to refinance, renew or refund other Commercial Paper Notes and may also be used to pay or reimburse the applicable Bank for Advances used to pay principal due on such maturing Commercial Paper Notes. The authorization hereunder specifically includes the authorization to issue and reissue Commercial Paper Notes for the purposes contemplated herein. The aggregate principal amount of the Commercial Paper Notes (Water Series) and aggregate principal amount of the Commercial Paper Notes (Wastewater Series), respectively, or, in each case, any Series or subseries thereof, that may be Outstanding at any time hereunder shall not at any time exceed the sum of the Commitments of the Banks then available under the applicable Liquidity Facilities therefor (or, in the case of any Series or subseries thereof, the related Commitment under the related Liquidity Facility)

94 SECTION 2.03 Terms of the Commercial Paper Notes. (a) The Commercial Paper Notes shall be dated the date of their respective authentication and issuance; shall be issued in registered form, registered as designated by the applicable Dealer (subject to Section 2.09 hereof); and shall be issued in denominations of $100,000 and in integral multiples of $1,000 in excess thereof. Commercial Paper Notes shall bear stated interest or accrue interest from their respective dates, payable on their respective maturity dates. (b) The Commercial Paper Notes (i) may bear stated interest or accrue interest, in each case payable at maturity, at a rate not to exceed the Maximum Rate (calculated on the basis of a 365/366-day year (in the case of Commercial Paper Notes the interest on which is Tax-Exempt), and a 360-day year containing twelve 30-day months (in the case of Commercial Paper Notes the interest on which is Taxable), and in each case the actual number of days elapsed), (ii) shall mature on a Business Day not more than 270 days after their respective dates, but in any event not later than the Business Day immediately preceding the applicable Liquidity Facility Expiration Date, and (iii) shall be sold at a price equal to the principal amount thereof if interest on the Commercial Paper Notes is Tax-Exempt and may be sold at a price less than the principal amount thereof if interest on the Commercial Paper Notes is Taxable. (c) The stated interest rate, if any, or yield to maturity, maturity date and other terms of each Commercial Paper Note, so long as not inconsistent with the terms of this Issuing and Paying Agent Agreement, shall be as set forth in the Issuance Request required to be delivered pursuant to Section 3.01 hereof directing the issuance of such Commercial Paper Note. maturity. (d) The Commercial Paper Notes shall not be subject to redemption prior to (e) Within each Series or subseries, Commercial Paper Notes shall be numbered in such manner as the Issuing and Paying Agent may deem appropriate. (f) The principal of and the interest on the Commercial Paper Notes shall be paid in immediately available funds in such coin or currency of the United States of America as, at the respective times of payment, is legal tender for the payment of public and private debts. Subject to Section 2.09 hereof, the principal of and the interest on the Commercial Paper Notes, if any, shall be payable at the Corporate Trust Office of the Issuing and Paying Agent on any Business Day upon which such Commercial Paper Notes have become due and payable on or before the close of business on such Business Day, provided, that such Commercial Paper Notes are presented and surrendered on a timely basis. Upon presentation of such a Commercial Paper Note to the Issuing and Paying Agent no later than 2:15 p.m., New York City time, on or after any Business Day upon which such Commercial Paper Notes have become due and payable, payment for such Commercial Paper Note shall be made by the Issuing and Paying Agent in immediately available funds on such Business Day. If a Commercial Paper Note is presented for payment after 2:15 p.m., New York City time, on such Business Day, payment therefor shall be made by the Issuing and Paying Agent on the next succeeding Business Day without the accrual of additional interest thereon. SECTION 2.04 Form of Commercial Paper Notes. Subject to Section 2.09 hereof, the Commercial Paper Notes and the Certificate of Authentication endorsed thereon shall be substantially in the forms set forth in Exhibit A hereto, with such appropriate variations, omissions and insertions as shall be required or appropriate in order to designate the Series and subseries, if any, thereof and as otherwise may be permitted or required by this Issuing and Paying Agent Agreement, and may contain or have endorsed thereon such legends, opinions and provisions not inconsistent with this Issuing and Paying

95 Agent Agreement as may be determined by an Authorized Representative of the District prior to their delivery. SECTION 2.05 Execution and Authentication of Commercial Paper Notes. The Commercial Paper Notes shall be executed in the name of the District by the manual or facsimile signature of one or more of the following: the President of the Board of Directors of the District, the General Manager of the District or the Director of Finance of the District, attested by the Secretary of the District, or in such other manner as may be required or permitted by law. In case any of the officers who shall have signed any of the Commercial Paper Notes shall cease to be such officer or officers of the District before the Commercial Paper Notes so signed shall have been authenticated or delivered by the Issuing and Paying Agent or issued by the District, such Commercial Paper Notes may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the District as though those who signed and attested the same had continued to be such officers of the District. The Commercial Paper Notes shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit A hereto, executed by the manual signature of the Issuing and Paying Agent. Only such of the Commercial Paper Notes as shall bear thereon a certificate of authentication manually executed by the Issuing and Paying Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Issuing and Paying Agent Agreement, and such certificate of authentication when manually executed by the Issuing and Paying Agent shall be conclusive evidence that the Commercial Paper Notes so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Issuing and Paying Agent Agreement. The District agrees to furnish the Issuing and Paying Agent with an adequate supply of Commercial Paper Notes from time to time, executed in accordance with this Section 2.05, with the principal amount, date of issue, Owner, maturity date, interest rate and amount of interest left blank. Pending receipt of an Issuance Request, the form of which is set forth as Exhibit D hereto, the Issuing and Paying Agent agrees to hold the Commercial Paper Notes in safekeeping for the account of the District in accordance with the customary practice of the Issuing and Paying Agent. Notwithstanding the foregoing, the District may furnish a single Note for each Series or subseries of the Commercial Paper Notes in the form of a Master Note as further provided in Section 2.09 hereof. SECTION 2.06 Registration and Transfer of Notes. The Issuing and Paying Agent will keep or cause to be kept at its Corporate Trust Office sufficient books for the registration and transfer of Commercial Paper Notes, which shall at all times be open to inspection during normal business hours by the District upon reasonable prior notice, and upon presentation for such purpose, the Issuing and Paying Agent shall, under reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred on such books the Commercial Paper Notes, as herein provided. Any Commercial Paper Note may, in accordance with its terms, be transferred, upon the register required to be kept pursuant to the provisions of this Section 2.06 by the person in whose name it is registered, in person or by such person s duly authorized attorney, upon surrender of such Commercial Paper Note for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form approved by the Issuing and Paying Agent. Whenever any Commercial Paper Note or Notes shall be surrendered for transfer, the District shall execute and the Issuing and Paying Agent shall authenticate and deliver a new Commercial Paper Note or Notes, of the same tenor, Series and subseries (if applicable), maturity and interest rate and for a like aggregate principal amount. The Issuing and Paying Agent shall require the Owner of the Commercial Paper Note requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer

96 SECTION 2.07 Commercial Paper Notes Mutilated, Lost, Destroyed or Stolen. If any Commercial Paper Note shall become mutilated, the District, at the expense of the Owner of said Commercial Paper Note, shall execute, and the Issuing and Paying Agent shall thereupon authenticate and deliver, a new Commercial Paper Note of like Series and subseries (if applicable), tenor and number in exchange and substitution for the Commercial Paper Note so mutilated, but only upon surrender to the Issuing and Paying Agent of the Commercial Paper Note so mutilated. If any Commercial Paper Note shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Issuing and Paying Agent and, if such evidence be satisfactory to it and indemnity satisfactory to it shall be given, the District, at the expense of the Owner, shall execute, and the Issuing and Paying Agent shall thereupon authenticate and deliver a new Commercial Paper Note of like Series and subseries (if applicable) and tenor and bearing a different number in lieu of and in substitution for the Commercial Paper Note so lost, destroyed or stolen. Neither the District nor the Issuing and Paying Agent shall be required to treat both the original Commercial Paper Note and any replacement Commercial Paper Note as being Outstanding for the purpose of determining the principal amount of Commercial Paper Notes which may be issued hereunder, but both the original and the replacement Commercial Paper Note shall be treated as one and the same. SECTION 2.08 Cancellation of Commercial Paper Notes. The Issuing and Paying Agent agrees promptly to cancel the Commercial Paper Notes presented for payment and, if so requested by the District, to return such Commercial Paper Notes to the District. Promptly upon the written request of the District, the Issuing and Paying Agent agrees to cancel and return to the District all unissued Commercial Paper Notes in the possession of the Issuing and Paying Agent at the time of such request. SECTION 2.09 Master Note; Registration of Notes; Book-Entry Provisions. Notwithstanding any other provision of this Issuing and Paying Agent Agreement to the contrary, the District may deliver the Commercial Paper Notes in the form of one or more Master Notes representing the Commercial Paper Notes of any Series or subseries to be issued from time to time. Unless an Authorized Representative determines that a Series or subseries of Commercial Paper Notes shall be issued in other than book-entry form, the Commercial Paper Notes shall initially be issued in book-entry form as further provided in this Section (a) Delivery and Provisions for Book-Entry Notes. The Commercial Paper Notes issued pursuant to this Issuing and Paying Agent Agreement shall initially be issued as book-entry only in the form of a separate single fully-registered Master Note for each Series and subseries of the Commercial Paper Notes. The initial Depository with respect to each Series and subseries of Commercial Paper Notes shall be DTC. The initial Nominee with respect to each Series and subseries of Commercial Paper Notes shall be Cede & Co., as nominee of DTC. Except as provided in subsection (c) of this Section 2.09, all of the Commercial Paper Notes shall be registered in the name of the Nominee. Notwithstanding any provision to the contrary in Section 2.09, so long as the Commercial Paper Notes remain in the form of one or more Master Notes in book-entry form, the issuance of Commercial Paper Notes pursuant to an Issuance Request against payment therefor shall not require the physical delivery of note certificates. The Issuing and Paying Agent and the District may treat the registered owner of each Commercial Paper Note as the sole and exclusive owner thereof for the purposes of payment of the principal of or interest on the Series or subseries of Commercial Paper Notes to which such Commercial Paper Note belongs, giving any notice permitted or required to be given to Owners under this Issuing and Paying Agent Agreement, registering the transfer of Commercial Paper Notes, obtaining any consent or other action to be taken by the Owners, and for all other purposes whatsoever, and neither the Issuing and Paying Agent nor the District shall be affected by any notice to the contrary. Neither the Issuing and Paying Agent nor the District shall have any responsibility or obligation to any Participant in the Depository, any person claiming a beneficial ownership interest in the

97 Commercial Paper Notes under or through the Depository or any Participant, or any other person who is not shown on the registration books as being an Owner, with respect to (i) the accuracy of any records maintained by the Depository or any Participant; (ii) the payment by the Depository or any Participant of any amount in respect of the principal of or interest on the Commercial Paper Notes; (iii) the delivery of any notice which is permitted or required to be given to Owners under this Issuing and Paying Agent Agreement; (iv) any consent given or other action taken by the Depository as Owner; or (v) any other purpose. The Issuing and Paying Agent shall pay all principal of and interest on the Commercial Paper Notes only to or upon the order of the Depository, and all such payments shall be valid and effective to fully satisfy and discharge the District s obligations with respect to the payment of the principal of and interest on the Commercial Paper Notes to the extent of the sum or sums so paid. Upon delivery by the Depository to the Issuing and Paying Agent of written notice to the effect that the Depository has determined to substitute a new Nominee in place of the current Nominee, and subject to the provisions herein with respect to record dates, the word Nominee in this Issuing and Paying Agent Agreement shall refer to such new Nominee. (b) Certificate Agreement and Letter of Representations. The Issuing and Paying Agent has executed and delivered to DTC a Certificate Agreement, a copy of which is attached hereto as Exhibit C. Prior to the issuance of Commercial Paper Notes hereunder, the District shall deliver to the Issuing and Paying Agent a Letter of Representations executed by the District substantially in the form provided by DTC in order to provide for the issuance of the Master Notes and to qualify the Commercial Paper Notes for the Depository s book-entry only system. The Issuing and Paying Agent is hereby authorized and directed to execute and deliver to DTC such Letter of Representations. Notwithstanding any other provision of this Issuing and Paying Agent Agreement and so long as all Outstanding Commercial Paper Notes are registered in the name of Cede & Co. as nominee of DTC or its registered assigns, the District and the Issuing and Paying Agent shall cooperate with DTC, as sole registered owner of the Commercial Paper Notes, and its registered assigns, in effecting payment of the principal of and interest on the Commercial Paper Notes by arranging for payment in such manner that funds for such payment are properly identified and are made available on the date they are due, all in accordance with the Letter of Representations, the provisions of which the Issuing and Paying Agent may rely upon to implement the foregoing procedures notwithstanding any inconsistent provisions herein. The execution and delivery of the Letter of Representations shall not in any way limit the provisions of this Section 2.09 or in any other way impose upon the District any obligation whatsoever with respect to persons having beneficial ownership interests in the Commercial Paper Notes other than the Owners. (c) Discontinuation of Book-Entry System. In the event (i) the Depository determines not to continue to act as securities depository for a Series or subseries of Commercial Paper Notes, or (ii) the District determines that the Depository shall no longer so act and delivers a written certificate to the Issuing and Paying Agent to that effect, then the District will discontinue the book-entry system with the Depository for such Series or subseries of Commercial Paper Notes. If the District determines to replace the Depository for a Series or subseries of Commercial Paper Notes with another qualified securities depository, the District shall prepare or direct the preparation of a new, single, separate, fully registered Commercial Paper Note for such Series or subseries of Commercial Paper Notes registered in the name of such successor or substitute qualified Depository or its Nominee, or make such other arrangements acceptable to the Issuing and Paying Agent and such successor or substitute Depository as are not inconsistent with the terms of this Issuing and Paying Agent Agreement. If the District fails to identify another qualified Depository to replace the incumbent Depository for a Series or subseries of Commercial Paper Notes, then such Series or subseries of Commercial Paper Notes shall no longer be restricted to being registered in the registration books of the Issuing and Paying Agent in the name of the incumbent Depository or its Nominee, but shall be registered in whatever name or names the

98 incumbent Depository or its Nominee transferring or exchanging such Series or subseries of Commercial Paper Notes shall designate. (d) Payments to the Nominee. Notwithstanding any provision of this Issuing and Paying Agent Agreement to the contrary, so long as the Commercial Paper Notes are registered in the name of the Nominee, all payments with respect to principal of and interest on the Commercial Paper Notes and all notices with respect to the Commercial Paper Notes shall be made and given, respectively, as provided in the Letter of Representations for the related Series or subseries of Commercial Paper Notes or as otherwise instructed by the Depository. ARTICLE III ISSUANCE AND SALE OF COMMERCIAL PAPER NOTES SECTION 3.01 Issuance and Sale of Commercial Paper Notes. (a) At the time of the execution and delivery by the Issuing and Paying Agent of this Agreement and as a condition precedent to the initial issuance of Commercial Paper Notes hereunder, there shall be filed with the Issuing and Paying Agent by the District: (1) a copy of Resolution No of the District referred to in the first recital to this Issuing and Paying Agent Agreement, certified by the Secretary of the District or his or her duly authorized designee; (2) a copy of the Resolution No. -15 of the District authorizing the issuance of the Commercial Paper Notes and the Bank Notes and the execution and delivery of this Issuing and Paying Agent Agreement; (3) a letter of Co-Bond Counsel addressed to the Issuing and Paying Agent authorizing the Issuing and Paying Agent to rely upon the approving opinion of Co-Bond Counsel delivered in connection with the initial issuance of the Commercial Paper Notes as to the validity of such Commercial Paper Notes; (4) to the extent any of the Commercial Paper Notes proposed to be issued are to be issued as Tax-Exempt, an opinion of Special Tax Counsel with respect to the Tax- Exempt status thereof; (5) an executed copy of this Issuing and Paying Agent Agreement; (6) fully executed copies of one or more Dealer Agreements for such Commercial Paper Notes; and (7) one or more fully executed Liquidity Facilities, together with one or more legal opinions addressed to the District and the Issuing and Paying Agent of counsel to each Bank providing the initial Liquidity Facilities for the Commercial Paper Notes to the effect that the applicable Liquidity Facility is a legal, valid and binding obligation of the issuing Bank and is enforceable against such Bank in accordance with its terms (subject to such qualifications as may be acceptable to the District). (b) At any time after the execution of this Issuing and Paying Agent Agreement and from time to time prior to April 27, 2022, unless an Authorized Representative of the District shall have provided to the Issuing and Paying Agent a written notification of the extension of such date, Commercial

99 Paper Notes may be issued and shall, subject to Section 2.09 and Section 3.01(c) hereof, be manually authenticated and delivered by the Issuing and Paying Agent in the manner hereinafter provided, but only upon receipt by the Issuing and Paying Agent of an Issuance Request in substantially the form attached hereto as Exhibit D or upon receipt by the Issuing and Paying Agent in the manner specified below of telephonic, computer or written instructions providing the information set forth in Exhibit D (which instructions shall be the equivalent to the giving of a written Issuance Request to the Issuing and Paying Agent) no later than 1:00 p.m., New York City time (or, in the case of book-entry Commercial Paper Notes, 1:30 p.m., New York City time), on the Business Day on which Commercial Paper Notes are to be delivered, directing the Issuing and Paying Agent to authenticate the Commercial Paper Notes referred to therein and to deliver the same to or upon the order of one or more Dealers upon receipt of payment in accordance with custom then prevailing in the New York financial market for commercial paper notes and the rules of the New York Clearinghouse then in effect. If an Issuance Request is received after 1:00 p.m., New York City time, (or, in the case of book-entry Commercial Paper Notes, 1:30 p.m., New York City time), on a given day, the Issuing and Paying Agent shall not be obligated to deliver the requested Commercial Paper Notes until the next succeeding Business Day. To the extent any instructions given pursuant to this Section 3.01 are not written, they shall be confirmed in writing by an Authorized Representative by the close of business on the day such instructions are given. Each Issuance Request shall include: (1) the Series and subseries designation of each Commercial Paper Note to be delivered; (2) the principal amount and date of each Commercial Paper Note then to be delivered; (3) the interest rate or yield to maturity of the Commercial Paper Notes then to be delivered; (4) the purchase price of the Commercial Paper Notes then to be delivered, and (v) the maturity date thereof. Upon receipt of any Issuance Instructions which shall provide for the issuance of Commercial Paper Notes with a maturity date of two (2) days or shorter, the Issuing and Paying Agent shall use its best efforts to notify the Bank thereof. Each such Issuance Request shall also certify or shall constitute a representation to the Issuing and Paying Agent that, as of the date of delivery of the related Commercial Paper Notes: (i) the Commercial Paper Notes then to be issued are being issued for purposes authorized by Section 2.02 of this Issuing and Paying Agent Agreement; (ii) all actions on the part of the District necessary for the valid issuance of the Commercial Paper Notes have been taken, and that such Commercial Paper Notes will be valid obligations of the District enforceable in accordance with their terms; (iii) after the issuance of such Commercial Paper Notes and the application of the proceeds thereof, the aggregate principal amount of the Commercial Paper Notes Outstanding will not exceed the amount that at the time is authorized to be Outstanding as provided in the Act and Section 2.01(a) hereof; (iv) Liquidity Facilities supporting the full principal amount of the Commercial Paper Notes then to be Outstanding are in full force and effect; (v) the interest rates, if any, borne by the Commercial Paper Notes or the yield to maturity of the Commercial Paper Notes to be delivered on such date does not exceed the Maximum Rate;

100 (vi) unless the Commercial Paper Notes to be issued are Taxable, the facts, estimates, circumstances and representations set forth or made (as the case may be) in the Tax Certificate continue to exist and are reaffirmed on such date; (vii) the terms of the Commercial Paper Notes do not exceed 270 days and the maturity dates of such Commercial Paper Notes set forth in the Issuance Request do not extend beyond the applicable Liquidity Facility Expiration Date; (viii) the District has not been notified by Co-Bond Counsel that their opinion with respect to the validity of the Commercial Paper Notes of such Series or subseries and, if the interest on such Series or subseries of Commercial Paper Notes is Tax-Exempt, has not been notified by Special Tax Counsel that their opinion with respect to the tax treatment of the interest thereon, delivered prior to the initial issuance of such Series or subseries of Commercial Paper Notes has been revised or withdrawn or, if any such revisions or withdrawal has occurred, a revised opinion or a substitute opinion acceptable to the applicable Dealer has been delivered; (ix) no Event of Default under Section 8.01 hereof has occurred and is continuing as of the date of such Issuance Request; and (x) all of the conditions precedent to the issuance of such Commercial Paper Notes set forth in the applicable Liquidity Facility and in this Section 3.01 have been satisfied. (c) Upon receipt of an Issuance Request from an Authorized Representative or of telephonic, computer or written instructions as hereinabove provided (and which instructions may be mailed, telephoned, transmitted through an electronic instruction reporting communication service offered by the Issuing and Paying Agent and/or transmitted by facsimile device to the Issuing and Paying Agent) given by an Authorized Representative, or by any person, including any employee or partner of a Dealer, who has been designated by an Authorized Representative in writing to the Issuing and Paying Agent as a person authorized to transmit such instructions hereunder, the Issuing and Paying Agent shall, by 2:15 p.m., New York City time, subject to the last sentence of this Section 3.01(c), withdraw the necessary Commercial Paper Notes from safekeeping and, in accordance with such Issuance Request,(i) complete each Commercial Paper Note as to principal amount (in denominations as prescribed by section 2.03(a)), date of issue, maturity date, interest rate and amount of interest thereon (or, in the case of a Series or subseries of Commercial Paper Notes issued at a price below the principal amount thereof, initial amount and value at maturity), and to register such Commercial Paper Note as directed by Dealer; (ii) manually authenticate each Commercial Paper Note by any officer or employee duly authorized and designated for such purpose; (iii) deliver the Commercial Paper Notes to or upon the order of the Dealer or its agent, which delivery shall be against receipt for payment as herein provided or as otherwise provided in such Issuance Request. Notwithstanding the foregoing, so long as a Master Note is held by the Depository as provided in Section 2.09 hereof, the Issuing and Paying Agent shall provide for the delivery of Commercial Paper Notes thereunder in accordance with the terms of the Letter of Representations and the Certificate Agreement. (d) Notwithstanding any other provision hereof, if a No-Issuance Notice has been received by the Issuing and Paying Agent from the applicable Bank and has not been withdrawn, the Issuing and Paying Agent shall not issue or authenticate any Commercial Paper Notes hereunder which are affected by such No-Issuance Notice, except to effect transfers or exchanges of Outstanding Commercial Paper Notes as provided in Section 2.06 and Section 2.07 hereof. In the event an Issuance Request is received by the Issuing and Paying Agent compliance with which would violate a No-Issuance

101 Notice, the Issuing and Paying Agent shall return such Issuance Request to the District together with a copy of the No-Issuance Notice, and shall notify the applicable Dealer of such action. (e) Any Issuance Request made by telephone pursuant to this Section 3.01 may be recorded by the Issuing and Paying Agent and promptly confirmed in writing by an Authorized Representative. Except in the case of negligence or willful misconduct, the Issuing and Paying Agent shall incur no liability to the District in acting hereunder upon telephonic or other instructions contemplated hereby which the recipient thereof believed in good faith to have been given by an Authorized Representative. In the event a discrepancy exists between the telephonic instructions and the written confirmation, or in the absence of receiving a written confirmation, the telephonic instructions as recorded by the Issuing and Paying Agent will be deemed the controlling and proper instructions. If the Issuing and Paying Agent does not record an oral Issuance Request, and a conflict exists between such oral Issuance Request and the written confirmation thereof, the terms of the written confirmation shall control. ARTICLE IV BANK NOTES SECTION 4.01 Authorization and Terms of Bank Notes. (a) The District hereby authorizes the issuance of its Bank Notes, subject to the provisions of this Section 4.01 and as hereinafter provided. Bank Notes shall be issued from time to time for each Bank providing a Liquidity Facility for a Series or subseries of the Commercial Paper Notes as provided herein in the event that any Advance under the related Liquidity Facility is made or, if required by the applicable Bank, shall be issued on the date the Liquidity Facility is delivered to evidence the obligation of the District to repay any Advance under such Liquidity Facility. Bank Notes payable from Available Water Revenues shall be designated as East Bay Municipal Utility District Bank Notes (Water Series), Subseries [insert applicable letter and number designation] [insert name of applicable Bank]. Bank Notes payable from Available Wastewater Revenues shall be designated as East Bay Municipal Utility District Bank Notes (Wastewater Series), Subseries [insert applicable letter and number designation] [insert name of applicable Bank]. The principal amount of any Bank Note that may be Outstanding at any one time hereunder shall not at any time exceed the Commitment of the applicable Bank under the related Liquidity Facility. (b) Bank Notes may be executed on behalf of the District by the General Manager or the Director of Finance. The Bank Notes shall be dated the date of their respective authentication and issuance; shall be issued in registered form only; shall be issued in any denomination and shall bear interest at the Bank Rate (calculated on the basis of a year consisting of 365 days and actual number of days elapsed); provided, however, that the interest rate on the Bank Notes shall not exceed the Maximum Rate. Bank Notes shall bear interest from their respective dates, payable in accordance with the Liquidity Facility. Principal of Bank Notes shall be payable in accordance with the Liquidity Facility. The final maturity of the Bank Notes shall be no later than such date as may be provided for in the Liquidity Facility. (c) The maturity date and other terms of each Bank Note, so long as not inconsistent with the terms of this Issuing and Paying Agent Agreement, shall be as set forth in the certificate of an Authorized Representative of the District directing the issuance of such Bank Note. (d) Each Series or subseries of Bank Notes shall be subject to optional prepayment prior to maturity in accordance with, and upon notice as provided by, the related Liquidity Facility

102 (e) Each Series or subseries of Bank Notes shall be numbered in such manner as the Issuing and Paying Agent shall determine. SECTION 4.02 Issuance of Bank Notes. In the event that a Bank shall have made an Advance under a Liquidity Facility which is not reimbursed on the date of such Advance, the Issuing and Paying Agent shall authenticate a Bank Note in the principal amount equal to the amount of the Advance and shall deliver, or cause to be delivered, such Bank Note to or upon the order of the Bank, unless a Bank Note was delivered to the Bank in the amount of the related Commitment on the date of issuance of the Liquidity Facility as provided in Section 4.01(a) hereof. No further approval of the Board of Directors of the District is necessary for the issuance of any Bank Notes. SECTION 4.03 Form of Bank Notes and Authentication Certificate. The definitive Bank Notes and the Certificate of Authentication endorsed thereon shall be substantially in the form set forth in the applicable Liquidity Facility, with such appropriate variations, omissions and insertions as shall be necessary or appropriate in order to accomplish the purpose of the transaction authorized by this Issuing and Paying Agent Agreement. The Bank Notes may have endorsed thereon such legends or text as may be necessary or appropriate to conform to any applicable rules and regulations of any governmental authority or any usage or requirement of law or regulation with respect thereto. SECTION 4.04 No Transfers of Bank Notes. Unless otherwise required by applicable law, the Bank Notes shall be non-negotiable and non-transferable; provided that the Bank Notes may be transferred to any successor or assign of the Bank pursuant to the terms of the Liquidity Facility or to any successor of the Bank by merger or other business combination. ARTICLE V FUNDS AND ACCOUNTS; APPLICATION OF NOTE PROCEEDS SECTION 5.01 Establishment and Designation of Funds and Accounts; Pledge of Certain Funds. The following funds and separate accounts and subaccounts within funds are hereby established and shall be held and maintained by the Issuing and Paying Agent: (a) a Proceeds Fund (Water Series) and a Proceeds Fund (Wastewater Series), together with a subaccount therein for each subseries (if any) of the Commercial Paper Notes of the respective Series; (b) a Payment Fund (Water Series) and a Payment Fund (Wastewater Series), together with the following accounts and subaccounts in each such fund: (i) a Commercial Paper Note Payment Account, with subaccounts therein for each subseries (if any) of the Commercial Paper Notes of the respective Series; and (ii) a Bank Note Payment Account, with subaccounts therein for each subseries (if any) of the Commercial Paper Notes of the respective Series. There are hereby pledged to secure the payment of the principal of and interest on the respective Series and subseries of the Commercial Paper Notes and the Bank Notes and all other amounts payable to the Bank under each Liquidity Facility, each in accordance with their terms, all amounts held by the Issuing and Paying Agent hereunder in the respective funds and accounts (or with respect to subseries, the respective subaccounts) related to such Series or subseries, as applicable, subject only to the provisions of this Issuing and Paying Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth herein. Said pledge shall be valid and binding from and after delivery by

103 the Issuing and Paying Agent of the Commercial Paper Notes and any Bank Notes. SECTION 5.02 Proceeds Fund. There shall be deposited into the applicable Proceeds Fund and subaccount therein (if any) the proceeds of the sale of the Commercial Paper Notes of the related Series or subseries and such amounts in the Proceeds Fund shall be applied immediately after receipt as follows and in the following order of priority: (i) First, there shall be transferred from the related Proceeds Fund to the related Payment Fund and the applicable Commercial Paper Note Payment Account and subaccount therein (if any) for the respective Series or subseries on the date such proceeds are received, the amount necessary to pay the principal of the Commercial Paper Notes of such Series or subseries that mature on the date such transfer is made; (ii) Second, if Commercial Paper Notes have been issued for the purpose of refunding, paying or providing for the payment or discharge of any Water Note Parity Debt or other obligations of the District, there shall be transferred in accordance with the written direction of an Authorized Representative of the District, the amount directed by the District as necessary to refund, pay or provide for the payment and discharge of any of the District s outstanding Water Note Parity Debt or other obligations; and (iii) Third, there shall be transferred to the District or as otherwise specified by the District in accordance with the written direction of an Authorized Representative of the District, the amount specified by the District to be applied to, or to reimburse the District for funds applied to, any or all of the purposes specified in Article 1 of Chapter 7.5 of the Act and Section 2.02 hereof. SECTION 5.03 Commercial Paper Note Payment Account. In addition to the proceeds of the sale of Commercial Paper Notes of a Series and subseries transferred from the related Proceeds Fund to the applicable Commercial Paper Note Payment Account or subaccount therein (if any) pursuant to Section 5.02 hereof, there shall be deposited in each such Commercial Paper Note Payment Account or subaccount therein (if any) such other amounts as the District may direct or otherwise deposit therein, including all amounts provided by the District for the payment of interest on the related Series or subseries of the Commercial Paper Notes as provided in Section 6.01 hereof. In addition, there shall be deposited into the applicable Commercial Paper Note Payment Account or subaccount therein (if any) all amounts received by the Issuing and Paying Agent as an Advance under the related Liquidity Facility for such Series or subseries of Commercial Paper Notes. The proceeds of Advances shall be held separate and apart from all other amounts in the Commercial Paper Note Payment Account or subaccount therein (if any). Amounts in the Commercial Paper Note Payment Account or any subaccount therein for a respective Series or subseries of Commercial Paper Notes are to be used solely to pay the principal of and interest on such Series or subseries of the Commercial Paper Notes and shall be held by the Issuing and Paying Agent in trust and applied by the Issuing and Paying Agent for such purpose. If by 11:30 a.m., New York time, on any date on which payment of Commercial Paper Notes shall be due, the Issuing and Paying Agent has not received either moneys for deposit in the applicable Commercial Paper Note Payment Account or subaccount therein for a Series or subseries of Commercial Paper Notes or notifications from the applicable Dealer(s) that such Dealer(s) have arranged to sell or agreed to purchase Commercial Paper Notes of such Series or subseries in an amount sufficient to pay the principal amount of the Commercial Paper Notes of such Series or subseries maturing on such date, the Issuing and Paying Agent shall submit to the applicable Bank, no later than 12:00 p.m., New York time, on such date a request for an Advance in the form and in accordance with the requirements of the applicable Liquidity Facility, in order to draw on the Liquidity Facility in such amount as is necessary to pay the principal of such maturing Commercial Paper Notes of the related Series or subseries, and shall

104 deposit the proceeds of any such Advance in the applicable Commercial Paper Note Payment Account or subaccount therein (if any) as herein provided. The proceeds of any Advance that the Issuing and Paying Agent determines are not necessary to pay the principal of maturing Commercial Paper Notes of the related Series or subseries shall be returned promptly to the applicable Bank. SECTION 5.04 Deposits of Available Water Revenues and Available Wastewater Revenues in Bank Note Payment Accounts. On the Business Day before each Bank Note Payment Date, the District shall allocate and transfer to the Issuing and Paying Agent for deposit in the applicable Bank Note Payment Account or subaccount therein (if any) amounts from Available Water Revenues or Available Wastewater Revenues, as applicable, as follows: (a) From Available Water Revenues, (i) an amount equal to the aggregate amount of interest due and payable on such Bank Note Payment Date on all Bank Notes Outstanding payable from Available Water Revenues and (ii) an amount equal to the aggregate principal amount due and payable on such Bank Note Payment Date on the Outstanding Bank Notes payable from Available Water Revenues; and (b) From Available Wastewater Revenues, (i) an amount equal to the aggregate amount of interest due and payable on such Bank Note Payment Date on all Bank Notes Outstanding payable from Available Wastewater Revenues and (ii) an amount equal to the aggregate principal amount due and payable on such Bank Note Payment Date on the Outstanding Bank Notes payable from Available Wastewater Revenues. Amounts in each Bank Note Payment Account or subaccount therein (if any) shall be invested by the Issuing and Paying Agent in Permitted Investments pursuant to the written instructions of the District. In the absence of such instructions, the Issuing and Paying Agent shall invest in a money market fund rated in one of the two top categories by Standard & Poor s, including funds for which the Issuing and Paying Agent and its affiliates provide investment advisory or other management services. The Bank Notes shall not be payable from the proceeds of amounts drawn under any Liquidity Facility. SECTION 5.05 Moneys in Funds and Accounts; Investments Authorized. Pending expenditure for authorized purposes, moneys held by the Issuing and Paying Agent hereunder in the Commercial Paper Note Payment Account or the Bank Note Payment Account or any subaccount therein to the extent representing funds provided by the District shall be invested by the Issuing and Paying Agent at the written direction of the District in Permitted Investments maturing or available not later than the date on which it is estimated that such moneys will be required to be used or applied as provided herein. Amounts held in the Commercial Paper Note Payment Account or any subaccount therein representing the proceeds of an Advance made under a Liquidity Facility shall be held uninvested, in cash, and shall not be commingled with any other funds held hereunder. Unless otherwise provided herein, all interest, profits and other income received from the investment of moneys in any fund, account or subaccount shall remain in and be credited to such fund, account or subaccount; provided that an amount of interest received with respect to any Permitted Investment equal to the amount of accrued interest, if any, paid as part of the purchase price of such Permitted Investment shall be credited to the fund, account or subaccount from which such accrued interest was paid. Moneys held in any fund, account or subaccount hereunder (other than the Rebate Fund) may be comingled for purposes of investment only; provided, that each fund, account or subaccount held by the Issuing and Paying Agent hereunder shall be accounted for separately as required by this Issuing and Paying Agent Agreement and the Issuing and Paying Agent shall segregate such funds, accounts and subaccounts if so instructed by the District. The Issuing and Paying Agent shall keep proper books of record and accounts containing

105 complete and correct entries of all transactions made by it relating to the receipt, disbursement, allocation and application of the moneys related to the Commercial Paper Notes, including moneys derived from, pledged to, or to be used to make payments on the Commercial Paper Notes. Such records shall specify the fund, account and subaccount to which such moneys are to be allocated. ARTICLE VI PLEDGE OF AVAILABLE REVENUES; LIMITED LIABILITY OF DISTRICT SECTION 6.01 Pledge of Available Revenues. (a) Available Water Revenues. The Commercial Paper Notes (Water Series) and the Bank Notes (Water Series) are revenue obligations, are not secured by the taxing power of the District and shall be payable as to both principal and interest from, and shall be secured by a pledge (which pledge shall be effected in the manner and to the extent hereinafter provided) of, the Available Water Revenues. The Available Water Revenues constitute a trust fund for the security and payment of the interest on and principal of the Commercial Paper Notes (Water Series) and the Bank Notes (Water Series) and all obligations of the District relating to such Commercial Paper Notes (Water Series) and Bank Notes (Water Series) hereunder, all obligations of the District relating to Water Note Parity Debt and all obligations of the District under any liquidity or credit agreement (including any Liquidity Facility) relating thereto payable from or secured by Available Water Revenues. The Available Water Revenues are hereby pledged to the payment of the Commercial Paper Notes (Water Series) and the Bank Notes (Water Series) and all obligations of the District relating to such Commercial Paper Notes (Water Series) and the Bank Notes (Water Series) hereunder and under any Liquidity Facility, without priority or distinction of one over the other, subject only to the provisions of this Issuing and Paying Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth herein. The pledge of Available Water Revenues herein made shall be irrevocable until all of the Commercial Paper Notes (Water Series) and the Bank Notes (Water Series) and any Water Note Parity Debt have been paid and retired and any related obligations of the District under any liquidity or credit agreement (including any Liquidity Facility) relating thereto and payable from or secured by Available Water Revenues have been satisfied. To provide for the payment of the principal of and interest on the Commercial Paper Notes (Water Series) and Bank Notes (Water Series) as the same shall become due and payable, the District shall, from Available Water Revenues on a parity with the transfers made for all Water Note Parity Debt, from time to time transfer to the Issuing and Paying Agent for deposit in the respective Payment Fund in accordance with Article V hereof amounts sufficient, together with other moneys available therefor, for the timely payment of principal of and interest on the Commercial Paper Notes (Water Series) and Bank Notes (Water Series). Such payment shall be subject and subordinate to the application of Water Revenues to the payment of Water operation and maintenance costs and the principal of, premium, if any, interest on, and any reserve requirements for, or other payment obligation with respect to, the Prior Water Obligations. All remaining Available Water Revenues, after making the foregoing allocation, shall be available to the District for any lawful purpose. (b) Available Wastewater Revenues. The Commercial Paper Notes (Wastewater Series) and the Bank Notes (Wastewater Series) are revenue obligations, are not secured by the taxing power of the District and shall be payable as to both principal and interest from, and shall be secured by a pledge (which pledge shall be effected in the manner and to the extent hereinafter provided) of, the Available Wastewater Revenues. The Available Wastewater Revenues constitute a trust fund for the security and payment of the interest on and principal of the Commercial Paper Notes (Wastewater Series) and the Bank Notes (Wastewater Series) and all obligations of the District relating to such Commercial

106 Paper Notes (Wastewater Series) and Bank Notes (Wastewater Series) hereunder, all obligations of the District relating to Wastewater Note Parity Debt and all obligations of the District under any liquidity or credit agreement (including any Liquidity Facility) relating thereto payable from or secured by Available Wastewater Revenues. The Available Wastewater Revenues are hereby pledged to the payment of the Commercial Paper Notes (Wastewater Series) and the Bank Notes (Wastewater Series) and all obligations of the District relating to such Commercial Paper Notes (Wastewater Series) and the Bank Notes (Wastewater Series) hereunder and under any Liquidity Facility, without priority or distinction of one over the other, subject only to the provisions of this Issuing and Paying Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth herein. The pledge of Available Wastewater Revenues herein made shall be irrevocable until all of the Commercial Paper Notes (Wastewater Series) and the Bank Notes (Wastewater Series) and any Wastewater Note Parity Debt have been paid and retired and any related obligations of the District under any liquidity or credit agreement (including any Liquidity Facility) relating thereto and payable from or secured by Available Wastewater Revenues have been satisfied. To provide for the payment of the principal of and interest on the Commercial Paper Notes (Wastewater Series) and Bank Notes (Wastewater Series) as the same shall become due and payable, the District shall, from Available Wastewater Revenues on a parity with the transfers made for all Wastewater Note Parity Debt, from time to time transfer to the Issuing and Paying Agent for deposit in the respective Payment Fund in accordance with Article V hereof amounts sufficient, together with other moneys available therefor, for the timely payment of principal of and interest on the Commercial Paper Notes (Wastewater Series) and Bank Notes (Wastewater Series). Such payment shall be subject and subordinate to the application of Wastewater Revenues to the payment of Wastewater operation and maintenance costs and the principal of, premium, if any, interest on, and any reserve requirements for, or other payment obligation with respect to, the Prior Wastewater Obligations. All remaining Available Wastewater Revenues, after making the foregoing allocation, shall be available to the District for any lawful purpose. SECTION 6.02 Limited Obligations. Anything herein to the contrary notwithstanding, the Commercial Paper Notes and the Bank Notes shall not constitute a debt of the State or any political subdivision thereof (other than the District) and the State shall not be liable with respect thereto, and the Commercial Paper Notes, the Bank Notes and any other obligations of the District hereunder shall not be payable out of any funds of the District other than from Available Water Revenues or Available Wastewater Revenues and other amounts pledged therefor, as applicable, as and to the extent provided herein (subject to disbursements in accordance with the provisions of this Issuing and Paying Agent Agreement), and nothing contained herein or in the Commercial Paper Notes or the Bank Notes shall be considered as pledging any other funds or assets of the District. Notwithstanding anything in this Issuing and Paying Agent Agreement or in the Commercial Paper Notes or Bank Notes contained, the District shall not be required to advance any moneys derived from any source other than the Available Water Revenues or Available Wastewater Revenues, as applicable, pledged hereunder for any of the purposes in this Issuing and Paying Agent Agreement mentioned, whether for the payment of the principal of or interest on the Commercial Paper Notes or the Bank Notes or for any other purpose hereof. No Owner of any Commercial Paper Note or Bank Note shall ever have the right to compel any exercise of the taxing power of the District to pay any Commercial Paper Note or Bank Note or the interest thereon. Neither the full faith and credit nor the taxing power of the District is pledged for the payment of the principal of or interest on any Commercial Paper Note or any Bank Note. Neither the Board of Directors of the District nor any officer or employee thereof shall be liable or obligated for the payment of the principal of and interest on any Commercial Paper Notes or Bank Notes or for any payment agreed to be made or contemplated pursuant to the terms of this Issuing and Paying Agent Agreement, save and except from Available Water Revenues or Available Wastewater Revenues, as

107 applicable, and the other moneys pledged thereto under the terms of this Issuing and Paying Agent Agreement. ARTICLE VII COVENANTS OF THE DISTRICT SECTION 7.01 Punctual Payment. The District will punctually pay or cause to be paid the principal of and interest on the Commercial Paper Notes, in strict conformity with the terms of the Commercial Paper Notes and of this Issuing and Paying Agent Agreement, but in each case only out of Available Water Revenues or Available Wastewater Revenues and the amounts on deposit in the funds and accounts created hereunder and pledged thereto as provided herein. SECTION 7.02 Further Assurances. The District will make, execute and deliver any and all such instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Issuing and Paying Agent Agreement and for the better assuring and confirming to the Owners of the Commercial Paper Notes and the Bank Notes the rights and benefits provided herein. SECTION 7.03 Liquidity Facility; Substitute Liquidity Facility. Prior to the issuance of Commercial Paper Notes of any Series or subseries, the District will procure, and will at all times maintain in effect, one or more Liquidity Facilities enabling it to borrow an aggregate amount at least equal to the sum of the principal amount of each Series and/or subseries of the Commercial Paper Notes then Outstanding or at that time proposed to be issued hereunder. The District may at any time and from time to time obtain a substitute or alternate Liquidity Facility to replace any Liquidity Facility then in effect. The District shall cause the Issuing and Paying Agent to provide written notice by first-class mail, postage prepaid, or by electronic means of communication to the applicable Owners and the Dealers for the Series and/or subseries of the Commercial Paper Notes for which a Liquidity Facility is to be replaced no less than 30 days prior to the proposed delivery of the substitute or alternate Liquidity Facility (unless 30 days notice is not practical, in which case notice shall be given as soon as practical). [Such substitute or alternate Liquidity Facility must go into effect on a date on which all Commercial Paper Notes of the applicable Series or subseries to be supported thereby then Outstanding are scheduled to mature.] Prior to the Issuing and Paying Agent s release of an existing Liquidity Facility and acceptance of a substitute or alternate Liquidity Facility, the following shall be delivered: (i) a legal opinion of counsel to the successor Bank to the effect that the substitute or alternate Liquidity Facility is a legal, valid and binding obligation of the issuing Bank and is enforceable against such Bank in accordance with its terms; [(ii) an opinion of Co-Bond Counsel to the effect that the substitution of the Liquidity Facility is authorized under the Issuing and Paying Agent Agreement, and (with respect to Commercial Paper Notes other than Commercial Paper Notes designated as Taxable), an opinion of Special Tax Counsel to the effect that the substitution of the Liquidity Facility will not, in and of itself, adversely affect the exclusion from gross income for federal tax purposes of interest on such Commercial Paper Notes]; (iii) written evidence from each Rating Agency then maintaining a rating on the Commercial Paper Notes that the delivery or such substitute or alternate Liquidity Facility will not, in and of itself, result in a reduction, suspension or withdrawal of its rating of the Commercial Paper Notes to be supported thereby from the rating which then prevails; and (iv) a revised Exhibit F hereto reflecting the delivery of such substitute or alternate Liquidity Facility. The Issuing and Paying Agent shall promptly give notice of the acceptance of such substitute or alternate Liquidity Facility to the applicable Owners and the Dealers for the Series and/or subseries of the Commercial Paper Notes to be supported thereby by first-class mail, postage prepaid, or by electronic means of communication. SECTION 7.04 Tax Covenants. The District covenants that it will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion of the

108 interest on the Commercial Paper Notes which have been designated as Tax-Exempt from gross income under Section 103 of the Code. Without limiting the generality of the foregoing, the District shall comply with all requirements and covenants contained in the Tax Certificate. In the event that at any time the District is of the opinion that for purposes of this Section 7.04 it is necessary to restrict or limit the yield on the investment of any moneys held by the Issuing and Paying Agent under this Issuing and Paying Agent Agreement, the District shall so instruct the Issuing and Paying Agent in writing, and the Issuing and Paying Agent shall take such action as may be necessary in accordance with such instructions. Notwithstanding any provision of this Section 7.04 and Section 7.05 hereof, if the District shall receive an opinion of Special Tax Counsel to the effect that any action required under the Tax Certificate or this Section 7.04 and Section 7.05 hereof is no longer required, or to the effect that some further action is required, to maintain the exclusion pursuant to Section 103 of the Code of the interest on the Commercial Paper Notes which have been designated as Tax-Exempt from gross income, the District and the Issuing and Paying Agent may rely conclusively on such opinion in complying with the provisions hereof, and the covenants hereunder shall be deemed to be modified to that extent. SECTION 7.05 Rebate to United States. The District will pay or cause to be paid to the United States Government the amount required by Section 148(f) of the Code and any regulations promulgated thereunder at the times required thereby. To further the satisfaction of such rebate requirement, there is hereby created, to be held by the Issuing and Paying Agent as separate fund for the Commercial Paper Notes which are Tax-Exempt distinct from all other funds and accounts held by the Issuing and Paying Agent under this Issuing and Paying Agent Agreement, a fund designated as the Rebate Fund. The Issuing and Paying Agent shall hold any payments received from the District for deposit in the Rebate Fund for purposes of ultimate rebate to the United States, all as more particularly described in the Tax Certificate. Pending payment to the United States, moneys held in the Rebate Fund are hereby pledged to secure such payments to the United States as provided herein and in the Tax Certificate, and none of the District, the Owners or any other person shall have any rights in or claim to such moneys. Computations of the rebate amount and all calculations under this Section 7.05 and the Tax Certificate shall be furnished by or on behalf of the District. The Issuing and Paying Agent shall be deemed conclusively to have complied with the provisions of this Section 7.05 if it follows the payment directions of the Authorized Representative. The Issuing and Paying Agent shall have no liability or responsibility to enforce compliance by the District with the Tax Certificate. The Issuing and Paying Agent shall have no obligation to pay any amounts required to be rebated to the United States pursuant to this Section 7.05 and the Tax Certificate, other than from moneys required to be held in the funds and accounts created under this Issuing and Paying Agent Agreement, including the Rebate Fund, or from other moneys provided to it for such purpose by the District. SECTION 7.06 Taxable Commercial Paper Notes. Notwithstanding anything in this Issuing and Paying Agent Agreement to the contrary, in the event the District designates any Series or subseries of Commercial Paper Notes as Taxable, the provisions of Sections 7.04 and 7.05 shall not apply to such Series or subseries of Commercial Paper Notes. SECTION 7.07 Amounts of Rates and Charges. The District covenants to establish, maintain and collect rates and charges with respect to the Water System and the Wastewater System, respectively (after giving effect to the expected receipt of refinancing proceeds from the sale of Commercial Paper Notes or Water Bonds or Wastewater Bonds, as applicable, and taking into account the amounts, if any, made available for treatment as Water Revenues or Wastewater Revenues, as the case may be, from the respective Rate Stabilization Fund) to pay the respective Series of Commercial Paper Notes and all other obligations which are payable from Water Revenues and Wastewater Revenues, respectively

109 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES OF OWNERS SECTION 8.01 Events of Default. The following shall constitute Events of Default hereunder: (a) (i) with respect to Commercial Paper Notes (Water Series) only, if default shall be made in the due and punctual payment of the principal of or interest on any Commercial Paper Note (Water Series) or Water Note Parity Debt when and as the same shall become due and payable and (ii) with respect to Commercial Paper Notes (Wastewater Series) only, if default shall be made in the due and punctual payment of the principal of or interest on any Commercial Paper Note (Wastewater Series) or Wastewater Note Parity Debt when and as the same shall become due and payable; (b) (i) with respect to Commercial Paper Notes (Water Series) only, if the principal of any Bank Note (Water Series) shall be declared due and payable prior to the maturity thereof pursuant to such Bank Note (Water Series) or the related Liquidity Facility as a result of a default thereunder and (ii) with respect to Commercial Paper Notes (Wastewater Series) only, if the principal of any Bank Note (Wastewater Series) shall be declared due and payable prior to the maturity thereof pursuant to the such Bank Note (Wastewater Series) or the related Liquidity Facility as a result of a default thereunder; (c) (i) with respect to Commercial Paper Notes (Water Series) only, if the holders of the Water Bonds or other Prior Water Obligations or the trustee for the holders of the Water Bonds at the time outstanding exercises a right, if any, under the Water Bonds or other Prior Water Obligations or the constituent instruments under which such Water Bonds or other Prior Water Obligations were issued or incurred upon a default thereunder to declare the principal thereof to be payable prior to the maturity thereof and (ii) with respect to Commercial Paper Notes (Wastewater Series) only, if the holders of the Wastewater Bonds or other Prior Wastewater Obligations or the trustee for the holders of the Wastewater Bonds at the time outstanding exercises a right, if any, under the Wastewater Bonds or other Prior Wastewater Obligations or the constituent instruments under which such Wastewater Bonds or other Prior Wastewater Obligations were issued upon a default thereunder to declare the principal thereof to be payable prior to the maturity thereof; or (d) if the District shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained herein or in the Commercial Paper Notes on the part of the District to be performed and such default shall continue for forty five (45) days after written notice specifying such default and requiring same to be remedied shall have been given to the District by the Owners of not less than twenty five percent (25%) in principal amount of the Outstanding Commercial Paper Notes. SECTION 8.02 Remedies. Upon the happening and continuance of any Event of Default specified in Section 8.01 hereof with respect to Commercial Paper Notes (Water Series), then and in every such case, the Owner of any Commercial Paper Note (Water Series) shall be entitled to proceed to protect and enforce such Owner s rights by such appropriate judicial proceeding as such Owner shall deem most effectual to protect and enforce any such right, either by suit in equity or by action in law, whether for specific performance of any covenant or agreement contained herein, or in aid of the exercise of any power granted hereby, or to enforce any other legal or equitable right vested in the Owners of the Commercial Paper Notes (Water Series) hereby or by the Commercial Paper Notes (Water Series) or by law; provided, however, that the principal of all Outstanding Commercial Paper Notes (Water Series) and the interest accrued thereon may not be declared to be due and payable except upon the happening and continuance of an event of default specified in Section 8.01(a)(i) hereof. Upon the happening and continuance of any Event of Default specified in Section 8.01 hereof

110 with respect to Commercial Paper Notes (Wastewater Series), then and in every such case, the Owner of any Commercial Paper Note (Wastewater Series) shall be entitled to proceed to protect and enforce such Owner s rights by such appropriate judicial proceeding as such Owner shall deem most effectual to protect and enforce any such right, either by suit in equity or by action in law, whether for specific performance of any covenant or agreement contained herein, or in aid of the exercise of any power granted hereby, or to enforce any other legal or equitable right vested in the Owners of the Commercial Paper Notes (Wastewater Series) hereby or by the Commercial Paper Notes (Wastewater Series) or by law; provided, however, that the principal of all Outstanding Commercial Paper Notes (Wastewater Series) and the interest accrued thereon may not be declared to be due and payable except upon the happening and continuance of an Event of Default specified in Section 8.01(a)(ii) hereof. SECTION 8.03 Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Owners of the Commercial Paper Notes is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. ARTICLE IX THE ISSUING AND PAYING AGENT SECTION 9.01 Appointment and Acceptance of Issuing and Paying Agent. The District hereby appoints U.S. Bank National Association as Issuing and Paying Agent hereunder. The Issuing and Paying Agent agrees to perform all the functions and duties of the Issuing and Paying Agent hereunder, subject to the terms and conditions set forth herein. The Issuing and Paying Agent shall signify its acceptance of the duties and obligations of Issuing and Paying Agent imposed upon it hereby by the execution and delivery of this Issuing and Paying Agent Agreement. SECTION 9.02 Reports, Records and Accounts. The Issuing and Paying Agent shall at all times keep or cause to be kept proper books and records, as shall be consistent with sound industry practice, in which complete and accurate entries shall be made of all transactions, including, without limitation a complete record of all Issuance Requests, made by it relating to the Commercial Paper Notes and Bank Notes and all funds, accounts and subaccounts established and maintained by the Issuing and Paying Agent hereunder. Such books and records shall be available for inspection by the District and the Banks on each Business Day during reasonable business hours and, if so requested, by any Owner of Commercial Paper Notes or its agent or representative duly authorized in writing at reasonable hours upon reasonable notice. The Issuing and Paying Agent shall maintain such books, records and accounts as may be necessary to evidence the obligations of the District resulting from the Commercial Paper Notes and the Bank Notes, the principal amounts owing thereunder, the maturity schedule therefor, the respective rates of interest thereon and the principal and interest paid from time to time thereunder. The Issuing and Paying Agent agrees to provide to the District each month a report of the amounts deposited in each fund, account and subaccount held by it hereunder and the amount disbursed from such funds, accounts and subaccounts, the earnings thereon, if any, the investments in each such fund, account and subaccount and the ending balance thereof. Such report shall further set forth such information regarding the authentication and issuance of Commercial Paper Notes and Bank Notes during the subject month in the manner agreed upon by the District and the Issuing and Paying Agent. SECTION 9.03 Duties of the Issuing and Paying Agent. (a) The Issuing and Paying Agent s duties and responsibilities in connection with the issuance of the Commercial Paper Notes and Bank Notes shall include:

111 (i) to hold each Master Note Certificate representing a Series or subseries of the Commercial Paper Notes in safekeeping; (ii) upon receipt of each Issuance Request received from the District, to assign a CUSIP number to the Commercial Paper Note or Notes of the applicable Series or subseries; (iii) to cause to be delivered a Commercial Paper Note or Notes on behalf of the District upon receipt of an Issuance Request with instructions from an Authorized Representative, as to the principal amount, registered owner, date of issue, maturity date and interest rate, by way of data entry transfer to the DTC Same Day Funds Settlement System ( SDFS ), and to receive from SDFS a confirmation receipt that such delivery was effected; (iv) to credit the proceeds of sales of the Commercial Paper Notes to the appropriate account and subaccount of Proceeds Fund and to transfer such amounts to the appropriate subaccount of the Commercial Paper Note Payment Account of the Payment Fund in the amounts necessary to pay principal of or interest on maturing Commercial Paper Notes of related Series or subseries; (v) to transfer any remaining proceeds of the sales of the Commercial Paper Notes after the credits pursuant to paragraph (iv) above to the District or to such other fund, account or subaccount as an Authorized Representative may instruct; and (vi) to hold the amounts on deposit in each subaccount of the Bank Note Payment Account separate from all other funds and accounts of the Issuing and Paying Agent and to apply such amounts in accordance with the terms hereof. The Issuing and Paying Agent shall have no duty or responsibility to make any transfer of the proceeds of the sale of the Commercial Paper Notes, or to advance any moneys or effect any credit with respect to such proceeds or transfers, unless and until (1) the Issuing and Paying Agent has actually received the proceeds of the sale of the Commercial Paper Notes, and (2) such receipt of the proceeds is not subject to reversal or cancellation. (b) The Issuing and Paying Agent s duties and responsibilities in connection with the payment of the Commercial Paper Notes and Bank Notes shall include: (i) to credit amounts received from the District for the payment of the principal of or interest on the applicable Series or subseries of Commercial Paper Notes to the appropriate subaccount of the Commercial Paper Note Payment Account; (ii) in accordance with Section 5.03 hereof, when required, to make the necessary and timely requests for Advances under each Liquidity Facility in accordance with the terms and provisions thereof as may be necessary in order to effectuate the timely payment of principal of and interest on the applicable Series or subseries of Commercial Paper Notes supported by such Liquidity Facility as the same becomes due in accordance herewith and therewith; (iii) to credit amounts received from each Bank as a result of Advances under the applicable Liquidity Facility for a Series or subseries of Commercial Paper Notes to the appropriate subaccount of the Commercial Paper Note Payment Account;

112 (iv) upon presentment at maturity of a Commercial Paper Note or Notes, to pay the principal of and interest on the Commercial Paper Note or Notes to the Owner(s) thereof; (v) to credit amounts received from the District for the payment of the principal of and interest on Bank Notes to the appropriate subaccount of the Bank Note Payment Account; (vi) to apply the amounts on deposit in each subaccount of the Bank Note Payment Account to make payments due to each Bank on the applicable Bank Notes under the related Liquidity Facility in accordance with the terms hereof and the applicable Liquidity Facility; and (vii) to keep amounts on deposit in each account and subaccount of the Payment Fund separate from all other funds and accounts of the Issuing and Paying Agent and to utilize such amounts in accordance with the terms hereof. The Issuing and Paying Agent shall have no obligation to pay amounts due on the applicable Series or subseries of Commercial Paper Notes at their maturity other than from funds received by the Issuing and Paying Agent from the District of the applicable Dealer for the account of the District or from Advances under the related Liquidity Facility. SECTION 9.04 Compensation of Issuing and Paying Agent. The District covenants to pay to the Issuing and Paying Agent from time to time, and the Issuing and Paying Agent shall be entitled to, reasonable compensation for all services rendered by it in the exercise and performance of any of the powers and duties hereunder of the Issuing and Paying Agent, and the District will pay or reimburse the Issuing and Paying Agent upon its request for all expenses, disbursements and advances incurred or made by the Issuing and Paying Agent in accordance with the provisions of this Issuing and Paying Agent Agreement (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence, default or willful misconduct. SECTION 9.05 Liability of Issuing and Paying Agent. (a) The recitals of facts herein and in the Commercial Paper Notes contained shall be taken as statements of the District, and the Issuing and Paying Agent assumes no responsibility for the correctness of the same, and makes no representations as to the validity or sufficiency of this Issuing and Paying Agent Agreement or of the Commercial Paper Notes as to the sufficiency of the Available Water Revenues and/or Available Wastewater Revenues for the payment thereof, and shall not incur any responsibility in respect of any such matter, other than in connection with the duties or obligations expressly herein or in the Commercial Paper Notes assigned to or imposed upon it. The Issuing and Paying Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence, willful misconduct or breach of the express terms and conditions hereof. The Issuing and Paying Agent and its directors, officers, employees or agents may in good faith buy, sell, own, hold and deal in any of the Commercial Paper Notes and may join in any action which any Owner of a Commercial Paper Note may be entitled to take, with like effect as if the Issuing and Paying Agent was not the Issuing and Paying Agent under this Issuing and Paying Agent Agreement. The Issuing and Paying Agent may in good faith hold any other form of indebtedness of the District, own, accept or negotiate any drafts, bills of exchange, acceptances or obligations of the District and make disbursements for the District and enter into any commercial or business arrangement therewith, without limitation. (b) The Issuing and Paying Agent shall not be liable for any error of judgment made in good faith by a responsible officer unless it shall be proved that the Issuing and Paying Agent was

113 negligent in ascertaining the pertinent facts. The Issuing and Paying Agent may execute any of the duties or powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or receivers, and shall be entitled to advice of counsel concerning all matters of its duties hereunder, but the Issuing and Paying Agent shall be liable for the negligence, default or misconduct of any such attorney, agent, or receiver selected by it. (c) No provision of this Issuing and Paying Agent Agreement shall require the Issuing and Paying Agent to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers, if repayment of such funds or adequate indemnity against such risk or liability is not assured to its satisfaction; provided, however, that the Issuing and Paying Agent shall not be entitled to such assurances in connection with making timely Advance requests under each Liquidity Facility when required and making payments of principal and interest on the Commercial Paper Notes and Bank Notes when due. (d) The Issuing and Paying Agent shall not be deemed to have knowledge of and shall not be required to take any action with respect to, any Event of Default (other than an Event of Default described in subsection (a) of Section 8.01 hereof) or event which would, with the giving of notice, the passage of time or both, constitute an Event of Default, unless the Issuing and Paying Agent shall have actual knowledge of such event or shall have been notified of such event by the District, the Bank, or an Owner. Without limiting the generality of the foregoing, the Issuing and Paying Agent shall not be required to ascertain, monitor or inquire as to the performance or observance by the District of the terms, conditions, covenants or agreements set forth in Article VII hereof (including, without limitation, the covenants of the District set forth in Sections 7.04 or 7.05 hereof), other than the covenants of the District to make payments with respect to the Commercial Paper Notes when due as set forth in Section 7.01 and to file with the Issuing and Paying Agent when due, such reports and certifications as the District is required to file with the Issuing and Paying Agent hereunder. SECTION 9.06 Right of Issuing and Paying Agent to Rely on Documents. The Issuing and Paying Agent agrees to accept and act upon facsimile transmission of written instructions and/or directions pursuant to this Issuing and Paying Agent Agreement provided, however, that: (a) subsequent to such facsimile transmission of written instructions and/or directions the Issuing and Paying Agent shall forthwith receive the originally executed instructions and/or directions, (b) such originally executed instructions and/or directions shall be signed by a person as may be designated and authorized to sign for the party signing such instructions and/or directions, and (c) the Issuing and Paying Agent shall have received a current incumbency certificate containing the specimen signature of such designated person. Whenever in the administration of the duties imposed upon it by this Issuing and Paying Agent Agreement the Issuing and Paying Agent 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 conclusively proved and established by a Certificate of the District, and such Certificate shall be full warrant to the Issuing and Paying Agent for any action taken or suffered in good faith under the provisions of this Issuing and Paying Agent Agreement in reliance upon such Certificate, but in its discretion the Issuing and Paying Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The Issuing and Paying Agent may consult with counsel, including, without limitation, counsel of or to the District, 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 unless it shall be proved that the Issuing and Paying Agent was negligent in ascertaining the pertinent facts. The Issuing and Paying Agent may also rely conclusively on any report or certification of any certified public accountant, investment banker, financial consultant, or other expert selected by the District or selected by the Issuing and Paying Agent with due care in

114 connection with matters required to be proven or ascertained in connection with its administration of the duties created hereby. SECTION 9.07 Indemnification of Issuing and Paying Agent. To the extent permitted by law, the District agrees to indemnify, protect, save and keep harmless the Issuing and Paying Agent and its officers, employees and agents against any costs, expenses, fees (including reasonable legal fees), losses and liabilities which may be imposed on, incurred by, or asserted against, the Issuing and Paying Agent at any time (whether or not also indemnified against the same by the District or any other person under any other agreement or instrument, but without double indemnity) in the exercise or performance of its powers and duties under this Issuing and Paying Agent Agreement; provided, however, that the District shall not be required to indemnify the Issuing and Paying Agent for costs, expenses, fees, losses and liabilities arising out of negligence, willful breach or misconduct, bad faith or default of the Issuing and Paying Agent, its officers, directors, employees, servants or agents of the terms of this Issuing and Paying Agent Agreement. In no event shall the District or the Issuing and Paying Agent be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this Section The indemnities contained in this Section 9.07 shall survive the termination of this Issuing and Paying Agent Agreement and the resignation or removal of the Issuing and Paying Agent. SECTION 9.08 Resignation and Removal of Issuing and Paying Agent. (a) The District may remove the Issuing and Paying Agent at any time unless an Event of Default shall have occurred and then be continuing, and shall remove the Issuing and Paying Agent if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate amount of principal of the Commercial Paper Notes then Outstanding (or their attorneys duly authorized in writing) or if at any time the Issuing and Paying Agent shall cease to be eligible in accordance with subsection (d) of this Section, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Issuing and Paying Agent or its property shall be appointed, or any public officer shall take control or charge of the Issuing and Paying Agent 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 Issuing and Paying Agent, and thereupon shall appoint a successor Issuing and Paying Agent by an instrument in writing. (b) The Issuing and Paying Agent may at any time resign by giving written notice of such resignation to the District, the Bank and the Dealer. Upon receiving such notice of resignation, the District shall promptly appoint a successor Issuing and Paying Agent by an instrument in writing. Prior to any voluntary resignation or any sale, assignment, merger, consolidation or reorganization by the Issuing and Paying Agent, the Issuing and Paying Agent shall pay to the District any and all amounts which will be payable by the District to the Bank due to any resulting transfer of the Liquidity Facility. (c) Any removal or resignation of the Issuing and Paying Agent and appointment of a successor Issuing and Paying Agent shall become effective upon acceptance of appointment by the successor Issuing and Paying Agent. If no successor Issuing and Paying Agent shall have been appointed and have accepted appointment within sixty (60) days of giving notice of removal or notice of resignation as aforesaid, the resigning Issuing and Paying Agent, any Owner (on behalf of himself or herself and all other Owners) or the Bank may petition any court of competent jurisdiction for the appointment of a successor Issuing and Paying Agent, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Issuing and Paying Agent. Any successor Issuing and Paying Agent appointed under this Issuing and Paying Agent Agreement, shall signify its acceptance of such appointment by executing and delivering to the District and to its predecessor Issuing and Paying Agent a written acceptance thereof, and thereupon such successor Issuing and Paying Agent, without any further act, deed or conveyance, shall become vested with all the moneys, properties, rights, powers, duties and obligations of such predecessor Issuing and Paying Agent, with like effect as if originally named Issuing

115 and Paying Agent herein; but, nevertheless at the Request of the District or the request of the successor Issuing and Paying Agent, such predecessor Issuing and Paying Agent 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 Issuing and Paying Agent all the right, title and interest of such predecessor Issuing and Paying Agent in and to any property held by it under this Issuing and Paying Agent Agreement and shall pay over, transfer, assign and deliver to the successor Issuing and Paying Agent any money or other property subject to the conditions herein set forth. Upon request of the successor Issuing and Paying Agent, the District shall execute and deliver any and all instruments, including the current Liquidity Facilities in place, as may be reasonably required for more fully and certainly vesting in and confirming to such successor Issuing and Paying Agent all such moneys, estates, properties, rights, powers, duties and obligations. Upon acceptance of appointment by a successor Issuing and Paying Agent as provided in this subsection, the District shall give notice of the succession of such Issuing and Paying Agent hereunder by mail to the Bank and the Dealer. (d) Any Issuing and Paying Agent appointed under the provisions of this Section 9.08 in succession to the Issuing and Paying Agent shall be a trust company or bank having the powers of a trust company having a combined capital and surplus of at least one hundred million dollars ($100,000,000), subject to supervision or examination by federal or state authority, and having a Corporate Trust Office in New York, New York. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this subsection the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Issuing and Paying Agent shall cease to be eligible in accordance with the provisions of this subsection (d), the Issuing and Paying Agent shall resign immediately in the manner and with the effect specified in this Section SECTION 9.09 Merger or Consolidation. Any company into which the Issuing and Paying Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Issuing and Paying Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under subsection (d) of Section 9.08 hereof, shall be the successor to such Issuing and Paying Agent without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. ARTICLE X MODIFICATION OR AMENDMENT OF THIS ISSUING AND PAYING AGENT AGREEMENT SECTION Amendments or Modifications Without Consent of Owners. This Issuing and Paying Agent Agreement and the rights and obligations of the District, of the Issuing and Paying Agent and of the Owners of the Commercial Paper Notes may be modified or amended at any time by a Supplement, which the District and Issuing and Paying Agent may enter into without the consent of any Owners but only to the extent permitted by law and only for any one or more of the following purposes: (1) to add to the covenants and agreements of the District in this Issuing and Paying Agent Agreement contained other covenants and agreements thereafter to be observed or to surrender any right or power herein reserved to or conferred upon the District; (2) to make provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in this Issuing and Paying Agent Agreement;

116 (3) to facilitate the delivery of the Commercial Paper Notes in registered form, including a system of book-entry registration, or to discontinue the issuance of Commercial Paper Notes in book-entry only form and to issue the Commercial Paper Notes in fully certificated form; (5) to supplement the security for the Commercial Paper Notes, replace or provide additional or alternate liquidity or credit facilities, or change the form of the Commercial Paper Notes or make such other changes in the provisions hereof as the District may deem necessary or desirable and which shall not materially and adversely affect the interests of the Owners of the Commercial Paper Notes; (6) in connection with Commercial Paper Notes which are or which are to be issued as Tax-Exempt, to make such provisions as are necessary or appropriate to maintain the exclusion of interest on such Commercial Paper Notes from gross income for purposes of federal income taxation; (7) for any other purpose that does not materially and adversely affect the interests of the Owners of the Commercial Paper Notes or the Bank, including, without limitation, to provide for changes requested by a Rating Agency in order to obtain or maintain a credit rating for any Series or subseries of Commercial Paper Notes; and (8) to provide for any modification or amendment of this Issuing and Paying Agent Agreement which will only apply to the Commercial Paper Notes to be issued after the effective date of such modification or amendment. Notwithstanding any other provision hereof, no modification or amendment hereto affecting the rights, remedies or security of any Bank hereunder shall be entered into without the prior written consent of such Bank. SECTION Amendments or Modifications With Consent of Owners. This Issuing and Paying Agent Agreement and the rights and obligations of the District, the Owners of the Commercial Paper Notes and the Issuing and Paying Agent may also be modified or amended at any time by a Supplement, which the District and the Issuing and Paying Agent may enter into with the written consent of the Bank and the Owners of a majority in aggregate principal amount of the Commercial Paper Notes (or, if such Supplement is only applicable to a Series or subseries of Commercial Paper Notes, the Owners of a majority in aggregate principal amount of such Series or subseries of Commercial Paper Notes) then Outstanding and which shall have been filed with the Issuing and Paying Agent; provided, that if such modification or amendment will, by its terms, not take effect so long as any Commercial Paper Notes of any particular maturity remain Outstanding, the consent of the Owners of such Commercial Paper Notes shall not be required and such Commercial Paper Notes shall not be deemed to be Outstanding for the purpose of any calculation of Commercial Paper Notes Outstanding under this Section No such modification or amendment shall (A) extend the fixed maturity of any Commercial Paper Note, or reduce the amount of principal thereof, or extend the time of payment provided for any Commercial Paper Note, or reduce the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each Commercial Paper Note so affected, or (B) reduce the aforesaid percentage of principal the consent of the Owners of which is required to effect any such modification or amendment, or reduce or restrict the pledge made pursuant to Section 6.01(a) hereof for the payment of the Commercial Paper Notes (Water Series) and the Bank Notes (Water Series) or reduce or restrict the pledge made pursuant to Section 6.01(b) hereof for the payment of the Commercial Paper Notes (Wastewater Series) and the Bank Notes (Wastewater Series), without the consent of the Owners of

117 all of the Commercial Paper Notes of the respective Series then Outstanding and all of the Banks providing Liquidity Facilities for such respective Series. It shall not be necessary for the consent of the Owners to approve the particular form of any Supplement, but it shall be sufficient if such consent shall approve the substance thereof. SECTION Effect of Supplement. From and after the time any Supplement becomes effective pursuant to this Article, this Issuing and Paying Agent Agreement shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Issuing and Paying Agent Agreement of the District, the Bank, the Issuing and Paying Agent, and all Owners of Commercial Paper Notes 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 Supplement shall be deemed to be part of the terms and conditions of this Issuing and Paying Agent Agreement for any and all purposes. SECTION Amendment of Particular Notes. The provisions of this Article shall not prevent any Owner from accepting any amendment as to the particular Commercial Paper Notes held by him, provided that due notation thereof is made, or caused to be made, on such Commercial Paper Notes by the District. ARTICLE XI DEFEASANCE SECTION Payment of Notes. Commercial Paper Notes of any Series or subseries or portion thereof may be paid by the District in any of the following ways: (i) by paying or causing to be paid the principal of and interest on such Outstanding Commercial Paper Notes, as and when the same become due and payable; (ii) by depositing with the Issuing and Paying Agent, an escrow agent or other fiduciary, in trust, at or before maturity, money or securities in the necessary amount (as provided in Section hereof) to pay such Outstanding Commercial Paper Notes; or (iii) by delivering to the Issuing and Paying Agent, for cancellation by it, such Outstanding Commercial Paper Notes. If the District shall pay all Series for which any Commercial Paper Notes are Outstanding and also pay or cause to be paid all other sums payable hereunder by the District and provided that the applicable Bank(s) shall have been paid in full all amounts then owing under any Liquidity Facilities, then and in that case, at the election of the District (evidenced by a Certificate of the District, filed with the Issuing and Paying Agent and each of the Banks, signifying the intention of the District to discharge all such indebtedness and this Issuing and Paying Agent Agreement), and notwithstanding that any Commercial Paper Notes shall not have been surrendered for payment, this Issuing and Paying Agent Agreement and the pledge of Available Water Revenues and Available Wastewater Revenues and other assets made under this Issuing and Paying Agent Agreement and all covenants, agreements and other obligations of the District under this Issuing and Paying Agent Agreement shall cease, terminate, become void and be completely discharged and satisfied, and no additional Commercial Paper Notes shall be issued hereunder. In such event, upon the Request of the District, the Issuing and Paying Agent shall cause an accounting for such period or periods as may be requested by the District to be prepared and filed with the District and shall execute and deliver to the District all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Issuing and Paying Agent shall pay over, transfer, assign or deliver to the District all moneys or securities or other property held by it

118 pursuant to this Issuing and Paying Agent Agreement which are not required for the payment of Commercial Paper Notes not theretofore surrendered for such payment; provided that in all events moneys in the Rebate Fund shall be subject to the provisions of Sections 7.04 and 7.05 hereof. SECTION Discharge of Liability on Commercial Paper Notes. Upon the deposit with the Issuing and Paying Agent, escrow agent or other fiduciary, in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section hereof) to pay any Outstanding Commercial Paper Note, then (provided that the applicable Bank has been paid in full all amounts then owing under the related Liquidity Facility) all liability of the District in respect of such Commercial Paper Note shall cease, terminate and be completely discharged, provided that the Owner thereof shall thereafter be entitled to the payment of the principal of and interest on such Commercial Paper Note, and the District shall remain liable for such payment, but only out of such money or securities deposited as aforesaid for such payment, subject, however, to the provisions of Section hereof and the continuing duties of the Issuing and Paying Agent hereunder including, without limitation, the provisions of Section 2.07 hereof. The District may at any time surrender to the Issuing and Paying Agent for cancellation by it any Commercial Paper Notes previously issued and delivered, which the District may have acquired in any manner whatsoever, and such Commercial Paper Notes, upon such surrender and cancellation, shall be deemed to be paid and retired. SECTION Deposit of Money or Securities with Issuing and Paying Agent. Whenever it is provided or permitted herein that there be deposited with or held in trust money or securities in the necessary amount to pay any Commercial Paper Notes, the money or securities so to be deposited or held may include money or securities held by the Issuing and Paying Agent in the funds and accounts (other than the Bank Note Payment Account) established pursuant to this Issuing and Paying Agent Agreement and shall be: (i) lawful money of the United States of America in an amount equal to the principal amount of such Commercial Paper Notes and all unpaid interest thereon to maturity; or (ii) noncallable and non-prepayable investment securities consisting of (1) any bonds or other obligations which as to principal and interest constitute direct obligations of, or are unconditionally guaranteed as to full and timely payment by, the United States of America, (2) any certificates, receipts, securities or other obligations (excluding mutual funds and unit investment trusts) evidencing ownership of, or the right to receive, a specified portion of one or more interest payments or principal payments, or any combination thereof, to be made on any bond, note, or other obligation described above in clause (1), the principal of and interest on which when due will, in the opinion of an independent certified public accountant delivered to the Issuing and Paying Agent (upon which opinion the Issuing and Paying Agent may conclusively rely), provide money sufficient to pay the principal of and all unpaid interest to maturity, on the Commercial Paper Notes to be paid, as such principal and interest become due; provided, in each case, that the Issuing and Paying Agent, escrow agent or other fiduciary shall have been irrevocably instructed (by the terms of this Issuing and Paying Agent Agreement or by a Request of the District) to apply such money to the payment of such principal and interest with respect to such Commercial Paper Notes. SECTION Payment of Commercial Paper Notes After Discharge of Agreement. Provided that the applicable Banks have been paid in full all amounts then owing under the Liquidity Facilities and the Liquidity Facilities have terminated, any moneys held by the Issuing and Paying Agent in trust for the payment of the principal of, or interest on, any Commercial Paper Notes and remaining unclaimed for two (2) years after the principal of all of the Commercial Paper Notes has become due and payable, if such

119 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 Commercial Paper Notes became due and payable, shall, upon a Request of the District, be repaid to the District free from the trusts created by this Issuing and Paying Agent Agreement, and all liability of the Issuing and Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XII MISCELLANEOUS SECTION Successor Is Deemed Included in All References to Predecessor. Whenever in this Issuing and Paying Agent Agreement either the District or the Issuing and Paying Agent 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 Issuing and Paying Agent Agreement contained by or on behalf of the District or the Issuing and Paying Agent shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. SECTION Notices. Except as otherwise specifically provided herein, all notices and documents required of and provided for under this Issuing and Paying Agent Agreement shall be in writing and shall be delivered by first-class mail (postage prepaid) or overnight express delivery, or by e- mail, facsimile transmission or other electronic means of communication promptly confirmed by mail (postage prepaid), and shall be effective when received at the following addresses or at such other address as a party may designate in a notice delivered to the other party hereto in accordance herewith: If to the District: East Bay Municipal Utility District 375 Eleventh Street Oakland, California Attention: Director of Finance Telephone: (510) Facsimile: (510) If to the Issuing and Paying Agent: U.S. Bank National Association 100 Wall Street, 16 th Floor New York, New York Attention: Global Corporate Trust Services Telephone: (212) Facsimile: If to the Banks: See Exhibit F If to the Dealers: See Exhibit F SECTION Notice to Rating Agencies. The Issuing and Paying Agent shall give notice to each Rating Agency of: (i) any supplements or amendments to or termination of this Issuing and Paying Agent Agreement, (ii) any expiration, substitution, termination or extension of the term of, any Liquidity Facility for the Commercial Paper Notes, (iii) any substitution of the Dealer, (iv) any acceleration or

120 defeasance or payment in full of the Commercial Paper Notes, and (v) the appointment of a successor Issuing and Paying Agent, initially at each respective address given below, or at such other address as may be furnished to the District from time to time by each Rating Agency: Moody s Investors Service, Inc. 7 World Trade Center at 250 Greenwich Street New York, NY Attn: Standard & Poor s Ratings Services 55 Water Street, 38th Floor New York, NY Attn: Municipal Structured Surveillance Fitch Ratings, Inc. 33 Whitehall Street New York, NY Attn: SECTION Waiver of Notice. Whenever in this Issuing and Paying Agent Agreement the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any 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. SECTION Authorized Representatives. The District agrees to furnish, from time to time, to the Issuing and Paying Agent a certificate certifying the incumbency and specimen signatures of Authorized Representatives. Until the Issuing and Paying Agent receives a subsequent incumbency certificate of the District, the Issuing and Paying Agent is entitled to rely on the last such certificate delivered to it for purposes of determining the Authorized Representatives of the District. SECTION Evidence of Rights of Owners. Any request, consent or other instrument required or permitted by this Issuing and Paying Agent Agreement to be signed and executed by Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such 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 shall be sufficient for any purpose of this Issuing and Paying Agent Agreement and shall be conclusive in favor of the Issuing and Paying Agent and of the District if made in the manner provided in this Section The ownership of Commercial Paper Notes shall be proved by the registration books held by the Issuing and Paying Agent pursuant to Section 2.06 hereof. The Issuing and Paying Agent may establish a record date as of which to measure consent of the Owners in order to determine whether the requisite consents are received. Any request, consent, or other instrument or writing of the Owner of any Commercial Paper Note shall bind every future Owner of the same Commercial Paper Note and the Owner of every Commercial Paper Note issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Issuing and Paying Agent or the District in accordance therewith or reliance thereon. SECTION Disqualified Notes. In determining whether the Owners of the requisite aggregate principal amount of Commercial Paper Notes have concurred in any demand, request, direction, consent or waiver under this Issuing and Paying Agent Agreement, Commercial Paper Notes which are

121 owned or held by or for the account of the District, or by any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the District shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Commercial Paper Notes so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the Issuing and Paying Agent the pledgee s right to vote such Commercial Paper Notes and that the pledgee is not a person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the District. In case of a dispute as to such right, any decision by the Issuing and Paying Agent taken upon the advice of counsel shall be full protection to the Issuing and Paying Agent. SECTION Limitation on Bank Rights. Any provisions herein requiring notice to or from a Bank or the consent of a Bank prior to any action by the Issuing and Paying Agent or the District shall have no force or effect (1) following the later of (i) the expiration of the related Liquidity Facility and (ii) the repayment of all monetary obligations owing to the Bank under the Liquidity Facility or (2) during any period in which the Bank is continuing to dishonor a conforming Advance under its Liquidity Facility. SECTION Destruction or Delivery of Canceled Notes. Whenever in this Issuing and Paying Agent Agreement provision is made for the cancellation by the Issuing and Paying Agent and the delivery to the District of any Commercial Paper Notes, the Issuing and Paying Agent may, in its sole discretion, in lieu of such cancellation and delivery, destroy such Commercial Paper Notes, and deliver a certificate of such destruction to the District. SECTION Money Held for Particular Notes. The money held by the Issuing and Paying Agent for the payment of the interest or principal due on any date with respect to particular Commercial Paper Notes shall, pending such payment, be set aside on its books and held in trust by it for the Owners of the Commercial Paper Notes entitled thereto, and for the purposes hereof such principal of and interest on such Commercial Paper Notes, due after such date, shall no longer be considered to be unpaid. SECTION Funds and Accounts. Any fund required by this Issuing and Paying Agent Agreement to be established and maintained by the Issuing and Paying Agent may be established and maintained in the accounting records of the Issuing and Paying Agent, 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 shall at all times be maintained in accordance with customary standards of the corporate trust industry, to the extent practicable, and with due regard for the protection of the security of the Commercial Paper Notes and the rights of every Owner thereof. SECTION Waiver of Set-off, Offset Lien or Counterclaims. The Issuing and Paying Agent hereby waives to the fullest extent possible under applicable law any and all rights of set-off, offset, lien or counterclaim it may have with respect to any amounts held by it hereunder by reason of any claim it may have against the District, the Bank or any other person. SECTION Payments or Actions on Non-Business Days. If a payment date is not a Business Day at the place of payment or if any action to be taken hereunder is required to occur on a date that is not a Business Day, then such payment may be made or such action may be taken on the next succeeding Business Day with the same effect as if the payment were made or the action were taken on the stated date, and no interest shall accrue for the intervening period. SECTION Waiver of Personal Liability. No Board member, officer, agent or employee of the District or the Issuing and Paying Agent shall be individually or personally liable for the payment of the principal of or interest on the Commercial Paper Notes or Bank Notes or be subject to any personal

122 liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such Board member, officer, agent or employee of the District or the Issuing and Paying Agent from the performance of any official duty provided by law or by this Issuing and Paying Agent Agreement. SECTION Benefit of Agreement. Nothing herein, expressed or implied, is intended to or shall be construed to confer upon or to give to any person or party other than the District, the Issuing and Paying Agent, the Bank and the Owners of the Commercial Paper Notes and owners of the Bank Notes any rights, remedies or claims hereunder or by reason hereof or any covenant, condition or stipulation thereof, and no other person shall acquire or have any right under or by virtue hereof. SECTION Severability of Invalid Provisions. If any one or more of the provisions contained in this Issuing and Paying Agent Agreement or in the Commercial Paper Notes 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 Issuing and Paying Agent Agreement and such invalidity, illegality or unenforceability shall not affect any other provision of this Issuing and Paying Agent Agreement, and this Issuing and Paying Agent Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The District hereby declares that it would have executed and delivered this Issuing and Paying Agent Agreement and each and every other Section, subsection, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Commercial Paper Notes and the Bank Notes pursuant hereto irrespective of the fact that any one or more Sections, subsections, paragraphs, sentences, clauses or phrases of this Issuing and Paying Agent Agreement may be held illegal, invalid or unenforceable. SECTION Governing Law. This Issuing and Paying Agent Agreement shall be construed and governed in accordance with the laws of the State of California. SECTION Execution in Counterparts. This Issuing and Paying Agent Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. [Remainder of page intentionally left blank.]

123 IN WITNESS WHEREOF, the parties hereto have executed this Issuing and Paying Agent Agreement by their duly authorized officers as of the date set forth above. EAST BAY MUNICIPAL UTILITY DISTRICT By: D. Scott Klein Acting Director of Finance ATTEST: By: Lynelle M. Lewis Secretary of the District U.S. BANK NATIONAL ASSOCIATION, as Issuing and Paying Agent By: Authorized Officer

124 EXHIBIT A FORMS OF COMMERCIAL PAPER NOTES EAST BAY MUNICIPAL UTILITY DISTRICT COMMERCIAL PAPER NOTES (WATER SERIES), [TAXABLE] [TAX-EXEMPT] SUBSERIES No.: Principal Amount: Interest to Maturity: Due at Maturity: Place of Payment: Dated Date: Maturity Date: Number of Days: Interest Rate (%): Payee: FOR VALUE RECEIVED, EAST BAY MUNICIPAL UTILITY DISTRICT (the District ), a municipal utility district duly organized and existing under and pursuant to the Municipal Utility District Act, constituting Division 6 of the Public Utilities Code of the State of California, and all laws of the State of California amendatory thereof or supplemental thereto (the Act ), FOR VALUE RECEIVED hereby promises to pay, but only from the sources hereinafter identified and stated, to the Payee identified above, on the Maturity Date specified above the Principal Amount specified above and to pay interest, if any, on said Principal Amount at said Maturity Date from the Note Date specified above to said Maturity Date at the per annum Interest Rate specified above, if any (calculated on the basis of a 365/366-day-year for Commercial Paper Notes designated as Tax-Exempt and a 360-day year containing twelve 30-day months for Commercial Paper Notes designated as Taxable and, in each case, the actual number of days elapsed), upon presentation and surrender at the principal corporate trust office of the Issuing and Paying Agent executing the Certificate of Authentication endorsed hereon and appearing below, or its successor at the principal corporate trust office of such successor. For payment of this Commercial Paper Note on the Maturity Date hereof, this Commercial Paper Note must be presented to the Issuing and Paying Agent no later than 2:15 p.m., New York City time, on such day. If a Commercial Paper Note is presented for payment after 2:15 p.m., New York City time, payment therefor shall be made by the Issuing and Paying Agent on the next succeeding business day without the accrual of additional interest thereon. The principal of and interest on this Commercial Paper Note are payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Commercial Paper Note is one of a duly authorized issue of commercial paper notes of the District (hereinafter called the Commercial Paper Notes ) of the Series, subseries and other designation as set forth on the face hereof, to be issued from time to time by the District in the aggregate principal amount Outstanding at any time not to exceed the amounts set forth below, under and pursuant to the Act, and pursuant to the Issuing and Paying Agent Agreement, dated as of December 1, 2015 (as it may be supplemented and amended from time to time, the Issuing and Paying Agent Agreement ), by and between the District and the Issuing and Paying Agent. This Commercial Paper Note is designated as a Commercial Paper Note (Water Series) of the subseries hereinabove provided. The Commercial Paper Notes (Water Series) issued from time to time may include multiple subseries and be of varying denominations, dates, maturities and interest rates, and may otherwise vary as provided in the Issuing and Paying Agent Agreement. Such Issuing and Paying Agent Agreement provides that the District may issue additional notes and incur other indebtedness under the terms and conditions set forth in the Issuing and Paying Agent Agreement A-1

125 The Commercial Paper Notes are issued for the purposes described in the Issuing and Paying Agent Agreement. Under the Issuing and Paying Agent Agreement, the aggregate principal amount of Commercial Paper Notes of the District which may be executed, authenticated and delivered is not limited except that the aggregate principal amount of all Commercial Paper Notes Outstanding at any time, together with all other evidences of indebtedness of the District issued and outstanding pursuant to Article 1 of Chapter 7.5 of the Act, including all amounts drawn on available bank lines of credit related thereto, if any, shall not at any one time exceed the lesser of either (1) the annual average of the District s total revenue for the three preceding years or (2) 25 percent of the District s total outstanding bonds issued pursuant to Chapters 6, 7 and 8 of the Act. Copies of the Issuing and Paying Agent Agreement are on file with and available for inspection at the offices of the Issuing and Paying Agent, at the above address, and at the offices of the District. Reference is made to the Issuing and Paying Agent Agreement for a description of the provisions relating, among other things, to the terms of and security for the Commercial Paper Notes, the respective rights, limitation of rights, obligations, duties, immunities and remedies of the District, the Issuing and Paying Agent and the registered owners of the Commercial Paper Notes and to the terms and conditions under which the Commercial Paper Notes are issued and may be issued thereunder, and, by the acceptance of this Commercial Paper Note, the owner hereof assents to all provisions of the Issuing and Paying Agent Agreement. Unless otherwise defined herein, all capitalized terms herein shall have the same meanings as such terms are given in the Issuing and Paying Agent Agreement. The rights and obligations of the District and of the registered owners of the Commercial Paper Notes may be modified or amended at any time in the manner, to the extent, and upon the terms provided in the Issuing and Paying Agent Agreement. The Commercial Paper Notes (Water Series) are revenue obligations, are not secured by the taxing power of the District and shall be payable as to both principal and interest from, and shall be secured by a pledge of, the Available Water Revenues. The Available Water Revenues constitute a trust fund for the security and payment of the interest on and principal of the Commercial Paper Notes (Water Series) and all obligations of the District relating to such Commercial Paper Notes (Water Series) under the Issuing and Paying Agent Agreement, all obligations of the District relating to Water Note Parity Debt and all obligations of the District under any liquidity or credit agreement relating thereto secured by Available Water Revenues (including Bank Notes). The Available Water Revenues are pledged by the District to the payment of the Commercial Paper Notes (Water Series) and all obligations of the District relating to such Commercial Paper Notes (Water Series) without priority or distinction of one over the other. The pledge of Available Water Revenues made by the District shall be irrevocable until all of the Commercial Paper Notes (Water Series) and any Water Note Parity Debt have been paid and retired and any related obligations of the District under any credit agreement relating thereto and secured by Available Water Revenues have been satisfied. This Commercial Paper Note (Water Series) may also be paid from the proceeds of borrowings made by the District as Advances under a Liquidity Facility which are to be deposited by the Issuing and Paying Agent into a designated account therefor held by the Issuing and Paying Agent. Amounts held by the Issuing and Paying Agent in the related funds and accounts for each Series and subseries of Commercial Paper Notes of the District are pledged under the Issuing and Paying Agent Agreement to secure the payment of the principal of and interest on the Commercial Paper Notes and the Bank Notes of such Series and subseries and all other amounts payable to the Bank under the related Liquidity Facility, each in accordance with their terms, subject only to the provisions of the Issuing and Paying Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein A-2

126 The Commercial Paper Notes (Water Series) are payable solely from the sources hereinabove identified securing the payment thereof and do not constitute a legal or equitable pledge, charge, lien or encumbrance upon any other property of the District. No owner of this Commercial Paper Note (Water Series) shall ever have the right to compel any exercise of the taxing power of the District to pay this Commercial Paper Note (Water Series) or the interest hereon. It is hereby certified and recited that any and all acts, conditions and things required to exist, to happen and to be performed, precedent to and in the incurring of the indebtedness evidenced by this Commercial Paper Note (Water Series), and in the issuing of this Commercial Paper Note (Water Series), do exist, have happened and have been performed in due time, form and manner, as required by the Constitution and statutes of the State of California, and that this Commercial Paper Note (Water Series), together with all other indebtedness of the District pertaining to the Available Water Revenues, is within every debt and other limit prescribed by the Constitution and the statutes of the State of California, and is not in excess of the amount of Commercial Paper Notes permitted to be issued under the Issuing and Paying Agent Agreement. This Commercial Paper Note (Water Series) shall not be entitled to any benefit under the Issuing and Paying Agent Agreement, or become valid or obligatory for any purpose, until the Certificate of Authentication hereon shall have been manually signed by the Issuing and Paying Agent. IN WITNESS WHEREOF, THE EAST BAY MUNICIPAL WATER DISTRICT has caused this Commercial Paper Note (Water Series) to be signed in its name and on its behalf by the President of its Board of Directors and attested by its Secretary (the signatures of said officers may be by facsimile), and said officials by the execution hereof do adopt as and for their own proper signatures the signatures appearing on each of the Commercial Paper Notes, all as of the Dated Date specified above. EAST BAY MUNICIPAL UTILITY DISTRICT ATTEST: By: Title: President of the Board of Directors By: Title: Secretary A-3

127 CERTIFICATE OF AUTHENTICATION This Commercial Paper Note (Water Series) is one of the Commercial Paper Notes (Water Series) delivered pursuant to and described in the within mentioned Issuing and Paying Agent Agreement. U.S. BANK NATIONAL ASSOCIATION, as Issuing and Paying Agent By Authorized Officer Date of Authentication: A-4

128 [FORM OF ASSIGNMENT] For value received hereby sell, assign and transfer unto the within Note and hereby irrevocably constitute and appoint attorney, to transfer the same on the books kept for the registration thereof, with full power of substitution in the premises. NOTE: The signature to this Assignment must correspond with the name on the face of the within registered note in every particular, without alteration or enlargement or any change whatsoever. Dated: Signature Guaranteed by: NOTE: Signature must be guaranteed by an eligible guarantor institution A-5

129 EAST BAY MUNICIPAL UTILITY DISTRICT COMMERCIAL PAPER NOTES (WASTEWATER SERIES), [TAXABLE] [TAX-EXEMPT] SUBSERIES No.: Principal Amount: Interest to Maturity: Due at Maturity: Place of Payment: Dated Date: Maturity Date: Number of Days: Interest Rate (%): Payee: FOR VALUE RECEIVED, EAST BAY MUNICIPAL UTILITY DISTRICT (the District ), a municipal utility district duly organized and existing under and pursuant to the Municipal Utility District Act, constituting Division 6 of the Public Utilities Code of the State of California, and all laws of the State of California amendatory thereof or supplemental thereto (the Act ), FOR VALUE RECEIVED hereby promises to pay, but only from the sources hereinafter identified and stated, to the Payee identified above, on the Maturity Date specified above the Principal Amount specified above and to pay interest, if any, on said Principal Amount at said Maturity Date from the Note Date specified above to said Maturity Date at the per annum Interest Rate specified above, if any (calculated on the basis of a 365/366-day-year for Commercial Paper Notes designated as Tax-Exempt and a 360-day year containing twelve 30-day months for Commercial Paper Notes designated as Taxable and, in each case, the actual number of days elapsed), upon presentation and surrender at the principal corporate trust office of the Issuing and Paying Agent executing the Certificate of Authentication endorsed hereon and appearing below, or its successor at the principal corporate trust office of such successor. For payment of this Commercial Paper Note on the Maturity Date hereof, this Commercial Paper Note must be presented to the Issuing and Paying Agent no later than 2:15 p.m., New York City time, on such day. If a Commercial Paper Note is presented for payment after 2:15 p.m., New York City time, payment therefor shall be made by the Issuing and Paying Agent on the next succeeding business day without the accrual of additional interest thereon. The principal of and interest on this Commercial Paper Note are payable in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts. This Commercial Paper Note is one of a duly authorized issue of commercial paper notes of the District (hereinafter called the Commercial Paper Notes ) of the Series, subseries and other designation as set forth on the face hereof, to be issued from time to time by the District in the aggregate principal amount Outstanding at any time not to exceed the amounts set forth below, under and pursuant to the Act, and pursuant to the Issuing and Paying Agent Agreement, dated as of December 1, 2015 (as it may be supplemented and amended from time to time, the Issuing and Paying Agent Agreement ), by and between the District and the Issuing and Paying Agent. This Commercial Paper Note is designated as a Commercial Paper Note (Wastewater Series) of the subseries hereinabove provided. The Commercial Paper Notes (Wastewater Series) issued from time to time may include multiple subseries and be of varying denominations, dates, maturities and interest rates, and may otherwise vary as provided in the Issuing and Paying Agent Agreement. Such Issuing and Paying Agent Agreement provides that the District may issue additional notes and incur other indebtedness under the terms and conditions set forth in the Issuing and Paying Agent Agreement. The Commercial Paper Notes are issued for the purposes described in the Issuing and Paying Agent Agreement. Under the Issuing and Paying Agent Agreement, the aggregate principal amount of Commercial Paper Notes of the District which may be executed, authenticated and delivered is not limited A-6

130 except that the aggregate principal amount of all Commercial Paper Notes Outstanding at any time, together with all other evidences of indebtedness of the District issued and outstanding pursuant to Article 1 of Chapter 7.5 of the Act, including all amounts drawn on available bank lines of credit related thereto, if any, shall not at any one time exceed the lesser of either (1) the annual average of the District s total revenue for the three preceding years or (2) 25 percent of the District s total outstanding bonds issued pursuant to Chapters 6, 7 and 8 of the Act. Copies of the Issuing and Paying Agent Agreement are on file with and available for inspection at the offices of the Issuing and Paying Agent, at the above address, and at the offices of the District. Reference is made to the Issuing and Paying Agent Agreement for a description of the provisions relating, among other things, to the terms of and security for the Commercial Paper Notes, the respective rights, limitation of rights, obligations, duties, immunities and remedies of the District, the Issuing and Paying Agent and the owners of the Commercial Paper Notes and to the terms and conditions under which the Commercial Paper Notes are issued and may be issued thereunder, and, by the acceptance of this Commercial Paper Note, the owner hereof assents to all provisions of the Issuing and Paying Agent Agreement. Unless otherwise defined herein, all capitalized terms herein shall have the same meanings as such terms are given in the Issuing and Paying Agent Agreement. The rights and obligations of the District and of the registered owners of the Commercial Paper Notes may be modified or amended at any time in the manner, to the extent, and upon the terms provided in the Issuing and Paying Agent Agreement. The Commercial Paper Notes (Wastewater Series) are revenue obligations, are not secured by the taxing power of the District and shall be payable as to both principal and interest from, and shall be secured by a pledge of, the Available Wastewater Revenues. The Available Wastewater Revenues constitute a trust fund for the security and payment of the interest on and principal of the Commercial Paper Notes (Wastewater Series) and all obligations of the District relating to such Commercial Paper Notes (Wastewater Series) under the Issuing and Paying Agent Agreement, all obligations of the District relating to Wastewater Note Parity Debt and all obligations of the District under any liquidity or credit agreement relating thereto secured by Available Wastewater Revenues (including Bank Notes). The Available Wastewater Revenues are pledged by the District to the payment of the Commercial Paper Notes (Wastewater Series) and all obligations of the District relating to such Commercial Paper Notes (Wastewater Series) without priority or distinction of one over the other. The pledge of Available Wastewater Revenues made by the District shall be irrevocable until all of the Commercial Paper Notes (Wastewater Series) and any Wastewater Note Parity Debt have been paid and retired and any related obligations of the District under any liquidity or credit agreement relating thereto and secured by Available Wastewater Revenues have been satisfied. This Commercial Paper Note (Wastewater Series) may also be paid from the proceeds of borrowings made by the District as Advances under a Liquidity Facility which are to be deposited by the Issuing and Paying Agent into a designated account therefor held by the Issuing and Paying Agent. Amounts held by the Issuing and Paying Agent in the related funds and accounts for each Series and subseries of Commercial Paper Notes of the District are pledged under the Issuing and Paying Agent Agreement to secure the payment of the principal of and interest on the Commercial Paper Notes and the Bank Notes of such Series and subseries and all other amounts payable to the Bank under the related Liquidity Facility, each in accordance with their terms, subject only to the provisions of the Issuing and Paying Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein. The Commercial Paper Notes (Wastewater Series) are payable solely from the sources hereinabove identified securing the payment thereof and do not constitute a legal or equitable pledge, A-7

131 charge, lien or encumbrance upon any other property of the District. No owner of this Commercial Paper Note (Wastewater Series) shall ever have the right to compel any exercise of the taxing power of the District to pay this Commercial Paper Note (Wastewater Series) or the interest hereon. It is hereby certified and recited that any and all acts, conditions and things required to exist, to happen and to be performed, precedent to and in the incurring of the indebtedness evidenced by this Commercial Paper Note (Wastewater Series), and in the issuing of this Commercial Paper Note (Wastewater Series), do exist, have happened and have been performed in due time, form and manner, as required by the Constitution and statutes of the State of California, and that this Commercial Paper Note (Wastewater Series), together with all other indebtedness of the District pertaining to the Available Wastewater Revenues, is within every debt and other limit prescribed by the Constitution and the statutes of the State of California, and is not in excess of the amount of Commercial Paper Notes permitted to be issued under the Issuing and Paying Agent Agreement. This Commercial Paper Note (Wastewater Series) shall not be entitled to any benefit under the Issuing and Paying Agent Agreement, or become valid or obligatory for any purpose, until the Certificate of Authentication hereon shall have been manually signed by the Issuing and Paying Agent. IN WITNESS WHEREOF, THE EAST BAY MUNICIPAL WASTEWATER DISTRICT has caused this Commercial Paper Note (Wastewater Series) to be signed in its name and on its behalf by the President of its Board of Directors and attested by its Secretary (the signatures of said officers may be by facsimile), and said officials by the execution hereof do adopt as and for their own proper signatures the signatures appearing on each of the Commercial Paper Notes, all as of the Dated Date specified above. EAST BAY MUNICIPAL UTILITY DISTRICT ATTEST: By: Title: President of the Board of Directors By: Title: Secretary A-8

132 CERTIFICATE OF AUTHENTICATION This Commercial Paper Note (Wastewater Series) is one of the Commercial Paper Notes (Wastewater Series) delivered pursuant to and described in the within mentioned Issuing and Paying Agent Agreement. U.S. BANK NATIONAL ASSOCIATION, as Issuing and Paying Agent By Authorized Officer Date of Authentication: A-9

133 [FORM OF ASSIGNMENT] For value received hereby sell, assign and transfer unto the within Note and hereby irrevocably constitute and appoint attorney, to transfer the same on the books kept for the registration thereof, with full power of substitution in the premises. NOTE: The signature to this Assignment must correspond with the name on the face of the within registered note in every particular, without alteration or enlargement or any change whatsoever. Dated: Signature Guaranteed by: NOTE: Signature must be guaranteed by an eligible guarantor institution A-10

134 EXHIBIT B FORMS OF MASTER NOTES [Insert DTC Forms to Follow] B-1

135 EXHIBIT C CERTIFICATE AGREEMENT [Insert IPA DTC Certificate Agreement to Follow] C-1

136 EXHIBIT D FORM OF ISSUANCE REQUEST ISSUANCE REQUEST AND DIRECTION OF THE EAST BAY MUNICIPAL UTILITY DISTRICT Part I: Terms of the Notes The undersigned, the of the East Bay Municipal Utility District, a municipal utility district duly organized and validly existing pursuant to the Municipal Utility District Act, constituting Division 6 of the Public Utilities Code of the State of California, as amended (the Act ) does hereby request U.S. Bank National Association, as issuing and paying agent (the Issuing and Paying Agent ) under the Issuing and Paying Agent Agreement, dated as of December 1, 2015 (the Issuing and Paying Agent Agreement ), by and between the District and the Issuing and Paying Agent, to issue East Bay Municipal Utility District Commercial Paper Notes as follows: [expand as needed] Series Subseries Tax Status Liquidity Provider Purpose Principal Amount Maturity Date Interest Rate (Water Series): Renewal (Roll-Over) Notes: $ Original Issue Notes: $ Subtotal: $ (Wastewater Series): Renewal (Roll-Over) Notes: $ Original Issue Notes: $ Subtotal: $ Total: $ Upon receipt of proceeds of the Commercial Paper Notes from the Dealers, you are hereby authorized and directed to transfer $ from the proceeds of the Commercial Paper Notes as follows:. All capitalized terms used in this Issuance Request and not otherwise defined herein shall have the meanings assigned to such terms in the Issuing and Paying Agent Agreement D-1

137 Part II: Certifications of the District The undersigned does hereby certify as follows: 1. The Commercial Paper Notes hereby requested to be issued are being issued for purposes authorized by Section 2.02 of this Issuing and Paying Agent Agreement. 2. All actions on the part of the District necessary for the valid issuance of the Commercial Paper Notes hereby requested to be issued have been taken, and such Commercial Paper Notes will be valid obligations of the District enforceable in accordance with their terms. 3. After the issuance of the Commercial Paper Notes hereby requested to be issued and the application of the proceeds thereof, the aggregate principal amount of the Commercial Paper Notes Outstanding will not exceed the amount that at the time is authorized to be Outstanding as provided in the Act and the Issuing and Paying Agent Agreement. 4. Liquidity Facilities supporting the full principal amount of the Commercial Paper Notes to be Outstanding upon the issuance of the Commercial Paper Notes hereby requested to be issued are in full force and effect. 5. The interest rates, if any, borne by the Commercial Paper Notes hereby requested to be issued or the yield to maturity of the Commercial Paper Notes hereby requested to be issued does not exceed the Maximum Rate. 6. Unless the Commercial Paper Notes hereby requested to be issued are Taxable as provided in Part I hereof, the facts, estimates, circumstances and representations set forth or made (as the case may be) in the Tax Certificate continue to exist and are reaffirmed as of the date hereof. 7. The terms of the Commercial Paper Notes hereby requested to be issued do not exceed 270 days and the maturity dates of such Commercial Paper Notes do not extend beyond the applicable Liquidity Facility Expiration Date. 8. The District has not been notified by Co-Bond Counsel that their opinion with respect to the validity of the Commercial Paper Notes of such Series or subseries and, if the interest on such Series or subseries of Commercial Paper Notes is Tax-Exempt, has not been notified by Special Tax Counsel that its opinion with respect to the tax treatment of the interest thereon, delivered prior to the initial issuance of such Series or subseries of Commercial Paper Notes has been revised or withdrawn or, if any such revisions or withdrawal has occurred, a revised opinion or a substitute opinion acceptable to the Dealer has been delivered. 9. No Event of Default under Section 8.01 of the Issuing and Paying Agent Agreement has occurred and is continuing as of the date hereof. 10. All of the conditions precedent to the issuance of such Commercial Paper Notes set forth in the applicable Liquidity Facility and in Section 3.01 of the Issuing and Paying Agent Agreement have been satisfied D-2

138 IN WITNESS WHEREOF, this Issuance Request is executed and delivered this day of,. EAST BAY MUNICIPAL UTILITY DISTRICT By: Authorized Representative D-3

139 EXHIBIT E CERTIFICATE OF INCUMBENCY OF AUTHORIZED REPRESENTATIVES EAST BAY MUNICIPAL UTILITY DISTRICT COMMERCIAL PAPER NOTES (WATER SERIES) COMMERCIAL PAPER NOTES (WASTEWATER SERIES) SECRETARY S CERTIFICATE OF INCUMBENCY I, Lynelle M. Lewis, the duly appointed Secretary of East Bay Municipal Utility District (the District ) do hereby certify that attached hereto as Attachment A is a list with the genuine signature and true and correct title of each of the officers of the District authorized to act for the District as an Authorized Representative thereof in connection with the District s Commercial Paper Notes (Water Series) and Commercial Paper Notes (Wastewater Series) (collectively, the Commercial Paper Notes ) issued pursuant to the Issuing and Paying Agent Agreement, dated as of December 1, 2015 (the Issuing and Paying Agent Agreement ), by and between the District and U.S. Bank National Association, as Issuing and Paying Agent, and that said list is in full force and effect on and after the date hereof until a new list is hereinafter delivered to you. Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Issuing and Paying Agent Agreement. IN WITNESS WHEREOF, I have hereunto signed my name. Lynelle M. Lewis Dated:, 2015 I, Sophia D. Skoda, Treasury Manager of East Bay Municipal Utility District, do hereby certify that Lynelle M. Lewis is the duly appointed Secretary of East Bay Municipal Utility District and that the signature appearing above and on Attachment A hereto is each her genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name. Sophia D. Skoda Dated:, E-1

140 ATTACHMENT A INCUMBENCY OF AUTHORIZED REPRESENTATIVES OF THE DISTRICT Pursuant to the Issuing and Paying Agency Agreement, dated as of December 1, 2015 (the Issuing and Paying Agent Agreement ) by and between the District and U.S. Bank National Association as Issuing and Paying Agent for the Commercial Paper Notes, the following individuals are Authorized Representatives of the District authorized to act for the District in connection with the Commercial Paper Notes. Name Title Signature Frank G. Mellon President Alexander R. Coate General Manager Craig S. Spencer General Counsel D. Scott Klein Acting Director of Finance Sophia D. Skoda Assistant Treasurer (Treasury Manager) Lynelle M. Lewis Secretary of the District E-2

141 EXHIBIT F SERIES AND SUBSERIES OF COMMERCIAL PAPER NOTES, DEALERS, LIQUIDITY FACILITIES AND APPLICABLE BANKS The Series and subseries designations of the Commercial Paper Notes, as well as the Dealers therefor and the Bank or Banks providing the Liquidity Facility supporting such Series or subseries of Commercial Paper Notes, are set forth below. 1 Series Subseries of Notes Principal Amount Dealers Dealer Notice Address Bank Providing Liquidity Facility Liquidity Facility Effective Date Liquidity Facility Expiration Date Bank Notice Address Commercial Paper Notes (Water Series): (see attached page F-2) (see attached page F-2) (see attached page F-2) (see attached page F-2) Commercial Paper Notes (Wastewater Series): (see attached page F-2) (see attached page F-2) 1 As provided in Section 1.02(e) of the Issuing and Paying Agent Agreement, subseries of Commercial Paper Notes, Banks, Liquidity Facilities and Dealers may be added to, or deleted from, the Issuing and Paying Agent Agreement without the need to amend the Issuing and Paying Agent Agreement, upon delivery by an Authorized Representative of the District to the Issuing and Paying Agent of a new Exhibit F replacing this Exhibit F F-1

142 ATTACHMENT TO EXHIBIT F: BANK AND DEALER NOTICE ADDRESSES F-2

143 REVOLVING CREDIT AGREEMENT dated as of December 1, 2015 between EAST BAY MUNICIPAL UTILITY DISTRICT and BANK OF AMERICA, N.A. relating to EAST BAY MUNICIPAL UTILITY DISTRICT COMMERCIAL PAPER NOTES (WATER SERIES) TAX-EXEMPT SUBSERIES A-2 2a_ Revolving Credit Agreement BANA.DOCX

144 TABLE OF CONTENTS SECTION HEADING PAGE ARTICLE I DEFINITIONS...1 Section 1.1. Definitions...1 Section 1.2. Other Interpretive Provisions...12 Section 1.3. Accounting Terms...13 Section 1.4. Interpretations...13 Section 1.5. Rounding...13 ARTICLE II REVOLVING CREDIT; TERM LOANS...13 Section 2.1. Commitment to Lend...13 Section 2.2. Method of Borrowing...14 Section 2.3. Repayment; Bank Notes...15 Section 2.4. Interest...16 Section 2.5. Fees...17 Section 2.6. Termination or Reduction of Commitment...17 Section 2.7. Prepayments...18 Section 2.8. General Provisions as to Payment...18 Section 2.9. Nature of Obligations...19 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY...19 Section 3.1. Net of Taxes, Etc...19 Section 3.2. Increased Costs...21 Section 3.3. Survival...22 ARTICLE IV CONDITIONS PRECEDENT TO EFFECTIVENESS...22 Section 4.1. Conditions Precedent to Effective Date...22 Section 4.2. Conditions to Revolving Loans...23 Section 4.3. Conditions to Term Loan...24 Section 4.4. Conditions Precedent to Each Note Issuance...24 ARTICLE V REPRESENTATIONS AND WARRANTIES...25 Section 5.1. Organization and Powers...25 Section 5.2. Authorization; Contravention...25 Section 5.3. Governmental Consent or Approval...26 Section 5.4. Binding Effect...26 Section 5.5. Federal Reserve Regulations...26 Section 5.6. Litigation...26 Section 5.7. No Defaults...26 Section 5.8. Financial Statements...27 Section 5.9. Complete and Correct Information...27 Section Sovereign Immunity i-

145 Section Compliance with Rules and Regulations...27 Section No ERISA Plans...28 Section Tax-Exempt Status of Commercial Paper Notes...28 Section Incorporation of Representations and Warranties by Reference...28 Section No Proposed Legal Changes...28 Section Environmental Laws...28 Section Issuing and Paying Agent and Dealers...28 Section Offering Memorandum...28 Section Related Documents...29 Section Issuance of Commercial Paper Notes...29 Section Sanctions Concerns and Anti-Corruption Laws...29 ARTICLE VI COVENANTS...30 Section 6.1. Information...30 Section 6.2. Performance of this and other Agreements...31 Section 6.3. Maintenance of Approvals...31 Section 6.4. Preservation of Existence...31 Section 6.5. Sale of Commercial Paper Notes...31 Section 6.6. Notices...32 Section 6.7. Total Outstanding...32 Section 6.8. Books; Access to Records...32 Section 6.9. Limitation on Additional Debt...32 Section Reserved...32 Section No Amendment of Related Documents...32 Section Taxes and Liabilities...32 Section Compliance with Rules and Regulations...33 Section Maintenance and Operation of the Water System...33 Section Insurance...33 Section Book Entry Eligibility...33 Section Exempt Status...33 Section Issuing and Paying Agent; Dealers...33 Section Alternate Liquidity Facility...34 Section Incorporation of Covenants by Reference...34 Section Sale or Encumbrance of Water System...34 Section Best Efforts to Sell Commercial Paper Notes; Successor Dealers...35 Section Reserved...35 Section Preservation of Collateral...35 Section ERISA...35 Section No Priority for Certain Debt...35 Section Offering Memorandum and Other Documents...36 Section Sovereign Immunity...36 Section Maintenance of Ratings...36 Section Use of Proceeds ii-

146 Section Rates and Charges...36 ARTICLE VII EVENTS OF DEFAULT...37 Section 7.1. Events of Default Resulting in Immediate Termination...37 Section 7.2. Events of Default Resulting in Immediate Suspension...39 Section 7.3. Events of Default no Resulting in Immediate Termination or Suspension...40 Section 7.4. Remedies...42 Section 7.5. Suits at Law or in Equity and Mandamus...44 ARTICLE VIII OBLIGATIONS ABSOLUTE...44 Section 8.1. Obligations Absolute...44 Article IX Miscellaneous...45 Section 9.1. Liability of the Bank...45 Section 9.2. Costs and Expenses...45 Section 9.3. Notices...46 Section 9.4. Successors and Assigns...47 Section 9.5. Governing Law; Venue; Waiver of Jury Trial...48 Section 9.6. No Waivers, Amendments, Etc...48 Section 9.7. Counterparts...49 Section 9.8. Source of Funds...49 Section 9.9. Term of the Agreement...49 Section Right of Setoff...49 Section Headings...49 Section Complete and Controlling Agreement...49 Section Severability...50 Section USA PATRIOT Act Notice...50 Section Assignment to Federal Reserve Bank...50 Section No Advisory or Fiduciary Relationship...50 EXHIBIT A Form of Notice of Revolving Loan EXHIBIT B Form of Revolving Loan Note EXHIBIT C Form of Term Loan Note EXHIBIT D Sixteenth Supplemental Indenture -iii-

147 REVOLVING CREDIT AGREEMENT This REVOLVING CREDIT AGREEMENT is dated as of December 1, 2015, between EAST BAY MUNICIPAL UTILITY DISTRICT (the District ) and BANK OF AMERICA, N.A. (the Bank ). RECITALS: WHEREAS, the District has established a commercial paper program for the issuance and reissuance from time to time of its Commercial Paper Notes (Water Series) (the Water Series Notes ) and its Commercial Paper Notes (Wastewater Series), each in one or more subseries thereof; WHEREAS, the Commercial Paper Notes (Water Series) Tax-Exempt Subseries A-2 (herein referred to as the Commercial Paper Notes ) constitute a subseries of the Water Series Notes; WHEREAS, the District proposes to borrow money through the issuance and reissuance of the Commercial Paper Notes, in the maximum principal amount equal to the principal component of the Commitment (as herein defined), pursuant to the Municipal Utility District Act, constituting Division 6 of the Public Utilities Code of the State of California, and all laws of the State of California amendatory thereof or supplemental thereto (collectively, the Act ), and Resolution No , adopted by the Board of Directors of the District on April 28, 2015 and Resolution No. [ ]-15 adopted by the Board of Directors of the District on [November,] 2015 (Resolution Nos and [ ]-15 being collectively referred to herein as the Resolution ); and WHEREAS, the District has requested the Bank to provide liquidity to support such Commercial Paper Notes by making available a revolving line of credit, initially in an aggregate principal amount not to exceed $160,000,000 at any time outstanding. The Bank is willing to make available such a revolving line of credit to the District, subject to the terms and conditions of this Agreement. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. In addition to other terms defined herein, unless the context shall indicate a contrary meaning or intent, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms: Act has the meaning set forth in the recitals hereof.

