INDENTURE. by and between. WELLS FARGO BANK NATIONAL ASSOCIATION as Trustee. and STOCKTON PUBLIC FINANCING AUTHORITY. Relating to

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1 OH&S DRAFT 09/24/10 INDENTURE by and between WELLS FARGO BANK NATIONAL ASSOCIATION as Trustee and STOCKTON PUBLIC FINANCING AUTHORITY Relating to $55,000,000 STOCKTON PUBLIC FINANCING AUTHORITY VARIABLE RATE DEMAND WATER REVENUE BONDS, SERIES 2010A (DELTA WATER SUPPLY PROJECT) Dated as of October 1, 2010 OHS West:

2 TABLE OF CONTENTS ARTICLE I DEFINITIONS; EQUAL SECURITY Section 1.01 Definitions... 2 Section 1.02 Equal Security ARTICLE II CONDITIONS AND TERMS OF BONDS Page Section 2.01 Authorization and Purpose of Bonds; Preparation of Bonds Section 2.02 Denominations; Dating Section 2.03 Payment of Principal and Interest with Respect to Bonds Section 2.04 Form of Bonds Section 2.05 Authentication Section 2.06 Transfer of Bonds Section 2.07 Exchange of Bonds Section 2.08 Bond Registration Books Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen Section 2.10 Book-Entry System Section 2.11 General Terms of the Bonds Section 2.12 Interest on the Bonds Section 2.13 Conversion of Interest Rate Periods Section 2.14 Method and Place of Payment Section 2.15 Negotiability Section 2.16 Purchase of Bonds Section 2.17 Credit Facility Section 2.18 Alternate Credit Facility Section 2.19 Rights and Duties Under Credit Facility Section 2.20 Notice of Termination, Event of Default or Other Change in Credit Facility Section 2.21 Remarketing Agent; Tender Agent Section 2.22 Qualifications of Remarketing Agent and Tender Agent; Resignation Section 2.23 and Removal of Remarketing Agent and Tender Agent Notice of Bonds Delivered for Purchase; Purchase of Bonds; Deposit of Purchase Price Section 2.24 Remarketing of Bonds; Notice of Interest Rates Section 2.25 Delivery of Bonds Section 2.26 Delivery of Proceeds of Sale Section 2.27 Bond Purchase Fund Section 2.28 Inadequate Funds for Tenders; Event of Default ARTICLE III PROCEEDS OF BONDS Section 3.01 Delivery of Bonds Section 3.02 Establishment of Funds and Accounts and Deposit and Use of Proceeds of Bonds Section 3.03 Reserve Fund OHS West: i

3 TABLE OF CONTENTS Section 3.04 Improvement Fund ARTICLE IV REDEMPTION OF BONDS Section 4.01 Redemption of Bonds Section 4.02 Selection of Bonds To Be Redeemed Section 4.03 Notice of Redemption Section 4.04 Partial Redemption of Bonds Section 4.05 Effect of Redemption of Bonds ARTICLE V REVENUES Section 5.01 Pledge of Revenues Section 5.02 Deposit of Revenues ARTICLE VI COVENANTS Section 6.01 Compliance with Indenture and Agreements Section 6.02 Tax Covenants Section 6.03 Prosecution and Defense of Suits Section 6.04 Accounting Records and Statements Section 6.05 Further Assurances ARTICLE VII DEFAULT AND LIMITATIONS OF LIABILITY Section 7.01 Events of Default Section 7.02 Remedies Upon Event of Default Section 7.03 Application of Revenues and Other Funds After Default Section 7.04 Trustee to Represent Bond Owners Section 7.05 Bond Owners Direction of Proceedings Section 7.06 Limitation on Bond Owners Right to Sue Section 7.07 Absolute Obligation of Authority Section 7.08 Termination of Proceedings Section 7.09 Remedies Not Exclusive Section 7.10 No Waiver of Default Section 7.11 Remedial Proceedings ARTICLE VIII THE TRUSTEE Section 8.01 Employment and Duties of the Trustee Section 8.02 Removal and Resignation of the Trustee Section 8.03 Compensation and Indemnification of the Trustee Section 8.04 Protection of the Trustee Page OHS West: ii

4 TABLE OF CONTENTS Page ARTICLE IX AMENDMENT OF OR SUPPLEMENT TO THE INDENTURE Section 9.01 Amendment or Supplement by Consent of Owners Section 9.02 Disqualified Bonds Section 9.03 Endorsement or Replacement of Bonds After Amendment or Supplement Section 9.04 Amendment or Supplement by Mutual Consent ARTICLE X DEFEASANCE Section Discharge of Bonds and Indenture Section Unclaimed Money ARTICLE XI MISCELLANEOUS Section Benefits of the Indenture Limited to Parties Section Successor Deemed Included in All References to Predecessor Section Execution of Documents by Owners Section Waiver of Personal Liability Section Acquisition of Bonds by the City or the Authority Section Content of Certificates Section Notice by Mail Section Funds Section Deposits and Investments Section Article and Section Headings, Gender and References Section Partial Invalidity Section California Law Section Notices Section Notice to Rating Agencies Section Rights of Credit Facility Provider Section Execution in Counterparts Section Effective Date EXHIBIT A [FORM OF BOND]... A-1 OHS West: iii