148 Affiliate means a corporation, partnership, joint venture, limited liability company, limited liability partnership, association, business trust or similar entity organized under the laws of the United States of America or any state thereof which is directly or indirectly controlled by any Person. For purposes of this definition, control means the power to direct the management and policies of a Person through the ownership of not less than a majority of its voting securities or the right to designate or elect not less than a majority of the members of its board of directors or other governing board. Agreement means this Revolving Credit Agreement, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof. Authorized Representative means any of the President or the Vice President of the Board of Directors of the District, the General Manager, the Director of Finance, the Treasurer or any Assistant Treasurer, the Secretary or the General Counsel of the District and such other person(s) or officer(s) of the District designated by the Board of Directors of the District to act as an Authorized Representative. Available Commitment means, and in no event shall it exceed, the Initial Commitment as adjusted from time to time as follows: (a) downward in an amount equal to the principal amount of any Revolving Loan, effective on the date such Revolving Loan is made; (b) downward by the amount of any reduction pursuant to Section 2.6 or Section 7.4 hereof; and (c) upward in an amount equal to the principal amount of any Loan that is repaid pursuant to the terms of Section 2.3 or 2.7 hereof (other than the deemed repayment of a Revolving Loan from the proceeds of a Term Loan made in accordance with Section 2.2(b) hereof); provided, that, after giving effect to any such adjustment the Available Commitment shall never exceed $160,000,000. Any adjustment pursuant to clause (a), (b) or (c) above shall occur simultaneously with the event requiring such adjustment. Available Water Revenues for any fiscal period means the sum of (a) the Water Revenues for such fiscal period plus (b) the amounts, if any, withdrawn by the District from the Rate Stabilization Fund referenced in the Water Bond Indenture for treatment as Water Revenues for such fiscal period, less the sum of (1) all Water operation and maintenance costs for such fiscal period, (2) the amounts, if any, withdrawn by the District from Water Revenues for such fiscal period for deposit in such Rate Stabilization Fund, and (3) all amounts required to be paid with respect to all Prior Water Obligations under the Prior Water Obligation Documents as the same become due and payable. Bank has the meaning set forth in the introductory paragraph hereof. Bank Rate means, for each day of determination with respect to any Loan, except as provided in Section 2.4 of this Agreement, a rate per annum equal to (i) for the period from and including the date such Loan is made to and including the Conversion Date, the Base Rate from time to time in effect, and (ii) following the Conversion Date, the sum of the Base Rate from time to time in effect plus one percent (1.00%); provided that from and after the occurrence of an Event of Default, Bank Rate shall mean the Default Rate; provided further that at no time shall -2-

149 the Bank Rate be less than the highest per annum rate of interest applicable to any Outstanding Commercial Paper Notes. Bank s Payment Account means Bank of America, N.A., Attention:, ABA #:, Account No., Account Name:, Ref:, or such other account as the Bank may designate from time to time. Base Rate means, for any day, a fluctuating rate of interest per annum equal to the greatest of (i) the Prime Rate in effect at such time plus one percent (1.00%), (ii) the Federal Funds Rate in effect at such time plus two percent (2.00%), and (iii) seven percent (7.00%). Bond Counsel means, collectively, Norton Rose Fulbright US LLP and Curls Bartling P.C. (or other nationally recognized bond counsel selected by the District with the prior written approval of the Bank, which approval shall not be unreasonably withheld). Business Day means any day other than (i) a Saturday, Sunday or other day on which commercial banks in New York, New York, San Francisco, California, the city in which the corporate trust office of the Issuing and Paying Agent is located, or the city in which is located the office of the Bank from which a Revolving Loan will be made, are authorized or required by law to close, (ii) a legal holiday of the District or any other day the District is authorized to be closed for official business or (iii) a day on which the New York Stock Exchange of the Federal Reserve Bank of New York is closed. Capitalized Lease means any lease of real or personal property required to be capitalized on the balance sheet of the lessee in accordance with GAAP. Capitalized Lease Obligation means the amount of the liability shown on the balance sheet of any Person in respect of a Capitalized Lease as determined in accordance with GAAP. Change in Law means the occurrence, after the Effective Date, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law, regardless of the date enacted, adopted or issued. Code means the Internal Revenue Code of 1986, as amended, and when reference is made to a particular section thereof, the applicable Treasury Regulations from time to time promulgated or proposed thereunder. -3-

150 Commercial Paper Notes has the meaning set forth in the recitals hereof. Commitment means an amount equal to the Commitment of the Bank to make Loans to the District, as such amount may be terminated or permanently reduced pursuant to Section 2.6 or Section 7.4 hereof. The District and the Bank agree that the Commitment of the Bank as of the Effective Date is the Initial Commitment. Commitment Fee has the meaning set forth in the Fee Agreement. Commitment Fee Rate has the meaning set forth in the Fee Agreement. Commitment Termination Date means the earliest to occur of: (a) the Stated Expiration Date; (b) the date the District voluntarily terminates or permanently reduces the Commitment to zero; (c) the date the Commitment is terminated or permanently reduced to zero pursuant to Section 7.4 hereof; and (d) the Substitution Date. Conversion Date has the meaning set forth in Section 2.3(a) hereof. Dealer Agreements means, collectively, each dealer agreement between a Dealer and the District. Dealers means each dealer selected from time to time by the District to market or remarket the Commercial Paper Notes in accordance with the Issuing and Paying Agent Agreement. As of the Effective Date, the Dealers are Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC. Debt of any Person means, on any date, without duplication, (i) all indebtedness created, assumed or incurred in any manner by such Person representing money borrowed (including by the issuance of debt securities), (ii) all obligations for the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business), (iii) all obligations secured by any Lien upon Property of such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness, (iv) all Capitalized Lease Obligations of such Person, (v) without duplication, all obligations of such Person on or with respect to letters of credit, banker s acceptances and other evidences of indebtedness representing extensions of credit whether or not representing obligations for borrowed money, (vi) all Guarantees and (vii) all obligations of such Persons under Swap Contracts. For purposes of this definition Guarantee by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other -4-

151 obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part). Default means any condition or event that with the giving of notice or lapse of time or both would constitute an Event of Default. Default Rate means a rate of interest per annum equal to the sum of the Base Rate from time to time in effect plus three percent (3.00%). Designated Jurisdiction means any country or territory to the extent that such country or territory itself is the subject of any Sanction. District has the meaning set forth in the introductory paragraph hereof. DTC means The Depository Trust Company and any successor thereto. Effective Date means December [2], 2015, so long as the conditions precedent set forth in Section 4.1 hereof have been satisfied or waived (which satisfaction or waiver shall be evidenced by the execution and delivery by the Bank and the District of this Agreement as of such date). Environmental Laws means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules and regulations from time to time promulgated thereunder. ERISA Affiliate means any trade or business (whether or not incorporated) under common control with the District within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). Event of Default has the meaning set forth in Article VII hereof. Federal Funds Rate means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve -5-

152 System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Bank on such day on such transactions as determined by the Bank. Fee Agreement means that certain Fee Agreement dated the Effective Date, between the District and the Bank, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof and thereof. Final Maturity Date means, with respect to any Term Loan, the earlier to occur of (i) the third (3rd) anniversary of the date on which the Bank honored the related Revolving Loan, (ii) the Substitution Date, (iii) the date on which the District issues new commercial paper notes or bonds to fund the full repayment of such Term Loan, (iv) the date the District voluntarily terminates or permanently reduces the Commitment to zero; and (v) the date the Commitment is terminated or permanently reduced to zero or such Term Loan becomes due and payable, in each case, pursuant to Section 7.4 hereof. Fitch means Fitch, Inc. and its successors and assigns. Fiscal Year means the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve month period hereafter designated as the official fiscal year period of the District, which designation shall be provided to the Bank in a certificate of the District. GAAP means generally accepted accounting principles in the United States as set forth in the opinions and pronouncements of the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA) and statements and pronouncements of the Governmental Accounting Standards Board (GASB), that are applicable to the circumstances as of the date of determination consistently applied to governmental entities, or as modified by the opinions, statements and pronouncements of any similar accounting body of comparable standing having authority over accounting by governmental entities. Governmental Authority means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including, without limitation, any supra-national bodies such as the European Union or the European Central Bank). Initial Commitment means $160,000,

153 Investment Grade means a long-term rating of Baa3 (or its equivalent) or higher in the case of Moody s, BBB- (or its equivalent) or higher in the case of Fitch and BBB- (or its equivalent) or higher in the case of S&P. Issuing and Paying Agent means the firm serving as issuing and paying agent for the Commercial Paper Notes pursuant to the Issuing and Paying Agent Agreement. As of the Effective Date, the Issuing and Paying Agent is U.S. Bank National Association. Issuing and Paying Agent Agreement means the Issuing and Paying Agent Agreement, dated as of December 1, 2015, between the District and the Issuing and Paying Agent, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof and thereof. Issuing and Paying Agent Agreement Event of Default means an Event of Default as described in Section 8.01 of the Issuing and Paying Agent Agreement. Issuing and Paying Agent s Payment Account means, Attention:, ABA #:, Account No., Account Name:, Ref:, or such other account as the Issuing and Paying Agent may designate in writing from time to time. Laws means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law. Lien means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. Liquidity Facility has the meaning set forth in the Issuing and Paying Agent Agreement. Loan means a Revolving Loan or a Term Loan made by the Bank to the District pursuant to Article II hereof. Material Adverse Change means the occurrence of any event or change resulting in (a) a material adverse change in, or material adverse effect upon, the operations, business, properties, liabilities or condition (financial or otherwise) of the Water System which change or event would reasonably be expected to result in a material impairment of the ability or authority of the District to perform its obligations under this Agreement or any Related Document to which it is a party; or (b) a material adverse change in, or material adverse effect upon, the legality, validity, binding effect or enforceability against the District of this Agreement or any Related Document to which it is a party. -7-

154 Material Litigation has the meaning set forth in Section 5.6 hereof. Maximum Lawful Rate means the maximum interest rate permitted by law. Maximum Loan Interest Rate means the lesser of (i) the rate of 18% per annum and (ii) the Maximum Lawful Rate. Moody s means Moody s Investors Service, Inc. and its successors and assigns. No-Issuance Notice has the meaning set forth in Section 4.4 hereof. Notice of Revolving Loan means a written borrowing request, in substantially the form of Exhibit A hereto, with appropriate completions, executed by the Issuing and Paying Agent, which requests a Revolving Loan from the Bank. Obligations means the fees relating to this Agreement or the Fee Agreement, the Revolving Loans, the Term Loans, and all other amounts payable by the District to the Bank pursuant to this Agreement, the Fee Agreement, the Revolving Loan Note, the Term Loan Note or the Issuing and Paying Agent Agreement. OFAC means the Office of Foreign Assets Control of the United States Department of the Treasury. Offering Memorandum means the Commercial Paper Offering Memorandum dated [November, 2015], relating to the Commercial Paper Notes, and any other offering memorandum used in connection with the offering and sale of the Commercial Paper Notes. Other Taxes has the meaning set forth in Section 3.1(a) hereof. Outstanding (i) with respect to the Commercial Paper Notes, has the meaning set forth in the Issuing and Paying Agent Agreement and (ii) with respect to Loans, means all Loans made by the Bank pursuant to the terms hereof and not repaid in full to the Bank by the District. Owner has the meaning set forth in the Issuing and Paying Agent Agreement. Participant means any Person to which the Bank or any participant has granted, directly or indirectly, a participation in the Bank s commitment to make Loans hereunder and to receive amounts payable with respect to the Revolving Loan Note and/or the Term Loan Note; provided that any such participant shall take such participation subject to the terms of this Agreement. Person means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a governmental or political subdivision or an agency or instrumentality thereof. -8-

155 Prime Rate means on any day, the rate of interest in effect for such day as publicly announced from time to time by the Bank as its prime rate. The prime rate is a rate set by the Bank based upon various factors including the Bank s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by the Bank shall take effect at the opening of business on the day specified in the public announcement of such change. Prior Water Obligation Documents means the Water Bond Indenture and any other indenture, resolution or other instrument of the District providing for the issuance of indebtedness or incurrence of any other obligation of the District (including for purposes hereof, obligations under credit and liquidity facilities and obligations under interest rate swap agreements and other hedging instruments, including termination payments related thereto) secured in whole or in part by Water Revenues and which by its terms is superior in right of payment to the Commercial Paper Notes or any Water Note Parity Debt. Prior Water Obligations means the Water Bonds and any other securities, evidences of indebtedness or obligations of the District (including for purposes hereof, obligations under credit and liquidity facilities and obligations under interest rate swap agreements or other hedging instruments, including termination payments related thereto) issued or incurred pursuant to a Prior Water Obligation Document. Property means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, whether now owned or hereafter acquired. Rating Agency means any of S&P, Fitch and Moody s; provided, however, that if at any time the Water Bonds are not rated by S&P, Fitch or Moody s (other than as the result of such rating being withdrawn as provided in Section 7.1(g) or Section 7.3(f) hereof), such entity shall not be a Rating Agency hereunder. Recipient means the Bank or any other recipient of any payment to be made by or on account of any obligation of the District hereunder. Reduction Fee has the meaning set forth in the Fee Agreement. Related Documents means the Resolution, the Issuing and Paying Agent Agreement, the Dealer Agreements, the Commercial Paper Notes, the Fee Agreement, the Revolving Loan Note, the Term Loan Note, in each case as amended and supplemented in accordance with the terms thereof and hereof. Resolution has the meaning set forth in the recitals hereof. Revenues Secured Debt means the (i) Prior Water Obligations, (ii) Water Note Parity Debt, and (iii) any other Water System Related Debt described in clauses (b), (d), (e) and (h) of the definition thereof (and, in each case, in connection with obligations of the District in respect of Swap Contracts, only (x) with respect to Swap Contracts that provide interest rate support and -9-

156 (y) insofar as the obligations in respect of such Swap Contracts constitute regularly scheduled payments that relate to the Commercial Paper Notes, any Water Bonds or any obligations described in clause (b) of the definition thereof) the payment of which is secured by a pledge of or lien on Water Revenues senior to or on a parity with the payment of the Commercial Paper Notes, the Revolving Loan Note and the Term Loan Note. Revolving Credit Period means the period commencing on the Effective Date and ending on the Commitment Termination Date. Revolving Loan means each revolving loan made by the Bank to the District pursuant to Section 2.1(b) hereof. Revolving Loan Notes has the meaning set forth in Section 2.3(b) hereof. S&P means Standard & Poor s Ratings Services, a Standard & Poor s Financial Services LLC business, and its successors and assigns. Sanction(s) means any international economic sanction administered or enforced by the United States Government (including, without limitation, OFAC), the United Nations Security Council, the European Union, Her Majesty s Treasury or other relevant sanctions authority. Sixteenth Supplemental Indenture means the Sixteenth Supplemental Indenture dated as of February 1, 2010, between the District and The Bank of New York Mellon Trust Company, N.A., as successor trustee, supplementing the Water Bond Indenture, in the form attached as Exhibit D hereto. Special Event of Default has the meaning set forth in Section 7.1 hereof. State means the State of California. Stated Expiration Date means [November 30, 2018], or such later date to which the Stated Expiration Date shall have been extended pursuant to Section 9.9(b) hereof. Substitution Date means the date of acceptance by the District of a substitute or alternate Liquidity Facility in accordance with the terms and provisions of the Issuing and Paying Agent Agreement. Suspension Event has the meaning set forth in Section 7.2 hereof. Swap Contract means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap -10-

157 transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a Master Agreement ), including any such obligations or liabilities under any Master Agreement. Taxes has the meaning set forth in Section 3.1(a) hereof. Term Loan means each term loan made by the Bank to the District pursuant to Section 2.1(c) hereof on a Conversion Date. Term Loan Note has the meaning set forth in Section 2.3(d) hereof. Termination Fee has the meaning set forth in the Fee Agreement. Water Bond Indenture means the Water System Subordinated Revenue Bond Indenture dated as of April 1, 1990, between the District and The Bank of New York Mellon Trust Company, N.A., as successor trustee, as amended and supplemented to the date hereof, and as further amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof and thereof. Water Bonds means all bonds and other obligations and securities of the District issued and secured pursuant to the Water Bond Indenture. Water Note Parity Debt means any indebtedness, installment sale obligation, lease obligation or other obligation of the District for borrowed money or any interest rate swap agreement or other hedging instrument having an equal lien and charge upon all or part of the Available Water Revenues and therefore payable on a parity with the Commercial Paper Notes, including but not limited to other Water Series Notes and Extendable Municipal Commercial Paper Notes (Water Series) of the District issued under Resolution No of the District adopted on March 10, 2009, as the same may be amended from time to time. Water operation and maintenance costs means the reasonable and necessary costs of maintaining and operating the Water System, calculated on sound accounting principles, including (among other things) the reasonable expenses of management, repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, the cost of purchasing water and reasonable amounts for administration, overhead, insurance, taxes and other similar costs, but excluding in all cases depreciation and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature, and excluding all costs paid from the proceeds of taxes received by the District. -11-

158 Water Revenues means all charges received for, and all other income and receipts derived by the District from, the operation of the Water System, or arising from the Water System, together with income from the investment of any moneys in any fund or account established under the Water Bond Indenture. Water Series Notes has the meaning set forth in the recitals hereof. Water System means the entire water system of the District and all of the facilities thereof, including all facilities for the storage, transmission or distribution of water or the generation or transmission of hydroelectric power, together with all additions, betterments, extensions and improvements to said system or any part thereof. The term Water System does not include the sewage disposal system or facilities of Special District No. 1 of the District (including any power generation facilities constituting a part of said system). Water System Related Debt means, without duplication, the following types of obligations with respect to, and to the extent payable from or secured by Water Revenues: (a) all obligations of the District for borrowed money, (b) all obligations of the District evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of the District to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (d) all obligations of the District under leases which are or should be, in accordance with GAAP, consistently applied, recorded as capital leases, (e) all obligations of the District to reimburse or repay any bank or other Person in respect of amounts paid or advanced under a letter of credit, credit agreement, liquidity facility or other instrument, (f) all obligations of other Persons secured by a Lien on Water Revenues, whether or not such obligations are assumed by the District, (g) all obligations of other Persons guaranteed directly or indirectly by the District and (h) obligations of the District in respect of Swap Contracts, including, without limitation, interest rate swap agreements. Section 1.2. Other Interpretive Provisions. With reference to this Agreement and each Related Document, unless otherwise specified herein or in such Related Document: (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. The word will shall be construed to have the same meaning and effect as the word shall. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any Related Document), (ii) any reference herein to any Person shall be construed to include such Person s successors and assigns, (iii) the words herein, hereof and hereunder, and words of similar import when used in any Related Document, shall be construed to refer to such Related Document in its entirety and not to any particular provision thereof, (iv) all references in a Related Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and -12-

159 Sections of, and Exhibits and Schedules to, the Related Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words asset and property shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. (b) In the computation of periods of time from a specified date to a later specified date, the word from means from and including; the words to and until each mean to but excluding; and the word through means to and including. (c) Section headings herein and in the Related Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any Related Document. Section 1.3. Accounting Terms. All accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles applied on a basis consistent with the financial statements of the District referred to in Section 5.8 hereof. Section 1.4. Interpretations. The table of contents and article and section headings of this Agreement are included herein for convenience of reference purposes only and shall not constitute a part of this Agreement or affect its interpretation in any respect. All references to time herein shall refer to local time in New York, New York. Section 1.5. Rounding. Any financial ratios required to be maintained by the District pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number). ARTICLE II REVOLVING CREDIT; TERM LOANS Section 2.1. Commitment to Lend. (a) Generally. The District hereby requests the Bank, and the Bank hereby agrees, on the terms and conditions hereinafter set forth, to establish a revolving line of credit for the benefit of the District in an amount not to exceed the Available Commitment for the purpose of making Loans to fund the payment by the District of the principal of any Commercial Paper Notes at the stated maturity thereof in accordance with the terms and provisions of this Agreement and the Issuing and Paying Agent Agreement. -13-

160 (b) Revolving Loans. The Bank agrees, on the terms and conditions hereinafter set forth, to make each borrowing of Revolving Loans to the District during the Revolving Credit Period in an aggregate principal amount at any one time outstanding not to exceed the amount of the Bank s Available Commitment. Each Revolving Loan under this Section 2.1(b) shall be made in such amount as may be requested by the Issuing and Paying Agent to enable the District to pay the principal of Commercial Paper Notes maturing on the date of such Revolving Loan. Notwithstanding anything herein to the contrary, the Bank shall have no obligation to make a Revolving Loan if the sum of such Revolving Loan plus the aggregate principal amount of the outstanding Revolving Loans and Term Loans would exceed the Commitment then in effect. Each Revolving Loan shall be in an aggregate principal amount equal to the principal of Commercial Paper Notes maturing on the date of such Revolving Loan. The amount of the Revolving Loans made on any date shall not exceed the Available Commitment on such date. The District may borrow under this Section 2.1(b), prepay under Section 2.7 hereof, and reborrow under this Section 2.1(b) at any time and from time to time during the Revolving Credit Period (subject to the terms and provisions of this Agreement). (c) Term Loans. The Bank agrees, on the terms and conditions hereinafter set forth, to make a Term Loan to the District on each Conversion Date in an amount equal to the outstanding principal amount of the Bank s Revolving Loan that matures on such Conversion Date; provided, however, that the aggregate outstanding principal amount of all Loans by the Bank shall at no time exceed the amount of the Commitment. Section 2.2. Method of Borrowing. (a) Revolving Loans. (i) The District has pursuant to the Issuing and Paying Agent Agreement, authorized and directed the Issuing and Paying Agent to act as its agent in the issuance, authentication, delivery and payment of Commercial Paper Notes and in effecting borrowings under this Agreement to pay the principal of Commercial Paper Notes on their respective maturity dates. Each Revolving Loan shall be made upon the Issuing and Payment Agent s irrevocable notice, on behalf of the District, to the Bank by delivery to the Bank of a Notice of Revolving Loan substantially in the form of Exhibit A hereto appropriately completed and signed by the Issuing and Paying Agent. Each Notice of Revolving Loan must be received by the Bank not later than [12:00 p.m. (noon)] on the date of the proposed Revolving Loan and shall specify (i) the requested date of the Revolving Loan (which shall be a Business Day) and (ii) the principal amount of Revolving Loans to be borrowed. Any Notice of Revolving Loan received by the Bank shall be irrevocable and binding upon the Issuing and Paying Agent and the District. (ii) Upon satisfaction of the applicable conditions set forth in this Section and Section 4.2 hereof, the Bank, from its own funds and not with the funds of any other Person, shall make the amount of the Revolving Loan available to the Issuing and Paying Agent, on behalf of the District and unless otherwise directed by the District, no later than [2:30 p.m.] on the Business Day specified in the applicable Notice of Revolving Loan by wire transfer of such funds, to the Issuing and Paying Agent s Payment Account. -14-

161 (iii) If the Bank is requested to make Revolving Loans hereunder on a day on which the District is to repay all or any part of the principal of outstanding Revolving Loans ( Existing Revolving Loans ), the Bank shall apply the proceeds of the requested Revolving Loans to repay such Existing Revolving Loans and only an amount equal to the excess (if any) of the principal amount of such Revolving Loans being borrowed over the outstanding principal of and accrued interest on such Existing Revolving Loans shall be made available by the Bank to the District. (b) Term Loans. Subject to the satisfaction of the terms and conditions of Section 4.3 hereof, on a Conversion Date, the unpaid principal amount of the related Revolving Loan shall convert into a Term Loan and the proceeds of such Term Loan shall be used to pay in full the related Revolving Loan. Section 2.3. Repayment; Bank Notes. (a) Each Revolving Loan shall be paid in full on the date such Revolving Loan is made; provided, however, that if no Event of Default has occurred and is continuing and the representations and warranties of the District contained in Article V hereof are true and correct in all material respects as of the date of the related Revolving Loan, then such Revolving Loan shall be repaid on the earliest to occur of the following: (i) the ninetieth (90th) day immediately succeeding the date the Bank honored such Revolving Loan, (ii) the Stated Expiration Date (the earlier to occur of the dates in clauses (i) and (ii), referred to herein as the Conversion Date ), (iii) the Commitment Termination Date (other than the Stated Expiration Date) and (iv) the Business Day when Commercial Paper Notes are sold to fund such repayment; provided further, however, that if the conditions to the making of the Term Loan set forth in Section 4.3 are satisfied on the related Conversion Date, such Revolving Loan shall be deemed to be repaid from the proceeds of a Term Loan made in accordance with Section 2.2(b) hereof. (b) All Revolving Loans shall be evidenced by one Revolving Loan Note of the District in substantially the form of Exhibit B hereto (the Revolving Loan Note ) to be delivered on the Effective Date, payable to the Bank in accordance with the provisions of the Issuing and Paying Agent Agreement in a principal amount up to the Initial Commitment. (c) The principal of each Term Loan shall be repaid in full no later than the Final Maturity Date. The principal amount of each Term Loan shall be payable in equal semi-annual installments, commencing on first Business Day of the next succeeding June or December that is at least 120 days after the Conversion Date and continuing on the first Business Day of each June and December to occur thereafter to and including the Final Maturity Date and on the Final Maturity Date for the related Term Loan. Notwithstanding the foregoing, the aggregate principal amount of, and interest on, all Loans shall be repaid on the Final Maturity Date. (d) All Term Loans shall be evidenced by one Term Loan Note of the District in substantially the form of Exhibit C hereto (the Term Loan Note ), to be delivered on the Effective Date, payable to the Bank in accordance with the provisions of the Issuing and Paying Agent Agreement in a principal amount equal to the Initial Commitment. The Revolving Loan Note and the Term Loan Note each constitute a Bank Note under the Issuing and Paying Agent Agreement. Notwithstanding anything herein to the contrary, the principal amount of all -15-

162 Outstanding Loans under the Revolving Loan Note and the Term Loan Note in the aggregate shall never exceed the Commitment. (e) The Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the District resulting from Revolving Loans and Term Loans and the amounts of principal and interest payable and paid from time to time under the Revolving Loan Note and the Term Loan Note. The failure to record any such amount, or any error in such records, shall not, however, limit or otherwise affect the Obligations of the District hereunder to repay any and all amounts owed hereunder, together with all interest accrued thereon as provided herein. Section 2.4. Interest. (a) Subject to the provisions of subsection (b) below, the District shall pay interest on the unpaid principal amount of each Loan, from the date of such Loan until such principal amount shall be paid in full, at the Bank Rate, payable monthly in arrears on the first Business Day of each month (commencing on the first such date to occur after the making of such Loan), on the Commitment Termination Date, on the Final Maturity Date and on the date any Loan shall be paid or prepaid; provided however, that, subject to the provisions of subparagraph (c) below, at no time shall the interest rate payable on any Loan exceed the Maximum Loan Interest Rate. (b) (i) From and after the occurrence of an Event of Default and during the continuance of any such Event of Default, all Obligations of the District to the Bank hereunder shall thereafter bear interest at the Default Rate; provided however, that, subject to the provisions of subparagraph (c) below, at no time shall the Default Rate exceed the Maximum Loan Interest Rate. (ii) If any amounts payable by the District hereunder (without regard to any applicable grace periods) or under any Related Document are not paid when due, whether at stated maturity, by acceleration or otherwise, such amounts shall thereafter bear interest at the Default Rate commencing on the later to occur of (x) the date such amount is due and (y) the Business Day next following the date that the District receives an invoice from the Bank for such amount. (iii) Accrued and unpaid interest on past due amounts (including interest on past due interest, to the extent permitted by law) shall be due and payable upon demand. (c) To the extent permitted by law, if the rate of interest payable hereunder shall exceed the Maximum Loan Interest Rate for any period for which interest is payable, then (i) interest at the Maximum Loan Interest Rate shall be due and payable with respect to such interest period and (ii) interest at the rate equal to the difference between (A) the rate of interest calculated in accordance with the terms hereof without regard to the limitation of the Maximum Loan Interest Rate and (B) the Maximum Loan Interest Rate (the Excess Interest ), shall be deferred until such date as the rate of interest calculated in accordance with the terms hereof ceases to exceed the Maximum Loan Interest Rate, at which time the District shall pay to the Bank with respect to amounts then payable to the Bank that are required to accrue interest hereunder, such portion of the deferred Excess Interest as will cause the rate of interest then paid to the Bank to equal the Maximum Loan Interest Rate, which payments of deferred Excess Interest shall continue to -16-

163 apply to such unpaid amounts hereunder until all deferred Excess Interest is fully paid to the Bank. Upon the termination of the Commitment and this Agreement, in consideration for the limitation of the rate of interest otherwise payable hereunder, the District shall pay to the Bank a fee equal to the amount of all unpaid deferred Excess Interest to the extent provided by law. (d) All computations of interest shall be made by the Bank on the basis of a year of 365/366 days (as applicable) and all other computations of fees and other amounts due and owing hereunder shall be made by the Bank on the basis of a year of 360 days, in each case, for the actual number of days (including the first day but excluding the last day in the case of interest) occurring in the period for which such interest or fee is payable. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall bear interest for one day. Each determination by the Bank of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent demonstrable error. In addition, any calculation made pursuant to this Section 2.4(d) that would cause the interest paid, payable or accruing on the indebtedness of the District under this Agreement, the Revolving Loan Note and the Term Loan Note to exceed the Maximum Loan Interest Rate shall be adjusted so as to reduce the interest paid, payable and accruing hereunder to such Maximum Loan Interest Rate, as more fully set forth in Section 2.4(c) hereof. Section 2.5. Fees. The District agrees to perform the obligations provided for in the Fee Agreement, including, without limitation, the payment of any and all fees provided for therein. The terms and provisions of the Fee Agreement are incorporated herein by reference. Any reference herein or in any other document to fees and/or other amounts or obligations payable hereunder shall include, without limitation, all fees and other amounts or obligations payable pursuant to the Fee Agreement. Section 2.6. Termination or Reduction of Commitment. (a) Notwithstanding any provision of this Agreement to the contrary, the District agrees not to terminate or permanently reduce the Commitment prior to the Stated Expiration Date, except upon (i) the payment by the District to the Bank of the Termination Fee or Reduction Fee, if any and as applicable, in the amount set forth in the Fee Agreement, (ii) with respect to termination, the payment to the Bank of all Obligations payable hereunder and (iii) the District providing the Bank with twenty (20) days prior written notice of its intent to terminate or permanently reduce the Commitment; provided that all payments to the Bank referred to in clauses (i) and (ii) above shall be made in immediately available funds. (b) The Commitment shall terminate on the Commitment Termination Date. All Revolving Loans then Outstanding (together with accrued interest thereon) shall be due and payable on the Commitment Termination Date, unless such Revolving Loans have been converted into Term Loans pursuant to the provisions of this Agreement. (c) If the Commitment is terminated, all accrued Commitment Fees and all other amounts due and owing hereunder and under the Fee Agreement shall be payable on the effective date of such termination. -17-

164 Section 2.7. Prepayments. (a) Optional Prepayments. The District may, upon notice to the Bank at any time or from time to time voluntarily prepay any Loan in whole or in part at any time, without penalty or premium (other than any Reduction Fee, if any, in the amount set forth in the Fee Agreement), each such prepayment to be accompanied by the payment of accrued interest to the date of such prepayment on the amount prepaid, provided that (i) each partial prepayment shall be in a principal amount equal to at least $100,000 and integral multiples thereof or the balance owed to the Bank, and (ii) the District shall give the Bank irrevocable written notice at least one Business Day prior to the date of the prepayment of a Loan. Each notice of prepayment shall be irrevocable and shall specify the date and the amount of the prepayment and identify the Loan to be prepaid. (b) Mandatory Prepayments. (i) If on any date (A) the sum of the aggregate principal amount of outstanding Loans exceeds the amount of the Commitment, the District shall immediately prepay the Loans in an amount equal to such excess, (B) the aggregate principal amount of Outstanding Commercial Paper Notes exceeds the amount of the Available Commitment, the District shall immediately prepay the Loans in an amount equal to such excess, or (C) any Commercial Paper Notes are sold to finance the repayment of a Loan, the District shall immediately prepay any outstanding Loans (if any) in an amount equal to the sum of the proceeds from such sale. Each such prepayment shall be accompanied by the payment of accrued interest to the date of such prepayment on the amount prepaid. (c) Application. Any amount of principal of a Revolving Loan prepaid in accordance with this Section 2.7 may be reborrowed in accordance with Section 2.1 hereof. Any amount of principal of a Term Loan prepaid in accordance with this Section 2.7 shall be applied to reduce the installments of principal due and payable hereunder with respect to such Term Loan in the inverse order of maturity, and, if prepaid prior to the Commitment Termination Date, may be reborrowed as a Revolving Loan in accordance with Section 2.1 hereof. Section 2.8. General Provisions as to Payment. The following general provisions shall apply to all payments of Commitment Fees, payments on the Loans, the Revolving Loan Note and the Term Loan Note and all other Obligations of the District to the Bank under this Agreement: (a) The Bank shall calculate and notify the District in writing of the amounts due and payable by the District hereunder; provided, however, that the failure of the Bank to provide such notice shall not affect the obligations of the District to make any payments owed to the Bank hereunder. All payments to be made by the District or the Issuing and Paying Agent on behalf of the District shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the District hereunder shall be made to the Bank, at the Bank s Payment Account in U.S. Dollars and in immediately available funds not later than 4:00 p.m. on the date specified herein. All payments received by the Bank after 4:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the -18-

165 District shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be. (b) Nothing herein shall be deemed to obligate the Bank to obtain the funds for any Loan in any particular place or manner or to constitute a representation by the Bank that it has obtained or will obtain the funds for any Loan in any particular place or manner. Section 2.9. Nature of Obligations. Notwithstanding any other provision of this Agreement to the contrary, the Revolving Loan Note, the Term Loan Note, and all other Obligations of the District hereunder and under the Fee Agreement are special, limited obligations of the District secured by and payable solely from Available Water Revenues and such funds and accounts pledged therefor under the Issuing and Paying Agent Agreement, and are secured by such Available Water Revenues on a parity with the Commercial Paper Notes and the Water Note Parity Debt (including all other Water Series Notes). Anything herein to the contrary notwithstanding, the Revolving Loan Note, the Term Loan Note and the other Obligations of the District hereunder and under the Fee Agreement shall not constitute a debt or obligation of the State or any political subdivision thereof (other than the District) and the State shall not be liable with respect thereto, and the Revolving Loan Note, the Term Loan Note and any other Obligations of the District hereunder and under the Fee Agreement shall not be entitled to be paid out of any funds of the District other than from Available Water Revenues and other amounts pledged therefor, as applicable, as and to the extent provided herein and in the Issuing and Paying Agent Agreement (and subject to disbursements in accordance with the provisions of the Issuing and Paying Agent Agreement), and nothing contained herein or in the Issuing and Paying Agent Agreement shall be considered as pledging any other funds or assets of the District. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY Section 3.1. Net of Taxes, Etc. (a) Taxes. To the fullest extent permitted by law, any and all payments to the Bank by the District hereunder shall be made free and clear of and without deduction for any and all taxes, levies, imposts, deductions, charges, withholdings or liabilities imposed as a result of a Change in Law, excluding, however, taxes imposed on or measured by the net income or capital of the Bank by any jurisdiction or any political subdivision or taxing authority thereof or therein, solely as a result of a connection between the Bank and such jurisdiction or political subdivision (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as Taxes ). If, as a result of a Change in Law, the District shall be required by law to withhold or deduct any Taxes imposed by the United States or any political subdivision thereof from or in respect of any sum payable hereunder to the Bank, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.1), the Bank -19-

166 receives an amount equal to the sum it would have received had no such deductions been made, (ii) the District shall make such deductions and (iii) the District shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. Notwithstanding anything to the contrary contained herein, the District shall not be required to pay any additional amount in respect of withholding of United States Federal income taxes pursuant to this Section to the extent such withholding is required because the Bank has failed to submit any form or certificate that it is entitled to submit under applicable law to qualify for an exemption from such withholding. Further, if the District shall make any payment under this Section 3.1 to or for the benefit of the Bank with respect to Taxes and if the Bank shall claim any credit or deduction for such Taxes against any other taxes payable by the Bank to any taxing jurisdiction in the United States, then the Bank shall pay to the District an amount equal to the amount by which such other taxes are actually reduced; provided that the aggregate amount payable by the Bank pursuant to this sentence shall not exceed the aggregate amount previously paid by the District with respect to such Taxes. In addition, the District agrees to pay any present or future stamp, recording or documentary taxes and, if as a result of any Change in Law, any other excise or property taxes, charges or similar levies that arise under the laws of the United States of America, the State of New York or any other taxing authority from which or through which any payment is made hereunder or from the execution or delivery or otherwise with respect to this Agreement, excluding, however, taxes imposed on or measured by the net income or capital of the Bank by any jurisdiction or any political subdivision or taxing authority thereof or therein solely as a result of a connection between the Bank and such jurisdiction or political subdivision (hereinafter referred to as Other Taxes ). The Bank shall provide to the District within a reasonable time a copy of any written notification it receives with respect to Other Taxes owing by the District to the Bank, hereunder; provided that the failure by the Bank to send such notice shall not relieve the District of its obligation to pay such amounts hereunder. (b) Indemnity. The District shall, to the fullest extent permitted by law, and subject to the provisions of Section 2.9 hereof, indemnify the Bank, for the full amount of Taxes and Other Taxes including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.1 paid by the Bank, or any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted; provided, that the District shall not be obligated to indemnify the Bank for any penalties, interest or expenses relating to Taxes or Other Taxes arising from the Bank s gross negligence or willful misconduct. The Bank agrees to give notice to the District of the assertion of any claim against the Bank relating to such Taxes or Other Taxes as promptly as is practicable after being notified of such assertion; provided, that the Bank s failure to notify the District promptly of such assertion shall not relieve the District of its obligation under this Section 3.1. Payments by the District pursuant to this indemnification shall be made within thirty (30) days from the date the Bank makes written demand therefor, which demand shall be accompanied by a certificate describing in reasonable detail the basis thereof. The Bank agrees to repay to the District any refund (including that portion of any interest that was included as part of such refund) with respect to Taxes or Other Taxes paid by the District pursuant to this Section 3.1 received by the Bank for Taxes or Other Taxes that were paid by the District pursuant to this Section

167 (c) Notice. Within thirty (30) days after the date of any payment of Taxes by the District, the District shall furnish to the Bank, the original or a certified copy of a receipt evidencing payment thereof. The District shall compensate the Bank for all reasonable losses and expenses sustained by the Bank as a result of any failure by the District to so furnish such copy of such receipt. Section 3.2. Increased Costs. (a) Increased Costs Generally. If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, the Bank; (ii) without duplication with Section 3.1 hereof, subject any Recipient to any taxes on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or (iii) impose on the Bank any other condition, cost or expense affecting this Agreement, the Revolving Loan Note, the Term Loan Note or the Fee Agreement or any participation therein; and the result of any of the foregoing shall be to increase the cost to the Bank of participating in, issuing or maintaining the Commitment (or of maintaining its obligation to make Loans hereunder), or to reduce the amount of any sum received or receivable by the Bank hereunder (whether of principal, interest or any other amount) then, upon request of the Bank, the District will pay to the Bank such additional amount or amounts as will compensate the Bank for such additional costs incurred or reduction suffered. (b) Capital Requirements. If the Bank determines that any Change in Law affecting the Bank or the Bank s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on the Bank s capital or liquidity or on the capital or liquidity of the Bank s holding company, if any, as a consequence of this Agreement or the Commitment maintained by the Bank, to a level below that which the Bank or the Bank s holding company could have achieved but for such Change in Law (taking into consideration the Bank s policies and the policies of the Bank s holding company with respect to capital adequacy), then from time to time the District will pay to the Bank such additional amount or amounts as will compensate the Bank or the Bank s holding company for any such reduction suffered. (c) Certificates for Reimbursement. A certificate of the Bank setting forth the amount or amounts necessary to compensate the Bank or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the District shall be conclusive absent manifest error. The District shall pay the Bank the amount shown as due on any such certificate within thirty (30) days after receipt thereof. -21-

168 (d) Delay in Requests. Failure or delay on the part of the Bank to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of the Bank s right to demand such compensation; provided that the District shall not be required to compensate the Bank pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than one hundred twenty (120) days prior to the date that the Bank notifies the District of the Change in Law giving rise to such increased costs or reductions and of the Bank s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the one hundred twenty (120) day period referred to above shall be extended to include the period of retroactive effect thereof). Section 3.3. Survival. All of the District s obligations under this Article III shall survive termination of the Commitment and repayment of all Obligations hereunder. ARTICLE IV CONDITIONS PRECEDENT TO EFFECTIVENESS Section 4.1. Conditions Precedent to Effective Date. The Bank s obligation to make Loans in accordance with Section 2.1 hereof shall become effective on the Effective Date subject to the satisfaction of the following conditions: (a) the District shall provide to the Bank on or before the Effective Date, in form and substance satisfactory to the Bank and its counsel Chapman and Cutler LLP: (i) a written opinion or opinions of counsel to the District dated the Effective Date and addressed to the Bank; (ii) the written opinion or opinions of Bond Counsel and Orrick, Herrington & Sutcliffe LLP, as special tax counsel, each dated the Effective Date and addressed to the Bank; (iii) a certificate signed by a duly authorized officer of the District, dated the Effective Date and stating that: (A) the representations and warranties contained in Article V of this Agreement are true and correct on and as of the Effective Date as though made on such date; and (B) no Event of Default or Default has occurred and is continuing, or would result from the execution and delivery of this Agreement or any Related Document to which the District is a party; (iv) a copy of resolutions of the District certified as of the Effective Date by the Secretary, authorizing, among other things, the execution and delivery by the District of this Agreement and the Related Documents to which it is a party; -22-

169 (v) a certificate of the Secretary of the District certifying the names and true signatures of the officers of the District authorized to sign this Agreement and the Related Documents to which the District is a party; (vi) evidence that (x) the Commercial Paper Notes have been assigned the short-term ratings of F1 (or its equivalent) by Fitch, A-1 (or its equivalent) by S&P and P-1 (or the equivalent thereof) by Moody s and (y) the District s unenhanced Water Bonds are rated AA+ (or its equivalent) by Fitch, AAA (or its equivalent) by S&P and Aa1 (or its equivalent) by Moody s; (vii) executed copies (certified if applicable) of (i) this Agreement, (ii) each of the Related Documents and (iii) the Water Bond Indenture; (viii) evidence satisfactory to the Bank that (i) a separate CUSIP number has been obtained and reserved from Standard and Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. for the Revolving Loan Note and the Term Loan Note (such CUSIP numbers shall also be made available on the Bloomberg Municipal Bond Description Screen or otherwise provided electronically to the Bank pursuant to a third party provider of such information) and (ii) the Revolving Loan Note and the Term Loan Note (and their related CUSIP numbers) shall have been assigned a long-term rating of at least Investment Grade by any one Rating Agency; (ix) payment of the fees, costs and expenses set forth in this Agreement and the Fee Agreement that are payable on the Effective Date; and (x) such other documents, certificates and instruments (and, if requested by the Bank, certified duplicates or executed copies thereof) as the Bank may reasonably request; and (b) the Bank shall have determined, as of the Effective Date, that no change in law, regulation, ruling or other official action of the United States, the State of California or the State of New York shall have occurred, the effect of which would be to make it unlawful or otherwise prevent the District or the Bank from fulfilling its respective obligations under this Agreement or any Related Document to which it is a party. Section 4.2. Conditions to Revolving Loans. The obligation of the Bank to make any Revolving Loan is subject to the satisfaction on or prior to the Effective Date of each condition in Section 4.1 hereof, receipt by the Bank of a Notice of Revolving Loan in accordance with Section 2.2(a) hereof and the satisfaction of the further condition that no Special Event of Default shall have occurred and no Suspension Event shall have occurred and be continuing. In addition, the Bank shall have no obligation to make a Revolving Loan to the District to pay the principal of any Commercial Paper Note that was issued by the District after receipt by the Issuing and Paying Agent and the District of a No-Issuance Notice from the Bank in accordance with Section 4.4 hereof. Unless the District shall have otherwise previously advised the Bank in writing, the delivery to the Bank of a Notice of Revolving Loan shall be deemed to be a -23-

170 representation and warranty by the District on the date of such borrowing that no Special Event of Default shall have occurred and no Suspension Event shall have occurred and be continuing. Section 4.3. Conditions to Term Loan. The obligation of the Bank to make any Term Loan is subject to (i) the representations and warranties of the District contained in Article V hereof shall be true and correct in all material respects on and as of the Conversion Date as though made on and as of such date, except to the extent a representation or warranty relates specifically to an earlier date (in which case such representation or warranty shall be true and correct as of such date); (ii) no Event of Default shall have occurred and be continuing on the Conversion Date; and (iii) the Bank shall have received a certificate, signed by the District and dated the applicable Conversion Date, confirming that all of the foregoing conditions have been satisfied. Section 4.4. Conditions Precedent to Each Note Issuance. No Commercial Paper Notes shall be issued unless on the date of such issuance, each of the following conditions precedent shall have been fulfilled: (a) No Event of Default. No Event of Default shall have occurred and be continuing on such date or would result from such issuance. (b) Representations and Warranties Correct. The representations and warranties contained in Article V hereof and in each Related Document shall be true and correct in all material respects on and as of the issuance date as though made on and as of such date, except to the extent a representation or warranty relates specifically to an earlier date (in which case such representation or warranty shall be true and correct as of such date). (c) Commercial Paper Notes. All conditions precedent for the issuance of the Commercial Paper Notes under the Issuing and Paying Agent Agreement and the Resolution shall have been satisfied. (d) No-Issuance Notice. The Bank shall not have given a No-Issuance Notice. (e) Available Commitment. After the issuance of the Commercial Paper Notes, the aggregate principal amount of all Commercial Paper Notes that will be outstanding immediately after such issuance will not exceed the amount of the Available Commitment. Unless the District shall have previously advised the Bank in writing that one or more conditions set forth in subsections (a), (b), (c) and (e) of this Section 4.4 have not been satisfied, the District shall be deemed to have represented and warranted that on the date of such issuance or authentication of any Commercial Paper Note the above conditions have been satisfied. The Bank may deliver a notice to the Issuing and Paying Agent and to the District, directing the District not to issue and the Issuing and Paying Agent not to authenticate any Commercial Paper Notes (a No-Issuance Notice ), at any time that the Bank shall have determined that any condition to the issuance of Commercial Paper Notes has not been satisfied. The No-Issuance -24-

171 Notice may be delivered by telecopy, by mail, by electronic mail, or by messenger, and may also be given by telephone if promptly confirmed in writing. Upon receipt of such No-Issuance Notice, the District shall not issue and the Issuing and Paying Agent shall not authenticate any Commercial Paper Notes, in each case unless and until such No-Issuance Notice is rescinded by the Bank. The District shall use its best efforts to cause the Issuing and Paying Agent to comply immediately with any such No-Issuance Notice. The Bank shall not incur any liability as a result of the Bank s giving any No-Issuance Notice that, in its good faith judgment, the Bank determines to be in accordance with this Section 4.4. The Bank agrees that if, after the delivery of a No-Issuance Notice, the Bank determines that the conditions to the issuance of Commercial Paper Notes have been satisfied and the Bank has received a notice from the District to such effect, then the Bank shall promptly deliver a notice (a copy of which shall be delivered by the Bank to the District and each Dealer) to the Issuing and Paying Agent, rescinding such No- Issuance Notice. ARTICLE V REPRESENTATIONS AND WARRANTIES To induce the Bank to enter into this Agreement and to make Loans as provided herein, the District makes the following representations and warranties to, and agreements with, the Bank (which representations, warranties and agreements shall survive the execution and delivery of this Agreement): Section 5.1. Organization and Powers. The District (a) is a municipal utility district duly organized and validly existing under the laws of the State; (b) has all governmental power and authority, and all governmental licenses, authorizations, consents and approvals, to conduct the business of the Water System, to own the property (real and personal) constituting the Water System; and (c) had, as of the date of adoption thereof, full power and authority to adopt the Resolution and has full power and authority to execute, deliver and perform all of its obligations under this Agreement and the other Related Documents to which it is or will be a party and to borrow amounts hereunder. Section 5.2. Authorization; Contravention. The execution, delivery and performance by the District of the Issuing and Paying Agent Agreement, this Agreement and the other Related Documents, the issuance of the Commercial Paper Notes, the Revolving Loan Note and the Term Loan Note, and the making of the payments under the Revolving Loan Note and the Term Loan Note and hereunder, (a) have been duly authorized by all necessary action by the District, and (b) do not and will not, in any respect material to the ability of the District to perform its obligations under this Agreement or the Related Documents, (i) violate any constitutional provision or any provision of any law, rule, regulation, order, writ, injunction, decree or determination of any court or other Governmental Authority having applicability to the District, or (ii) result in a breach of or constitute a default under any of the material terms, conditions or provisions of any ordinance, resolution, mortgage, indenture, agreement or instrument to which the District is a party or by which the District or any of its properties is bound. -25-

172 Section 5.3. Governmental Consent or Approval. No authorization, consent, approval, permit, license, exemption or other action by, and no filing or registration with, any court or governmental department, commission, board, bureau, agency or other Governmental Authority (including, without limitation, any voter referendum) is or will be necessary for the valid adoption, execution, delivery or performance by the District of this Agreement, the Revolving Loan Note, the Term Loan Note or any of the other Related Documents, or the issuance of Commercial Paper Notes, except such as shall have been duly obtained, given or accomplished prior to the execution and delivery hereof or thereof. Section 5.4. Binding Effect. This Agreement, the Issuing and Paying Agent Agreement and the other Related Documents constitute legal, valid and binding obligations of the District, enforceable against the District in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally, by general equitable principals (regardless of whether such enforceability is considered in a proceeding in equity or at law) and by limitations on legal remedies against public agencies in the State. The Commercial Paper Notes, the Revolving Loan Note and the Term Loan Note have been duly and validly issued under the Act, the Resolution and the Issuing and Paying Agent Agreement and are entitled to the benefits thereof. Section 5.5. Federal Reserve Regulations. No part of the proceeds made available hereunder will be used for the purpose, whether immediate, incidental, or ultimate, to purchase or carry any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time), or to extend credit to others for the purpose of purchasing or carrying any margin stock, or for any other purpose which would violate any of the regulations of said Board of Governors. Section 5.6. Litigation. Except as otherwise disclosed in the Offering Memorandum delivered by the District on or prior to the Effective Date or otherwise disclosed by the District to the Bank in writing prior to the Effective Date, there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court, other Governmental Authority or arbitrator, pending with service of process accomplished or, to the best knowledge of the District after due inquiry, threatened against or affecting the District (i) wherein an unfavorable decision, ruling or finding would reasonably be expected to result in a Material Adverse Change or (ii) which in any way contests the existence, organization or powers of the District to adopt, execute and deliver this Agreement or any of the Related Documents or to perform its obligations hereunder or thereunder (herein referred to as Material Litigation ). Section 5.7. No Defaults. The District is not in material default under (i) any order, writ, injunction or decree of any court or other Governmental Authority applicable to the Water System, or (ii) any law or regulation applicable to the Water System, or (iii) any Water System Related Debt or other Debt of the District payable from or secured by the Water Revenues, or (iv) any contract, agreement or instrument to which the District is a party or by which it or its property is bound, in any case, which default would reasonably be expected to result in a Material Adverse Change. In addition, (a) no Event of Default has occurred and is continuing, or -26-

173 exists and (b) no Issuing and Paying Agent Agreement Event of Default has occurred and is continuing, or exists. Section 5.8. Financial Statements. The financial statements for the Fiscal Year ended June 30, 2015 (which includes information regarding the financial status of the Water System for such period), together with the auditors reports with respect thereto for such Fiscal Year, copies of which have been furnished to the Bank, are complete and correct and fairly present such financial information of the District (and the Water System) at such dates and for such periods and were prepared in accordance with GAAP. Except as otherwise disclosed in writing to the Bank, such financial statements disclose all Prior Water Obligations and Water Note Parity Debt outstanding as of the Effective Date. As of the Effective Date, the Water System has no contingent liabilities (excluding any swap agreements entered into in connection with any Water Bonds) which are material to it other than as indicated in such financial statements or as otherwise disclosed to the Bank in writing. Section 5.9. Complete and Correct Information. To the best knowledge of the District after reasonable investigation, the representations and statements made by the District in this Agreement and the Related Document, and all certificates and other documents furnished by the District to the Bank with respect to the District or the Water System in connection with the transactions contemplated hereby, were, as of their respective dates, complete and correct in all material respects and did not contain any material misstatement of fact relating to the District or the Water System necessary to make the statements contained herein and therein not misleading. To the best knowledge of the District after reasonable investigation, as of the Effective Date, there is no fact or circumstance that could reasonably be expected to result in a Material Adverse Change. Section Sovereign Immunity. The District is not entitled to claim, with respect to itself or the Available Water Revenues, the defense of sovereign immunity in any action, suit or proceeding arising under or relating to this Agreement or any Related Document (a) to enforce the provisions hereof or thereof, (b) for monetary damages or (c) for the execution or enforcement of any judgment (subject to applicable bankruptcy or insolvency laws or limitations on legal remedies against public agencies in the State), nor may there be attributed to the District or the Available Water Revenues any such immunity (whether or not claimed). Section Compliance with Rules and Regulations. (a) The District is in compliance with all laws, ordinances, orders, rules regulations applicable to it (including, without limitation, laws of the State relating to investments pursuant to Chapter 4, Part 1, Division 2, Title 5 of the California Government Code and Article 7 of the Act to the extent applicable), noncompliance with which would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change, and (b) all cash and other assets of the District are invested in accordance with all laws, ordinances, orders, rules regulations applicable to it and all established investment policy guidelines of the District (a true and correct copy of which guidelines in effect as of the Effective Date have been disclosed to the Bank in writing), as amended or otherwise modified from time to time, except for such minor deviations therefrom as will not impair the finances of the District or its ability to satisfy its Obligations hereunder. -27-

174 Section No ERISA Plans. The District has never established, is not a party to and has never contributed to any employee benefit plan within the meaning of Section 3(3) of ERISA or any other form of bonus, incentive compensation, deferred compensation or other similar plan or arrangement, other than a governmental plan within the meaning of Section 414(b) of the Code or Section 3(32) of ERISA. Section Tax-Exempt Status of Commercial Paper Notes. The District has not taken any action or omitted to take any action, and knows of no action taken or omitted to be taken by any other person or entity, which action, if taken or omitted, would adversely affect the exclusion of interest on the Commercial Paper Notes from gross income for federal income tax purposes. Section Incorporation of Representations and Warranties by Reference. The District hereby makes to the Bank the same representations and warranties as are set forth in the Issuing and Paying Agent Agreement, which representations and warranties, together with the related defined terms contained therein, are hereby incorporated by reference in this Section 5.14 with the same effect as if each and every representation and warranty and defined term were set forth in this Section 5.14 in its entirety. No amendment to such representations and warranties or defined terms made pursuant to the Issuing and Paying Agent Agreement shall be effective to amend such representations and warranties and defined terms as incorporated by reference in this Section 5.14 without the prior written consent of the Bank. Section No Proposed Legal Changes. There is no amendment or, to the knowledge of the District after reasonable investigation, proposed amendment certified for placement on a statewide ballot, to the Constitution of the State or any published administrative interpretation of the Constitution of the State or any law of the State, or any legislation that has passed either house of the legislature of the State, or any published judicial decision interpreting any of the foregoing, the effect of which is to materially adversely affect the ability of the District to perform its obligations under this Agreement and the Related Documents. Section Environmental Laws. Except as disclosed in the District s financial statements or otherwise in writing to the Bank prior to the Effective Date, as of the Effective Date, the District has not received notice to the effect that the operations of the Water System are not in compliance with any of the requirements of any applicable Environmental Laws or health and safety statutes and regulations or are the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which noncompliance or remedial action could reasonably be expected to have a Material Adverse Change. Section Issuing and Paying Agent and Dealers. The Issuing and Paying Agent is the duly appointed and acting issuing and paying agent under the Issuing and Paying Agent Agreement. The Dealers are the duly appointed and acting dealers with respect to the Commercial Paper Notes. Section Offering Memorandum. The Offering Memorandum prepared with respect to the Commercial Paper Notes, a true copy of which has heretofore been delivered to the Bank, does not as of its date or as of the Effective Date contain, and such Offering Memorandum -28-

175 (including any amendments or supplements prepared subsequent to its date, a true copy of which shall be furnished to the Bank prior to the distribution thereof), will not as of the date thereof contain, any untrue statement of a material fact and such Offering Memorandum does not as of its date or as of the Effective Date omit, and will not as of the date of any such amendment or supplement omit, to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except no representation is made as to information furnished by or on behalf of the Bank, the Dealers or DTC expressly for inclusion therein. Section Related Documents. Each of the Related Documents to which the District is a party is in full force and effect and none of the Related Documents has been amended or supplemented except by such amendments or supplements as have previously been delivered to the Bank to the extent required by the provisions hereof. Section Issuance of Commercial Paper Notes. Each issuance of Commercial Paper Notes by the District shall be deemed a representation by the District that (a) on such date, and after giving effect to the issuance of the Commercial Paper Notes, no Event of Default has occurred or is continuing, (b) the representations and warranties of the District contained in this Agreement and the other Related Documents to which it is a party are true and correct in all material respects on and as of the date of issuance of the Commercial Paper Notes in question as though made on and as of such date, except to the extent a representation or warranty relates specifically to an earlier date (in which case such representation or warranty shall be true and correct as of such date), and (c) the aggregate amount of Commercial Paper Notes Outstanding, after issuance of the Commercial Paper Notes will not exceed the Available Commitment. Section Sanctions Concerns and Anti-Corruption Laws. Neither the District, nor, to the knowledge of the District, any Related Party, (a) is currently the subject of any Sanctions, (b) is located, organized or residing in any Designated Jurisdiction, or (c) to the District s knowledge, is engaged in any transaction with any Person who is the subject of Sanctions. The proceeds from the Commercial Paper Notes and any Loans will be used solely as described in Section 6.30 hereof, in the Resolution and in the Issuing and Paying Agent Agreement. For purposes of this Section 5.21, the term Related Party means the District and the directors and officers of the District. -29-

176 ARTICLE VI COVENANTS The District covenants and agrees that, so long as any Commercial Paper Notes shall be Outstanding, this Agreement remains in effect or any amounts remain unpaid hereunder or under the Revolving Loan Note or the Term Loan Note, it shall perform and observe the covenants set forth below: Section 6.1. Information. The District will deliver to the Bank or, where applicable, make available on EMMA (with notice to the Bank that such information has been filed with EMMA and is publicly available): (a) as soon as practicable and in any event within one hundred eighty (180) days after the end of each Fiscal Year, a copy of the audited financial statements of the District, prepared in accordance with GAAP consistently applied and audited by independent certified public accountants of recognized standing, including a balance sheet of the Water System as of the end of such Fiscal Year and related statements of revenues, expenses and changes in fund equity and cash flows for the Fiscal Year; (b) together with the audited financial statements delivered pursuant to Section 6.1(a) above, a certificate of an Authorized Representative (i) to the effect that as of the date of such certificate no Default or Event of Default has occurred, or (ii) if a Default or Event of Default has occurred, specifying the nature of such Default or Event of Default, the period of its existence and the action which the District is taking or proposes to take with respect thereto, unless such Default or Event of Default has previously been reported pursuant to 6.1(d) below and no change in the status of such Default or Event of Default has occurred; (c) as soon as practicable but in any event within thirty (30) days after the issuance thereof, copies of any prospectus, official statement, offering circular, placement memorandum, or similar or corresponding document, and any supplements thereto and updates and amendments thereof, that the District makes available in connection with the offering for sale of any securities issued by the District secured (directly or indirectly) by a pledge of or lien on Water Revenues, and, on request, copies of such other financial reports that the District shall customarily and regularly provide to the public; (d) as soon as practicable and in any event within ten (10) Business Days after the occurrence of any Event of Default or Default, a certificate of an Authorized Representative setting forth the details of such Event of Default or Default and, promptly thereafter, the action which the District is taking or proposes to take with respect thereto; (e) (i) as soon as available but in any event within ninety (90) days after the beginning of the Fiscal Year for which it is prepared, a copy of the District s operating budget for such Fiscal Year and any other Fiscal Year with respect to which it applies, -30-

177 and (ii) within ninety (90) days of any modification made by the District to any such operating budget, a copy of the same; (f) upon the written request of the Bank, confirmation of the amount of funds on deposit in any fund or account established under the Water Bond Indenture or the Issuing and Paying Agent Agreement; (g) as soon as available but in any event within ten (10) Business Days after the adoption of any material amendment to the District s investment policy or the execution and delivery of any amendment or supplement to the Water Bond Indenture (other than any such amendment or supplement which is executed and delivered solely for the purposes of issuing additional Prior Water Obligations) or the Issuing and Paying Agent Agreement, a copy thereof; (h) upon the written request of the Bank, copies of any other resolution, indenture, credit agreement or other agreement providing for the issuance or incurrence of any indebtedness of the District secured by Water Revenues, any information relating to the foregoing, or information relating to the Water Revenues, Water operation and maintenance costs, or any other information about the financial condition, operations or business of the District or the Water System that the Bank may reasonably request; and (i) promptly upon any filing of the same, any notice of any material event required to be filed by the District with respect to Revenues Secured Debt pursuant to SEC Rule 15c2-12, as amended. Section 6.2. Performance of this and other Agreements. The District shall punctually pay or cause to be paid all amounts payable under this Agreement and the Related Documents and observe and perform in all material respects all of the conditions, covenants and requirements of this Agreement and the Related Documents. Section 6.3. Maintenance of Approvals. The District shall at all times maintain in effect, renew and comply with all the terms and conditions of all consents, licenses, approvals and authorizations as may be necessary or appropriate under any applicable law or regulation for its execution, delivery and performance of this Agreement and the Related Documents to which it is a party. Section 6.4. Preservation of Existence. The District shall maintain its legal existence. Section 6.5. Sale of Commercial Paper Notes. Unless such Loan is otherwise to be paid promptly from available funds of the District, the District will issue and sell Commercial Paper Notes as promptly as practicable after the making of a Loan and use the proceeds of such sale solely for the repayment of the Loan (and such proceeds of sale shall be deemed to be proceeds of Commercial Paper Notes for all the purposes of the Resolution, the Issuing and Paying Agent Agreement, this Agreement, the Revolving Loan Note and the Term Loan Note). -31-

178 Section 6.6. Notices. The District will promptly furnish, or cause to be furnished, to the Bank (i) notice of the occurrence of any Issuing and Paying Agent Agreement Event of Default, (ii) notice of the failure by any Dealer or the Issuing and Paying Agent to perform any of its material obligations under the applicable Dealer Agreement or the Issuing and Paying Agent Agreement of which the District has actual knowledge, (iii) each notice required to be given to the Bank pursuant to the Issuing and Paying Agent Agreement, (iv) notice of any Material Litigation or any proposed, pending or adopted legislation, administrative proceeding or business development which would reasonably be expected to result in a Material Adverse Change, and (v) such further financial and other information with respect to the District and its affairs as the Bank may reasonably request from time to time. Section 6.7. Total Outstanding. At no time shall the District permit the aggregate principal amount of (i) Commercial Paper Notes Outstanding and (ii) all Loans outstanding and unpaid to exceed the Commitment. Section 6.8. Books; Access to Records. The District will keep proper books of record and accounts in which full, true and correct entries in conformity with GAAP. The District will furnish to the Bank such information regarding the financial condition, results of operations or business of the District and the Water System as the Bank may reasonably request and will permit any officers, employees or agents of the Bank to visit and inspect any of the properties of the District and to discuss matters reasonably pertinent to an evaluation of the credit of the District, all at such reasonable times as the Bank may reasonably request. Section 6.9. Limitation on Additional Debt. The District will not issue any Water Bonds or any other obligations or securities payable in whole or in part from Subordinated Water Revenues (as defined in the Water Bond Indenture) except in compliance with Sections 3.01 and 3.05 of the Water Bond Indenture (as in effect on the Effective Date, without regard to any amendment, modification or waiver of such provisions other than such amendments and modifications effected by the Sixteenth Supplemental Indenture pursuant to its terms, notwithstanding that there may be no outstanding Water Bonds and without regard to whether the Water Bond Indenture remains in effect), which Sections (together with all related definitions and ancillary provisions) are hereby incorporated by reference as if set forth herein in their entirety. Section Reserved. Section No Amendment of Related Documents. Without the prior written consent of the Bank, the District will not amend, supplement, modify or waive any of the provisions of the Issuing and Paying Agent Agreement or any of the other Related Documents, or consent to any of the foregoing, if any such amendment, supplement, modification or waiver could reasonably be expected to (i) result in a Material Adverse Change or (ii) adversely affect the rights, title, interest or security of the Bank hereunder or under any Related Document. Section Taxes and Liabilities. The District will pay all the indebtedness and obligations of the Water System promptly and in accordance with its terms and pay and discharge, or cause to be paid and discharged, promptly all taxes, assessments and governmental -32-

179 charges or levies imposed upon it or upon its income and profits, or upon any of its property, real, personal, or mixed, or upon any part thereof, before the same shall become in default, except for those matters which are being contested in good faith by appropriate action or proceedings or for which the District has established adequate reserves in accordance with GAAP applied on a consistent basis. Section Compliance with Rules and Regulations. The District shall comply with all laws, ordinances, orders, consents, licenses, approvals, authorizations, rules and regulations of all Governmental Authorities (including, without limitation, all Environmental Laws and laws of the State relating to investments pursuant to Chapter 4, Part 1, Division 2 Title 5 of the California Government Code and Article 7 of the Act) applicable to it, and will not materially deviate from its internal investment policies and guidelines, except for any such noncompliance or deviation which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change. Section Maintenance and Operation of the Water System. The District will maintain the Water System in good repair and working order at all times and will operate the same, or cause the same to be operated, in an efficient and economic manner and in accordance with sound business principles. Section Insurance. The District will maintain and procure at all times: (a) insurance on the Water System against such risks as and in such amounts as the District deems prudent taking into account insurance coverage for similar utilities, and (b) public liability insurance in such amounts as the District deems prudent taking into account insurance coverage for similar utilities. Section Book Entry Eligibility. The District covenants that at all times from and including the Effective Date until and including the date of maturity of all Commercial Paper Notes, the District shall use commercially reasonable efforts to cause the Commercial Paper Notes to be eligible for, and to be registered with, DTC s book-entry delivery services and that such registration with DTC shall not be discontinued without the Bank s prior written consent. Section Exempt Status. The District shall not take any action or omit to take any action that, if taken or omitted, would adversely affect the excludability of interest on the Commercial Paper Notes from the gross income of the holders thereof for purposes of Federal income taxation. Section Issuing and Paying Agent; Dealers. The District shall at all times maintain an Issuing and Paying Agent pursuant to the terms of the Issuing and Paying Agent Agreement. The District will use its best efforts to at all times maintain one or more Dealers with respect to the Commercial Paper Notes that is reasonably acceptable to the Bank. The District shall not substitute or replace the Issuing and Paying Agent or any Dealer unless the District shall have received the prior written approval of the Bank (which approval will not be unreasonably withheld) with respect to the proposed successor or replacement Issuing and Paying Agent or Dealer. -33-

180 Section Alternate Liquidity Facility. (i) The District shall use its commercially reasonable best efforts to obtain an alternate Liquidity Facility to replace this Agreement or to take such other action as will result in the payment of all amounts owed to the Bank upon termination of this Agreement in the event the Bank shall decide not to extend the Stated Expiration Date, or the District shall fail to request an extension of the Stated Expiration Date, pursuant to Section 9.9(b). (ii) The District agrees that any alternate Liquidity Facility will require, as a condition to the effectiveness of the alternate Liquidity Facility, that the issuer of the alternate Liquidity Facility will provide funds to the extent necessary, in addition to other funds available, on the date the alternate Liquidity Facility becomes effective, for the payment of all principal of all Loans then Outstanding through the date such alternate Liquidity Facility becomes effective. On such date, any and all amounts due to the Bank hereunder and under the Revolving Loan Note and the Term Loan Note shall be payable in full to the Bank. (iii) The District shall not permit an alternate Liquidity Facility (or alternate Liquidity Facilities in the aggregate) to become effective with respect to less than all of the Commercial Paper Notes without the prior written consent of the Bank. For the avoidance of doubt, this Section 6.19(iii) shall not prohibit the District from permitting a Liquidity Facility to become effective with respect to any Water Series Notes other than the Commercial Paper Notes. Section Incorporation of Covenants by Reference. The District agrees that it will perform and comply with each and every covenant and agreement required to be performed or observed by it in the Issuing and Paying Agent Agreement, which provisions, as well as related defined terms contained therein, are hereby incorporated by reference in this Section 6.20 with the same effect as if each and every such provision were set forth in this Section 6.20 in its entirety. To the extent that (i) any such incorporated provision permits any Person to waive compliance with or consent to such provisions or requires that a document, opinion or other instrument or any event or condition be acceptable or satisfactory to any Person and (ii) any such waiver or consent or acceptance of a document, opinion or other instrument would adversely affect the interests of the Bank for purposes of this Agreement, such provision shall be complied with only if it is waived or consented to in writing by the Bank and such document, opinion or other instrument shall be acceptable or satisfactory only if it is acceptable or satisfactory to the Bank. Without the written consent of the Bank, no amendment to such covenants and agreements or defined terms made pursuant to the Issuing and Paying Agent Agreement shall be effective to amend such covenants and agreements and defined terms as incorporated by reference in this Section Section Sale or Encumbrance of Water System. The District will not sell, lease or otherwise dispose of the Water System or any part thereof essential to the proper operation of the Water System or to the maintenance of Water Revenues. The District will not enter into any lease or agreement which impairs the operation of the Water System or any part thereof necessary to secure adequate Available Water Revenues for the payment of principal of and interest on the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, and any Water Note Parity Debt, or which would otherwise impair the rights of the Bank with respect to the Water Revenues or the operations of Water System. The District will not mortgage or -34-

181 otherwise encumber, pledge or place any charge upon the Water System or any part thereof essential to the Water System or any part thereof which impairs the operation of the Water System or any part thereof necessary to secure adequate Available Water Revenues for the payment of principal of and interest on the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, and any Water Note Parity Debt. Section Best Efforts to Sell Commercial Paper Notes; Successor Dealers. The District will at all times maintain a Dealer under the Issuing and Paying Agent Agreement and the Dealer Agreement. The District agrees to cause the Dealer to use its best efforts to sell Commercial Paper Notes up to the Maximum Rate (as defined in the Issuing and Paying Agent Agreement) applicable to Commercial Paper Notes in order to repay maturing Commercial Paper Notes. If any Loan remains outstanding for a period of thirty (30) consecutive days, at the written direction of the Bank, the District shall promptly take such actions as necessary to cause the related Dealer (that has been unable to sell rollover Commercial Paper Notes) to be replaced with a Dealer reasonably satisfactory to the Bank. Any dealer agreement with a successor dealer shall provide that (a) such dealer shall use its best efforts to sell Commercial Paper Notes up to the Maximum Rate (as defined in the Issuing and Paying Agent Agreement) applicable to Commercial Paper Notes in order to repay maturing Commercial Paper Notes, without regard to the Bank Rate (i.e., whether or not the rate to be borne by the rollover Commercial Paper Notes is less than the Bank Rate) and (b) such dealer may not resign except upon sixty (60) days prior written notice to the District and the Bank. Section Reserved. Section Preservation of Collateral. The District will preserve and protect the pledge of Available Water Revenues to secure the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, in each case the interest thereon, and all other Obligations hereunder, and will warrant and defend the Bank s right to such Available Water Revenues against all claims and demands of all other Persons (other than the senior and parity claims thereto of the holders of Prior Water Obligations, Commercial Paper Notes and Water Note Parity Debt, including all other Water Series Notes). Section ERISA. The District will not establish, become a party to or contribute to any employee benefit plan within the meaning of Section 3(3) of ERISA or any other form of bonus, incentive compensation, deferred compensation or other similar plan or arrangement other than a governmental plan within the meaning of Section 414(b) of the Code and Section 3(32) of ERISA. Section No Priority for Certain Debt. The District will not incur any Debt payable from or having a Lien upon all or part of the Water Revenues that is (i) senior in priority of payment or Lien to the Prior Water Obligations or (ii) senior in priority of payment or Lien to the Revolving Loan Note and Term Loan Note other than the Prior Water Obligations; provided that nothing in this Agreement shall preclude the ability of the District to incur any Debt the payment of which is properly characterized as a Water operation and maintenance cost. -35-

182 Section Offering Memorandum and Other Documents. The District, will not, without the prior written consent of the Bank, refer to the Bank in any offering document; provided, that the District may identify the Bank as the provider of a Liquidity Facility with respect to the Commercial Paper Notes. The Bank hereby consents to the references to the Bank contained in, and the distribution of, the Offering Memorandum. Section Sovereign Immunity. To the fullest extent permitted by applicable law, with respect to its obligations arising under this Agreement and the Fee Agreement, the District irrevocably agrees that it will not claim in any legal proceeding to enforce any of the obligations of the District hereunder or under the Related Documents or collect upon the Obligations of the District or in connection with the transactions contemplated hereby any immunity on the grounds of sovereignty or other similar grounds from (i) any action, suit or proceeding arising under or relating to this Agreement or any Related Document, (ii) relief by way of injunction, order for specific performance or writ of mandamus, or (iii) execution or enforcement of any judgment to which it or the Water Revenues might otherwise be entitled in any proceedings in the courts of any jurisdiction and irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and the Water Revenues (irrespective of their use or intended use), all such immunity. Section Maintenance of Ratings. The District shall at all times maintain (i) at least one unenhanced long-term rating on each of the Revolving Loan Note and the Term Loan Note from any Rating Agency, (ii) at least one short-term rating on the Commercial Paper Notes from any Rating Agency and (iii) an unenhanced long-term rating on its Water Bonds from at least two Rating Agencies; provided, however, that the District shall not at any time cease to maintain any long-term unenhanced rating on its Water Bonds from any of Fitch, Moody s or S&P if the effect would be to cure a Default or an Event of Default under this Agreement or reduce, or avoid a pending increase of, the Commitment Fee Rate (as defined in the Fee Agreement). Section Use of Proceeds. The District will (i) use the proceeds of each Revolving Loan only to pay the principal of the Commercial Paper Notes maturing on the date of such Revolving Loan, (ii) use the proceeds of each Term Loan only to refinance the outstanding principal amount of a Revolving Loan on the applicable Conversion Date for such Revolving Loan, and (iii) not use the proceeds of any Loan for any other manner or for any purpose except in the manner and for the purposes authorized by the laws of the State of California, this Agreement and the Resolution and the Issuing and Paying Agent Agreement. Section Rates and Charges. (a) The District will comply with the covenant contained in Section 6.09 of the Water Bond Indenture (as in effect on the Effective Date without regard to any amendment, modification or waiver of such provisions other than such amendments and modifications of such provisions effected by the Sixteenth Supplemental Indenture pursuant to its terms, notwithstanding that there may be no outstanding Water Bonds and without regard to whether the Water Bond Indenture remains in effect), which Section (together with all related and ancillary provisions) is hereby incorporated by reference as if set forth herein in its entirety. -36-

183 (b) The District will comply with the covenant contained in Section 7.07 of the Issuing and Paying Agent Agreement (as in effect on the Effective Date without regard to any amendment, modification or waiver of such provision, notwithstanding that there may be no outstanding Water Series Notes and without regard to whether the Issuing and Paying Agent Agreement remains in effect). ARTICLE VII EVENTS OF DEFAULT The occurrence of any of the events set forth in Section 7.1, 7.2 or 7.3 hereof shall constitute an Event of Default hereunder. Upon the occurrence of an Event of Default, the Bank may exercise those rights and remedies applicable to such Event of Default as set forth in Section 7.4 hereof. Section 7.1. Events of Default Resulting in Immediate Termination. Each of the following Events of Default shall also constitute a Special Event of Default hereunder: (a) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment, acceleration or otherwise) (i) any interest on any Commercial Paper Notes in accordance with its terms or (ii) any principal of or interest on any Loan or the Revolving Loan Note or the Term Loan Note (other than solely as a result of acceleration of the payment of the Revolving Loan Note or the Term Loan Note pursuant to Section 7.4(d)); or (b) (i) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment or acceleration) any principal of or interest on any Revenues Secured Debt of the District (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, any regularly scheduled payment thereunder) and such failure shall continue beyond any applicable period of grace specified in any underlying resolution, indenture, contract or instrument pursuant to which such Revenues Secured Debt have been issued or incurred, or (ii) pursuant to the provisions of any such resolution, indenture, contract or instrument, any Revenues Secured Debt, as a result of the failure to pay principal of or interest on such Revenues Secured Debt (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, any regularly scheduled payment thereunder), shall have been or may be accelerated or required to be prepaid prior to the stated maturity thereof (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, the stated termination thereof) (with respect to both clauses (i) and (ii), other than as a result of acceleration of the payment of any such Revenues Secured Debt that is owned by a liquidity provider pursuant to the provisions of the related liquidity facility); or (c) one or more final, unappealable judgments against the District for the payment of money payable from the Water Revenues or attachments against the Water Revenues, the operation or result of which, individually or in the aggregate, equal or -37-

184 exceed $15,000,000 shall remain unpaid, unstayed, undischarged, unbonded or undismissed for a period of sixty (60) days; or (d) (i) The District shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its Water System Related Debt, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of the assets of the Water System, or the District shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the District any case, proceeding or other action of a nature referred to in clause (i) above which (x) results in an order for such relief or in the appointment of a receiver or similar official or (y) remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) there shall be commenced against the District, any case, proceeding or other action seeking the issuance of a warrant of attachment, execution, restraint or similar process against all or any substantial part of the assets of the Water System or the Water Revenues, which results in the entry of a final and non-appealable order or ruling for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (iv) the District shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the District shall admit in writing its inability to pay its debts; or (e) (i) Any provision of this Agreement, the Act, the Resolution, the Commercial Paper Notes or the Issuing and Paying Agent Agreement relating to (A) the ability or obligation of the District to pay, when due, the principal or interest payable on the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, or any Revenues Secured Debt or (B) the Lien on or pledge of the Water Revenues securing the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, or any Revenues Secured Debt shall at any time cease to be valid and binding on the District or shall be declared to be null and void, invalid or unenforceable as the result of a final nonappealable judgment by any federal or state court or as a result of any legislative or administrative action by any Governmental Authority having jurisdiction over the District, (ii) an authorized representative of the District repudiates or otherwise denies in writing that the District has any further liability or obligation under or with respect to any provision of this Agreement, the Act, the Resolution, the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, or any Revenues Secured Debt or the Issuing and Paying Agent Agreement relating to (A) the ability or the obligation of the District to pay, when due, the principal or interest payable on any Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, or any Revenues Secured Debt or (B) the Lien on or pledge of all or any portion of the Water Revenues, or (iii) the State or the District shall have taken or permitted to be taken any official action, or has duly enacted any statute or regulation, which would invalidate, or render null and void, invalid or unenforceable, any provision of this Agreement, the Act, the Resolution, the Commercial -38-

185 Paper Notes, the Revolving Loan Note, the Term Loan Note, or the Revenues Secured Debt or the Issuing and Paying Agent Agreement relating to (A) the ability or the obligation of the District to pay, when due, the principal or interest payable on the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, or the Revenues Secured Debt, or (B) the Lien on or pledge of the Water Revenues; or (f) (i) the District shall impose a debt moratorium or comparable extraordinary restriction on the repayment of debt (whether or not in writing) with respect to the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, or any Revenues Secured Debt or (ii) any Governmental Authority having appropriate jurisdiction over the District shall make a finding or ruling or shall enact or adopt legislation or issue an executive order or enter a judgment or decree which results in a debt moratorium or comparable extraordinary restriction on the repayment of debt with respect to the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, any Revenues Secured Debt or all debt of the District; or (g) all of the Rating Agencies shall have (i) assigned to any Water Bonds or Water Note Parity Debt (if rated) a long-term unenhanced rating below Investment Grade, (ii) withdrawn their ratings of any Water Bonds or Water Note Parity Debt (if rated), other than as a result of (A) debt maturity, redemption or defeasance or, in the case of Water Bonds or Water Note Parity Debt supported by credit enhancement, such withdrawal being attributable to the long-term ratings assigned to the related credit enhancer, or (B) a failure by the District to apply for a rating by such Rating Agency or to provide information to such Rating Agency, in either case as a result of such Rating Agency s imposition or proposed imposition of a condition or conditions to issuing such rating with respect to which the District cannot legally comply, and excluding any withdrawal which such Rating Agency stipulates in writing is being taken for non-credit related reasons or (iii) suspended their ratings of any Water Bonds or Water Note Parity Debt (if rated), other than as a result of (x) debt maturity, redemption or defeasance or, in the case of any Water Bonds or Water Note Parity Debt supported by credit enhancement, such suspension being attributable to the long-term ratings assigned to the related credit enhancer, or (y) a failure by the District to apply for a rating by such Rating Agency or to provide information to such Rating Agency, in either case as a result of such Rating Agency s imposition or proposed imposition of a condition or conditions to issuing such rating with respect to which the District cannot legally comply, and excluding any suspension which such Rating Agency stipulates in writing is being taken for non-credit related reasons. Section 7.2. Events of Default Resulting in Immediate Suspension. The following Event of Default shall also constitute a Suspension Event hereunder: (a) Any Governmental Authority with jurisdiction to rule on the validity or enforceability of this Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Commercial Paper Notes, the Revolving Loan Note or the Term Loan Note, shall find or rule, in a judicial or administrative proceeding, that any material provision of any of the foregoing relating to (i) the ability or the obligation of the District -39-

186 to pay, when due, the principal or interest payable on the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt or (ii) the Lien on or pledge of Water Revenues securing the Commercial Paper Notes or any Revenues Secured Debt is not valid or not binding on, or enforceable against, the District; or (b) the State or the District (i) makes a claim in a judicial or administrative proceeding that the District has no further liability or obligation under this Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt, as and to the extent the District has obligations thereunder, to pay, when due, the principal or interest payable on the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt, or (ii) contests in a judicial or administrative proceeding the validity or enforceability of any provision of this Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt secured by and relating to (A) the ability or the obligation of the District to pay, when due, the principal of or interest on the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt or (B) the Lien on or pledge of Available Water Revenues securing the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt. Section 7.3. Events of Default not Resulting in Immediate Termination or Suspension. Each of the following Events of Default shall also constitute a Notice Event of Default hereunder: (a) the District shall fail to pay any other amount owed by the District hereunder or under the Fee Agreement as and when due (other than amounts described in Section 7.1(a) hereof), and such failure shall continue unremedied for ten (10) days after the later to occur of (x) the date such amount is due and (y) the date the District receives an invoice from the Bank for such amount; or (b) any representation or warranty made by or on behalf of the District in this Agreement or in any Related Document shall be incorrect or untrue in any material respect when made or deemed to have been made; or (c) the District shall default in the due performance or observance of any of the covenants set forth in Section 6.4, 6.7, 6.9, 6.11, 6.17, 6.18, 6.19, 6.20 (after giving effect to any applicable grace periods contained in the Issuing and Paying Agent Agreement), 6.21, 6.22, 6.24, 6.25, 6.26, 6.28, 6.29, or 6.31; or (d) the District shall default in the due performance or observance of any other term, covenant or agreement contained in this Agreement and such default shall remain unremedied for a period of thirty (30) days after the earlier of (i) the date on which such failure shall first become known to any officer of the District or (ii) written notice thereof is given to the District by the Bank; or -40-

187 (e) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) any Water System Related Debt, the aggregate principal amount or notional amount of which is not less than $15,000,000, or any interest or premium thereon, and such failure shall continue beyond any applicable period of grace specified in any underlying resolution, indenture, contract or instrument providing for the creation or concerning any such Water System Related Debt; or any other default or automatic termination event shall occur under any resolution, indenture, contract or instrument providing for the creation of or concerning any such Water System Related Debt if such default or automatic termination event results in the acceleration of the maturity of such Water System Related Debt or requires such Water System Related Debt to become due prior to the stated maturity thereof or a termination payment to be paid in connection therewith, and either (i) the District shall fail to pay any such accelerated amount, amount required to be prepaid prior to the stated maturity thereof or termination payment or (ii) the payment by the District of any such accelerated amount, amount required to be prepaid prior to maturity or termination payment shall materially adversely affect the ability of the District to perform its obligations under this Agreement; or (f) the long-term unenhanced ratings assigned to any Water Bonds by (x) any two Rating Agencies if all three Rating Agencies then rate Water Bonds or (y) any Rating Agency if only one or two Rating Agencies then rate Water Bonds, are reduced below A- (or its equivalent) by S&P, A- (or its equivalent) by Fitch or A3 (or its equivalent) by Moody s, or are withdrawn or suspended by any such Rating Agency other than as a result of (i) debt maturity, redemption or defeasance or, in the case of Water Bonds supported by credit enhancement, such withdrawal or suspension being attributable to a long-term rating assigned to the related credit enhancer, (ii) a determination by the District to cease maintaining such rating and following such withdrawal or suspension the District is in compliance with Section 6.29(iii), or (iii) a failure by the District to apply for a rating by such Rating Agency or to provide information to such Rating Agency, in either case as a result of such Rating Agency s imposition or proposed imposition of a condition or conditions to issuing such rating with respect to which the District cannot legally comply; or (g) the occurrence of any Issuing and Paying Agent Agreement Event of Default which is not cured within any applicable cure period; or (h) any Governmental Authority shall declare a financial emergency with respect to the District and shall appoint or designate with respect to the District, an entity such as an organization, board, commission, authority, agency or body to manage the affairs and operations of the Water System; or (i) a ruling, assessment, notice of deficiency or technical advice by the Internal Revenue Service shall be rendered to the effect that interest on the Commercial Paper Notes is included in the gross income of the Owners of such Commercial Paper Notes and either (i) the District, after it has been notified by the Internal Revenue Service, shall not challenge such ruling, assessment, notice or advice in a court of law -41-

188 during the period within which such challenge is permitted or (ii) the District shall challenge such ruling, assessment, notice or advice and a court of law shall make a determination, not subject to appeal or review by another court of law, that such ruling, assessment, notice or advice is correctly rendered; or (j) the occurrence of any default resulting from a failure by the District to perform any of its obligations under any agreement or instrument providing credit enhancement or liquidity support with respect to any Revenues Secured Debt, or pursuant to which the related holder purchased and continues to hold the same, which default results in an acceleration of such Revenues Secured Debt or the District s obligations under such agreement or instrument or requires such Revenues Secured Debt to be prepaid prior to the stated maturity thereof. Section 7.4. Remedies. Upon the occurrence of an Event of Default hereunder, the Bank may take one or more of the following actions: (a) Immediate Termination. Upon the occurrence of any Special Event of Default, the Commitment shall be reduced to zero and the Bank s obligations under this Agreement shall automatically and immediately terminate and expire, without notice, with respect to all Commercial Paper Notes, and the Bank shall have no obligation to make any Loans hereunder. (b) Suspension Contest to Validity. Upon the occurrence of the Suspension Event set forth in Section 7.2 hereof, the obligation of the Bank to make Loans hereunder shall be automatically and immediately suspended from the time of the occurrence of such Event of Default until a final, non-appealable judgment of a court having jurisdiction in the premises shall be entered declaring that all contested provisions of this Agreement, the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the pledge of the Available Water Revenues securing the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note and the Loans are upheld in their entirety. In the event such judgment is entered declaring that all material contested provisions of this Agreement, the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the Available Water Revenues are upheld in their entirety, the obligation of the Bank to make Loans hereunder shall be automatically reinstated and the terms of this Agreement will continue in full force and effect (unless this Agreement shall have otherwise expired or terminated in accordance with the terms hereof or there has occurred a Special Event of Default) as if there had been no suspension. In the event any provision of this Agreement, the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the pledge of the Available Water Revenues securing the Commercial Paper Notes and the Loans is declared to be null and void or unenforceable, or it is determined that the District has no liability or obligation under this Agreement, the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, the Issuing and Paying Agent Agreement, or the -42-

189 Resolution, then the obligations of the Bank under this Agreement will terminate as set forth above. Notwithstanding the foregoing, if, upon the date which is the earlier of the Commitment Termination Date or nine months after the effective date of such suspension of the obligation of the Bank pursuant to this paragraph, litigation is still pending and a judgment regarding the validity and enforceability of this Agreement, the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the Available Water Revenues securing the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note and the Loans as is the subject of such Event of Default has not been obtained, then the Commitment and the obligation of the Bank to make Loans hereunder shall at such time terminate without notice or demand. (c) Termination with Notice. Upon the occurrence of an Event of Default that is not a Special Event of Default, the Bank may, by notice to the District, terminate the Commitment, if any (except as provided below with respect to Commercial Paper Notes issued and sold prior to such date), deliver a No-Issuance Notice to the Issuing and Paying Agent directing the Issuing and Paying Agent to cease issuing any Commercial Paper Notes, whereupon no additional Commercial Paper Notes shall be issued, the Available Commitment shall immediately be reduced to the then outstanding principal amount of Commercial Paper Notes, and the Available Commitment shall be further reduced in a similar manner as and when such Commercial Paper Notes mature such that, on the date all Commercial Paper Notes issued and sold prior to the date such No- Issuance Notice is received by the Issuing and Paying Agent mature, the Commitment will be reduced to zero and terminated and the obligation of the Bank to extend any further credit hereunder will be terminated; provided that the Commitment shall not terminate, and the right of the Bank to accelerate the maturity of the Revolving Loan Note and the Term Loan Note, as applicable, pursuant to Section 7.4(d) shall not affect the obligation of the Bank to make Loans to the extent necessary for the District to make required payments of principal on the Commercial Paper Notes issued and sold prior to the date upon which the No-Issuance Notice is received by the Issuing and Paying Agent; provided further that if any Loans are made that would not have been made but for the application of the immediately preceding provision, such Loans shall be immediately due and payable on the date such Loans are made. (d) In addition to the rights and remedies set forth in Sections 7.4(a), (b), and (c) hereof, in the case of any Event of Default hereunder, other than an Event of Default specified in Section 7.1(d) above, the Bank may declare the Revolving Loan Note, the Term Loan Note, all accrued interest thereon, and all other outstanding Obligations of the District to be forthwith due and payable, whereupon the Revolving Loan Note and the Term Loan Note and such interest and all such other Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the District. If any Event of Default specified in Section 7.1(d) above shall occur, without any notice to the District or any other act by the Bank, the Revolving Loan Note and the Term Loan Note, together with accrued interest thereon, and all other outstanding Obligations of the District shall -43-

190 become forthwith due and payable, without presentment, demand, protest, or other notice of any kind, all of which are hereby waived by the District. Failure to take action in regard to one or more Events of Default shall not constitute a waiver of, or the right to take action in the future in regard to, such or subsequent Events of Default. Section 7.5. Suits at Law or in Equity and Mandamus. If any Event of Default shall occur, then and in every such case the Bank shall be entitled to proceed to protect and enforce its rights by such appropriate judicial proceeding as it may deem most effectual to protect and enforce any such right, either by suit, in equity, or by action at law, whether for the specific performance of any covenant or agreement contained in this Agreement, in aid of the exercise of any power granted in this Agreement, or to enforce any other legal or equitable right vested in the Bank by this Agreement, the Revolving Loan Note, the Term Loan Note or by law. ARTICLE VIII OBLIGATIONS ABSOLUTE Section 8.1. Obligations Absolute. Subject to the provisions of Section 2.9 hereof, the Obligations of the District shall be absolute, unconditional and irrevocable and shall be paid or performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including, without limitation, the following circumstances: (a) any lack of validity or enforceability of this Agreement or any Related Document or any other agreement or instrument delivered in connection herewith or therewith; (b) any amendment or waiver of or any consent to departure from, the terms of this Agreement or any of the Related Documents; (c) the existence of any claim, set-off, defense or other right which the District may have at any time against any Dealer, the Issuing and Paying Agent, the Bank or any other Person, whether in connection with this Agreement, the Related Documents or any unrelated transaction; provided, however, that nothing herein contained shall prevent the assertion of such claim by separate suit; (d) any statement or any other document presented by a Person other than by the Bank under this Agreement or any of the Related Documents proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; or (e) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. -44-

191 ARTICLE IX MISCELLANEOUS Section 9.1. Liability of the Bank. (a) With respect to the Bank, the District assumes all risks of the acts or omissions of the Issuing and Paying Agent and its agents in respect of their use of this Agreement or any amounts made available by the Bank hereunder; provided that this assumption with respect to the Bank is not intended to and shall not preclude the District from pursuing such rights and remedies as it may have against the Issuing and Paying Agent and its agents under any other agreements. Neither the Bank nor any of its officers or directors shall be liable or responsible for: (i) the use which may be made of this Agreement or any amounts made available by the Bank hereunder or for any acts or omissions of the District, the Issuing and Paying Agent or any Dealer or their agents in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement(s) thereon (other than validity as against the Bank of any agreement to which the Bank is a party), even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) any other circumstances whatsoever in making or failing to make payment under this Agreement, except only that the District shall have a claim against the Bank and the Bank shall be liable to the District to the extent, but only to the extent, of any direct, as opposed to consequential or punitive, damages suffered by the District which the District proves were caused by (i) the Bank s gross negligence or willful misconduct, or (ii) the Bank s willful or grossly negligent failure to make Loans when required under this Agreement in accordance with the terms hereof. In furtherance and not in limitation of the foregoing, the Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information (other than actual knowledge) to the contrary. (b) The District assumes all risks associated with the acceptance by the Bank of documents received by telecommunication, it being agreed that the use of telecommunication devices is for the benefit of the District and that the Bank assumes no liabilities or risks with respect thereto. Section 9.2. Costs and Expenses. (a) The District agrees to reimburse the Bank in respect of all (i) reasonable out-of-pocket expenses of the Bank, including fees and disbursements of counsel, in connection with the preparation, negotiation, execution, and delivery of this Agreement, (ii) reasonable out-of-pocket expenses of the Bank, including fees and disbursements of counsel, in connection with any waiver or consent hereunder or to any Related Document or any amendment hereof or to any Related Document and (iii) out-of-pocket expenses incurred by the Bank, including fees and disbursements of counsel, in connection with a workout, restructuring or enforcement proceeding under this Agreement or any Related Document, resulting from an Event of Default hereunder; provided, however, that the District shall not be required to pay costs or expenses referred to in clauses (ii) and (iii) of this Section if such costs and expenses have been paid or incurred by the Bank solely as a result of its willful misconduct or gross negligence. (b) To the extent permitted by law, the District agrees to indemnify and hold harmless the Bank, its officers, directors, employees and agents (each an Indemnified Party ) from and -45-

192 against any and all claims, damages, losses, liabilities, fines, penalties costs or expenses (including fees of counsel) whatsoever incurred (or which may be claimed against an Indemnified Party by any Person) by reason of or in connection with the execution and delivery of and consummation of the transactions contemplated under this Agreement, including, without limitation, (i) the offering or sale of Commercial Paper Notes (including, without limitation, by reason of any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum, or in any supplement or amendment thereof, prepared with respect to the Commercial Paper Notes, or the omission or alleged omission to state therein a material fact necessary to make such statements, in light of the circumstances under which they are or were made, not misleading and (ii) the execution and delivery of, or payment or failure to pay by any Person (other than the Bank, as and when required by the terms and provisions hereof) under, this Agreement; provided, however, that the District shall not be required to indemnify the Bank for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by the Bank s gross negligence or willful misconduct, including without limitation, (x) the Bank s gross negligence or willful misconduct in determining whether a Notice of Revolving Loan presented hereunder complied with the terms hereof, or (y) the Bank s willful or grossly negligent failure to make Loans when required under this Agreement in accordance with the terms hereof, or the material inaccuracy of any information included in the Offering Memorandum concerning the Bank, which was furnished in writing by or on behalf of the Bank expressly for inclusion therein. Nothing in this Section 9.2 is intended to limit the obligations of the District under the Commercial Paper Notes, the Revolving Loan Note or the Term Loan Note or of the District to pay its obligations hereunder and under the Related Documents in accordance with the terms hereof and thereof. (c) The provisions of this Section 9.2 and Sections 3.1 and 3.2 hereof shall survive the termination of this Agreement and the payment in full of the Commercial Paper Notes, the Revolving Loan Note and the Term Loan Note and the obligations of the District hereunder. Each Indemnified Party shall notify the District of any amounts which are owed to such Indemnified Party pursuant to this Section 9.2. Section 9.3. Notices. Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto or referred to herein shall be in writing and be deemed to have been given (a) in the case of notice by letter, when delivered by hand or four (4) days after the same is deposited in the mail, first class postage prepaid, and (b) in the case of notice by telecopier or electronic mail, when sent, receipt confirmed by telephone or electronic mail, addressed to them as follows or at such other address as any of the parties hereto may designate by written notice to the other parties hereto and to the Issuing and Paying Agent: District: East Bay Municipal Utility District 375 Eleventh Street Oakland, California Attention: Director of Finance Telephone: (510) Telecopy: (510)

193 Bank with respect to credit matters: Issuing and Paying Agent: Bank of America, N.A. Attention: Telephone: ( ) - Telecopy: ( ) - U.S. Bank National Association 100 Wall Street, 16 th Floor New York, New York Attention: Corporate Trust Services Telephone: (212) Telecopy: ( ) - Section 9.4. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the District and the Bank and their respective successors, endorsees and assigns, except that the District may not assign or transfer its rights or obligations hereunder without the prior written consent of the Bank. The Bank may grant a participation to any financial institution in all or any part of, or any interest (undivided or divided) in, the Bank s rights and benefits under this Agreement, the Revolving Loan Note and Term Loan Note owned by it and the Related Documents, and to the extent of that participation such participant shall, except as set forth in the following clause (b), have the same rights and benefits against the District hereunder as it would have had if such participant were a direct party hereto; provided that (a) no such participation shall affect the obligations of the Bank to make Loans as herein provided; (b) the District shall be required to deal only with the Bank with respect to any matters under this Agreement and no such participant shall be entitled to enforce directly against the District any provision hereunder, and (c) such participant shall not be any Person registered as an investment company under the Investment Company Act of 1940, as amended, substantially all of the assets of which are invested in obligations exempt from Federal income taxation under Section 103 or 103A of the Code or any similar or successor provision. The Bank may disclose to any Participants or prospective Participants any information or other data or material in the Bank's possession relating to this Agreement, any Related Document and the District without the consent of or notice to the District. The obligations of the Bank under this Agreement or any part hereof may be assigned by the Bank to any financial institution approved in writing by the District; provided, however, that (i) any payment in respect of such assigned amounts owed with respect to the Revolving Loan Note or the Term Loan Note made by the District to the assigning Bank in accordance with the terms of this Agreement shall satisfy the District s obligations hereunder in respect of such assigned obligation to the extent of such payment and (ii) no such assignment shall release the Bank from its obligations hereunder. Notwithstanding the foregoing, nothing contained in this -47-

194 Agreement shall prohibit the Bank from assigning its obligations hereunder from one U.S. branch of the Bank to another U.S. branch of the Bank having the same or higher ratings as the Bank as of the effective date of such assignments, or from pledging, assigning or granting a security interest in all or part of its right hereunder, including with respect to the Revolving Loan Note and the Term Loan Note, to secure obligations of the Bank to a Federal Reserve Bank. Section 9.5. Governing Law; Venue; Waiver of Jury Trial. (A) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PROVISIONS (OTHER THAN NEW YORK GENERAL OBLIGATIONS LAWS AND ); PROVIDED THAT THE POWER AND AUTHORITY OF THE DISTRICT TO ENTER INTO AND ITS RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. (B) ALL LITIGATION ARISING OUT OF, OR RELATING TO THIS AGREEMENT SHALL BE BROUGHT IN A STATE OR FEDERAL COURT LOCATED IN THE COUNTY OF NEW YORK IN THE STATE OF NEW YORK OR IN THE COUNTY OF ALAMEDA IN THE STATE OF CALIFORNIA. (C) THE DISTRICT AND THE BANK HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING UNDER OR RELATING TO THIS AGREEMENT OR A RELATED DOCUMENT. IF AND TO THE EXTENT THAT THE FOREGOING WAIVER OF THE RIGHT TO A JURY TRIAL IS UNENFORCEABLE FOR ANY REASON IN SUCH FORUM, THE DISTRICT AND THE BANK HEREBY CONSENT TO THE ADJUDICATION OF ANY AND ALL CLAIMS PURSUANT TO JUDICIAL REFERENCE AS PROVIDED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638, AND THE JUDICIAL REFEREE SHALL BE EMPOWERED TO HEAR AND DETERMINE ANY AND ALL ISSUES IN SUCH REFERENCE WHETHER FACT OR LAW. EACH OF THE DISTRICT AND THE BANK REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND CONSENT, AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS AND CONSENTS TO JUDICIAL REFERENCE FOLLOWING THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF ITS CHOICE ON SUCH MATTERS. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT OR TO JUDICIAL REFERENCE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 AS PROVIDED HEREIN. Section 9.6. No Waivers, Amendments, Etc. (a) No amendment or waiver of any provision of this Agreement or Related Document, nor consent to any departure by the District therefrom, shall in any event be effective unless the same shall be in writing and signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) No failure on the part of the Bank to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver of such right; nor shall any single or partial exercise of any right under this Agreement preclude any other further exercise of such right or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. -48-

195 Section 9.7. Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Delivery of a counterpart hereof by facsimile transmission or by transmission of an Adobe portable document file (also known as a PDF file) shall be effective as delivery of an original executed counterpart hereof. Section 9.8. Source of Funds. The Bank agrees that all payments made by the Bank hereunder will be paid from funds of the Bank and not directly or indirectly from funds or collateral on deposit with or for the account of, or pledged with or for the account of, the Bank by the District. Section 9.9. Term of the Agreement. (a) The term of this Agreement shall be until the later of (x) the last day of the Commitment Period and (y) the payment in full of the principal of and interest on the Revolving Loan Note and the Term Loan Note and all other amounts due hereunder. (b) No earlier than one hundred twenty (120) days and no later than ninety (90) days prior to the Stated Expiration Date as from time to time in effect, the District may request in writing to the Bank to extend the Stated Expiration Date of this Agreement for a period as designated by the District in such request. If the District makes any such request, the Bank will, not more than thirty (30) days after such request, notify the District in writing whether or not the Bank consents to such request, and, if the Bank in its sole discretion consents to such request, the terms under which the Bank will consent to such request. If the Bank does not so notify the District within such period of time, the Bank shall be deemed not to have consented to such request. Section Right of Setoff. Upon the occurrence of an Event of Default, the Bank may, to the extent not inconsistent with the provisions of the Prior Water Obligation Documents, the Issuing and Paying Agent Agreement and the other Related Documents, at any time and from time to time, without notice to the District or any other person (any such notice being expressly waived), set off and appropriate and apply, against and on account of, any obligations and liabilities of the District to the Bank arising under this Agreement, the Revolving Loan Note and the Term Loan Note, without regard to whether or not the Bank shall have made any demand therefor, any and all deposits (general or special, including but not limited to indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other indebtedness at any time held or owing by the Bank to or for the credit or the account of the District. Section Headings. Article and Section headings in this Agreement are included herein for convenience of reference only and shall not have any effect for purposes of interpretation or construction of the terms of this Agreement. Section Complete and Controlling Agreement. This Agreement and the Related Documents completely set forth the agreements among the Bank and the District and fully supersede all prior agreements, both written and oral, among the Bank and the District relating to the matters set forth herein and in the Related Documents. -49-

196 Section Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. The parties shall endeavor, in good faith negotiations, to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. Section USA PATRIOT Act Notice. The Bank hereby notifies the District that, pursuant to the requirements of the USA Patriot Act (Title III of Pub. L (signed into law October 26, 2001)) (the Act ), it is required to obtain, verify and record information that identifies the District, which information includes the name and address of the District and other information that will allow the Bank to identify the District in accordance with the Act. Section Assignment to Federal Reserve Bank. The Bank may assign and pledge all or any portion of the Revolving Loan Note, the Term Loan Note and any other obligations owing to it hereunder to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank; provided, that any payment in respect of such assigned Revolving Loan Note, Term Loan Note or any other obligations made by the District to the Bank in accordance with the terms of this Agreement shall satisfy the District s obligations hereunder in respect of such assigned obligation to the extent of such payment. No such assignment shall release the Bank from its obligations hereunder. Section No Advisory or Fiduciary Relationship. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any Related Document), the District acknowledges and agrees, and acknowledges its Affiliates understanding, that: (a) (i) the services regarding this Agreement provided by the Bank and any Affiliate thereof are arm s-length commercial transactions between the District, on the one hand, and the Bank and its Affiliates, on the other hand, (ii) the District has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) the District is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the Related Documents; (b) (i) the Bank and its Affiliates each is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary, for the District, or any other Person and (ii) neither the Bank nor any of its Affiliates has any obligation to the District with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the Related Documents; and (c) the Bank and its Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the District, and neither the Bank nor any of its Affiliates has any obligation to disclose any of such interests to the District. To the fullest extent permitted by law, the District, hereby waives and releases any claims that it may have against the Bank or any of its Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transactions contemplated hereby. [SIGNATURES BEGIN ON THE FOLLOWING PAGE] -50-

197 -51-

198 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. EAST BAY MUNICIPAL UTILITY DISTRICT By: Name: Title: BANK OF AMERICA, N.A. By: Name: Title: [Signature Page to Revolving Credit Agreement]

199 EXHIBIT A FORM OF NOTICE OF REVOLVING LOAN To: Bank of America, N.A. (the Bank ), as the Bank under the Revolving Credit Agreement dated as of December 1, 2015 (as amended, supplemented or otherwise modified from time to time, the Agreement ), between the East Bay Municipal Utility District (the District ) and the Bank The undersigned, U.S. Bank National Association, as Issuing and Paying Agent, hereby requests pursuant to Section 2.2(a) of the Agreement, a Revolving Loan, and in connection therewith sets forth below the following information relating to such Revolving Loan: 1. Business Day on which Revolving Loan is to be made: 2. Principal Amount of Revolving Loan: Any capitalized terms used and not defined herein shall have the meaning assigned to it in the Agreement. Date of this Notice of Revolving Loan: U.S. BANK NATIONAL ASSOCIATION, as Issuing and Paying Agent By: Name: Title:

200 EXHIBIT B FORM OF REVOLVING LOAN NOTE EAST BAY MUNICIPAL UTILITY DISTRICT BANK NOTE (WATER SERIES), SUBSERIES A-2 BANK OF AMERICA, N.A. (REVOLVING LOAN NOTE) December [2], 2015 Oakland, California For value received, EAST BAY MUNICIPAL UTILITY DISTRICT (the District ) promises to pay to the order of BANK OF AMERICA, N.A. (the Bank ), at its office at, the aggregate unpaid principal amount of all Revolving Loans made by the Bank from time to time pursuant to the Credit Agreement referred to below on the dates and in the amounts provided for in the Credit Agreement. The District promises to pay interest on the unpaid principal amount of such Revolving Loans on the dates and at the rates provided for in the Revolving Credit Agreement dated as of December 1, 2015 (as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the Credit Agreement ) by and between the District and the Bank. All payments of principal and interest shall be made in lawful money of the United States of America in immediately available funds. All capitalized terms used herein and not otherwise defined herein shall have the meanings specified in the Credit Agreement. This note is the Revolving Loan Note referred to in the Credit Agreement and is entitled to the benefits thereof and of the Related Documents referred to therein. As provided in and subject to the terms of the Credit Agreement, this Revolving Loan Note is subject to prepayment, in whole or in part. In case an Event of Default shall occur, the unpaid principal of and accrued interest on this Revolving Loan Note may be declared due and payable in the manner and with the effect provided in the Credit Agreement. The Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the District evidenced hereby and the amounts of principal and interest payable and paid from time to time hereunder. The failure to record any such amount, or any error in such records, shall not, however, limit or otherwise affect the Obligations of the District hereunder to repay any and all amounts owed hereunder, together with all interest accrued hereon as provided in the Credit Agreement. This Revolving Loan Note is an obligation of the District secured by a lien on the Available Water Revenues as more fully described in Section 2.9 of the Credit Agreement. This Revolving Loan Note constitutes a Bank Note within the meaning of the Issuing and Paying Agent Agreement.

201 THIS REVOLVING LOAN NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. EAST BAY MUNICIPAL UTILITY DISTRICT By: Name: Title:

202 EXHIBIT C FORM OF TERM LOAN NOTE EAST BAY MUNICIPAL UTILITY DISTRICT BANK NOTE (WATER SERIES), SUBSERIES A-2 BANK OF AMERICA, N.A. (TERM LOAN NOTE) December [2], 2015 Oakland, California For value received, EAST BAY MUNICIPAL UTILITY DISTRICT (the District ) promises to pay to the order of BANK OF AMERICA, N.A. (the Bank ), at its office at, the aggregate unpaid principal amount of all Term Loans made by the Bank from time to time pursuant to the Credit Agreement referred to below on the dates and in the amounts provided for in the Credit Agreement. The District promises to pay interest on the unpaid principal amount of such Term Loans on the dates and at the rates provided for in the Revolving Credit Agreement dated as of December 1, 2015 (as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the Credit Agreement ) by and between the District and the Bank. All payments of principal and interest shall be made in lawful money of the United States of America in immediately available funds. All capitalized terms used herein and not otherwise defined herein shall have the meanings specified in the Credit Agreement. This note is the Term Loan Note referred to in the Credit Agreement and is entitled to the benefits thereof and of the Related Documents referred to therein. As provided in and subject to the terms of the Credit Agreement, this Term Loan Note is subject to prepayment, in whole or in part. In case an Event of Default shall occur, the unpaid principal of and accrued interest on this Term Loan Note may be declared due and payable in the manner and with the effect provided in the Credit Agreement. The Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the District evidenced hereby and the amounts of principal and interest payable and paid from time to time hereunder. The failure to record any such amount, or any error in such records, shall not, however, limit or otherwise affect the Obligations of the District hereunder to repay any and all amounts owed hereunder, together with all interest accrued hereon as provided in the Credit Agreement. This Term Loan Note is an obligation of the District secured by a lien on the Available Water Revenues as more fully described in Section 2.9 of the Credit Agreement. This Term Loan Note constitutes a Bank Note within the meaning of the Issuing and Paying Agent Agreement.

203 THIS TERM LOAN NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. EAST BAY MUNICIPAL UTILITY DISTRICT By: Name: Title:

204 EXHIBIT D SIXTEENTH SUPPLEMENTAL INDENTURE [To be attached]

205 FEE AGREEMENT December, 2015 Reference is hereby made to that certain Revolving Credit Agreement dated as of December 1, 2015 (as amended, supplemented, restated or otherwise modified from time to time, the Agreement ), between the East Bay Municipal Utility District (the District ) and Bank of America, N.A. (the Bank ), relating to the District s Commercial Paper Notes (Water Series) Tax-Exempt Subseries [ ]. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement. The purpose of this Fee Agreement is to confirm the agreement between the Bank and the District with respect to the Commitment Fees (as defined below) and certain other fees payable by the District to the Bank. This Fee Agreement is the Fee Agreement referenced in the Agreement, and the terms hereof are incorporated by reference into the Agreement. ARTICLE I. FEES. Section 1.1. Commitment Fee. The District hereby agrees to pay or cause to be paid to the Bank on April 1, 2016, for the period commencing on the Effective Date and ending on March 31, 2016, and in arrears on the first Business Day of each July, October, January and April occurring thereafter to the Commitment Termination Date, and on the Commitment Termination Date, a non-refundable Commitment Fee (the Commitment Fee ) with respect to the Available Commitment of the Bank under the Agreement in an amount equal to the rate per annum (the Commitment Fee Rate ) specified below on the average daily Available Commitment from time to time in effect during each related period. LEVEL S&P RATING MOODY S RATING FITCH RATING COMMITMENT FEE RATE Level 1: AA or higher Aa2 or higher AA or higher 0.325% Level 2: AA- Aa3 AA % Level 3: A+ A1 A % Level 4: A A2 A 0.775% Level 5: A- A3 A % Level 6: BBB+ Baa1 BBB % Level 7: BBB Baa2 BBB 1.475% Level 8: BBB- Baa3 BBB % The term Rating as used above shall mean the lowest long-term unenhanced debt rating assigned by each Rating Agency to any outstanding Water Bond. In the event of a split rating (i.e., the Rating of one of the foregoing Rating Agencies is at a different Level than the Rating of any other Rating Agency), the Commitment Fee Rate shall be based upon the Level in which the lower of the two highest Ratings appears; provided, however, that if only two Rating Agencies are then rating Water Bonds, the Commitment Fee Rate shall be based upon the Level 2b_ BANA Fee Agreement (CP).doc

206 in which the lower of the two Ratings appears; provided, further, that, for purposes of this sentence only, any Rating that appears in a higher numbered Level than the Level in which a Rating of another Rating Agency appears shall be deemed to be a lower Rating for purposes of determining the Commitment Fee Rate. Any change in the Commitment Fee Rate resulting from a change in a Rating shall be and become effective as of and on the date of the announcement of the change in a Rating. References to Ratings above are references to rating categories as presently determined by the Rating Agencies, and in the event of adoption of any new or changed rating system by any such Rating Agency, including, without limitation, any recalibration of the Ratings in connection with the adoption of a global rating scale, each of the Ratings from the Rating Agency in question referred to above shall be deemed to refer to the rating category under the new rating system which most closely approximates the applicable rating category as currently in effect. The District and the Bank acknowledge that as of the Effective Date the Commitment Fee Rate is that specified above for Level 1. In the event that either (i) a Rating is suspended, withdrawn or otherwise unavailable from any Rating Agency or (ii) there shall have occurred and be continuing any Event of Default, in each such case the Commitment Fee Rate shall increase by 1.50% per annum from the Commitment Fee Rate in effect on the date of the occurrence of such suspension, withdrawal, unavailability or Event of Default, as applicable (the Fee Increase ); provided, however, that the Fee Increase shall not occur pursuant to clause (i) of this sentence if any such rating shall have been suspended or withdrawn by or becomes otherwise unavailable from a Rating Agency due to (a) the District s failure to apply for such rating or failure to provide information to such Rating Agency, in each case as a result of such Rating Agency s imposition or proposed imposition of conditions to issuing such rating with which the District cannot legally comply or (b) a determination by the District to cease maintaining such rating and following such withdrawal or suspension the District is in compliance with Section 6.29(iii) of the Agreement. The Commitment Fees shall be payable quarterly in arrears, together with interest on the Commitment Fees from the date payment is due until payment in full at the Default Rate. Such fee shall be payable in immediately available funds and computed on the basis of a 360-day year and the actual number of days elapsed. Section 1.2. Loan Fees. Upon the making of each Loan, the District agrees to pay to the Bank a non-refundable Loan fee equal to $250, payable without any requirement of notice or demand by the Bank on the day on which such Loan is made by the Bank. Section 1.3. Transfer Fee. Upon each transfer of the Agreement by the District in accordance with its terms or appointment of a successor Issuing and Paying Agent under the Issuing and Paying Agent Agreement, the District agrees to pay the Bank a non-refundable fee of $2,500, and to reimburse the Bank for its actual costs and expenses associated with such transfer or appointment (including, without limitation, the reasonable fees and expenses of counsel to the Bank), payable on the date of such transfer or appointment. Section 1.4. Amendment Fee. The District agrees to pay to the Bank on the date of each amendment, supplement, or modification to the Agreement (or any Related Document, the amendment, supplement or modification of which requires the consent of the Bank), a non-refundable fee equal to $2,500, or such other fee as may be agreed to between the District and the Bank, plus, in each case, the reasonable fees and expenses of counsel to the Bank. -2-

207 Section 1.5. Termination Fee. (a) Notwithstanding anything set forth herein or in the Agreement to the contrary, the District hereby agrees not to terminate the Agreement prior to the first anniversary of the Effective Date, without the payment by the District to the Bank of a termination fee (the Termination Fee ) in an amount equal to the product of (i) the Commitment Fee Rate in effect pursuant to Section 1.1 hereof on the date of such termination, (ii) the Available Commitment in effect on the Effective Date, and (iii) a fraction, the numerator of which is equal to the number of days from and including the date of such termination to and including the first anniversary of the Effective Date, and the denominator of which is 360. Notwithstanding any provisions of this Section to the contrary, the District will not be required to pay the Termination Fee if (i) any two of Moody s, S&P or Fitch shall have withdrawn the shortterm credit rating of the Bank or lowered the short-term credit rating of the Bank below P-1, A-1 and F1, respectively, and thereafter for so long as such withdrawal or reduction shall be continuing, (ii) the Bank submits to the District a request for payment of amounts payable pursuant to Section 3.2 of the Agreement or (iii) the District elects to refinance the Commercial Paper Notes in full from a source of funds which does not involve the issuance by a bank or other financial institution of a letter of credit, liquidity facility, or credit facility or a direct purchase of such debt by a bank or other financial institution. (b) Notwithstanding the foregoing and anything set forth herein or in the Agreement to the contrary, the District agrees not to permanently reduce the Available Commitment under the Agreement prior to the first anniversary of the Effective Date, without the payment by the District to the Bank of a reduction fee (the Reduction Fee ) in connection with each and every permanent reduction of the Available Commitment as set forth herein in an amount equal to the product of (A) the Commitment Fee Rate in effect on the date of such reduction, (B) the difference between the Commitment prior to such reduction and the Commitment after such reduction, and (C) a fraction, the numerator of which is equal to the number of days from and including the date of such reduction to and including the first anniversary of the Effective Date, and the denominator of which is 360. Notwithstanding any provisions of this Section to the contrary, the District will not be required to pay the Reduction Fee if (i) any two of Moody s, S&P or Fitch shall have withdrawn the short-term credit rating of the Bank or lowered the short-term credit rating of the Bank below P-1, A-1 and F1, respectively, and thereafter for so long as such withdrawal or reduction shall be continuing, (ii) the Bank submits to the District a request for payment of amounts payable pursuant to Section 3.2 of the Agreement or (iii) the District elects to refinance Commercial Paper Notes in an amount equivalent to the amount of such reduction from a source of funds which does not involve the issuance by a bank or other financial institution of a letter of credit, liquidity facility, or credit facility or a direct purchase of such debt by a bank or other financial institution. ARTICLE II. MISCELLANEOUS. Section 2.1. Out-of-Pocket Expenses. The District shall pay to the Bank promptly upon receipt of invoice any and all reasonable fees and expenses of the Bank (including the out-of-pocket expenses of the Bank and the reasonable fees and disbursements of counsel to the Bank) all payable in accordance with this Fee Agreement and Section 9.2(a) of the Agreement. -3-

208 Section 2.2. Payment Account. As provided in the Agreement, all payments hereunder shall be made by means of wire transfer of funds to the Bank s Payment Account. Section 2.3. Amendments. No amendment to this Fee Agreement shall become effective without the prior written consent of the District and the Bank. Section 2.4. Governing Law. THIS FEE AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PROVISIONS (OTHER THAN NEW YORK GENERAL OBLIGATIONS LAWS AND ); PROVIDED THAT THE POWER AND AUTHORITY OF THE DISTRICT TO ENTER INTO AND ITS RIGHTS AND OBLIGATIONS UNDER THIS FEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. Section 2.5. Counterparts. This Fee Agreement may be executed in two or more counterparts, each of which shall constitute an original but both or all of which, when taken together, shall constitute but one instrument. Delivery of a counterpart hereof by facsimile transmission or by transmission of an Adobe portable document file (also known as a PDF file) shall be effective as delivery of an original executed counterpart hereof. Section 2.6. Severability. Any provision of this Fee Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. [SIGNATURES BEGIN ON THE FOLLOWING PAGE] -4-

209 IN WITNESS WHEREOF, the parties hereto have caused this Fee Agreement to be duly executed and delivered by their respective officers thereunto duly authorized on the date first set forth above. EAST BAY MUNICIPAL UTILITY DISTRICT By: Name: Title: BANK OF AMERICA, N.A. By: Name: Title: Signature Page to Fee Agreement

210 CHAPMAN DRAFT DATED NOVEMBER 16, 2015 STANDBY LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT dated as of December 1, 2015 between EAST BAY MUNICIPAL UTILITY DISTRICT and SUMITOMO MITSUI BANKING CORPORATION, acting through its New York Branch Relating to EAST BAY MUNICIPAL UTILITY DISTRICT COMMERCIAL PAPER NOTES (WATER SERIES) TAX-EXEMPT SUBSERIES A-1 2c_ Standby LOC & Reimb Agmt (SMBCEBMUD).docx

211 TABLE OF CONTENTS SECTION DESCRIPTION PAGE ARTICLE I DEFINITIONS...1 Section 1.1. Definitions...1 Section 1.2. Other Interpretive Provisions...12 Section 1.3. Accounting Terms...13 Section 1.4. Interpretations...13 Section 1.5. Rounding...13 ARTICLE II LETTER OF CREDIT ADVANCES; TERM LOANS...13 Section 2.1. Issuance of Letter of Credit...13 Section 2.2. Liquidity Drawings...13 Section 2.3. Reimbursement of Drawings under the Letter of Credit; Bank Note Mandatory Prepayment; Interest...13 Section 2.4. Interest...15 Section 2.5. Fees...16 Section 2.6. Termination of Letter of Credit or Reduction of Available Amount...16 Section 2.7. Prepayments...16 Section 2.8. General Provisions as to Payment...17 Section 2.9. Nature of Obligations...17 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY...18 Section 3.1. Net of Taxes, Etc...18 Section 3.2. Increased Costs...19 Section 3.3. Survival...20 ARTICLE IV CONDITIONS PRECEDENT TO EFFECTIVENESS...21 Section 4.1. Conditions Precedent to Effective Date...21 Section 4.2. Conditions to Term Loan...22 Section 4.3. Conditions Precedent to Each Note Issuance...22 ARTICLE V REPRESENTATIONS AND WARRANTIES...23 Section 5.1. Organization and Powers...23 Section 5.2. Authorization; Contravention...24 Section 5.3. Governmental Consent or Approval...24 Section 5.4. Binding Effect...24 Section 5.5. Federal Reserve Regulations...24 Section 5.6. Litigation...24 Section 5.7. No Defaults...25 Section 5.8. Financial Statements...25 Section 5.9. Complete and Correct Information i-

212 Section Sovereign Immunity...25 Section Compliance with Rules and Regulations...26 Section No ERISA Plans...26 Section Tax-Exempt Status of Commercial Paper Notes...26 Section Incorporation of Representations and Warranties by Reference...26 Section No Proposed Legal Changes...26 Section Environmental Laws...26 Section Issuing and Paying Agent and Dealers...27 Section Offering Memorandum...27 Section Related Documents...27 Section Issuance of Commercial Paper Notes...27 Section Sanctions Concerns and Anti-Corruption Laws...27 ARTICLE VI COVENANTS...28 Section 6.1. Information...28 Section 6.2. Performance of this and other Agreements...29 Section 6.3. Maintenance of Approvals...29 Section 6.4. Preservation of Existence...29 Section 6.5. Sale of Commercial Paper Notes...29 Section 6.6. Notices...30 Section 6.7. Total Outstanding...30 Section 6.8. Books; Access to Records...30 Section 6.9. Limitation on Additional Debt...30 Section Reserved...30 Section No Amendment of Related Documents...30 Section Taxes and Liabilities...31 Section Compliance with Rules and Regulations...31 Section Maintenance and Operation of the Water System...31 Section Insurance...31 Section Book Entry Eligibility...31 Section Exempt Status...31 Section Issuing and Paying Agent; Dealers...31 Section Alternate Liquidity Facility...32 Section Incorporation of Covenants by Reference...32 Section Sale or Encumbrance of Water System...32 Section Best Efforts to Sell Commercial Paper Notes; Successor Dealers...33 Section Reserved...33 Section Preservation of Collateral...33 Section ERISA...33 Section No Priority for Certain Debt...33 Section Offering Memorandum and Other Documents...34 Section Sovereign Immunity...34 Section Maintenance of Ratings ii-

213 Section Use of Proceeds...34 Section Rates and Charges...34 Section Maturity of Commercial Notes...35 ARTICLE VII EVENTS OF DEFAULT...35 Section 7.1. Events of Default Resulting in Immediate Termination...35 Section 7.2. Events of Default Resulting in Immediate Suspension...38 Section 7.3. Events of Default no Resulting in Immediate Termination or Suspension...38 Section 7.4. Remedies...40 Section 7.5. Suits at Law or in Equity and Mandamus...42 ARTICLE VIII OBLIGATIONS ABSOLUTE...42 Section 8.1. Obligations Absolute...42 Article IX Miscellaneous...43 Section 9.1. Liability of the Bank...43 Section 9.2. Costs and Expenses...44 Section 9.3. Notices...45 Section 9.4. Successors and Assigns...45 Section 9.5. Governing Law; Venue; Waiver of Jury Trial...46 Section 9.6. No Waivers, Amendments, Etc...47 Section 9.7. Counterparts...47 Section 9.8. Source of Funds...47 Section 9.9. Term of the Agreement...47 Section Right of Setoff...48 Section Headings...48 Section Complete and Controlling Agreement...48 Section Severability...48 Section USA PATRIOT Act Notice...48 Section Assignment to Federal Reserve Bank...48 Section No Advisory or Fiduciary Relationship...49 EXHIBIT A Form of Standby Letter of Credit EXHIBIT B Form of Advance Note EXHIBIT C Form of Term Loan Note EXHIBIT D Form of Sixteenth Supplemental Indenture -iii-

214 STANDBY LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT THIS STANDBY LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, is dated as of December 1, 2015, is between EAST BAY MUNICIPAL UTILITY DISTRICT (the District ) and SUMITOMO MITSUI BANKING CORPORATION, acting through its New York Branch (in its capacity hereunder as provider of the liquidity facility for the Commercial Paper Notes (hereinafter defined), but in no other capacity the Bank ). RECITALS: WHEREAS, the District has established a commercial paper program for the issuance and reissuance from time to time of its Commercial Paper Notes (Water Series) (the Water Series Notes ) and its Commercial Paper Notes (Wastewater Series), each in one or more subseries thereof; WHEREAS, the Commercial Paper Notes (Water Series) Tax-Exempt Subseries A-1 (herein referred to as the Commercial Paper Notes ) constitute a subseries of the Water Series Notes; WHEREAS, the District proposes to borrow money through the issuance and reissuance of the Commercial Paper Notes, in the maximum principal amount equal to the Original Stated Amount (as herein defined), pursuant to the Municipal Utility District Act, constituting Division 6 of the Public Utilities Code of the State of California, and all laws of the State of California amendatory thereof or supplemental thereto (collectively, the Act ), and Resolution No , adopted by the Board of Directors of the District on April 28, 2015 and Resolution No. -15 adopted by the Board of Directors of the District on [November,] 2015 (Resolution Nos and -15 being collectively referred to herein as the Resolution ); and WHEREAS, the District has requested the Bank to provide liquidity to support such Commercial Paper Notes by making available its Letter of Credit, initially with an Available Amount not to exceed $200,000,000. The Bank is willing to issue the Letter of Credit to the Issuing and Paying Agent for the benefit of the holders of Commercial Paper Notes, subject to the terms and conditions of this Agreement. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. In addition to other terms defined herein, unless the context shall indicate a contrary meaning or intent, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:

215 Act has the meaning set forth in the recitals hereof. Advance means a loan made pursuant to drawing under the Letter of Credit resulting from the presentation of a certificate in the form of Annex A to the Letter of Credit. Advance Notes has the meaning set forth in Section 2.3(c)(i) hereof. Affiliate means a corporation, partnership, joint venture, limited liability company, limited liability partnership, association, business trust or similar entity organized under the laws of the United States of America or any state thereof which is directly or indirectly controlled by any Person. For purposes of this definition, control means the power to direct the management and policies of a Person through the ownership of not less than a majority of its voting securities or the right to designate or elect not less than a majority of the members of its board of directors or other governing board. Agreement means this Standby Letter of Credit and Reimbursement Agreement, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof. Authorized Representative means any of the President or the Vice President of the Board of Directors of the District, the General Manager, the Director of Finance, the Treasurer or any Assistant Treasurer, the Secretary or the General Counsel of the District and such other person(s) or officer(s) of the District designated by the Board of Directors of the District to act as an Authorized Representative. Available Amount has the meaning set forth in the Letter of Credit. Available Water Revenues for any fiscal period means the sum of (a) the Water Revenues for such fiscal period plus (b) the amounts, if any, withdrawn by the District from the Rate Stabilization Fund referenced in the Water Bond Indenture for treatment as Water Revenues for such fiscal period, less the sum of (1) all Water operation and maintenance costs for such fiscal period, (2) the amounts, if any, withdrawn by the District from Water Revenues for such fiscal period for deposit in such Rate Stabilization Fund, and (3) all amounts required to be paid with respect to all Prior Water Obligations under the Prior Water Obligation Documents as the same become due and payable. Bank has the meaning set forth in the introductory paragraph hereof. Bank Rate means, for each day of determination with respect to an Advance, a rate per annum equal to (i) from and including the date such Advance is made through and including the date which is ninety (90) days immediately following the date such Advance is made, the Base Rate from time to time in effect, (ii) from and including the ninety-first (91st) day immediately following the date such Advance is made through and including the date which is one hundred twenty (120) days immediately following the date such Advance is made, the sum of the Base Rate from time to time in effect plus one percent (1.00%), and (ii) from and after the one hundred twenty-first (121st) day immediately following the date such Advance is made, the sum -2-

216 of the Base Rate from time to time in effect plus two percent (2.00%); provided that from and after the occurrence of an Event of Default, Bank Rate shall mean the Default Rate; provided further that at no time shall the Bank Rate be less than the highest per annum rate of interest applicable to any Outstanding Commercial Paper Notes. Bank s Payment Account means the Bank s account at Citibank, N.A., New York, ABA Number: , F/O Sumitomo Mitsui Banking Corporation, New York Branch, Account Number: , Attn: Trade Credit Services District, Reference: Letter of Credit No. LG/MIS/NY-, or such other office as the Bank may designate from time to time. Base Rate means, for any day, a fluctuating rate of interest per annum equal to the greatest of (i) the Prime Rate in effect at such time plus two percent (2.00%), (ii) the Federal Funds Rate in effect at such time plus three percent (3.00%), (iii) the SIFMA Rate in effect at such time plus three percent (3.00%) and (iv) six and one-half percent (6.50%). Bond Counsel means, collectively, Norton Rose Fulbright US LLP and Curls Bartling P.C. (or other nationally recognized bond counsel selected by the District with the prior written approval of the Bank, which approval shall not be unreasonably withheld). Business Day has the meaning set forth in the Letter of Credit. Capitalized Lease means any lease of real or personal property required to be capitalized on the balance sheet of the lessee in accordance with GAAP. Capitalized Lease Obligation means the amount of the liability shown on the balance sheet of any Person in respect of a Capitalized Lease as determined in accordance with GAAP. Change in Law means the occurrence, after the Effective Date, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law, regardless of the date enacted, adopted or issued. Code means the Internal Revenue Code of 1986, as amended, and when reference is made to a particular section thereof, the applicable Treasury Regulations from time to time promulgated or proposed thereunder. Commercial Paper Notes has the meaning set forth in the recitals hereof. -3-

217 Conversion Date has the meaning set forth in Section 2.3(a) hereof. Dealer Agreements means, collectively, each dealer agreement between a Dealer and the District. Dealers means each dealer selected from time to time by the District to market or remarket the Commercial Paper Notes in accordance with the Issuing and Paying Agent Agreement. As of the Effective Date, the Dealers are Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC. Debt of any Person means, on any date, without duplication, (i) all indebtedness created, assumed or incurred in any manner by such Person representing money borrowed (including by the issuance of debt securities), (ii) all obligations for the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business), (iii) all obligations secured by any Lien upon Property of such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness, (iv) all Capitalized Lease Obligations of such Person, (v) without duplication, all obligations of such Person on or with respect to letters of credit, banker s acceptances and other evidences of indebtedness representing extensions of credit whether or not representing obligations for borrowed money, (vi) all Guarantees and (vii) all obligations of such Persons under Swap Contracts. For purposes of this definition Guarantee by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part). Default means any condition or event that with the giving of notice or lapse of time or both would constitute an Event of Default. Default Rate means a rate of interest per annum equal to the sum of the Alternative Base Rate from time to time in effect plus four percent (4.00%). Designated Jurisdiction means any country or territory to the extent that such country or territory itself is the subject of any Sanction. District has the meaning set forth in the introductory paragraph hereof. Drawing has the meaning set forth in the Letter of Credit. DTC means The Depository Trust Company and any successor thereto. -4-

218 Effective Date means December [2], 2015, so long as the conditions precedent set forth in Section 4.1 hereof have been satisfied or waived (which satisfaction or waiver shall be evidenced by the execution and delivery by the Bank and the District of this Agreement as of such date). Environmental Laws means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules and regulations from time to time promulgated thereunder. ERISA Affiliate means any trade or business (whether or not incorporated) under common control with the District within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). Event of Default has the meaning set forth in Article VII hereof. Excess Interest has the meaning set forth in Section 2.4(c) hereof. Federal Funds Rate means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Bank on such day on such transactions as determined by the Bank. Fee Agreement means that certain Fee Agreement dated the Effective Date, between the District and the Bank, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof and thereof. Final Maturity Date means, with respect to any Term Loan, the earlier to occur of (i) the third (3rd) anniversary of the date on which the Bank honored the related Drawing under the Letter of Credit, (ii) the Substitution Date, (iii) the date on which the District issues new commercial paper notes or bonds to fund the full repayment of such Term Loan, (iv) the date the District voluntarily terminates the Letter of Credit or permanently reduces the Available Amount to zero; and (v) the date the Letter of Credit is terminated or the Available Amount is permanently reduced to zero or such Term Loan becomes due and payable, in each case, pursuant to Section 7.4 hereof and the terms of the Letter of Credit. -5-

219 Fitch means Fitch, Inc. and its successors and assigns. Fiscal Year means the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve month period hereafter designated as the official fiscal year period of the District, which designation shall be provided to the Bank in a certificate of the District. GAAP means generally accepted accounting principles in the United States as set forth in the opinions and pronouncements of the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA) and statements and pronouncements of the Governmental Accounting Standards Board (GASB), that are applicable to the circumstances as of the date of determination consistently applied to governmental entities, or as modified by the opinions, statements and pronouncements of any similar accounting body of comparable standing having authority over accounting by governmental entities. Governmental Authority means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including, without limitation, any supra-national bodies such as the European Union or the European Central Bank). Gross Available Amount means the Available Amount without regard to any reductions thereto that may be reinstated pursuant to the terms of the Letter of Credit. Investment Grade means a long-term rating of Baa3 (or its equivalent) or higher in the case of Moody s, BBB- (or its equivalent) or higher in the case of Fitch and BBB- (or its equivalent) or higher in the case of S&P. Issuing and Paying Agent means the firm serving as issuing and paying agent for the Commercial Paper Notes pursuant to the Issuing and Paying Agent Agreement. As of the Effective Date, the Issuing and Paying Agent is U.S. Bank National Association. Issuing and Paying Agent Agreement means the Issuing and Paying Agent Agreement, dated as of December 1, 2015, between the District and the Issuing and Paying Agent, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof and thereof. Issuing and Paying Agent Agreement Event of Default means an Event of Default as described in Section 8.01 of the Issuing and Paying Agent Agreement. Issuing and Paying Agent s Payment Account means, Attention:, ABA #:, Account No., Account Name:, Ref:, or such other account as the Issuing and Paying Agent may designate in writing from time to time. -6-

220 Laws means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law. Letter of Credit means the Bank s Standby Letter of Credit No. [ ] dated [December 2, 2015], issued by the Bank in favor of the Issuing and Paying Agent on behalf of the District, substantially in the form attached hereto as Exhibit A, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof and thereof. Letter of Credit Fees has the meaning set forth in the Fee Agreement. Lien means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. Liquidity Facility has the meaning set forth in the Issuing and Paying Agent Agreement. Loans means Advances and Term Loans. Material Adverse Change means the occurrence of any event or change resulting in (a) a material adverse change in, or material adverse effect upon, the operations, business, properties, liabilities or condition (financial or otherwise) of the Water System which change or event would reasonably be expected to result in a material impairment of the ability or authority of the District to perform its obligations under this Agreement or any Related Document to which it is a party; or (b) a material adverse change in, or material adverse effect upon, the legality, validity, binding effect or enforceability against the District of this Agreement or any Related Document to which it is a party. Material Litigation has the meaning set forth in Section 5.6 hereof. Maximum Lawful Rate means the maximum interest rate permitted by law. Maximum Loan Interest Rate means the lesser of (i) the rate of 18% per annum and (ii) the Maximum Lawful Rate. Moody s means Moody s Investors Service, Inc. and its successors and assigns. No-Issuance Notice has the meaning set forth in Section 4.3 hereof. Obligations means the fees relating to this Agreement or the Fee Agreement, the Advances, the Term Loans, and all other amounts payable by the District to the Bank pursuant to -7-

221 this Agreement, the Fee Agreement, the Advance Note, the Term Loan Note or the Issuing and Paying Agent Agreement. OFAC means the Office of Foreign Assets Control of the United States Department of the Treasury. Offering Memorandum means the Commercial Paper Offering Memorandum dated [ [November, 2015], relating to the Commercial Paper Notes, and any other offering memorandum used in connection with the offering and sale of the Commercial Paper Notes. Original Stated Amount has the meaning set forth in Section 2.1 hereof. Other Taxes has the meaning set forth in Section 3.1(a) hereof. Outstanding (i) with respect to the Commercial Paper Notes, has the meaning set forth in the Issuing and Paying Agent Agreement and (ii) with respect to Loans, means all Loans made by the Bank pursuant to the terms hereof and not repaid in full to the Bank by the District. Owner has the meaning set forth in the Issuing and Paying Agent Agreement. Participant means any Person to which the Bank or any participant has granted, directly or indirectly, a participation in the Letter of Credit and the right to receive amounts payable with respect to the Advance Note and/or the Term Loan Note; provided that any such participant shall take such participation subject to the terms of this Agreement. Person means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a governmental or political subdivision or an agency or instrumentality thereof. Prime Rate means on any day, the rate of interest in effect for such day as publicly announced from time to time by the Bank as its prime rate. The prime rate is a rate set by the Bank based upon various factors including the Bank s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by the Bank shall take effect at the opening of business on the day specified in the public announcement of such change. Prior Water Obligation Documents means the Water Bond Indenture and any other indenture, resolution or other instrument of the District providing for the issuance of indebtedness or incurrence of any other obligation of the District (including for purposes hereof, obligations under credit and liquidity facilities and obligations under interest rate swap agreements and other hedging instruments, including termination payments related thereto) secured in whole or in part by Water Revenues and which by its terms is superior in right of payment to the Commercial Paper Notes or any Water Note Parity Debt. -8-

222 Prior Water Obligations means the Water Bonds and any other securities, evidences of indebtedness or obligations of the District (including for purposes hereof, obligations under credit and liquidity facilities and obligations under interest rate swap agreements or other hedging instruments, including termination payments related thereto) issued or incurred pursuant to a Prior Water Obligation Document. Property means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, whether now owned or hereafter acquired. Rating Agency means any of S&P, Fitch and Moody s; provided, however, that if at any time the Water Bonds are not rated by S&P, Fitch or Moody s (other than as the result of such rating being withdrawn as provided in Section 7.1(g) or Section 7.3(f) hereof), such entity shall not be a Rating Agency hereunder. Recipient means the Bank or any other recipient of any payment to be made by or on account of any obligation of the District hereunder. Related Documents means the the Resolution, the Issuing and Paying Agent Agreement, the Dealer Agreements, the Commercial Paper Notes, the Fee Agreement, the Advance Note, and the Term Loan Note, in each case as amended and supplemented in accordance with the terms thereof and hereof. Resolution has the meaning set forth in the recitals hereof. Revenues Secured Debt means the (i) Prior Water Obligations, (ii) Water Note Parity Debt, and (iii) any other Water System Related Debt described in clauses (b), (d), (e) and (h) of the definition thereof (and with respect to clauses (i), (ii) and (iii), in connection with obligations of the District in respect of Swap Contracts, only (x) with respect to Swap Contracts that provide interest rate support and (y) insofar as the obligations in respect of such Swap Contracts constitute regularly scheduled payments that relate to the Commercial Paper Notes, any Water Bonds or any obligations described in clause (b) of the definition thereof) the payment of which is secured by a pledge of or lien on Water Revenues senior to or on a parity with the payment of the Commercial Paper Notes, the Advance Note and the Term Loan Note. S&P means Standard & Poor s Ratings Services, a Standard & Poor s Financial Services LLC business, and its successors and assigns. Sanction(s) means any international economic sanction administered or enforced by the United States Government (including, without limitation, OFAC), the United Nations Security Council, the European Union, Her Majesty s Treasury or other relevant sanctions authority. SIFMA Rate means, on any date, a rate determined on the basis of the seven-day high grade market index of tax-exempt variable rate demand obligations, as produced by Municipal Market Data and published or made available by SIFMA or any Person acting in cooperation with or under the sponsorship of SIFMA and acceptable to the Bank and effective from such -9-

223 date. In the event Municipal Market Data no longer produces an index satisfying the requirements of the preceding sentence, the SIFMA Rate (a/k/a, the SIFMA Municipal Swap Index ) shall be deemed to be the S&P Weekly High Grade Index, or if either such index is not available, such other similar national index as shall be reasonably designated by the Bank. Sixteenth Supplemental Indenture means the Sixteenth Supplemental Indenture dated as of February 1, 2010, between the District and The Bank of New York Mellon Trust Company, N.A., as successor trustee, supplementing the Water Bond Indenture, in the form attached as Exhibit D hereto. Special Event of Default has the meaning set forth in Section 7.1 hereof. State means the State of California. Stated Expiration Date means, initially, December [ ], 2020, as such date may be extended from time to time pursuant to the terms of the Letter of Credit. Substitution Date means the date of acceptance by the District and the Issuing and Paying Agent of a substitute or alternate Liquidity Facility in accordance with the terms and provisions of the Issuing and Paying Agent Agreement. Suspension Event has the meaning set forth in Section 7.2 hereof. Swap Contract means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a Master Agreement ), including any such obligations or liabilities under any Master Agreement. Taxes has the meaning set forth in Section 3.1(a) hereof. Term Loan means each term loan made by the Bank to the District pursuant to Section 2.1(c) hereof on a Conversion Date. Term Loan Note has the meaning set forth in Section 2.3 hereof. -10-

224 terms. Termination Date means the date the Letter of Credit terminates in accordance with its Water Bond Indenture means the Water System Subordinated Revenue Bond Indenture dated as of April 1, 1990, between the District and The Bank of New York Mellon Trust Company, N.A., as successor trustee, as amended and supplemented to the date hereof, and as further amended, supplemented, restated or otherwise modified from time to time in accordance with the terms hereof and thereof. Water Bonds means all bonds and other obligations and securities of the District issued and secured pursuant to the Water Bond Indenture. Water Note Parity Debt means any indebtedness, installment sale obligation, lease obligation or other obligation of the District for borrowed money or any interest rate swap agreement or other hedging instrument having an equal lien and charge upon all or part of the Available Water Revenues and therefore payable on a parity with the Commercial Paper Notes, including but not limited to other Water Series Notes and Extendable Municipal Commercial Paper Notes (Water Series) of the District issued under Resolution No of the District adopted on March 10, 2009, as the same may be amended from time to time. Water operation and maintenance costs means the reasonable and necessary costs of maintaining and operating the Water System, calculated on sound accounting principles, including (among other things) the reasonable expenses of management, repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, the cost of purchasing water and reasonable amounts for administration, overhead, insurance, taxes and other similar costs, but excluding in all cases depreciation and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature, and excluding all costs paid from the proceeds of taxes received by the District. Water Revenues means all charges received for, and all other income and receipts derived by the District from, the operation of the Water System, or arising from the Water System, together with income from the investment of any moneys in any fund or account established under the Water Bond Indenture. Water Series Notes has the meaning set forth in the recitals hereof. Water System means the entire water system of the District and all of the facilities thereof, including all facilities for the storage, transmission or distribution of water or the generation or transmission of hydroelectric power, together with all additions, betterments, extensions and improvements to said system or any part thereof. The term Water System does not include the sewage disposal system or facilities of Special District No. 1 of the District (including any power generation facilities constituting a part of said system). Water System Related Debt means, without duplication, the following types of obligations with respect to, and to the extent payable from or secured by Water Revenues: (a) all obligations of the District for borrowed money, (b) all obligations of the District evidenced by -11-

225 bonds, debentures, notes or other similar instruments, (c) all obligations of the District to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (d) all obligations of the District under leases which are or should be, in accordance with GAAP, consistently applied, recorded as capital leases, (e) all obligations of the District to reimburse or repay any bank or other Person in respect of amounts paid or advanced under a letter of credit, credit agreement, liquidity facility or other instrument, (f) all obligations of other Persons secured by a Lien on Water Revenues, whether or not such obligations are assumed by the District, (g) all obligations of other Persons guaranteed directly or indirectly by the District and (h) obligations of the District in respect of Swap Contracts, including, without limitation, interest rate swap agreements. Section 1.2. Other Interpretive Provisions. With reference to this Agreement and each Related Document, unless otherwise specified herein or in such Related Document: (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. The word will shall be construed to have the same meaning and effect as the word shall. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any Related Document), (ii) any reference herein to any Person shall be construed to include such Person s successors and assigns, (iii) the words herein, hereof and hereunder, and words of similar import when used in any Related Document, shall be construed to refer to such Related Document in its entirety and not to any particular provision thereof, (iv) all references in a Related Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Related Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words asset and property shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. (b) In the computation of periods of time from a specified date to a later specified date, the word from means from and including; the words to and until each mean to but excluding; and the word through means to and including. (c) Section headings herein and in the Related Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any Related Document. -12-

226 Section 1.3. Accounting Terms. All accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles applied on a basis consistent with the financial statements of the District referred to in Section 5.8 hereof. Section 1.4. Interpretations. The table of contents and article and section headings of this Agreement are included herein for convenience of reference purposes only and shall not constitute a part of this Agreement or affect its interpretation in any respect. All references to time herein shall refer to local time in New York, New York. Section 1.5. Rounding. Any financial ratios required to be maintained by the District pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number). ARTICLE II LETTER OF CREDIT ADVANCES; TERM LOANS Section 2.1. Issuance of Letter of Credit. Upon the terms, subject to the conditions and relying upon the representations and warranties set forth in this Agreement or incorporated herein by reference, the Bank agrees to issue the Letter of Credit (substantially in the form of Exhibit A hereto). The Letter of Credit shall be in the original stated amount of $200,000,000 (the Original Stated Amount ), which is the maximum principal amount of Commercial Paper Notes that may be Outstanding at any time so long as this Agreement shall be in effect. Section 2.2. Liquidity Drawings. The Issuing and Paying Agent is authorized to make drawings under the Letter of Credit in accordance with the terms thereof to pay the principal of Commercial Paper Notes at the stated maturity thereof to the extent proceeds of any sale of Commercial Paper Notes or any other funds are unavailable therefor. The District hereby directs the Bank to make payments under the Letter of Credit in the manner therein provided. The District hereby irrevocably approves reductions and reinstatements of the Available Amount of the Letter of Credit as provided therein. Section 2.3. Reimbursement of Drawings under the Letter of Credit; Bank Note Mandatory Prepayment; Interest. (a) Advances. Each Drawing under the Letter of Credit shall constitute an Advance under this Agreement. Each Advance shall be paid in full on the date such Advance is made; provided, however, that if no Event of Default has occurred and is continuing and the representations and warranties of the District contained in Article V hereof are true and correct in all material respects as of the date of the related Advance, then such Advance shall be repaid on the earliest to occur of the following: (i) the ninetieth (90th) day immediately succeeding the date the Bank honored the related -13-

227 Drawing under the Letter of Credit, (ii) the Stated Expiration Date (the earlier to occur of the dates in clauses (i) and (ii), referred to herein as the Conversion Date ), (iii) the Termination Date (other than the Stated Expiration Date) and (iv) the Business Day when Commercial Paper Notes are sold to fund such repayment; provided further, however, that if the conditions to the making of the Term Loan set forth in Section 4.2 are satisfied on the related Conversion Date, such Advance shall be deemed to be repaid from the proceeds of a Term Loan made in accordance with Section 2.3(b) hereof. (b) Term Loans. Subject to the satisfaction of the terms and conditions of Section 4.3 hereof, on a Conversion Date, the unpaid principal amount of the related Advance shall convert into a Term Loan and the proceeds of such Term Loan shall be used to pay in full the related Advance; provided, however, that the aggregate outstanding principal amount of all Loans by the Bank shall at no time exceed the Available Amount. No principal amount of a Term Loan that is paid or prepaid may be reborrowed hereunder or under the Letter of Credit. The principal of each Term Loan shall be repaid in full no later than the Final Maturity Date. The principal of each Term Loan shall be repaid in full no later than the Final Maturity Date. The principal amount of each Term Loan shall be payable in equal semi-annual installments, commencing on first Business Day of the next succeeding June or December that is at least 120 days after the Conversion Date and continuing on the first Business Day of each June and December to occur thereafter to and including the Final Maturity Date and on the Final Maturity Date for the related Term Loan; provided, however, that notwithstanding the foregoing, the aggregate outstanding principal amount of, and interest on, all Loans shall be repaid on the Final Maturity Date. (c) Bank Notes. (i) All Advances shall be evidenced by one Advance Note of the District in substantially the form of Exhibit B hereto (the Advance Note ) to be delivered on the Effective Date, payable to the Bank in accordance with the provisions of the Issuing and Paying Agent Agreement in a principal amount up to the Original Stated Amount. (ii) All Term Loans shall be evidenced by one Term Loan Note of the District in substantially the form of Exhibit C hereto (the Term Loan Note ), to be delivered on the Effective Date, payable to the Bank in accordance with the provisions of the Issuing and Paying Agent Agreement in a principal amount equal to the Original Stated Amount. The Advance Note and the Term Loan Note each constitute a Bank Note under the Issuing and Paying Agent Agreement. Notwithstanding anything herein to the contrary, the principal amount of all Outstanding Loans under the Advance Note and the Term Loan Note in the aggregate shall never exceed the Gross Available Amount. (iii) The Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the District resulting from Advances and Term Loans and the amounts of principal and interest payable and paid from time to time under the Advance Note and the Term Loan Note. The failure to record any such amount, or any error in such records, shall not, however, limit or otherwise affect the Obligations of the District hereunder to repay any and all amounts owed hereunder, together with all interest accrued thereon as provided herein. -14-

228 Section 2.4. Interest. (a) Subject to the provisions of subsection (b) below, the District shall pay interest on the unpaid principal amount of each Loan, from the date of such Loan until such principal amount shall be paid in full, at the Bank Rate, payable monthly in arrears on the first Business Day of each month (commencing on the first such date to occur after the making of such Loan), on the Termination Date, on the Final Maturity Date and on the date any Loan shall be paid or prepaid; provided however, that, subject to the provisions of subparagraph (c) below, at no time shall the interest rate payable on any Loan exceed the Maximum Loan Interest Rate. (b) (i) From and after the occurrence of an Event of Default and during the continuance of any such Event of Default, all Obligations of the District to the Bank hereunder shall thereafter bear interest at the Default Rate; provided however, that, subject to the provisions of subparagraph (c) below, at no time shall the Default Rate exceed the Maximum Loan Interest Rate. (ii) If any amounts payable by the District hereunder (without regard to any applicable grace periods) or under any Related Document are not paid when due, whether at stated maturity, by acceleration or otherwise, such amounts shall thereafter bear interest at the Default Rate. (iii) Accrued and unpaid interest on past due amounts (including interest on past due interest, to the extent permitted by law) shall be due and payable upon demand. (c) To the extent permitted by law, if the rate of interest payable hereunder shall exceed the Maximum Loan Interest Rate for any period for which interest is payable, then (i) interest at the Maximum Loan Interest Rate shall be due and payable with respect to such interest period and (ii) interest at the rate equal to the difference between (A) the rate of interest calculated in accordance with the terms hereof without regard to the limitation of the Maximum Loan Interest Rate and (B) the Maximum Loan Interest Rate (the Excess Interest ), shall be deferred until such date as the rate of interest calculated in accordance with the terms hereof ceases to exceed the Maximum Loan Interest Rate, at which time the District shall pay to the Bank with respect to amounts then payable to the Bank that are required to accrue interest hereunder, such portion of the deferred Excess Interest as will cause the rate of interest then paid to the Bank to equal the Maximum Loan Interest Rate, which payments of deferred Excess Interest shall continue to apply to such unpaid amounts hereunder until all deferred Excess Interest is fully paid to the Bank. Upon the termination of the Letter of Credit and this Agreement, in consideration for the limitation of the rate of interest otherwise payable hereunder, the District shall pay to the Bank a fee equal to the amount of all unpaid deferred Excess Interest to the extent provided by law. (d) All computations of interest shall be made by the Bank on the basis of a year of 365/366 days (as applicable) and all other computations of fees and other amounts due and owing hereunder shall be made by the Bank on the basis of a year of 360 days, in each case, for the actual number of days (including the first day but excluding the last day in the case of interest) occurring in the period for which such interest or fee is payable. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall bear interest for one day. Each determination -15-

229 by the Bank of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent demonstrable error. In addition, any calculation made pursuant to this Section 2.4(d) that would cause the interest paid, payable or accruing on the indebtedness of the District under this Agreement, the Advance Note and the Term Loan Note to exceed the Maximum Loan Interest Rate shall be adjusted so as to reduce the interest paid, payable and accruing hereunder to such Maximum Loan Interest Rate, as more fully set forth in Section 2.4(c) hereof. Section 2.5. Fees. The District agrees to perform the obligations provided for in the Fee Agreement, including, without limitation, the payment of any and all fees provided for therein. The terms and provisions of the Fee Agreement are incorporated herein by reference. Any reference herein or in any other document to fees and/or other amounts or obligations payable hereunder shall include, without limitation, all fees and other amounts or obligations payable pursuant to the Fee Agreement. Section 2.6. Termination of Letter of Credit or Reduction of Available Amount. (a) Notwithstanding any provision of this Agreement to the contrary, the District agrees not to terminate the Letter of Credit or permanently reduce the Available Amount prior to the Stated Expiration Date, except upon (i) the payment by the District to the Bank of a termination fee or a reduction fee, if any and as applicable, in the amounts set forth in the Fee Agreement, (ii) with respect to termination, the payment to the Bank of all Obligations payable hereunder and (iii) the District providing the Bank with twenty (20) days prior written notice of its intent to terminate the Letter of Credit or permanently reduce the Available Amount; provided that all payments to the Bank referred to in clauses (i) and (ii) above shall be made in immediately available funds. (b) The Letter of Credit shall terminate on the Termination Date. All Advances then Outstanding (together with accrued interest thereon) shall be due and payable on the Termination Date, unless such Advances have been converted into Term Loans pursuant to the provisions of this Agreement. (c) If the Letter of Credit is terminated, all accrued Letter of Credit Fees and all other amounts due and owing hereunder and under the Fee Agreement shall be payable on the effective date of such termination. Section 2.7. Prepayments. (a) Optional Prepayments. The District may, upon notice to the Bank at any time or from time to time voluntarily prepay any Loan in whole or in part at any time, without penalty or premium (other than any Reduction Fee, if any, in the amount set forth in the Fee Agreement), each such prepayment to be accompanied by the payment of accrued interest to the date of such prepayment on the amount prepaid, provided that (i) each partial prepayment shall be in a principal amount equal to at least $100,000 and integral multiples thereof or the balance owed to the Bank, and (ii) the District shall give the Bank irrevocable written notice at least one Business Day prior to the date of the prepayment of a Loan. Each notice of prepayment shall be irrevocable and shall specify the date and the amount of the prepayment and identify the Loan to be prepaid. -16-

230 (b) Mandatory Prepayments. (i) If on any date (A) the sum of the aggregate principal amount of outstanding Loans exceeds the amount of the Gross Available Amount, the District shall immediately prepay the Loans in an amount equal to such excess, (B) the aggregate principal amount of Outstanding Commercial Paper Notes exceeds the amount of the Available Amount, the District shall immediately prepay the Loans in an amount equal to such excess, or (C) any Commercial Paper Notes are sold to finance the repayment of a Loan, the District shall immediately prepay any outstanding Loans (if any) in an amount equal to the sum of the proceeds from such sale. Each such prepayment shall be accompanied by the payment of accrued interest to the date of such prepayment on the amount prepaid. (d) Application. Any amount of principal of an Advance prepaid in accordance with this Section 2.7 may be reborrowed under the Letter of Credit in accordance with the terms thereof. Any amount of principal of a Term Loan prepaid in accordance with this Section 2.7 shall be applied to reduce the installments of principal due and payable hereunder with respect to such Term Loan in the inverse order of maturity, and, if prepaid prior to the Termination Date, may be reborrowed under the Letter of Credit in accordance with the terms thereof. Section 2.8. General Provisions as to Payment. The following general provisions shall apply to all payments of Letter of Credit Fees, payments on the Loans, the Advance Note and the Term Loan Note and all other Obligations of the District to the Bank under this Agreement: (a) The Bank shall calculate and notify the District in writing of the amounts due and payable by the District hereunder; provided, however, that the failure of the Bank to provide such notice shall not affect the obligations of the District to make any payments owed to the Bank hereunder. All payments to be made by the District or the Issuing and Paying Agent on behalf of the District shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the District hereunder shall be made to the Bank, at the Bank s Payment Account in U.S. Dollars and in immediately available funds not later than 4:00 p.m. on the date specified herein. All payments received by the Bank after 4:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the District shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be. (b) Nothing herein shall be deemed to obligate the Bank to obtain the funds for any Loan in any particular place or manner or to constitute a representation by the Bank that it has obtained or will obtain the funds for any Loan in any particular place or manner. Section 2.9. Nature of Obligations. Notwithstanding any other provision of this Agreement to the contrary, the Advance Note, the Term Loan Note, and all other Obligations of the District hereunder and under the Fee Agreement are special, limited obligations of the District secured by and payable solely from Available Water Revenues and such funds and accounts pledged therefor under the Issuing and Paying Agent Agreement, and are secured by -17-

231 such Available Water Revenues on a parity with the Commercial Paper Notes and the Water Note Parity Debt (including all other Water Series Notes). Anything herein to the contrary notwithstanding, the Advance Note, the Term Loan Note and the other Obligations of the District hereunder and under the Fee Agreement shall not constitute a debt or obligation of the State or any political subdivision thereof (other than the District) and the State shall not be liable with respect thereto, and the Advance Note, the Term Loan Note and any other Obligations of the District hereunder and under the Fee Agreement shall not be entitled to be paid out of any funds of the District other than from Available Water Revenues and other amounts pledged therefor, as applicable, as and to the extent provided herein and in the Issuing and Paying Agent Agreement (and subject to disbursements in accordance with the provisions of the Issuing and Paying Agent Agreement), and nothing contained herein or in the Issuing and Paying Agent Agreement shall be considered as pledging any other funds or assets of the District. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY Section 3.1. Net of Taxes, Etc. (a) Taxes. To the fullest extent permitted by law, any and all payments to the Bank by the District hereunder shall be made free and clear of and without deduction for any and all taxes, levies, imposts, deductions, charges, withholdings or liabilities imposed as a result of a Change in Law, excluding, however, taxes imposed on or measured by the net income or capital of the Bank by any jurisdiction or any political subdivision or taxing authority thereof or therein, solely as a result of a connection between the Bank and such jurisdiction or political subdivision (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as Taxes ). If, as a result of a Change in Law, the District shall be required by law to withhold or deduct any Taxes imposed by the United States or any political subdivision thereof from or in respect of any sum payable hereunder to the Bank, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.1), the Bank receives an amount equal to the sum it would have received had no such deductions been made, (ii) the District shall make such deductions and (iii) the District shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. Notwithstanding anything to the contrary contained herein, the District shall not be required to pay any additional amount in respect of withholding of United States Federal income taxes pursuant to this Section to the extent such withholding is required because the Bank has failed to submit any form or certificate that it is entitled to submit under applicable law to qualify for an exemption from such withholding. Further, if the District shall make any payment under this Section 3.1 to or for the benefit of the Bank with respect to Taxes and if the Bank shall claim any credit or deduction for such Taxes against any other taxes payable by the Bank to any taxing jurisdiction in the United States, then the Bank shall pay to the District an amount equal to the amount by which such other taxes are actually reduced; provided that the aggregate amount payable by the Bank pursuant to this sentence shall not exceed the aggregate amount previously paid by the District with respect to such Taxes. In addition, the District agrees to pay any present or future stamp, recording or documentary taxes and, if as a result of any Change in Law, any -18-

232 other excise or property taxes, charges or similar levies that arise under the laws of the United States of America, the State of New York or any other taxing authority from which or through which any payment is made hereunder or from the execution or delivery or otherwise with respect to this Agreement, excluding, however, taxes imposed on or measured by the net income or capital of the Bank by any jurisdiction or any political subdivision or taxing authority thereof or therein solely as a result of a connection between the Bank and such jurisdiction or political subdivision (hereinafter referred to as Other Taxes ). The Bank shall provide to the District within a reasonable time a copy of any written notification it receives with respect to Other Taxes owing by the District to the Bank, hereunder; provided that the failure by the Bank to send such notice shall not relieve the District of its obligation to pay such amounts hereunder. (b) Indemnity. The District shall, to the fullest extent permitted by law, and subject to the provisions of Section 2.9 hereof, indemnify the Bank, for the full amount of Taxes and Other Taxes including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.1 paid by the Bank, or any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted; provided, that the District shall not be obligated to indemnify the Bank for any penalties, interest or expenses relating to Taxes or Other Taxes arising from the Bank s gross negligence or willful misconduct. The Bank agrees to give notice to the District of the assertion of any claim against the Bank relating to such Taxes or Other Taxes as promptly as is practicable after being notified of such assertion; provided, that the Bank s failure to notify the District promptly of such assertion shall not relieve the District of its obligation under this Section 3.1. Payments by the District pursuant to this indemnification shall be made within thirty (30) days from the date the Bank makes written demand therefor, which demand shall be accompanied by a certificate describing in reasonable detail the basis thereof. The Bank agrees to repay to the District any refund (including that portion of any interest that was included as part of such refund) with respect to Taxes or Other Taxes paid by the District pursuant to this Section 3.1 received by the Bank for Taxes or Other Taxes that were paid by the District pursuant to this Section 3.1. (c) Notice. Within thirty (30) days after the date of any payment of Taxes by the District, the District shall furnish to the Bank, the original or a certified copy of a receipt evidencing payment thereof. The District shall compensate the Bank for all reasonable losses and expenses sustained by the Bank as a result of any failure by the District to so furnish such copy of such receipt. Section 3.2. Increased Costs. (a) Increased Costs Generally. If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, the Bank; -19-

233 (ii) without duplication with Section 3.1 hereof, subject any Recipient to any taxes on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or (iii) impose on the Bank any other condition, cost or expense affecting this Agreement, the Letter of Credit, the Advance Note, the Term Loan Note or the Fee Agreement or any participation therein; and the result of any of the foregoing shall be to increase the cost to the Bank of issuing or maintaining the Letter of Credit (or of maintaining its obligation to make Loans hereunder), or to reduce the amount of any sum received or receivable by the Bank hereunder (whether of principal, interest or any other amount) then, upon request of the Bank, the District will pay to the Bank such additional amount or amounts as will compensate the Bank for such additional costs incurred or reduction suffered. (b) Capital Requirements. If the Bank determines that any Change in Law affecting the Bank or the Bank s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on the Bank s capital or liquidity or on the capital or liquidity of the Bank s holding company, if any, as a consequence of this Agreement or the Letter of Credit maintained by the Bank, to a level below that which the Bank or the Bank s holding company could have achieved but for such Change in Law (taking into consideration the Bank s policies and the policies of the Bank s holding company with respect to capital adequacy), then from time to time the District will pay to the Bank such additional amount or amounts as will compensate the Bank or the Bank s holding company for any such reduction suffered. (c) Certificates for Reimbursement. A certificate of the Bank setting forth the amount or amounts necessary to compensate the Bank or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the District shall be conclusive absent manifest error. The District shall pay the Bank the amount shown as due on any such certificate within thirty (30) days after receipt thereof. (d) Delay in Requests. Failure or delay on the part of the Bank to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of the Bank s right to demand such compensation; provided that the District shall not be required to compensate the Bank pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than one hundred twenty (120) days prior to the date that the Bank notifies the District of the Change in Law giving rise to such increased costs or reductions and of the Bank s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the one hundred twenty (120) day period referred to above shall be extended to include the period of retroactive effect thereof). Section 3.3. Survival. All of the District s obligations under this Article III shall survive termination of the Letter of Credit and repayment of all Obligations hereunder. -20-

234 ARTICLE IV CONDITIONS PRECEDENT TO EFFECTIVENESS Section 4.1. Conditions Precedent to Effective Date. The Bank s obligation to issue the Letter of Credit shall become effective on the Effective Date subject to the satisfaction of the following conditions: (a) the District shall provide to the Bank on or before the Effective Date, in form and substance satisfactory to the Bank and its counsel Chapman and Cutler LLP: (i) a written opinion or opinions of counsel to the District dated the Effective Date and addressed to the Bank; (ii) the written opinion or opinions of Bond Counsel, and Orrick, Herrington & Sutcliffe LLP, as special tax counsel, each dated the Effective Date and addressed to the Bank; (iii) a certificate signed by a duly authorized officer of the District, dated the Effective Date and stating that: (A) the representations and warranties contained in Article V of this Agreement are true and correct on and as of the Effective Date as though made on such date; and (B) no Event of Default or Default has occurred and is continuing, or would result from the execution and delivery of this Agreement or any Related Document to which the District is a party; (iv) a copy of resolutions of the District certified as of the Effective Date by the Secretary, authorizing, among other things, the execution and delivery by the District of this Agreement and the Related Documents to which it is a party; (v) a certificate of the Secretary of the District certifying the names and true signatures of the officers of the District authorized to sign this Agreement and the Related Documents to which the District is a party; (vi) evidence that (x) the Commercial Paper Notes have been assigned the short-term ratings of F1 (or its equivalent) by Fitch, A-1 (or its equivalent) by S&P and P-1 (or the equivalent thereof) by Moody s and (y) the District s unenhanced Water Bonds are rated AA+ (or its equivalent) by Fitch, AAA (or its equivalent) by S&P and Aa1 (or its equivalent) by Moody s; (vii) executed copies (certified if applicable) of (i) this Agreement, (ii) each of the Related Documents and (iii) the Water Bond Indenture; -21-

235 (viii) evidence satisfactory to the Bank that (i) a separate CUSIP number has been obtained and reserved from Standard and Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. for the Advance Note and the Term Loan Note (such CUSIP numbers shall also be made available on the Bloomberg Municipal Bond Description Screen or otherwise provided electronically to the Bank pursuant to a third party provider of such information) and (ii) the Advance Note and the Term Loan Note (and their related CUSIP numbers) shall have been assigned a long-term rating of at least Investment Grade by any one Rating Agency; (ix) payment of the fees, costs and expenses set forth in this Agreement and the Fee Agreement that are payable on the Effective Date; and (x) such other documents, certificates and instruments (and, if requested by the Bank, certified duplicates or executed copies thereof) as the Bank may reasonably request; and (b) the Bank shall have determined, as of the Effective Date, that no change in law, regulation, ruling or other official action of the United States, the State of California or the State of New York shall have occurred, the effect of which would be to make it unlawful or otherwise prevent the District or the Bank from fulfilling its respective obligations under this Agreement or any Related Document to which it is a party. Section 4.2. Conditions to Term Loan. The obligation of the Bank to make any Term Loan is subject to (i) the representations and warranties of the District contained in Article V hereof shall be true and correct in all material respects on and as of the Conversion Date as though made on and as of such date, except to the extent a representation or warranty relates specifically to an earlier date (in which case such representation or warranty shall be true and correct as of such date); (ii) no Event of Default shall have occurred and be continuing on the Conversion Date; and (iii) the Bank shall have received a certificate, signed by the District and dated the applicable Conversion Date, confirming that all of the foregoing conditions have been satisfied. Section 4.3. Conditions Precedent to Each Note Issuance. No Commercial Paper Notes shall be issued unless on the date of such issuance, each of the following conditions precedent shall have been fulfilled: (a) No Event of Default. No Event of Default shall have occurred and be continuing on such date or would result from such issuance. (b) Representations and Warranties Correct. The representations and warranties contained in Article V hereof and in each Related Document shall be true and correct in all material respects on and as of the issuance date as though made on and as of such date, except to the extent a representation or warranty relates specifically to an earlier date (in which case such representation or warranty shall be true and correct as of such date). -22-

236 (c) Commercial Paper Notes. All conditions precedent for the issuance of the Commercial Paper Notes under the Issuing and Paying Agent Agreement and the Resolution shall have been satisfied. (d) No-Issuance Notice. The Bank shall not have given a No-Issuance Notice. (e) Available Amount. After the issuance of the Commercial Paper Notes, the aggregate principal amount of all Commercial Paper Notes that will be outstanding immediately after such issuance will not exceed the Available Amount. Unless the District shall have previously advised the Bank in writing that one or more conditions set forth in subsections (a), (b), (c) and (e) of this Section 4.3 have not been satisfied, the District shall be deemed to have represented and warranted that on the date of such issuance or authentication of any Commercial Paper Note the above conditions have been satisfied. The Bank may deliver a notice to the Issuing and Paying Agent and to the District, directing the District not to issue and the Issuing and Paying Agent not to authenticate any Commercial Paper Notes (a No-Issuance Notice ), at any time that the Bank shall have determined that any condition to the issuance of Commercial Paper Notes has not been satisfied. The No-Issuance Notice may be delivered by telecopy, by mail, by electronic mail, or by messenger, and may also be given by telephone if promptly confirmed in writing. Upon receipt of such No-Issuance Notice, the District shall not issue and the Issuing and Paying Agent shall not authenticate any Commercial Paper Notes, in each case unless and until such No-Issuance Notice is rescinded by the Bank. The District shall use its best efforts to cause the Issuing and Paying Agent to comply immediately with any such No-Issuance Notice. The Bank shall not incur any liability as a result of the Bank s giving any No-Issuance Notice that, in its good faith judgment, the Bank determines to be in accordance with this Section 4.3. The Bank agrees that if, after the delivery of a No-Issuance Notice, the Bank determines that the conditions to the issuance of Commercial Paper Notes have been satisfied and the Bank has received a notice from the District to such effect, then the Bank shall promptly deliver a notice (a copy of which shall be delivered by the Bank to the District and each Dealer) to the Issuing and Paying Agent, rescinding such No- Issuance Notice. ARTICLE V REPRESENTATIONS AND WARRANTIES To induce the Bank to enter into this Agreement and to issue the Letter of Credit, the District makes the following representations and warranties to, and agreements with, the Bank (which representations, warranties and agreements shall survive the execution and delivery of this Agreement): Section 5.1. Organization and Powers. The District (a) is a municipal utility district duly organized and validly existing under the laws of the State; (b) has all governmental power and authority, and all governmental licenses, authorizations, consents and approvals, to conduct the business of the Water System, to own the property (real and personal) constituting the Water System; and (c) had, as of the date of adoption thereof, full power and authority to adopt the -23-

237 Resolution and has full power and authority to execute, deliver and perform all of its obligations under this Agreement and the other Related Documents to which it is or will be a party and to borrow amounts hereunder. Section 5.2. Authorization; Contravention. The execution, delivery and performance by the District of the Issuing and Paying Agent Agreement, this Agreement and the other Related Documents, the issuance of the Commercial Paper Notes, the Advance Note and the Term Loan Note, and the making of the payments under the Advance Note and the Term Loan Note and hereunder, (a) have been duly authorized by all necessary action by the District, and (b) do not and will not, in any respect material to the ability of the District to perform its obligations under this Agreement or the Related Documents, (i) violate any constitutional provision or any provision of any law, rule, regulation, order, writ, injunction, decree or determination of any court or other Governmental Authority having applicability to the District, or (ii) result in a breach of or constitute a default under any of the material terms, conditions or provisions of any ordinance, resolution, mortgage, indenture, agreement or instrument to which the District is a party or by which the District or any of its properties is bound. Section 5.3. Governmental Consent or Approval. No authorization, consent, approval, permit, license, exemption or other action by, and no filing or registration with, any court or governmental department, commission, board, bureau, agency or other Governmental Authority (including, without limitation, any voter referendum) is or will be necessary for the valid adoption, execution, delivery or performance by the District of this Agreement, the Advance Note, the Term Loan Note or any of the other Related Documents, or the issuance of Commercial Paper Notes, except such as shall have been duly obtained, given or accomplished prior to the execution and delivery hereof or thereof. Section 5.4. Binding Effect. This Agreement, the Issuing and Paying Agent Agreement and the other Related Documents constitute legal, valid and binding obligations of the District, enforceable against the District in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally, by general equitable principals (regardless of whether such enforceability is considered in a proceeding in equity or at law) and by limitations on legal remedies against public agencies in the State. The Commercial Paper Notes, the Advance Note and the Term Loan Note have been duly and validly issued under the Act, the Resolution and the Issuing and Paying Agent Agreement and are entitled to the benefits thereof. Section 5.5. Federal Reserve Regulations. No part of the proceeds made available under the Letter of Credit will be used for the purpose, whether immediate, incidental, or ultimate, to purchase or carry any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time), or to extend credit to others for the purpose of purchasing or carrying any margin stock, or for any other purpose which would violate any of the regulations of said Board of Governors. Section 5.6. Litigation. Except as otherwise disclosed in the Offering Memorandum delivered by the District on or prior to the Effective Date or otherwise disclosed by the District to the Bank in writing prior to the Effective Date, there is no action, suit, proceeding, inquiry or -24-

238 investigation at law or in equity before or by any court, other Governmental Authority or arbitrator, pending with service of process accomplished or, to the best knowledge of the District after due inquiry, threatened against or affecting the District (i) wherein an unfavorable decision, ruling or finding would reasonably be expected to result in a Material Adverse Change or (ii) which in any way contests the existence, organization or powers of the District to adopt, execute and deliver this Agreement or any of the Related Documents or to perform its obligations hereunder or thereunder (herein referred to as Material Litigation ). Section 5.7. No Defaults. The District is not in material default under (i) any order, writ, injunction or decree of any court or other Governmental Authority applicable to the Water System, or (ii) any law or regulation applicable to the Water System, or (iii) any Water System Related Debt or other Debt of the District payable from or secured by the Water Revenues, or (iv) any contract, agreement or instrument to which the District is a party or by which it or its property is bound, in any case, which default would reasonably be expected to result in a Material Adverse Change. In addition, (a) no Event of Default has occurred and is continuing, or exists and (b) no Issuing and Paying Agent Agreement Event of Default has occurred and is continuing, or exists. Section 5.8. Financial Statements. The financial statements for the Fiscal Year ended June 30, 2015 (which includes information regarding the financial status of the Water System for such period), together with the auditors reports with respect thereto for such Fiscal Year, copies of which have been furnished to the Bank, are complete and correct and fairly present such financial information of the District (and the Water System) at such dates and for such periods and were prepared in accordance with GAAP. Except as otherwise disclosed in writing to the Bank, such financial statements disclose all Prior Water Obligations and Water Note Parity Debt outstanding as of the Effective Date. As of the Effective Date, the Water System has no contingent liabilities (excluding any swap agreements entered into in connection with any Water Bonds) which are material to it other than as indicated in such financial statements or as otherwise disclosed to the Bank in writing. Section 5.9. Complete and Correct Information. To the best knowledge of the District after reasonable investigation, the representations and statements made by the District in this Agreement and the Related Documents, and all certificates and other documents furnished by the District to the Bank with respect to the District or the Water System in connection with the transactions contemplated hereby, were, as of their respective dates, complete and correct in all material respects and did not contain any material misstatement of fact relating to the District or the Water System necessary to make the statements contained herein and therein not misleading. To the best knowledge of the District after reasonable investigation, as of the Effective Date, there is no fact or circumstance that could reasonably be expected to result in a Material Adverse Change. Section Sovereign Immunity. The District is not entitled to claim, with respect to itself or the Available Water Revenues, the defense of sovereign immunity in any action, suit or proceeding arising under or relating to this Agreement or any Related Document (a) to enforce the provisions hereof or thereof, (b) for monetary damages or (c) for the execution or enforcement of any judgment (subject to applicable bankruptcy or insolvency laws or limitations -25-

239 on legal remedies against public agencies in the State), nor may there be attributed to the District or the Available Water Revenues any such immunity (whether or not claimed). Section Compliance with Rules and Regulations. (a) The District is in compliance with all laws, ordinances, orders, rules regulations applicable to it (including, without limitation, laws of the State relating to investments pursuant to Chapter 4, Part 1, Division 2, Title 5 of the California Government Code and Article 7 of the Act to the extent applicable), noncompliance with which would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change, and (b) all cash and other assets of the District are invested in accordance with all laws, ordinances, orders, rules regulations applicable to it and all established investment policy guidelines of the District (a true and correct copy of which guidelines in effect as of the Effective Date have been disclosed to the Bank in writing), as amended or otherwise modified from time to time, except for such minor deviations therefrom as will not impair the finances of the District or its ability to satisfy its Obligations hereunder. Section No ERISA Plans. The District has never established, is not a party to and has never contributed to any employee benefit plan within the meaning of Section 3(3) of ERISA or any other form of bonus, incentive compensation, deferred compensation or other similar plan or arrangement, other than a governmental plan within the meaning of Section 414(b) of the Code or Section 3(32) of ERISA. Section Tax-Exempt Status of Commercial Paper Notes. The District has not taken any action or omitted to take any action, and knows of no action taken or omitted to be taken by any other person or entity, which action, if taken or omitted, would adversely affect the exclusion of interest on the Commercial Paper Notes from gross income for federal income tax purposes. Section Incorporation of Representations and Warranties by Reference. The District hereby makes to the Bank the same representations and warranties as are set forth in the Issuing and Paying Agent Agreement, which representations and warranties, together with the related defined terms contained therein, are hereby incorporated by reference in this Section 5.14 with the same effect as if each and every representation and warranty and defined term were set forth in this Section 5.14 in its entirety. No amendment to such representations and warranties or defined terms made pursuant to the Issuing and Paying Agent Agreement shall be effective to amend such representations and warranties and defined terms as incorporated by reference in this Section 5.14 without the prior written consent of the Bank. Section No Proposed Legal Changes. There is no amendment or, to the knowledge of the District after reasonable investigation, proposed amendment certified for placement on a statewide ballot, to the Constitution of the State or any published administrative interpretation of the Constitution of the State or any law of the State, or any legislation that has passed either house of the legislature of the State, or any published judicial decision interpreting any of the foregoing, the effect of which is to materially adversely affect the ability of the District to perform its obligations under this Agreement and the Related Documents. Section Environmental Laws. Except as disclosed in the District s financial statements or otherwise in writing to the Bank prior to the Effective Date, as of the Effective -26-

240 Date, the District has not received notice to the effect that the operations of the Water System are not in compliance with any of the requirements of any applicable Environmental Laws or health and safety statutes and regulations or are the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which noncompliance or remedial action could reasonably be expected to have a Material Adverse Change. Section Issuing and Paying Agent and Dealers. The Issuing and Paying Agent is the duly appointed and acting issuing and paying agent under the Issuing and Paying Agent Agreement. The Dealers are the duly appointed and acting dealers with respect to the Commercial Paper Notes. Section Offering Memorandum. The Offering Memorandum prepared with respect to the Commercial Paper Notes, a true copy of which has heretofore been delivered to the Bank, does not as of its date or as of the Effective Date contain, and such Offering Memorandum (including any amendments or supplements prepared subsequent to its date, a true copy of which shall be furnished to the Bank prior to the distribution thereof), will not as of the date thereof contain, any untrue statement of a material fact and such Offering Memorandum does not as of its date or as of the Effective Date omit, and will not as of the date of any such amendment or supplement omit, to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except no representation is made as to information furnished by or on behalf of the Bank, the Dealers or DTC expressly for inclusion therein. Section Related Documents. Each of the Related Documents to which the District is a party is in full force and effect and none of the Related Documents has been amended or supplemented except by such amendments or supplements as have previously been delivered to the Bank to the extent required by the provisions hereof. Section Issuance of Commercial Paper Notes. Each issuance of Commercial Paper Notes by the District shall be deemed a representation by the District that (a) on such date, and after giving effect to the issuance of the Commercial Paper Notes, no Event of Default has occurred or is continuing, (b) the representations and warranties of the District contained in this Agreement and the other Related Documents to which it is a party are true and correct in all material respects on and as of the date of issuance of the Commercial Paper Notes in question as though made on and as of such date, except to the extent a representation or warranty relates specifically to an earlier date (in which case such representation or warranty shall be true and correct as of such date), and (c) the aggregate amount of Commercial Paper Notes Outstanding, after issuance of the Commercial Paper Notes will not exceed the Available Amount. Section Sanctions Concerns and Anti-Corruption Laws. Neither the District, nor, to the knowledge of the District, any Related Party, (a) is currently the subject of any Sanctions, (b) is located, organized or residing in any Designated Jurisdiction, or (c) to the District s knowledge, is engaged in any transaction with any Person who is the subject of Sanctions. The proceeds from the Commercial Paper Notes and any Loans will be used solely as described in Section 6.30 hereof, in the Resolution and in the Issuing and Paying Agent Agreement. For -27-

241 purposes of this Section 5.21, the term Related Party means the District and the directors and officers of the District. ARTICLE VI COVENANTS The District covenants and agrees that, so long as any Commercial Paper Notes shall be Outstanding, this Agreement and the Letter of Credit remain in effect or any amounts remain unpaid hereunder or under the Advance Note or the Term Loan Note, it shall perform and observe the covenants set forth below: Section 6.1. Information. The District will deliver to the Bank or, where applicable, make available on EMMA (with notice to the Bank that such information has been filed with EMMA and is publicly available): (a) as soon as practicable and in any event within one hundred eighty (180) days after the end of each Fiscal Year, a copy of the audited financial statements of the District, prepared in accordance with GAAP consistently applied and audited by independent certified public accountants of recognized standing, including a balance sheet of the Water System as of the end of such Fiscal Year and related statements of revenues, expenses and changes in fund equity and cash flows for the Fiscal Year; (b) together with the audited financial statements delivered pursuant to Section 6.1(a) above, a certificate of an Authorized Representative (i) to the effect that as of the date of such certificate no Default or Event of Default has occurred, or (ii) if a Default or Event of Default has occurred, specifying the nature of such Default or Event of Default, the period of its existence and the action which the District is taking or proposes to take with respect thereto, unless such Default or Event of Default has previously been reported pursuant to 6.1(d) below and no change in the status of such Default or Event of Default has occurred; (c) as soon as practicable but in any event within thirty (30) days after the issuance thereof, copies of any prospectus, official statement, offering circular, placement memorandum, or similar or corresponding document, and any supplements thereto and updates and amendments thereof, that the District makes available in connection with the offering for sale of any securities issued by the District secured (directly or indirectly) by a pledge of or lien on Water Revenues, and, on request, copies of such other financial reports that the District shall customarily and regularly provide to the public; (d) as soon as practicable and in any event within ten (10) Business Days after the occurrence of any Event of Default or Default, a certificate of an Authorized Representative setting forth the details of such Event of Default or Default and, promptly thereafter, the action which the District is taking or proposes to take with respect thereto; -28-

242 (e) (i) as soon as available but in any event within ninety (90) days after the beginning of the Fiscal Year for which it is prepared, a copy of the District s operating budget for such Fiscal Year and any other Fiscal Year with respect to which it applies, and (ii) within ninety (90) days of any modification made by the District to any such operating budget, a copy of the same; (f) upon the written request of the Bank, confirmation of the amount of funds on deposit in any fund or account established under the Water Bond Indenture or the Issuing and Paying Agent Agreement; (g) as soon as available but in any event within ten (10) Business Days after the adoption of any material amendment to the District s investment policy or the execution and delivery of any amendment or supplement to the Water Bond Indenture (other than any such amendment or supplement which is executed and delivered solely for the purposes of issuing additional Prior Water Obligations) or the Issuing and Paying Agent Agreement, a copy thereof; (h) upon the written request of the Bank, copies of any other resolution, indenture, credit agreement or other agreement providing for the issuance or incurrence of any indebtedness of the District secured by Water Revenues, any information relating to the foregoing, or information relating to the Water Revenues, Water operation and maintenance costs, or any other information about the financial condition, operations or business of the District or the Water System that the Bank may reasonably request; and (i) promptly upon any filing of the same, any notice of any material event required to be filed by the District with respect to Revenues Secured Debt pursuant to SEC Rule 15c2-12, as amended. Section 6.2. Performance of this and other Agreements. The District shall punctually pay or cause to be paid all amounts payable under this Agreement and the Related Documents and observe and perform in all material respects all of the conditions, covenants and requirements of this Agreement and the Related Documents. Section 6.3. Maintenance of Approvals. The District shall at all times maintain in effect, renew and comply with all the terms and conditions of all consents, licenses, approvals and authorizations as may be necessary or appropriate under any applicable law or regulation for its execution, delivery and performance of this Agreement and the Related Documents to which it is a party. Section 6.4. Preservation of Existence. The District shall maintain its legal existence. Section 6.5. Sale of Commercial Paper Notes. Unless such Loan is otherwise to be paid promptly from available funds of the District, the District will issue and sell Commercial Paper Notes as promptly as practicable after the making of a Loan pursuant to a Drawing under the Letter of Credit and use the proceeds of such sale solely for the repayment of the Loan (and such proceeds of sale shall be deemed to be proceeds of Commercial Paper Notes for all the purposes -29-

243 of the Resolution, the Issuing and Paying Agent Agreement, this Agreement, the Letter of Credit, the Advance Note and the Term Loan Note). Section 6.6. Notices. The District will promptly furnish, or cause to be furnished, to the Bank (i) notice of the occurrence of any Issuing and Paying Agent Agreement Event of Default, (ii) notice of the failure by any Dealer or the Issuing and Paying Agent to perform any of its material obligations under the applicable Dealer Agreement or the Issuing and Paying Agent Agreement of which the District has actual knowledge, (iii) each notice required to be given to the Bank pursuant to the Issuing and Paying Agent Agreement, (iv) notice of any Material Litigation or any proposed, pending or adopted legislation, administrative proceeding or business development which would reasonably be expected to result in a Material Adverse Change, and (v) such further financial and other information with respect to the District and its affairs as the Bank may reasonably request from time to time. Section 6.7. Total Outstanding. At no time shall the District permit the aggregate principal amount of (i) Commercial Paper Notes Outstanding and (ii) all Loans outstanding and unpaid to exceed the Gross Available Amount. Section 6.8. Books; Access to Records. The District will keep proper books of record and accounts in which full, true and correct entries in conformity with GAAP. The District will furnish to the Bank such information regarding the financial condition, results of operations or business of the District and the Water System as the Bank may reasonably request and will permit any officers, employees or agents of the Bank to visit and inspect any of the properties of the District and to discuss matters reasonably pertinent to an evaluation of the credit of the District, all at such reasonable times as the Bank may reasonably request. Section 6.9. Limitation on Additional Debt. The District will not issue any Water Bonds or any other obligations or securities payable in whole or in part from Subordinated Water Revenues (as defined in the Water Bond Indenture) except in compliance with Sections 3.01 and 3.05 of the Water Bond Indenture (as in effect on the Effective Date, without regard to any amendment, modification or waiver of such provisions other than such amendments and modifications effected by the Sixteenth Supplemental Indenture pursuant to its terms, notwithstanding that there may be no outstanding Water Bonds and without regard to whether the Water Bond Indenture remains in effect), which Sections (together with all related definitions and ancillary provisions) are hereby incorporated by reference as if set forth herein in their entirety. Section Reserved. Section No Amendment of Related Documents. Without the prior written consent of the Bank, the District will not amend, supplement, modify or waive any of the provisions of the Issuing and Paying Agent Agreement or any of the other Related Documents, or consent to any of the foregoing, if any such amendment, supplement, modification or waiver could reasonably be expected to (i) result in a Material Adverse Change or (ii) adversely affect the rights, title, interest or security of the Bank hereunder or under any Related Document. -30-

244 Section Taxes and Liabilities. The District will pay all the indebtedness and obligations of the Water System promptly and in accordance with its terms and pay and discharge, or cause to be paid and discharged, promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its income and profits, or upon any of its property, real, personal, or mixed, or upon any part thereof, before the same shall become in default, except for those matters which are being contested in good faith by appropriate action or proceedings or for which the District has established adequate reserves in accordance with GAAP applied on a consistent basis. Section Compliance with Rules and Regulations. The District shall comply with all laws, ordinances, orders, consents, licenses, approvals, authorizations, rules and regulations of all Governmental Authorities (including, without limitation, all Environmental Laws and laws of the State relating to investments pursuant to Chapter 4, Part 1, Division 2 Title 5 of the California Government Code and Article 7 of the Act) applicable to it, and will not materially deviate from its internal investment policies and guidelines, except for any such noncompliance or deviation which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change. Section Maintenance and Operation of the Water System. The District will maintain the Water System in good repair and working order at all times and will operate the same, or cause the same to be operated, in an efficient and economic manner and in accordance with sound business principles. Section Insurance. The District will maintain and procure at all times: (a) insurance on the Water System against such risks as and in such amounts as the District deems prudent taking into account insurance coverage for similar utilities, and (b) public liability insurance in such amounts as the District deems prudent taking into account insurance coverage for similar utilities. Section Book Entry Eligibility. The District covenants that at all times from and including the Effective Date until and including the date of maturity of all Commercial Paper Notes, the District shall use commercially reasonable efforts to cause the Commercial Paper Notes to be eligible for, and to be registered with, DTC s book-entry delivery services and that such registration with DTC shall not be discontinued without the Bank s prior written consent. Section Exempt Status. The District shall not take any action or omit to take any action that, if taken or omitted, would adversely affect the excludability of interest on the Commercial Paper Notes from the gross income of the holders thereof for purposes of Federal income taxation. Section Issuing and Paying Agent; Dealers. The District shall at all times maintain an Issuing and Paying Agent pursuant to the terms of the Issuing and Paying Agent Agreement. The District will use its best efforts to at all times maintain one or more Dealers with respect to the Commercial Paper Notes that is reasonably acceptable to the Bank. The District shall not substitute or replace the Issuing and Paying Agent or any Dealer unless the District shall have received the prior written approval of the Bank (which approval will not be unreasonably -31-

245 withheld) with respect to the proposed successor or replacement Issuing and Paying Agent or Dealer. Section Alternate Liquidity Facility. (i) The District shall use its commercially reasonable best efforts to obtain an alternate Liquidity Facility to replace the Letter of Credit or to take such other action as will result in the payment of all amounts owed to the Bank upon termination of the Letter of Credit in the event the Bank shall decide not to extend the Stated Expiration Date, or the District shall fail to request an extension of the Stated Expiration Date, pursuant to Section 9.9(b). (ii) The District agrees that any alternate Liquidity Facility will require, as a condition to the effectiveness of the alternate Liquidity Facility, that the issuer of the alternate Liquidity Facility will provide funds to the extent necessary, in addition to other funds available, on the date the alternate Liquidity Facility becomes effective, for the payment of all principal of all Loans then Outstanding through the date such alternate Liquidity Facility becomes effective. On such date, any and all amounts due to the Bank hereunder and under the Advance Note and the Term Loan Note shall be payable in full to the Bank. (iii) The District shall not permit an alternate Liquidity Facility (or alternate Liquidity Facilities in the aggregate) to become effective with respect to less than all of the Commercial Paper Notes without the prior written consent of the Bank. For the avoidance of doubt, this Section 6.19(iii) shall not prohibit the District from permitting a Liquidity Facility to become effective with respect to any Water Series Notes other than the Commercial Paper Notes. Section Incorporation of Covenants by Reference. The District agrees that it will perform and comply with each and every covenant and agreement required to be performed or observed by it in the Issuing and Paying Agent Agreement, which provisions, as well as related defined terms contained therein, are hereby incorporated by reference in this Section 6.20 with the same effect as if each and every such provision were set forth in this Section 6.20 in its entirety. To the extent that (i) any such incorporated provision permits any Person to waive compliance with or consent to such provisions or requires that a document, opinion or other instrument or any event or condition be acceptable or satisfactory to any Person and (ii) any such waiver or consent or acceptance of a document, opinion or other instrument would adversely affect the interests of the Bank for purposes of this Agreement, such provision shall be complied with only if it is waived or consented to in writing by the Bank and such document, opinion or other instrument shall be acceptable or satisfactory only if it is acceptable or satisfactory to the Bank. Without the written consent of the Bank, no amendment to such covenants and agreements or defined terms made pursuant to the Issuing and Paying Agent Agreement shall be effective to amend such covenants and agreements and defined terms as incorporated by reference in this Section Section Sale or Encumbrance of Water System. The District will not sell, lease or otherwise dispose of the Water System or any part thereof essential to the proper operation of the Water System or to the maintenance of Water Revenues. The District will not enter into any lease or agreement which impairs the operation of the Water System or any part thereof necessary to secure adequate Available Water Revenues for the payment of principal of and -32-

246 interest on the Commercial Paper Notes, the Advance Note, the Term Loan Note, and any Water Note Parity Debt, or which would otherwise impair the rights of the Bank with respect to the Water Revenues or the operations of Water System. The District will not mortgage or otherwise encumber, pledge or place any charge upon the Water System or any part thereof essential to the Water System or any part thereof which impairs the operation of the Water System or any part thereof necessary to secure adequate Available Water Revenues for the payment of principal of and interest on the Commercial Paper Notes, the Revolving Loan Note, the Term Loan Note, and any Water Note Parity Debt. Section Best Efforts to Sell Commercial Paper Notes; Successor Dealers. The District will at all times maintain a Dealer under the Issuing and Paying Agent Agreement and the Dealer Agreement. The District agrees to cause the Dealer to use its best efforts to sell Commercial Paper Notes up to the Maximum Rate (as defined in the Issuing and Paying Agent Agreement) applicable to Commercial Paper Notes in order to repay maturing Commercial Paper Notes. If any Loan remains outstanding for a period of thirty (30) consecutive days, at the written direction of the Bank, the District shall promptly take such actions as necessary to cause the related Dealer (that has been unable to sell rollover Commercial Paper Notes) to be replaced with a Dealer reasonably satisfactory to the Bank. Any dealer agreement with a successor dealer shall provide that (a) such dealer shall use its best efforts to sell Commercial Paper Notes up to the Maximum Rate (as defined in the Issuing and Paying Agent Agreement) applicable to Commercial Paper Notes in order to repay maturing Commercial Paper Notes, without regard to the Bank Rate (i.e., whether or not the rate to be borne by the rollover Commercial Paper Notes is less than the Bank Rate) and (b) such dealer may not resign except upon sixty (60) days prior written notice to the District and the Bank. Section Reserved. Section Preservation of Collateral. The District will preserve and protect the pledge of Available Water Revenues to secure the Commercial Paper Notes, the Advance Note, the Term Loan Note, in each case the interest thereon, and all other Obligations hereunder, and will warrant and defend the Bank s right to such Available Water Revenues against all claims and demands of all other Persons (other than the senior and parity claims thereto of the holders of Prior Water Obligations, Commercial Paper Notes and Water Note Parity Debt, including all other Water Series Notes). Section ERISA. The District will not establish, become a party to or contribute to any employee benefit plan within the meaning of Section 3(3) of ERISA or any other form of bonus, incentive compensation, deferred compensation or other similar plan or arrangement other than a governmental plan within the meaning of Section 414(b) of the Code and Section 3(32) of ERISA. Section No Priority for Certain Debt. The District will not incur any Debt payable from or having a Lien upon all or part of the Water Revenues that is (i) senior in priority of payment or Lien to the Prior Water Obligations or (ii) senior in priority of payment or Lien to the Advance Note and Term Loan Note other than the Prior Water Obligations; provided that -33-

247 nothing in this Agreement shall preclude the ability of the District to incur any Debt the payment of which is properly characterized as a Water operation and maintenance cost. Section Offering Memorandum and Other Documents. The District, will not, without the prior written consent of the Bank, refer to the Bank in any offering document; provided, that the District may identify the Bank as the provider of a Liquidity Facility with respect to the Commercial Paper Notes. The Bank hereby consents to the references to the Bank contained in, and the distribution of, the Offering Memorandum. Section Sovereign Immunity. To the fullest extent permitted by applicable law, with respect to its obligations arising under this Agreement and the Fee Agreement, the District irrevocably agrees that it will not claim in any legal proceeding to enforce any of the obligations of the District hereunder or under the Related Documents or collect upon the Obligations of the District or in connection with the transactions contemplated hereby any immunity on the grounds of sovereignty or other similar grounds from (i) any action, suit or proceeding arising under or relating to this Agreement or any Related Document, (ii) relief by way of injunction, order for specific performance or writ of mandamus, or (iii) execution or enforcement of any judgment to which it or the Water Revenues might otherwise be entitled in any proceedings in the courts of any jurisdiction and irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and the Water Revenues (irrespective of their use or intended use), all such immunity. Section Maintenance of Ratings. The District shall at all times maintain (i) at least one unenhanced long-term rating on each of the Advance Note and the Term Loan Note from any Rating Agency, (ii) at least one short-term rating on the Commercial Paper Notes from any Rating Agency and (iii) an unenhanced long-term rating on its Water Bonds from at least two Rating Agencies; provided, however, that the District shall not at any time cease to maintain any long-term unenhanced rating on its Water Bonds from any of Fitch, Moody s or S&P if the effect would be to cure a Default or an Event of Default under this Agreement or reduce, or avoid a pending increase of, the Letter of Credit Fee Rate (as defined in the Fee Agreement). Section Use of Proceeds. The District will (i) use the proceeds of each Advance only to pay the principal of the Commercial Paper Notes maturing on the date of such Advance, (ii) use the proceeds of each Term Loan only to refinance the outstanding principal amount of an Advance on the applicable Conversion Date for such Advance, and (iii) not use the proceeds of any Loan for any other manner or for any purpose except in the manner and for the purposes authorized by the laws of the State of California, this Agreement and the Resolution and the Issuing and Paying Agent Agreement. Section Rates and Charges. (a) The District will comply with the covenant contained in Section 6.09 of the Water Bond Indenture (as in effect on the Effective Date without regard to any amendment, modification or waiver of such provisions other than such amendments and modifications of such provisions effected by the Sixteenth Supplemental Indenture pursuant to its terms, notwithstanding that there may be no outstanding Water Bonds and without regard to whether -34-

248 the Water Bond Indenture remains in effect), which Section (together with all related and ancillary provisions) is hereby incorporated by reference as if set forth herein in its entirety. (b) The District will comply with the covenant contained in Section 7.07 of the Issuing and Paying Agent Agreement (as in effect on the Effective Date without regard to any amendment, modification or waiver of such provision, notwithstanding that there may be no outstanding Water Series Notes and without regard to whether the Issuing and Paying Agent Agreement remains in effect). Section Maturity of Commercial Notes. (a) The District will use its best efforts to not permit the Issuing and Paying Agent to issue, or to not permit any Dealer to market, any Commercial Paper Notes with a maturity shorter than two (2) days from their date of issuance, unless the District or the applicable Dealer has provided three (3) Business Days prior written notice to the Bank with a copy to the Issuing and Paying Agent; provided, however, that no written notice will be required to be provided to the Bank by the District or the applicable Dealer in the event that (x) the Commercial Paper Notes are issued with a maturity of one (1) day and the applicable Dealer for such Commercial Paper Notes are the registered holder of all such Commercial Paper Notes or (y) the applicable Dealer is unable to market Commercial Paper Notes up to the Maximum Rate (as defined in the Issuing and Paying Agent Agreement). However, failure to comply with this section shall not result in an Event of Default under Section 7 of this Agreement. ARTICLE VII EVENTS OF DEFAULT The occurrence of any of the events set forth in Section 7.1, 7.2 or 7.3 hereof shall constitute an Event of Default hereunder. Upon the occurrence of an Event of Default, the Bank may exercise those rights and remedies applicable to such Event of Default as set forth in Section 7.4 hereof. Section 7.1. Events of Default Resulting in Immediate Termination. Each of the following Events of Default shall also constitute a Special Event of Default hereunder: (a) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment, acceleration or otherwise) (i) any interest on any Commercial Paper Notes in accordance with its terms or (ii) any principal of or interest on any Loan or the Advance Note or the Term Loan Note (other than solely as a result of acceleration of the payment of the Advance Note or the Term Loan Note pursuant to Section 7.4(d)); or (b) (i) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment or acceleration) any principal of or interest on any Revenues Secured Debt of the District (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, any regularly scheduled payment thereunder) and such failure shall continue beyond any applicable period of grace -35-

249 specified in any underlying resolution, indenture, contract or instrument pursuant to which such Revenues Secured Debt have been issued or incurred, or (ii) pursuant to the provisions of any such resolution, indenture, contract or instrument, any Revenues Secured Debt, as a result of the failure to pay principal of or interest on such Revenues Secured Debt (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, any regularly scheduled payment thereunder), shall have been or may be accelerated or required to be prepaid prior to the stated maturity thereof (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, the stated termination thereof) (with respect to both clauses (i) and (ii), other than as a result of acceleration of the payment of any such Revenues Secured Debt that is owned by a liquidity provider pursuant to the provisions of the related liquidity facility); or (c) one or more final, unappealable judgments against the District for the payment of money payable from the Water Revenues or attachments against the Water Revenues, the operation or result of which, individually or in the aggregate, equal or exceed $15,000,000 shall remain unpaid, unstayed, undischarged, unbonded or undismissed for a period of sixty (60) days; or (d) (i) The District shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its Water System Related Debt, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of the assets of the Water System, or the District shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the District any case, proceeding or other action of a nature referred to in clause (i) above which (x) results in an order for such relief or in the appointment of a receiver or similar official or (y) remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) there shall be commenced against the District, any case, proceeding or other action seeking the issuance of a warrant of attachment, execution, restraint or similar process against all or any substantial part of the assets of the Water System or the Water Revenues, which results in the entry of a final and non-appealable order or ruling for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (iv) the District shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the District shall admit in writing its inability to pay its debts; or (e) (i) Any provision of this Agreement, the Act, the Resolution, the Commercial Paper Notes or the Issuing and Paying Agent Agreement relating to (A) the ability or obligation of the District to pay, when due, the principal or interest payable on the Commercial Paper Notes, the Advance Note, the Term Loan Note, or any Revenues Secured Debt or (B) the Lien on or pledge of the Water Revenues securing the -36-

250 Commercial Paper Notes, the Advance Note, the Term Loan Note, or any Revenues Secured Debt shall at any time cease to be valid and binding on the District or shall be declared to be null and void, invalid or unenforceable as the result of a final nonappealable judgment by any federal or state court or as a result of any legislative or administrative action by any Governmental Authority having jurisdiction over the District, (ii) an authorized representative of the District repudiates or otherwise denies in writing that the District has any further liability or obligation under or with respect to any provision of this Agreement, the Act, the Resolution, the Commercial Paper Notes, the Advance Note, the Term Loan Note, or any Revenues Secured Debt or the Issuing and Paying Agent Agreement relating to (A) the ability or the obligation of the District to pay, when due, the principal or interest payable on any Commercial Paper Notes, the Advance Note, the Term Loan Note, or any Revenues Secured Debt or (B) the Lien on or pledge of all or any portion of the Water Revenues, or (iii) the State or the District shall have taken or permitted to be taken any official action, or has duly enacted any statute or regulation, which would invalidate, or render null and void, invalid or unenforceable, any provision of this Agreement, the Act, the Resolution, the Commercial Paper Notes, the Advance Note, the Term Loan Note, or the Revenues Secured Debt or the Issuing and Paying Agent Agreement relating to (A) the ability or the obligation of the District to pay, when due, the principal or interest payable on the Commercial Paper Notes, the Advance Note, the Term Loan Note, or the Revenues Secured Debt, or (B) the Lien on or pledge of the Water Revenues; or (f) (i) the District shall impose a debt moratorium or comparable extraordinary restriction on the repayment of debt (whether or not in writing) with respect to the Commercial Paper Notes, the Advance Note, the Term Loan Note, or any Revenues Secured Debt or (ii) any Governmental Authority having appropriate jurisdiction over the District shall make a finding or ruling or shall enact or adopt legislation or issue an executive order or enter a judgment or decree which results in a debt moratorium or comparable extraordinary restriction on the repayment of debt with respect to the Commercial Paper Notes, the Advance Note, the Term Loan Note, any Revenues Secured Debt or all debt of the District; or (g) all of the Rating Agencies shall have (i) assigned to any Water Bonds or Water Note Parity Debt (if rated) a long-term unenhanced rating below Investment Grade, (ii) withdrawn their ratings of any Water Bonds or Water Note Parity Debt (if rated), other than as a result of (A) debt maturity, redemption or defeasance or, in the case of Water Bonds or Water Note Parity Debt supported by credit enhancement, such withdrawal being attributable to the long-term ratings assigned to the related credit enhancer, and excluding any withdrawal which such Rating Agency stipulates in writing is being taken for non-credit related reasons or (iii) suspended their ratings of any Water Bonds or Water Note Parity Debt (if rated), other than as a result of (x) debt maturity, redemption or defeasance or, in the case of any Water Bonds or Water Note Parity Debt supported by credit enhancement, such suspension being attributable to the long-term ratings assigned to the related credit enhancer, and excluding any suspension which such Rating Agency stipulates in writing is being taken for non-credit related reasons. -37-

251 Section 7.2. Events of Default Resulting in Immediate Suspension. Each of the following Events of Default shall also constitute a Suspension Event hereunder: (a) Any Governmental Authority with jurisdiction to rule on the validity or enforceability of this Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Commercial Paper Notes, the Advance Note or the Term Loan Note, shall find or rule, in a judicial or administrative proceeding, that any material provision of any of the foregoing relating to (i) the ability or the obligation of the District to pay, when due, the principal or interest payable on the Commercial Paper Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt or (ii) the Lien on or pledge of Water Revenues securing the Commercial Paper Notes or any Revenues Secured Debt is not valid or not binding on, or enforceable against, the District; or (b) the State or the District (i) makes a claim in a judicial or administrative proceeding that the District has no further liability or obligation under this Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Commercial Paper Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt, as and to the extent the District has obligations thereunder, to pay, when due, the principal or interest payable on the Commercial Paper Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt, or (ii) contests in a judicial or administrative proceeding the validity or enforceability of any provision of this Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Commercial Paper Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt secured by and relating to (A) the ability or the obligation of the District to pay, when due, the principal of or interest on the Commercial Paper Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt or (B) the Lien on or pledge of Water Revenues securing the Commercial Paper Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt. Section 7.3. Events of Default not Resulting in Immediate Termination or Suspension. Each of the following Events of Default shall also constitute a Notice Event of Default hereunder: (a) the District shall fail to pay any other amount owed by the District hereunder or under the Fee Agreement as and when due (other than amounts described in Section 7.1(a) hereof), and such failure shall continue unremedied for ten (10) days after the later to occur of (x) the date such amount is due and (y) the date the District receives an invoice from the Bank for such amount; or (b) any representation or warranty made by or on behalf of the District in this Agreement or in any Related Document shall be incorrect or untrue in any material respect when made or deemed to have been made; or (c) the District shall default in the due performance or observance of any of the covenants set forth in Section 6.4, 6.7, 6.9, 6.11, 6.17, 6.18, 6.19, 6.20 (after giving effect to any applicable grace periods contained in the Issuing and Paying Agent Agreement), 6.21, 6.22, 6.24, 6.25, 6.26, 6.28, 6.29, or 6.31; or -38-

252 (d) the District shall default in the due performance or observance of any other term, covenant or agreement contained in this Agreement and such default shall remain unremedied for a period of thirty (30) days after the earlier of (i) the date on which such failure shall first become known to any officer of the District or (ii) written notice thereof is given to the District by the Bank; or (e) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) any Water System Related Debt, the aggregate principal amount or notional amount of which is not less than $15,000,000, or any interest or premium thereon, and such failure shall continue beyond any applicable period of grace specified in any underlying resolution, indenture, contract or instrument providing for the creation or concerning any such Water System Related Debt; or any other default or automatic termination event shall occur under any resolution, indenture, contract or instrument providing for the creation of or concerning any such Water System Related Debt if such default or automatic termination event results in the acceleration of the maturity of such Water System Related Debt or requires such Water System Related Debt to become due prior to the stated maturity thereof or a termination payment to be paid in connection therewith, and either (i) the District shall fail to pay any such accelerated amount, amount required to be prepaid prior to the stated maturity thereof or termination payment or (ii) the payment by the District of any such accelerated amount, amount required to be prepaid prior to maturity or termination payment shall materially adversely affect the ability of the District to perform its obligations under this Agreement; or (f) the long-term unenhanced ratings assigned to any Water Bonds by (x) any two Rating Agencies if all three Rating Agencies then rate Water Bonds or (y) any Rating Agency if only one or two Rating Agencies then rate Water Bonds, are reduced below A- (or its equivalent) by S&P, A- (or its equivalent) by Fitch or A3 (or its equivalent) by Moody s, or are withdrawn or suspended by any such Rating Agency other than as a result of (i) debt maturity, redemption or defeasance or, in the case of Water Bonds supported by credit enhancement, such withdrawal or suspension being attributable to a long-term rating assigned to the related credit enhancer, (ii) a determination by the District to cease maintaining such rating and following such withdrawal or suspension the District is in compliance with Section 6.29(iii), or (iii) a failure by the District to apply for a rating by such Rating Agency or to provide information to such Rating Agency, in either case as a result of such Rating Agency s imposition or proposed imposition of a condition or conditions to issuing such rating with respect to which the District cannot legally comply; or (g) the occurrence of any Issuing and Paying Agent Agreement Event of Default which is not cured within any applicable cure period; or (h) any Governmental Authority shall declare a financial emergency with respect to the District and shall appoint or designate with respect to the District, an entity such as an organization, board, commission, authority, agency or body to manage the affairs and operations of the Water System; or -39-

253 (i) a ruling, assessment, notice of deficiency or technical advice by the Internal Revenue Service shall be rendered to the effect that interest on the Commercial Paper Notes is included in the gross income of the Owners of such Commercial Paper Notes and either (i) the District, after it has been notified by the Internal Revenue Service, shall not challenge such ruling, assessment, notice or advice in a court of law during the period within which such challenge is permitted or (ii) the District shall challenge such ruling, assessment, notice or advice and a court of law shall make a determination, not subject to appeal or review by another court of law, that such ruling, assessment, notice or advice is correctly rendered; or (j) the occurrence of any default resulting from a failure by the District to perform any of its obligations under any agreement or instrument providing credit enhancement or liquidity support with respect to any Revenues Secured Debt, or pursuant to which the related holder purchased and continues to hold the same, which default results in an acceleration of such Revenues Secured Debt or the District s obligations under such agreement or instrument or requires such Revenues Secured Debt to be prepaid prior to the stated maturity thereof. Section 7.4. Remedies. Upon the occurrence of an Event of Default hereunder, the Bank may take one or more of the following actions: (a) Immediate Termination. Upon the occurrence of any Special Event of Default, the Available Amount of the Letter of Credit shall be reduced to zero and the Letter of Credit and the Bank s obligations thereunder shall automatically and immediately terminate and expire, without notice, with respect to all Commercial Paper Notes, and the Bank shall have no obligation to make any Loans hereunder. (b) Suspension Contest to Validity. Upon the occurrence of any Suspension Event set forth in Section 7.2 hereof, the obligation of the Bank to make Loans pursuant to draws under the Letter of Credit shall be automatically and immediately suspended from the time of the occurrence of such Event of Default until a final, non-appealable judgment of a court having jurisdiction in the premises shall be entered declaring that all contested provisions of this Agreement, the Letter of Credit the Commercial Paper Notes, the Advance Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the pledge of the Available Water Revenues securing the Commercial Paper Notes, the Advance Note, the Term Loan Note and the Loans are upheld in their entirety. In the event such judgment is entered declaring that all material contested provisions of this Agreement, the Letter of Credit, the Commercial Paper Notes, the Advance Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the Available Water Revenues are upheld in their entirety, the obligation of the Bank to make Loans pursuant to draws under the Letter of Credit shall be automatically reinstated and the terms of the Letter of Credit and this Agreement will continue in full force and effect (unless the Letter of Credit and this Agreement shall have otherwise expired or terminated in accordance with the terms hereof or there has occurred a Special Event of Default) as if there had been no suspension. In the event any -40-

254 provision of this Agreement, the Letter of Credit, the Commercial Paper Notes, the Advance Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the pledge of the Available Water Revenues securing the Commercial Paper Notes and the Loans is declared to be null and void or unenforceable, or it is determined that the District has no liability or obligation under this Agreement, the Commercial Paper Notes, the Advance Note, the Term Loan Note, the Issuing and Paying Agent Agreement, or the Resolution, then the obligations of the Bank under this Agreement and the Letter of Credit will terminate as set forth above. Notwithstanding the foregoing, if, upon the date which is the earlier of the Termination Date or nine months after the effective date of such suspension of the obligations of the Bank under this Agreement and the Letter of Credit pursuant to this paragraph, litigation is still pending and a judgment regarding the validity and enforceability of this Agreement, the Letter of Credit, the Commercial Paper Notes, the Advance Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the Available Water Revenues securing the Commercial Paper Notes, the Advance Note, the Term Loan Note and the Loans as is the subject of such Event of Default has not been obtained, then the Letter of Credit and the obligation of the Bank to make Loans shall at such time terminate without notice or demand. (c) Termination with Notice. Upon the occurrence of an Event of Default that is not a Special Event of Default, the Bank may (i) deliver a No-Issuance Notice to the Issuing and Paying Agent directing the Issuing and Paying Agent to cease issuing any Commercial Paper Notes, whereupon no additional Commercial Paper Notes shall be issued, and (ii) by notice to the District and the Issuing and Paying Agent, reduce the Available Amount to the then Outstanding principal amount of Commercial Paper Notes and cause the Available Amount to no longer be subject to reinstatement upon drawings under the Letter of Credit for such Commercial Paper Notes, so that, on the date all Commercial Paper Notes issued and sold prior to the date such No-Issuance Notice is received by the Issuing and Paying Agent mature, the Available Amount will be reduced to zero and the Letter of Credit shall be terminated; provided that the Letter of Credit shall not terminate, and the right of the Bank to accelerate the maturity of the Advance Note and the Term Loan Note, as applicable, pursuant to Section 7.4(d) hereof shall not affect the obligation of the Bank to make Loans pursuant to drawings under the Letter of Credit, to the extent necessary for the District to make required payments of principal on maturing Commercial Paper Notes that were issued and sold prior to the date upon which the No-Issuance Notice is received by the Issuing and Paying Agent; provided further that if any Loans are made that would not have been made but for the application of the immediately preceding provision, such Loans shall be immediately due and payable on the date such Loans are made. (d) In addition to the rights and remedies set forth in Sections 7.4(a), (b) and (c) hereof, in the case of any Event of Default hereunder, other than an Event of Default specified in Section 7.1(d) above, the Bank may declare the Advance Note, the Term Loan Note, all accrued interest thereon, and all other outstanding Obligations of the District to be forthwith due and payable, whereupon the Advance Note and the Term -41-

255 Loan Note and such interest and all such other Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the District. If any Event of Default specified in Section 7.1(d) above shall occur, without any notice to the District or any other act by the Bank, the Advance Note and the Term Loan Note, together with accrued interest thereon, and all other outstanding Obligations of the District shall become forthwith due and payable, without presentment, demand, protest, or other notice of any kind, all of which are hereby waived by the District. Failure to take action in regard to one or more Events of Default shall not constitute a waiver of, or the right to take action in the future in regard to, such or subsequent Events of Default. Section 7.5. Suits at Law or in Equity and Mandamus. If any Event of Default shall occur, then and in every such case the Bank shall be entitled to proceed to protect and enforce its rights by such appropriate judicial proceeding as it may deem most effectual to protect and enforce any such right, either by suit, in equity, or by action at law, whether for the specific performance of any covenant or agreement contained in this Agreement, in aid of the exercise of any power granted in this Agreement, or to enforce any other legal or equitable right vested in the Bank by this Agreement, the Advance Note, the Term Loan Note or by law. ARTICLE VIII OBLIGATIONS ABSOLUTE Section 8.1. Obligations Absolute. Subject to the provisions of Section 2.9 hereof, the Obligations of the District shall be absolute, unconditional and irrevocable and shall be paid or performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including, without limitation, the following circumstances: (a) any lack of validity or enforceability of this Agreement or any Related Document or any other agreement or instrument delivered in connection herewith or therewith; (b) any amendment or waiver of or any consent to departure from, the terms of this Agreement or any of the Related Documents; (c) the existence of any claim, set-off, defense or other right which the District may have at any time against any Dealer, the Issuing and Paying Agent, the Bank or any other Person, whether in connection with this Agreement, the Related Documents or any unrelated transaction; provided, however, that nothing herein contained shall prevent the assertion of such claim by separate suit; (d) any statement or any other document presented by a Person other than by the Bank under this Agreement or the Letter of Credit proving to be forged, fraudulent, -42-

256 invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (e) payment by the Bank under the Letter of Credit against presentation of a draft or certificate which the Bank in good faith determines to be valid, sufficient or genuine which subsequently is found not to comply with the terms of the Letter of Credit; or (f) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. ARTICLE IX MISCELLANEOUS Section 9.1. Liability of the Bank. (a) With respect to the Bank, the District assumes all risks of the acts or omissions of the Issuing and Paying Agent and its agents in respect of their use of this Agreement and the Letter of Credit or any amounts made available by the Bank under the Letter of Credit; provided that this assumption with respect to the Bank is not intended to and shall not preclude the District from pursuing such rights and remedies as it may have against the Issuing and Paying Agent and its agents under any other agreements. Neither the Bank nor any of its officers or directors shall be liable or responsible for: (i) the use which may be made of this Agreement or the Letter of Credit or any amounts made available by the Bank under the Letter of Credit or for any acts or omissions of the District, the Issuing and Paying Agent or any Dealer or their agents in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement(s) thereon (other than validity as against the Bank of any agreement to which the Bank is a party), even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; (iii) payment by the Bank against presentation of documents which do not comply with the terms of the Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (iv) any other circumstances whatsoever in making or failing to make payment under this Agreement or the Letter of Credit, except only that the District shall have a claim against the Bank and the Bank shall be liable to the District to the extent, but only to the extent, of any direct, as opposed to consequential or punitive, damages suffered by the District which the District proves were caused by (i) the Bank s gross negligence or willful misconduct, or (ii) the Bank s willful or grossly negligent failure to make Loans pursuant to a drawing under the Letter of Credit when required in accordance with the terms hereof and of the Letter of Credit. In furtherance and not in limitation of the foregoing, the Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information (other than actual knowledge) to the contrary. The Bank is hereby expressly authorized and directed to honor any demand for payment which is made under the Letter of Credit without regard to, and without any duty on its part to inquire into the existence of, any disputes or controversies between or among the District, the Issuing and Paying Agent, any transferee beneficiary of the Letter of Credit or any other Person or the respective rights, duties or liabilities of any of them, or whether any facts or occurrences represented in any of the documents presented under the Letter of Credit are true and correct. -43-

257 (b) The District assumes all risks associated with the acceptance by the Bank of documents received by telecommunication, it being agreed that the use of telecommunication devices is for the benefit of the District and that the Bank assumes no liabilities or risks with respect thereto. Section 9.2. Costs and Expenses. (a) The District agrees to reimburse the Bank in respect of all (i) reasonable out-of-pocket expenses of the Bank, including fees and disbursements of counsel, in connection with the preparation, negotiation, execution, and delivery of this Agreement and the Letter of Credit, (ii) reasonable out-of-pocket expenses of the Bank, including fees and disbursements of counsel, in connection with any waiver or consent hereunder or to any Related Document or any amendment hereof or to any Related Document and (iii) out-of-pocket expenses incurred by the Bank, including fees and disbursements of counsel, in connection with a workout, restructuring or enforcement proceeding under this Agreement or any Related Document, resulting from an Event of Default hereunder; provided, however, that the District shall not be required to pay costs or expenses referred to in clauses (ii) and (iii) of this Section if such costs and expenses have been paid or incurred by the Bank solely as a result of its willful misconduct or gross negligence. (b) To the extent permitted by law, the District agrees to indemnify and hold harmless the Bank, its officers, directors, employees and agents (each an Indemnified Party ) from and against any and all claims, damages, losses, liabilities, fines, penalties costs or expenses (including fees of counsel) whatsoever incurred (or which may be claimed against an Indemnified Party by any Person) by reason of or in connection with the execution and delivery of and consummation of the transactions contemplated under this Agreement, including, without limitation, (i) the offering or sale of Commercial Paper Notes (including, without limitation, by reason of any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum, or in any supplement or amendment thereof, prepared with respect to the Commercial Paper Notes, or the omission or alleged omission to state therein a material fact necessary to make such statements, in light of the circumstances under which they are or were made, not misleading and (ii) the execution and delivery of, or payment or failure to pay by any Person (other than the Bank, as and when required by the terms and provisions of the Letter of Credit) under, this Agreement; provided, however, that the District shall not be required to indemnify the Bank for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (y) the willful misconduct or gross negligence of the Bank (including without limitation, the Bank s gross negligence or willful misconduct in failing to honor its obligations to make Loans pursuant to a drawing under the Letter of Credit in accordance with the terms of the Letter of Credit) or (z) the material inaccuracy of any information included in the Offering Memorandum concerning the Bank, which was furnished in writing by or on behalf of the Bank expressly for inclusion therein. Nothing in this Section 9.2 is intended to limit the obligations of the District under the Commercial Paper Notes, the Advance Note or the Term Loan Note or of the District to pay its obligations hereunder and under the Related Documents in accordance with the terms hereof and thereof. (c) The provisions of this Section 9.2 and Sections 3.1 and 3.2 hereof shall survive the termination of this Agreement and the Letter of Credit and the payment in full of the Commercial Paper Notes, the Advance Note and the Term Loan Note and the obligations of the District -44-

258 hereunder. Each Indemnified Party shall notify the District of any amounts which are owed to such Indemnified Party pursuant to this Section 9.2. Section 9.3. Notices. Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto or referred to herein shall be in writing and be deemed to have been given (a) in the case of notice by letter, when delivered by hand or four (4) days after the same is deposited in the mail, first class postage prepaid, and (b) in the case of notice by telecopier or electronic mail, when sent, receipt confirmed by telephone or electronic mail, addressed to them as follows or at such other address as any of the parties hereto may designate by written notice to the other parties hereto and to the Issuing and Paying Agent: District: East Bay Municipal Utility District 375 Eleventh Street Oakland, California Attention: Director of Finance Telephone: (510) Telecopy: (510) Bank with respect to credit matters: Bank with respect to the Letter of Credit: Issuing and Paying Agent: Sumitomo Mitsui Banking Corporation 277 Park Avenue New York, New York Attention: Public and Infrastructure Finance Telephone: (212) Telecopy: (212) Sumitomo Mitsui Banking Corporation 277 Park Avenue, 6th Floor New York, New York Attention:Trade Services Credit Department Telephone: (212) Telecopy: (212) U.S. Bank National Association 100 Wall Street, 16th Floor New York, New York Attention: Corporate Trust Services Telephone: (212) Telecopy: ( ) - Section 9.4. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the District and the Bank and their respective successors, endorsees and assigns, except that the District may not assign or transfer its rights or obligations hereunder without the -45-

259 prior written consent of the Bank. The Bank may grant a participation to any financial institution in all or any part of, or any interest (undivided or divided) in, the Bank s rights and benefits under this Agreement, the Advance Note and Term Loan Note owned by it and the Related Documents, and to the extent of that participation such participant shall, except as set forth in the following clause (b), have the same rights and benefits against the District hereunder as it would have had if such participant were a direct party hereto; provided that (a) no such participation shall affect the obligations of the Bank to make Loans as herein provided; (b) the District shall be required to deal only with the Bank with respect to any matters under this Agreement and no such participant shall be entitled to enforce directly against the District any provision hereunder, and (c) such participant shall not be any Person registered as an investment company under the Investment Company Act of 1940, as amended, substantially all of the assets of which are invested in obligations exempt from Federal income taxation under Section 103 or 103A of the Code or any similar or successor provision. The Bank may disclose to any Participants or prospective Participants any information or other data or material in the Bank's possession relating to this Agreement, any Related Document and the District without the consent of or notice to the District. The obligations of the Bank under this Agreement or any part hereof or the Letter of Credit may be assigned by the Bank to any financial institution approved in writing by the District; provided, however, that (i) any payment in respect of such assigned amounts owed with respect to the Advance Note or the Term Loan Note made by the District to the assigning Bank in accordance with the terms of this Agreement shall satisfy the District s obligations hereunder in respect of such assigned obligation to the extent of such payment and (ii) no such assignment shall release the Bank from its obligations hereunder. Notwithstanding the foregoing, nothing contained in this Agreement shall prohibit the Bank from assigning its obligations hereunder from one U.S. branch of the Bank to another U.S. branch of the Bank having the same or higher ratings as the Bank as of the effective date of such assignments, or from pledging, assigning or granting a security interest in all or part of its right hereunder, including with respect to the Advance Note and the Term Loan Note, to secure obligations of the Bank to a Federal Reserve Bank. Section 9.5. Governing Law; Venue; Waiver of Jury Trial. (A) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PROVISIONS (OTHER THAN NEW YORK GENERAL OBLIGATIONS LAWS AND ); PROVIDED THAT THE POWER AND AUTHORITY OF THE DISTRICT TO ENTER INTO AND ITS RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. (B) ALL LITIGATION ARISING OUT OF, OR RELATING TO THIS AGREEMENT SHALL BE BROUGHT IN A STATE OR FEDERAL COURT LOCATED IN THE COUNTY OF NEW YORK IN THE STATE OF NEW YORK OR IN THE COUNTY OF ALAMEDA IN THE STATE OF CALIFORNIA. (C) THE DISTRICT AND THE BANK HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING UNDER OR RELATING TO THIS AGREEMENT OR A RELATED DOCUMENT. IF AND TO THE -46-

260 EXTENT THAT THE FOREGOING WAIVER OF THE RIGHT TO A JURY TRIAL IS UNENFORCEABLE FOR ANY REASON IN SUCH FORUM, THE DISTRICT AND THE BANK HEREBY CONSENT TO THE ADJUDICATION OF ANY AND ALL CLAIMS PURSUANT TO JUDICIAL REFERENCE AS PROVIDED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638, AND THE JUDICIAL REFEREE SHALL BE EMPOWERED TO HEAR AND DETERMINE ANY AND ALL ISSUES IN SUCH REFERENCE WHETHER FACT OR LAW. EACH OF THE DISTRICT AND THE BANK REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND CONSENT, AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS AND CONSENTS TO JUDICIAL REFERENCE FOLLOWING THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF ITS CHOICE ON SUCH MATTERS. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT OR TO JUDICIAL REFERENCE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 AS PROVIDED HEREIN. Section 9.6. No Waivers, Amendments, Etc. (a) No amendment or waiver of any provision of this Agreement or Related Document, nor consent to any departure by the District therefrom, shall in any event be effective unless the same shall be in writing and signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) No failure on the part of the Bank to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver of such right; nor shall any single or partial exercise of any right under this Agreement preclude any other further exercise of such right or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 9.7. Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Delivery of a counterpart hereof by telecopy transmission or by transmission of an Adobe portable document file (also known as a PDF file) shall be effective as delivery of an original executed counterpart hereof. Section 9.8. Source of Funds. The Bank agrees that all payments made by the Bank under the Letter of Credit will be paid from funds of the Bank and not directly or indirectly from funds or collateral on deposit with or for the account of, or pledged with or for the account of, the Bank by the District. Section 9.9. Term of the Agreement. (a) The term of this Agreement shall be until the later of (x) the Termination Date, (y) the Final Maturity Date and (z) the payment in full of the principal of and interest on the Advance Note and the Term Loan Note and all other Obligations of the District. (b) No earlier than one hundred twenty (120) days and no later than sixty (60) days prior to the Stated Expiration Date as from time to time in effect, the District may request in writing to the Bank to extend the Stated Expiration Date of this Agreement for a period as designated by the District in such request. If the District makes any such request, the Bank will, not more than thirty (30) days after such request, notify the District in writing whether or not the Bank consents to such request, and, if the Bank in its sole discretion consents to such request, the -47-

261 terms under which the Bank will consent to such request. If the Bank does not so notify the District within such period of time, the Bank shall be deemed not to have consented to such request. Section Right of Setoff. Upon the occurrence of an Event of Default, the Bank may, to the extent not inconsistent with the provisions of the Prior Water Obligation Documents, the Issuing and Paying Agent Agreement and the other Related Documents, at any time and from time to time, without notice to the District or any other person (any such notice being expressly waived), set off and appropriate and apply, against and on account of, any obligations and liabilities of the District to the Bank arising under this Agreement, the Advance Note and the Term Loan Note, without regard to whether or not the Bank shall have made any demand therefor, any and all deposits (general or special, including but not limited to indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other indebtedness at any time held or owing by the Bank to or for the credit or the account of the District. Section Headings. Article and Section headings in this Agreement are included herein for convenience of reference only and shall not have any effect for purposes of interpretation or construction of the terms of this Agreement. Section Complete and Controlling Agreement. This Agreement and the Related Documents completely set forth the agreements among the Bank and the District and fully supersede all prior agreements, both written and oral, among the Bank and the District relating to the matters set forth herein and in the Related Documents. Section Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. The parties shall endeavor, in good faith negotiations, to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. Section USA PATRIOT Act Notice. The Bank hereby notifies the District that, pursuant to the requirements of the USA Patriot Act (Title III of Pub. L (signed into law October 26, 2001)) (the Act ), it is required to obtain, verify and record information that identifies the District, which information includes the name and address of the District and other information that will allow the Bank to identify the District in accordance with the Act. Section Assignment to Federal Reserve Bank. The Bank may assign and pledge all or any portion of the Advance Note, the Term Loan Note and any other obligations owing to it hereunder to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank; provided, that any payment in respect of such assigned Advance Note, Term Loan Note or any other obligations made by the District to the Bank in accordance with the terms of this Agreement shall satisfy the District s obligations -48-

262 hereunder in respect of such assigned obligation to the extent of such payment. No such assignment shall release the Bank from its obligations hereunder. Section No Advisory or Fiduciary Relationship. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any Related Document), the District acknowledges and agrees, and acknowledges its Affiliates understanding, that: (a) (i) the services regarding this Agreement provided by the Bank and any Affiliate thereof are arm s-length commercial transactions between the District, on the one hand, and the Bank and its Affiliates, on the other hand, (ii) the District has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) the District is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the Related Documents; (b) (i) the Bank and its Affiliates each is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary, for the District, or any other Person and (ii) neither the Bank nor any of its Affiliates has any obligation to the District with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the Related Documents; and (c) the Bank and its Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the District, and neither the Bank nor any of its Affiliates has any obligation to disclose any of such interests to the District. To the fullest extent permitted by law, the District, hereby waives and releases any claims that it may have against the Bank or any of its Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transactions contemplated hereby. [SIGNATURES BEGIN ON THE FOLLOWING PAGE] -49-

263 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the Effective Date. EAST BAY MUNICIPAL UTILITY DISTRICT By: Name: Title: SUMITOMO MITSUI BANKING CORPORATION, acting through its New York Branch By Name Title [Signature Page of Standby Letter of Credit and Reimbursement Agreement]

264 EXHIBIT A STANDBY LETTER OF CREDIT U.S. Bank National Association 100 Wall Street, 16th Floor New York, New York Attention: Corporate Trust Services Telecopy: ( ) - December [2], 2015 No. [ ] Ladies and Gentlemen: 1. At the request and for the account of our customer, the East Bay Municipal Utility District (the District ), which has or will cause the issuance of its Commercial Paper Notes (Water Series) Tax-Exempt Subseries A-1 (the Commercial Paper Notes ), Sumitomo Mitsui Banking Corporation, acting through its New York Branch (the Bank ), hereby establishes in favor of U.S. Bank National Association, as issuing and paying agent acting for the benefit of the holders of the Commercial Paper Notes (the Issuing and Paying Agent ) pursuant to that certain Issuing and Paying Agent Agreement, dated as of December 1, 2015 (as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms of the hereinafter defined Reimbursement Agreement and thereof, the Issuing and Paying Agent Agreement ), between the District and the Issuing and Paying Agent, pursuant to which the Commercial Paper Notes have been or will be issued from time to time, and that certain Standby Letter of Credit and Reimbursement Agreement dated as of December 1, 2015 (as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof, the Reimbursement Agreement ), between the District and the Bank, this Standby Letter of Credit (this Letter of Credit ) in the maximum available amount of [ ] U.S. DOLLARS ($ ) (hereinafter, as reduced or reinstated from time to time in accordance with the provisions hereof, the Available Amount ), which may be drawn upon, subject to the conditions set forth herein, by the Issuing and Paying Agent to pay the unpaid principal amount of Commercial Paper Notes on their stated maturity date to the extent other funds are unavailable therefor. 2. This Letter of Credit shall expire at 5:00 p.m. New York City time on the date (the Termination Date ) which is the earliest of: (i) December [ ], 2020, as such date may be extended in a Notice of Extension from the Bank to the Issuing and Paying Agent and the District in the form attached hereto as Annex G (such date, as extended from time to time, the Stated Expiration Date ), (ii) the date of payment of a Drawing not subject to reinstatement that causes the Available Amount to be reduced to zero, (iii) the date of our receipt of a certificate signed by your duly authorized officer in the form of Annex C or D attached hereto appropriately completed, (iv) the date when you surrender this Letter of Credit to the Bank for cancellation or (v) the date on which a Special Event of Default (as defined in the Reimbursement Agreement) shall have occurred. You agree to surrender this Letter of Credit to

265 the Bank, and not to make any Drawings, on and after the Termination Date. All Drawings hereunder shall be paid from immediately available funds of the Bank. 3. Funds under this Letter of Credit are available to you, commencing on the date hereof, against your presentation of (i) a drawing certificate in the form of Annex A-1 (with respect to the payment at maturity of the principal of (to the extent other funds are unavailable therefore) Commercial Paper Notes issued in accordance with the Issuing and Paying Agent Agreement) and (ii) a certificate in the form of Annex A-2 hereto, dated the date of such Drawing, attached hereto (any such set of certificates being a Drawing ) at the Bank s office located at 277 Park Avenue, New York, New York 10172, or by telecopier (at Telecopier Number: (212) ), in each case, Attention: Trade Services Credit Department], or at any other office or offices or number or numbers which may be designated by the Bank by written notice delivered to you. Each Drawing and related certificate so presented shall have all blanks appropriately filled in and shall be signed by a person who purports to be an authorized officer of the Issuing and Paying Agent and the aforesaid certificates shall be either in the form of a letter on the letterhead of the Issuing and Paying Agent or a communication by telecopy delivered or transmitted to us. Any telecopy pursuant to which a Drawing is made hereunder shall be promptly confirmed to us in writing. 4. The Bank hereby agrees with you that, to the extent of its liability as provided herein, all demands for payment made under and in compliance with the terms of this Letter of Credit will be duly honored (to the extent no (i) Special Event of Default shall have occurred or (ii) Suspension Event has occurred and is continuing) upon delivery or transmission of the certificates as specified in paragraph 3 hereof and if presented at the aforesaid office on or before the Termination Date. If a Drawing is made hereunder at or prior to [12:00 p.m. (noon)], New York City time, on a Business Day and such Drawing and the documents and other items presented in connection therewith conform to the terms and conditions hereof, payment shall be made of the amount specified in immediately available funds, no later than [2:30 p.m.], New York City time, on the same Business Day. If a Drawing is made by you hereunder after [12:00 p.m. (noon)], New York City time, on a Business Day and provided that such Drawing and the documents and other items presented in connection therewith conform to the terms and conditions hereof, payment shall be made to you, or to your designee, of the amount specified, in immediately available funds, not later than 12:00 p.m. (noon), New York City time, on the next succeeding Business Day. Payment under this Letter of Credit shall be made by or on behalf of the Bank by wire transfer of immediately available funds, to [U.S. Bank National Association, ABA No., Account No., Account Name:, Attention:, Reference: Santa ]. Such instructions (as specified by the Issuing and Paying Agent in the immediately preceding sentence) may be changed only by presentation to the Bank of a letter in form satisfactory to the Bank specifying different instructions and executed by the Issuing and Paying Agent. As used in this Letter of Credit, Business Day shall mean any day other than (i) a Saturday, Sunday or other day on which commercial banks in New York, New York, San Francisco, California, the city in which the corporate trust office of the Issuing and Paying Agent is located, or the city in which the office of the Bank at which Drawings are to be presented is located, are authorized or required by law to be closed, (ii) a legal holiday of the District or any other day the District is authorized to be closed for official - 2 -

266 business or (iii) a day on which the New York Stock Exchange of the Federal Reserve Bank of New York is closed. 5. Demands for payment hereunder honored by us shall not at the time of any Drawing exceed the Available Amount, as such amount may have been reduced or reinstated by us as hereinafter provided. Subject to the preceding sentences, each Drawing honored by the Bank hereunder shall pro tanto reduce, by the applicable amount of principal of the Commercial Paper Notes paid with the proceeds of such Drawing, the Available Amount (the amount of such reduction referred to herein as the Reduction Amount ). The amount available to be drawn hereunder by you shall be reduced by the Reduction Amount, except to the extent the Available Amount has been reinstated in accordance with the provisions of paragraph 7 of this Letter of Credit. 6. Upon receipt by us of a certificate in the form of Annex B (a Reduction Certificate of Available Amount ) attached hereto appropriately completed and signed by your duly authorized officer, at least three (3) Business Days prior to the date specified in such certificate for the permanent reduction of the Available Amount, the Available Amount shall be permanently reduced to the amounts set forth therein. 7. After any Drawing (except in the case of a Drawing that occurs after your receipt of a No-Issuance Notice (as defined in the Reimbursement Agreement) that has not been revoked), the Available Amount will be reinstated by and to the extent of amounts received by the Bank of reimbursement or repayment by the District of any amounts of such Drawing concurrently with your receipt of written notice from the Bank in the form of Annex H attached hereto (subject to any reduction in said Available Amount as above provided in paragraph 6), unless you shall have received prior notice from the Bank in substantially the form of Annex F attached hereto that an Event of Default under the Reimbursement Agreement has occurred and is continuing. 8. Only you or your successor as Issuing and Paying Agent may make Drawings under this Letter of Credit. Upon the payment to you, to your designee or to your account of the amount demanded hereunder, we shall be fully discharged of our obligation under this Letter of Credit with respect to such demand for payment and we shall not thereafter be obligated to make any further payments under this Letter of Credit in respect of such demand for payment to you or any other person who may have made to you or makes to you a demand for payment of principal of any Commercial Paper Note. By paying to you an amount demanded in accordance herewith, we make no representations as to the correctness of the amount demanded. 9. If you receive written notice from the District that all the Commercial Paper Notes are defeased or otherwise no longer outstanding and that the District does not intend to issue any additional Commercial Paper Notes, you shall submit a termination certificate in the form of Annex D hereto. 10. This Letter of Credit is intended to apply only to the payment of the principal amount of the Commercial Paper Notes upon maturity, to the extent other funds are unavailable therefor

267 11. Except as expressly stated herein, this Letter of Credit is governed by, and construed in accordance with, the terms of the Uniform Customs and Practices for Documentary Credit 1993 Revision, International Chamber of Commerce Publication No. 500 (the UCP ) other than Article 48(g) thereof. As to matters not governed by the UCP, this Letter of Credit shall be governed by and construed in accordance with the laws of the State of New York, including without limitation the Uniform Commercial Code as in effect in the State of New York, without regard to conflict of laws. Communications with respect to this Letter of Credit shall be in writing and shall be addressed to the Bank at Sumitomo Mitsui Banking Corporation, acting through its New York Branch, 277 Park Avenue, New York, New York 10172, by telecopy (at telecopy number (212) ) or such other address and telecopy number as we may notify you in writing, specifically referring thereon to this Letter of Credit by number. Any communication to the Bank which is made by telecopy as permitted hereby (other than Drawings) shall be immediately confirmed in writing delivered to the Bank at the address set forth in paragraph 3 hereof, provided, that failure to provide such written confirmation shall not affect the validity of such notice by telecopier. 12. This Letter of Credit is transferable in its entirety to any transferee whom you have certified to us has succeeded you as Issuing and Paying Agent with respect to the Commercial Paper Notes, and may be successively transferred. Transfer of the available balance under this Letter of Credit to such transferee shall be effected by presenting to us the attached form of Annex E signed by the transferor and the transferee (each a Transfer ) together with the original Letter of Credit. Upon presentation and payment by the District of $5,000 representing transfer fees payable under the Reimbursement Agreement, we shall forthwith effect a transfer of this Letter of Credit to your designated transferee. Transfers to designated foreign nationals and /or specially designated nationals are not permitted as being contrary to the U.S. Treasury Department or Foreign Assets Control Regulations. Upon our endorsement of such transfer, the transferee instead of the transferor shall, without necessity of further action, be entitled to all the benefits of and rights under this Letter of Credit in the transferor s place; provided that, in such case, any certificates of the Issuing and Paying Agent to be provided hereunder shall be signed by one who states therein that he is a duly authorized officer or agent of the transferee. 13. This Letter of Credit sets forth in full our undertaking, and such undertaking shall not in any way be modified, amended, amplified or limited by reference to any document, instrument or agreement referred to herein (including, without limitation, the Commercial Paper Notes), except only the certificates and letters referred to herein; and no such reference shall be deemed to incorporate herein by reference any document, instrument or agreement

268 Very truly yours, SUMITOMO MITSUI BANKING CORPORATION, acting through its New York Branch By: Name: Title: S - 1

269 ANNEX A-1 TO STANDBY LETTER OF CREDIT NO. [ ] [Date] Sumitomo Mitsui Banking Corporation, acting through its New York Branch 277 Park Avenue, 6th Floor New York, New York Attention: Trade Services Credit Department Re: Drawing Certificate Ladies and Gentlemen: [Issuing and Paying Agent], (the Issuing and Paying Agent ) hereby certifies to Sumitomo Mitsui Banking Corporation, acting through its New York Branch (the Bank ), with reference to Standby Letter of Credit No. [ ], dated December [2], 2015, (the Letter of Credit ; any other defined terms used herein having their respective meanings set forth in the Letter of Credit or the hereinafter defined Reimbursement Agreement) issued by the Bank in favor of the Issuing and Paying Agent pursuant to that certain Standby Letter of Credit and Reimbursement Agreement, dated as of December 1, 2015, by and between East Bay Municipal Utility District (the District ) and the Bank (the Reimbursement Agreement ) that: 1. The Issuing and Paying Agent is the Issuing and Paying Agent under the Issuing and Paying Agent Agreement, and is acting as agent for the owners of Commercial Paper Notes. 2. The Issuing and Paying Agent is making a drawing under the Letter of Credit with respect to payment of the principal amount of the Commercial Paper Notes upon the stated maturity thereof, to the extent other funds (from the proceeds of the sale of Commercial Paper Notes or otherwise) are unavailable for such purpose. 3. The amount demanded hereby is $ to be used for payment of principal of the Commercial Paper Notes. Said amounts do not exceed the amounts permitted to be drawn under the Letter of Credit in accordance with the Letter of Credit. 4. The amount demanded hereby does not include any amount in respect of (a) the Commercial Paper Notes registered in the name of the District or, to the best knowledge of the Issuing and Paying Agent, any nominee for or any Person who owns such Commercial Paper Notes for the sole benefit of the District or (b) any Commercial Paper Notes issued on or after the date on which the Bank has issued a No-Issuance Notice to the District and the Issuing and Paying Agent, substantially in the form of Exhibit D to the Reimbursement Agreement.

270 5. Upon receipt by the undersigned of the amount demanded hereby, (a) the undersigned will apply the same directly to the payment when due of the principal of Commercial Paper Notes upon the stated maturity thereof, (b) no portion of said amount shall be applied by the undersigned for any other purpose and (c) no portion of said amount shall be commingled with other funds held by the undersigned. 6. The undersigned is the duly authorized officer or agent of the Issuing and Paying Agent. 7. Payment by the Bank shall be made to the Issuing and Paying Agent in accordance with the terms of the Letter of Credit. IN WITNESS WHEREOF, the Issuing and Paying Agent has executed and delivered this certificate as of the day of,. [ISSUING AND PAYING AGENT], as Issuing and Paying Agent By: Name: Title: Annex A-1-2

271 ANNEX A-2 TO STANDBY LETTER OF CREDIT NO. [ ] NO SPECIAL EVENT OF DEFAULT OR SUSPENSION EVENT CERTIFICATE Sumitomo Mitsui Banking Corporation, acting through its New York Branch 277 Park Avenue, 6th Floor New York, New York Attention: Trade Services Credit Department The undersigned, a duly authorized officer of the undersigned Issuing and Paying Agent (the Issuing and Paying Agent ), hereby certifies to Sumitomo Mitsui Banking Corporation, acting through its New York Branch (the Bank ), with reference to Standby Letter of Credit No. [ ] (the Letter of Credit, the terms defined therein and not otherwise defined herein being used herein as therein defined) issued by the Bank in favor of the Issuing and Paying Agent, as follows: 1. The undersigned is the Issuing and Paying Agent under the Issuing and Paying Agent Agreement and is acting as the agent for the holders of the Commercial Paper Notes. 2. This certification is being delivered by the Issuing and Paying Agent in connection with a request for a Drawing. 3. The Issuing and Paying Agent has not received notice of, and has no actual knowledge of, (i) the occurrence of a Special Event of Default or (ii) the occurrence and the continuance of a Suspension Event. IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate as of the day of,., as Issuing and Paying Agent By: Name: Title:

272 ANNEX B TO STANDBY LETTER OF CREDIT NO. [ ] [Date] Sumitomo Mitsui Banking Corporation, acting through its New York Branch 277 Park Avenue, 6th Floor New York, New York Attention: Trade Services Credit Department Re: Reduction of Available Amount of Letter of Credit Ladies and Gentlemen: [Issuing and Paying Agent] (the Issuing and Paying Agent ) hereby certifies to Sumitomo Mitsui Banking Corporation, acting through its New York Branch (the Bank ), with reference to Standby Letter of Credit No. [ ], dated December [2], 2015 (the Letter of Credit ; any other defined terms used herein having their respective meanings set forth in the Letter of Credit and the therein defined Reimbursement Agreement) issued by the Bank in favor of the Issuing and Paying Agent that: 1. The Issuing and Paying Agent is the Issuing and Paying Agent under the Issuing and Paying Agent Agreement, and is acting as the agent for the owners of the Commercial Paper Notes. 2. The Issuing and Paying Agent hereby notifies you that on or prior to the date hereof the District has determined that the Available Amount of the Letter of Credit shall be permanently reduced to $, which amount, as so reduced, is equal to or not less than the principal amount of all Commercial Paper Notes outstanding as of the date hereof. 3. If any Commercial Paper Notes are outstanding as of the date of this Certificate, the District has informed us that it will not issue additional Commercial Paper Notes unless after the issuance of such additional Commercial Paper Notes the aggregate principal amount of Commercial Paper Notes outstanding shall be no greater than the Available Amount of the Letter of Credit, as so reduced pursuant to this certificate. 4. The Available Amount of the Letter of Credit is permanently reduced to $ upon receipt by the Bank of this certificate. 5. The undersigned represents that he/she is a duly authorized representative of the Issuing and Paying Agent.

273 IN WITNESS WHEREOF, the Issuing and Paying Agent has executed and delivered this certificate as of the day of,. [ISSUING AND PAYING AGENT], as Issuing and Paying Agent By: Name: Title: Annex B-2

274 ANNEX C TO STANDBY LETTER OF CREDIT NO. [ ] [Date] Sumitomo Mitsui Banking Corporation, acting through its New York Branch 277 Park Avenue, 6th Floor New York, New York Attention: Trade Services Credit Department Re: Termination of Letter of Credit (Alternate Liquidity Facility) Ladies and Gentlemen: [ISSUING AND PAYING AGENT] (the Issuing and Paying Agent ) hereby certifies to Sumitomo Mitsui Banking Corporation, acting through its New York Branch (the Bank ) with reference to Standby Letter of Credit No. [ ], dated December [2], 2015 (the Letter of Credit ; any other defined terms used herein having their respective meanings set forth in the Letter of Credit and the therein defined Reimbursement Agreement) issued by the Bank in favor of the Issuing and Paying Agent that: 1. The Issuing and Paying Agent is the Issuing and Paying Agent under the Issuing and Paying Agent Agreement. 2. As Issuing and Paying Agent under the Issuing and Paying Agent Agreement, the Issuing and Paying Agent has accepted an alternate liquidity facility to replace the Letter of Credit, in compliance with the Issuing and Paying Agent Agreement and the Reimbursement Agreement. 3. Upon receipt of this certificate accompanied by the Letter of Credit, the Letter of Credit shall terminate as provided above in clause (iii) of paragraph 2 of the Letter of Credit. 4. The undersigned is the duly authorized officer or agent of the Issuing and Paying Agent.

275 IN WITNESS WHEREOF, the Issuing and Paying Agent has executed and delivered this certificate as of the day of,. [ISSUING AND PAYING AGENT], as Issuing and Paying Agent By: Name: Title: Annex C-2

276 ANNEX D TO STANDBY LETTER OF CREDIT NO. [ ] [Date] Sumitomo Mitsui Banking Corporation, acting through its New York Branch 277 Park Avenue, 6th Floor New York, New York Attention: Trade Services Credit Department Re: Termination of Letter of Credit (No Commercial Paper Notes Outstanding) Ladies and Gentlemen: [ISSUING AND PAYING AGENT] (the Issuing and Paying Agent ) hereby certifies to Sumitomo Mitsui Banking Corporation, acting through its New York Branch (the Bank ) with reference to Standby Letter of Credit No. [ ], dated December [2], 2015 (the Letter of Credit ; any other defined terms used herein having their respective meanings set forth in the Letter of Credit and the therein defined Reimbursement Agreement) issued by the Bank in favor of the Issuing and Paying Agent that: 1. The Issuing and Paying Agent is the Issuing and Paying Agent under the Issuing and Paying Agent Agreement. 2. No Commercial Paper Notes remain outstanding under the Issuing and Paying Agent Agreement. 3. The District has notified us that it does not intend to issue any additional Commercial Paper Notes and desires to terminate this Letter of Credit in accordance with terms of the Reimbursement Agreement. 4. Upon receipt by the Bank of this certificate the Letter of Credit shall terminate as provided in clause (iii) of paragraph 2 of the Letter of Credit. 5. The undersigned is the duly authorized officer or agent of the Issuing and Paying Agent.

277 IN WITNESS WHEREOF, the Issuing and Paying Agent has executed and delivered this certificate as of the day of,. [ISSUING AND PAYING AGENT], as Issuing and Paying Agent By: Name: Title: Annex D-2

278 ANNEX E TO STANDBY LETTER OF CREDIT NO. [ ] [Date] Sumitomo Mitsui Banking Corporation, acting through its New York Branch 277 Park Avenue, 6th Floor New York, New York Attention: Trade Services Credit Department Re: Transfer of Standby Letter of Credit No. [ ] dated December [2], 2015 (the Letter of Credit ) Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: (Name of Transferee) (Address of Transferee) (Notice Details of Transferee) as successor Issuing and Paying Agent under the Issuing and Paying Agent Agreement (as defined in the above-referenced Letter of Credit) all rights of the undersigned beneficiary to draw under the above-referenced Letter of Credit in its entirety. By this transfer, all rights of the undersigned beneficiary in such Letter of Credit are transferred to the transferee and the transferee shall have the sole rights as beneficiary thereof, including sole rights relating to any amendments, whether increases or extensions, or other amendments and whether now existing or hereafter made. All amendments are to be advised directly to the transferee without necessity of any consent of or notice to the undersigned beneficiary.

279 The Letter of Credit (and any amendments thereto) is returned herewith, and we ask you to endorse the transfer on the reference thereof, and forward it directly to the transferee with your customary notice of transfer. Very truly yours, SIGNATURE AUTHENTICATED (Signature of Beneficiary) (Bank) (Authorized Signature) We certify that we (i) are duly authorized officers or agents and (ii) have succeeded (name of beneficiary) as Issuing and Paying Agent under the Issuing and Paying Agent Agreement. Very truly yours, SIGNATURE AUTHENTICATED (Authorized Signature) (Signature of Transferee) Annex E-2

280 ANNEX F TO STANDBY LETTER OF CREDIT NO. [ ] [Date] [ISSUING AND PAYING AGENT] as Issuing and Paying Agent Attention: East Bay Municipal Utility District 375 Eleventh Street Oakland, California Attention: Director of Finance Telecopy: (510) Re: Event of Default under the Reimbursement Agreement Not Resulting in Immediate Termination or Suspension of the Letter of Credit Ladies and Gentlemen: The undersigned, authorized officers of Sumitomo Mitsui Banking Corporation, acting through its New York Branch (the Bank ) with reference to Standby Letter of Credit No. [ ], dated December [2], 2015 (the Letter of Credit ; any capitalized term used herein and not defined shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of, as Issuing and Paying Agent, hereby certify that: 1. The Bank has determined that there exists an Event of Default under Section 7.3[ ] of the Standby Letter of Credit and Reimbursement Agreement dated as of December 1, 2015 (as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof, the Reimbursement Agreement ), by and between the District and the Bank and that such Event of Default is continuing. 2. We have, prior to, or concurrently with, the delivery of this Certificate, delivered a No-Issuance Notice (as defined in the Reimbursement Agreement) in connection with such Event of Default. 3. Upon receipt by you of this certificate you are notified that (i) the Available Amount of the Letter of Credit is hereby reduced to principal amount of Commercial Paper Notes currently outstanding, (ii) on the maturity date of each such Commercial Paper Note, after any Drawing required to pay such Commercial paper Note, the Available Amount shall be reduced further by an amount equal to the principal amount of such maturing Commercial Paper Note and (iii) upon the last maturity date of

281 all such Commercial Paper Notes, after any Drawing required to pay Commercial Paper Notes maturing on such date, the Available Amount shall permanently be reduced to zero and the Letter of Credit shall be terminated. Annex F-2

282 IN WITNESS WHEREOF, the Bank has executed and delivered this certificate as of the day of,. SUMITOMO MITSUI BANKING CORPORATION, acting through its New York Branch By: Name: Title: Annex F-3

283 ANNEX G TO STANDBY LETTER OF CREDIT NO. [ ] [Date] [ISSUING AND PAYING AGENT] as Issuing and Paying Agent Attention: Re: Notice of Extension Ladies and Gentlemen: 1. Pursuant to Section 9.9 of that certain Standby Letter of Credit and Reimbursement Agreement, dated as of December 1, 2015 (as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof, the Reimbursement Agreement ), by and between the East Bay Municipal Utility District (the District ) and Sumitomo Mitsui Banking Corporation, acting through its New York Branch (the Bank ), the Bank has approved an extension of Standby Letter of Credit No. [ ] (the Letter of Credit ), dated December [2], The new Stated Expiration Date is. You are hereby authorized to attach this Notice of Extension to the Letter of Credit and to treat this Notice of Extension as extending the Stated Expiration Date of the Letter of Credit. The District s acknowledgment hereof shall be deemed to be the District s representation that all its representations contained in Article V of the Reimbursement Agreement are true and correct and will be true and correct as of the date hereof and that no Default or Event of Default has occurred and is continuing. Very truly yours, SUMITOMO MITSUI BANKING CORPORATION, acting through its New York Branch By: Name: Title:

284 Accepted as of, by [ISSUING AND PAYING AGENT], as Issuing and Paying Agent By Title Acknowledged as of, by EAST BAY MUNICIPAL UTILITY DISTRICT By Title Annex G-2

285 ANNEX H TO STANDBY LETTER OF CREDIT NO. [ ] [Date] [ISSUING AND PAYING AGENT] Attention: Re: Reinstatement Ladies and Gentlemen: Reference is hereby made to that certain Standby Letter of Credit No. [ ], dated December [2], 2015 (the Letter of Credit ). Please be advised that the undersigned is in receipt of the amount of $, which represents reimbursement by East Bay Municipal Utility District (the District ) for the Advance under the Standby Letter of Credit and Reimbursement Agreement dated as of December 1, 2015 (as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof, the Reimbursement Agreement ), between the District and you, relating to the Drawing made on, 20, and accordingly, the Available Amount shall be reinstated by an amount equal to the amount so received. Dated this day of,. SUMITOMO MITSUI BANKING CORPORATION, acting through its New York Branch By: Name: Title:

286 EXHIBIT B FORM OF ADVANCE NOTE EAST BAY MUNICIPAL UTILITY DISTRICT BANK NOTE (WATER SERIES), SUBSERIES A-1 SUMITOMO MITSUI BANKING CORPORATION (ADVANCE NOTE) December [2], 2015 Oakland, California For value received, EAST BAY MUNICIPAL UTILITY DISTRICT (the District ) promises to pay to the order of SUMITOMO MITSUI BANKING CORPORATION (the Bank ), at its office at, the aggregate unpaid principal amount of all Advances made by the Bank from time to time pursuant to the Reimbursement Agreement referred to below on the dates and in the amounts provided for in the Reimbursement Agreement. The District promises to pay interest on the unpaid principal amount of such Advances on the dates and at the rates provided for in the Standby Letter of Credit and Reimbursement Agreement dated as of December 1, 2015 (as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the Reimbursement Agreement ) by and between the District and the Bank, acting through its New York Branch. All payments of principal and interest shall be made in lawful money of the United States of America in immediately available funds. All capitalized terms used herein and not otherwise defined herein shall have the meanings specified in the Reimbursement Agreement. This note is the Advance Note referred to in the Reimbursement Agreement and is entitled to the benefits thereof and of the Related Documents referred to therein. As provided in and subject to the terms of the Reimbursement Agreement, this Advance Note is subject to prepayment, in whole or in part. In case an Event of Default shall occur, the unpaid principal of and accrued interest on this Advance Note may be declared due and payable in the manner and with the effect provided in the Reimbursement Agreement. The Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the District evidenced hereby and the amounts of principal and interest payable and paid from time to time hereunder. The failure to record any such amount, or any error in such records, shall not, however, limit or otherwise affect the Obligations of the District hereunder to repay any and all amounts owed hereunder, together with all interest accrued hereon as provided in the Reimbursement Agreement. This Advance Note is an obligation of the District secured by a lien on the Available Water Revenues as more fully described in Section 2.9 of the Reimbursement Agreement. This Advance Note constitutes a Bank Note within the meaning of the Issuing and Paying Agent Agreement.

287 THIS ADVANCE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. EAST BAY MUNICIPAL UTILITY DISTRICT By: Name: Title:

288 EXHIBIT C FORM OF TERM LOAN NOTE EAST BAY MUNICIPAL UTILITY DISTRICT BANK NOTE (WATER SERIES), SUBSERIES A-1 SUMITOMO MITSUI BANKING CORPORATION (TERM LOAN NOTE) December [2], 2015 Oakland, California For value received, EAST BAY MUNICIPAL UTILITY DISTRICT (the District ) promises to pay to the order of SUMITOMO MITSUI BANKING CORPORATION (the Bank ), at its office at, the aggregate unpaid principal amount of all Term Loans made by the Bank from time to time pursuant to the Reimbursement Agreement referred to below on the dates and in the amounts provided for in the Reimbursement Agreement. The District promises to pay interest on the unpaid principal amount of such Term Loans on the dates and at the rates provided for in the Standby Letter of Credit and Reimbursement Agreement dated as of December 1, 2015 (as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the Reimbursement Agreement ) by and between the District and the Bank, acting through its New York Branch. All payments of principal and interest shall be made in lawful money of the United States of America in immediately available funds. All capitalized terms used herein and not otherwise defined herein shall have the meanings specified in the Reimbursement Agreement. This note is the Term Loan Note referred to in the Reimbursement Agreement and is entitled to the benefits thereof and of the Related Documents referred to therein. As provided in and subject to the terms of the Reimbursement Agreement, this Term Loan Note is subject to prepayment, in whole or in part. In case an Event of Default shall occur, the unpaid principal of and accrued interest on this Term Loan Note may be declared due and payable in the manner and with the effect provided in the Reimbursement Agreement. The Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the District evidenced hereby and the amounts of principal and interest payable and paid from time to time hereunder. The failure to record any such amount, or any error in such records, shall not, however, limit or otherwise affect the Obligations of the District hereunder to repay any and all amounts owed hereunder, together with all interest accrued hereon as provided in the Reimbursement Agreement. This Term Loan Note is an obligation of the District secured by a lien on the Available Water Revenues as more fully described in Section 2.9 of the Reimbursement Agreement. This Term Loan Note constitutes a Bank Note within the meaning of the Issuing and Paying Agent Agreement.

289 THIS TERM LOAN NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. EAST BAY MUNICIPAL UTILITY DISTRICT By: Name: Title: -2-

290 EXHIBIT D FORM OF SIXTEENTH SUPPLEMENTAL INDENTURE [to be attached]

291 CHAPMAN DRAFT DATED NOVEMBER 15, 2015 FEE AGREEMENT December [2], 2015 Reference is hereby made to the Standby Letter of Credit dated December [2], 2015 (the Letter of Credit ), issued by Sumitomo Mitsui Banking Corporation, acting through its New York Branch (the Bank ) pursuant to the Standby Letter of Credit and Reimbursement Agreement dated as of December 1, 2015 (as amended, supplemented, restated or otherwise modified from time to time, the Agreement ), between the East Bay Municipal Utility District (the District ) and the Bank, supporting the District s Commercial Paper Notes (Water Series) Tax-Exempt Subseries A-1. Capitalized terms not otherwise defined herein have the meanings set forth in the Agreement. The purpose of this Fee Agreement is to confirm the agreement between the Bank and the District with respect to the Letter of Credit Fees (as defined below) and certain other fees payable by the District to the Bank. This Fee Agreement is the Fee Agreement referenced in the Agreement, and the terms hereof are incorporated by reference into the Agreement. This Fee Agreement and the Agreement are to be construed as one agreement between the District and the Bank, and all obligations hereunder are to be construed as obligations thereunder. All references to amounts due and payable under the Agreement will be deemed to include all amounts, fees and expenses payable under this Fee Agreement. ARTICLE I. FEES. Section 1.1. Letter of Credit Fee. The District hereby agrees to pay or cause to be paid to the Bank on April 1, 2016, for the period commencing on the Effective Date and ending on March 31, 2015, and in arrears on the first Business Day of each July, October, January and April occurring thereafter to the Termination Date, and on the Termination Date, a non-refundable Letter of Credit Fee (the Letter of Credit Fee ) with respect to the Available Amount under the Letter of Credit in an amount equal to the rate per annum associated with the Rating (as defined below) specified below (the Letter of Credit Fee Rate ) for each day in the related fee period and the Available Amount for each day in the related fee period. 2d_SMBC_EBMUD_Fee_Agmt_ doc

292 MOODY S FITCH COMMITMENT LEVEL S&P RATING RATING RATING FEE RATE Level 1: AA+ or higher Aa1 or higher AA+ or higher 0.315% Level 2: AA Aa2 AA 0.42% Level 3: AA- Aa3 AA- 0.60% Level 4: A+ A1 A+ 0.70% Level 5: A A2 A 0.90% Level 6: A- A3 A- 1.20% Level 7: BBB+ Baa1 BBB+ 1.75% Level 8: BBB Baa2 BBB 2.25% Level 9: BBB- Baa3 BBB- 2.50% The term Rating as used above shall mean the long-term unenhanced debt rating assigned by each Rating Agency to any outstanding Water Bond. In the event of a split rating (i.e., the Rating of one of the foregoing Rating Agencies is at a different Level than the Rating of either of the other Rating Agencies), the Letter of Credit Fee Rate shall be based upon the Level in which the lower of the two highest Ratings appears; provided, however, that if only two Rating Agencies are then rating the Water Bonds, the Letter of Credit Fee Rate shall be based upon the Level in which the lower of the two Ratings appears; provided, further, that for purposes of this sentence only, any Rating that appears in a higher numbered Level than the Level in which a Rating of another Rating Agency appears shall be deemed to be a lower Rating for purposes of determining the Letter of Credit Fee Rate. Any change in the Letter of Credit Fee Rate resulting from a change in a Rating shall be and become effective as of and on the date of the announcement of the change in a Rating. References to Ratings above are references to rating categories as presently determined by the Rating Agencies, and in the event of adoption of any new or changed rating system by any such Rating Agency, including, without limitation, any recalibration of the Ratings in connection with the adoption of a global rating scale, each of the Ratings from the Rating Agency in question referred to above shall be deemed to refer to the rating category under the new rating system which most closely approximates the applicable rating category as currently in effect. The District and the Bank acknowledge that as of the Effective Date the Letter of Credit Fee Rate is that specified above for Level 1. In the event that either (i) a Rating is suspended, withdrawn or otherwise unavailable from any Rating Agency for credit related reasons or (ii) there shall have occurred and be continuing any Event of Default, in each such case, the Letter of Credit Fee Rate shall immediately increase to a rate per annum equal to 3.00% (the Fee Increase ); provided, however, that the Fee Increase shall not occur pursuant to clause (i) of this sentence if any such rating shall have been suspended or withdrawn by or becomes otherwise unavailable from a Rating Agency due to (a) the District s failure to apply for such rating or failure to provide information to such Rating Agency, in each case as a result of such Rating Agency s imposition or proposed imposition of conditions to issuing such rating with which the District cannot legally comply or (b) a determination by the District to cease maintaining such rating and following such withdrawal, the District is in compliance with Section 6.29 of the Agreement. The Letter of Credit Fees shall be payable quarterly in arrears, together with interest on the Letter of Credit Fees from the date payment is -2-

293 due until payment in full at the Default Rate. Such fee shall be payable in immediately available funds and computed on the basis of a 360-day year and the actual number of days elapsed. Section 1.2. Drawing Fees. For each Drawing under the Letter of Credit, the District agrees to pay to the Bank a non-refundable drawing fee equal to $300, payable without any requirement of notice or demand by the Bank on the date of such Drawing. Section 1.3. Transfer Fee. Upon each transfer of the Letter of Credit in accordance with its terms to a successor Issuing and Paying Agent under the Issuing and Paying Agent Agreement, the District agrees to pay the Bank a non-refundable fee of $5,000, and to reimburse the Bank for its actual costs and expenses associated with such transfer or appointment (including, without limitation, the reasonable fees and expenses of counsel to the Bank), payable on the date of such transfer or appointment. Section 1.4. Amendment Fee. The District agrees to pay to the Bank on the date of each amendment, supplement, or modification to the Agreement (or any Related Document, the amendment, supplement or modification of which requires the consent of the Bank or a waiver from the Bank), a non-refundable fee equal to $5,000, or such other fee as may be agreed to between the District and the Bank, plus, in each case, the reasonable fees and expenses of counsel to the Bank. Section 1.5. Termination Fee. (a) Notwithstanding anything set forth herein or in the Agreement to the contrary, the District hereby agrees not to terminate the Letter of Credit prior to the first anniversary of the Effective Date, without the payment by the District to the Bank of a termination fee in an amount equal to the product of (i) the Letter of Credit Fee Rate in effect pursuant to Section 1.1 hereof on the date of such termination, (ii) the Available Amount in effect on the Effective Date, and (iii) a fraction, the numerator of which is equal to the number of days from and including the date of such termination to and including the first anniversary of the Effective Date, and the denominator of which is 360. Notwithstanding any provisions of this Section to the contrary, the District will not be required to pay the Termination Fee if (i) any two of Moody s, S&P or Fitch shall have withdrawn or suspended the short-term credit rating of the Bank for credit related reasons or lowered the short-term credit rating of the Bank below P-1, A-1 and F1, respectively, and thereafter for so long as such withdrawal, suspension or reduction shall be continuing, (ii) the Bank submits to the District a request for payment of amounts payable pursuant to Section 3.2 of the Agreement or (iii) the District elects to refinance the Commercial Paper Notes in full from a source of funds which does not involve the issuance by a bank or other financial institution of a letter of credit, liquidity facility, or credit facility or a direct purchase of such debt by a bank or other financial institution. (b) Notwithstanding the foregoing and anything set forth herein or in the Agreement to the contrary, the District agrees not to permanently reduce the Available Amount in effect on the Effective Date under the Agreement prior to the first anniversary of the Effective Date, without the payment by the District to the Bank of a reduction fee in connection with each and every permanent reduction of the Available Amount as set forth herein in an amount equal to the product of (A) the Letter of Credit Fee Rate in effect on the date of such permanent reduction, (B) the difference between the Available Amount prior to such permanent reduction and the -3-

294 Available Amount after such permanent reduction, and (C) a fraction, the numerator of which is equal to the number of days from and including the date of such permanent reduction to and including the first anniversary of the Effective Date, and the denominator of which is 360. ARTICLE II. MISCELLANEOUS. Section 2.1. Out-of-Pocket Expenses. The District shall pay to the Bank promptly upon receipt of invoice any and all reasonable fees and expenses of the Bank (including the out-of-pocket expenses of the Bank and the reasonable fees and disbursements of both domestic and foreign counsel to the Bank) all payable in accordance with this Fee Agreement and Section 9.2(a) of the Agreement. Section 2.2. Payment Account. As provided in the Agreement, all payments hereunder shall be made by means of wire transfer of funds to the Bank s Payment Account. Section 2.3. Amendments. No amendment to this Fee Agreement shall become effective without the prior written consent of the District and the Bank. Section 2.4. Governing Law. THIS FEE AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PROVISIONS (OTHER THAN NEW YORK GENERAL OBLIGATIONS LAWS AND ); PROVIDED THAT THE POWER AND AUTHORITY OF THE DISTRICT TO ENTER INTO AND ITS RIGHTS AND OBLIGATIONS UNDER THIS FEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. Section 2.5. Counterparts. This Fee Agreement may be executed in two or more counterparts, each of which shall constitute an original but both or all of which, when taken together, shall constitute but one instrument. Delivery of a counterpart hereof by facsimile transmission or by transmission of an Adobe portable document file (also known as a PDF file) shall be effective as delivery of an original executed counterpart hereof. Section 2.6. Severability. Any provision of this Fee Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. [SIGNATURES BEGIN ON THE FOLLOWING PAGE] -4-

295 IN WITNESS WHEREOF, the parties hereto have caused this Fee Agreement to be duly executed and delivered by their respective officers thereunto duly authorized on the date first set forth above. EAST BAY MUNICIPAL UTILITY DISTRICT By: Name: Title: SUMITOMO MITSUI BANKING CORPORATION, acting through its New York Branch By: Name: Title: Signature Page to Fee Agreement

296 Norton Rose Fulbright US LLP Draft of 11/16/15 [FORM OF DEALER AGREEMENT] EAST BAY MUNICIPAL UTILITY DISTRICT COMMERCIAL PAPER NOTES (WATER SERIES) THIS DEALER AGREEMENT (this Agreement ) is entered into as of December 1, 2015 by and between the East Bay Municipal Utility District (the Issuer or the District ) and or any successor thereto (the Dealer ). RECITALS The District proposes to issue and reissue its Commercial Paper Notes (Water Series) (the Water Series Notes ) and its Commercial Paper Notes (Wastewater Series) (the Wastewater Series Notes, and collectively with the Water Series Notes, the Notes ) in an aggregate principal amount at any time outstanding which, together with all other evidences of indebtedness issued and outstanding pursuant to Article 1 of Chapter 7.5 of the Municipal Utility District Act of the State of California (the Act ), including all amounts drawn on available bank lines of credit related thereto, if any, shall not at any one time exceed the lesser of either (1) the annual average of the District s total revenue for the three preceding years or (2) 25 percent of the District s total outstanding bonds issued pursuant to Chapters 6, 7 and 8 of the Act. The Notes are authorized by Resolution No , adopted on April 28, 2015 by the Board of Directors (the Board ) of the District, pursuant to which the Board declared its intention to authorize successive issues of short-term indebtedness, and by Resolution No. -15, adopted on November, 2015, by the Board, authorizing the issuance of the Notes and the execution and delivery of the Issuing and Paying Agent Agreement, dated as of December 1, 2015, as it may be amended from time to time (the Issuing and Paying Agent Agreement ), by and between the District and U.S. Bank National Association, as issuing and paying agent (the Issuing and Paying Agent ), pursuant to which the Notes will be issued. The Water Series Notes are initially being delivered in two subseries, Commercial Paper Notes (Water Series), Subseries A-1 (the Water Series A-1 Notes ) and Commercial Paper Notes (Water Series), Subseries A-2 (the Water Series A-2 Notes and, together with the Water Series A-1 Notes, the Water Series A Notes ). The Water Series A Notes are secured by a pledge of Available Water Revenues of the District. The Water Series A-1 Notes are additionally supported by a dedicated liquidity facility in the form of a standby letter of credit in the stated amount of $200,000,000 (representing an amount equal to principal amount of the Water Series A-1 Notes) issued by Sumitomo Mitsui Banking Corporation, acting through its New York Branch, pursuant to a standby letter of credit and reimbursement agreement. The Water Series A-2 Notes are additionally supported by a dedicated liquidity facility in the form of a revolving credit agreement with a maximum available principal commitment of $160,000,000 entered into with Bank of America, N.A. The liquidity facilities, as amended, extended, restated or otherwise modified from time to time (and/or such additional, substitute or alternate liquidity facility as shall hereafter be delivered for any Notes allocated to the Dealer hereunder) are referred to herein individually as a Liquidity Facility and collectively as the Liquidity

297 Facilities. The issuing banks of the Liquidity Facilities are referred to herein individually as a Bank and collectively as the Banks. The Dealer has heretofore been appointed by the District, and currently serves, as a dealer for the District s outstanding Extendable Municipal Commercial Paper Notes (Water Series) and/or Extendable Municipal Commercial Paper Notes (Wastewater Series). The District has determined that it is in the best interests of the District to expand the services of the Dealer to provide for such dealer to serve as dealer for the Notes. The Dealer has agreed to act as a Dealer for the Notes and to perform the duties imposed upon the Dealer by the Issuing and Paying Agent Agreement and this Agreement. AGREEMENTS NOW THEREFORE, for and in consideration of the covenants herein made, and subject to the conditions herein set forth, the parties hereto agree as follows: Section 1. Definitions. Unless the context clearly indicates a contrary meaning, each capitalized term used in this Agreement shall have the meaning given to that term in the Issuing and Paying Agent Agreement. Section 2. Appointments of Dealer; Acceptance and Responsibilities. (a) Subject to the terms and conditions set forth in this Agreement, the District hereby appoints as a Dealer for the Notes of such Series and subseries and in such amount as may be allocated to such Dealer from time to time by the District, and hereby accepts such appointment and accepts and agrees to perform the duties and obligations imposed upon it as Dealer under this Agreement and under the Issuing and Paying Agent Agreement, subject to the terms, conditions and limitations set forth in this Agreement. (b) The Dealer shall act as a non-exclusive dealer with respect to the Notes and shall be responsible to solicit and arrange sales of the Notes allocated to it, including, without limitation, the initial placement of such Notes and subsequent sales, and establishing the rates and maturities of such Notes from time to time. It is understood that the Dealer s responsibilities hereunder will include (i) the soliciting of purchases of Notes allocated to it from investors that can purchase tax-exempt or taxable commercial paper, as applicable, or other short-term securities, (ii) providing information to the District concerning such purchases, (iii) billing and receiving payment for Notes purchased and sold and (iv) performing such other related functions as Dealer as set forth in the Issuing and Paying Agent Agreement. (c) The Dealer acknowledges that the District has and may enter into agreements with other dealers in connection with the offering and sale of the Notes. The District reserves the right to allocate and reallocate Notes among the Dealer and the other dealers with respect to the Notes at any time in its sole discretion for any reason. (d) The Dealer acknowledges that the District intends to conduct a regular evaluation of the Dealer. Such evaluation will consider, among other things, an analysis of

298 interest rates on the Notes allocated hereunder and managed by the Dealer in comparison to the interest rates provided by other dealers. (e) The Dealer acknowledges that the District has delivered to the Dealer an executed copy of the Issuing and Paying Agent Agreement and the Liquidity Facilities in accordance with Section 8 hereof. The District agrees to provide the Dealer with an executed copy of any amendment to the Issuing and Paying Agent Agreement or Liquidity Facilities, if any, promptly upon the execution and delivery thereof. (f) The Dealer hereby agrees that it will comply with all statutes and regulations applicable to it, including without limitation, all applicable securities laws and requirements of the Securities Exchange Commission, the Municipal Securities Rulemaking Board or any regulatory body having jurisdiction over the Dealer, non-compliance with which would adversely affect the Notes or the District s Note program. Section 3. Sale and Purchase of Notes. (a) The Dealer and the District agree that any Note which the Dealer may purchase or for which the Dealer may arrange the sale, will be purchased or sold on the terms and conditions and in the manner provided in the Issuing and Paying Agent Agreement and this Agreement and that in particular, the Notes of each Series and subseries thereof (i) shall be issued in denominations of $100,000 and in integral multiples of $1,000 in excess thereof, (ii) shall bear or accrue interest payable at maturity at an annual rate (calculated on the basis of a 365/366-day year (in the case of Notes the interest on which is Tax-Exempt), and a 360-day year containing twelve 30-day months (in the case of Notes the interest on which is Taxable), and in each case the actual number of days elapsed) payable at maturity, which shall not in any event exceed, in the case of Notes the interest on which is Tax-Exempt, the Maximum Rate of 12%, and in the case of Notes the interest on which is Taxable, the Maximum Rate of 15%, (ii) shall mature on a Business Day not more than 270 days after their respective dates, but in no event later than the Business Day immediately preceding the applicable Liquidity Facility Expiration Date, and (iv) shall be sold at a price equal to 100% of the principal amount thereof if interest on the Notes is Tax-Exempt and may be sold at a price less than the principal amount thereof, if interest on the Notes is Taxable. (b) The Dealer shall use its best efforts, consistent with commercial practice, to solicit and arrange sales of the Notes allocated to it at such rates or yields (up to the applicable Maximum Rate without regard to the interest rate payable with respect to Advances under the respective Liquidity Facility) and maturities as may prevail from time to time in the market in accordance with Section 4 hereof, provided that the rate or yield on the Notes shall not exceed the applicable Maximum Rate. Nothing herein shall obligate the Dealer to purchase or (subject to its undertaking in paragraph (b) of this Section 3) arrange for the sale of any Notes. Section 4. Transaction in Notes. (a) All transactions in Notes between the Dealer and the District shall be in accordance with the Issuing and Paying Agent Agreement and this Agreement and with the

299 custom and practice in the commercial paper market regarding settlement and delivery formally adopted in writing from time to time by the New York Clearinghouse, to the extent not inconsistent with the Issuing and Paying Agent Agreement. The purchase of Notes by the Dealer or the sales arranged by the Dealer shall be negotiated and agreed upon orally between personnel of the Dealer and personnel of the District or in accordance with such other procedures as the District and the Dealer may from time to time agree. The District hereby designates the Dealer as an authorized person to transmit instructions to the Issuing and Paying Agent in accordance with Section 3.01 of the Issuing and Paying Agent Agreement with respect to the final maturities, prices and interest rates of the Notes of such Series and subseries and in such amount as are allocated to it by the District. (b) The Dealer shall notify the District, the Issuing and Paying Agent and the Bank no later than 11:30 a.m. (New York City time) on the day on which any Notes of a Series or subseries are to be issued and sold hereunder, whether the Dealer has arranged to sale or agreed to purchase Notes of such Series and subseries to be marketed by the Dealer on such Business Day in an amount sufficient to pay the principal of the Notes of such Series and subseries that mature on such day, and the proposed final maturities, prices and interest rates (which interest rates shall not exceed the Maximum Rate) of each such Note to be sold or purchased on such date. (c) With respect to all Notes marketed by the Dealer or purchased for the Dealer s own account, the Dealer will provide to the District and the Issuing and Paying Agent not later than 1:00 p.m. (New York City time) on the date the Notes are to be issued the following trade information: (i) the amount of such Notes maturing on that date and (ii) the amount of Notes sold. This trade information shall be given by telephone (or by other telecommunications medium acceptable to the District) to the District contact person set forth in Section 14 hereof (or to his or her designee), and to the Issuing and Paying Agent, and confirmed in writing to the District and the Issuing and Paying Agent. Section 5. Payment for and Delivery of Notes. The Dealer shall pay for the Notes purchased by the Dealer or sold by the Dealer in immediately available funds payable to the Issuing and Paying Agent for the account of the District not later than 2:00 p.m. (New York City time) on the Business Day such Notes are delivered to the Dealer. All Notes will be executed and delivered in the manner provided for in the Issuing and Paying Agent Agreement. Section 6. follows: Representations of the District. The District represents to the Dealer as (a) The District is a municipal utility district, duly organized and validly existing under the laws of the State of California, and has full power and authority to issue the Notes, and to execute and deliver the Issuing and Paying Agent Agreement, the Liquidity Facilities and this Agreement (collectively, the Financing Documents ) and the Financing Documents have been duly authorized, executed and delivered by the District. (b) The Notes, when delivered to the Dealer in accordance with the terms of the Issuing and Paying Agent Agreement, will be duly authorized, executed and issued and will constitute valid and binding obligations of the District

300 (c) There are no consents, authorizations or approvals of, or filings with, any Federal or state government authority (other than the District) required in connection with the issuance or sale by the District of the Notes or the performance of its obligations thereunder except as may be required by state securities laws and those which have already been obtained or made. (d) No breach or default by the District has occurred and is continuing under the instruments relating to the Prior Water Obligations and the execution, delivery and performance by the District of this Agreement and the other Financing Documents have not and will not result in any such breach or default. Section 7. Offering Memorandum and Disclosure. (a) The District shall provide to the Dealer as soon as practical an offering memorandum containing certain information concerning the District, its operations and financial condition, the Bank(s) and the Liquidity Facilities, and a description of the Notes which, together with any amendments and supplements, or as replaced by any updated or revised offering memorandum provided by the District, may be distributed by the Dealer in connection with the sale of Notes, and the District will provide to the Dealer, only upon request by the Dealer no more frequently than annually, or as otherwise provided pursuant to this Section 7, an updated and revised offering memorandum. Any such offering memorandum, amendments or supplements or updates or revisions may be provided by the District in electronic form. (b) The District shall furnish the Dealer, upon request, or shall file or cause to be filed on the Electronic Municipal Market Access ( EMMA ) database of the Municipal Securities Rulemaking Board copies of any official statements published by it with respect to the sale of its bonds or other evidence of indebtedness payable from Water Revenues or Wastewater Revenues and its annual audited financial statements. (c) If at any time when Dealer is offering Notes or any Notes are outstanding, any event occurs or any circumstances exist as a result of which the offering memorandum as then amended and supplemented (and including any information incorporated therein or filed on EMMA in connection with the Notes), would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the District will promptly prepare and furnish to the Dealer, at the expense of the District, an amendment or supplement or updated offering memorandum which will correct such untrue statement or include such omitted material fact. (d) The District will provide the Dealer with: (i) a copy of any material amendment to the Issuing and Paying Agent Agreement or any relevant Liquidity Facility (provided, that, without the prior written consent of the Dealer, the District shall not permit to become effective any amendment to the Issuing and Paying Agent Agreement that would affect the rights or obligations of the Dealer hereunder), (ii) prompt notice of the substitution, termination or extension of any relevant Liquidity Facility, (iii) prompt notice of the occurrence and continuance of an event of default under the Issuing and Paying Agent Agreement or the applicable Liquidity Facility agreement of which the District has actual knowledge, (iv) prompt

301 notice of the receipt by the District of notification from co-bond counsel or special tax counsel that the District may not continue to rely on their opinion regarding the validity or tax-exempt status of the Notes or their withdrawal or retraction thereof, and (v) such information concerning the operations and financial condition of the District as the Dealer may from time to time reasonably request. (e) The Dealer shall provide or otherwise make available through access on EMMA a copy of the offering memorandum, as supplemented, amended and updated from time to time, to each person to whom it sells Notes. The Dealer further agrees to post the offering memorandum and any amendment, supplements, updates or revisions thereto, upon receipt from the District, to EMMA. Section 8. Documents to be Delivered. On or prior to the first date on which the Dealer shall purchase Notes from the District, or arranges for the sale of Notes by the District there shall be delivered to the Dealer the following documents: the District; (a) (b) certified copies of Resolution No and Resolution No. of an executed copy of each of the Financing Documents; (c) a copy of the opinion of General Counsel to the District, dated December, 2015, with respect to the Notes; (d) copies of the opinions of co-bond counsel and special tax counsel, substantially in the forms attached to the Offering Memorandum; (e) copies of the opinion(s) of counsel to the Bank, dated December, 2015, with respect to the relevant Liquidity Facility; (f) the offering memorandum described in Section 7(a) hereof; (g) evidence that the Notes have been rated by Standard & Poor s Rating Services and by Moody s Investors Service; and (h) a certificate signed by an authorized officer of the District to the effect that (i) the offering memorandum provided pursuant to paragraph (f) above (except for information with respect to the Bank as to which no certification is made) does not contain any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (ii) no Event of Default (as defined in the Issuing and Paying Agent Agreement and the Liquidity Facilities, respectively) has occurred and is continuing. Section 9. Payment of Fees of Dealer. For the services to be performed by the Dealer under this Agreement, the District agrees to pay to the Dealer during each calendar year a fee equal to 0.045% of the principal amount of Notes allocated to the Dealer and which is Outstanding times the number of days such Notes shall be Outstanding, divided by 365 or 366 days (as appropriate), payable quarterly in arrears on the first day of April 1, 2016 and each

302 January, April, July and October thereafter, within 45 days after the receipt of an invoice from the Dealer for the previous quarter, setting forth in reasonable detail the calculation of the fees payable. Section 10. Termination and Suspension. (a) Either the Dealer or the District may terminate this Agreement with 60 calendar days prior written notice to the other, with a copy provided to the Issuing and Paying Agent and to the Banks. No such termination shall affect the rights and obligations of the District or the Dealer arising under this Agreement prior to termination. Notwithstanding the previous sentence, if the Dealer notifies the District that there is a material misstatement in, or omission from, the offering memorandum (as amended, supplemented, updated and revised to such date) and the District shall fail to provide the Dealer with an amendment or supplement thereto or updated offering memorandum in accordance with Section 7(c) hereof in a manner reasonably satisfactory to the Dealer within 30 days of such notice, the Dealer may terminate this Agreement on the 30 th day following the giving of such notice. (b) The Dealer may suspend its obligations hereunder upon written notice to the District and the Banks of its election to do so in the case of subclause (i) below, and upon 30 days prior written notice to the District and the Banks of its election to do so in the case of subclauses (ii)-(v) below, if: (i) in the reasonable judgment of the Dealer the offering memorandum for the Notes (as amended, supplemented, updated and revised to such date) includes an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Dealer has so notified the District, and the District has failed to provide the Dealer with an amendment or supplement thereto or updated offering memorandum; (ii) the market for the Notes shall have been materially and adversely affected, in the reasonable judgment of the Dealer, by (1) legislation enacted by the Congress of the United States, or passed by either House of Congress, or favorably reported for passage to either House of Congress by any Committee of such House to which such legislation has been referred for consideration or proposed by any member of any Committee of such House, or by the legislature of the State of California, or a decision rendered by a court of the United States or the State of California or by the United States Tax Court, or a ruling, order or regulation (final or temporary) made by the Treasury Department of the United States or the Internal Revenue Service or other federal or State authority, which would have the effect of changing, directly or indirectly, the federal income tax consequences or State tax consequences of the receipt of interest on the Notes by the owners thereof, or (2) a war involving the United States shall have been declared or any new outbreak of hostilities or escalation of existing hostilities involving the armed forces of the United States or other national or internal calamity or crisis shall have occurred, or (3) a general banking moratorium declared by either federal or State of California or State of New York authorities having jurisdiction or a material

303 disruption in commercial banking or securities settlement or clearing services shall have occurred; (iii) the imposition by the New York Stock Exchange or other national securities exchange, or any governmental authority, of any material restrictions not now in force upon trading in obligations of the general character of the Notes which, in the reasonable judgment of the Dealer materially and adversely affect the ability of the Dealer to market the Notes; (iv) the rating on the Notes shall have been withdrawn or downgraded to a rating below P-2 by Moody s Investors, Inc., or withdrawn or downgraded to a rating below A-2 by Standard & Poor s Ratings Services; or (v) the Issuing and Paying Agent Agreement or the applicable Liquidity Facility shall cease to be in full force and effect, an Event of Default (as defined in the applicable Liquidity Facility agreement) has occurred and is continuing thereunder or a No-Issuance Notice (as defined in the applicable Liquidity Facility agreement) has been delivered by the Bank under the applicable Liquidity Facility. Section 11. No Advisory or Fiduciary Role. The District acknowledges and agrees that (i) the purchase of, or arrangement for the sale of, Notes by the Dealer as contemplated by this Agreement is an arm s-length commercial transaction between the District and the Dealer, (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Dealer is not acting as a financial advisor or municipal advisor to or fiduciary of the District, (iii) the Dealer has not assumed an advisory or fiduciary responsibility in favor of the District with respect to the purchase of, or arrangement for the sale of, Notes by the Dealer as contemplated by this Agreement or the discussions, undertakings and procedures leading thereto (irrespective of whether the Dealer has provided other services or is currently providing other services to the District on other matters), (iv) the Dealer has financial and other interests that differ from those of the District, and (v) the District has consulted its own legal, financial and other advisors to the extent it has deemed appropriate. Section 12. Assignment. This Agreement shall not be assignable by any party hereto without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of the District and the Dealer and their respective successors and assigns. This Agreement shall not be deemed to give any legal or equitable right, remedy or claim to any other person or entity other than the parties hereto. Section 13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be regarded as an original but all of which shall constitute one and the same document. Section 14. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California. Section 15. Notices. Except as otherwise specifically provided herein, all notices and documents required of and provided for under this Agreement shall be in writing and shall be delivered by hand, first-class mail (postage prepaid) or overnight express delivery, or by

304 facsimile transmission or other electronic means of communication promptly confirmed by mail (postage prepaid), and shall be effective when received at the following addresses or at such other address as a party may designate in a notice delivered to the other party hereto in accordance herewith: If to the District: East Bay Municipal Utility District 375 Eleventh Street Oakland, California Attention: Director of Finance Telephone: (510) Facsimile: (510) If to the Dealer: Attention: Telephone: Facsimile: If to the Banks: As set forth in the respective Liquidity Facility Section 16. Headings. The section headings hereof have been inserted for convenience of reference only, shall not be part of this Agreement, and shall not be used to construe, define, limit or interpret the meaning of any provision hereof. Section 17. Severability. If any provision of this Agreement shall be held or deemed by a court of competent jurisdiction to be invalid, inoperative or unenforceable for any reason, such determination shall not affect the validity or enforceability of the remaining provisions hereof. Section 18. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters covered hereby and supersedes all prior agreements and understandings between the parties. This Agreement shall only be amended, supplemented or modified in a writing signed by both of the parties hereto

305 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written. EAST BAY MUNICIPAL UTILITY DISTRICT By: D. Scott Klein Acting Director of Finance [DEALER] Authorized Signatory

306 OFFERING MEMORANDUM EAST BAY MUNICIPAL UTILITY DISTRICT (Alameda and Contra Costa Counties, California) Norton Rose Fulbright US LLP Draft of 11/16/15 Ratings: S&P: Moody s: COMMERCIAL PAPER NOTES (WATER SERIES) $200,000,000 Tax-Exempt Subseries A-1 $160,000,000 Tax-Exempt Subseries A-2 The Commercial Paper Notes (Water Series), Tax-Exempt Subseries A-1 (the Water Series A-1 Notes ) and Commercial Paper Notes (Water Series), Tax-Exempt Subseries A-2 (the Water Series A-2 Notes ) to be offered hereby are part of an issue of Commercial Paper Notes of the East Bay Municipal Utility District (the District ) which are to be issued from time to time pursuant to an Issuing and Paying Agent Agreement (as herein defined). The Water Series A-1 Notes and the Water Series A-2 Notes are referred to herein collectively as the Water Series A Notes. The Water Series A Notes, together with all other Commercial Paper Notes (Water Series) issued and outstanding from time to time under the Issuing and Paying Agent Agreement, are collectively referred to herein as the Commercial Paper Notes (Water Series). The Water Series A Notes are being issued as interest-bearing obligations, in book-entry form, in denominations of $100,000 and integral multiples of $1,000 in excess thereof. The Commercial Paper Notes (Water Series) are limited obligations of the District, payable solely from and secured by a pledge of Available Water Revenues. Neither the full faith and credit nor the taxing power of the District is pledged for the payment of the Commercial Paper Notes (Water Series) or the interest thereon. The Commercial Paper Notes (Water Series) are payable from Available Water Revenues of the District s Water System on a basis that is subordinate to the payment of any Prior Water Obligations of the District presently outstanding or hereafter incurred by the District. The District has entered into (i) a Standby Letter of Credit and Reimbursement Agreement with Sumitomo Mitsui Banking Corporation, acting through its New York Branch ( SMBC ), pursuant to which SMBC will issue a Standby Letter of Credit (the SMBC Letter of Credit ) for the account of the District which may be drawn upon, subject to certain conditions precedent, to pay the principal of maturing Water Series A-1 Notes and (ii) a Revolving Credit Agreement (the BANA Credit Agreement ) with Bank of America, N.A. ( BANA ), pursuant to which funds may be borrowed thereunder, subject to certain conditions precedent, to pay principal of maturing Water Series A-2 Notes. SMBC and BANA are each referred to herein as a Bank and are referred to herein collectively as the Banks. The SMBC Letter of Credit (together with the SMBC Reimbursement Agreement) supporting the Water Series A Notes and the BANA Credit Agreement supporting the Water Series A-2 Notes are each referred to herein as an Initial Liquidity Facility and are referred to herein collectively as the Initial Liquidity Facilities. UNDER CERTAIN CIRCUMSTANCES, THE OBLIGATION OF THE RESPECTIVE BANK TO MAKE HONOR DRAWINGS OR MAKE ADVANCES, RESPECTIVELY, UNDER ITS INITIAL LIQUIDITY FACILITY FOR THE RELATED WATER SERIES A NOTES IS SUBJECT TO IMMEDIATE TERMINATION OR SUSPENSION WITHOUT NOTICE OR PAYMENT TO THE HOLDERS OF THE WATER SERIES A NOTES. IN SUCH EVENT, SUFFICIENT FUNDS MAY NOT BE AVAILABLE TO PAY THE RELATED WATER SERIES A NOTES. SEE THE INITIAL LIQUIDITY FACILITIES AND THE BANKS HEREIN FOR A DISCUSSION OF EVENTS THAT WOULD CAUSE IMMEDIATE TERMINATION OR AN IMMEDIATE SUSPENSION OF THE INITIAL LIQUIDITY FACILITIES. In the opinion of Orrick Herrington & Sutcliffe LLP, San Francisco, California, Special Tax Counsel, based on an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Water Series A Notes, when issued in accordance with the Issuing and Paying Agent Agreement and the Tax Certificate, is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes. In the further opinion of Special Tax Counsel, interest on the Water Series A Notes is not a specific preference item for purposes of federal individual or corporate alternative minimum taxes, although Special Tax Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Special Tax Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Water Series A Notes. See TAX MATTERS herein. The Water Series A Notes have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption from registration contained in such Act. Dealers BofA Merrill Lynch Goldman, Sachs & Co. J.P. Morgan Morgan Stanley Dated: November, 2015

307 FURTHER INFORMATION AVAILABLE Information herein concerning the District is limited. No attempt is made herein to summarize the terms of the Issuing and Paying Agent Agreement or any documents relating to the District s outstanding Prior Water Obligations. The District will provide upon request copies of its most recent audited financial statements, official statements concerning the District s Water Bonds and the Issuing and Paying Agent Agreement. In addition, pursuant to continuing disclosure undertakings of the District in connection with certain of its outstanding Water Bonds, the District is obligated to provide annually certain financial information and operating data relating to the District and the Water System to the Municipal Securities Rulemaking Board through the Electronic Municipal Marketplace Access ( EMMA ) website by not later than 180 days following the end of each Fiscal Year of the District (presently June 30), copies of which are available from EMMA (each, an Annual Report ), and to provide notices of the occurrence of certain enumerated events (each, an Event Notice ). The information and opinions herein and in such Annual Reports, Event Notices, official statements and other EMMA filings are subject to change without notice, and neither the delivery thereof nor the delivery of this Commercial Paper Offering Memorandum shall, under any circumstances, create any implication that there has been no change in the affairs of the District or other matters described therein or herein.. Capitalized terms used herein and not defined shall have the respective meanings given such terms in the Issuing and Paying Agent Agreement, dated as of December 1, 2015 (the Issuing and Paying Agent Agreement ), by and between the District and U.S. Bank National Association, as issuing and paying agent (the Issuing and Paying Agent )

308 TABLE OF CONTENTS Page INTRODUCTION... 1 THE COMMERCIAL PAPER NOTES (WATER SERIES)... 2 Authorization and Amount... 2 Use of Proceeds of the Commercial Paper Notes (Water Series)... 2 Description of the Water Series A Notes... 2 SECURITY FOR THE COMMERCIAL PAPER NOTES (WATER SERIES)... 3 General... 3 Liquidity Facilities... 4 Rate Covenant... 5 Certain Definitions... 5 THE DISTRICT AND THE WATER SYSTEM... 6 The District... 6 The Water System... 6 Capital Improvement Program... 7 Sources of Revenues... 7 Senior and Parity Water System Indebtedness... 8 Investment Policy... 9 District Financial Statements... 9 THE INITIAL LIQUIDITY FACILITIES AND THE BANKS... 9 Water Series A-1 Notes... 9 Water Series A-2 Notes Alternate or Substitute Liquidity Facilities RATINGS TAX MATTERS CERTAIN LEGAL MATTERS DEALERS OTHER MATTERS APPENDIX A EAST BAY MUNICIPAL UTILITY DISTRICT AUDITED FINANCIAL STATEMENTS... A-1 APPENDIX B PROPOSED FORMS OF CO-BOND COUNSEL OPINION AND SPECIAL TAX COUNSEL OPINION... B-1 APPENDIX C EAST BAY MUNICIPAL UTILITY DISTRICT ANNUAL STATEMENT OF INVESTMENT POLICY... C-1 APPENDIX D BOOK-ENTRY SYSTEM FOR THE WATER SERIES A NOTES... D-1 -i-

309 EAST BAY MUNICIPAL UTILITY DISTRICT (Alameda and Contra Costa Counties, California) COMMERCIAL PAPER NOTES (WATER SERIES) $200,000,000 Tax-Exempt Subseries A-1 $160,000,000 Tax-Exempt Subseries A-2 INTRODUCTION The purpose of this Commercial Paper Offering Memorandum is to provide certain general information in connection with the offering, from time to time, of Commercial Paper Notes (Water Series), Tax-Exempt Subseries A-1 (the Water Series A-1 Notes ) and Commercial Paper Notes (Water Series), Tax-Exempt Subseries A-2 (the Water Series A-2 Notes ) of the East Bay Municipal Utility District (the District ). The Water Series A-1 Notes and Water Series A-2 Notes offered hereby are part of an issue of Commercial Paper Notes of the District which are to be issued from time to time pursuant to the Issuing and Paying Agent Agreement, by and between the District and U.S. Bank National Association, as Issuing and Paying Agent. The Water Series A-1 Notes and the Water Series A-2 Notes are each referred to herein separately as a subseries and are referred to herein collectively as the Water Series A Notes. The Water Series A Notes, together with all other Commercial Paper Notes (Water Series) issued and outstanding from time to time under the Issuing and Paying Agent Agreement, are collectively referred to herein as the Commercial Paper Notes (Water Series). The Commercial Paper Notes of the District are authorized under Chapter 7.5 of the Municipal Utility District Act, constituting Division 6 of the Public Utilities Code of the State of California (the Act ) and Resolution No , adopted by the Board of Directors of the District (the Board ) on April 28, 2015 ( Resolution No ). The Commercial Paper Notes (Water Series) are being issued pursuant to the Issuing and Paying Agent Agreement. The Water Series A-1 Notes are being offered hereby from time to time in an aggregate principal amount of up to $200,000,000 unless such amount is hereafter subsequently increased. The Water Series A-2 Notes are being offered hereby from time to time in an aggregate principal amount of up to $160,000,000 unless such amount is hereafter subsequently increased. The aggregate principal amount of the Commercial Paper Notes of the District may change from time to time as provided in the Issuing and Paying Agent Agreement. The Commercial Paper Notes (Water Series) are special obligations of the District, payable solely from and secured by a pledge of Available Water Revenues. Neither the full faith and credit nor the taxing power of the District is pledged for the payment of the Commercial Paper Notes (Water Series) or the interest thereon. The District has covenanted pursuant to the Issuing and Paying Agent Agreement that it will maintain in effect one or more Liquidity Facilities enabling it to borrow an aggregate amount at least equal to the sum of the principal amount of each series or subseries of Commercial Paper Notes (Water Series) then Outstanding under the Issuing and Paying Agent Agreement. As described herein, the District has arranged for a separate Liquidity Facility to be delivered for each of the subseries of the Water Series A Notes in order to provide an additional source of repayment of the principal amount of the Water Series A Notes on their respective maturity dates. See THE INITIAL LIQUIDITY FACILITIES AND THE BANKS. The information in this Commercial Paper Offering Memorandum has been obtained from the District, the Banks, and other sources believed to be reliable. The references herein to the Issuing and Paying Agent Agreement, the Initial Liquidity Facilities and other documents referred to herein do not purport to be complete or definitive, do not constitute summaries thereof, and are qualified in their

310 entirety by reference to the provisions thereof. The information and expressions of opinion in this Commercial Paper Offering Memorandum are subject to change without notice after the date hereof and future use of this Commercial Paper Offering Memorandum shall not otherwise create any implication that there has been no change in the matters referred to in this Commercial Paper Offering Memorandum since the date hereof. The information contained herein will not typically be distributed or updated upon each new sale of Water Series A Notes. Authorization and Amount THE COMMERCIAL PAPER NOTES (WATER SERIES) Pursuant to the Act and Resolution No , the District is authorized to borrow money and incur indebtedness by the issuance of bonds, notes or other forms of short-term indebtedness (including commercial paper notes and bank credit) for any or all of the purposes set forth in Chapter 7.5 of the Act. See Use of Proceeds of the Commercial Paper Notes (Water Series) below. As provided in the Act and Resolution No , the maximum principal amount of all short-term indebtedness of the District outstanding pursuant to Chapter 7.5 of the Act, including amounts drawn on available bank lines of credit, shall not exceed the lesser of either (1) the annual average of the total revenue for the three preceding years or (2) 25 percent of the District s total outstanding bonds issued pursuant to Chapters 6, 7 and 8 of the Act. Pursuant to the authority of Chapter 7.5 of the Act, the District has previously authorized and has established a program for the issuance, from time to time, of its Extendable Municipal Commercial Paper Notes (Water Series) and its Extendable Municipal Commercial Paper Notes (Wastewater Series). In addition to the Commercial Paper Notes (Water Series), Commercial Paper Notes (Wastewater Series) of the District may also be issued under the Issuing and Paying Agent Agreement. The Commercial Paper Notes (Water Series) and the Extendable Municipal Commercial Paper Notes (Water Series) are payable only from the Available Water Revenues of the District, and the Commercial Paper Notes (Wastewater Series) and the Extendable Municipal Commercial Paper Notes (Wastewater Series) are payable only from the Available Wastewater Revenues of the District. The Water Series A Notes constitute a part of the Commercial Paper Notes (Water Series) that may be issued under the Issuing and Paying Agent Agreement. Use of Proceeds of the Commercial Paper Notes (Water Series) The proceeds of the Commercial Paper Notes (Water Series) will be used to provide funds to finance or refinance the costs of (i) the planning, design, engineering, acquisition or construction of facilities for the storage, transmission or distribution of water; or the generation or transmission of electricity, (ii) the replacement of works of the District that have been damaged or demolished by reason of fire, flood, earthquake, sabotage or acts of God or the public enemy, and (iii) any expenses or charges incurred in connection with the foregoing purposes and to reimburse the District for expenditures for any such purposes, or for the purpose of paying Commercial Paper Notes (Water Series) or other obligations issued or incurred for such purposes. Description of the Water Series A Notes The Water Series A Notes will be dated the date of their respective authentication and will be issued as interest-bearing obligations, in book-entry form, in denominations of $100,000 and integral multiples of $1,000 in excess thereof. Each Water Series A Note will bear interest from its respective date of issuance at a separately stated interest rate determined at the time of issuance thereof, not to exceed 12% per annum, payable on its respective maturity dates. Interest on the Water Series A Notes will be calculated on the basis of a 365/366-day year and the actual number of days elapsed. Each Water Series A Note will mature on a Business Day not more than

311 270 days after its respective date of issuance, but in any event not later than the Business Day immediately preceding the scheduled expiration date of the applicable Liquidity Facility provided therefor. The Water Series A Notes will be sold at a price equal to 100% of the principal amount thereof. The purchase price payable by an investor for the Water Series A Notes is required to be made, and the amount payable by the District at maturity will be paid, in immediately available funds. The Water Series A Notes will be delivered as fully registered notes, registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the Water Series A Notes. So long as the Water Series A Notes are held in book-entry only form only, the Issuing and Paying Agent will make all payments of principal of and interest on the Water Series A Notes by wire transfer directly to DTC or its nominee, as the sole registered owner of the Series A Notes. Payments to the beneficial owners are the responsibility of DTC and its participants. See APPENDIX D BOOK-ENTRY SYSTEM FOR THE WATER SERIES A NOTES. General SECURITY FOR THE COMMERCIAL PAPER NOTES (WATER SERIES) The Commercial Paper Notes (Water Series) of the District, including the Water Series A Notes, will be limited obligations of the District, payable solely from and secured by a pledge of Available Water Revenues. Neither the full faith and credit nor the taxing power of the District is pledged for the payment of the Commercial Paper Notes (Water Series) or the interest thereon. The Commercial Paper Notes (Water Series) are payable from Available Water Revenues of the District s Water System on a basis that is subordinate to the payment of any Prior Water Obligations (defined below) of the District presently outstanding or hereafter incurred by the District. See also THE DISTRICT AND THE WATER SYSTEM Senior and Parity Indebtedness. To provide security for the payment of the principal of and interest on the Commercial Paper Notes (Water Series) as the same shall become due and payable, the Issuing and Paying Agent Agreement grants a pledge of the Available Water Revenue to such payment and to the payment of all other obligations of the District relating to the Commercial Paper Notes (Water Series), including the District s obligations under any liquidity or credit agreement therefor (including the Initial Liquidity Facilities) payable from or secured by Available Water Revenues, subject only to the provisions of the Issuing and Paying Agent Agreement permitting the application thereof for purposes of the terms and conditions therein. The Available Water Revenues constitute a trust fund for the security and payment of the interest on and principal of the Commercial Paper Notes (Water Series) and all obligations of the District relating to such Commercial Paper Notes (Water Series) under the Issuing and Paying Agent Agreement, all obligations of the District relating to any Water Note Parity Debt and all obligations of the District under any liquidity or credit agreement (including the Initial Liquidity Facilities) payable from or secured by Available Water Revenues relating to any of the foregoing. The Issuing and Paying Agent Agreement additionally pledges to the payment of each respective subseries of the Commercial Paper Notes (Water Series), all amounts held by the Issuing and Paying Agent under the Issuing and Paying Agent Agreement in the respective funds and accounts (or subaccounts therein) related to such Series or subseries, as applicable, including the proceeds of Commercial Paper Notes (Water Series) issued for the purpose of paying Commercial Paper Notes (Water Series) and Advances (as defined in the Issuing and Paying Agent Agreement) made available under the Liquidity Facility for a subseries of the Commercial Paper Notes (Water Series) deposited into the applicable subaccount of the Commercial Note Payment Account established therefor, subject only to the

312 provisions of this Issuing and Paying Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein. The District expects to pay the principal of the Water Series A Notes with proceeds of other Water Series A Notes until the District provides permanent financing for the Water System improvements refinanced with the Water Series A Notes or until, from time to time, revenues of the Water System are made available therefor. Liquidity Facilities To provide an additional source of funds for the repayment of the Water Series A-1 Notes, the District has entered into a Standby Letter of Credit and Reimbursement Agreement, dated as of December 1, 2015 (the SMBC Reimbursement Agreement ) with Sumitomo Mitsui Banking Corporation, acting through its New York Branch ( SMBC ), with respect to the Water Series A-1 Notes only. Pursuant to the SMBC Reimbursement Agreement, SMBC will issue a Standby Letter of Credit (the SMBC Letter of Credit ) for the account of the District in favor of the Issuing and Paying Agent which SMBC Letter of Credit may be drawn upon, subject to certain conditions precedent as specified therein and in such SMBC Reimbursement Agreement, in an amount not to exceed $200,000,000 to pay the principal of any maturing Water Series A-1 Notes. The SMBC Letter of Credit may not be drawn on for any purpose other than as stated in the immediately preceding sentence. Unless terminated earlier or extended in accordance with its terms, the SMBC Letter of Credit has a stated expiration date of [December 1, 2020]. To provide an additional source of funds for the repayment of the Water Series A-2 Notes, the District has entered into a Revolving Credit Agreement, dated as of December 1, 2015 (the BANA Credit Agreement ) with Bank of America, N.A. ( BANA ), with respect to the Water Series A-2 Notes only. Pursuant to the BANA Credit Agreement, funds can be borrowed thereunder for the benefit of the District, subject to certain conditions precedent as specified in such BANA Credit Agreement, in an amount not to exceed $160,000,000 to fund the payment of the principal of any maturing Water Series A-2 Notes. Funds may not be borrowed under the BANA Credit Agreement for any purpose other than as stated in the immediately preceding sentence. Unless terminated earlier or extended in accordance with its terms, the BANA Credit Agreement will terminate on [November 30, 2018]. All interest payments on the outstanding Water Series A Notes are expected to be paid from Available Water Revenues of the District. SMBC and BANA are each referred to herein as a Bank and are referred to herein collectively as the Banks. The SMBC Letter of Credit (together with the SMBC Reimbursement Agreement) supporting the Water Series A-1 Notes and the BANA Credit Agreement supporting the Water Series A-2 Notes are each referred to herein as an Initial Liquidity Facility and are referred to herein collectively as the Initial Liquidity Facilities. UNDER CERTAIN CIRCUMSTANCES, THE OBLIGATION OF THE RESPECTIVE BANK TO HONOR DRAWINGS OR MAKE ADVANCES, RESPECTIVELY, UNDER ITS LIQUIDITY FACILITY FOR THE RELATED WATER SERIES A NOTES IS SUBJECT TO IMMEDIATE TERMINATION OR SUSPENSION WITHOUT NOTICE OR PAYMENT TO THE HOLDERS OF THE WATER SERIES A NOTES. IN SUCH EVENT, SUFFICIENT FUNDS MAY NOT BE AVAILABLE TO PAY THE RELATED WATER SERIES A NOTES. SEE THE INITIAL LIQUIDITY FACILITIES AND THE BANKS FOR A DISCUSSION OF EVENTS THAT WOULD CAUSE IMMEDIATE TERMINATION OR AN IMMEDIATE SUSPENSION OF THE INITIAL LIQUIDITY FACILITIES

313 The District may deliver an alternate or substitute Liquidity Facility to replace any Liquidity Facility then in effect; provided, however, that any such substitute or alternate Liquidity Facility for a subseries of the Water Series A Notes must go into effect on a date on which all of the Outstanding Water Series A Notes of the applicable subseries to be supported thereby then Outstanding are scheduled to mature. Rate Covenant Pursuant to the Issuing and Paying Agent Agreement, the District covenants to establish, maintain and collect rates and charges with respect to the Water System (after giving effect to the expected receipt of refinancing proceeds from the sale of Commercial Paper Notes (Water Series) or Water Bonds and taking into account the amounts, if any, made available for treatment as Water Revenues from the Rate Stabilization Fund) to pay the Commercial Paper Notes (Water Series) and all other obligations which are payable from Water Revenues. Certain Definitions For purposes of the foregoing discussion, Available Water Revenues for any fiscal period means the sum of (a) the Water Revenues for such fiscal period plus (b) the amounts, if any, withdrawn by the District from the Rate Stabilization Fund referenced in the Water Bond Indenture for treatment as Water Revenues for such fiscal period, less the sum of (1) all Water operation and maintenance costs for such fiscal period, (2) the amounts, if any, withdrawn by the District from Water Revenues for such fiscal period for deposit in such Rate Stabilization Fund, and (3) all amounts required to be paid with respect to all Prior Water Obligations under the Prior Water Obligation Documents as the same become due and payable. Prior Water Obligations means the Water Bonds and any other securities, evidences of indebtedness or obligations of the District (including for purposes hereof, obligations under credit and liquidity facilities and obligations under interest rate swap agreements or other hedging instruments, including termination payments related thereto) issued or incurred pursuant to a Prior Water Obligation Document. Prior Water Obligation Documents means the Water Bond Indenture and any other indenture, resolution or other instrument of the District providing for the issuance of indebtedness or incurrence of any other obligation of the District (including for purposes hereof, obligations under credit and liquidity facilities and obligations under interest rate swap agreements and other hedging instruments, including termination payments related thereto) secured in whole or in part by Water Revenues and which by its terms is superior in right of payment to the Commercial Paper Notes (Water Series) or any Water Note Parity Debt. Water Bonds means all bonds and other obligations and securities of the District issued and secured pursuant to the Water Bond Indenture. Water Bond Indenture means the Water System Subordinated Revenue Bond Indenture dated as of April 1, 1990, by and between the District and The Bank of New York Mellon Trust Company, N.A., as successor trustee (or any other trustee appointed by the District), as amended and supplemented. Water Note Parity Debt means any indebtedness, installment sale obligation, lease obligation or other obligation of the District for borrowed money or any interest rate swap agreement or other hedging instrument having an equal lien and charge upon all or part of the Available Water Revenues and therefore payable on a parity with the Commercial Paper Notes (Water Series), including but not limited

314 to Extendable Municipal Commercial Paper Notes (Water Series) of the District issued under Resolution No of the District adopted on March 10, 2009, as the same may be amended from time to time. Water Revenues means all charges received for, and all other income and receipts derived by the District from, the operation of the Water System, or arising from the Water System, together with income from the investment of any moneys in any fund or account established under the Water Bond Indenture. Water operation and maintenance costs means the reasonable and necessary costs of maintaining and operating the Water System, calculated on sound accounting principles, including (among other things) the reasonable expenses of management, repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, the cost of purchasing water and reasonable amounts for administration, overhead, insurance, taxes and other similar costs, but excluding in all cases depreciation and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature, and excluding all costs paid from the proceeds of taxes received by the District. The District THE DISTRICT AND THE WATER SYSTEM The District is a municipal utility district, created in 1923 by vote of the electorate in portions of Alameda and Contra Costa Counties in the State of California. The District is formed under the authority of the Act. Under the Act, municipal utility districts are empowered to acquire, construct, own, operate or control works for supplying the district and public agencies in the district with light, water, power, heat, transportation, telephone service or other means of communications, means for the collection, treatment or disposition of garbage, sewage or refuse matter, and public recreation facilities appurtenant to its reservoirs and may do all things necessary and convenient to the full exercise of powers granted in the Act. The District presently exercises only those functions relating to water supply, power generation and recreational facilities through its water system (the Water System ), and, within an area known as Special District No. 1, those functions relating to sewerage and wastewater interception, treatment and disposal, and power generation through its wastewater system (the Wastewater System ). Special District No. 1 covers only a portion of the service area of the District. The District presently does not intend to exercise other functions. Such other functions and the related facilities, if exercised, would not constitute part of the Water System or the Wastewater System. The Commercial Paper Notes (Water Series), including the Water Series A Notes, are not payable from or secured by the revenues of the Wastewater System of the District. The District is governed by an elected seven member Board of Directors which determines such matters as rates and charges for services, approval of contracts and District policy. The Water System The District occupies an area of approximately 332 square miles in the San Francisco Oakland metropolitan region, extending from Crockett on the north, southward to and including San Lorenzo, encompassing the major cities of Oakland and Berkeley, and eastward from San Francisco Bay to Walnut Creek. The District s Water System serves approximately 1.4 million persons, or approximately 53% of the population of Alameda and Contra Costa Counties. During wet and normal rainfall years, the District s water supply is obtained from three sources: the 627-square mile Mokelumne River watershed in the Sierra Nevada mountains, runoff from streams within the District, and recycled water produced at various locations in the service area. Water from the Mokelumne River watershed is transported from the watershed reservoirs through pipelines to the District s service area, where it is stored in terminal

315 reservoirs or delivered directly to treatment plants prior to distribution. During drought times, the District has access to substantial additional supplies from the Sacramento River via the Freeport Regional Water Project and may also seek to secure additional supplemental water supply under contractual arrangements such as water transfers. The District can also utilize water stored within a local aquifer through its Bayside Groundwater Project. The most recent description of the District s Water System, service area, water supply and seismic considerations may be found in the District s most recent official statement or other offering document for its Water Bonds filed with the MSRB. See also FURTHER INFORMATION AVAILABLE on the inside cover of this Commercial Paper Offering Memorandum and OTHER MATTERS herein. Capital Improvement Program Since fiscal year 2002, the District has implemented a biennial budget. The District s biennial budget planning process includes a review of its projected long-term (10 years or longer) facilities needs and the development of a capital expenditure forecast for the ensuing five fiscal years. A series of master plans document the identified facilities needs by asset classes (such as pipes, reservoirs and other assets) and include assessments of the District s key facilities, taking into consideration condition assessments, operational performance and maintenance histories. Facilities in need of rehabilitation or replacement are identified and prioritized. Project scopes are also defined (for example, replacement of aging mechanical or electrical gear, seismic upgrades, or other defined scopes). The results of the master plans are considered during the biennial update to the District s Capital Improvement Program (the CIP ) and the development of the five-year capital expenditure forecast. The District s CIP is funded primarily from the following sources: (i) revenues of the District s Water System; (ii) commercial paper proceeds; (iii) proceeds from the issuance of District Water Bonds; and (iv) advances, contributions and grants. It is the current policy of the District to fund no more than 65% of its CIP over each five-year planning period from debt. A description of the District s most recent five-year CIP may be found in the District s most recent official statement or other offering document for its Water Bonds filed with the MSRB. See also FURTHER INFORMATION AVAILABLE on the inside cover of this Commercial Paper Offering Memorandum and OTHER MATTERS herein. Sources of Revenues The Water System s principal source of revenues is water sales. Sources of funds other than water sales include taxes, income from the sale of energy from the District s hydroelectric power plants, investment income, and grants and contributions in aid of construction. Water Revenues include all charges received for, and all other income and receipts derived by the District from, the operation of the Water System or arising from the Water System, which include, without limitation, the District s water rates, system capacity charge and seismic surcharge, as well as investment income. Property taxes are applied to reduce operation and maintenance costs and are not pledged to the repayment of debt. Contributions received for facility relocations, main extensions and service installations and grants and other reimbursements which are restricted to use for the specified purposes are not included in Water Revenues pledged to the repayment of debt. The District s rates and rate structure are established by the District s Board after a public hearing process, and are not subject to regulation by any other agency. All water service customers are billed directly by the District bimonthly, with the exception of approximately 1,000 accounts consisting of the largest users in the District, which are billed monthly. Billing is staggered throughout the billing cycle by

316 geographic location within the District. Service may be discontinued if an overdue account is not paid after appropriate customer notification. In addition to basic water rates (which are composed of two components: a monthly service charge and a commodity charge for water delivered), in times of drought the District imposes drought surcharges for four stages of drought. The drought surcharges, corresponding to increasingly severe stages of water shortages, are applied to each unit of water used during the relevant billing period when the Board declares a specific drought stage pursuant to its water shortage contingency plan. The District also imposes a system capacity charge on new accounts designed to recover from such accounts a portion of the costs of existing facilities, as well as the costs of additional facilities (primarily water supply projects) to be constructed in the future to provide water service to new customers based on land use plans, as well as certain recreation fees, installation charges and one-time fees and charges. The imposition of taxes, assessments, rates and charges by the District is subject to various constitutional and statutory limitations, including some requirements of Articles XIIIA, XIIIB, XIIIC and XIIID of the California Constitution, and are subject to reduction or repeal through the initiative process as provided in Article XIIIC of the California Constitution. Senior and Parity Water System Indebtedness As of September 30, 2015, the District had outstanding $2,319,730,000 aggregate principal amount of Water Bonds, which are senior in payment priority to the Commercial Paper Notes (Water Series), including the Water Series A Notes. The District s outstanding Water Bonds include fixed rate bonds and variable rate demand obligations, outstanding in the aggregate principal amount of $105,250,000 as of September 30, 2015, which are currently in a weekly mode during which the per annum interest rate thereon is re-set weekly (the Weekly Rate Bonds ). The District has entered into liquidity agreements with various banks to provide liquidity facilities for such variable rate outstanding Water Bonds that are Weekly Rate Bonds, The obligation of the District to repay any draws on such liquidity facilities is payable on a parity with the outstanding Water Bonds to the extent such repayment is not thereafter provided from remarketing proceeds of the related outstanding Water Bonds and is payable senior in payment priority to the Commercial Paper Notes (Water Series), including the Water Series A Notes. In connection with the outstanding Weekly Rate Bonds, the District has entered into and has outstanding interest rate swap agreements (the Water Interest Rate Swap Agreements ) with various counterparties in the aggregate notional amount of $105,250,000 as of September 30, The obligation of the District to make regularly scheduled payments to the counterparties under the respective Water Interest Rate Swap Agreements is on a parity with the District s obligation to make payments on the Water Bonds and is payable senior in payment priority to the Commercial Paper Notes (Water Series), including the Water Series A Notes. Further, any termination payment that may be payable to a swap counterparty under the Water Interest Rate Swap Agreements in the event of termination of any such Water Interest Rate Swap Agreement would be payable on a basis that is prior to the Commercial Paper Notes (Water Series), including the Water Series A Notes. In addition to the outstanding Water Bonds, as of September 30, 2015, the District had outstanding loans with the State of California s State Water Resources Control Board and the Department of Water Resources in the aggregate principal amount of $14,996,255, the payments under which are payable from Water Revenues on a parity with the Water Bonds and are senior in payment priority to the Commercial Paper Notes (Water Series), including the Water Series A Notes. The District has maintained a commercial paper note program since In March 2009, the District implemented an extendable municipal commercial paper note program for the purpose of retiring its then existing commercial paper note program. As of September 30, 2015, the District had outstanding

317 $359,800,000 aggregate principal amount of tax-exempt Extendable Municipal Commercial Paper Notes (Water Series) which are payable from and secured by a pledge of Available Water Revenues on parity with Commercial Paper Notes (Water Series), including the Water Series A Notes. The District intends to refinance all of its currently outstanding $359,800,000 principal amount of outstanding Extendable Municipal Commercial Paper Notes (Water Series) with proceeds of the Water Series A Notes. There is no limitation in the Act or the Issuing and Paying Agent Agreement on District indebtedness senior to the Commercial Paper Notes (Water Series), including the Water Series A Notes. The Board of the District can authorize additional Water Bonds or other Prior Water Obligations (which are defined to include any obligations of the District payable from net revenues of the Water System superior in right of payment to the Commercial Paper Notes (Water Series)) subject to the satisfaction of certain provisions (if any) contained in the related documents. The Board can authorize additional indebtedness on parity with the Commercial Paper Notes (Water Series), including the Water Series A Notes, without notice to or the consent of any holder of Commercial Paper Notes (Water Series). Investment Policy Funds of the District are invested in accordance with the Government Code of the State of California, the Act and the District s investment policy. The investment policy of the District is reviewed and submitted annually to the Board of the District and is subject to change. A copy of the District s current Annual Statement of Investment Policy is attached hereto as Appendix C. District Financial Statements The audited financial statements of the District for the fiscal years ended June 30, 2015 and 2014 are attached hereto as Appendix A. Additional financial and operating data relating to the District and the Water System may be found in the District s most recent continuing disclosure Annual Report filed with the MSRB. See FURTHER INFORMATION AVAILABLE on the inside cover of this Commercial Paper Offering Memorandum and OTHER MATTERS herein. Water Series A-1 Notes THE INITIAL LIQUIDITY FACILITIES AND THE BANKS SMBC Letter of Credit and SMBC Reimbursement Agreement. The following description is a summary of certain provisions of the SMBC Letter of Credit and the SMBC Reimbursement Agreement. Such summary does not purport to be a complete description or restatement of the material provisions of the SMBC Letter of Credit and the SMBC Reimbursement Agreement. Investors should obtain and review a copy of both the SMBC Letter of Credit and the SMBC Reimbursement Agreement in order to understand all of the terms of those documents. All capitalized terms appearing under this subheading SMBC Letter of Credit and SMBC Reimbursement Agreement not otherwise defined herein shall have the meanings assigned to them in the SMBC Letter of Credit and the SMBC Reimbursement Agreement. The SMBC Letter of Credit is a conditional obligations of SMBC issued pursuant to the SMBC Reimbursement Agreement, which contains various provisions, covenants and conditions that affect the SMBC Letter of Credit, certain of which are summarized below. The Issuing and Paying Agent is authorized to make drawings under the SMBC Letter of Credit in accordance with the terms thereof to pay the principal of Water Series A-1 Notes at the stated maturity thereof to the extent proceeds of any sale of Water Series A-1 Notes or any other funds are unavailable therefor. The maximum amount available under the SMBC Letter of Credit, subject to reduction or reinstatement as set forth therein, is $200,000,000. The SMBC Letter of Credit is scheduled to expire on [December 1, 2020], subject to

318 extension or earlier termination in accordance with the terms thereof. Upon the occurrence of certain events of default under the SMBC Reimbursement Agreement described below, SMBC s commitment under the SMBC Letter of Credit may be automatically and immediately terminated or suspended without notice. The occurrence of any of the events described under the subheadings Events of Default Resulting in Immediate Termination, Events of Default Resulting in Immediate Suspension, and Events of Default not Resulting in Immediate Termination or Suspension below shall constitute an Event of Default under the SMBC Reimbursement Agreement. Upon the occurrence of an Event of Default, SMBC may exercise those rights and remedies applicable to such Event of Default as described under the subheading Remedies below. Events of Default Resulting in Immediate Termination. Each of the following Events of Default shall also constitute a Special Event of Default under the SMBC Reimbursement Agreement: (a) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment, acceleration or otherwise) (i) any interest on any Water Series A-1 Notes in accordance with its terms or (ii) any principal of or interest on any Loan or the Advance Note or the Term Loan Note (other than solely as a result of acceleration of the payment of the Advance Note or the Term Loan Note as described in paragraph (d) under the subheading Remedies below); or (b) (i) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment or acceleration) any principal of or interest on any Revenues Secured Debt of the District (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, any regularly scheduled payment thereunder) and such failure shall continue beyond any applicable period of grace specified in any underlying resolution, indenture, contract or instrument pursuant to which such Revenues Secured Debt have been issued or incurred, or (ii) pursuant to the provisions of any such resolution, indenture, contract or instrument, any Revenues Secured Debt, as a result of the failure to pay principal of or interest on such Revenues Secured Debt (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, any regularly scheduled payment thereunder), shall have been or may be accelerated or required to be prepaid prior to the stated maturity thereof (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, the stated termination thereof) (with respect to both clauses (i) and (ii), other than as a result of acceleration of the payment of any such Revenues Secured Debt that is owned by a liquidity provider pursuant to the provisions of the related liquidity facility); or (c) one or more final, unappealable judgments against the District for the payment of money payable from the Water Revenues or attachments against the Water Revenues, the operation or result of which, individually or in the aggregate, equal or exceed $15,000,000 shall remain unpaid, unstayed, undischarged, unbonded or undismissed for a period of sixty (60) days; or (d) (i) The District shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its Water System Related Debt, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of the assets of the Water System, or the District shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the District any case, proceeding or other action of a nature referred to in clause (i) above which (x) results in an order for such relief or in the appointment of a receiver or similar official or (y) remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) there shall be commenced against the District, any case, proceeding or

319 other action seeking the issuance of a warrant of attachment, execution, restraint or similar process against all or any substantial part of the assets of the Water System or the Water Revenues, which results in the entry of a final and non-appealable order or ruling for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (iv) the District shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the District shall admit in writing its inability to pay its debts; or (e) (i) Any provision of the SMBC Reimbursement Agreement, the Act, the Resolution, the Water Series A-1 Notes or the Issuing and Paying Agent Agreement relating to (A) the ability or obligation of the District to pay, when due, the principal or interest payable on the Water Series A-1 Notes, the Advance Note, the Term Loan Note, or any Revenues Secured Debt or (B) the Lien on or pledge of the Water Revenues securing the Water Series A-1 Notes, the Advance Note, the Term Loan Note, or any Revenues Secured Debt shall at any time cease to be valid and binding on the District or shall be declared to be null and void, invalid or unenforceable as the result of a final nonappealable judgment by any federal or state court or as a result of any legislative or administrative action by any Governmental Authority having jurisdiction over the District, (ii) an authorized representative of the District repudiates or otherwise denies in writing that the District has any further liability or obligation under or with respect to any provision of the SMBC Reimbursement Agreement, the Act, the Resolution, the Water Series A-1 Notes, the Advance Note, the Term Loan Note, or any Revenues Secured Debt or the Issuing and Paying Agent Agreement relating to (A) the ability or the obligation of the District to pay, when due, the principal or interest payable on any Water Series A-1 Notes, the Advance Note, the Term Loan Note, or any Revenues Secured Debt or (B) the Lien on or pledge of all or any portion of the Water Revenues, or (iii) the State of California or the District shall have taken or permitted to be taken any official action, or has duly enacted any statute or regulation, which would invalidate, or render null and void, invalid or unenforceable, any provision of the SMBC Reimbursement Agreement, the Act, the Resolution, the Water Series A-1 Notes, the Advance Note, the Term Loan Note, or the Revenues Secured Debt or the Issuing and Paying Agent Agreement relating to (A) the ability or the obligation of the District to pay, when due, the principal or interest payable on the Water Series A-1 Notes, the Advance Note, the Term Loan Note, or the Revenues Secured Debt, or (B) the Lien on or pledge of the Water Revenues; or (f) (i) the District shall impose a debt moratorium or comparable extraordinary restriction on the repayment of debt (whether or not in writing) with respect to the Water Series A-1 Notes, the Advance Note, the Term Loan Note, or any Revenues Secured Debt or (ii) any Governmental Authority having appropriate jurisdiction over the District shall make a finding or ruling or shall enact or adopt legislation or issue an executive order or enter a judgment or decree which results in a debt moratorium or comparable extraordinary restriction on the repayment of debt with respect to the Water Series A-1 Notes, the Advance Note, the Term Loan Note, any Revenues Secured Debt or all debt of the District; or (g) all of the Rating Agencies shall have (i) assigned to any Water Bonds or Water Note Parity Debt (if rated) a long-term unenhanced rating below Investment Grade, (ii) withdrawn their ratings of any Water Bonds or Water Note Parity Debt (if rated), other than as a result of debt maturity, redemption or defeasance or, in the case of Water Bonds or Water Note Parity Debt supported by credit enhancement, such withdrawal being attributable to the long-term ratings assigned to the related credit enhancer, and excluding any withdrawal which such Rating Agency stipulates in writing is being taken for non-credit related reasons or (iii) suspended their ratings of any Water Bonds or Water Note Parity Debt (if rated), other than as a result of (x) debt maturity, redemption or defeasance or, in the case of any Water Bonds or Water Note Parity Debt supported by credit enhancement, such suspension being

320 attributable to the long-term ratings assigned to the related credit enhancer, and excluding any suspension which such Rating Agency stipulates in writing is being taken for non-credit related reasons. Events of Default Resulting in Immediate Suspension. Each of the following Events of Default shall also constitute a Suspension Event under the SMBC Reimbursement Agreement: (a) (i) Any Governmental Authority with jurisdiction to rule on the validity or enforceability of the SMBC Reimbursement Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Water Series A-1 Notes, the Advance Note or the Term Loan Note, shall find or rule, in a judicial or administrative proceeding, that any material provision of any of the foregoing relating to (A) the ability or the obligation of the District to pay, when due, the principal or interest payable on the Water Series A-1 Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt or (B) the Lien on or pledge of Water Revenues securing the Water Series A-1 Notes or any Revenues Secured Debt is not valid or not binding on, or enforceable against, the District; or (ii) the State of California or the District (A) makes a claim in a judicial or administrative proceeding that the District has no further liability or obligation under the SMBC Reimbursement Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Water Series A-1 Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt, as and to the extent the District has obligations thereunder, to pay, when due, the principal or interest payable on the Water Series A-1 Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt, or (B) contests in a judicial or administrative proceeding the validity or enforceability of any provision of the SMBC Reimbursement Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Water Series A-1 Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt secured by and relating to (1) the ability or the obligation of the District to pay, when due, the principal of or interest on the Water Series A-1 Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt or (2) the Lien on or pledge of Water Revenues securing the Water Series A-1 Notes, the Advance Note, the Term Loan Note or any Revenues Secured Debt; or Events of Default not Resulting in Immediate Termination or Suspension. Each of the following Events of Default shall also constitute a Notice Event of Default under the SMBC Reimbursement Agreement: (a) the District shall fail to pay any other amount owed by the District under the SMBC Reimbursement Agreement or under the Fee Agreement as and when due (other than amounts described in paragraph (a) of the subheading Events of Default Resulting in Immediate Termination ), and such failure shall continue unremedied for ten (10) days after the later to occur of (x) the date such amount is due and (y) the date the District receives an invoice from SMBC for such amount; or (b) any representation or warranty made by or on behalf of the District in the SMBC Reimbursement Agreement or in any Related Document shall be incorrect or untrue in any material respect when made or deemed to have been made; or (c) the District shall default in the due performance or observance of certain covenants set forth in the SMBC Reimbursement Agreement; or (d) the District shall default in the due performance or observance of any other term, covenant or agreement contained in the SMBC Reimbursement Agreement and such default shall remain unremedied for a period of thirty (30) days after the earlier of (i) the date on which such failure shall first become known to any officer of the District or (ii) written notice thereof is given to the District by SMBC; or

321 (e) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) any Water System Related Debt, the aggregate principal amount or notional amount of which is not less than $15,000,000, or any interest or premium thereon, and such failure shall continue beyond any applicable period of grace specified in any underlying resolution, indenture, contract or instrument providing for the creation or concerning any such Water System Related Debt; or any other default or automatic termination event shall occur under any resolution, indenture, contract or instrument providing for the creation of or concerning any such Water System Related Debt if such default or automatic termination event results in the acceleration of the maturity of such Water System Related Debt or requires such Water System Related Debt to become due prior to the stated maturity thereof or a termination payment to be paid in connection therewith, and either (i) the District shall fail to pay any such accelerated amount, amount required to be prepaid prior to the stated maturity thereof or termination payment or (ii) the payment by the District of any such accelerated amount, amount required to be prepaid prior to maturity or termination payment shall materially adversely affect the ability of the District to perform its obligations under the SMBC Reimbursement Agreement; or (f) the long-term unenhanced ratings assigned to any Water Bonds by (x) any two Rating Agencies if all three Rating Agencies then rate Water Bonds or (y) any Rating Agency if only one or two Rating Agencies then rate Water Bonds, are reduced below A- (or its equivalent) by S&P, A- (or its equivalent) by Fitch or A3 (or its equivalent) by Moody s, or are withdrawn or suspended by any such Rating Agency other than as a result of (i) debt maturity, redemption or defeasance or, in the case of Water Bonds supported by credit enhancement, such withdrawal or suspension being attributable to a long-term rating assigned to the related credit enhancer, (ii) a determination by the District to cease maintaining such rating and following such withdrawal or suspension the District is in compliance with the terms of the SMBC Reimbursement Agreement, or (iii) a failure by the District to apply for a rating by such Rating Agency or to provide information to such Rating Agency, in either case as a result of such Rating Agency s imposition or proposed imposition of a condition or conditions to issuing such rating with respect to which the District cannot legally comply; or (g) the occurrence of any Issuing and Paying Agent Agreement Event of Default which is not cured within any applicable cure period; or (h) any Governmental Authority shall declare a financial emergency with respect to the District and shall appoint or designate with respect to the District, an entity such as an organization, board, commission, authority, agency or body to manage the affairs and operations of the Water System; or (i) a ruling, assessment, notice of deficiency or technical advice by the Internal Revenue Service shall be rendered to the effect that interest on the Water Series A-1 Notes is included in the gross income of the Owners of such Water Series A-1 Notes and either (i) the District, after it has been notified by the Internal Revenue Service, shall not challenge such ruling, assessment, notice or advice in a court of law during the period within which such challenge is permitted or (ii) the District shall challenge such ruling, assessment, notice or advice and a court of law shall make a determination, not subject to appeal or review by another court of law, that such ruling, assessment, notice or advice is correctly rendered; or (j) the occurrence of any default resulting from a failure by the District to perform any of its obligations under any agreement or instrument providing credit enhancement or liquidity support with respect to any Revenues Secured Debt, or pursuant to which the related holder purchased and continues to hold the same, which default results in an acceleration of such Revenues Secured Debt or the District s obligations under such agreement or instrument or requires such Revenues Secured Debt to be prepaid prior to the stated maturity thereof

322 Remedies. Upon the occurrence of an Event of Default under the SMBC Reimbursement Agreement, SMBC may take one or more of the following actions: (a) Immediate Termination. Upon the occurrence of any Special Event of Default, the Available Amount of the SMBC Letter of Credit shall be reduced to zero and the SMBC Letter of Credit and SMBC s obligations thereunder shall automatically and immediately terminate and expire, without notice, with respect to all Water Series A-1 Notes, and SMBC shall have no obligation to make any Loans under the SMBC Reimbursement Agreement. (b) Suspension Contest to Validity. Upon the occurrence of any Suspension Event described in paragraph (a) under the subheading Events of Default Resulting in Immediate Suspension, the obligation of SMBC to make Loans pursuant to draws under the SMBC Letter of Credit shall be automatically and immediately suspended from the time of the occurrence of such Event of Default until a final, non-appealable judgment of a court having jurisdiction in the premises shall be entered declaring that all contested provisions of the SMBC Reimbursement Agreement, the SMBC Letter of Credit the Water Series A-1 Notes, the Advance Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the pledge of the Available Water Revenues securing the Water Series A-1 Notes, the Advance Note, the Term Loan Note and the Loans are upheld in their entirety. In the event such judgment is entered declaring that all material contested provisions of the SMBC Reimbursement Agreement, the SMBC Letter of Credit, the Water Series A-1 Notes, the Advance Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the Available Water Revenues are upheld in their entirety, the obligation of SMBC to make Loans pursuant to draws under the SMBC Letter of Credit shall be automatically reinstated and the terms of the SMBC Letter of Credit and the SMBC Reimbursement Agreement will continue in full force and effect (unless the SMBC Letter of Credit and the SMBC Reimbursement Agreement shall have otherwise expired or terminated in accordance with the terms thereof or there has occurred a Special Event of Default) as if there had been no suspension. In the event any provision of the SMBC Reimbursement Agreement, the SMBC Letter of Credit, the Water Series A-1 Notes, the Advance Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the pledge of the Available Water Revenues securing the Water Series A-1 Notes and the Loans is declared to be null and void or unenforceable, or it is determined that the District has no liability or obligation under the SMBC Reimbursement Agreement, the Water Series A-1 Notes, the Advance Note, the Term Loan Note, the Issuing and Paying Agent Agreement, or the Resolution, then the obligations of SMBC under the SMBC Reimbursement Agreement and the SMBC Letter of Credit will terminate as set forth above. Notwithstanding the foregoing, if, upon the date which is the earlier of the Termination Date or nine months after the effective date of such suspension of the obligations of SMBC under the SMBC Reimbursement Agreement and the SMBC Letter of Credit pursuant to this paragraph, litigation is still pending and a judgment regarding the validity and enforceability of the SMBC Reimbursement Agreement, the SMBC Letter of Credit, the Water Series A-1 Notes, the Advance Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the Available Water Revenues securing the Water Series A-1 Notes, the Advance Note, the Term Loan Note and the Loans as is the subject of such Event of Default has not been obtained, then the SMBC Letter of Credit and the obligation of SMBC to make Loans shall at such time terminate without notice or demand. (c) Termination with Notice. Upon the occurrence of an Event of Default that is not a Special Event of Default, SMBC may (i) deliver a No-Issuance Notice to the Issuing and Paying Agent directing the Issuing and Paying Agent to cease issuing any Water Series A-1 Notes, whereupon no additional Water Series A-1 Notes shall be issued, and (ii) by notice to the District and the Issuing and Paying Agent, reduce the Available Amount to the then Outstanding principal amount of Water Series A

323 1 Notes and cause the Available Amount to no longer be subject to reinstatement upon drawings under the SMBC Letter of Credit for such Water Series A-1 Notes, so that, on the date all Water Series A-1 Notes issued and sold prior to the date such No-Issuance Notice is received by the Issuing and Paying Agent mature, the Available Amount will be reduced to zero and the SMBC Letter of Credit shall be terminated; provided that the SMBC Letter of Credit shall not terminate, and the right of SMBC to accelerate the maturity of the Advance Note and the Term Loan Note, as applicable, described in paragraph (d) under this subheading Remedies shall not affect the obligation of SMBC to make Loans pursuant to drawings under the SMBC Letter of Credit, to the extent necessary for the District to make required payments of principal on maturing Water Series A-1 Notes that were issued and sold prior to the date upon which the No-Issuance Notice is received by the Issuing and Paying Agent; provided further that if any Loans are made that would not have been made but for the application of the immediately preceding provision, such Loans shall be immediately due and payable on the date such Loans are made. (d) Additional Remedies. In addition to the rights and remedies set forth in paragraphs (a), (b) and (c) above under this subheading Remedies, in the case of any Event of Default under the SMBC Reimbursement Agreement, other than an Event of Default described in paragraph (d) under the subheading Events of Default Resulting in Immediate Termination above, SMBC may declare the Advance Note, the Term Loan Note, all accrued interest thereon, and all other outstanding Obligations of the District to be forthwith due and payable, whereupon the Advance Note and the Term Loan Note and such interest and all such other Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by the District. If any Event of Default described in paragraph (d) under the subheading Events of Default Resulting in Immediate Termination above shall occur, without any notice to the District or any other act by SMBC, the Advance Note and the Term Loan Note, together with accrued interest thereon, and all other outstanding Obligations of the District shall become forthwith due and payable, without presentment, demand, protest, or other notice of any kind, all of which are waived by the District. Sumitomo Mitsui Banking Corporation. The following information has been furnished by SMBC for use in this Commercial Paper Offering Memorandum. Such information has not been independently confirmed or verified by the District. No representation is made herein by the District as to the accuracy or adequacy of such information or as to the absence of material adverse changes with respect to SMBC or its financial condition subsequent to the date hereof, or that the information contained and incorporated herein by reference is correct. Sumitomo Mitsui Banking Corporation (Kabushiki Kaisha Mitsui Sumitomo Ginko) ( SMBC ) is a joint stock corporation with limited liability (Kabushiki Kaisha) under the laws of Japan. The registered head office of SMBC is located at 1-2, Marunouchi 1-chome, Chiyoda ku, Tokyo , Japan. SMBC was established in April 2001 through the merger of two leading banks, The Sakura Bank, Limited and The Sumitomo Bank, Limited. In December 2002, Sumitomo Mitsui Financial Group, Inc. ( SMFG ) was established through a stock transfer as a holding company under which SMBC became a wholly-owned subsidiary. SMFG reported 187,315,077 million (US$1,526, million) in consolidated total assets as of June 30, SMBC is one of the world s leading commercial banks and provides an extensive range of banking services to its customers in Japan and overseas. In Japan, SMBC accepts deposits, makes loans and extends guarantees to corporations, individuals, governments and governmental entities. It also offers financing solutions such as syndicated lending, structured finance and project finance. SMBC also underwrites and deals in bonds issued by or under the guarantee of the Japanese government and local government authorities, and acts in various administrative and advisory capacities for certain types of corporate and government bonds. Internationally, SMBC operates through a network of branches,

324 representative offices, subsidiaries and affiliates to provide many financing products, including syndicated lending and project finance. The New York Branch of SMBC is licensed by the State of New York Banking Department to conduct branch banking business at 277 Park Avenue, New York, New York, and is subject to examination by the State of New York Banking Department and the Federal Reserve Bank of New York. Audited consolidated financial statements for SMFG and its consolidated subsidiaries for the fiscal year 2014 ended March 31, 2015, as well as other corporate data, financial information and analyses, are available in English on SMFG's website at The information herein has been obtained from SMBC, which is solely responsible for its content. The delivery of the Commercial Paper Offering Memorandum shall not create any implication that there has been no change in the affairs of SMBC since the date hereof, or that the information contained or referred to herein is correct as of any time subsequent to its date.] Water Series A-2 Notes BANA Credit Agreement. The following description is a summary of certain provisions of the BANA Credit Agreement pursuant to which BANA has agreed to establish a revolving line of credit for the benefit of the District for the purpose of making loans to fund the payment of the principal of maturing Water Series A-2 Notes. Such summary does not purport to be a complete description or restatement of the material provisions of the BANA Credit Agreement. Investors should obtain and review a copy of the BANA Credit Agreement in order to understand all of the terms of that document. All capitalized terms appearing under this subheading BANA Credit Agreement not otherwise defined herein shall have the meanings assigned to them in the BANA Credit Agreement. The District has entered into the BANA Credit Agreement with BANA, under which BANA has agreed, subject to compliance with certain conditions as specified in the BANA Credit Agreement, to provide a revolving line of credit for the benefit of the District in an amount not to exceed $160,000,000, as such amount may be reduced from time to time in accordance with the terms of the BANA Credit Agreement, to fund the payment of the principal of any maturing Water Series A-2 Notes at the stated maturity thereof to the extent proceeds of any sale of Water Series A-2 Notes or any funds are unavailable therefor. The stated expiration date of the BANA Credit Agreement is [November 30, 2018], unless sooner terminated or later extended pursuant to its terms. Upon the occurrence of certain events of default under the BANA Credit Agreement described below, BANA s commitment may be automatically and immediately terminated or suspended without notice. The occurrence of any of the events described under the subheadings Events of Default Resulting in Immediate Termination, Events of Default Resulting in Immediate Suspension, and Events of Default not Resulting in Immediate Termination or Suspension below shall constitute an Event of Default under the BANA Credit Agreement. Upon the occurrence of an Event of Default, BANA may exercise those rights and remedies applicable to such Event of Default as described under the subheading Remedies below. Events of Default Resulting in Immediate Termination. Each of the following Events of Default shall also constitute a Special Event of Default under the BANA Credit Agreement: (a) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment, acceleration or otherwise) (i) any interest on any Water Series A-2 Notes in accordance with its terms or (ii) any principal of or interest on any Loan or the Revolving Loan Note or

325 the Term Loan Note (other than solely as a result of acceleration of the payment of the Revolving Loan Note or the Term Loan Note as described in paragraph (d) under the subheading Remedies below); or (b) (i) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment or acceleration) any principal of or interest on any Revenues Secured Debt of the District (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, any regularly scheduled payment thereunder) and such failure shall continue beyond any applicable period of grace specified in any underlying resolution, indenture, contract or instrument pursuant to which such Revenues Secured Debt have been issued or incurred, or (ii) pursuant to the provisions of any such resolution, indenture, contract or instrument, any Revenues Secured Debt, as a result of the failure to pay principal of or interest on such Revenues Secured Debt (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, any regularly scheduled payment thereunder), shall have been or may be accelerated or required to be prepaid prior to the stated maturity thereof (or, in the case of Revenues Secured Debt consisting of obligations in respect of Swap Contracts, the stated termination thereof) (with respect to both clauses (i) and (ii), other than as a result of acceleration of the payment of any such Revenues Secured Debt that is owned by a liquidity provider pursuant to the provisions of the related liquidity facility); or (c) one or more final, unappealable judgments against the District for the payment of money payable from the Water Revenues or attachments against the Water Revenues, the operation or result of which, individually or in the aggregate, equal or exceed $15,000,000 shall remain unpaid, unstayed, undischarged, unbonded or undismissed for a period of sixty (60) days; or (d) (i) The District shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its Water System Related Debt, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of the assets of the Water System, or the District shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the District any case, proceeding or other action of a nature referred to in clause (i) above which (x) results in an order for such relief or in the appointment of a receiver or similar official or (y) remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) there shall be commenced against the District, any case, proceeding or other action seeking the issuance of a warrant of attachment, execution, restraint or similar process against all or any substantial part of the assets of the Water System or the Water Revenues, which results in the entry of a final and non-appealable order or ruling for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (iv) the District shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above; or (v) the District shall admit in writing its inability to pay its debts; or (e) (i) Any provision of the BANA Credit Agreement, the Act, the Resolution, the Water Series A-2 Notes or the Issuing and Paying Agent Agreement relating to (A) the ability or obligation of the District to pay, when due, the principal or interest payable on the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, or any Revenues Secured Debt or (B) the Lien on or pledge of the Water Revenues securing the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, or any Revenues Secured Debt shall at any time cease to be valid and binding on the District or shall be declared to be null and void, invalid or unenforceable as the result of a final nonappealable judgment by any federal or state court or as a result of any legislative or administrative action by any Governmental Authority having jurisdiction over the District, (ii) an authorized representative of the District repudiates or otherwise denies in writing that the District has any further

326 liability or obligation under or with respect to any provision of the BANA Credit Agreement, the Act, the Resolution, the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, or any Revenues Secured Debt or the Issuing and Paying Agent Agreement relating to (A) the ability or the obligation of the District to pay, when due, the principal or interest payable on any Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, or any Revenues Secured Debt or (B) the Lien on or pledge of all or any portion of the Water Revenues, or (iii) the State of California or the District shall have taken or permitted to be taken any official action, or has duly enacted any statute or regulation, which would invalidate, or render null and void, invalid or unenforceable, any provision of the BANA Credit Agreement, the Act, the Resolution, the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, or the Revenues Secured Debt or the Issuing and Paying Agent Agreement relating to (A) the ability or the obligation of the District to pay, when due, the principal or interest payable on the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, or the Revenues Secured Debt, or (B) the Lien on or pledge of the Water Revenues; or (f) (i) the District shall impose a debt moratorium or comparable extraordinary restriction on the repayment of debt (whether or not in writing) with respect to the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, or any Revenues Secured Debt or (ii) any Governmental Authority having appropriate jurisdiction over the District shall make a finding or ruling or shall enact or adopt legislation or issue an executive order or enter a judgment or decree which results in a debt moratorium or comparable extraordinary restriction on the repayment of debt with respect to the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, any Revenues Secured Debt or all debt of the District; or (g) all of the Rating Agencies shall have (i) assigned to any Water Bonds or Water Note Parity Debt (if rated) a long-term unenhanced rating below Investment Grade, (ii) withdrawn their ratings of any Water Bonds or Water Note Parity Debt (if rated), other than as a result of debt maturity, redemption or defeasance or, in the case of Water Bonds or Water Note Parity Debt supported by credit enhancement, such withdrawal being attributable to the long-term ratings assigned to the related credit enhancer, and excluding any withdrawal which such Rating Agency stipulates in writing is being taken for non-credit related reasons or (iii) suspended their ratings of any Water Bonds or Water Note Parity Debt (if rated), other than as a result of (x) debt maturity, redemption or defeasance or, in the case of any Water Bonds or Water Note Parity Debt supported by credit enhancement, such suspension being attributable to the long-term ratings assigned to the related credit enhancer, and excluding any suspension which such Rating Agency stipulates in writing is being taken for non-credit related reasons. Events of Default Resulting in Immediate Suspension. The following Event of Default shall also constitute a Suspension Event under the BANA Credit Agreement: (a) Any Governmental Authority with jurisdiction to rule on the validity or enforceability of the BANA Credit Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Water Series A-2 Notes, the Revolving Loan Note or the Term Loan Note, shall find or rule, in a judicial or administrative proceeding, that any material provision of any of the foregoing relating to (i) the ability or the obligation of the District to pay, when due, the principal or interest payable on the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt or (ii) the Lien on or pledge of Water Revenues securing the Water Series A-2 Notes or any Revenues Secured Debt is not valid or not binding on, or enforceable against, the District; or (b) the State of California or the District (i) makes a claim in a judicial or administrative proceeding that the District has no further liability or obligation under the BANA Credit Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt, as and to the extent the District has obligations thereunder, to pay, when due, the principal or interest payable on the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt, or (ii) contests in a judicial or administrative proceeding

327 the validity or enforceability of any provision of the BANA Credit Agreement, the Act, the Resolution, the Issuing and Paying Agent Agreement, the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt secured by and relating to (A) the ability or the obligation of the District to pay, when due, the principal of or interest on the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt or (B) the Lien on or pledge of Available Water Revenues securing the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note or any Revenues Secured Debt. Events of Default not Resulting in Immediate Termination or Suspension. Each of the following Events of Default shall also constitute a Notice Event of Default under the BANA Credit Agreement: (a) the District shall fail to pay any other amount owed by the District under the BANA Credit Agreement or under the Fee Agreement as and when due (other than amounts described in paragraph (a) of the subheading Events of Default Resulting in Immediate Termination ), and such failure shall continue unremedied for ten (10) days after the later to occur of (x) the date such amount is due and (y) the date the District receives an invoice from BANA for such amount; or (b) any representation or warranty made by or on behalf of the District in the BANA Credit Agreement or in any Related Document shall be incorrect or untrue in any material respect when made or deemed to have been made; or (c) the District shall default in the due performance or observance of certain covenants set forth in the BANA Credit Agreement; or (d) the District shall default in the due performance or observance of any other term, covenant or agreement contained in the BANA Credit Agreement and such default shall remain unremedied for a period of thirty (30) days after the earlier of (i) the date on which such failure shall first become known to any officer of the District or (ii) written notice thereof is given to the District by BANA; or (e) the District shall fail to pay when due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) any Water System Related Debt, the aggregate principal amount or notional amount of which is not less than $15,000,000, or any interest or premium thereon, and such failure shall continue beyond any applicable period of grace specified in any underlying resolution, indenture, contract or instrument providing for the creation or concerning any such Water System Related Debt; or any other default or automatic termination event shall occur under any resolution, indenture, contract or instrument providing for the creation of or concerning any such Water System Related Debt if such default or automatic termination event results in the acceleration of the maturity of such Water System Related Debt or requires such Water System Related Debt to become due prior to the stated maturity thereof or a termination payment to be paid in connection therewith, and either (i) the District shall fail to pay any such accelerated amount, amount required to be prepaid prior to the stated maturity thereof or termination payment or (ii) the payment by the District of any such accelerated amount, amount required to be prepaid prior to maturity or termination payment shall materially adversely affect the ability of the District to perform its obligations under the BANA Credit Agreement; or (f) the long-term unenhanced ratings assigned to any Water Bonds by (x) any two Rating Agencies if all three Rating Agencies then rate Water Bonds or (y) any Rating Agency if only one or two Rating Agencies then rate Water Bonds, are reduced below A- (or its equivalent) by S&P, A- (or its equivalent) by Fitch or A3 (or its equivalent) by Moody s, or are withdrawn or suspended by any such Rating Agency other than as a result of (i) debt maturity, redemption or defeasance or, in the case of Water Bonds supported by credit enhancement, such withdrawal or suspension being attributable to a

328 long-term rating assigned to the related credit enhancer, (ii) a determination by the District to cease maintaining such rating and following such withdrawal or suspension the District is in compliance with the terms of the BANA Credit Agreement, or (iii) a failure by the District to apply for a rating by such Rating Agency or to provide information to such Rating Agency, in either case as a result of such Rating Agency s imposition or proposed imposition of a condition or conditions to issuing such rating with respect to which the District cannot legally comply; or (g) the occurrence of any Issuing and Paying Agent Agreement Event of Default which is not cured within any applicable cure period; or (h) any Governmental Authority shall declare a financial emergency with respect to the District and shall appoint or designate with respect to the District, an entity such as an organization, board, commission, authority, agency or body to manage the affairs and operations of the Water System; or (i) a ruling, assessment, notice of deficiency or technical advice by the Internal Revenue Service shall be rendered to the effect that interest on the Water Series A-2 Notes is included in the gross income of the Owners of such Water Series A-2 Notes and either (i) the District, after it has been notified by the Internal Revenue Service, shall not challenge such ruling, assessment, notice or advice in a court of law during the period within which such challenge is permitted or (ii) the District shall challenge such ruling, assessment, notice or advice and a court of law shall make a determination, not subject to appeal or review by another court of law, that such ruling, assessment, notice or advice is correctly rendered; or (j) the occurrence of any default resulting from a failure by the District to perform any of its obligations under any agreement or instrument providing credit enhancement or liquidity support with respect to any Revenues Secured Debt, or pursuant to which the related holder purchased and continues to hold the same, which default results in an acceleration of such Revenues Secured Debt or the District s obligations under such agreement or instrument or requires such Revenues Secured Debt to be prepaid prior to the stated maturity thereof. Remedies. Upon the occurrence of an Event of Default under the BANA Credit Agreement, BANA may take one or more of the following actions: (a) Immediate Termination. Upon the occurrence of any Special Event of Default, the Commitment shall be reduced to zero and BANA s obligations under the BANA Credit Agreement shall automatically and immediately terminate and expire, without notice, with respect to all Water Series A-2 Notes, and BANA shall have no obligation to make any Loans under the BANA Credit Agreement. (b) Suspension Contest to Validity. Upon the occurrence of the Suspension Event described in paragraph (a) under the subheading Events of Default Resulting in Immediate Suspension, the obligation of BANA to make Loans under the BANA Credit Agreement shall be automatically and immediately suspended from the time of the occurrence of such Event of Default until a final, non-appealable judgment of a court having jurisdiction in the premises shall be entered declaring that all contested provisions of the BANA Credit Agreement, the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the pledge of the Available Water Revenues securing the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note and the Loans are upheld in their entirety. In the event such judgment is entered declaring that all material contested provisions of the BANA Credit Agreement, the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the Available Water Revenues are upheld in their entirety, the obligation of BANA to make Loans under the BANA

329 Credit Agreement shall be automatically reinstated and the terms of the BANA Credit Agreement will continue in full force and effect (unless the BANA Credit Agreement shall have otherwise expired or terminated in accordance with the terms of the BANA Credit Agreement or there has occurred a Special Event of Default) as if there had been no suspension. In the event any provision of the BANA Credit Agreement, the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the pledge of the Available Water Revenues securing the Water Series A-2 Notes and the Loans is declared to be null and void or unenforceable, or it is determined that the District has no liability or obligation under the BANA Credit Agreement, the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, the Issuing and Paying Agent Agreement, or the Resolution, then the obligations of BANA under the BANA Credit Agreement will terminate as set forth above. Notwithstanding the foregoing, if, upon the date which is the earlier of the Commitment Termination Date or nine months after the effective date of such suspension of the obligation of BANA pursuant to this paragraph, litigation is still pending and a judgment regarding the validity and enforceability of the BANA Credit Agreement, the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note, the Issuing and Paying Agent Agreement, the Resolution or any Loans or the validity or enforceability of the Available Water Revenues securing the Water Series A-2 Notes, the Revolving Loan Note, the Term Loan Note and the Loans as is the subject of such Event of Default has not been obtained, then the Commitment and the obligation of BANA to make Loans under the BANA Credit Agreement shall at such time terminate without notice or demand. (c) Termination with Notice. Upon the occurrence of an Event of Default that is not a Special Event of Default, BANA may, by notice to the District, terminate the Commitment, if any (except as provided below with respect to Water Series A-2 Notes issued and sold prior to such date), deliver a No-Issuance Notice to the Issuing and Paying Agent directing the Issuing and Paying Agent to cease issuing any Water Series A-2 Notes, whereupon no additional Water Series A-2 Notes shall be issued, the Available Commitment shall immediately be reduced to the then outstanding principal amount of Water Series A-2 Notes, and the Available Commitment shall be further reduced in a similar manner as and when such Water Series A-2 Notes mature such that, on the date all Water Series A-2 Notes issued and sold prior to the date such No-Issuance Notice is received by the Issuing and Paying Agent mature, the Commitment will be reduced to zero and terminated and the obligation of BANA to extend any further credit under the BANA Credit Agreement will be terminated; provided that the Commitment shall not terminate, and the right of BANA to accelerate the maturity of the Revolving Loan Note and the Term Loan Note, as applicable, described in paragraph (d) under this subheading Remedies below shall not affect the obligation of BANA to make Loans to the extent necessary for the District to make required payments of principal on the Water Series A-2 Notes issued and sold prior to the date upon which the No- Issuance Notice is received by the Issuing and Paying Agent; provided further that if any Loans are made that would not have been made but for the application of the immediately preceding provision, such Loans shall be immediately due and payable on the date such Loans are made. (d) Additional Remedies. In addition to the rights and remedies set forth in paragraphs (a), (b), and (c) above under this subheading Remedies, in the case of any Event of Default under the BANA Credit Agreement, other than an Event of Default described in paragraph (d) under the subheading Events of Default Resulting in Immediate Termination above, BANA may declare the Revolving Loan Note, the Term Loan Note, all accrued interest thereon, and all other outstanding Obligations of the District to be forthwith due and payable, whereupon the Revolving Loan Note and the Term Loan Note and such interest and all such other Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by the District. If any Event of Default described in paragraph (d) under the subheading Events of Default Resulting in Immediate Termination above shall occur, without any notice to the District or any other act by BANA, the Revolving Loan Note and the Term Loan Note, together with accrued interest thereon, and all other outstanding Obligations of the District shall become forthwith due

330 and payable, without presentment, demand, protest, or other notice of any kind, all of which are waived by the District. Bank of America, N.A. The following information has been furnished by BANA for use in this Commercial Paper Offering Memorandum. Such information has not been independently confirmed or verified by the District. No representation is made herein by the District as to the accuracy or adequacy of such information or as to the absence of material adverse changes with respect to the Bank or its financial condition subsequent to the date hereof, or that the information contained and incorporated herein by reference is correct. Bank of America, N.A. ( BANA ) is a national banking association organized under the laws of the United States, with its principal executive offices located in Charlotte, North Carolina. BANA is a wholly-owned indirect subsidiary of Bank of America Corporation (the Corporation ) and is engaged in a general consumer banking, commercial banking and trust business, offering a wide range of commercial, corporate, international, financial market, retail and fiduciary banking services. As of June 30, 2015, BANA had consolidated assets of $1.61 trillion, consolidated deposits of $1.24 trillion and stockholder s equity of $ billion based on regulatory accounting principles. The Corporation is a bank holding company and a financial holding company, with its principal executive offices located in Charlotte, North Carolina. Additional information regarding the Corporation is set forth in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014, together with its subsequent periodic and current reports filed with the Securities and Exchange Commission (the SEC ). Filings can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C , United States, at prescribed rates. In addition, the SEC maintains a website at which contains reports, proxy statements and other information regarding registrants that file such information electronically with the SEC. The information concerning the Corporation and BANA is furnished solely to provide limited introductory information and does not purport to be comprehensive. Such information is qualified in its entirety by the detailed information appearing in the referenced documents and financial statements referenced therein. BANA will provide copies of the most recent Bank of America Corporation Annual Report on Form 10-K, any subsequent reports on Form 10-Q, and any required reports on Form 8-K (in each case as filed with the SEC pursuant to the Exchange Act), and the publicly available portions of the most recent quarterly Call Report of BANA delivered to the Comptroller of the Currency, without charge, to each person to whom this document is delivered, on the written request of such person. Written requests should be directed to: Bank of America Corporate Communications 100 North Tryon St, 18th Floor Charlotte, North Carolina Attention: Corporate Communication LOANS MAY BE MADE UNDER THE BANA CREDIT AGREEMENT TO PAY PRINCIPAL ON MATURING WATER SERIES A-2 NOTES IN THE EVENT OTHER FUNDS ARE NOT AVAILABLE. ALTHOUGH THE BANA CREDIT AGREEMENT IS A BINDING OBLIGATION OF BANA, THE WATER SERIES A-2 NOTES ARE NOT DEPOSITS OR OBLIGATIONS OF THE CORPORATION OR ANY OF ITS AFFILIATED BANKS AND ARE NOT GUARANTEED BY ANY OF THESE ENTITIES. THE WATER SERIES A-2 NOTES ARE NOT INSURED BY THE FEDERAL

331 DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY AND ARE SUBJECT TO CERTAIN INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. The delivery of this information shall not create any implication that there has been no change in the affairs of the Corporation or BANA since the date of the most recent filings referenced herein, or that the information contained or referred to under this subheading Bank of America, N.A. is correct as of any time subsequent to the referenced date. Alternate or Substitute Liquidity Facilities The District has covenanted pursuant to the Issuing and Paying Agent Agreement that it will maintain in effect one or more Liquidity Facilities enabling it to borrow an aggregate amount at least equal to the sum of the principal amount of each series or subseries of Commercial Paper Notes then Outstanding under the Issuing and Paying Agent Agreement. The District shall cause the Issuing and Paying Agent to give the Dealers and the Owners of the relevant subseries of the Water Series A Notes written notice of the proposed delivery of a substitute or alternate liquidity facility for a subseries of the Water Series A Notes not less than 30 days prior to the proposed delivery of the substitute or alternate Liquidity Facility (unless 30 days notice is not practical, in which case notice will be given as soon as practical). Any such substitute or alternate Liquidity Facility for a subseries of the Water Series A Notes must go into effect on a date on which all of the Outstanding Water Series A Notes of the applicable subseries to be supported thereby then Outstanding are scheduled to mature. RATINGS The following table sets forth the ratings assigned, if applicable, by Standard & Poor s Ratings Services ( S&P ), Fitch Ratings, Inc. ( Fitch ) and Moody s Investors Service, Inc. ( Moody s ) to the Water Series A Notes and to the District s outstanding unenhanced senior Water Bonds. These ratings reflect only the view of such organizations and an explanation of the significance of the ratings may be obtained from such agencies as follows: Standard & Poor s Ratings Services, 55 Water Street, 38th Floor, New York, New York 10041; Fitch Ratings, Inc., 33 Whitehall Street, New York, New York 10004; and Moody s Investors Service, Inc., 7 World Trade Center, at 250 Greenwich Street, New York, New York There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by such rating agency, if in the judgment of such rating agency circumstances so warrant. Any such revision or withdrawal may have an adverse effect on the market price of the Water Series A Notes. S&P Moody s Fitch Water Series A Notes: Tax-Exempt Subseries A-1 N/A (1) Tax-Exempt Subseries A-2 N/A (1) Senior Water Bonds: AAA Aa1 AA+ (1) No ratings were requested from Fitch in connection with the Water Series A Notes

332 TAX MATTERS The following is a summary of certain of the United States federal income tax consequences of the ownership of the Water Series A Notes as of the date hereof. Each prospective investor should consult with its own tax advisor regarding the application of United States federal income tax laws, as well as any state, local, foreign or other tax laws, to its particular situation. On December 2, 2015, Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Special Tax Counsel to the Dealers, will deliver its opinion that, based on an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Water Series A Notes, when issued in accordance with the Issuing and Paying Agent Agreement and the Tax Certificate of the District (the Tax Certificate ), will be excluded from gross income for federal income tax purposes and will be exempt from State of California personal income taxes. Special Tax Counsel s opinion will also state that interest on the Water Series A Notes is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Special Tax Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. The form of such opinion is included in Appendix B hereto. Notice 94-84, C.B. 559, states that the Internal Revenue Service (the IRS ) is studying whether the amount of the payment at maturity on short-term debt obligations (i.e., debt obligations with a stated fixed rate of interest which mature not more than one year from the date of issue) that is excluded from gross income for federal income tax purposes is (i) the stated interest payable at maturity or (ii) the difference between the issue price of the short-term debt obligations and the aggregate amount to be paid at maturity of the short-term debt obligations (the original issue discount ). For this purpose, the issue price of the short-term debt obligations is the first price at which a substantial amount of the short-term debt obligations is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). Until the IRS provides further guidance with respect to tax-exempt short-term debt obligations, taxpayers may treat either the stated interest payable at maturity or the original issue discount as interest that is excluded from gross income for federal income tax purposes. However, taxpayers must treat the amount to be paid at maturity on all tax-exempt short-term debt obligations in a consistent manner. Prospective purchasers of the Water Series A Notes should consult their own tax advisors with respect to the tax consequences of ownership of Water Series A Notes if the owner elects original issue discount treatment. Water Series A Notes purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) ( Premium Notes ) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of notes, like the Premium Notes, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and an owner s basis in a Premium Note, will be reduced by the amount of amortizable bond premium properly allocable to such owner. Owners of Premium Notes should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Internal Revenue Code of 1986, as amended (the Code ) imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal tax purposes of interest on obligations such as the Water Series A Notes. The District has made certain representations and has covenanted to comply with certain restrictions designed to assure that the interest on the Water Series A Notes will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Water Series A Notes being included in federal gross income, possibly from the date of first issuance of the Water Series A Notes. The opinion

333 of Special Tax Counsel assumes the accuracy of these representations and compliance with these covenants. Special Tax Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring) or any other matters coming to Special Tax Counsel s attention after December 2, 2015 (the date of delivery of its special tax counsel opinion with respect to the Water Series A Notes) may adversely affect the value of, or the tax status of interest on, such Water Series A Notes. Accordingly, the opinion of Special Tax Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Special Tax Counsel will render an opinion on December 2, 2015 that interest on the Water Series A Notes, when issued in accordance with the Issuing and Paying Agent Agreement and the Tax Certificate, will be excluded from gross income for tax purposes and exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Water Series A Notes may otherwise affect the owner s federal, state or local tax liability. The nature and extent of these other tax consequences depend upon the owner s particular tax status and the owner s other items of income or deduction. Special Tax Counsel expresses no opinion regarding any such consequences. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Water Series A Notes to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent owners from realizing the full current benefit of the tax status of such interest. For example, the Obama Administration s budget proposals in recent years have proposed legislation that would limit the exclusion from gross income of interest on obligations like the Water Series A Notes to some extent for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. The introduction or enactment of any such future legislative proposals, or clarification of the Code or court decisions, may also affect, perhaps significantly, the market price for, or marketability of, the Water Series A Notes. Prospective purchasers of the Water Series A Notes should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Special Tax Counsel expresses no opinion. The opinion of Special Tax Counsel to be delivered on December 2, 2015 will be based on then current legal authority, will cover certain matters not directly addressed by such authorities, and will represent Special Tax Counsel s judgment as to the proper treatment of interest on the Water Series A Notes for federal income tax purposes. They are not binding on the IRS or the courts. Furthermore, Special Tax Counsel cannot give and has not given any opinion or assurance about the activities of the District after the date of such opinion, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The District has covenanted, however, to comply with the requirements of the Code. The IRS has an ongoing program of auditing tax-exempt obligations to determine whether, in the view of the IRS, interest on such tax-exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. Unless separately engaged, Special Tax Counsel is not obligated to defend the District or the owners of the Water Series A Notes regarding the tax-exempt status of interest on the Water Series A Notes in the event of an audit examination by the IRS. Under current procedures, parties other than the District and its appointed counsel, including the owners of the Water Series A Notes, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the District legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Water Series A Notes for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Water Series A Notes, and may cause the District or the owners of the Water Series A Notes to incur significant expense

334 CERTAIN LEGAL MATTERS Norton Rose Fulbright US LLP, Los Angeles, California, and Curls Bartling P.C., Oakland, California, have served as Co-Bond Counsel to the District in connection with the authorization of the Water Series A Notes. Orrick, Herrington & Sutcliffe LLP, San Francisco, California, has served as Special Tax Counsel to the Dealers in connection with the Water Series A Notes. The forms of opinions to be delivered by Co-Bond Counsel and Special Tax Counsel with respect to the Water Series A Notes are included in Appendix B to this Commercial Paper Offering Memorandum. DEALERS Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC (collectively, the Dealers ) have been appointed to initially serve as exclusive dealers for the Water Series A Notes. Morgan Stanley, parent company of Morgan Stanley & Co. LLC, one of the Dealers for the Water Series A Notes, has entered into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Water Series A Notes. OTHER MATTERS The Dealers have provided the following sentence for inclusion in this Commercial Paper Offering Memorandum. The Dealers have reviewed the information in this Commercial Paper Offering Memorandum in accordance with, and as part of, their responsibility to investors under the federal securities law as applied to the facts and circumstances of this transaction, but the Dealers do not guarantee the accuracy or completeness of such information. No Dealer or other person has been authorized by the District to give any information or to make any representations other than those contained in this Commercial Paper Offering Memorandum, and if given or made, such other information or representations must not be relied upon as having been authorized by the District. The references herein to the Issuing and Paying Agent Agreement, the Initial Liquidity Facilities and other documents referred to herein do not purport to be complete or definitive, do not constitute summaries thereof, and are qualified in their entirety by reference to the provisions thereof. Any statements in this Commercial Paper Offering Memorandum involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Commercial Paper Offering Memorandum is not to be construed as a contract or agreement between the District and the purchasers or registered owners of any of the Water Series A Notes. The Water Series A Notes are exempt from the continuing disclosure requirements of the Securities Exchange Commission Rule 15c2-12, and the District has not undertaken to provide any secondary market information regarding the Water Series A Notes. As described under FURTHER INFORMATION AVAILABLE on the inside cover of this Commercial Paper Offering Memorandum, the District files official statements and continuing disclosure reports and notices with respect to its Water Bonds through the MSRB. Such filings may be accessed through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at Such filings are not incorporated by reference herein

335 The financial statements of the District for the fiscal year ended June 30, 2015 and the forms of opinions to be delivered by Co-Bond Counsel and Special Tax Counsel are attached hereto as Appendices. The District will provide upon request copies of its most recent audited financial statements, official statements concerning the District s Water Bonds, the Issuing and Paying Agent Agreement and the Initial Liquidity Facilities. For additional information please contact the following: EAST BAY MUNICIPAL UTILITY DISTRICT Attention: Director of Finance 375 Eleventh Street Oakland, California (866)

336 APPENDIX A EAST BAY MUNICIPAL UTILITY DISTRICT AUDITED FINANCIAL STATEMENTS A-1

337 APPENDIX B PROPOSED FORMS OF CO-BOND COUNSEL OPINION AND SPECIAL TAX COUNSEL OPINION PROPOSED FORM OF CO-BOND COUNSEL OPINION On December 2, 2015, the District will receive an opinion of Norton Rose Fulbright US LLP, Los Angeles, California, and Curls Bartling P.C., Oakland, California, Co-Bond Counsel to the District, with respect to the Water Series A Notes in substantially the following form: [Date] East Bay Municipal Utility District Oakland, California East Bay Municipal Utility District Commercial Paper Notes (Water Series) Tax-Exempt Subseries A-1 and Tax-Exempt Subseries A-2 (Final Opinion) Ladies and Gentlemen: We have examined a record of proceedings relating to the authorization of issuance by the East Bay Municipal Utility District (the District ) of up to $ in aggregate principal amount (at any time Outstanding) of its Commercial Paper Notes (Water Series), Tax-Exempt Subseries A-1 (the Water Series A-1 Notes ) and up to $ in aggregate principal amount (at any time Outstanding) of its Commercial Paper Notes (Water Series), Tax-Exempt Subseries A-2 (the Water Series A-2 Notes ). The Water Series A-1 Notes and the Water Series A-2 Notes are each referred to herein separately as a subseries and are referred to herein collectively as the Notes. The Notes are authorized and will be issued pursuant to and by authority of Chapter 7.5 of the Municipal Utility District Act (constituting Division 6 of the Public Utilities Code of the State of California) (the Act ), Resolution No , adopted by the Board of Directors of the District (the Board ) on April 28, 2015, and Resolution No. -15, adopted by the Board on November, 2015 (together, the Note Resolutions ), and the Issuing and Paying Agent Agreement, dated as of December 1, 2015 (the Issuing and Paying Agent Agreement ), by and between the District and U.S. Bank, National Association, as issuing and paying agent (the Issuing and Paying Agent ). In our capacity as co-bond counsel, we have reviewed the Act, the Note Resolutions, the Issuing and Paying Agent Agreement, certifications of the District and others, opinions of counsel to the District and such other documents, opinions and instruments as we deemed necessary to render the opinions set forth herein. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Issuing and Paying Agent Agreement. We have assumed the genuineness of all documents and signatures presented to us. We have not undertaken to verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in the documents. Furthermore, we have assumed compliance with all covenants and agreements contained in the Issuing and Paying Agent Agreement. We call attention to the fact that the rights and obligations under the Notes and the Issuing and Paying Agent Agreement are subject to B-1

338 bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other similar laws relating to or affecting creditors rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public agencies in the State of California. In addition, the imposition of certain fees and charges by the District relating to the Water System is subject to the provisions of Articles XIIIC and XIIID of the California Constitution. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Notes have been duly authorized by the District in accordance with the laws of the State of California and pursuant to the Note Resolutions. 2. The Issuing and Paying Agent Agreement has been duly authorized, executed and delivered by the District and, assuming due authorization, execution and delivery by the Issuing and Paying Agent, constitutes a valid and binding obligation of the District. The Issuing and Paying Agent Agreement creates a valid pledge, to secure the payment of the principal of and interest on the Notes, of the Available Water Revenues of the District, as and to the extent set forth in the Issuing and Paying Agent Agreement and subject to the provisions of the Issuing and Paying Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein. 3. The Notes, when duly issued in the form authorized by and otherwise in compliance with the Issuing and Paying Agent Agreement, executed by the manual or facsimile signature of a duly authorized official of the District and authenticated by the Issuing and Paying Agent against payment therefor, will constitute valid and binding limited obligations of the District, payable exclusively from and secured by a pledge of Available Water Revenues. Each subseries of the Notes is also payable from the proceeds of such subseries of Notes or Advances under the related Liquidity Facility, as provided in the Issuing and Paying Agent Agreement. Neither the full faith and credit nor the taxing power of the District is pledged for the payment of the Notes or the interest thereon. We express no opinion as to any federal or state tax consequences of the ownership or disposition of the Notes. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may hereafter come to our attention or to reflect any changes in any law that may hereafter occur or become effective. Moreover, our opinions are not a guarantee of result; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. No opinion is expressed herein on the accuracy, completeness or sufficiency of the Commercial Paper Offering Memorandum or other offering material relating to the Notes. This opinion is limited to the laws of the State of California. Respectfully submitted, Respectfully submitted, B-2

339 PROPOSED FORM OF OPINION OF SPECIAL TAX COUNSEL On December 2, 2015, the District will receive an opinion of Orrick, Herrington & Sutcliffe LLP, Special Tax Counsel to the Dealers, with respect to the Water Series A Notes in substantially the following form: [Date] East Bay Municipal Utility District Oakland, California Ladies and Gentlemen: East Bay Municipal Utility District Commercial Paper Notes (Water Series) Tax-Exempt Subseries A-1 and Tax-Exempt Subseries A-2 (Special Tax Opinion) We have acted as special tax counsel in connection with the authorization of issuance by the East Bay Municipal Utility District (the District ) of up to $ in aggregate principal amount (at any time Outstanding) of its Commercial Paper Notes (Water Series), Tax-Exempt Subseries A-1 (the Water Series A-1 Notes ) and up to $ in aggregate principal amount (at any time Outstanding) of its Commercial Paper Notes (Water Series), Tax-Exempt Subseries A-2 (the Water Series A-2 Notes and together with the Water Series A-1 Notes, the Notes ). The Notes are authorized and will be issued pursuant to and by authority of Chapter 7.5 of the Municipal Utility District Act (constituting Division 6 of the Public Utilities Code of the State of California) (the Act ), Resolution No , adopted by the Board of Directors of the District (the Board ) on April 28, 2015, and Resolution No. -15, adopted by the Board on November, 2015 (together, the Note Resolutions ), and the Issuing and Paying Agent Agreement, dated as of December 1, 2015 (the Issuing and Paying Agent Agreement ), by and between the District and U.S. Bank, National Association, as issuing and paying agent (the Issuing and Paying Agent ). In such connection, we have reviewed the Issuing and Paying Agent Agreement, the Tax Certificate of the District, dated the date hereof (the Tax Certificate ), certificates of the District and others, an opinion of counsel to the District and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. In particular, we have relied on the opinion of Norton Rose Fulbright US LLP and Curls Bartling P.C., co-bond counsel to the District (the Bond Counsel Opinion ), regarding, among other matters, the validity of the Notes. In rendering the opinions expressed herein, we expressly have relied on the Bond Counsel Opinion that, among other matters, the Notes are valid, binding and enforceable in accordance with their terms. We call attention to the fact that the interest on the Notes may not be excluded from gross income for federal income tax purposes or exempt from State of California personal income taxes if the Notes are not valid, binding and enforceable in accordance with their terms. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions, and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof and before or after Notes are issued. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this opinion speaks only as of its date and is not intended to, and may not, be relied upon or B-3

340 otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Notes, has concluded on the date hereof, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies and the due and legal execution and delivery thereof by, and validity against, any parties other than the Issuer). We have assumed, without undertaking to verify, the accuracy (as of the date hereof and as of the date of issuance from time to time of the Notes) of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinion, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Issuing and Paying Agent Agreement and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Notes to be included in gross income for federal income tax purposes, possibly retroactive to the date on which the first Notes were issued. We call attention to the fact that the rights and obligations under the Notes, the Issuing and Paying Agent Agreement and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against county municipal utility district in the State of California. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Commercial Paper Offering Memorandum or other offering material relating to the Notes and express no opinion with respect thereto. Based on and subject to the foregoing and in reliance thereon, as of the date hereof, we are of the opinion that interest on the Notes, when issued in accordance with the Issuing and Paying Agent Agreement and the Tax Certificate, will be excluded from gross income for federal income tax purposes under section 103 of the Internal Revenue Code of 1986 and exempt from State of California personal income taxes. The amount treated as interest on the Notes and excluded from gross income will depend upon the taxpayer s elective under Internal Revenue Service Notice Interest on the Notes is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that interest on the Notes is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Notes. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP B-4

341 APPENDIX C EAST BAY MUNICIPAL UTILITY DISTRICT ANNUAL STATEMENT OF INVESTMENT POLICY C-1

342 APPENDIX D BOOK-ENTRY SYSTEM FOR THE WATER SERIES A NOTES General One fully-registered master commercial paper note certificate in the aggregate principal amount not exceeding the full $200,000,000 available to support the Water Series A-1 Notes under the Liquidity Facility provided therefor and one fully-registered master Commercial Paper Note in the aggregate principal amount not exceeding the full $160,000,000 available to support the Water Series A-2 Notes under the Liquidity Facility provided therefor, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York, will be deposited with DTC. DTC will act as securities depository for the Water Series A Notes. DTC and the Book-Entry System DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at The information on such website is not incorporated herein by reference. Purchases of Water Series A Notes under the DTC book-entry system must be made by or through Direct Participants, which will receive a credit for the Water Series A Notes on DTC s records. The ownership interest of each actual purchaser of each Water Series A Note ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Water Series A Notes are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Water Series A Notes, except in the event that use of the book-entry system for the Water Series A Notes is discontinued D-1

343 To facilitate subsequent transfers, all Water Series A Notes deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the master commercial paper notes evidencing the Water Series A Notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Water Series A Notes; DTC s records reflect only the identity of the Direct Participants to whose accounts such Water Series A Notes are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Water Series A Notes may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Water Series A Notes. For example, Beneficial Owners of the Water Series A Notes may wish to ascertain that the nominee holding the Water Series A Notes for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the issuing and paying agent and request that copies of notices be provided directly to them. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Water Series A Notes unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Water Series A Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of principal of and interest on the Water Series A Notes will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the District or the Issuing and Paying Agent, on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Direct or Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Issuing and Paying Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of and interest on the Water Series A Notes to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Issuing and Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Water Series A Notes at any time by giving notice to the Issuing and Paying Agent and the District. Under certain circumstances, in the event that a successor depository is not obtained, Water Series A Note certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry transfers for the Water Series A Notes through DTC (or a successor securities depository). In that event, Water Series A Notes certificates will be printed and delivered as provided in the Issuing and Paying Agent Agreement D-2

344 SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE WATER SERIES A NOTES, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE HOLDERS OR OWNERS OR REGISTERED HOLDERS OR REGISTERED OWNERS OF THE WATER SERIES A NOTES (OTHER THAN UNDER THE CAPTION TAX MATTERS HEREIN) SHALL MEAN CEDE & CO., AS AFORESAID, AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE WATER SERIES A NOTES. THE DISTRICT AND THE ISSUING AND PAYING AGENT SHALL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, ANY BENEFICIAL OWNER OR ANY OTHER PERSON CLAIMING A BENEFICIAL OWNERSHIP INTEREST IN THE WATER SERIES A NOTES UNDER OR THROUGH DTC OR ANY DTC PARTICIPANT, OR ANY OTHER PERSON WHICH IS NOT SHOWN ON THE REGISTRATION BOOKS OF THE ISSUING AND PAYING AGENT AS BEING AN OWNER WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (II) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT IN RESPECT OF THE PRINCIPAL OF OR INTEREST ON THE WATER SERIES A NOTES; (III) ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO OWNERS OD THE WATER SERIES A NOTES; (IV) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS AN OWNER; OR (V) ANY OTHER PROCEDURES OR OBLIGATIONS OF DTC UNDER THE BOOK-ENTRY SYSTEM. The foregoing description of the procedures and recordkeeping with respect to beneficial ownership interests in the Water Series A Notes, payment of principal and interest on the Water Series A Notes to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in such Water Series A Notes 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 D-3

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359 ITEM 14 BUTTE FIRE UPDATE WILL BE GIVEN AS AN ORAL REPORT

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