5 INDENTURE This INDENTURE (this Indenture ), dated as of October 1, 2010, by and between WELLS FARGO BANK NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws to the United States (the Trustee ) and STOCKTON PUBLIC FINANCING AUTHORITY, a joint exercise of powers entity duly organized and existing under and by virtue of the laws of the State of California (the Authority ); W I T N E S S E T H WHEREAS, the Authority is a joint exercise of powers entity duly organized and existing under and pursuant to Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California, as amended (the Act ); WHEREAS, the Act authorizes and empowers the Authority to issue revenue bonds to assist the City of Stockton (the City ) in financing public capital improvements; WHEREAS, the City is a local agency as defined and provided in the Act; WHEREAS, the City has determined that the acquisition and construction of those certain additions, betterments, extensions and improvements to the Water System of the City constituting a portion of the Delta Water Supply Project (the Project ), as provided in the Installment Purchase Contract (as that term is hereinafter defined), is necessary and proper for the City and is in the public interest, and the Authority and the City have determined that providing funds to the City for paying the costs of the acquisition and construction of the Project (to be sold by the Authority to the City under the Installment Purchase Contract) by the issuance of revenue bonds of the Authority will result in demonstrable savings in borrowing costs of the City and will accelerate the purchase of the Project by the City and will result in significant public benefits to the City; WHEREAS, the City s obligation to make the installment payments under the Installment Purchase Contract are secured by a pledge of certain net revenues of the Water System of the City; WHEREAS, in order to achieve the foregoing, the Authority has authorized the issuance of its Variable Rate Demand Water Revenue Bonds, Series 2010A (City of Stockton) (the Bonds ) pursuant to the Act in an aggregate principal amount of $55,000,000; WHEREAS, in order to provide for the authentication and delivery of the Bonds and to establish and declare the conditions and terms upon which the Bonds are to be issued and secured and to secure the payment of the interest on and principal of and redemption premiums, if any, on the Bonds, the Authority has authorized the execution and delivery of this Indenture; WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed necessary to make the Bonds, when executed by the Authority and authenticated and delivered by the Trustee, valid and binding obligations of the Authority payable in accordance with their terms, and to constitute this Indenture a valid and binding OHS West:

6 agreement of the parties hereto for the uses and purposes herein set forth in accordance with its conditions and terms, do exist, have happened and have been performed in the time, form and manner required by law, and the execution and delivery of this Indenture by the parties hereto has been in all respects duly authorized; NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the interest on and principal of and redemption premiums, if any, on the Bonds at any time issued and outstanding hereunder according to their tenor, and to secure the performance and observance of all the agreements, conditions, covenants and terms therein and herein set forth, and to declare the conditions and terms upon and subject to which the Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the registered owners thereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, the Authority does hereby covenant and agree with the Trustee, for the benefit of the respective holders from time to time of the Bonds, as follows: ARTICLE I DEFINITIONS; EQUAL SECURITY Section 1.01 Definitions. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Installment Purchase Contract. Unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of the Bonds and of any certificate, opinion, request or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein: Act. The term Act shall mean the Joint Exercise of Powers Act (being Chapter 5 of Division 7 of Title 1 of the Government Code of the State, as amended) and all laws amendatory thereof or supplemental thereto. Alternate Credit Facility. The term Alternate Credit Facility shall mean a Credit Facility issued to replace a Credit Facility as provided herein. Authority. The term Authority means the Stockton Public Financing Authority, a joint exercise of powers entity duly organized and existing under and by virtue of the laws of the State. Authorized Denominations. The term Authorized Denominations shall mean, with respect to the Bonds, (a) which are subject to a Long-Term Interest Rate Period, $5,000 or any integral multiple thereof, and (b) which are subject to a Daily Interest Rate Period, a Weekly Interest Rate Period or a Short-Term Interest Rate Period, $100,000 or any integral multiple of $5,000 in excess of $100,000. Available Money. The term Available Money means (i) proceeds of drawings on the Credit Facility, including investment earnings thereon, (ii) proceeds of the remarketing of the Bonds deposited in the Bond Purchase Fund in accordance with Section 2.16 hereof, including OHS West:

7 the investment earnings thereon, (iii) the proceeds of any contracts, bonds or notes issued or incurred by or on behalf of the City to refund the Bonds, and (iv) moneys, including investment earnings thereon, for which an opinion of counsel experienced in bankruptcy matters has been delivered to the Trustee to the effect that the use of such amounts would not be voidable as preferential payments under federal bankruptcy laws. Bank Bonds. The term Bank Bonds shall mean Bonds purchased by a Credit Facility Provider or its assignee pursuant to a draw on the Credit Facility, if any. Bond Counsel. The term Bond Counsel means any attorney at law or firm of attorneys selected by the City, of nationally-recognized standing in matters pertaining to the federal tax exemption of interest with respect to obligations of states and political subdivisions. Bond Interest Term. The term Bond Interest Term means each period established in accordance with Section 2.12(g) during which the interest rate with respect to a Bond shall be a Bond Interest Term Rate. Bond Interest Term Rate. The term Bond Interest Term Rate shall mean, with respect to each Bond, a non-variable interest rate with respect such Bond established periodically in accordance with Section 2.12(g) hereof. Bond Purchase Fund. The term Bond Purchase Fund shall mean the fund with that name established with the Tender Agent pursuant to Section 2.27 hereof. Bonds. The term Bonds means the Stockton Public Financing Authority Variable Rate Demand Water Revenue Bonds, Series 2010A (Delta Water Supply Project) in the aggregate principal amount of $55,000,000. Bond Payment Fund. The term Bond Payment Fund means the fund by that name established pursuant to Section Book-Entry System. The term Book-Entry System shall mean the system maintained by the Securities Depository and described in Section 2.10 hereof. Business Day. The term Business Day shall mean, for purposes of the Bonds, any day other than (i) a Saturday or Sunday or (ii) a day on which banks located (A) in the city in which the Corporate Trust Office of the Trustee is located, (B) in the city in which drawings under the applicable Credit Facility, if any, are to be honored is located, (C) in the city in which the Corporate Trust Office of the Tender Agent at which the Bonds may be tendered for purchase by the owners thereof is located or (D) in the city in which the principal office of the Remarketing Agent is located, are authorized or required to remain closed or (iii) a day on which The New York Stock Exchange is closed. OHS West:

8 Certificate or Request. The term Certificate or Request means (i) with respect to the City, an instrument in writing signed on behalf of the City by the Mayor, Vice-Mayor, City Manager or Chief Financial Officer of the City, or by any other officer of the City duly authorized by the City Council of the City to sign documents on its behalf with respect to the matters referred to therein; and (ii) with respect to the Authority, by the Chairperson, Vice- Chairperson, Executive Director or Treasurer of the Authority, or by any other officer of the Authority duly authorized by the Board of Directors of the Authority to sign documents on its behalf with respect to the matters referred to therein. City. The term City shall mean the City of Stockton, a municipal corporation and chartered city duly organized and existing under and by virtue of the Constitution and the laws of the State and its Charter. Code. The term Code means the Internal Revenue Code of 1986 and the regulations of the United States Department of the Treasury issued thereunder, and in this regard reference to any particular section of the Code shall include reference to all successor sections of the Code. Conversion, Convert or Converted. The term Conversion, Convert or Converted shall mean or refer to a conversion of the Bonds from one Interest Rate Period to another Interest Rate Period as provided in Section 2.12(d)(ii), Section 2.12(e)(ii), Section 2.12(f)(ii) or Section 2.12(g)(ii) hereof. Conversion Date. Conversion of the Bonds. The term Conversion Date shall mean the effective date of a Credit Facility. The term Credit Facility shall mean any irrevocable, direct-pay letter of credit issued in favor of the Trustee by the Credit Facility Provider and all amendments, extensions, renewals or substitutions thereof pursuant to its terms, and upon the effectiveness of any Alternate Credit Facility, such Alternate Credit Facility. The initial Credit Facility shall be the Letter of Credit, dated October, 2010, issued by Union Bank, N.A. Credit Facility Provider. The term Credit Facility Provider shall mean the issuer of the Credit Facility, and upon the effectiveness of an Alternate Credit Facility, the issuer of such Alternate Credit Facility. The initial Credit Facility Provider shall be Union Bank, N.A. Credit Facility Provider Agreement. The term Credit Facility Provider Agreement shall mean the agreement between the City and the Credit Facility Provider pursuant to which the Credit Facility is issued. The initial Credit Facility Provider Agreement shall be the Reimbursement Agreement dated as of October 1, 2010, among the City, the Authority and Union Bank, N.A. Credit Facility Provider Failure. The term Credit Facility Provider Failure shall mean a failure of the Credit Facility Provider to honor a properly presented and conforming draw under the Credit Facility or the filing or commencement of any bankruptcy or insolvency proceedings by or against the Credit Facility Provider or the Credit Facility Provider shall declare a moratorium on the payment of its unsecured debt obligations or shall repudiate the Credit Facility. OHS West:

9 Credit Facility Provider Obligations. The term Credit Facility Provider Obligations means Credit Facility Provider Reimbursement Obligations and all other obligations of the City under the applicable Credit Facility Provider Agreement. Credit Facility Provider Reimbursement Obligations. The term Credit Facility Provider Reimbursement Obligations means any and all obligations of the City to reimburse the Credit Facility Provider for any drawings under the Credit Facility and all obligations to repay the Credit Facility Provider for any liquidity advance with respect to Bank Bonds, including in each instance all accrued interest thereon. Credit Facility Purchase Account. The term Credit Facility Purchase Account shall mean the account with that name established within the Bond Purchase Fund pursuant to Section 2.27 hereof. Daily Interest Rate. The term Daily Interest Rate shall mean a variable interest rate with respect to the Bonds established in accordance with Section 2.12(e) hereof. Daily Interest Rate Period. The term Daily Interest Rate Period shall mean each period during which a Daily Interest Rate is in effect for the Bonds. Date of Original Issuance. The term Date of Original Issuance means the date on which the Bonds were initially executed and delivered. Delivery Costs. The term Delivery Costs means all items of expense directly or indirectly payable by or reimbursable to the City and related to the authorization, execution, sale and delivery of the Bonds, including but not limited to costs of preparation and reproduction of documents, printing expenses, filing and recording fees, initial fees and charges of the Trustee and counsel to the Trustee, legal fees and charges, fees and disbursements of consultants and professionals, rating agency fees, Credit Facility fees, fees and charges for preparation, execution and safekeeping of the Bonds and any other cost, charge or fee in connection with the original execution and delivery of the Bonds. Delivery Costs Fund. The term Delivery Costs Fund means the account by that name established pursuant to Section 3.02 hereof. Delivery Date. The term Delivery Date means the date of the delivery of the Bonds to the initial purchaser thereof. DTC. The term DTC shall mean The Depository Trust Company, New York, New York, and its successors and assigns. Depository. The term Depository shall mean DTC or another recognized securities depository selected by the Authority which maintains a book-entry system for the Bonds. Eligible Account. The term Eligible Account means an account that is either (a) maintained with a federal or state-chartered depository institution or trust company that has an S&P short-term debt rating of at least A-2 (or, if no short-term debt rating, a long-term debt rating of BBB+ ); or (b) maintained with the corporate trust department of a federal depository OHS West:

10 institution or state-chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the U.S. Code of Federal Regulation Section 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity. Event of Default. The term Event of Default means an Event of Default as defined in Section 7.01 of this Indenture. Favorable Opinion of Bond Counsel. The term Favorable Opinion of Bond Counsel shall mean an opinion of Bond Counsel addressed to the Authority, the City, the Trustee and the Remarketing Agent (if any) to the effect that an action proposed to be taken is not prohibited by the laws of the State or this Indenture and will not, in and of itself, adversely affect any exclusion of interest on the Bonds from gross income for purposes of federal income taxation. Federal Securities. The term Federal Securities means United States of America Treasury bills, notes, bonds or certificates of indebtedness, or obligations for which the full faith and credit of the United States of America are pledged for the payment of interest and principal, or securities evidencing direct ownership interests in such obligations or in specified portions of the interest on or principal of such obligations that are held by a custodian in safekeeping on behalf of the owners of such securities. Fitch. The term Fitch means Fitch Ratings, Inc., a Delaware corporation, and its successors and assigns, but only to the extent that such entity is then rating the Bonds at the request of the Authority. Fixed Rate Bonds. The term Fixed Rate Bonds means Bonds representing interest at a Long-Term Interest Rate for a Long-Term Interest Rate Period extending to the Maturity Date. Improvement Fund. The term Improvement Fund means the fund by that name established in Section 3.02 hereof. Independent Certified Public Accountant. The term Independent Certified Public Accountant means any firm of certified public accountants duly licensed and entitled to practice and practicing as such under the laws of the State, appointed and paid by the Authority, and each of whom (1) is in fact independent and not under the domination of the Authority; (2) does not have a substantial financing interest, direct or indirect, in the operations of the Authority; and (3) is not connected with the Authority as a member, officer or employee of the Authority, but which firm may be regularly retained by the Authority to audit the accounting records of the Authority and make reports thereon to the Authority. Indenture. The term Indenture means this Indenture, dated as of October 1, 2010, by and between the Trustee and the Authority, as originally entered into and as it may from time to time be amended or supplemented in accordance herewith. OHS West:

11 Information Services. The term Information Services means Financial Information, Inc. s Daily Called Bond Service, 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services Called Bond Service, 55 Broad Street, 28th floor, New York, New York, 10004; Moody s Investor s Service Municipal and Government, 5050 Center Drive, Suite 150, Charlotte, North Carolina, 28217, Attention: Called Bonds Department; Standard & Poor s Corporation, Called Bond Record, 65 Broadway, 16th Floor, New York, New York, 10064; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other information services providing information with respect to called bonds as the City may designate. Installment Payment Date. The term Installment Payment Date means each date on which Installment Payments are scheduled to be paid by the City pursuant to the Installment Purchase Contract. Installment Payments. The term Installment Payments means the installment payments payable by the City pursuant to the Installment Purchase Contract and in the amounts and at the times set forth in the Installment Purchase Contract. Installment Purchase Contract. The term Installment Purchase Contract means the Installment Purchase Contract, dated as of October 1, 2010, by and between the City and the Authority, as originally entered into or as it may from time to time be amended or supplemented in accordance with its terms. Interest Account. The term Interest Account means the account by that name established pursuant to Section Interest Accrual Date. The term Interest Accrual Date shall mean with respect to the Bonds: (a) for any Weekly Interest Rate Period, the first day thereof, and thereafter, the first Wednesday of each month during that Weekly Interest Rate Period; (b) for any Daily Interest Rate Period, the first day thereof, and thereafter, the first day of each month; (c) for any Long-Term Interest Rate Period, the first day thereof and, thereafter, each Interest Payment Date during that Long-Term Interest Rate Period, other than the last such Interest Payment Date; and (d) for each Bond Interest Term within a Short-Term Interest Rate Period, the first day thereof. mean: Interest Payment Date. The term Interest Payment Date with respect to the Bonds shall OHS West:

12 (a) for any Weekly Interest Rate Period, the first Wednesday of each calendar month, or, if such first Wednesday shall not be a Business Day, the next succeeding Business Day; (b) each calendar month; for any Daily Interest Rate Period, the fifth Business Day of October 1; (c) for any Long-Term Interest Rate Period, each April 1 and (d) for any Bond Interest Term, the day next succeeding the last day of that Bond Interest Term; (e) day thereof; and for each Interest Rate Period, the day next succeeding the last (f) for Bank Bonds, the days on which interest is payable pursuant to the Credit Facility Provider Agreement. Interest Rate Period. The term Interest Rate Period shall mean each Daily Interest Rate Period, Weekly Interest Rate Period, Short-Term Interest Rate Period or Long-Term Interest Rate Period. Letter of Representations. The term Letter of Representations means the letter of the Authority delivered to and accepted by the Depository on or prior to delivery of the Bonds as book-entry certificates setting forth the basis on which the Depository serves as depository for such book-entry certificates, as originally executed or as it may be supplemented or revised or replaced by a letter from the Authority delivered to and accepted by the Depository. Long-Term Interest Rate. The term Long-Term Interest Rate shall mean a term, nonvariable interest rate established in accordance with Section 2.12(f) hereof. Long-Term Interest Rate Period. The term Long-Term Interest Rate Period shall mean each period during which a Long-Term Interest Rate is in effect. Mandatory Credit Facility Tender. The term Mandatory Credit Facility Tender shall mean the mandatory tender of Bonds pursuant to Section 2.16(e) hereof upon receipt by the Trustee of written notice from the Credit Facility Provider that an event has occurred under the Credit Facility Provider Agreement which gives the Credit Facility Provider the option to cause a mandatory tender of the Bonds and directing that all Outstanding Bonds secured by such Credit Facility be tendered for purchase. Maturity Date. The term Maturity Date shall mean October 1, 20. Maximum Rate. The term Maximum Rate shall mean the rate of 12% per annum calculated in the same manner as interest is calculated for the particular interest rate on the Bonds; provided, however, to the extent permitted by law, Bank Bonds shall not be subject to any Maximum Rate. OHS West:

13 Moody s. The term Moody s shall mean Moody s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, but only to the extent that such entity is then rating the Bonds at the request of the Authority. Nominee. The term Nominee means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.11 hereof. Outstanding. The term Outstanding, when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 9.02) all Bonds except: (i) Bonds canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Bonds paid or deemed to have been paid within the meaning of Section 10.01; and (iii) Bonds in lieu of or in substitution for which other Bonds shall have been executed and delivered by the Trustee pursuant to this Indenture. Owner. The term Owner or Bond Owner or Owner of Bonds or any similar term, when used with respect to the Bonds, means any person who shall be the registered owner of any Outstanding Bond. Participant. The term Participant shall mean, with respect to DTC or another Securities Depository, a member of or participant in DTC or such other Securities Depository, respectively. Person. The term Person means a natural person or any legal entity. Permitted Investments. The term Permitted Investments means any of the following to the extent then authorized by law for the investment of money of the Authority: (1) Direct obligations (including obligations issued or held in book-entry form on the books of) the Department of the Treasury of the United States of America; (2) Direct obligations of any of the following federal agencies, which obligations represent the full faith and credit of the United States of America: Export-Import Bank Farm Credit System Financial Assistance Corporation Rural Economic Community Development Administration (formerly the Farmers Home Administration) General Services Administration U.S. Maritime Administration Small Business Administration Government National Mortgage Association (GNMA) OHS West:

14 U.S. Department of Housing & Urban Development (PHA s) Federal Housing Administration Federal Financing Bank; (3) Direct obligations of any of the following federal agencies, which obligations are not fully guaranteed by the full faith and credit of the United States of America: Senior debt obligations rated Aaa by Moody s and AAA by S&P issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) Obligations of the Resolution Funding Corporation (REFCORP) Senior debt obligations of the Federal Home Loan Bank System Senior debt obligations of other Government Sponsored Agencies; (4) U.S. dollar denominated deposit accounts, federal funds and bankers acceptances with domestic commercial banks which have a rating on their short-term certificates of deposit on the date of purchase of A-1 or A-1+ by S&P and P-1 by Moody s and maturing no more than three hundred sixty (360) days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank); (5) Commercial paper which is rated at the time of purchase in the single highest classification, A-1+ by S&P and P-1 by Moody s and which matures not more than two hundred seventy (270) days after the date of purchase; (6) Investments in a money market fund rated AAAm or AAAm-G by S&P, including any such fund managed, advised or sponsored by the Trustee or any of its affiliates; (7) Pre-refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (A) which are rated, based on an irrevocable escrow account or fund (the escrow ), in the highest rating category of S&P and Moody s or any successors thereto; or (B) (i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (1) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized OHS West:

15 independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in such irrevocable instructions, as appropriate; (8) General obligations of states with a rating of at least A2/A or higher by both Moody s and S&P; (9) Investment agreements (supported by appropriate opinions of counsel) with notice to S&P; (10) Shares in the California Asset Management Program (established pursuant to Title 1, Division 7, Chapter 5 of the Government Code of the State) that invests exclusively in investments permitted by Section of the Government Code of the State, as now existing and as it may be amended from time to time; (11) The Local Agency Investment Fund (established under Sections of the California Government Code, as amended or supplemented from time to time); and (12) Other forms of investment agreements (including repurchase agreements and forward delivery agreements) with notice to S&P. The value of the above investments shall be determined at fair market value. Principal Account. The term Principal Account means the account by that name established pursuant to Section 3.02 hereof. Principal Corporate Trust Office. The term Principal Corporate Trust Office means the principal corporate trust office of the Trustee in San Francisco, California, or such other office designated by the Trustee from time to time. Project. The term Project shall mean the 2010 Water Project, as defined in the Installment Purchase Contract. Purchase Date. The term Purchase Date shall mean any date on which Bonds are required to be purchased pursuant to Section 2.16 hereof. Purchase Price. The term Purchase Price shall mean the purchase price to be paid to the Owners of Bonds purchased pursuant to Section 2.16 hereof, which shall be equal to the principal amount thereof tendered for purchase, plus accrued interest from the immediately preceding Interest Accrual Date to the Purchase Date (if the Purchase Date is not an Interest Payment Date), plus, in the case of a Conversion from the Long-Term Interest Rate on an optional redemption date, any applicable premium. Rating Agency. The term Rating Agency means S&P, Moody s and Fitch and any other nationally recognized rating agency then rating the Bonds at the request of the Authority. Record Date. The term Record Date shall mean, with respect to Bonds, (i) with respect to any Interest Payment Date in respect to any Daily Interest Rate Period, the last Business Day OHS West:

16 of each calendar month or, in the case of the last Interest Payment Date in respect to a Daily Interest Rate Period, the Business Day immediately preceding such Interest Payment Date, (ii) with respect to any Interest Payment Date in respect to any Weekly Interest Rate Period or any Short-Term Interest Rate Period, the Business Day immediately preceding such Interest Payment Date, and (iii) with respect to any Interest Payment Date in respect to any Long-Term Interest Rate Period, the fifteenth (15th) day immediately preceding that Interest Payment Date or, in the event that an Interest Payment Date shall occur less than fifteen (15) days after the first day of a Long-Term Interest Rate Period, that first day. Redemption Account. The term Redemption Account means the account by that name established pursuant to Section Redemption Price. The term Redemption Price means, with respect to any Bond (or portion thereof), the principal amount with respect to such Bond (or portion) plus the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such Bond and this Indenture. Remarketing Account. The term Remarketing Account shall mean the account with that name established within the Bond Purchase Fund pursuant to Section 2.27 hereof. Remarketing Agent. The term Remarketing Agent shall mean each Person qualified under Section 2.22(a) hereof to act as Remarketing Agent for Bonds and appointed by the Authority from time to time. The initial Remarketing Agent for the Bonds shall be Citigroup Global Markets Inc. Remarketing Agreement. The term Remarketing Agreement shall mean the Remarketing Agreement between the Authority and a Remarketing Agent whereby the Remarketing Agent undertakes to perform the duties of a Remarketing Agent under this Indenture, as amended from time to time. Reserve Fund. The term Reserve Fund shall mean the fund by that name established in Section 3.02 hereof. Reserve Requirement. The term Reserve Requirement shall mean as of any date of determination, the least of (a) ten per cent (10%) of the sale proceeds of the Bonds, or (b) the maximum annual Installment Payments payable under the Installment Purchase Contract in the then current or any future one-year period ending on October 1, or (c) one hundred twenty-five per cent (125%) of the average annual Installment Payments payable under the Installment Purchase Contract in the then current and all future one-year periods ending on October 1, all as computed by the City under the Code and specified in writing to the Trustee. Revenues. The term Revenues means amounts received by the Authority pursuant to or with respect to the Installment Purchase Contract and all interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder. Securities Depository. The term Securities Depository shall mean DTC or, if applicable, any successor securities depository appointed pursuant to Section 2.10 hereof. OHS West:

17 Short-Term Interest Rate Period. The term Short-Term Interest Rate Period shall mean each period, consisting of Bond Interest Terms, during which Bonds bear interest at one or more Bond Interest Term Rates. SIFMA. The term SIFMA shall mean the Securities Industry and Financial Markets Association (formerly known as the Bond Market Association and the Public Securities Association), its successors and assigns. SIFMA Index. The term SIFMA Index shall mean 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 effective from such date. S&P. The term S&P shall mean Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, but only to the extent that such entity is then rating the Bonds as the request of the Authority. State. The term State means the State of California. Statement of the Authority or the City. The term Statement of the Authority or the City means a statement signed by or on behalf of (i) the Authority by its Chairperson, Vice- Chairperson, Executive Director or Treasurer or by any other officer of the Authority duly authorized by the Board of Directors of the Authority to sign documents on its behalf with respect to the matters referred to therein, or (ii) the City by its Mayor, Vice-Mayor, City Manager or Chief Financial Officer or by any other officer of the City duly authorized by the City Council of the City to sign documents on its behalf with respect to the matters referred to therein. Tax Certificate. The Term Tax Certificate means the Tax Certificate and Agreement, dated October, 2010, executed and delivered by the Authority and the City on the date of execution and delivery of the Bonds, including any and all exhibits attached thereto. Tender Agent. The term Tender Agent shall mean each Person qualified under Section 2.22(b) hereof to act as Tender Agent with respect to the Bonds and so appointed by the City and so acting from time to time, and its successors. The initial Tender Agent shall be Wells Fargo Bank National Association. While the Credit Facility is in effect, the Tender Agent shall at all times be the Trustee. Trustee. The term Trustee means Wells Fargo Bank National Association, a national banking association having a principal corporate trust office in San Francisco, California, or such other office designated by the Trustee from time to time. Undelivered Bond. The term Undelivered Bond shall mean any Bond which constitutes an Undelivered Bond under the provisions of Section 2.16(g)(ii) hereof. OHS West:

18 Weekly Interest Rate. The term Weekly Interest Rate shall mean a variable interest rate for the Bonds established in accordance with Section 2.12(d) hereof. Weekly Interest Rate Period. The term Weekly Interest Rate Period shall mean each period during which a Weekly Interest Rate is in effect for the Bonds. Written Consent of the Authority or the City, Written Order of the Authority or the City, Written Request of the Authority or the City, Written Requisition of the Authority or the City. The terms Written Consent of the Authority or the City, Written Order of the Authority or the City, Written Request of the Authority or the City, and Written Requisition of the Authority or the City mean, respectively, a written consent, order, request or requisition signed by or on behalf of (i) the Authority by its Chairperson, Vice-Chairperson, Executive Director or Treasurer or by any other officer of the Authority duly authorized by the Board of Directors of the Authority to sign documents on its behalf with respect to the matters referred to therein, or (ii) the City by its Mayor, Vice-Mayor, City Manager or Chief Financial Officer or by any other officer of the City duly authorized by the City Council of the City to sign documents on its behalf with respect to the matters referred to therein. Section 1.02 Equal Security. In consideration of the acceptance of the Bonds by the Owners, the Indenture shall be deemed to be and shall constitute a contract among the Authority, the Trustee and the Owners to secure the full and final payment of the interest and principal and redemption premiums, if any, on the Bonds, subject to the agreements, conditions, covenants and terms contained herein, including without limitation the terms included in Article VIII hereof; and all agreements, conditions, covenants and terms contained herein required to be observed or performed by or on behalf of the Trustee shall be for the equal and proportionate benefit, protection and security of all Owners without distinction, preference or priority as to benefit, protection or security of any Bonds over any other Bonds by reason of the number or date thereof or the time of sale, execution or delivery thereof or otherwise for any cause whatsoever, except as expressly provided herein or therein. ARTICLE II CONDITIONS AND TERMS OF BONDS Section 2.01 Authorization and Purpose of Bonds; Preparation of Bonds. The Authority has reviewed all proceedings heretofore taken relative to the authorization of the Bonds and has found, as a result of such review, and hereby finds and determines that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of the Bonds do exist, have happened and have been performed in due time, form and manner as required by law, that the Authority is now duly authorized, pursuant to each and every requirement of the Act, to issue the Bonds in the form and manner provided herein for the purpose of providing funds to pay the costs of the acquisition and construction of the Project to be sold by the Authority to the City under the Installment Purchase Contract, and that the Bonds shall be entitled to the benefit, protection and security of the provisions hereof. The Trustee is hereby authorized to authenticate and deliver the Bonds, to be denominated Stockton Public Financing Authority Variable Rate Demand Water Revenue OHS West:

19 Bonds, Series 2010A (Delta Water Supply Project) in an aggregate principal amount of $55,000,000. Section 2.02 Denominations; Dating. The Bonds shall be prepared in the form of fully registered Bonds in Authorized Denominations; provided that no Bond shall mature in more than one year. The Bonds shall be dated the initial date of delivery thereof. Section 2.03 Payment of Principal and Interest with Respect to Bonds. (a) Bonds. Principal of the Bonds shall be due and payable on the Maturity Date in the amount of $55,000,000 as provided in Section 2.11 hereof and with accrued interest as provided in Section 2.12 hereof. (b) Amounts Due. Principal or Redemption Price of the Bonds at maturity or redemption thereof, whichever is earlier, shall, to the extent of the aggregate principal amount stated upon the Bonds, represent the sum of those portions of the Installment Payments designated as principal coming due on the Installment Payment Dates immediately preceding the Payment Dates in each year. Section 2.04 Form of Bonds. The Bonds and the form of assignment to appear thereon shall be in substantially the form set forth in Exhibit A hereto with necessary or appropriate variations, omissions and insertions as permitted or required by this Indenture. Section 2.05 Authentication. The Bonds shall be authenticated by the Trustee by the manual signature of an authorized representative of the Trustee. Section 2.06 Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept pursuant to the provisions of Section 2.8, by the person in whose name it is registered, in person or by such person s duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Corporate Trust Office of the Trustee, accompanied by delivery of a duly executed written instrument of transfer in a form approved by the Trustee. Whenever any Bond or Bonds shall be surrendered for transfer, the Trustee shall authenticate and deliver a new Bond or Bonds of the same series and maturity, for a like aggregate principal amount and of authorized denomination or denominations. The Trustee may charge a sum for each new Bond authenticated and delivered upon any transfer. The Trustee may require the payment by any Bond Owner requesting any such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of Bonds the Trustee shall cancel and destroy the Bonds it has received. Section 2.07 Exchange of Bonds. Bonds may be exchanged at the Principal Corporate Trust Office of the Trustee, for a like aggregate principal amount of Bonds of other authorized denominations of the same series and maturity. The Trustee may charge a sum for each new Bond authenticated and delivered upon any exchange except in the case of any exchange of temporary Bonds for definitive Bonds. The Trustee may require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with OHS West:

20 respect to such exchange. Following any exchange of Bonds, the Trustee shall cancel and destroy the Bonds it has received. The Trustee shall not be required to register the exchange or transfer pursuant to Section 2.6 hereof, of any Bond (i) within 15 days preceding selection of Bonds for redemption or (ii) selected for redemption. Section 2.08 Bond Registration Books. The Trustee will keep or cause to be kept, at the Principal Corporate Trust Office of the Trustee sufficient books for the registration and transfer of the Bonds, which shall upon reasonable prior notice and at all reasonable times be open to inspection by the Authority, the City or the Credit Facility Provider, if any, and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, Bonds as hereinbefore provided. The person in whose name any Bond shall be registered shall be deemed the Owner thereof for all purposes hereof, and payment of or on account of the interest with respect to and principal of and Redemption Price represented by such Bond shall be made only to or upon the order in writing of such registered Owner, which payments shall be valid and effectual to satisfy and discharge liability upon such Bond to the extent of the sum or sums so paid. Section 2.09 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Trustee shall authenticate and deliver a new Bond of like series, tenor, maturity and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it and destroyed. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee, and, if such evidence is satisfactory to the Trustee and indemnity satisfactory to the Trustee shall be given indemnifying the Trustee, the Authority and the City, the Trustee, at the expense of the Bond Owner, shall execute and deliver a new Bond of like series, tenor and maturity, and numbered as the Trustee shall determine, in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Trustee may require payment of a sum not exceeding the actual cost of preparing each new Bond executed under this Section and of the expenses which may be incurred by the Trustee under this Section. Any Bond executed under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits of this Indenture with all other Bonds secured by this Indenture. The Trustee shall not be required to treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be executed hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and replacement Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond for a Bond which has been mutilated, lost, destroyed or stolen and which has matured or has been selected for redemption, the Trustee may make payment of such Bond upon receipt of indemnity satisfactory to the Trustee. OHS West: