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10-28-2009 Board Agenda Packet
AGENDA BOARD OF DIRECTORS ORANGE COUNTY SANITATION DISTRICT ADMINISTRATIVE OFFICE REGULAR MEETING October 28, 2009 – 6:30 P.M. INVOCATION AND PLEDGE OF ALLEGIANCE (John Withers – Irvine Ranch Water District) ROLL CALL PUBLIC COMMENTS REPORTS: The Chair, General Manager and General Counsel may present verbal reports on miscellaneous matters of general interest to the Directors. These reports are for information only and require no action by the Directors. 1. Ratifying payment of claims of the District, by roll call vote, as follows: ALL DISTRICTS 09/15/09 09/30/09 Totals $16,611,878.16 $30,915,786.47 CONSENT CALENDAR (2 - 3) Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: 2. Approve and file the minutes for the regular meeting held on September 23, 2009. 3. Approve the Access Agreement for Operation of a Hydrogen Fueling Station and Fuel Cell Related Research Activities, with the University of California, Irvine, in connection with Fuel Cell Hydrogen Gas Generation, Project No. SP-134, in a form approved by General Counsel. DIRECTORS: Pursuant to Government Code Section 84308, you are required to disclose any campaign contribution greater than $250 received in the past twelve months from any party to a contract involving OCSD. This requires that you identify the contributor by name. Further, you may not participate in the decision making process to award a contract to such party. For reference, you are directed to the Register of Warrants as to all current contractors/vendors with OCSD. For the specifics of Government Code Section 84308, please see your Director’s Handbook or call the office of General Counsel. 10/28/09 Page 2 STEERING COMMITTEE (4) 4. Order Steering Committee Minutes for the regular meeting held on September 23, 2009 to be filed. OPERATIONS COMMITTEE (5 – 9) 5. Order Operations Committee minutes for the meeting held on October 7, 2009 to be filed. 6. a) Establish a budget for Chemical Scrubber Conversions and Piping System Improvements, Project No. P2-106, in an amount of $3,261,000; and, b) Authorize the General Manager to negotiate a Professional Design Services Agreement with Dudek, Inc. for design and construction support services for Chemical Scrubber Conversions and Piping System Improvements, Project No. P2-106. 7. Approve a contingency increase of $277,172 (1%) to the Construction Contract with J. F. Shea Inc., for Ellis Avenue Pump Station Construction, Contract No. I-10B, for a total contingency of $1,663,034 (6%). 8. Approve the Memorandum of Understanding with South Orange County Wastewater Authority (SOCWA) to accept hauled waste from the SOCWA service area, in a form approved by General Counsel. 9. Approve Change Order No. 8 to Purchase Order No. 102354 OB for Purchase of Ferric Chloride, Specification No. C-2005-247, issued to Kemira Water at a unit price of $673.02 per dry ton delivered, plus applicable tax, indexed to Iron Age Black Foundry Busheling benchmark of $635/ton and a pricing correction factor of 34% of the difference of the benchmark and index on a quarterly basis, for an estimated annual contract amount of $5,050,000 for the period December 1, 2009 through November 30, 2010. ADMINISTRATION COMMITTEE (10 - 12) 10. Order Administration Committee minutes for the regular meeting held on October 14, 2009 to be filed. 11. a) Authorize the General Manager to enroll the Orange County Sanitation District in the Proposition 1A Securitization Program, managed by the California Statewide Communities Development Authority, for the immediate collection of the 8 Percent State Budget Reduction of Local Property Tax Revenues estimated to be $5 million, in a form approved by General Counsel; and, b) Adopt Resolution No. OCSD No. 09-15, Approving the Form of and Authorizing the Execution and Delivery of a Purchase and Sale Agreement and related documents with respect to the sale of the Seller’s Proposition 1A Receivable from the State; and, Directing and Authorizing certain actions in connection therewith. 10/28/09 Page 3 12. a) Adopt Resolution No. OCSD 09-16, Authorizing the Execution and Delivery by the District of an Installment Purchase Agreement, a Trust Agreement, and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B, such Notes Evidencing Principal in an Aggregate Amount of Not to Exceed $181,000,000, Approving an Official Statement in Connection with the Offering and Sale of such Notes and Authorizing the Execution of Other Necessary Documents and Related Actions; and, b) That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Revenue Refunding Certificate Anticipation Notes, Series 2009B in an amount not to exceed $181,000,000. GWR SYSTEM STEERING COMMITTEE (13) 13. Approve Joint Groundwater Replenishment System Steering Committee minutes for the meeting held on October 12, 2009, to be filed. NON-CONSENT CALENDAR (14) 14. a) Authorize the General Manager to competitively bid and subsequently award a facility repair contract to the lowest responsive and responsible bidder for the Plant No. 2 Primary Clarifier Sweep Mechanism Repairs, Project No. FE09-03-R, for an amount not to exceed $1,400,000, and, b) Approve a contingency of $280,000 (20%). Recess by Board of Directors, Orange County Sanitation District. * * * * * * * * * * * FINANCING CORPORATION (15) 15. Call to order, Board of Directors, Orange County Sanitation District Financing Corporation: a. Roll Call b. If no corrections or amendments are made, the minutes for the meeting held on November 19, 2008 will be deemed approved and be so ordered by the Chair. c. Report of the Director of Finance. 10/28/09 Page 4 d. a) Adopt Resolution No. FC-10, Authorizing the Execution and Delivery by the District of an Installment Purchase Agreement, a Trust Agreement, and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B, such Notes Evidencing Principal in an Aggregate Amount of Not to Exceed $181,000,000, Approving an Official Statement in Connection with the Offering and Sale of such Notes and Authorizing the Execution of Other Necessary Documents and Related Actions. (See Agenda Item No. 12 for report.) Adjourn, Board of Directors, Orange County Sanitation District Financing Corporation. * * * * * * * * * * * * * * * Reconvene, Board of Directors, Orange county Sanitation District CLOSED SESSION CLOSED SESSION: During the course of conducting the business set forth on this agenda as a regular meeting of the Board, the Chair may convene the Board in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employment actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Board during a permitted closed session and are not available for public inspection. At such time as the Board takes final action on any of these subjects, the minutes will reflect all required disclosures of information. Convene in closed session, if necessary Reconvene in regular session Consideration of action, if any, on matters considered in closed session OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY ADJOURNMENT - The next Board of Directors regular meeting is scheduled for November 18, 2009, at 6:30 p.m. 10/28/09 Page 5 NOTICE TO DIRECTORS: To place items on the agenda for the Regular Meeting of the Board of Directors, items shall be submitted to the Clerk of the Board no later than the close of business 14 days preceding the Board meeting. The Clerk of the Board shall include on the agenda all items submitted by Directors, the General Manager and General Counsel and all formal communications. General Manager James D. Ruth (714) 593-7110 jruth@ocsd.com Assistant General Manager Bob Ghirelli (714) 593-7400 rghirelli@ocsd.com Clerk of the Board Penny Kyle (714) 593-7130 pkyle@ocsd.com Director of Engineering Jim Herberg (714) 593-7300 jherberg@ocsd.com Director of Fin. & Admin Services Lorenzo Tyner (714) 593-7550 ltyner@ocsd.com Director of Operations & Nick Arhontes (714) 593-7210 narhontes@ocsd.com Maintenance Director of Technical Services Ed Torres (714) 593-7080 etorres@ocsd.com General Counsel Brad Hogin (714) 415-1006 bhogin@wss-law.com H:\dept\agenda\Board Agendas\2009 Board Agendas\Migrated to Sharepoint\102809.agenda_DRAFT.docx Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted in the main lobby of the District’s Administrative offices not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item, including any public records distributed less than 72 hours prior to the meeting to all, or a majority of all, of the members of District’s Board, are available for public inspection in the office of the Clerk of the Board, located at 10844 Ellis Avenue, Fountain Valley, California. Items Not Posted: In the event any matter not listed on this agenda is proposed to be submitted to the Board for discussion and/or action, it will be done in compliance with Section 54954.2(b) as an emergency item or because there is a need to take immediate action, which need came to the attention of the Board subsequent to the posting of agenda, or as set forth on a supplemental agenda posted in the manner as above, not less than 72 hours prior to the meeting date. Public Comments: Any member of the public may address the Board of Directors on specific agenda items or matters of general interest. As determined by the Chair, speakers may be deferred until the specific item is taken for discussion and remarks may be limited to three minutes. Matters of interest addressed by a member of the public and not listed on this agenda cannot have action taken by the Board of Directors except as authorized by Section 54954.2(b). If you wish to speak, please complete a Speaker’s Form (located at the table outside of the Board Room) and give it to the Clerk of the Board. Consent Calendar: All matters placed on the Consent Calendar are considered as not requiring discussion or further explanation and unless any particular item is requested to be removed from the Consent Calendar by a Director, staff member or member of the public in attendance, there will be no separate discussion of these items. All items on the Consent Calendar will be enacted by one action approving all motions, and casting a unanimous ballot for resolutions included on the consent calendar. All items removed from the Consent Calendar shall be considered in the regular order of business. Members of the public who wish to remove an item from the Consent Calendar shall, upon recognition by the Chair, state their name, address and designate by number the item to be removed from the Consent Calendar. The Chair will determine if any items are to be deleted from the Consent Calendar. Items Continued: Items may be continued from this meeting without further notice to a Committee or Board meeting held within five (5) days of this meeting per Government Code Section 54954.2(b)(3). Meeting Adjournment: This meeting may be adjourned to a later time and items of business from this agenda may be considered at the later meeting by Order of Adjournment and Notice in accordance with Government Code Section 54955 (posted within 24 hours). Accommodations for the Disabled: The Board of Directors Meeting Room is wheelchair accessible. If you require any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the Board’s office at (714) 593-7130 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. Form No. DW-102-4 Agenda Report – Board Revised: 12/06/06 Page 1 BOARD OF DIRECTORS Meeting Date To Bd. of Dir. 10/28/09 AGENDA REPORT Item Number Item Number 1 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: PAYMENT OF CLAIMS OF THE ORANGE COUNTY SANITATION DISTRICT GENERAL MANAGER'S RECOMMENDATION Ratify Payment of Claims of the District by Roll Call Vote. CONFLICT OF INTEREST NOTIFICATION Pursuant to Government Code Section 84308, you are required to disclose any campaign contribution greater than $250 received in the past twelve months from any party to a contract involving the Orange County Sanitation District. Further, you may not participate in the decision making process to award a contract to such party. For reference, you are directed to the Register of Warrants as to all current contractors/vendors with the District. In general, you must disclose the basis of the conflict by identifying the name of the firm or individual who was the contributor. For the specifics of Government Code Section 84308, please see your Director’s Handbook or call the office of General Counsel. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION See attached listing. ATTACHMENTS 1. Copies of Claims Paid reports from 09/01/09 - 09/15/09 and 09/16/09 - 09/30/09 Vendor Warrant No. Amount Description Accounts Payable WarrantsA & J Sheet Metal, Inc. 24057 302.33$ Repair & Maintenance Services and/or Supplies A W Chesterton 24222 1,291.49 Repair & Maintenance Services and/or SuppliesABBA Parts 24059 1,788.00 Repair & Maintenance Services and/or Supplies Accent Flag & Sign 24060 439.70 Flag Pole, Parts, Repairs & InstallationAdvance Contractor & Inspector Training 24061 3,120.08 Repair & Maintenance Services and/or Supplies Advance Contractor & Inspector Training 24223 1,193.60 Professional Organizations Meeting/Training/Memberships Agilent Technologies, Inc. 24224 1,183.38 Laboratory Services & Supplies Air Products & Chemicals, Inc. 24032 26,813.90 Chemicals, Water/Wastewater Treatment Airgas Safety, Inc. 24062 171.23 Safety, Security, Health Equipment, Supplies, and Services Airgas Safety, Inc. 24225 459.25 Safety, Security, Health Equipment, Supplies, and Services Airgas West 24226 3,134.18 Laboratory Services & SuppliesAlan D. Ralph 24344 189.00 Meeting/Training Expense Reimbursement American Airlines 24063 4,819.50 TransportationAmerican Seal & Packing 24227 2,354.09 Repair & Maintenance Services and/or Supplies AMPS Abundant 24228 1,641.25 Instrument Parts & SuppliesAmtech Elevator Services 24064 1,400.00 Miscellaneous Services AON Risk Insurance Services West 24065 22,354.95 InsuranceApplied Industrial Technology 24066 407.82 Repair & Maintenance Services and/or Supplies Aquatic Biosystems, Inc. 24067 223.00 Laboratory Services & SuppliesArchie Ivy, Inc. 24229 3,677.00 Facilities, Maintenance, Services & Supplies AT & T 24058 214.54 TelecommunicationsAT & T Mobility II, L.L.C. 24230 9,496.53 Telecommunications Austin Building and Design dba The Austin Company 24068 1,301.18 Laboratory Services & SuppliesAvi-Con Inc., dba CA Construction 24216 47,880.90 Construction Awards & Trophies Company 24231 254.46 Awards and FramingBaker Tanks 24069 2,828.00 Repair & Maintenance Services and/or Supplies Baker Tanks 24232 2,252.95 Repair & Maintenance Services and/or SuppliesBasic Chemical Solutions, L.L.C. 24233 4,665.73 Chemicals, Water/Wastewater Treatment BC Wire Rope & Rigging 24070 506.78 Tools & SuppliesBell Pipe & Supply Co. 24071 91.74 Repair & Maintenance Services and/or Supplies BioMerieux Vitek, Inc. 24072 2,700.00 Laboratory Services & Supplies Brown & Caldwell 24033 123,369.88 Professional Services/Engineering Design Services Bush & Associates, Inc. 24234 2,820.00 Professional Services/Surveying Services California Dept. of Child Support 24235 1,734.90 Judgments Payable California Recreation Company 24073 2,989.38 Boat Slip Rental - Nerissa Ocean Monitoring Vessel California Relocation Services, Inc. 24074 202.50 Miscellaneous Services - Moving/RelocationCaltrol, Inc. 24236 468.46 Electrical/Electronic Equipment, Parts & Repairs Cameron Compression Systems 24237 384.77 Repair & Maintenance Services and/or SuppliesCamp Dresser & McKee, Inc. 24075 8,434.39 Professional Services/Engineering Design Services CAPPO, Inc. 24076 195.00 Professional Organizations Meeting/Training/MembershipsCarollo Engineers 24077 24,068.48 Professional Services/Engineering Design Services Carollo Engineers 24238 12,965.00 Professional Services/Engineering Design ServicesCasual Gourmet 24078 105.05 Catering Services Charles P. Crowley Co. 24239 4,967.52 Repair & Maintenance Services and/or SuppliesCircle, Inc. 24079 266.95 Copier Toner/Ink Supplies Circle, Inc. 24240 1,271.59 Copier Toner/Ink SuppliesCity National Bank 24049 146,378.10 Construction, Retention Claims Paid From 09/01/09 to 09/15/09 fin/210/lc Page 1 of 7 EXHIBIT A 10/12/2009 Vendor Warrant No. Amount Description Claims Paid From 09/01/09 to 09/15/09 City of Huntington Beach 24112 17,176.46 Water UseCity of Huntington Beach 24269 12.04 Water Use Clean Harbors Environmental Services 24080 907.68 Grit & Screenings; Hazard Waste DisposalClean Harbors Environmental Services 24241 703.79 Grit & Screenings; Hazard Waste Disposal CMF Corporation 24081 109.78 Laboratory Services & SuppliesCoast Rubber Stamp, Mfg. 24082 121.09 Stationery & Office Supplies Cole-Parmer Instrument Co. 24083 463.83 Instrument Parts & Supplies Compliance Services, Inc. 24242 880.00 Professional Services/Engineering Design Services Compressor Components of California 24243 5,676.75 Repair & Maintenance Services and/or Supplies Computer Protection Technology, Inc. 24084 1,730.75 Electrical/Electronic Equipment, Parts & Repairs Condition Monitoring Solutions 24085 3,294.12 Electrical/Electronic Equipment, Parts & Repairs Connell Chevrolet\GEO 24086 237.59 Autos, Trucks & Marine Equipment, Parts, Accessories & ServicesConsolidated Electrical Dist., Inc. 24244 311.46 Electrical/Electronic Equipment, Parts & Repairs Consumers Pipe & Supply Co. 24087 55.33 Repair & Maintenance Services and/or SuppliesConsumers Pipe & Supply Co. 24245 1,828.03 Repair & Maintenance Services and/or Supplies Controlled Motion Solutions 24246 361.13 Repair & Maintenance Services and/or SuppliesCorporate Business Interiors 24247 1,425.38 Furniture/Fixtures Corporate Image Maintenance, Inc. 24088 5,511.20 Janitor & Household Service & SuppliesCorporate Image Maintenance, Inc. 24208 35,995.00 Janitor & Household Service & Supplies Cortech Engineering 24248 19,023.64 Repair & Maintenance Services and/or SuppliesCounty of Orange Auditor Controller 24205 315.00 Governmental Agency Fees & Charges County of Orange Auditor Controller 24206 360.00 Governmental Agency Fees & ChargesCourt Order 24277 150.00 Judgments Payable Court Order 24283 225.00 Judgments PayableCourt Order 24339 912.50 Judgments Payable CS-AMSCO 24034 31,038.51 Repair & Maintenance Services and/or SuppliesCurley Wholesale Electric, Inc. 24089 639.45 Electrical/Electronic Equipment, Parts & Repairs CWEA Membership 24249 132.00 Professional Organizations Meeting/Training/MembershipDavid Jenkins & Assoc Inc 24090 500.00 Lab Analysis Service David's Tree Service 24091 4,500.00 GroundskeepingDavis Calibration 24250 120.85 Electrical/Electronic Equipment, Parts & Repairs DC Frost Associates, Inc. 24092 20,490.63 Mechanical Parts & Supplies Delta Dental 24035 67,502.04 Employee Benefits Don Wolf & Associates, Inc. 24251 6,865.94 Instrument Parts & Supplies Double D Painting 24093 6,199.00 Painting Services Dunn-Edwards Corporation 24094 64.67 Painting Services and Supplies Edmund L. Pendleton 24204 132.00 Meeting/Training Expense ReimbursementEmployee Benefits Specialists, Inc. 24252 11,539.68 Reimbursed Prepaid Employee Medical & Dependent Care Enchanter, Inc. 24095 1,330.00 Vessel Services - Monitoring Vessel NerissaEntech Design, Inc. 24096 4,108.50 Electrical/Electronic Equipment, Parts & Repairs Environmental Resource Associates 24253 1,320.08 Laboratory Services & SuppliesEric S. Hsieh 24342 196.92 Meeting/Training Expense Reimbursement ESSCO (Engineering Sales Service) 24097 5,513.58 Repair & Maintenance Services and/or SuppliesEwing Irrigation 24254 80.26 Irrigation Repair & Maintenance Services and/or Supplies Executive Portraits 24175 20.12 Photograph ServicesFedEx Corporation 24098 32.15 Freight Services Ferguson Enterprises, Inc. 24255 207.86 Repair & Maintenance Services and/or SuppliesFisher Scientific 24256 6,258.92 Laboratory Services & Supplies fin/210/lc Page 2 of 7 EXHIBIT A 10/12/2009 Vendor Warrant No. Amount Description Claims Paid From 09/01/09 to 09/15/09 Fleming Environmental, Inc. 24099 726.03 Repair & Maintenance Services and/or SuppliesFlomax Products, Inc. 24100 4,203.60 Repair & Maintenance Services and/or Supplies FLW, Inc. 24101 199.70 Repair & Maintenance Services and/or SuppliesFLW, Inc. 24257 2,097.22 Electrical/Electronic Equipment, Parts & Repairs Franchise Tax Board 24258 50.00 Governmental Agency Fees & ChargesFranklin Covey 24259 193.93 Office Supplies Frost Engineering Service Co. 24102 802.29 Repair & Maintenance Services and/or Supplies Garland Manufacturing Co. 24103 634.35 Repair & Maintenance Services and/or Supplies Getinge Castle 24104 1,117.81 Laboratory Services & Supplies Glens Alignment & Brake Service 24260 239.00 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Golden State Water Company 24261 106.61 Water Use Golden West Window Service 24105 6,635.00 Facilities, Maintenance, Services & SuppliesGolden West Window Service 24262 1,385.00 Facilities, Maintenance, Services & Supplies Grainger, Inc. 24106 3,461.41 Repair & Maintenance Services and/or SuppliesGrainger, Inc. 24263 1,532.55 Repair & Maintenance Services and/or Supplies Graybar Electric Company 24107 4,577.84 Electrical/Electronic Equipment, Parts & RepairsHaaker Equipment Company 24264 452.99 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Harrington Industrial Plastics, Inc. 24108 5,516.93 Repair & Maintenance Services and/or SuppliesHarrington Industrial Plastics, Inc. 24265 501.21 Repair & Maintenance Services and/or Supplies HD Supply Waterworks, Ltd. 24109 4,580.55 Repair & Maintenance Services and/or SuppliesHill Brothers 6 48,589.75 Chemicals, Water/Wastewater Treatment Home Depot 24110 430.52 Miscellaneous Parts and SuppliesHome Depot 24266 64.85 Miscellaneous Parts and Supplies Horizon Technology 24267 1,976.98 Laboratory Services & SuppliesHub Auto Supply 24111 61.38 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Hub Auto Supply 24268 218.26 Autos, Trucks & Marine Equipment, Parts, Accessories & ServicesHyatt Legal Plans, Inc. 24113 1,098.00 Voluntary Employee Benefit Program Indiana Child Support Bureau 24270 290.00 Judgments PayableIndustrial Distribution Group 24114 718.01 Repair & Maintenance Services and/or Supplies Industrial Threaded Products, Inc. 24271 1,406.70 Repair & Maintenance Services and/or SuppliesInorganic Ventures, Inc. 24272 201.69 Laboratory Services & Supplies Inplant Sales, L.L.C. 24115 8,765.25 Repair & Maintenance Services and/or Supplies Intercare Holdings Insurance Svcs., Inc. 24116 2,916.67 Workers' Compensation Service Internal Revenue Service 24273 125.00 Governmental Agency Fees & Charges Intl. Union of Oper. Eng. AFL CIO Local 501 24274 4,867.55 Dues Deductions Ironman Parts & Services 24117 220.68 Repair & Maintenance Services and/or Supplies Irvine Ranch Water District 24118 7.75 Water UseJ F Shea Construction, Inc. 24217 63,762.10 Construction J. F. Shea Construction, Inc. 24050 7,353,815.14 ConstructionJagadish C. Oruganti 24202 497.53 Meeting/Training Expense Reimbursement Jamison Engineering Contractors, Inc. 24119 6,290.00 Professional Services/Repair & Maintenance ServicesJays Catering 24275 263.19 Catering Services JCI Jones Chemicals, Inc. 5 58,048.31 Chemicals, Water/Wastewater TreatmentJCI Jones Chemicals, Inc. 7 71,035.34 Chemicals, Water/Wastewater Treatment Johnstone Supply 24120 3,500.69 Repair & Maintenance Services and/or SuppliesJWC Environmental 24121 18,946.33 Repair & Maintenance Services and/or Supplies Kaiser Foundation Health Plan 24036 99,457.26 Employee BenefitsKars Advance Materials, Inc. 24122 433.50 Repair & Maintenance Services and/or Supplies fin/210/lc Page 3 of 7 EXHIBIT A 10/12/2009 Vendor Warrant No. Amount Description Claims Paid From 09/01/09 to 09/15/09 Kemira Water Solutions 24037 66,199.39 Chemicals, Water/Wastewater TreatmentKemira Water Solutions 24209 126,823.51 Chemicals, Water/Wastewater Treatment Kiesel Environmental Lab 24123 120.00 Laboratory Services & SuppliesKiewit/Mass, A Joint Venture 24051 207,900.00 Construction Layne T. Baroldi 24200 313.20 Meeting/Training Expense ReimbursementLiberty Mutual Claims 24210 75,322.42 Insurance Long Beach Automotive Distrib., Inc. 24276 177.90 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Long Beach Automotive Distrib., Inc. 24276 231.47 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Lucci's Gourmet Foods, Inc. 24278 232.97 Catering Services Luparellos Pizza 24279 64.00 Catering Services Maintenance Technology Corp. 24124 450.33 Repair & Maintenance Services and/or Supplies Maintenance Turnaround Services 24281 10,000.00 Professional Services/Repair & Maintenance ServicesMalcolm Pirnie, Inc. 24038 120,829.00 Professional Services/Engineering Design Services Mandic Motors 24125 375.00 Autos, Trucks & Marine Equipment, Parts, Accessories & ServicesMasis V. Yegazarian 24280 952.33 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Maxim Security Systems 24126 1,094.00 Safety, Security, Health Equipment, Supplies, and ServicesMcMaster-Carr Supply Co. 24127 943.37 Repair & Maintenance Services and/or Supplies McMaster-Carr Supply Co. 24282 4,489.36 Repair & Maintenance Services and/or SuppliesMeasurement Control Systems, Inc. 24128 3,716.55 Repair & Maintenance Services and Supplies Mladen Buntich Construction Company 24052 1,322,402.90 ConstructionMorrow Meadows Corp. 24218 270,336.60 Construction MRC Technologies, Inc. 24284 6,551.10 Flow MeterMultiquip 24039 30,937.18 Repair & Maintenance Services and/or Supplies - Generator NACE International 24129 5,055.00 Professional Organizations Meeting/Training/MembershipsNACE International 24285 5,460.00 Professional Organizations Meeting/Training/Membership NAFA, Inc. 24130 460.00 Professional Organizations Meeting/Training/MembershipsNational Bond & Trust 24286 2,189.94 U.S. Savings Bonds Payroll Deductions National Safety Council 24131 885.00 Professional Organizations Meeting/Training/MembershipsNavigant Consulting, Inc. 24211 45,240.00 Professional Services/Engineering Design Services Ncompliance Services 24132 447.95 On-Line Webinar Training - 1099 SeminarNeal Supply Co. 24133 248.65 Repair & Maintenance Services and/or Supplies Neal Supply Co. 24287 185.96 Repair & Maintenance Services and/or Supplies Neutron Products, Inc. 24288 3,165.93 Chemicals, Water/Wastewater Treatment New Horizons Computer Learning Center 24134 300.00 Professional Organizations Meeting/Training/Memberships Norman A. Olsson Construction, Inc. 24053 307,939.50 Construction Norman A. Olsson Construction, Inc. 24219 237,375.00 Construction Northern Tool & Equipment 24135 526.69 Repair & Maintenance Services and/or SuppliesNWRI National Water Research Institute 24136 12,673.07 Meeting Expenses - OCSD Disinfection Panel OCEA 24289 629.74 Dues DeductibleOffice Depot 24137 123.16 Office Supplies Office Depot 24290 425.39 Office SuppliesOlin Corporation 24291 16,320.30 Chemicals, Water/Wastewater Treatment OneSource Distributors, Inc. 24138 4,267.05 Electrical/Electronic Equipment, Parts & RepairsOneSource Distributors, Inc. 24292 5,814.94 Electrical/Electronic Equipment, Parts & Repairs Orange Community Bank 24054 34,215.50 Construction, RetentionOrange Community Bank 24220 26,375.00 Construction, Retention Orange County Sanitation District 24207 1,267.98 Petty Cash ExpenseOrange County United Way 24293 50.00 Employee Contributions fin/210/lc Page 4 of 7 EXHIBIT A 10/12/2009 Vendor Warrant No. Amount Description Claims Paid From 09/01/09 to 09/15/09 Orange Fluid System Technologies, Inc. 24139 186.05 Repair & Maintenance Services and/or SuppliesOrange Fluid System Technologies, Inc. 24294 517.77 Repair & Maintenance Services and/or Supplies Orion Construction Corporation 24056 56,700.00 ConstructionOxygen Service Company 24140 1,266.58 Laboratory Services & Supplies Oxygen Service Company 24295 864.10 Laboratory Services & SuppliesPacific Mechanical Supply 24141 1,070.52 Repair & Maintenance Services and/or Supplies Parker Supply Company 24142 3,661.92 Miscellaneous Parts and Supplies Parkhouse Tire, Inc. 24143 465.16 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Peace Officers Council of CA 24296 2,219.50 Dues Deductions, Supervisors & Professionals Peak Scientific, Inc. 24297 1,543.92 Laboratory Services & Supplies Performance Pipeline Technologies 24144 4,950.00 Repair & Maintenance Services and/or Supplies Pico Chicago 24298 14,975.00 Professional Services - Admin Lobby KiosksPictometry International Corp. 24145 21,550.00 Computer Applications & Services PL Hawn Company, Inc. 24146 2,376.04 Repair & Maintenance Services and/or SuppliesPlanetbids, Inc. 24040 32,970.00 Computer Applications & Services Polydyne, Inc. 24041 50,568.45 Chemicals, Water/Wastewater TreatmentPowell Electrical Systems 24147 3,652.23 Repair & Maintenance Services and/or Supplies Praxair, Inc. 24299 97.30 Laboratory Services & SuppliesPrimary Source Office Furnishings, Inc. 24300 1,642.13 Minor Equipment/Furniture & Fixtures Primrose Ice Co., Inc. 24148 110.00 Water & Ice ServicesPrimrose Ice Co., Inc. 24301 110.00 Water & Ice Services Projectline Technical Services, Inc. 24302 3,391.50 Professional Services/Engineering Design ServicesProvidence Publications, L.L.C. 24149 427.00 Books & Publications Prudential Insurance Company of America 24212 41,353.95 BenefitsPrudential Overall Supply 24150 3,432.23 Uniforms Prudential Overall Supply 24303 1,588.01 UniformsPublic Safety Management Assoc. (PASMA) 24151 75.00 Professional Organizations Meeting/Training/Memberships Pump Engineering 24152 1,993.24 Repair & Maintenance Services and/or SuppliesPump Engineering 24304 4,248.31 Repair & Maintenance Services and/or Supplies Pumping Solutions, Inc. 24153 585.24 Repair & Maintenance Services and/or SuppliesR Garrison, L.L.C. 24154 8,579.90 On-Site Safety Training RBF Consulting 24155 14,434.00 Professional Services/Engineering Design Services Reliastar 24156 4,895.04 Voluntary Employee Life & Cancer Insurance Restek Corp. 24157 750.43 Laboratory Services & Supplies Restek Corp. 24305 83.78 Laboratory Services & Supplies RMS Engineering & Design, Inc. 24158 6,540.00 Professional Services/Engineering Design Services Robert P. Ghirelli 24201 971.20 Meeting/Training Expense ReimbursementRSA Soil Products 24159 2,270.63 Miscellaneous Parts and Supplies Sachs Electric Company 24221 634,607.43 Professional Services/Central Generation AutomationSC Field Technical Services 24160 5,377.69 Repair & Maintenance Services and/or Supplies Schwing Bioset 24042 130,119.38 Repair & Maintenance Services and/or Supplies - Hydraulic UnitSea Coast Designs, Inc. 24161 1,151.55 Furniture Seals Compressed Gases 24306 35.83 Miscellaneous Parts and SuppliesSejal Patel 24203 125.00 Meeting/Training Expense Reimbursement SETAC 24307 1,030.00 Professional Organizations Meeting/Training/MembershipShamrock Supply Co., Inc. 24162 3,741.61 Repair & Maintenance Services and/or Supplies Shamrock Supply Co., Inc. 24308 97.45 Repair & Maintenance Services and/or Tools and SuppliesShureluck Sales & Engineering 24163 3,304.38 Repair & Maintenance Services and/or Supplies fin/210/lc Page 5 of 7 EXHIBIT A 10/12/2009 Vendor Warrant No. Amount Description Claims Paid From 09/01/09 to 09/15/09 Siemens Water Technologies Corp. 24164 1,271.78 Repair & Maintenance Services and/or SuppliesSiemens Water Technologies Corp. 24309 265.20 Repair & Maintenance Services and/or Supplies Sigma-Aldrich, Inc. 24165 51.79 Laboratory Services & SuppliesSmith-Emery Company 24310 4,342.00 Professional Services/Geotech & Material Testing So Cal Gas Company 24311 5,459.43 UtilitiesSouth Coast Air Quality Management Dist. 24043 49,400.09 Regulatory Operating Fees South Coast Air Quality Management Dist. 24312 218.00 Regulatory Operating Fees South Coast Construction Services 24166 1,300.00 Repair & Maintenance Services and/or Supplies South Coast Construction Services 24167 3,100.00 Repair & Maintenance Services and/or Supplies Southern Calif Air Cond. Dist. 24186 259.24 Electrical Parts & Supplies Southern California Edison 24044 95,922.25 Utilities Southern California Edison 24168 6,300.00 UtilitiesSpec Services, Inc. 24313 3,397.47 Construction Spectrum Laboratory Products, Inc. 24169 89.52 Laboratory Services & SuppliesSPEX Certiprep, Inc. 24170 184.24 Laboratory Services & Supplies SPEX Certiprep, Inc. 24314 66.32 Laboratory Services & SuppliesSquare D Co. dba Schneider Electric 24171 4,765.43 Electrical/Electronic Equipment, Parts & Repairs St. Croix Sensory, Inc. 24172 610.00 Outside Laboratory ServicesStanley Steamer International, Inc. 24173 2,603.80 Janitor & Household Service & Supplies Stanley Steamer International, Inc. 24315 1,597.20 Janitor & Household Service & SuppliesStaples Direct 24174 2,734.73 Office Supplies Staples Direct 24316 753.44 Office SuppliesStephen Patrick Meyers 24323 310.00 Miscellaneous Pool Services Steve Bubalo Construction Co. 24055 828,916.70 ConstructionSunset Ford 24317 386.13 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Sunset Industrial Parts 24176 4,942.84 Repair & Maintenance Services and/or SuppliesSunset Industrial Parts 24318 2,951.97 Repair & Maintenance Services and/or Supplies TCH Associates, Inc. 24319 9,051.66 Laboratory Services & SuppliesTerminix International 24177 400.00 Pest Control Services Terra Renewal, L.L.C. 24213 25,773.71 Grit & Screenings DisposalTestAmerica Ontario 24178 6,130.25 Laboratory Services & Supplies TestAmerica Ontario 24320 210.00 Laboratory Services & Supplies The Wackenhut Corporation 24047 40,759.45 Safety, Security, Health Equipment, Supplies, and Services The Wackenhut Corporation 24215 34,076.39 Safety, Security, Health Equipment, Supplies, and Services The Walking Man, Inc. 24179 575.00 Miscellaneous Services Thompson Industrial Supply, Inc. 24180 5,893.80 Repair & Maintenance Services and/or Supplies Thompson Industrial Supply, Inc. 24321 7,171.45 Repair & Maintenance Services and/or SuppliesTiano Construction 24181 3,950.00 Facilities, Maintenance, Services & Supplies Time Warner Communications 24182 51.98 TelecommunicationsTony's Lock & Safe Service & Sales 24322 113.82 Repair & Maintenance Services and/or Supplies Transcat 24183 5,643.53 Repair & Maintenance Services and/or SuppliesTruck & Auto Supply, Inc. 24324 272.38 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Tule Ranch/Magan Farms 24045 124,592.83 Biosolids ManagementTW Telecom Holdings, Inc. 24184 9,669.82 Telecommunications UE Systems, Inc. 24325 3,924.13 Repair & Maintenance Services and/or SuppliesUltra Scientific 24326 252.21 Laboratory Services & Supplies Union Bank of California 24341 3,355.90 Construction, RetentionUnited Parcel Service 24185 69.28 Parcel Services fin/210/lc Page 6 of 7 EXHIBIT A 10/12/2009 Vendor Warrant No. Amount Description Claims Paid From 09/01/09 to 09/15/09 United Parcel Service 24327 62.00 Parcel ServicesUniversal Flooring Systems, Inc. 24046 25,907.00 Repair & Maintenance Services and/or Supplies Universal Flooring Systems, Inc. 24328 1,742.00 Repair & Maintenance Services and/or SuppliesUS Equipment Co., Inc. 24329 1,090.03 Repair & Maintenance Services and/or Supplies US Peroxide, L.L.C. 24214 162,833.12 Chemicals, Water/Wastewater TreatmentVapex, Inc. 24187 2,271.56 Electrical/Electronic Equipment, Parts & Repairs Varian, Inc. 24330 1,668.21 Laboratory Services & Supplies Verizon Wireless 24188 720.16 Telecommunications Verne's Plumbing 24189 140.00 Plumbing Services & Supplies Vibration Institute 24331 485.00 Professional Organizations Meeting/Training/Membership Villa Prep & Paint 24190 4,145.00 Painting Services and Supplies Vision Service Plan CA 24191 9,683.10 Employee BenefitsVladimir A. Kogan 24343 336.57 Meeting/Training Expense Reimbursement Vortex Corp. 24192 1,401.57 Repair & Maintenance Services and/or SuppliesVWR Scientific Products 24193 3,185.51 Laboratory Services & Supplies VWR Scientific Products 24332 36.99 Laboratory Services & SuppliesWACO Filter 24194 419.04 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Waters Corporation 24333 1,530.19 Laboratory Services & SuppliesWEF 24334 394.00 Professional Organizations Meeting/Training/Memberships Wells Fargo Bank Escrow 23518600 24199 23,100.00 Construction, RetentionWest Coast Safety Supply Co. 24195 540.15 Safety, Security, Health Equipment, Supplies, and Services West Coast Safety Supply Co. 24335 1,753.42 Safety, Security, Health Equipment, Supplies, and ServicesWest Lite Supply Company, Inc. 24196 58.63 Electrical/Electronic Equipment, Parts & Repairs West Lite Supply Company, Inc. 24336 406.40 Electrical/Electronic Equipment, Parts & RepairsWestport Apparatus dba Breaker Supply 24337 1,325.69 Electrical/Electronic Equipment, Parts & Repairs Woodruff Spradlin & Smart 24048 72,811.79 Professional Services - LegalXerox Corporation 24197 18,822.47 Computers, Software/Hardware & Managed Services Yale/Chase Materials Handling, Inc. 24198 266.50 Electrical/Electronic Equipment, & Electric Cart Parts & RepairsYale/Chase Materials Handling, Inc. 24338 4.50 Electrical/Electronic Equipment, & Electric Cart Parts & Repairs 24 Carrots 24340 351.26 Meeting Expenses Total Accounts Payable - Warrants $ 14,213,821.49 Payroll DisbursementsEmployee Paychecks 42882 - 42909 4,963.00$ Interim Payroll - ARBA (09/01/09) Employee Paychecks 42914 - 42975 116,036.43 Biweekly Payroll (09/09/09)*Employee Paychecks 42976 - 42985 6,921.17 Interim Payroll - Termination, Leave Payout, IDEA, Retro, ARBA (09/08/09) Employee Paychecks 42986 - 42991 8,571.71 Interim Payroll - Retirement, Resignation (09/10/09 & 09/14/09)Direct Deposit Statements 176577 - 176674 23,906.62 Interim Payroll - ARBA (09/01/09) Direct Deposit Statements 176675 - 177260 1,425,053.26 Biweekly Payroll (09/09/09) Total Payroll Disbursements $ 1,585,452.19 *Check numbers 42910 - 42913 were reported on the 8/31/09.Wire Transfer Payments OCSD Payroll Taxes & Contributions 812,604.48$ Biweekly Payroll (09/09/09) Total Wire Transfer Payments $ 812,604.48 Total Claims Paid 09/01/09 - 09/15/09 16,611,878.16$ fin/210/lc Page 7 of 7 EXHIBIT A 10/12/2009 Vendor Warrant No.Amount Description Accounts Payable Warrants A W Chesterton 24368 2,091.79$ Repair & Maintenance Services and/or Supplies Aable Material Distribution Services 24369 410.00 Repair and Maintenance Services & SuppliesABG Acquisition Corporation 24550 1,257.29 Office Supplies & Stationary Able Scale Repair 24734 870.00 Repair & Maintenance Services and/or SuppliesAbsolute Standards, Inc. 24370 355.00 Laboratory Services & Supplies ACCU Sludge 24371 809.65 Laboratory Services & Supplies AccuStandard 24372 680.05 Laboratory Services & SuppliesAccuStandard 24551 268.45 Laboratory Services & Supplies Advance Contractor & Inspector Training 24552 3,521.30 Professional Organizations Meeting/Training/MembershipsAdvance Contractor & Inspector Training 24735 1,717.50 Professional Organizations Meeting/Training/Memberships AECOM Technical Services, Inc. 24553 16,583.47 Professional Services/Engineering Design Services Aerotek 24345 33,766.10 Professional Services/Temporary Services Aerotek 24554 4,108.00 Professional Services/Temporary Services Agilent Technologies, Inc. 24373 1,106.18 Laboratory Services & SuppliesAgo IndustriesDBA So-Cal Sweeping 24374 980.00 Street Sweeping Services Ago IndustriesDBA So-Cal Sweeping 24736 980.00 Street Sweeping Services Air Products & Chemicals, Inc. 24346 26,813.90 Chemicals, Water/Wastewater Treatment Airgas Safety, Inc. 24347 32,983.24 Safety, Security, Health Equipment, Supplies, and Services Airgas Safety, Inc. 24536 43,841.04 Safety, Security, Health Equipment, Supplies, and ServicesAirgas Safety, Inc. 24887 63,598.39 Safety, Security, Health Equipment, Supplies, and Services AKM Consulting Engineers 24555 14,703.00 Professional Services/Dig Alert Associate Engineer Allied Packing & Rubber, Inc. 24375 111.01 Repair & Maintenance Services and/or Supplies Allied Packing & Rubber, Inc. 24737 272.53 Repair & Maintenance Services and/or Supplies American Chemical Society 24376 140.00 Professional Organizations Meeting/Training/MembershipAmerican Express 24537 29,699.01 Purchasing Card Program for Miscellaneous Parts and Supplies American Red Cross 24556 400.00 Professional Organizations Meeting/Training/Memberships American Society of Civil Engineers 24557 153.75 Professional Organizations Meeting/Training/Memberships American Society of Civil Engineers 24738 500.00 Professional Organizations Meeting/Training/Membership American Society of Mechanical Engineers 24377 134.00 Professional Organizations Meeting/Training/MembershipsAmtech Elevator Services 24739 1,400.00 Miscellaneous Services AppleOne Employment Service 24378 8,058.94 Professional Services/Temporary Services AppleOne Employment Service 24558 2,850.72 Professional Services/Temporary Services Applied Industrial Technology 24740 298.29 Repair & Maintenance Services and/or Supplies Aquatic Biosystems, Inc. 24559 223.00 Laboratory Services & SuppliesARGOS Technologies, Inc. 24560 153.83 Laboratory Services & Supplies Arizona Instrument 24379 742.19 Instrument Repairs & Calibration Services and/or Supplies Arizona Instrument 24561 2,316.71 Instrument Repairs & Calibration Services and/or Supplies Ashbrook Corporation 24741 3,816.25 Repair & Maintenance Services and/or Supplies Ashbrook Simon Hartley Operations 24562 5,844.95 Repair & Maintenance Services and/or SuppliesAshbrook Simon Hartley Operations 24742 5,411.03 Repair & Maintenance Services and/or Supplies ASSE American Society of Safety Engineers 24563 160.00 Professional Organizations Meeting/Training/Memberships AT & T Long Distance. 24743 69.16 Telecommunications AT & T Mobility II, L.L.C. 24381 79.99 Telecommunications AT & T Mobility II, L.L.C. 24565 129.98 TelecommunicationsAT & T Universal Biller 24380 5,444.54 Telecommunications AT & T Universal Biller 24564 737.20 Telecommunications Claims Paid From 09/16/09 to 09/30/09 fin/210/lc Page 1 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 Atlas Underground, Inc. 24382 4,300.00 Repair & Maintenance Services and/or Supplies Atlas Underground, Inc. 24566 24,150.00 Repair & Maintenance Services and/or Supplies Awards & Trophies Company 24383 19.75 Awards and FramingAWSI 24567 213.00 Professional Services - DOT Program Administration Basic Chemical Solutions, L.L.C. 24568 19,448.14 Chemicals, Water/Wastewater TreatmentBattery Specialties 24569 1,568.53 Batteries, Various Bee Man Pest Control, Inc. 24384 150.00 Pest Control Services Bell Pipe & Supply Co. 24385 290.52 Repair & Maintenance Services and/or SuppliesBioMerieux Vitek, Inc. 24570 137.58 Laboratory Services & Supplies Black & Veatch Corporation 24348 100,112.23 Professional Services/Engineering Design ServicesBlack & Veatch Corporation 24538 145,710.12 Professional Services/Engineering Design Services Blue Cross of California 24889 559,371.30 Employee Benefits Blue Diamond Car Wash, Inc. 24386 1,493.40 Facilities, Maintenance, Services & SuppliesBobby L. Unsell 24883 123.25 Meeting/Training Expense Reimbursement Borden Decal Company 24571 532.80 Safety, Security, Health Equipment, Supplies, and ServicesBP Energy Company 24387 12,557.07 Natural Gas Bridgecreek Garden Grove, L.L.C. 24528 6,991.86 Reconciliation User Fee Refund Program Brown & Caldwell 24388 14,775.48 Professional Services/Engineering Design Services Burlington Safety Laboratory of CA, Inc. 24744 182.53 Safety, Security, Health Equipment, Supplies, and Services Bush & Associates, Inc. 24745 540.00 Professional Services/Surveying ServicesButier Engineering, Inc. 24890 114,499.53 Professional Services/Engineering Design Services California Business Bank 24722 1,685.45 Construction, Retention California Dept. of Child Support 24572 1,688.75 Judgments Payable California Relocation Services, Inc. 24573 270.00 Miscellaneous Services - Moving/Relocation Caltrol, Inc. 24574 4,267.19 Electrical/Electronic Equipment, Parts & RepairsCaltrol, Inc. 24746 3,048.39 Electrical/Electronic Equipment, Parts & Repairs Cameron Compression Systems 24747 128.42 Repair & Maintenance Services and/or Supplies Camp Dresser & McKee, Inc. 24390 2,972.85 Professional Services/Engineering Design Services Campbell Window Tinting 24575 505.00 Miscellaneous Services Cardlock Fuel Systems, Inc. 24391 20,180.17 Fuel Card Professional ServicesCareer Track 24748 299.00 Professional Organizations Meeting/Training/Membership Carollo Engineers 24349 134,878.48 Professional Services/Engineering Design Services Carollo Engineers 24749 16,001.43 Professional Services/Engineering Design Services Cavanaugh Machine Works 24392 700.00 Repair & Maintenance Services and/or Supplies Cavanaugh Machine Works 24750 875.00 Repair & Maintenance Services and/or SuppliesCEPA Company 24576 1,975.00 Repair & Maintenance Services and/or Supplies Charles F. Winsor 24527 125.00 Meeting/Training Expense Reimbursement Circle, Inc. 24393 3,790.15 Copier Toner/Ink Supplies Circle, Inc. 24577 479.50 Copier Toner/Ink Supplies Circle, Inc. 24751 1,734.94 Copier Toner/Ink SuppliesCity National Bank 24901 88,774.00 Construction, Retention City of Fountain Valley 24539 41,648.79 Water Use City of Fullerton 24779 42.14 Water Use City of Huntington Beach 24796 16,605.41 Water Use City of Westminster 24394 68.46 Water UseClean Harbors Environmental Services 24395 6,552.38 Grit & Screenings; Hazard Waste Disposal Clean Harbors Environmental Services 24752 1,375.64 Grit & Screenings; Hazard Waste Disposal fin/210/lc Page 2 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 Comm Vault Systems, Inc. 24578 20,204.03 Computer Hardware/Software Compressor Components of California 24396 9,026.25 Repair & Maintenance Services and/or Supplies Connell Chevrolet\GEO 24753 1,054.11 Autos, Trucks & Marine Equipment, Parts, Accessories & ServicesConsumers Pipe & Supply Co. 24397 32.92 Repair & Maintenance Services and/or Supplies Consumers Pipe & Supply Co. 24579 4,253.46 Repair & Maintenance Services and/or SuppliesControlled Motion Solutions 24580 2,547.45 Repair & Maintenance Services and/or Supplies Corporate Business Interiors 24398 929.82 Furniture/Fixtures CORRPRO Companies, Inc. 24399 531.98 Professional Services/Temporary ServicesCortech Engineering 24400 5,565.08 Repair & Maintenance Services and/or Supplies Cosco Fire Protection 24754 2,625.00 Fire Extinguisher MaintenanceCounterpart Enterprises, Inc. 24581 2,924.75 Repair & Maintenance Services and/or Supplies County of Orange 24389 511.33 Repair & Maintenance Services and/or Supplies County of Orange Auditor Controller 24755 408.00 Governmental Agency Fees & ChargesCounty of Orange Auditor Controller 24756 105.00 Governmental Agency Fees & Charges County of Orange Auditor Controller 24757 122.50 Governmental Agency Fees & ChargesCounty Wholesale Electric Co. 24401 8,790.96 Electrical/Electronic Equipment, Parts & Repairs County Wholesale Electric Co. 24582 122.65 Electrical/Electronic Equipment, Parts & Repairs Court Order 24627 150.00 Judgments Payable Court Order 24632 225.00 Judgments Payable Court Order 24658 108.00 Judgments PayableCourt Order 24720 912.50 Judgments Payable CR&R, Inc. 24583 1,890.00 Waste Disposal CS-AMSCO 24584 3,321.12 Repair & Maintenance Services and/or Supplies CS-AMSCO 24758 17,650.61 Repair & Maintenance Services and/or Supplies Culligan of Orange County 24402 53.70 Repair & Maintenance Services and SuppliesCWEA Membership 24759 132.00 Professional Organizations Meeting/Training/Membership CWEA-TCP 24760 45.00 Professional Organizations Meeting/Training/Membership Dapper Tire Co. 24761 983.09 Autos, Trucks & Marine Equipment, Parts, Accessories & Services David Gutoff 24403 225.00 Laboratory Services & Supplies David N. Phillips 24524 137.85 Meeting/Training Expense ReimbursementDavid P. Halverson 24882 125.00 Meeting/Training Expense Reimbursement David's Tree Service 24404 6,075.00 Groundskeeping David's Tree Service 24585 3,175.00 Groundskeeping David's Tree Service 24762 4,900.00 Groundskeeping Denboer Engineering & Construction 24548 29,700.00 ConstructionDepartment of General Services 24763 521.35 Repair & Maintenance Services and/or Supplies Detector Service Center, Inc. 24764 1,012.00 Laboratory Services & Supplies Dion Deas 24725 195.00 Meeting/Training Expense Reimbursement DLT Solutions, Inc. 24350 25,960.90 Computer Applications & Services Double D Painting 24405 2,655.00 Painting ServicesDudek & Associates, Inc. 24406 2,000.00 Professional Services/Engineering Design Services Dudek & Associates, Inc. 24765 1,338.00 Professional Services/Engineering Design Services Duke Service Company 24766 106.00 Miscellaneous Services Dura-Chem, Inc. 24586 460.88 Repair & Maintenance Services and/or Supplies DWG Associates 24407 5,239.75 Professional ServicesEagle Aerial Imaging 24767 7,800.63 Computer Applications & Services Eagle Protection of California 24587 275.00 Safety, Security, Health Equipment, Supplies, and Services fin/210/lc Page 3 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 Edward M. Torres 24731 125.00 Meeting/Training Expense Reimbursement Electra Bond, Inc. 24588 3,631.16 Repair & Maintenance Services and/or Supplies Electro Numerics 24768 1,449.07 Electrical/Electronic Equipment, Parts & RepairsElectronic Balancing Co. 24408 795.00 Repair & Maintenance Services and/or Supplies Electronic Balancing Co. 24589 3,610.00 Repair & Maintenance Services and/or SuppliesEmployee Benefits Specialists, Inc. 24590 13,194.06 Reimbursed Prepaid Employee Medical & Dependent Care Employers Group 24591 4,409.63 Professional Services - Legal Enchanter, Inc. 24769 2,470.00 Vessel Services - Monitoring Vessel NerissaEnertech Environmental 24351 532,678.85 Biosolids Management Enertech Environmental 24540 507,452.07 Biosolids ManagementENS Resources, Inc. 24770 7,500.00 Professional Services - Federal Advocacy Entech Design, Inc. 24771 3,778.31 Electrical/Electronic Equipment, Parts & Repairs Entech Instruments, Inc. 24592 135.24 Laboratory Services & SuppliesEnvironmental Resource Associates 24594 368.40 Laboratory Services & Supplies Environmental Resource Center 24593 399.00 Safety, Security, Health Equipment, Supplies, and ServicesEnvironmental Water Solutions, Inc. 24409 16,321.58 Repair & Maintenance Services and/or Supplies Ewing Irrigation 24410 71.18 Irrigation Repair & Maintenance Services and/or Supplies Ewing Irrigation 24595 1,538.29 Irrigation Repair & Maintenance Services and/or Supplies Ewing Irrigation 24772 135.06 Irrigation Repair & Maintenance Services and/or Supplies Failure Prevention Associates 24596 3,712.97 Repair & Maintenance Services and/or SuppliesFar East National Bank 24879 23,528.04 Construction, Retention Fedex Corporation 24411 45.08 Freight Services Fedex Corporation 24597 17.03 Freight Services Fedex Corporation 24774 36.51 Freight Services Ferguson Enterprises, Inc. 24598 1,029.39 Repair & Maintenance Services and/or SuppliesFirst American Corelogic 24599 1,247.00 Annual On-Line Subscription Fisher Scientific 24412 258.32 Laboratory Services & Supplies Fisher Scientific 24775 3,794.21 Laboratory Services & Supplies Flomax Products, Inc. 24600 7,598.82 Electrical/Electronic Equipment, Parts & Repairs Florence L. Gerdes 24781 180.00 ARBA Payment (John Gerdes)FLW, Inc. 24413 419.64 Electrical/Electronic Equipment, Parts & Repairs Forkert Engineering & Surveying, Inc. 24414 4,255.50 Professional Services - Surveying Forkert Engineering & Surveying, Inc. 24601 4,426.25 Professional Services - Surveying Fox Scientific Inc 24776 1,443.46 Laboratory Services & Supplies Franchise Tax Board 24602 50.00 Governmental Agency Fees & ChargesFranklin Covey 24603 34.76 Office Supplies Franklin Covey 24777 98.18 Office Supplies Frasco Profiles 24415 317.00 Professional Services - Human Resources Frys Electronics 24604 27.17 Computers, Software/Hardware Frys Electronics 24778 130.46 Computers, Software/HardwareFuture Computing Solutions, Inc. 24780 3,621.38 Computer Hardware/Software Garland Manufacturing Co. 24605 2,996.54 Repair & Maintenance Services and/or Supplies GBC (General Binding Corp) 24782 151.83 Office Supplies Geomatrix Consultants, Inc. 24416 7,407.75 Professional Services/Geotech & Material Testing George Yardley Co. 24417 341.54 Repair & Maintenance Services and/or SuppliesGierlich-Mitchell, Inc. 24418 1,526.57 Repair & Maintenance Services and/or Supplies Glens Alignment & Brake Service 24783 574.00 Autos, Trucks & Marine Equipment, Parts, Accessories & Services fin/210/lc Page 4 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 GMR Transcription 24419 871.00 Professional Services - Transcription Golden State Overnight Delivery Service 24420 297.78 Courier Services Golden State Overnight Delivery Service 24784 90.53 Courier ServicesGolden West Window Service 24421 7,927.00 Facilities, Maintenance, Services & Supplies Golden West Window Service 24606 3,320.00 Facilities, Maintenance, Services & SuppliesGolden West Window Service 24785 8,300.00 Facilities, Maintenance, Services & Supplies Grainger, Inc. 24422 84.25 Repair & Maintenance Services and/or Supplies Grainger, Inc. 24607 1,925.99 Repair & Maintenance Services and/or SuppliesGrainger, Inc. 24786 1,172.86 Repair & Maintenance Services and/or Supplies Graybar Electric Company 24608 21,257.00 Electrical/Electronic Equipment, Parts & RepairsGraybar Electric Company 24787 1,603.49 Electrical/Electronic Equipment, Parts & Repairs Great Western Sanitary Supplies 24423 742.05 Janitor & Household Service & Supplies GRM Information Management Services 24424 114.19 Office SuppliesGTE.NET, L.L.C. (Verizon Online) 24609 99.00 Telecommunications Guarantee Records Management 24425 596.82 Professional Services - Document Storage & ShreddingHach c/o Ponton Industries 24426 3,219.99 Laboratory Services & Supplies Hach c/o Ponton Industries 24426 373.82 Laboratory Services & Supplies Hampton Tedder Technical Services 24788 4,209.00 Electrical/Electronic Equipment, Parts & Repairs Handy Hose Services 24427 77.47 Repair & Maintenance Services and/or Supplies Harrington Industrial Plastics, Inc. 24610 2,702.73 Repair & Maintenance Services and/or SuppliesHarrington Industrial Plastics, Inc. 24789 1,335.59 Repair & Maintenance Services and/or Supplies Hasler, Inc. 24428 94.61 Postage Meter Rental HDR Engineering, Inc. 24790 10,500.49 Professional Services/Engineering Design Services Health Dimensions 24791 450.00 Miscellaneous Services Healthfax, Inc. 24429 5,192.00 Miscellaneous ServicesHelix Electric, Inc. 24361 124,955.00 Construction Hello Direct 24611 1,323.24 Communications Equipment Hi Standard Automotive 24792 290.58 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Hill Brothers 8 122,729.43 Chemicals, Water/Wastewater Treatment Hill Brothers 13 124,542.22 Chemicals, Water/Wastewater TreatmentHills Boat Service, Inc. 24430 919.22 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Home Depot 24431 259.82 Miscellaneous Parts and Supplies Home Depot 24612 610.15 Miscellaneous Parts and Supplies Home Depot 24793 659.64 Miscellaneous Parts and Supplies Hope Health/IHAC 24794 563.73 BenefitsHorizon Technology 24432 4,601.00 Laboratory Services & Supplies Hua Y. Yu 24886 653.49 Meeting/Training Expense Reimbursement Hub Auto Supply 24795 2,269.24 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Humantech, Inc. 24613 13,767.07 Professional Organizations Meeting/Training/Membership Hyatt Legal Plans, Inc. 24797 1,098.00 Voluntary Employee Benefit ProgramIndiana Child Support Bureau 24614 290.00 Judgments Payable Industrial Distribution Group 24434 118.75 Repair & Maintenance Services and/or Supplies Industrial Distribution Group 24615 60.17 Repair & Maintenance Services and/or Supplies Industrial Metal Supply 24798 93.70 Repair & Maintenance Services and/or Supplies Industrial Plaza 24530 841.31 Reconciliation User Fee Refund ProgramIndustrial Threaded Products, Inc. 24616 1,610.18 Repair & Maintenance Services and/or Supplies Information Handling Services 24433 3,421.60 Computer Applications & Services fin/210/lc Page 5 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 Inland Litho 24617 2,044.50 Printing and Delivery Services Innerline Engineering 24435 2,712.50 Professional Services - Sewer Line Video Inspections Inorganic Ventures, Inc. 24436 96.40 Laboratory Services & SuppliesIntercare Holdings Insurance Svcs., Inc. 24437 2,916.67 Workers' Compensation Service Internal Revenue Service 24618 125.00 Governmental Agency Fees & ChargesInterstate Batteries of Cal Coast 24799 939.27 Repair & Maintenance Services and/or Supplies Intl. Union of Oper. Eng. AFL CIO Local 501 24619 4,863.87 Dues Deductions Invensys Systems Inc C/O Mag 24438 1,334.80 Electrical/Electronic Equipment, Parts & RepairsIPI*GrammTech, Inc. 24800 19,477.00 Computer Applications & Services IPMC c/o Parsons 24352 1,457,410.00 Professional Services/Temporary ServicesIrvine Ranch Water District 24620 48.15 Water Use Irvine Ranch Water District 24801 11.20 Water Use J F Shea Construction, Inc. 24362 671,040.19 ConstructionJ. F. Shea Construction, Inc. 24902 11,478,642.16 Construction Jack Finnell 24773 212.65 Reconciliation User Fee Refund ProgramJames C. Mullins 24523 1,083.13 Meeting/Training Expense Reimbursement James E. Colston 24724 336.20 Meeting/Training Expense Reimbursement James L. Burror 24880 250.00 Meeting/Training Expense Reimbursement James Spears, Jr. 24526 160.54 Meeting/Training Expense Reimbursement Jamison Engineering Contractors, Inc. 24353 81,616.84 Professional Services/Engineering Design ServicesJamison Engineering Contractors, Inc. 24621 5,605.00 Professional Services/Engineering Design Services Jamison Engineering Contractors, Inc. 24802 6,071.47 Professional Services/Repairs & Maintenance Services Jays Catering 24440 615.04 Catering Services Jays Catering 24622 615.04 Catering Services Jays Catering 24803 197.91 Catering ServicesJCI Jones Chemicals, Inc. 9 137,966.65 Chemicals, Water/Wastewater Treatment JCI Jones Chemicals, Inc. 11 109,116.90 Chemicals, Water/Wastewater Treatment JCI Jones Chemicals, Inc. 14 83,504.05 Chemicals, Water/Wastewater Treatment Jeffrey T. Reed 24728 347.26 Meeting/Training Expense Reimbursement Jensen Instrument Co. 24441 1,604.12 Electrical/Electronic Equipment, Parts & RepairsJG Tucker And Son, Inc. 24439 878.16 Safety, Security, Health Equipment, Supplies, and Services John G. Gonzalez 24529 1,427.61 Reconciliation User Fee Refund Program John Kavoklis 24522 160.54 Meeting/Training Expense Reimbursement Johnstone Supply 24623 377.45 Repair & Maintenance Services and/or Supplies Johnstone Supply 24804 2,900.79 Repair & Maintenance Services and/or SuppliesJoshua Casey Corporate Training 24624 2,100.00 Safety, Security, Health Equipment, Supplies, and Services Kemira Water Solutions 15 44,996.69 Chemicals, Water/Wastewater Treatment Kemira Water Solutions 24354 166,350.07 Chemicals, Water/Wastewater Treatment Ken Thompson, Inc. 24549 32,023.55 Construction Kiesel Environmental Lab 24625 120.00 Laboratory Services & SuppliesKiewit Pacific Co. 24363 3,885,781.50 Construction Kimberly A. Erickson 24881 1,503.25 Meeting/Training Expense Reimbursement KM Industrial, Inc. 24442 2,669.00 Repair & Maintenance Services and/or Supplies Koff & Associates Inc 24443 22,180.00 Professional Services/Comp & Class Study KTA-TATOR, Inc. 24444 76.00 Maint. Consulting ServiceL. Johnson Painting 24626 10,770.00 Painting Services and Supplies Lance Soll and Lunghard 24805 1,371.00 Professional Services - Auditing fin/210/lc Page 6 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 Lee & Ro, Inc. 24355 49,838.40 Professional Services/Engineering Design Services Lee & Ro, Inc. 24806 999.22 Professional Services/Engineering Design Services M. J. Schiff and Associates, Inc. 24628 4,000.00 Professional Services/Engineering Design ServicesMalcolm Pirnie, Inc. 24356 122,965.87 Professional Services/Engineering Design Services Malcolm Pirnie, Inc. 24541 112,921.68 Professional Services/Engineering Design ServicesMalcolm Pirnie, Inc. 24891 32,845.13 Professional Services/Engineering Design Services MarcoPolo S. Velasco 24733 1,267.49 Employee Computer Loan Program Maria Jimenez 24732 1,194.79 Employee Computer Loan ProgramMaterial and Contract Services 24446 14,880.00 Temporary Employment Services Maxim Security Systems 24807 1,049.00 Safety, Security, Health Equipment, Supplies, and ServicesMcMaster Carr Supply Co. 24445 50.12 Repair & Maintenance Services and/or Supplies McMaster-Carr Supply Co. 24447 6,645.34 Repair & Maintenance Services and/or Supplies McMaster-Carr Supply Co. 24629 1,916.61 Repair & Maintenance Services and/or Supplies McMaster-Carr Supply Co. 24808 839.80 Repair & Maintenance Services and/or SuppliesMeasurement Control Systems, Inc. 24448 5,339.36 Repair & Maintenance Services and Supplies Mellon Trust 24888 29,834.00 Professional Services - Asset Administration Mesa Consolidated Water District 24630 23.50 Water UseMesa Muffler 24809 419.75 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Michael D. White 24885 388.85 Meeting/Training Expense ReimbursementMichelle R. Hetherington 24521 132.54 Meeting/Training Expense Reimbursement Mine Safety Appliance 24810 1,675.68 Electrical/Electronic Equipment, Parts & Repairs Mission Abrasive & Janitorial Supplies 24631 507.28 Janitorial & Household Services & SuppliesMladen Buntich Construction Company 24903 798,966.00 Construction Murphy Industrial Coatings, Inc. 24449 4,750.00 Painting Services and SuppliesNational Assoc. of Clean Water Agencies 24892 38,028.00 Professional Organization & Meeting/Training Registration National Bond & Trust 24633 2,064.94 U.S. Savings Bonds Payroll Deductions National Fire Protection Association 24634 150.00 Professional OrganizationNational Notry Association 24635 459.70 Professional Organizations Meeting/Training/Membership Nautilus Environmental, L.L.C. 24450 250.00 Laboratory Services & SuppliesNeal Supply Co. 24451 4,218.36 Repair & Maintenance Services and/or Supplies Neal Supply Co. 24636 273.92 Repair & Maintenance Services and/or Supplies Neal Supply Co. 24811 1,940.07 Repair & Maintenance Services and/or SuppliesNeutron Products, Inc. 24637 6,280.97 Chemicals, Water/Wastewater Treatment Neutron Products, Inc. 24812 3,160.71 Chemicals, Water/Wastewater TreatmentNew Horizons Computer Learning Center 24452 450.00 Professional Organizations Meeting/Training/Memberships New Horizons Computer Learning Center 24813 150.00 Professional Organizations Meeting/Training/Memberships Newark Electronics 24814 282.87 Electrical/Electronic Equipment, Parts & RepairsNinyo & Moore 24638 477.00 Professional Services/Geotech & Material Testing Ninyo & Moore 24893 54,899.25 Professional Services/Geotech & Material TestingNorco Delivery 24815 436.16 Delivery Services Northeast Laboratory Services, Inc. 24816 1,670.96 Laboratory Services & Supplies Northern Tool & Equipment 24817 2,198.24 Repair & Maintenance Services and/or SuppliesNRG Engine Services, L.L.C. 10 1,222.87 Repair & Maintenance Services and/or Supplies NRG Engine Services, L.L.C. 24818 1,119.20 Repair & Maintenance Services and/or SuppliesO C Tanner Recognition Company 24453 1,475.03 Service Awards OCB Reprographics 24639 2,461.11 Miscellaneous Services fin/210/lc Page 7 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 OCEA 24640 634.55 Dues Deductible Office Depot 24454 546.04 Office Supplies Office Depot 24641 782.16 Office SuppliesOffice Depot 24819 222.97 Office Supplies Olin Corporation 24820 8,345.68 Chemicals, Water/Wastewater TreatmentOmega Engineering Inc 24455 3,298.37 Electrical/Electronic Equipment, Parts & Repairs Omega Industrial Supply, Inc. 24456 2,434.50 Janitor & Household Service & Supplies Omega Industrial Supply, Inc. 24821 1,908.44 Janitor & Household Service & SuppliesOMI Industries 24457 5,575.00 Chemicals, Water/Wastewater Treatment OneSource Distributors, Inc. 24458 6,110.23 Electrical/Electronic Equipment, Parts & RepairsOneSource Distributors, Inc. 24642 4,107.14 Electrical/Electronic Equipment, Parts & Repairs OneSource Distributors, Inc. 24822 9,302.94 Electrical/Electronic Equipment, Parts & Repairs Oracle USA, Inc. 24643 19,870.71 Computer Applications & ServicesOrange County Hose Company 24823 1,404.38 Miscellaneous Parts and Supplies Orange County Sanitation District 24531 1,496.39 Petty Cash ExpenseOrange County United Way 24644 60.00 Employee Contributions Orange County Vector Control District 24824 140.80 Pest Control Orange County Water District 24542 253,428.22 GAP Water Orange County Water District 24894 73,912.92 GAP Water Orange Fluid System Technologies, Inc. 24645 259.93 Repair & Maintenance Services and/or SuppliesOxygen Service Company 24459 1,298.22 Laboratory Services & Supplies Oxygen Service Company 24646 554.28 Laboratory Services & Supplies Oxygen Service Company 24825 1,014.02 Laboratory Services & Supplies PAC 24460 2,180.00 Laboratory Services & Supplies Pacific Mechanical Supply 24461 522.82 Repair & Maintenance Services and/or SuppliesPacific Mechanical Supply 24647 76.38 Repair & Maintenance Services and/or Supplies Pacific Mechanical Supply 24826 3,782.42 Repair & Maintenance Services and/or Supplies Pacific Parts and Controls, Inc. 24648 1,241.93 Repair & Maintenance Services and/or Supplies Pacific Parts and Controls, Inc. 24827 310.48 Repair & Maintenance Services and/or Supplies Padgett - Thompson 24649 199.00 Training RegistrationParker Supply Company 24650 5,808.85 Miscellaneous Parts and Supplies Parkhouse Tire, Inc. 24828 2,557.24 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Patriot Video Productions 24462 792.14 Miscellaneous Services PBS & J 24543 42,588.17 Professional Services/Engineering Design Services PCS Express, Inc. 24651 161.28 Courier ServicesPeace Officers Council of CA 24652 2,231.00 Dues Deductions, Supervisors & Professionals Peerless Wiping Materials Co. 24829 999.41 Janitor & Household Service & Supplies Performance Pipeline Technologies 24463 8,565.00 Professional Services/CCTV Inspection Performance Pipeline Technologies 24830 11,058.67 Professional Services/CCTV Inspection PL Hawn Company, Inc. 24464 89.39 Repair & Maintenance Services and/or SuppliesPL Hawn Company, Inc. 24653 3,697.59 Electrical/Electronic Equipment, Parts & Repairs Polydyne, Inc. 12 62,016.78 Chemicals, Water/Wastewater Treatment Polydyne, Inc. 16 24,050.67 Chemicals, Water/Wastewater Treatment Polydyne, Inc. 24357 41,702.87 Chemicals, Water/Wastewater Treatment Primary Source Office Furnishings, Inc. 24831 2,694.83 Minor Equipment/Furniture & FixturesPrimrose Ice Co., Inc. 24465 110.00 Water & Ice Services Primrose Ice Co., Inc. 24832 220.00 Water & Ice Services fin/210/lc Page 8 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 Procare Work Injury Center 24466 220.00 Medical Services Progressive Business Publications 24467 230.00 Books and Publications Project Management Institute 24468 154.00 Professional OrganizationProjectline Technical Services, Inc. 24833 1,798.50 Professional Services/Engineering Design Services Propipe Professional Pipe Services 24469 3,542.70 Professional Services/Sewerline CleaningPropipe Professional Pipe Services 24654 10,647.74 Professional Services/Sewerline Cleaning Prudential Insurance Company of America 24895 41,555.73 Benefits Prudential Overall Supply 24655 3,137.64 UniformsPrudential Overall Supply 24834 2,738.62 Uniforms Pump Engineering 24835 2,558.82 Repair & Maintenance Services and/or SuppliesPutzmeister America, Inc. 24656 3,431.11 Repair & Maintenance Services and/or Supplies Quickstart Intelligence 24657 597.00 Training R L Abbott & Associates 24836 1,000.00 Professional Services/Advocacy EffortsRadka, John A. 24525 153.56 Meeting/Training Expense Reimbursement Rainbow Disposal Co. 24470 3,376.48 Waste DisposalRainbow Nut & Bolt, Inc. 24471 110.29 Repair & Maintenance Services and/or Supplies Rainin Instrument, L.L.C. 24472 253.05 Laboratory Services & Supplies RBF Consulting 24659 3,796.00 Professional Services - Surveying RBF Consulting 24896 66,419.36 Professional Services/Engineering Design Services Recruiting.Com, Inc. 24473 1,185.00 Notices & AdsReliastar 24837 5,066.66 Voluntary Employee Life & Cancer Insurance Rentacrate, L.L.C. 24660 399.54 Facilities, Maintenance, Services & Supplies Resource Environmental, Inc. 24474 4,950.00 Facilities, Maintenance, Services & Supplies Rexel Electrical & Datacom Supplies 24661 1,549.69 Instrument Parts & Supplies Richard D. Chappell 24520 1,691.55 Meeting/Training Expense ReimbursementRMS Engineering & Design, Inc. 24838 6,465.00 Professional Services/Engineering Design Services Roberto's Auto Trim Shop 24839 970.50 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Rosemount Analytical 24662 1,060.00 Electrical/Electronic Equipment, Parts & Repairs Roto Rooter NOC#11 24475 3,078.50 Repair & Maintenance Services and/or Supplies Roto Rooter NOC#11 24663 162.50 Repair & Maintenance Services and/or SuppliesRoyale Cleaners 24476 44.70 Miscellaneous Services RP Amerige Delaware/Barclay 24367 54,880.77 Reconciliation User Fee Refund Program RPM Electric Motors 24664 42.37 Repair & Maintenance Services and/or Supplies Ryan Herco Products Corp. 24665 2,384.27 Repair & Maintenance Services and/or Supplies Safety-Kleen 24666 637.16 Repair & Maintenance Services and/or SuppliesSaybolt, L.P. 24667 2,440.00 Lab Analyses SC Field Technical Services 24668 1,446.81 Repair & Maintenance Services and/or Supplies Scott Specialty Gases, Inc. 24478 35.40 Laboratory Services & Supplies Scott Specialty Gases, Inc. 24840 3,666.99 Laboratory Services & Supplies Seals Compressed Gases 24670 28.01 Miscellaneous Parts and SuppliesSFM Mutual Insurance Company 24841 180.00 Safety, Security, Health Equipment, Supplies, and Services Shamrock Supply Co., Inc. 24671 1,838.93 Repair & Maintenance Services and/or Tools and Supplies Shamrock Supply Co., Inc. 24842 4,763.15 Repair & Maintenance Services and/or Tools and Supplies Shepard Brothers, Inc. 24843 6,277.30 Chemicals, Water/Wastewater Treatment Shimmick Construction Co., Inc. 24364 1,283,797.81 ConstructionShureluck Sales & Engineering 24479 920.36 Repair & Maintenance Services and/or Supplies Shureluck Sales & Engineering 24672 839.81 Repair & Maintenance Services and/or Supplies fin/210/lc Page 9 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 Shureluck Sales & Engineering 24844 621.72 Repair & Maintenance Services and/or Supplies Siemens c/o Jensen Instrument Co. 24673 8,152.04 Electrical/Electronic Equipment, Parts & Repairs Siemens c/o Ponton Industries, Inc. 24674 1,400.03 Repair & Maintenance Services and/or SuppliesSiemens Water Technologies Corp. 24480 443.76 Repair & Maintenance Services and/or Supplies Siemens Water Technologies Corp. 24675 891.66 Repair & Maintenance Services and/or SuppliesSigma-Aldrich, Inc. 24481 163.30 Laboratory Services & Supplies Sigma-Aldrich, Inc. 24676 219.21 Laboratory Services & Supplies Simon L. Watson 24884 169.51 Meeting/Training Expense ReimbursementSKC West, Inc. 24482 331.00 Laboratory Services & Supplies Smith-Emery Company 24483 8,310.38 Professional Services/Geotech & Material TestingSmith-Emery Company 24845 671.00 Professional Services/Geotech & Material Testing Snap On, Inc. DBA Shopkey 24846 1,499.00 Computer Applications & Services So Cal Gas Company 24484 3,397.02 UtilitiesSource Graphics 24847 20,349.30 Computer Applications & Services South Coast Air Quality Management Dist. 24677 402.21 Regulatory Operating FeesSouth Coast Construction Services 24485 2,875.00 Repair & Maintenance Services and/or Supplies South Coast Construction Services 24678 1,554.00 Repair & Maintenance Services and/or Supplies South Coast Environmental Co. 24477 3,483.18 Professional Services - Air Quality Monitoring South Coast Environmental Co. 24669 1,223.46 Professional Services - Air Quality Monitoring Southern California Edison 24486 2,133.54 UtilitiesSouthern California Edison 24544 438,440.41 Utilities Southern California Edison 24897 95,967.35 Utilities Southern California Trane Service 24487 1,645.87 Electrical/Electronic Equipment, Parts & Repairs Southern California Trane Service 24679 4,527.88 Electrical/Electronic Equipment, Parts & Repairs Southern Counties Lubricants 24680 1,481.74 Fuel and LubricantsSparkletts 24681 1,930.85 Miscellaneous Supplies Sparling Instruments, Inc. 24682 4,928.92 Electrical/Electronic Equipment, Parts & Repairs Spectrum Systems, Inc. 24488 3,738.75 Computer Applications & Services SPEX Certiprep, Inc. 24683 154.44 Laboratory Services & Supplies Square D Co. dba Schneider Electric 24684 4,765.43 Electrical/Electronic Equipment, Parts & RepairsSquare D Company 24848 10,030.02 Computers Software/Hardware Stanley Steamer International, Inc. 24685 1,713.20 Janitor & Household Service & Supplies Staples 24686 40.01 Office Supplies Staples Direct 24489 211.54 Office Supplies Staples Direct 24849 468.85 Office SuppliesStarbuck Truck Refinishing, Inc. 24490 860.00 Painting Service Steve Bubalo Construction Co. 24904 447,032.76 Construction Steven R. Speakman 24730 125.00 Meeting/Training Expense Reimbursement Stratus Environmental, Inc. 24850 3,950.00 Professional Services/Engineering Design Services Summit Steel 24687 878.16 Repair & Maintenance Services and/or SuppliesSummit Steel 24851 1,014.61 Repair & Maintenance Services and/or Supplies Sunset Ford 24852 343.90 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Sunset Industrial Parts 24491 513.36 Repair & Maintenance Services and/or Supplies Sunset Industrial Parts 24853 267.09 Repair & Maintenance Services and/or Supplies Synagro West, Inc. 24358 540,525.65 BiosolidsTDC Group, Inc. 24492 1,500.00 Computer Applications and Services TekSystems 24493 6,240.00 Professional Services/Temporary Services fin/210/lc Page 10 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 TekSystems 24688 3,120.00 Professional Services/Temporary Services Terminix International 24494 2,060.00 Pest Control Services Terminix International 24689 1,034.00 Pest Control ServicesTerminix International 24854 550.00 Pest Control Services Terra Renewal, L.L.C. 24495 21,136.38 Grit & Screenings DisposalTerra Renewal, L.L.C. 24545 26,435.80 Grit & Screenings Disposal Terra Renewal, L.L.C. 24855 17,354.65 Grit & Screenings Disposal TestAmerica Ontario 24496 382.00 Laboratory Services & SuppliesTestAmerica Ontario 24690 3,029.00 Laboratory Services & Supplies The Clock Sales and Service Co., Inc. 24859 133.94 Repair & Maintenance Services and/or SuppliesThe Integration Works, L.L.C. 24497 1,602.00 Repair & Maintenance Services and/or Supplies The Standard Insurance Company 24856 2,625.81 Disability Insurance The Training Clinic 24861 3,311.00 On-Site Training ClassesThe Unisource Corporation 24701 642.06 Paper & Office Supplies The Wackenhut Corporation 24710 13,113.00 Safety, Security, Health Equipment, Supplies, and ServicesThermo Electron Corp. 24691 572.37 Laboratory Services & Supplies Thompson Industrial Supply, Inc. 24498 3,887.16 Repair & Maintenance Services and/or Supplies Thompson Industrial Supply, Inc. 24692 4,063.91 Repair & Maintenance Services and/or Supplies Thompson Industrial Supply, Inc. 24857 1,596.83 Repair & Maintenance Services and/or Supplies Tiano Construction 24693 5,540.00 Facilities, Maintenance, Services & SuppliesTiano Construction 24858 12,805.00 Facilities, Maintenance, Services & Supplies Tim Hopkins and PC Nerds 24533 1,998.11 Employee Computer Loan Program Time Warner Communications 24860 51.98 Telecommunications T-Mobile 24499 108.18 Telecommunications Todd Painting, Inc. 24694 3,767.00 Painting Services and SuppliesTownsend Public Affairs 24500 7,500.00 Professional Services - State Advocacy Transcat 24501 28.11 Repair & Maintenance Services and/or Supplies Transcat 24695 713.95 Repair & Maintenance Services and/or Supplies Tremco Incorporated 24696 4,845.00 Repair & Maintenance Services and/or Supplies Troemner Inc., 24697 139.03 Repair & Maintenance Services and SuppliesTruck & Auto Supply, Inc. 24502 79.04 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Truck & Auto Supply, Inc. 24698 430.65 Autos, Trucks & Marine Equipment, Parts, Accessories & Services Tule Ranch/Magan Farms 24359 203,879.30 Biosolids Management Tule Ranch/Magan Farms 24546 41,156.39 Biosolids Management Tule Ranch/Magan Farms 24898 90,854.71 Biosolids ManagementTW Telecom Holdings, Inc. 24862 5,675.53 Telecommunications U Line 24699 472.53 Miscellaneous Parts and Supplies UC Regents 24863 725.00 Training Ultra Scientific 24700 222.60 Laboratory Services & Supplies Umesh N. Murthy 24727 150.00 Meeting/Training Expense ReimbursementUnderground Service Alert of So. Calif 24503 1,386.00 Professional Services - Dig Alert Notification Service Union Bank of California 24504 1,978.00 Annual Administrative Fee for Series 2003 Certificates of Participation Union Bank of California Escrow 24365 35,317.91 Construction, Retention Unisource Worldwide, Inc. 24864 688.67 Paper & Office Supplies United Direct Marketing 24505 4,054.25 Courier ServicesUnited Pacific Services, Inc. 24506 1,950.00 Groundskeeping United Parcel Service 24507 115.21 Parcel Services fin/210/lc Page 11 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 United Parcel Service 24702 1,051.37 Parcel Services United Parcel Service 24865 41.47 Parcel Services United Power Service, Inc. 24703 723.54 Repair & Maintenance Services and/or SuppliesUnited States Postal Service 24866 5,000.00 Postage University of Southern California 24867 724.70 Books & PublicationsUS Peroxide, L.L.C. 24360 306,726.15 Chemicals, Water/Wastewater Treatment US Peroxide, L.L.C. 24547 78,867.41 Chemicals, Water/Wastewater Treatment US Peroxide, L.L.C. 24899 169,508.48 Chemicals, Water/Wastewater TreatmentUSA Mobility Wireless, Inc. 24704 704.50 Telecommunications Valley Detroit Diesel Allison 24508 164.89 Repair & Maintenance Services and/or SuppliesVarian, Inc. 24705 770.85 Laboratory Services & Supplies Verizon 24706 1,535.58 Telecommunications Verizon California 24509 818.70 TelecommunicationsVerizon California 24868 49.74 Telecommunications Verizon California 24510 1,662.84 TelecommunicationsVerne's Plumbing 24511 70.00 Plumbing Services & Supplies Verne's Plumbing 24707 2,835.10 Plumbing Services & Supplies Victor A. Salinas 24729 1,004.06 Meeting/Training Expense Reimbursement Villa Prep & Paint 24512 5,445.00 Painting Services and Supplies Villa Prep & Paint 24869 3,495.00 Painting Services and SuppliesVision Financial Corporation 24870 664.60 Employee Voluntary Benefits Vladimir A. Kogan 24726 186.57 Meeting/Training Expense Reimbursement Voided Check 24723 - - Vortex Corp. 24708 451.37 Repair & Maintenance Services and/or Supplies Vortex Corp. 24871 3,249.37 Repair & Maintenance Services and/or SuppliesVWR Scientific Products 24513 808.17 Laboratory Services & Supplies VWR Scientific Products 24709 5,215.27 Laboratory Services & Supplies Walts Warf, L.L.C. 24534 2,277.37 Reconciliation User Fee Refund Program Water 3 Engineering, Inc. 24872 2,500.00 Professional Services/Engineering Design Services Waters Corporation 24711 5,246.17 Laboratory Services & SuppliesWaxie Sanitary Supply 24712 660.46 Janitor & Household Service & Supplies Waxie Sanitary Supply 24873 240.97 Janitor & Household Service & Supplies WEF 24514 177.00 Professional Organizations Meeting/Training/Memberships WEF 24713 177.00 Professional Organizations Meeting/Training/Memberships WEF 24874 217.00 Professional Organizations Meeting/Training/MembershipsWells Fargo Bank 24366 431,753.50 Construction, Retention West Coast Life 24875 2,983.00 Employee Life Insurance West Coast Safety Supply Co. 24515 1,002.85 Safety, Security, Health Equipment, Supplies, and Services West Coast Switchgear, Inc. 24714 599.06 Electrical/Electronic Equipment, Parts & Repairs West Lite Supply Company, Inc. 24516 500.47 Electrical/Electronic Equipment, Parts & RepairsWest Lite Supply Company, Inc. 24876 209.38 Electrical/Electronic Equipment, Parts & Repairs Western States Construction 24535 387.86 Reconciliation User Fee Refund Program Westflex Industrial 24715 270.00 Repair & Maintenance Services and/or Supplies Woodruff Spradlin & Smart 24900 59,929.89 Professional Services - Legal WorldatWork 24716 395.00 Professional Organizations Meeting/Training/MembershipWPL Publishing 24717 246.00 Professional Organizations Meeting/Training/Membership WPL Publishing 24877 246.00 Professional Organizations Meeting/Training/Memberships fin/210/lc Page 12 of 13 EXHIBIT B 10/14/2009 Vendor Warrant No.Amount Description Claims Paid From 09/16/09 to 09/30/09 Xerox Corporation 24517 179.28 Computers, Software/Hardware & Managed Services Xerox Corporation 24718 20,937.76 Computers, Software/Hardware & Managed Services Xyon Business Solutions, Inc. 24518 1,770.00 Professional Services/Temporary ServicesYale/Chase Materials Handling, Inc. 24719 2,158.14 Electrical/Electronic Equipment, & Electric Cart Parts & Repairs Yale/Chase Materials Handling, Inc. 24878 112.12 Electrical/Electronic Equipment, & Electric Cart Parts & RepairsYokogawa Ind Automation C/O Rm Controls 24721 1,192.73 Electrical/Electronic Equipment, Parts & Repairs Yu-Li Tsai 24532 2,000.00 Employee Computer Loan Program 1-800-Conference(R) 24519 184.01 Telecommunications Total Accounts Payable - Warrants $ 28,516,979.23 Payroll Disbursements Employee Paychecks 42992 - 43040 106,140.58$ Biweekly Payroll (09/23/09)Employee Paychecks 43041 - 43042 36.87 Interim Payroll - Retro, Term. & Voided Check #43042 Direct Deposit Statements 177261 - 177838 1,418,350.03 Biweekly Payroll (09/23/09) Total Payroll Disbursements $ 1,524,527.48 Wire Transfer PaymentsOCSD Payroll Taxes & Contributions 795,470.97$ Biweekly Payroll (09/23/09) Intercare Insurance Services 78,808.79 Workers' Compensation Fund/Medical/Legal Total Wire Transfer Payments $ 874,279.76 Total Claims Paid 09/16/09 - 09/30/09 30,915,786.47$ fin/210/lc Page 13 of 13 EXHIBIT B 10/14/2009 Corrected Orange County Sanitation District MINUTES BOARD MEETING September 23, 2009 ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708-7018 Minutes of Board Meeting 09/23/09 Page 2 ROLL CALL A regular meeting of the Board of Directors of the Orange County Sanitation District was held on September 23, 2009 at 6:30 p.m., in the Administrative Offices. Following the Pledge of Allegiance and invocation, the roll was called and the Associate Clerk of the Board reported a quorum present as follows: ACTIVE DIRECTORS ALTERNATE DIRECTORS X Doug Davert, Chair John Nielson X Larry Crandall, Vice Chair Steve Nagel X John Anderson Jim Winder X Charles Antos Gordon Shanks X Tom Beamish Rose Espinoza X Keith Bohr Don Hansen X Bill Dalton Andrew Do X Jon Dumitru Denis Bilodeau X Troy Edgar Ken Stephens James M. Ferryman X Bob Ooten X Phil Luebben Prakash Narain X Patsy Marshall Fred Smith X Roy Moore Ron Garcia Joy Neugebauer X Al Krippner X Chris Norby Janet Nguyen X Sharon Quirk-Silva Pam Keller X Brad Reese Bill Mac Aloney X David Shawver Carol Warren Christina Shea X Steven Choi X Harry Sidhu Lucille Kring Sal Tinajero X David Benavides X Constance Underhill Joseph Aguirre A Mark Waldman Henry Charoen A Don Webb Leslie Daigle X John Withers Douglas Reinhart STAFF MEMBERS PRESENT: Jim Ruth, General Manager; Lilia Kovac, Associate Clerk of the Board; Nick Arhontes; Jim Herberg; Ed Torres; Lorenzo Tyner; Norbert Gaia; Michael Gold; Jeff Reed; Ryal Wheeler; Chuck Winsor; Paula Zeller OTHERS PRESENT: Brad Hogin, General Counsel Minutes of Board Meeting 09/23/09 Page 3 PUBLIC COMMENTS There were no comments. REPORT OF THE CHAIR Doug Davert, Board Chair, reported that Director of Engineering Jim Herberg and Denis Bilodeau were recipients of the Said Khoury Award from the World Federation of Engineering Organizations for Engineering Construction Excellence on the Groundwater Replenishment System. Chair Davert reported that he and Vice Chair Crandall had attended the Volunteer Incentive Program (VIP) awards luncheon. Chair Davert announced 20-year service awards to Jim Colston and Merrill Seiler. The meeting schedule for the month of October was reviewed. REPORT OF THE GENERAL MANAGER General Manager Jim Ruth presented a brief report on the SARI Line status, Asset Management Program, and the status of SAWPA negotiations. REPORT OF THE GENERAL COUNSEL General Counsel, Brad Hogin, reported that the Ninth Circuit Court of Appeals dismissed the Kern County Measure-E Litigation Commerce Clause claim with no impact to OCSD. RATIFICATION OF PAYMENT OF CLAIMS 1. MOVED, SECONDED AND DULY CARRIED: Ratify payment of claims, as set forth on Exhibits “A” and “B”, attached hereto and made a part of these minutes. ALL DISTRICTS 08/15/09 08/31/09 Totals $ 18,083,506.11 $ 13,924,142.64 Director Crandall abstained from discussion and voting on Warrant No. 23423. Director Dalton abstained from discussion and voting on Warrant Nos. 23390 and 23781. Director Luebben abstained from discussion and voting on Warrant Nos. 23307, 23635, 23695, and 23874. Director Shawver abstained from discussion and voting on Warrant Nos. 23354, 23742, and 23904. Directors Bohr, Ooten, Norby, Sidhu and Benavides abstained from discussion and voting on all warrants. Abstentions were pursuant to California Government Code Section 84308. CONSENT CALENDAR (2 - 4) 2. MOVED, SECONDED AND DULY CARRIED: Approve the minutes for the regular meeting held on August 26, 2009, to be filed and deemed approved, as mailed. Minutes of Board Meeting 09/23/09 Page 4 3. MOVED, SECONDED AND DULY CARRIED: a) Approve a budget Increase of $153,000 for a total project budget not to exceed $983,000 for Santa Ana River Interceptor, 2009-10 Protection Repairs, Contract No. 2-41-6; b) Approve Plans and Specifications and addendum No. 1 for Santa Ana River Interceptor, 2009-10 Protection Repairs, Contract No. 2-41-6, on file at the office of the Clerk of the Board; c) Receive and file bid tabulation and recommendation, d) Award a contract to Jamison Engineering Contractors, Inc. for Santa Ana River Interceptor 2009-10 Protection Repairs, Contract No. 2-41-6 (Specification No. FR-2009-433BD) for an amount not to exceed $552,244.70; and, e) Approve a contingency of $55,225 (10%). 4. Item pulled by Board Chair. STEERING COMMITTEE (5) 5. MOVED, SECONDED AND DULY CARRIED: Order Steering Committee Minutes for the regular meeting held on August 23, 2009 to be filed. OPERATIONS COMMITTEE (6 – 11) 6. MOVED, SECONDED AND DULY CARRIED: Order Operations Committee minutes for the meeting held on September 2, 2009 to be filed. 7. MOVED, SECONDED AND DULY CARRIED: Approve a budget amendment in the amount of $137,518 for Rehabilitation of District Siphons, Contract No. 2-68, for a total budget of $8,141,518. 8. MOVED, SECONDED AND DULY CARRIED: a) Approve a Budget increase of $516,000 for Rehabilitation of Westside Pump Station, Contract No. 3-52, for a total budget amount of $11,025,000; and b) Approve a contingency increase of $176,550 (3%) to the construction contract with Norm A. Olsson Construction, Inc., for Rehabilitation of Westside Pump Station, Contract No. 3-52, for a total contingency of $470,800 (8%). 9. Item pulled for discussion. 10. MOVED, SECONDED AND DULY CARRIED: Approve a Quitclaim Grant of Property Rights in Sewer Pipeline and Assignment of Accompanying Easement Rights from Orange County Sanitation District to the Costa Mesa Sanitary District, in the amount not to exceed $1,300,000, in a form approved by General Counsel. Minutes of Board Meeting 09/23/09 Page 5 11. Item pulled for discussion. NON CONSENT CALENDAR 9. Directors requested additional information from staff. It was then: MOVED, SECONDED AND DULY CARRIED: Approve a reduction in retention to not less than 1% ($282,715) of the total contract amount for the Construction Contract with J. F. Shea Construction, Inc. for Ellis Avenue Pump Station Construction, Contract No. I-10B. Director Norby abstained. 11. A motion was made to reduce the number of Request for Proposals issued to the most qualified firms to three. A substitute motion was made; it was then, MOVED, SECONDED AND DULY CARRIED: a) Authorize the General Manager to issue a Request for Proposal for Design-Build Services to the five most qualified firms for Rehabilitation of Magnolia Trunk Sewer, Contract No. 3-58; and, b) Authorize the General Manager to negotiate a Design-Build Contract Agreement for said project with the Design-Build firm providing “best value,” as defined by the Public Contract Code, to be awarded by the Board of Directors at a future meeting. Directors Dumitru and Luebben opposed. ADMINISTRATION COMMITTEE (12 - 13) 12. MOVED, SECONDED AND DULY CARRIED: Order Administration Committee minutes for the regular meeting held on September 2, 2009 to be filed. 13. MOVED, SECONDED AND DULY CARRIED: Authorize the General Manager to issue Refunding Certificates of Participation, Series 2009B, in one-year fixed-rate certificate anticipation notes in an amount not to exceed $181 million to replace the $176 million Refunding Certificates of Participation, Series 2008C certificate anticipation notes maturing in December 2009. GWR SYSTEM STEERING COMMITTEE (14) 14. MOVED, SECONDED AND DULY CARRIED: Approve Joint Groundwater Replenishment System Steering Committee minutes for the meeting held on August 10, 2009, to be filed. Minutes of Board Meeting 09/23/09 Page 6 NON-CONSENT CALENDAR (15 - 16) 15. MOVED, SECONDED AND DULY CARRIED: Approve an Out of Service Area Sewer Service and Connection Agreement with the Board of Water Commissioners of the City of Long Beach to accept sewage flow from the Haynes Generating Station, in a form approved by General Counsel. 16. Ordinance No. OCSD-39, An Ordinance of the Board of Directors of Orange County Sanitation District, Establishing Wastewater Discharge Regulations, Revising Article 1, Section 104, and Repealing Ordinance No. OCSD-37. a. OPEN PUBLIC HEARING: Chair Davert declared the public hearing opened at 7:15 p.m. The Associate Clerk of the Board announced there were no written comments. b. CLOSE PUBLIC HEARING: Chair Davert declared the public hearing closed at 7:15 p.m. 1. MOVED, SECONDED AND DULY CARRIED: Read Ordinance No. OCSD-39 by title only and waive reading of said entire ordinance. 2. MOVED, SECONDED AND DULY CARRIED: Adopt Ordinance No. OCSD-39, An Ordinance of the Board of Directors of Orange County Sanitation District, Establishing Wastewater Discharge Regulations, Revising Article 1, Section 104, and Repealing Ordinance No. OCSD-37. Ayes: John Anderson; Charles Antos; Tom Beamish; Keith Bohr; Larry Crandall; Bill Dalton; Doug Davert; Jon Dumitru; Troy Edgar; Bob Ooten; Phil Luebben; Patsy Marshall; Roy Moore; Al Krippner; Chris Norby; Sharon Quirk-Silva; Brad Reese; Dave Shawver; Steven Choi; Harry Sidhu; David Benavides; Connie Underhill; John Withers Nays: None Absent: Mark Waldman; Don Webb CLOSED SESSION CONVENE IN CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(a): The Board convened in closed session at 7:16 p.m. pursuant to Government Code Section 54957(b)(1) to discuss one matter. RECONVENE IN REGULAR SESSION: The Board reconvened in regular session at 7:25 p.m. Minutes of Board Meeting 09/23/09 Page 7 ADJOURNMENT: The Chair declared the meeting adjourned at 7:26 p.m. _____________________________ Lilia Kovac Associate Clerk of the Board Orange County Sanitation District Page 1 BOARD OF DIRECTORS Meeting Date To Bd. of Dir. 10/28/09 AGENDA REPORT Item Number Item Number 3 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Ed Torres, Director of Technical Services SUBJECT: AGREEMENT WITH UNIVERSITY OF CALIFORNIA FOR ACCESS RELATED TO FUEL CELL HYDROGEN GAS GENERATION, PROJECT NO. SP-134 GENERAL MANAGER'S RECOMMENDATION Approve an Access Agreement for Operation of a Hydrogen Fueling Station and Fuel Cell Related Research Activities , with the University of California, Irvine, in connection with Fuel Cell Hydrogen Gas Generation, Project No. SP-134, in a form approved by General Counsel. SUMMARY • In April 2009, the Board of Directors approved an agreement with Air Products and Chemicals, Inc. (Air Products) for the construction, installation, and pilot testing of a hydrogen energy station as Project SP-134. • The University of California, Irvine (UCI) operates hydrogen fueling stations and develops hydrogen generation technology within its educational and research mission. • Air Products has engaged UCI to collect, analyze, and report data from the SP-134 fuel cell system and hydrogen fueling station as an independent evaluator of the equipment’s performance, operations and maintenance requirements, and air emissions levels. • An agreement to allow designated UCI representatives access the fuel cell and hydrogen fueling station sites for the purpose of collecting data has been developed. PRIOR COMMITTEE/BOARD ACTIONS April 2009 - Approval of an agreement with Air Products for installation and pilot testing for Fuel Cell Hydrogen Gas Generation, Project No. SP-134, at a cost not to exceed $400,000. This project includes fuel cell equipment to produce hydrogen and generate electricity and a hydrogen fueling station to allow some of the hydrogen to be used as vehicle fuel. Page 2 ADDITIONAL INFORMATION In August 2008, the Board of Directors approved an agreement with Air Products for the construction, installation, and pilot testing of a hydrogen energy station demonstration project, at a cost not to exceed $200,000. In April 2009 an amended agreement increased the cost limit to $400,000 to reflect changes in the location, layout, and scope of the project. The hydrogen energy station will use the Sanitation District’s digester gas to produce hydrogen, electricity, and heat. The hydrogen energy station project will have two main benefits for the Sanitation District. First, the project may demonstrate that the hydrogen station’s fuel cell power plant technology is a viable alternative source of reliable power and thermal heat for the treatment plants. Second, the station will produce hydrogen gas which will be compressed and made available to vehicles, including the Sanitation District’s fleet vehicles, as a clean burning fuel alternative to gasoline. Due to the Fountain Valley reclamation plant’s close proximity to a major freeway, placement of a hydrogen fueling station at this site will support the Governor’s hydrogen highway initiative. CEQA FINDINGS The Board of Directors previously approved the hydrogen energy station project. The current action is within the scope of that prior approval. Award Date: N/A Contract Amount: $400,000 Contingency: N/A ATTACHMENT N/A Form No. DW-102-2 Revised 03/01/07 Page 1 OPERATIONS COMMITTEE Meeting Date 10/07/09 To Bd. of Dir. 10/28/09 AGENDA REPORT Item Number 2 Item Number 6 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Director of Engineering Project Manager: Christopher MacLeod SUBJECT: CHEMICAL SCRUBBER CONVERSIONS AND PIPING SYSTEM IMPROVEMENTS, PROJECT NO. P2-106 GENERAL MANAGER'S RECOMMENDATION 1. Establish a budget for Chemical Scrubber Conversions and Piping System Improvements, Project No. P2-106, in the amount of $3,261,000; and, 2. Authorize the General Manager to negotiate a Professional Design Services Agreement with Dudek, Inc. for design and construction support services for Chemical Scrubber Conversions and Piping System Improvements, Project No. P2-106. SUMMARY • This project will convert existing chemical scrubbers to biological trickling filters with operational enhancements, install plant water booster pumps in the dewatering building to increase belt press water pressure, and rehabilitate the boiler feed water piping system to maintain system integrity. • This project was previously chartered and budgeted as Project No. FE05-11, which will be cancelled from the Facilities Engineering (FE) budget and project list. The project size is too large for the FE program to effectively manage. • The current construction document package has been delayed for one year awaiting personnel, schedule, and budget availability. The design effort was not completed and is approximately 75% complete. • Dudek, Inc. was selected as the design consultant using standard FE project protocols and Delegation of Authority in place at that time. Dudek, Inc. is uniquely qualified to finish the design work and to provide support services during the bidding, construction, commissioning, and closeout phases of this project. • The current Engineer’s Construction Cost Estimate is $2,265,000. This project will be offset from reduced expenditures on other Capital Improvement Program (CIP) projects. Form No. DW-102-2 Revised 03/01/07 Page 2 PRIOR COMMITTEE/BOARD ACTIONS March 2003 – Biotrickling Filter for Odor Control Demonstration Project: Phase II Final Report. This report formed the basis for Project No. FE03-34, subsequently chartered on July 22, 2004. ADDITIONAL INFORMATION Facilities Engineering (FE) vs. Capital Improvement Program (CIP) The Engineering Department has two distinct groups of staff dedicated to completing engineering projects. The CIP group leads the major projects through design and construction while the FE group focuses on smaller projects with shorter schedules. The FE and CIP staffing is separate with some combined functions for efficiency. Many of the policies and procedures are different in order to allow the smaller projects to have a shorter schedule. In addition the Delegation of Authority relating to the procurement of design services is slightly different between the two groups and the design size of the FE projects is limited. Project History Project No. FE 05-11 was created by a consolidation of three individual FE projects (Project Nos. FE03-34, FE00-12, and FE01-19) in order to finalize the design and prepare a single construction document package for enhanced competitive bidding. Each individual FE project was designed in accordance with FE project procedures in place at the time. The designs were completed to approximately 95%, but placed on hold awaiting resources to complete the project. A description of the original FE projects is provided below as information. Project No. P2-106 will update the consolidated earlier FE Project FE05-11 to match the current standards and facility requirements and create a bid package for construction. Project No. FE00-12 provides new plant water booster pumps at the existing dewatering facility in order to boost the pressure to 120psi. This provides far more efficient cleaning of the belt presses and will increase the efficiency of these machines to increase dewatering capabilities using existing equipment. Project No. FE01-19 provides boiler piping and feed water tank improvements to parts of the boiler system at Plant No. 2. Maintenance staff frequently repair leaks in the pressure vessel and feed water piping and this project will help relieve pressure on Sanitation District resources. Project No. FE03-34 will convert selected chemical scrubbers to biological trickling filters (BTFs). This will improve efficiency and reduce expenditures on chemicals. BTFs have proved to be a success by removing as much hydrogen sulfide as chemical scrubbers with improved removal of volatile organic compounds. This project will convert two more chemical scrubbers to BTFs and provide minor modifications to the existing five BTFs. Form No. DW-102-2 Revised 03/01/07 Page 3 CEQA FINDINGS A Notice of Exemption was filed on August 24, 2006. Chemical Scrubber Conversions and Piping System Improvements, Project No. P2-106, was determined to be categorically exempt under CEQA Section 15301(b) because the project consists of minor modifications to existing facilities with no increase in treatment capacity. This recommendation complies with authority levels of the Sanitation District’s Delegation of Authority. This item has not been budgeted. Funds will be reallocated from savings on other projects. Award Date: N/A Contract Amount: N/A Contingency: N/A JH:CM:eh:gc H:\dept\agenda\Operations Committee\Operations 2009\1009\P2-106 Project Establishment.docx Form No. DW-102-2 Revised 03/01/07 Page 1 OPERATIONS COMMITTEE Meeting Date 10/07/09 To Bd. of Dir. 10/28/09 AGENDA REPORT Item Number 3 Item Number 7 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Director of Engineering Project Manager: Steven Schock SUBJECT: ELLIS AVENUE PUMP STATION CONSTRUCTION, CONTRACT NO. I-10B GENERAL MANAGER'S RECOMMENDATION Approve a contingency increase of $277,172 (1%) to the Construction Contract with J. F. Shea Inc., for Ellis Avenue Pump Station Construction, Contract No. I-10B, for a total contingency of $1,663,034 (6%). SUMMARY • This project constructed a new 50 mgd lift station which has been dedicated as the Steve Anderson Lift Station. • Orange County Sanitation District (Sanitation District) has had beneficial use of the pump station since May 2009, and the work is 99% complete. • During commissioning of the lift station several items were discovered that require additional work to complete. These relate to the ventilation, odor control and flow systems that could not be tested in actual conditions until sewage was introduced. • This additional work is estimated at $180,000 which will expend the entire remaining contingency. The requested contingency increase does not impact the overall project budget. PRIOR COMMITTEE/BOARD ACTIONS September 2009 – Reduction in Retention, Retention reduced to not less than 1%. December 2006 - Awarded Ellis Avenue Pump Station Construction, Contract No. I-10B, to J.F. Shea Construction, Inc., for $27,717,245 and a 5% contingency. ADDITIONAL INFORMATION None. Form No. DW-102-2 Revised 03/01/07 Page 2 CEQA FINDINGS The Environmental Impact Report (EIR) for the Implementation of Ellis Avenue Pump Station Replacement Project, Job No. I-10, was certified on May 25, 2005 by Resolution No. OCSD 05-12. This request for increase in the project contingency complies with authority levels of the Sanitation District’s Delegation of Authority. This item has been budgeted (Page A–8, Item No. 51). Award Date: 12/20/06 Contract Amount: $27,717,245 Contingency: $1,385,862 (5%) 10/28/09 $277,172 (1%) $1,663,034 (6%) JH:SS:eh:gc H:\dept\agenda\Operations Committee\Operations 2009\1009\I-10B Contingency Increase.docx 1 OPERATIONS COMMITTEE Meeting Date 10/07/09 To Bd. of Dir. 10/28/09 AGENDA REPORT Item Number 4 Item Number 8 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Ed Torres, Director of Technical Services SUBJECT: Memorandum of Understanding between Orange County Sanitation District (OCSD) and South Orange County Wastewater Authority (SOCWA) for South County Waste Disposal at OCSD Facilities GENERAL MANAGER'S RECOMMENDATION Approve the Memorandum of Understanding (MOU) with South Orange County Wastewater Authority (SOCWA) to accept Hauled Waste from the SOCWA service area, in a form approved by general counsel. SUMMARY • OCSD Ordinance No. OCSD-36 states “Waste hauled from a source that is not within the OCSD’s service area is prohibited unless authorized by the General Manager. Service area is defined as any area the OCSD has an agreement to serve.” • With its current facilities, SOCWA cannot accept the Hauled Waste for treatment and disposal due mainly to physical limitations. OCSD has temporarily agreed to accept for treatment and disposal certain non-industrial based waste and waste by-products generated by persons and entities in the SOCWA service area, including brine, grease, and wastes from cesspools, chemical toilets, and septic tanks (“Hauled Waste”) until a service agreement is adopted. • SOCWA desires that OCSD continue accepting Hauled Waste for treatment and disposal • The cost for disposal is set by OCSD ordinance. The current charge to the wastehauler is $0.12 per gallon for waste originating in SOCWA’s service area. • Staff recommends approval of the MOU with SOCWA. PRIOR COMMITTEE/BOARD ACTIONS 2 N/A ADDITIONAL INFORMATION • SOCWA is a Joint Power Authority made up of the following agencies: El Toro Water District, Emerald Bay Service District, Irvine Ranch Water District, City of Laguna Beach, Moulton Niguel Water District, City of San Clemente, South Coast Water District, City of San Juan Capistrano, Santa Margarita Water District, and Trabuco Canyon Water District. • OCSD receives approximately 0.012 MGD of Hauled Waste from SOCWA’s service area which represents 15% of the total Hauled Waste received. • SOCWA prepared and completed a Liquid Waste Disposal Evaluation dated December 31, 2007, that assessed the potential alternative disposal and treatment strategies for Hauled Waste. The alternatives presented in the study were reviewed by the SOCWA Technical Advisory Committee. The committee, supported by the study, determined that a SOCWA disposal station was not the preferred alternative due to physical limitations and odor concerns, and that SOCWA should pursue a Memorandum of Understanding (MOU) with OCSD for the disposal of Hauled Waste originating in the SOCWA service area. Form No. DW-102 Agenda Report – Board Revised: 12/06/06 Page 1 OPERATIONS COMMITTEE Meeting Date 10/07/09 To Bd. of Dir. 10/28/09 AGENDA REPORT Item Number 5 Item Number 9 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Nick Arhontes, Director of Operations and Maintenance SUBJECT: Purchase of Ferric Chloride, Specification No. C-2005-247 GENERAL MANAGER'S RECOMMENDATION Approve Change Order No. 8 to Purchase Order No. 102354 OB for Purchase of Ferric Chloride, Specification No. C-2005-247, issued to Kemira Water at a unit price of $673.02 per dry ton delivered, plus applicable tax, indexed to Iron Age Black Foundry Busheling benchmark of $635/ton and a pricing correction factor of 34% of the difference of the benchmark and index on a quarterly basis, for an estimated annual contract amount of $5,050,000 for the period December 1, 2009 through November 30, 2010. SUMMARY • Ferric chloride is a liquid chemical iron salt used to increase the solids removal efficiencies at both Plant No. 1 and Plant No. 2 in primary treatment. In solids treatment, it is used to control hydrogen sulfide levels in the digester gas to meet South Coast Air Quality Management District (SCAQMD) requirements. It is critical to our operations to achieve cost effective regulatory compliance in our growing facilities. • A specification driven competitive bidding process was conducted in fiscal year 2005-06. Kemira Water (Kemira) was the sole bidder and was awarded, a one-year contract to provide ferric chloride. Kemira is the only vendor capable at this time of providing the 7,000 dry tons per year of ferric chloride currently required for our operational needs. This proposed contract renewal would exercise the final one-year contract extension of the four one-year contract extension provision in the original contract. A contingency is not requested at this time since the unit price is variable through the contract term and tied to an index. • Scrap steel and chlorine are the key raw ingredients used in the manufacture of ferric chloride. The price of scrap steel has fluctuated significantly in the recent past due to global marketplace issues beyond the wastewater treatment industry. From November 2007 to August 2008, the price of scrap steel increased about 250 percent. Subsequently, the scrap steel price dropped over 60 percent during the 2008 – 2009 contract period. Kemira is the largest supplier nationally and is a major Form No. DW-102 Agenda Report – Board Revised: 12/06/06 Page 2 supplier to other wastewater treatment utilities in the region. Staff recommends that the contract for ferric chloride be extended for an additional one-year term. PRIOR COMMITTEE/BOARD ACTIONS 1. 10/22/08: Board of Directors approved Change Order No. 4 to Purchase Order No. 102354 OB for Purchase of Ferric Chloride, Specification No. C-2005-247, issued to Kemira Water at an initial unit price of $610 per dry ton delivered, plus applicable tax indexed to Iron Age Scrap Index #1 Bushing Chicago listing benchmark of $635/ton and a pricing correction factor of 34 percent of the difference of the benchmark and index on a quarterly basis, for an estimated annual contract amount of $4,600,925 for the period December 1, 2008 through November 30, 2009. 2. 10/24/07: Board of Directors approved Change Order No. 3 to Purchase Order No. 102354-OB for Purchase of Ferric Chloride, Specification No. C-2005-247, for a unit price increase of $28.25 per dry ton for ferric chloride, increasing the total price to $462.25 per dry ton plus tax for an estimated amount of $4,029,562 for the period December 1, 2007 through November 30, 2008. 3. 10/25/06: Board of Directors approved Change Order No. 1 for a unit price increase of $76.20 per dry ton for ferric chloride increasing the total price to $434.00 per dry ton plus tax for an estimated amount of $3,255,000 for the period December 1, 4. The contract was competitively bid in fiscal year 2005-06 and awarded by the Purchasing Manager according to Resolution No. OCSD 04-08, Delegation of Authority. ADDITIONAL INFORMATION As our facilities grow and we continue to provide more flows to Orange County Water District for the Ground Water Reclamation System, we optimize the use of ferric chloride in the many process areas to maintain performance considering cost and regulatory risks. Alternative formulations of iron salts have been trialed or considered; however, plant performance suffered with little to no projected cost savings. Non-iron based chemicals have also been considered, but do not appear to offer a cost benefit. Additionally, a broad analysis of domestic and global markets for ferric chloride and potential alternate chemicals will be conducted as part of a Chemical Supply Sustainability Study already in progress. The Iron Age Black Foundry Busheling index is a better representative of the quality of steel used in the production of ferric chloride by Kemira than the quality of steel covered by the Iron Age Scrap Index #1 Bushing Chicago index, which was used during the last contract term. Form No. DW-102 Agenda Report – Board Revised: 12/06/06 Page 3 Kemira Water has offered to provide a one-year extension through November 30, 2010, at an initial unit price of $673.02 per dry ton of ferric chloride indexed to Iron Age Black Foundry Busheling benchmark of $635/ton and a pricing correction factor of 34% of the difference of the benchmark and index on a quarterly basis. The initial price offering of $673.02 per dry ton is an increase of $171.48 over the current contract price of $501.54 per dry ton. In the future, staff may propose using the chlor-alkali chemicals commodity index. This item is budgeted. (Object No. 52013, Divisions 830 and 840). However, in light of the extraordinary price increase, budget re-appropriations within the agency wide-operating budget may be necessary and the O&M staff will provide recommendations to the General Manager to accomplish this. Award Date Contract Price – $ per dry ton delivered + tax Contingency 12/01/05 - Original Contract $357.80 None 10/25/06 - Change Order #1 *11/06/06 - Change Order #2 $434.00 n/a None n/a 10/24/07 - Change Order #3 $462.25 10% 12/01/08 - Change Order #4 $610.00 with quarterly index adjustment None 03/01/09 – Change Order #5 $468.90 None 06/01/09 – Change Order #6 $467.88 None 09/01/09 – Change Order #7 $501.54 None 12/01/09 – Change Order #8 $673.02 None *Change Order #2 provided for an increase to the estimated annual amount. H:\dept\agenda\Operations Committee\Operations 2009\1009\08.C-2005-247_Ferric Chloride.docx Page 1 ADMINISTRATION COMMITTEE Meeting Date 10/14/09 To Bd. of Dir. 10/28/09 AGENDA REPORT Item Number 2 Item Number 11 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: PROPOSITION 1A SECURITIZATION PROGRAM GENERAL MANAGER'S RECOMMENDATION 1) Authorize the General Manager to enroll the Orange County Sanitation District in the Proposition 1A Securitization Program, managed by the California Statewide Communities Development Authority, for the immediate collection of the 8 Percent State Budget Reduction of Local Property Tax Revenues estimated to be $5 million, in a form approved by General Counsel; and, 2) Adopt Resolution No. OCSD No. 09-15, Approving the Form of and Authorizing the Execution and Delivery of a Purchase and Sale Agreement and related documents with respect to the sale of the Seller’s Proposition 1A Receivable from the State; and, Directing and Authorizing certain actions in connection therewith. SUMMARY Proposition 1A Securitization Program, managed through the California Statewide Communities Development Authority (CSCDA), provides all local government program participants 100 percent of its reduced property tax allocations, as a result of the passage of the FY 2009-2010 State budget that reduced local government property tax revenues by 8 percent. The funding of these reduced property tax revenues will come to the local government participants in two equal installments in January and May of 2010. The source of the funding is through the issuance of tax-exempt bonds by the CSCDA. Once the bonds are sold, local participating agencies have no ongoing obligations with repayment of the bonds. The State’s obligation to repay the 8 percent property tax borrowing is the only security pledge for the repayment of the bonds. The alternative to the Sanitation District is to forgo eight percent of property tax revenues in FY 2009-10, estimated at $5 million, until June 2013, at which time the estimated $5 million will be paid, including interest at 2 percent. PRIOR COMMITTEE/BOARD ACTIONS N/A Page 2 ADDITIONAL INFORMATION The CSCDA was created in 1988 to enable local governments and eligible private entities access to low-cost, tax-exempt, financing. It has completed over 1,200 financings totaling more than $42 billion since 1988, and has consistently ranked in the top 10 of the more than 3,000 tax-exempt issuers nationwide. There would be no cost to the Sanitation District by participating in the program as all interest and issuance costs will be paid by the State. Participating local agencies will have no obligation on the bonds and no credit exposure to the State. The commitment process includes the following signed documents by November 6, 2009: • Adopted Sale Resolution with Clerk’s Certificate • Executed Purchase and Sale Agreement • Certificate of Local Agency • Opinion of Local Agency Counsel • Bill of Sale and Bringdown Certificate • Bringdown Opinion of Local Agency Counsel • Escrow Instruction Letter • Irrevocable instructions to the State Controller These documents will be made available at the October 28, 2009, Board meeting. Following is a chart listing the timeline events of the Proposition 1A Securitization Program: Friday, November 6, 2006 Signed Participant documents due to Bond Counsel and is the Final Commitment date for Participating Local Agencies Tuesday, November 10, 2009 Bond Pricing Thursday, November 19, 2009 Closing Friday, January 15, 2010, and Monday, May 3, 2010 Local Agencies Receive Property Tax Withholdings Page 3 ATTACHMENTS (The following attachments were not included within the Administration Committee Meeting Agenda Report of October 14, 2009, but were included within the Board Agenda Report of October 28, 2009.) 1. Resolution No. OCSD 09-15 2. Purchase and Sale Agreement between the Orange County Sanitation District and California Statewide Communities Development Authority. MW:lc E-1 ORANGE COUNTY SANITATION DISTRICT, CALIFORNIA, as Seller and CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY, as Purchaser __________________________ PURCHASE AND SALE AGREEMENT Dated as of November 1, 2009 __________________________ TABLE OF CONTENTS Page i 1. DEFINITIONS AND INTERPRETATION......................................................................2 2. AGREEMENT TO SELL AND PURCHASE; CONDITIONS PRECEDENT................2 3. PURCHASE PRICE, CONVEYANCE OF PROPOSITION 1A RECEIVABLE AND PAYMENT OF PURCHASE PRICE......................................................................3 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..........................4 5. REPRESENTATIONS AND WARRANTIES OF THE SELLER...................................5 6. COVENANTS OF THE SELLER.....................................................................................7 7. THE PURCHASER’S ACKNOWLEDGMENT...............................................................9 8. NOTICES OF BREACH...................................................................................................9 9. LIABILITY OF SELLER; INDEMNIFICATION............................................................9 10. LIMITATION ON LIABILITY ......................................................................................10 11. THE SELLER’S ACKNOWLEDGMENT......................................................................10 12. NOTICES.........................................................................................................................10 13. AMENDMENTS.............................................................................................................10 14. SUCCESSORS AND ASSIGNS.....................................................................................10 15. THIRD PARTY RIGHTS................................................................................................11 16. PARTIAL INVALIDITY................................................................................................11 17. COUNTERPARTS..........................................................................................................11 18. ENTIRE AGREEMENT..................................................................................................11 19. GOVERNING LAW........................................................................................................12 EXHIBIT A – DEFINITIONS...................................................................................................A-1 EXHIBIT B1 – OPINION OF SELLER’S COUNSEL...........................................................B1-1 EXHIBIT B2 – BRINGDOWN OPINION OF SELLER’S COUNSEL.................................B2-1 EXHIBIT C1 – CLERK’S CERTIFICATE.............................................................................C1-1 EXHIBIT C2 – SELLER CERTIFICATE...............................................................................C2-1 EXHIBIT C3 – BILL OF SALE AND BRINGDOWN CERTIFICATE................................C3-1 EXHIBIT D – IRREVOCABLE INSTRUCTIONS TO CONTROLLER................................D-1 EXHIBIT E – ESCROW INSTRUCTION LETTER................................................................ E-1 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT, dated as of November 1, 2009 (this “Agreement”), is entered into by and between: (1) ORANGE COUNTY SANITATION DISTRICT, a local agency of the State of California within the meaning of Section 6585(f) of the California Government Code (the “Seller”); and (2) CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the State of California (the “Purchaser”). RECITALS A. Pursuant to Section 25.5 of Article XIII of the California Constitution and Section 100.06 of the California Revenue and Taxation Code, local agencies within the meaning of Section 6585(f) of the California Government Code are entitled to receive certain payments to be made by the State of California (the “State”) on or before June 30, 2013, as reimbursement for reductions in the percentage of the total amount of ad valorem property tax revenues allocated to such local agencies during the State’s 2009-10 fiscal year, which reductions have been authorized pursuant to Sections 100.05 and 100.06 of the California Revenue and Taxation Code. B. The Seller is the owner of the Proposition 1A Receivable (as defined below) and is entitled to and has determined to sell all right, title and interest in and to the Proposition 1A receivable, namely, the right to payment of moneys due or to become due to the Seller pursuant to Section 25.5(a)(1)(B)(iii) of Article XIII of the California Constitution and Section 100.06 of the California Revenue and Taxation Code, in order to obtain money to fund any lawful purpose as permitted under the applicable laws of the State. C. The Seller is authorized to sell or otherwise dispose of its property as the interests of its residents require. D. The Purchaser, a joint exercise of powers authority organized and existing under the laws of the State, has been authorized pursuant to Section 6588(x) of the California Government Code to purchase the Proposition 1A Receivable. E. The Seller is willing to sell, and the Purchaser is willing to purchase, the Proposition 1A Receivable upon the terms specified in this Agreement. F. Pursuant to its Proposition 1A Receivable Financing Program (the “Program”), the Purchaser will issue its bonds (the “Bonds”) pursuant to an Indenture (the “Indenture”), between the Purchaser and Wells Fargo Bank, National Association, as trustee (the “Trustee”), and will use a portion of the proceeds thereof to purchase the Proposition 1A Receivable from the Seller. G. The Purchaser will grant a security interest in such Proposition 1A Receivable to the Trustee and each Credit Enhancer to secure the Bonds. 2 AGREEMENT NOW, THEREFORE, in consideration of the above Recitals and the mutual covenants herein contained, the parties hereto hereby agree as follows: 1. Definitions and Interpretation. (a) For all purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in Exhibit A attached hereto and which is incorporated by reference herein. (b) The words “hereof,” “herein,” “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; section and exhibits references contained in this Agreement are references to sections and exhibits in or to this Agreement unless otherwise specified; and the term “including” shall mean “including without limitation.” (c) Any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time may be amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments and exhibits thereto and instruments incorporated therein; and any references to a Person are also to its permitted successors and assigns. 2. Agreement to Sell and Purchase; Conditions Precedent. (a) The Seller agrees to sell, and the Purchaser agrees to purchase, on the Closing Date, for an amount equal to the Purchase Price, all right, title and interest of the Seller in and to the “Proposition 1A receivable” as defined in Section 6585(g) of the California Government Code (the “Proposition 1A Receivable”), namely, the right to payment of moneys due or to become due to the Seller pursuant to Section 25.5(a)(1)(B)(iii) of Article XIII of the California Constitution and Section 100.06 of the California Revenue and Taxation Code. The Purchase Price shall be paid by the Purchaser to the Seller in two equal cash installment payments, without interest (each, an “Installment Payment” and, collectively, the “Installment Payments”), on January 15, 2010, and May 3, 2010 (each a “Payment Date” and, collectively, the “Payment Dates”). The Purchaser shall pay the Purchase Price by wire transfer pursuant to wire instructions provided by the Seller to the Trustee by e-mail to john.deleray@wellsfargo.com or by facsimile to 213-614-3355, Attention: John Deleray. If wire instructions are not provided to the Trustee (or if such wire instructions are invalid) payment will be made by check mailed to the Seller’s Principal Place of Business. (b) The performance by the Purchaser of its obligations hereunder shall be conditioned upon: (i) Transaction Counsel receiving on or before the date the Bonds are sold (the “Pricing Date”), to be held in escrow until the Closing Date and then delivered to the Purchaser on the Closing Date, the following documents 3 duly executed by the Seller or its counsel, as applicable: (1) an opinion of counsel to the Seller dated the Pricing Date in substantially the form attached hereto as Exhibit B1, (2) certificates dated the Pricing Date in substantially the forms attached hereto as Exhibit C1 and Exhibit C2, (3) irrevocable instructions to the Controller dated as of the Closing Date in substantially the form attached hereto as Exhibit D, (4) this Agreement, (5) a certified copy of the resolution of the Seller’s Board of Directors approving this Agreement, the transactions contemplated hereby and the documents attached hereto as exhibits, and (6) an escrow instruction letter in substantially the form attached hereto as Exhibit E; (ii) Transaction Counsel receiving on or before the Pricing Date, (1) a bringdown opinion of counsel to the Seller dated as of the Closing Date in substantially the form attached hereto as Exhibit B2, and (2) a bill of sale and bringdown certificate of the Seller (the “Bill of Sale”) in substantially the form attached hereto as Exhibit C3; provided that the Purchaser may waive, in its sole discretion, the requirements of Section 2(b)(ii)(1); (iii) the Purchaser issuing Bonds in an amount which will be sufficient to pay the Purchase Price; and (iv) the receipt by the Purchaser of a certification of the County Auditor confirming the Initial Amount of the Proposition 1A Receivable pursuant to the Act. (c) The performance by the Seller of its obligations hereunder shall be conditioned solely upon the Purchaser’s issuance of the Bonds its execution and delivery of this Agreement, pursuant to which it is legally obligated to pay the Installment Payments to the Seller on the Payment Dates as set forth in this Agreement, and no other act or omission on the part of the Purchaser or any other party shall excuse the Seller from performing its obligations hereunder. Seller specifically disclaims any right to rescind this Agreement, or to assert that title to the Proposition 1A Receivable has not passed to the Purchaser, should Purchaser fail to make Installment Payments in the requisite amounts on the Payment Dates. 3. Purchase Price, Conveyance of Proposition 1A Receivable and Payment of Purchase Price. (a) Upon pricing of the Bonds by the Purchaser, the Purchaser will inform the Seller that it will pay the Purchase Price in Installment Payments on the Payment Dates. (b) In consideration of the Purchaser’s agreement to pay and deliver to the Seller the Installment Payments on the Payment Dates, the Seller agrees to (i) transfer, grant, bargain, sell, assign, convey, set over and deliver to the Purchaser, absolutely and not as collateral security, without recourse except as expressly provided herein, and the Purchaser agrees to purchase, accept and receive, the Proposition 1A Receivable, and (ii) assign to the Purchaser, to the extent permitted by law, all present or future rights, if any, of the Seller to enforce or cause the enforcement of payment of the Proposition 1A Receivable pursuant to the Act and other 4 applicable law. Such transfer, grant, bargain, sale, assignment, conveyance, set over and delivery is hereby expressly stated to be a sale and, pursuant to Section 6588.6(b) of the California Government Code, shall be treated as an absolute sale and transfer of the Proposition 1A Receivable, and not as a grant of a security interest by the Seller to secure a borrowing. This is the statement referred to in Sections 6588.6(b) and (c) of the California Government Code. 4. Representations and Warranties of the Purchaser. The Purchaser represents and warrants to the Seller, as of the date hereof, as follows: (a) The Purchaser is duly organized, validly existing and in good standing under the laws of the State of California. (b) The Purchaser has full power and authority to enter into this Agreement and to perform its obligations hereunder and has duly authorized such purchase and assignment of the Proposition 1A Receivable by the Purchaser by all necessary action. (c) Neither the execution and delivery by the Purchaser of this Agreement, nor the performance by the Purchaser of its obligations hereunder, shall conflict with or result in a breach or default under any of its organizational documents, any law, rule, regulation, judgment, order or decree to which it is subject or any agreement or instrument to which it is a party. (d) To the best of the knowledge of the Purchaser, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, is pending or threatened in any way against the Purchaser affecting the existence of the Purchaser or the titles of its commissioners or officers, or seeking to restrain or to enjoin the purchase of the Proposition 1A Receivable or to direct the application of the proceeds of the purchase thereof, or in any way contesting or affecting the validity or enforceability of any of the Transaction Documents or any other applicable agreements or any action of the Purchaser contemplated by any of said documents, or in any way contesting the powers of the Purchaser or its authority with respect to the Transaction Documents to which it is a party or any other applicable agreement, or any action on the part of the Purchaser contemplated by the Transaction Documents, or in any way seeking to enjoin or restrain the Purchaser from purchasing the Proposition 1A Receivable or which if determined adversely to the Purchaser would have an adverse effect upon the Purchaser’s ability to purchase the Proposition 1A Receivable, nor to the knowledge of the Purchaser is there any basis therefor. (e) This Agreement, and its execution, delivery and performance hereof have been duly authorized by it, and this Agreement has been duly executed and delivered by it and constitutes its valid and binding obligation enforceable against it in accordance with the terms hereof, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors’ rights generally or the application of equitable principles in any proceeding, whether at law or in equity. (f) The Purchaser is a separate legal entity, acting solely through its authorized representatives, from the Seller, maintaining separate records, books of account, assets, bank accounts and funds, which are not and have not been commingled with those of the Seller. 5 (g) All approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would adversely affect, the purchase by the Purchaser of the Proposition 1A Receivable or the performance by the Purchaser of its obligations under the Transaction Documents to which it is a party and any other applicable agreements, have been obtained and are in full force and effect. (h) Insofar as it would materially adversely affect the Purchaser’s ability to enter into, carry out and perform its obligations under any or all of the Transaction Documents to which it is a party, or consummate the transactions contemplated by the same, the Purchaser is not in breach of or default under any applicable constitutional provision, law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which it is a party or to which it or any of its property or assets is otherwise subject, and, to the best of the knowledge of the Purchaser, no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument, and the execution and delivery by the Purchaser of the Transaction Documents to which it is a party, and compliance by the Purchaser with the provisions thereof, under the circumstances contemplated thereby, do not and will not conflict with or constitute on the part of the Purchaser a breach of or default under any agreement or other instrument to which the Purchaser is a party or by which it is bound or any existing law, regulation, court order or consent decree to which the Purchaser is subject. 5. Representations and Warranties of the Seller. The Seller hereby represents and warrants to the Purchaser, as of the date hereof, as follows: (a) The Seller is a local agency within the meaning of Section 6585(f) of the California Government Code, with full power and authority to execute and deliver this Agreement and to carry out its terms. (b) The Seller has full power, authority and legal right to sell and assign the Proposition 1A Receivable to the Purchaser and has duly authorized such sale and assignment to the Purchaser by all necessary action; and the execution, delivery and performance by the Seller of this Agreement has been duly authorized by the Seller by all necessary action. (c) This Agreement has been, and as of the Closing Date the Bill of Sale will have been, duly executed and delivered by the Seller and, assuming the due authorization, execution and delivery of this Agreement by the Purchaser, each of this Agreement and the Bill of Sale constitutes a legal, valid and binding obligation of the Seller enforceable in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors’ rights generally or the application of equitable principles in any proceeding, whether at law or in equity. (d) All approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would adversely affect, the sale by the Seller of the Proposition 1A Receivable or the performance by the Seller of its 6 obligations under the Resolution and the Transaction Documents to which it is a party and any other applicable agreements, have been obtained and are in full force and effect. (e) Insofar as it would materially adversely affect the Seller’s ability to enter into, carry out and perform its obligations under any or all of the Transaction Documents to which it is a party, or consummate the transactions contemplated by the same, the Seller is not in breach of or default under any applicable constitutional provision, law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which it is a party or to which it or any of its property or assets is otherwise subject, and, to the best of the knowledge of the Seller, no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument, and the adoption of the Resolution and the execution and delivery by the Seller of the Transaction Documents to which it is a party, and compliance by the Seller with the provisions thereof, under the circumstances contemplated thereby, do not and will not conflict with or constitute on the part of the Seller a breach of or default under any agreement or other instrument to which the Seller is a party or by which it is bound or any existing law, regulation, court order or consent decree to which the Seller is subject. (f) To the best of the knowledge of the Seller, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, is pending or threatened in any way against the Seller affecting the existence of the Seller or the titles of its Board of Directors members or officers to their respective offices, or seeking to restrain or to enjoin the sale of the Proposition 1A Receivable or to direct the application of the proceeds of the sale thereof, or in any way contesting or affecting the validity or enforceability of any of the Transaction Documents or any other applicable agreements or any action of the Seller contemplated by any of said documents, or in any way contesting the powers of the Seller or its authority with respect to the Resolution or the Transaction Documents to which it is a party or any other applicable agreement, or any action on the part of the Seller contemplated by the Transaction Documents, or in any way seeking to enjoin or restrain the Seller from selling the Proposition 1A Receivable or which if determined adversely to the Seller would have an adverse effect upon the Seller’s ability to sell the Proposition 1A Receivable, nor to the knowledge of the Seller is there any basis therefor. (g) Prior to the sale of the Proposition 1A Receivable to the Purchaser, the Seller was the sole owner of the Proposition 1A Receivable, and has such right, title and interest to the Proposition 1A Receivable as provided in the Act. From and after the conveyance of the Proposition 1A Receivable by the Seller to Purchaser on the Closing Date, the Seller shall have no right, title or interest in or to the Proposition 1A Receivable. Except as provided in this Agreement, the Seller has not sold, transferred, assigned, set over or otherwise conveyed any right, title or interest of any kind whatsoever in all or any portion of the Proposition 1A Receivable, nor has the Seller created, or to the best knowledge of the Seller permitted the creation of, any lien, pledge, security interest or any other encumbrance (a “Lien”) thereon. Prior to the sale of the Proposition 1A Receivable to the Purchaser, the Seller held title to the Proposition 1A Receivable free and clear of any Liens. As of the Closing Date, this Agreement, together with the Bill of Sale, constitutes a valid and absolute sale to the Buyer of all of the Seller’s right, title and interest in and to the Proposition 1A Receivable. 7 (h) The Seller acts solely through its authorized officers or agents. (i) The Seller maintains records and books of account separate from those of the Purchaser. (j) The Seller maintains its respective assets separately from the assets of the Purchaser (including through the maintenance of separate bank accounts); the Seller’s funds and assets, and records relating thereto, have not been and are not commingled with those of the Purchaser. (k) The Seller’s principal place of business and chief executive office is located at 10844 Ellis Avenue, Fountain Valley, CA 92708-7018. (l) The aggregate amount of the Installment Payments is reasonably equivalent value for the Proposition 1A Receivable. The Seller acknowledges that the amount payable to or on behalf of the Purchaser by the State with respect to the Proposition 1A Receivable will be in excess of the Purchase Price and the Initial Amount of the Proposition 1A Receivable and confirms that it has no claim to any such excess amount whatsoever. (m) The Seller does not act as an agent of the Purchaser in any capacity, but instead presents itself to the public as an entity separate from the Purchaser. (n) The Seller has not guaranteed and shall not guarantee the obligations of the Purchaser, nor shall it hold itself out or permit itself to be held out as having agreed to pay or as being liable for the debts of the Purchaser; and the Seller has not received nor shall the Seller accept any credit or financing from any Person who is relying upon the availability of the assets of the Purchaser in extending such credit or financing. The Seller has not purchased and shall not purchase any of the Bonds or any interest therein. (o) All transactions between or among the Seller, on the one hand, and the Purchaser on the other hand (including, without limitation, transactions governed by contracts for services and facilities, such as payroll, purchasing, accounting, legal and personnel services and office space), whether existing on the date hereof or entered into after the date hereof, shall be on terms and conditions (including, without limitation, terms relating to amounts to be paid thereunder) which are believed by each such party thereto to be both fair and reasonable and comparable to those available on an arms-length basis from Persons who are not affiliates. (p) The Seller has not, under the provisions of Section 100.06(b) of the California Revenue and Taxation Code, received a reduction for hardship or otherwise, nor has it requested, made arrangements for, or completed a reallocation or exchange with any other local agency, of the total amount of the ad valorem property tax revenue reduction allocated to the Seller pursuant to Section 100.06(a) of the California Revenue and Taxation Code. 6. Covenants of the Seller. (a) The Seller shall not take any action or omit to take any action which adversely affects the interests of the Purchaser in the Proposition 1A Receivable and in the proceeds thereof. The Seller shall not take any action or omit to take any action that shall adversely affect 8 the ability of the Purchaser, and any assignee of the Purchaser, to receive payments of the Proposition 1A Receivable. (b) The Seller shall not take any action or omit to take any action that would impair the validity or effectiveness of the Act, nor, without the prior written consent of the Purchaser or its assignees, agree to any amendment, modification, termination, waiver or surrender of, the terms of the Act, or waive timely performance or observance under the Act. Nothing in this agreement shall impose a duty on the Seller to seek to enforce the Act or to seek enforcement thereof by others, or to prevent others from modifying, terminating, discharging or impairing the validity or effectiveness of the Act. (c) Upon request of the Purchaser or its assignee, (i) the Seller shall execute and deliver such further instruments and do such further acts (including being named as a plaintiff in an appropriate proceeding) as may be reasonably necessary or proper to carry out more effectively the purposes and intent of this Agreement and the Act, and (ii) the Seller shall take all actions necessary to preserve, maintain and protect the title of the Purchaser to the Proposition 1A Receivable. (d) On or before the Closing Date, the Seller shall send (or cause to be sent) an irrevocable instruction to the Controller pursuant to Section 6588.6(c) of California Government Code to cause the Controller to disburse all payments of the Proposition 1A Receivable to the Trustee, together with notice of the sale of the Proposition 1A Receivable to the Purchaser and the assignment of all or a portion of such assets by the Purchaser to the Trustee. Such notice and instructions shall be in the form of Exhibit D hereto. The Seller shall not take any action to revoke or which would have the effect of revoking, in whole or in part, such instructions to the Controller. Upon sending such irrevocable instruction, the Seller shall have relinquished and waived any control over the Proposition 1A Receivable, any authority to collect the Proposition 1A Receivable, and any power to revoke or amend the instructions to the Controller contemplated by this paragraph. Except as provided in Section 2(c) of this Agreement, the Seller shall not rescind, amend or modify the instruction described in the first sentence of this paragraph. The Seller shall cooperate with the Purchaser or its assignee in giving instructions to the Controller if the Purchaser or its assignee transfers the Proposition 1A Receivable. In the event that the Seller receives any proceeds of the Proposition 1A Receivable, the Seller shall hold the same in trust for the benefit of the Purchaser and the Trustee and each Credit Enhancer, as assignees of the Purchaser, and shall promptly remit the same to the Trustee. (e) The Seller hereby covenants and agrees that it will not at any time institute against the Purchaser, or join in instituting against the Purchaser, any bankruptcy, reorganization, arrangement, insolvency, liquidation, or similar proceeding under any United States or state bankruptcy or similar law. (f) The financial statements and books and records of the Seller prepared after the Closing Date shall reflect the separate existence of the Purchaser and the sale to the Purchaser of the Proposition 1A Receivable. (g) The Seller shall treat the sale of the Proposition 1A Receivable as a sale for regulatory and accounting purposes. 9 (h) From and after the date of this Agreement, the Seller shall not sell, transfer, assign, set over or otherwise convey any right, title or interest of any kind whatsoever in all or any portion of the Proposition 1A Receivable, nor shall the Seller create, or to the knowledge of the Seller permit the creation of, any Lien thereon. 7. The Purchaser’s Acknowledgment. The Purchaser acknowledges that the Proposition 1A Receivable is not a debt or liability of the Seller, and that the Proposition 1A Receivable is payable solely by the State from the funds of the State provided therefor. Consequently, neither the taxing power of the Seller, nor the full faith and credit thereof is pledged to the payment of the Proposition 1A Receivable. No representation is made by the Seller concerning the obligation or ability of the State to make any payment of the Proposition 1A Receivable pursuant to Section 100.06 of the Revenue and Taxation Code and Section 25.5 of Article XIII of the California Constitution, nor is any representation made with respect to the ability of the State to enact any change in the law applicable to the Transaction Documents (including without limitation Section 100.06 of the Revenue and Taxation Code or Section 6588.6 of the Government Code). The Purchaser acknowledges that the Seller has no obligation with respect to any offering document or disclosure related to the Bonds. 8. Notices of Breach. (a) Upon discovery by the Seller or the Purchaser that the Seller or Purchaser has breached any of its covenants or that any of the representations or warranties of the Seller or the Purchaser are materially false or misleading, in a manner that materially and adversely affects the value of the Proposition 1A Receivable or the Purchase Price thereof, the discovering party shall give prompt written notice thereof to the other party and to the Trustee, as assignee of the Purchaser, who shall, pursuant to the Indenture, promptly thereafter notify each Credit Enhancer and the Rating Agencies. (b) The Seller shall not be liable to the Purchaser, the Trustee, the holders of the Bonds, or any Credit Enhancer for any loss, cost or expense resulting from the failure of the Trustee, any Credit Enhancer or the Purchaser to promptly notify the Seller upon the discovery by an authorized officer of the Trustee, any Credit Enhancer or the Purchaser of a breach of any covenant or any materially false or misleading representation or warranty contained herein. 9. Liability of Seller; Indemnification. The Seller shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Seller under this Agreement. The Seller shall indemnify, defend and hold harmless the Purchaser, the Trustee and each Credit Enhancer, as assignees of the Purchaser, and their respective officers, directors, employees and agents from and against any and all costs, expenses, losses, claims, damages and liabilities to the extent that such cost, expense, loss, claim, damage or liability arose out of, or was imposed upon any such Person by the Seller’s breach of any of its covenants contained herein or any materially false or misleading representation or warranty of the Seller contained herein. Notwithstanding anything to the contrary herein, the Seller shall have no liability for the payment of the principal of or interest on the Bonds issued by the Purchaser. 10 10. Limitation on Liability. (a) The Seller and any officer or employee or agent of the Seller may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Seller shall not be under any obligation to appear in, prosecute or defend any legal action regarding the Act that is unrelated to its specific obligations under this Agreement. (b) No officer or employee of the Seller shall have any liability for the representations, warranties, covenants, agreements or other obligations of the Seller hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Seller. 11. The Seller’s Acknowledgment. The Seller hereby agrees and acknowledges that the Purchaser intends to assign and grant a security interest in all or a portion of (a) its rights hereunder and (b) the Proposition 1A Receivable, to the Trustee and each Credit Enhancer pursuant to the Indenture. The Seller further agrees and acknowledges that the Trustee, the holders of the Bonds, and each Credit Enhancer have relied and shall continue to rely upon each of the foregoing representations, warranties and covenants, and further agrees that such Persons are entitled so to rely thereon. Each of the above representations, warranties and covenants shall survive any assignment and grant of a security interest in all or a portion of this Agreement or the Proposition 1A Receivable to the Trustee and each Credit Enhancer and shall continue in full force and effect, notwithstanding any subsequent termination of this Agreement and the other Transaction Documents. The above representations, warranties and covenants shall inure to the benefit of the Trustee and each Credit Enhancer. 12. Notices. All demands upon or, notices and communications to, the Seller, the Purchaser, the Trustee or the Rating Agencies under this Agreement shall be in writing, personally delivered or mailed by certified mail, return receipt requested, to such party at the appropriate notice address, and shall be deemed to have been duly given upon receipt. 13. Amendments. This Agreement may be amended by the Seller and the Purchaser, with (a) the consent of the Trustee, (b) the consent of each Credit Enhancer, and (c) a Rating Agency Confirmation, but without the consent of any of the holders of the Bonds, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement. Promptly after the execution of any such amendment, the Purchaser shall furnish written notification of the substance of such amendment to the Trustee and to the Rating Agencies. 14. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Seller, the Purchaser and their respective successors and permitted assigns. The Seller may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Purchaser. Except as specified herein, the Purchaser may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Seller. 11 15. Third Party Rights. The Trustee and each Credit Enhancer are express and intended third party beneficiaries under this Agreement. Nothing expressed in or to be implied from this Agreement is intended to give, or shall be construed to give, any Person, other than the parties hereto, the Trustee, and each Credit Enhancer, and their permitted successors and assigns hereunder, any benefit or legal or equitable right, remedy or claim under or by virtue of this Agreement or under or by virtue of any provision herein. 16. Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 17. Counterparts. This Agreement may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed original for all purposes. 18. Entire Agreement. This Agreement sets forth the entire understanding and agreement of the parties with respect to the subject matter hereof and supersedes any and all oral or written agreements or understandings between the parties as to the subject matter hereof. 12 19. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, the Seller and the Purchaser have caused this Agreement to be duly executed as of the date first written above. ORANGE COUNTY SANITATION DISTRICT, as Seller By: Authorized Officer CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY, as Purchaser By: Authorized Signatory A-1 EXHIBIT A DEFINITIONS For all purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms not otherwise defined herein shall have the meanings set forth below. “Act” means Chapter 14XXXX of the California Statutes of 2009 (Assembly Bill No. 15), as amended. “Bill of Sale” has the meaning given to that term in Section 2(b)(ii) hereof. “Closing Date” means the date on which the Bonds are issued. The Closing Date is expected to be November 19, 2009, but the Purchaser may change the Closing Date by providing e-mail notification to mwhite@ocsd.com not later than one day prior to the Closing Date. “Controller” means the Controller of the State. “County Auditor” means the auditor or auditor-controller of the county within which the Seller is located. “Credit Enhancer” means any municipal bond insurance company, bank or other financial institution or organization which is performing in all material respects its obligations under any Credit Support Instrument for some or all of the Bonds. “Credit Support Instrument” means a policy of insurance, a letter of credit, a stand-by purchase agreement, a revolving credit agreement or other credit arrangement pursuant to which a Credit Enhancer provides credit or liquidity support with respect to the payment of interest, principal or purchase price of the Bonds. “Initial Amount” means, with respect to the Proposition 1A Receivable, the amount of property tax revenue reallocated away from the Seller pursuant to the provisions of Section 100.06 of the Revenue and Taxation Code, as certified by the County Auditor pursuant to the Act. “Installment Payments” have the meaning set forth in Section 2(a). “Payment Dates” have the meaning set forth in Section 2(a). “Pricing Date” means the date on which the Bonds are sold. The Pricing Date is expected to be November 10, 2009, but the Purchaser may change the Pricing Date by providing e-mail notification to mwhite@ocsd.com not later than one day prior to the Pricing Date. “Principal Place of Business” means, with respect to the Seller, the location of the Seller’s principal place of business and chief executive office located at 10844 Ellis Avenue, Fountain Valley, CA 92708-7018. A-2 “Proposition 1A Receivable” has the meaning set forth in Section 2(a). “Purchase Price” means an amount equal to the Initial Amount. “Rating Agency” means any nationally recognized rating agency then providing or maintaining a rating on the Bonds at the request of the Purchaser. “Rating Agency Confirmation” means written confirmation from each Rating Agency that any proposed action will not, in and of itself, cause the Rating Agency to lower, suspend or withdraw the rating then assigned by such Rating Agency to any Bonds. “Resolution” means the resolution adopted by the Board of Directors approving the sale of the Proposition 1A Receivable. “State” means the State of California. “Transaction Counsel” means Orrick, Herrington & Sutcliffe LLP. “Transaction Documents” mean this Agreement, the Bill of Sale, the Indenture, the Bonds and the Irrevocable Instructions For Disbursement of Proposition 1A Receivable of Orange County Sanitation District, dated as of the Closing Date. B1-1 EXHIBIT B1 OPINION OF COUNSEL to ORANGE COUNTY SANITATION DISTRICT Dated: Pricing Date California Statewide Communities Development Authority Sacramento, California Wells Fargo Bank, National Association Los Angeles, California Re: Sale of Proposition 1A Receivable Ladies & Gentlemen: [I have/This Office has] acted as counsel for the Orange County Sanitation District (the “Seller”) in connection with the adoption of that certain resolution (the “Resolution”) of the Board of Directors of the Seller (the “Governing Body”) pursuant to which the Seller authorized the sale to the California Statewide Communities Development Authority (the “Purchaser”) of the Seller’s “Proposition 1A Receivable”, as defined in and pursuant to the Purchase and Sale Agreement dated as of November 1, 2009 (the “Sale Agreement”) between the Seller and the Purchaser. In connection with these transactions, the Seller has issued certain Irrevocable Instructions For Disbursement of the Seller’s Proposition 1A Receivable to the Controller of the State of California (the “Disbursement Instructions”) and a Bill of Sale and Bringdown Certificate of the Seller (the “Bill of Sale” and, collectively with the Sale Agreement and the Disbursement Instructions, the “Seller Documents”). Unless the context otherwise requires, capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Sale Agreement. [I/We] have examined and are familiar with the Seller Documents and with those documents relating to the existence, organization, and operation of the Seller, the adoption of the Resolution, and the execution of the Seller Documents, and have satisfied ourselves as to such other matters as [I/we] deem necessary in order to render the following opinions. As to paragraphs numbered 3 and 4 below, [I/we] have relied as to factual matters on the representations and warranties of the Seller contained in the Sale Agreement. Based upon the foregoing, and subject to the limitations and qualifications set forth herein, [I/we] are of the opinion that: B1-2 1. The Seller is a local agency, within the meaning of Section 6585(f) of the California Government Code. The Governing Body is the governing body of the Seller. 2. The Resolution was duly adopted at a meeting of the Governing Body, which was called and held pursuant to law and with all public notice required by law, and at which a quorum was present and acting throughout, and the Resolution is in full force and effect and has not been modified, amended or rescinded since the date of its adoption. 3. To the best of [my/our] knowledge, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, is pending or threatened in any way against the Seller (i) affecting the existence of the Seller or the titles of its Governing Body members or officers to their respective offices; (ii) seeking to restrain or to enjoin the sale of the Proposition 1A Receivable or to direct the application of the proceeds of the sale thereof, or materially adversely affecting the sale of the Proposition 1A Receivable; (iii) in any way contesting or affecting the validity or enforceability of the Resolution, Seller Documents or any other applicable agreements or any action of the Seller contemplated by any of said documents; or (iv) in any way contesting the powers of the Seller or its authority with respect to the Resolution or the Seller Documents or any other applicable agreement, or any action on the part of the Seller contemplated by any of said documents. 4. To the best of [my/our] knowledge, prior to the sale of the Proposition 1A Receivable to the Purchaser, the Seller had not sold, transferred, assigned, set over or otherwise conveyed any right, title or interest of any kind whatsoever in all or any portion of the Seller’s Proposition 1A Receivable, nor had the Seller created, or permitted the creation of, any Lien thereon. 5. The Seller has duly authorized and executed the Seller Documents and, assuming the due authorization execution and delivery of the Sale Agreement by the Purchaser, each Seller Document will be legal, valid and binding against the Seller and enforceable against the Seller in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or laws relating to or affecting creditors’ rights, and the application of equitable principles and the exercise of judicial discretion in appropriate areas. No opinion is expressed concerning the obligation or ability of the State of California to make any payment of the Proposition 1A Receivable pursuant to Section 100.06 of the Revenue and Taxation Code and Section 25.5 of Article XIII of the California Constitution, nor is any opinion expressed with respect to the ability of the State to enact any change in the law applicable to the Seller Documents (including, without limitation, Section 100.06 of the Revenue and Taxation Code or Section 6588.6 of the Government Code). Furthermore, [I/we] express no opinion as to the value of the Proposition 1A Receivable or as to any legal or equitable remedies that may be available to any person should the Proposition 1A Receivable have little or no value. No opinion is expressed with respect to the sale of Bonds by the Purchaser. B1-3 The legal opinion set forth herein is intended for the information solely of the addressees hereof and for the purposes contemplated by the Sale Agreement. The addressees may not rely on it in connection with any transactions other than those described herein, and it is not to be relied upon by any other person or entity, or for any other purpose, or quoted as a whole or in part, or otherwise referred to, in any document, or to be filed with any governmental or administrative agency other than the Purchaser or with any other person or entity for any purpose without [my/our] prior written consent. In addition to the addressees hereof, each Credit Enhancer and the underwriters of the Bonds may rely upon this legal opinion as if it were addressed to them. [I/We] do not undertake to advise you of matters that may come to [my/our] attention subsequent to the date hereof that may affect the opinions expressed herein. Very truly yours, By: Seller’s Counsel B2-1 EXHIBIT B2 OPINION OF COUNSEL to ORANGE COUNTY SANITATION DISTRICT Dated: Closing Date California Statewide Communities Development Authority Sacramento, California Wells Fargo Bank, National Association Los Angeles, California Re: Sale of Proposition 1A Receivable (Bringdown Opinion) Ladies & Gentlemen: Pursuant to that certain Purchase and Sale Agreement dated as of November 1, 2009 (the “Sale Agreement”) between the Orange County Sanitation District (the “Seller”) and the California Statewide Communities Development Authority (the “Purchaser”), this Office delivered an opinion (the “Opinion”) dated the Pricing Date as counsel for the Seller in connection with the sale of the Seller’s Proposition 1A Receivable (as defined in the Sale Agreement), the execution of documents related thereto and certain other related matters. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Sale Agreement. I confirm that you may continue to rely upon the Opinion as if it were dated as of the date hereof. Each Credit Enhancer and the underwriters of the Bonds may rely upon this legal opinion as if it were addressed to them. This letter is delivered to you pursuant to Section 2(b)(ii)(1) of the Sale Agreement. Very truly yours, By: Seller’s Counsel C1-1 EXHIBIT C1 CLERK’S CERTIFICATE CERTIFICATE OF THE CLERK OF THE BOARD OF ORANGE COUNTY SANITATION DISTRICT, CALIFORNIA Dated: Pricing Date The undersigned Clerk of the Board of the Orange County Sanitation District (the “Seller”), a local agency of the State of California within the meaning of Section 6585(f) of the California Government Code, does hereby certify that the foregoing is a full, true and correct copy of Resolution No. ______________ duly adopted at a regular meeting of the Board of Directors of said Seller duly and legally held at the regular meeting place thereof on the ______ day of _________________, 2009, of which meeting all of the members of said Board of Directors had due notice and at which a quorum was present and acting throughout, and that at said meeting said resolution was adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: I do hereby further certify that I have carefully compared the same with the original minutes of said meeting on file and of record in my office and that said resolution is a full, true and correct copy of the original resolution adopted at said meeting and entered in said minutes and that said resolution has not been amended, modified or rescinded since the date of its adoption and the same is now in full force and effect. I do hereby further certify that an agenda of said meeting was posted at least 72 hours before said meeting at a location in the City of Fountain Valley, California freely accessible to members of the public, and a brief general description of said resolution appeared on said agenda. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase and Sale Agreement, dated as of November 1, 2009, between the Seller and the California Statewide Communities Development Authority. WITNESS by my hand as of the Pricing Date. By: Clerk of the Board of the Orange County Sanitation District, California C2-1 EXHIBIT C2 SELLER CERTIFICATE SELLER CERTIFICATE Dated: Pricing Date We, the undersigned officers of the Orange County Sanitation District (the “Seller”), a local agency of the State of California within the meaning of Section 6585(f) of the California Government Code, holding the respective offices herein below set opposite our signatures, do hereby certify that on the date hereof the following documents (the “Seller Transaction Documents”) were officially executed and delivered by the Authorized Officer or Officers whose names appear on the executed copies thereof, to wit: Document 1. Purchase and Sale Agreement, dated as of November 1, 2009 (the “Sale Agreement”), between the Seller and the California Statewide Communities Development Authority (the “Purchaser”). 2. Irrevocable Instructions For Disbursement of Seller’s Proposition 1A Receivable to the Controller of the State of California, dated the Closing Date. 3. Bill of Sale, dated the Closing Date. Capitalized terms used herein and not defined herein shall have the meaning given such terms in the Sale Agreement. We further certify as follows: 1. At the time of signing the Seller Transaction Documents and the other documents and opinions related thereto, we held said offices, respectively, and we now hold the same. 2. The representations and warranties of the Seller contained in the Seller Transaction Documents are true and correct as of the date hereof in all material respects. 3. The Board of Directors duly adopted its resolution (the “Resolution”) approving the sale of the Seller’s Proposition 1A Receivable at a meeting of the Board of Directors which was duly called and held pursuant to law with all public notice required by law and at which a quorum was present and acting when the Resolution was adopted, and such Resolution is in full force and effect and has not been amended, modified, supplemented or rescinded. C2-2 Name, Official Title Signature James D. Ruth, General Manager Robert P. Ghirelli, Assistant General Manager Lorenzo Tyner, Director of Finance and Administrative Services I HEREBY CERTIFY that the signatures of the officers named above are genuine. Dated: Pricing Date By: Clerk of the Board of the Orange County Sanitation District, California C3-1 EXHIBIT C3 BILL OF SALE AND BRINGDOWN CERTIFICATE BILL OF SALE AND BRINGDOWN CERTIFICATE Pursuant to terms and conditions of the Purchase and Sale Agreement (the “Sale Agreement”), dated as of November 1, 2009, between the undersigned (the “Seller”) and the California Statewide Communities Development Authority (the “Purchaser”), and in consideration of the obligation of the Purchaser to pay and deliver to the Seller the Purchase Price (as defined in the Sale Agreement), in two equal installment payments to be made on January 15, 2010, and May 3, 2010 (collectively, the “Payment Dates”), the Seller does hereby (a) transfer, grant, bargain, sell, assign, convey, set over and deliver to the Purchaser, absolutely and not as collateral security, without recourse except as expressly provided in the Sale Agreement, the Proposition 1A Receivable as defined in the Sale Agreement (the “Proposition 1A Receivable”), and (b) assign to the Purchaser, to the extent permitted by law (as to which no representation is made), all present or future rights, if any, of the Seller to enforce or cause the enforcement of payment of the Proposition 1A Receivable pursuant to the Act and other applicable law. Such transfer, grant, bargain, sale, assignment, conveyance, set over and delivery is hereby expressly stated to be a sale and, pursuant to Section 6588.6(b) of the California Government Code, shall be treated as an absolute sale and transfer of the Proposition 1A Receivable, and not as a grant of a security interest by the Seller to secure a borrowing. Seller specifically disclaims any right to rescind the Agreement, or to assert that title to the Proposition 1A Receivable has not passed to the Purchaser, should Purchaser fail to make the installment payments in the requisite amounts on the Payment Dates. The Seller hereby certifies that the representations and warranties of the Seller set forth in the Certificate of the Clerk of the Board dated the Pricing Date, the Seller Certificate dated the Pricing Date and in the Transaction Documents to which the Seller is a party are true and correct in all material respects as of the date hereof (except for such representations and warranties made as of a specified date, which are true and correct as of such date). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Sale Agreement. Dated: Closing Date ORANGE COUNTY SANITATION DISTRICT By: Authorized Officer D-1 EXHIBIT D IRREVOCABLE INSTRUCTIONS TO CONTROLLER IRREVOCABLE INSTRUCTIONS FOR DISBURSEMENT OF PROPOSITION 1A RECEIVABLE OF ORANGE COUNTY SANITATION DISTRICT Dated: Closing Date Office of the Controller State of California P.O. Box 942850 Sacramento, California 94250-5872 Re: Notice of Sale of Proposition 1A Receivable by the Orange County Sanitation District and Wiring Instructions Information Form _____________________________________________________ Dear Sir or Madam: Pursuant to Section 6588.6(c) of the California Government Code, Orange County Sanitation District (the “Seller”) hereby notifies you of the sale by Seller, effective as of the date of these instructions written above, of all right, title and interest of the Seller in and to the “Proposition 1A Receivable” as defined in Section 6585(g) of the California Government Code (the “Proposition 1A Receivable”), namely, the right to payment of moneys due or to become due to the Seller pursuant to Section 25.5(a)(1)(B)(iii) of Article XIII of the California Constitution and Section 100.06 of the California Revenue and Taxation Code. By resolution, the Seller’s Board of Directors authorized the sale of the Proposition 1A Receivable to the California Statewide Communities Development Authority (the “Purchaser”) pursuant to a Purchase and Sale Agreement, dated as of November 1, 2009 (the “Purchase and Sale Agreement”) and a Bill of Sale, dated the Closing Date (as defined in the Purchase and Sale Agreement). The Proposition 1A Receivable has been pledged and assigned by the Purchaser pursuant to an Indenture, dated as of November 1, 2009 (the “Indenture”) between the Purchaser and Wells Fargo Bank, National Association, as Trustee (the “Trustee”). The Seller hereby irrevocably requests and directs that, commencing as of the date of these instructions written above, all payments of the Proposition 1A Receivable (and documentation related thereto) be made directly to Wells Fargo Bank, National Association, as Trustee, in accordance with the wire instructions and bank routing information set forth below. Please note that the sale of the Proposition 1A Receivable by the Seller is irrevocable and that: (i) the Seller has no power to revoke or amend these instructions at any time; (ii) the Purchaser shall have the power to revoke or amend these instructions only if there are no notes of the Purchaser outstanding under the Indenture and the Indenture has been discharged; and (iii) so long as the Indenture has not been discharged, these instructions D-2 cannot be revoked or amended by the Purchaser without the consent of the Trustee. Should the Purchaser, however, deliver a written notice to the Office of the Controller stating that: (a) the Seller failed to meet the requirements set forth in the Purchase and Sale Agreement; (b) the Purchaser has not waived such requirements; and (c) the Purchaser has not purchased the Proposition 1A Receivable as a result of the circumstances described in (a) and (b) above, then these instructions shall be automatically rescinded and the Seller shall again be entitled to receive all payment of moneys due or to become due to the Seller pursuant to Section 25.5(a)(1)(B)(iii) of Article XIII of the California Constitution and Section 100.06 of the California Revenue and Taxation Code. Bank Name: Wells Fargo Bank, N.A. Bank ABA Routing #: 121000248 Bank Account #: 0001038377 Bank Account Name: Corporate Trust Clearing Further Credit To: CSCDA Proposition 1A Bonds Bank Address: 707 Wilshire Blvd., 17th Floor MAC E2818-176 Los Angeles, CA 90017 Bank Telephone #: (213) 614-3353 Bank Contact Person: Robert Schneider Please do not hesitate to call the undersigned if you have any questions regarding this transaction. Thank you for your assistance in this matter. Very truly yours, ORANGE COUNTY SANITATION DISTRICT By: Authorized Officer E-1 EXHIBIT E ESCROW INSTRUCTION LETTER ESCROW INSTRUCTION LETTER ______________, 2009 California Statewide Communities Development Authority 1100 K Street Sacramento, CA 95814 Re: Proposition 1A Receivable Financing Dear Sir or Madam: The Orange County Sanitation District (the “Seller”) hereby notifies you of its agreement to participate in the California Statewide Communities Development Authority Proposition 1A Receivable Financing. By adoption of a resolution (the “Resolution”) authorizing the sale of its Proposition 1A Receivable, the Seller’s Board of Directors has agreed to sell to the California Statewide Communities Development Authority (the “Purchaser”), for a purchase price that meets the conditions set forth in the Resolution, all of its right, title and interest in the Proposition 1A Receivable. Enclosed herewith are the following documents which have been duly approved and executed by the Seller and which are to be held in escrow by Orrick, Herrington & Sutcliffe LLP, as transaction counsel (“Transaction Counsel”), as instructed below: 1. certified copy of the Resolution, together with a certificate of the Clerk of the Board, dated the Pricing Date; 2. the Seller Certificate, dated the Pricing Date; 3. the Opinion of Seller’s Counsel, dated the Pricing Date; 4. the Opinion of Seller’s Counsel (bringdown opinion), dated the Closing Date; 5. the Purchase and Sale Agreement, dated as of November 1, 2009; 6. the Bill of Sale and Bringdown Certificate, dated the Closing Date; and 7. the Irrevocable Instructions to Controller, dated the Closing Date. The foregoing documents are to be held in escrow by Transaction Counsel and shall be delivered on the Closing Date (as defined in the Purchase and Sale Agreement), provided that such Closing Date occurs on or before December 31, 2009. E-2 Should (i) the Closing Date not occur on or berfore December 31, 2009, or (ii) Transaction Counsel receive prior to the Closing Date written notification from Seller or Seller’s Counsel stating, respectively and in good faith, that the representations made in the Seller’s Certificate are not true and accurate, or the opinions set forth in the Opinion of Seller’s Counsel are not valid, in each case as of the Closing Date and provided that the Purchaser may, in its sole discretion, choose to waive receipt of such representations or opinions, then this agreement shall terminate and Transaction Counsel shall destroy all of the enclosed documents. Very truly yours, ORANGE COUNTY SANITATION DISTRICT By: Authorized Officer Enclosures cc: Orrick, Herrington & Sutcliffe LLP Page 1 ADMINISTRATION COMMITTEE Meeting Date 10/14/09 To Bd. of Dir. 10/28/09 AGENDA REPORT Item Number 3 Item Number 12 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B GENERAL MANAGER’S RECOMMENDATION 1) Adopt Resolution No. OCSD 09-16, Authorizing the Execution and Delivery by the District of an Installment Purchase Agreement, a Trust Agreement, and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B, such Notes Evidencing Principal in an Aggregate Amount of Not to Exceed $181,000,000, Approving an Official Statement in Connection with the Offering and Sale of such Notes and Authorizing the Execution of Other Necessary Documents and Related Actions; and, 2) That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Revenue Refunding Certificate Anticipation Notes, Series 2009B in an amount not to exceed $181,000,000. SUMMARY In September 2009, the Administration Committee and the Board of Directors authorized the execution and delivery of up to $181 million of Refunding Certificates of Participation. The current global financial crisis has negatively impacted the financial strength and ratings of many financial institutions that provide bank liquidity facilities securing variable rate bonds issued by municipal entities. Variable rate issues secured by banks with the least favorable investor perception have experienced higher than expected interest rate resets as investors are less willing to hold bonds secured by these weakening banks. In many cases, investors have tendered the bonds to the banks (Bank Bonds) to preempt any possibility of the liquidity bank not being able to provide funds in the future. Page 2 In addressing the global financial crisis and uncertainty in the market place, the District refinanced its exposure to higher reset rates and Bank Bonds existing with its outstanding Certificates of Participation (COP), Series 2006 variable rate debt by refunding it with the COP Series 2008C Certificate Anticipation Notes (CANs). The market yields on short-term securities issued in anticipation of permanent financing CANs have significantly lowered in cost to issuers. The District’s 2006 COPs debt was issued in 2006 as daily variable rate debt and had averaged 3.25 percent. However, the Bank Bond characteristics had increased the costs to over 4.00 percent in calendar year 2008. The yield on the COP Series 2008C CAN’s was 0.98 percent over a one-year period. Thus, the issuance of CANs allowed the District to redeem the Bank Bonds at a cost of less than 2.0 percent while waiting for the markets to stabilize. Staff has again recommended refunding the 2008C CANs with a new one-year CAN that will again enable the District to lock-in a low rate for approximately one year without encumbering its cash reserves. Given the large single maturity, CANs can be sold on a competitive basis in order to obtain the lowest interest rate possible. PRIOR COMMITTEE/BOARD ACTIONS September 23, 2009: Directed staff to pursue up to $181 million in one-year fixed-rate Certificates of Participation (COP) notes to replace the one-year $176 million outstanding certificates of participation notes maturing in December 2009 ADDITIONAL INFORMATION The Board of Directors and the Financing Corporation will each be required to adopt separate Resolutions to complete this refinancing. Drafts of these two Resolutions are attached for review. A Financing Corporation is required by the structure of the COPs and was formed in April 2000, to satisfy this need. The Board of Directors of the Corporation is the same as the Board of Directors of the District and the Corporation meets after an adjournment of the OCSD Board. The OCSD Resolution authorizes the execution and delivery of certain legal documents and the execution and delivery of Revenue Refunding Certificate Anticipation Notes, Series 2009B, evidencing principal in an aggregate amount of not to exceed $181,000,000 all as spelled out in the title as follows: Page 3 “A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST AGREEMENT, AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B, SUCH NOTES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $181,000,000, APPROVING AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH NOTES, AND AUTHORIZING THE EXECUTION OF OTHER NECESSARY DOCUMENTS AND RELATED ACTIONS.” The Resolution of the Corporation is somewhat shorter and simpler. It authorizes three actions that are similarly enumerated in the title as follows: “A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B; AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH NOTES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT-TO-EXCEED $181,000,000 AND; AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND NOTES AND RELATED ACTIONS.” Following is a chart listing the remaining steps to be completed for the issuance of the Certificate Anticipation Notes Series 2009B debt issuance: October Board approval of legal and disclosure documents Receive Ratings from Bond Rating Agencies November Competitive Bids December Closing Payment on 2008C CANs ATTACHMENTS (Only the District Resolution was provided at the Administration Committee Meeting of October 14th. All of the following attachments have been provided for the Board Meeting of October 28th.) 1. District Resolution 2. Corporation Resolution 3. Draft Trust Agreement 4. Draft Installment Purchase Agreement 5. Draft Continuing Disclosure Agreement 6. Draft Preliminary Official Statement 7. Draft Notice Inviting Bids 8. Draft Notice of Intention to Sell 85241633.4 RESOLUTION NO. OCSD 09-16 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST AGREEMENT AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B, SUCH NOTES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $181,000,000, APPROVING A NOTICE OF INTENTION TO SELL, AUTHORIZING THE DISTRIBUTION OF A NOTICE INVITING BIDS AND AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH NOTES AND AUTHORIZING THE EXECUTION OF OTHER NECESSARY DOCUMENTS AND RELATED ACTIONS WHEREAS, to finance the acquisition, construction and installation of certain improvements to its wastewater system (the “Prior Project”) the District caused the execution and delivery of $176,115,000 in aggregate principal amount of Orange County Sanitation District Refunding Certificates of Participation, Series 2008C (Certificate Anticipation Notes), of which $176,115,000 in principal amount is currently outstanding (the “Prior Certificates”); WHEREAS, the District desires to pay at maturity all of the Prior Certificates by paying all of the remaining principal components of the installment payment relating to the Prior Certificates (the “Prior Installment Payment”), and the interest components thereof to the date of maturity; WHEREAS, to provide the funds necessary to pay the Prior Installment Payment to be so paid, the District and the Orange County Sanitation District Financing Corporation (the “Corporation”) desire that the Corporation purchase the Prior Project from the District and the District sell the Prior Project to the Corporation, and that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the installment payment (the “Installment Payment”) to be made by the District, pursuant to a new installment purchase agreement (the “Installment Purchase Agreement”), and the Corporation and the District have agreed to finance such payment by causing the execution and delivery of up to $181,000,000 in aggregate principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”) to be repaid from the sale proceeds of future certificates of participation, other notes or obligations or lawfully available funds of the District; WHEREAS, the Corporation intends to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to Union Bank, N.A., as trustee (the “Trustee”), pursuant to a Trust Agreement by and among the Trustee, the Corporation and the District (such Trust Agreement, in the form presented at this meeting, with such changes, 85241633.4 2 insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Trust Agreement”); WHEREAS, in consideration of such assignment and the execution and delivery of the Trust Agreement, the Trustee intends to execute and deliver the Notes, evidencing direct, undivided fractional interests in the Installment Payment, and the interest thereon; WHEREAS, the District desires to provide for the public sale of the Notes in one or more discrete sale transactions; WHEREAS, a form of the Notice of Intention to Sell to be published in connection with the public offering and sale of the Notes has been prepared (such Notice of Intention to Sell, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Notice of Intention to Sell”); WHEREAS, a form of the Official Notice Inviting Bids to be distributed in connection with the public offering and sale of the Notes has been prepared (such Official Notice Inviting Bids, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Notice Inviting Bids”); WHEREAS, a form of the Preliminary Official Statement to be distributed in connection with the public offering of the Notes has been prepared (such Preliminary Official Statement in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Preliminary Official Statement”); WHEREAS, Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (“Rule 15c2-12”), requires that the underwriter thereof must have reasonably determined that the District has undertaken in a written agreement or contract for the benefit of the holders of the Notes to provide disclosure of certain material events; WHEREAS, to cause such requirement to be satisfied, the District desires to enter into a Continuing Disclosure Agreement with a dissemination agent to be named therein and the Trustee (such Continuing Disclosure Agreement in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Continuing Disclosure Agreement”); WHEREAS, there have been prepared and submitted to this meeting forms of: (1) the Installment Purchase Agreement; (2) the Trust Agreement; (3) the Notice of Intention to Sell; (4) the Notice Inviting Bids; (5) the Preliminary Official Statement; and 85241633.4 3 (6) the Continuing Disclosure Agreement. WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the District is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, THE BOARD OF DIRECTORS OF THE DISTRICT DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1. All of the recitals herein contained are true and correct and the Board of Directors of the District (the “Board”) so finds. Section 2. The Installment Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Chair of the Board, and such other member of the Board as the Chair may designate, the General Manager of the District, the Director of Finance and Administrative Services of the District, and such other officers of the District as the Director of Finance and Administrative Services may designate (the “Authorized Officers”) are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Installment Purchase Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Installment Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of the Installment Payment in excess of $181,000,000, shall not result in a true interest cost for the Installment Payment in excess of 3.0% per annum and shall not result in an Installment Payment later than December 15, 2010. Section 3. The Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Trust Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Trust Agreement by such Authorized Officer. Section 4. The execution and delivery of Notes evidencing principal in an aggregate amount not to exceed $181,000,000, payable in the years and in the amounts, and evidencing principal of and interest on the Installment Payment as specified in the Trust Agreement as finally executed, are hereby authorized and approved. 85241633.4 4 Section 5. The payment of the remaining principal components of the Prior Installment Payment at maturity, and the interest components thereof, and the Prior Certificates evidencing interests therein, is hereby authorized and approved. Section 6. The form of Notice of Intention to Sell, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the applicable Notice of Intention to Sell in connection with the offering and sale of a series of the Notes is hereby approved. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to cause one or more Notices of Intention to Sell to be published in The Bond Buyer (or in such other financial publication generally circulated throughout the State of California or reasonably expected to be disseminated among prospective bidders for the Notes as an Authorized Officer shall approve as being in the best interests of the District) at least five days prior to the date set for the opening of bids under the applicable Notice Inviting Bids, with such changes, insertions and omissions therein as an Authorized Officer may require or approve, such requirement or approval to be conclusively evidenced by the publishing of such Notice of Intention to Sell. Section 7. The Notice Inviting Bids, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, be and the same is hereby approved, and the use of one or more Notices Inviting Bids in connection with the offering and sale of the Notes is hereby authorized and approved. The terms and conditions of the offering and sale of the Notes shall be as specified in the applicable Notice Inviting Bids. Bids for the purchase of the Notes shall be received at the time and place set forth in the applicable Notice Inviting Bids. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to accept the bid for the Notes with the lowest true interest cost, or to reject all bids therefor, in accordance with the terms of the applicable Notice Inviting Bids. Section 8. The Preliminary Official Statement, in substantially the form presented to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Notes is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the District that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain information permitted by Rule 15c2-12 to be omitted). The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Notes a reasonable number of copies of the Preliminary Official Statement. Section 9. The preparation and delivery of a final Official Statement (the “Official Statement”), and its use in connection with the offering and sale of the Notes, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement, with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are, and each of them is, hereby authorized and 85241633.4 5 directed to execute the final Official Statement and any amendment or supplement thereto, for and in the name of the District. Section 10. The Continuing Disclosure Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Continuing Disclosure Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Continuing Disclosure Agreement by such Authorized Officer. Section 11. The Authorized Officers are, and each of them hereby is, authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the execution and delivery of the Notes and the transactions contemplated by the notices, agreements and documents referenced in this Resolution. The Authorized Officers are further authorized and directed to execute and deliver such additional notes as may be necessary or desirable to pay the Notes at maturity; provided, however, that the documents executed and delivered in connection with any such notes shall be in the form approved pursuant to this Resolution in connection with the Notes. Section 12. All actions heretofore taken by the officers and employees of the District with respect to the execution, delivery and sale of the Notes, or in connection with or related to any of the agreements or documents referenced in this Resolution, are hereby approved, confirmed and ratified. Section 13. This Resolution shall take effect immediately upon its adoption. 85241633.4 6 PASSED AND ADOPTED at a regular meeting held on October 28, 2009. Chair ATTEST: Clerk of the Board APPROVED: General Counsel, Orange County Sanitation District 85241633.4 STATE OF CALIFORNIA ) ) ss COUNTY OF ORANGE ) I, Penny M. Kyle, Clerk of the Board of Directors of the Orange County Sanitation District, do hereby certify that the foregoing Resolution No. OCSD 09-16 was passed and adopted at a regular meeting of said Board on the 28th day of October, 2009, by the following vote, to wit: AYES: NOES: ABSTENTIONS: ABSENT: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of Orange County Sanitation District this 28th day of October, 2009. Clerk of the Board of Directors Orange County Sanitation District 85241728.4 RESOLUTION NO. FC-10 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH CERTIFICATES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $181,000,000 AND AUTHORIZING THE EXECUTION OF OTHER NECESSARY DOCUMENTS AND RELATED ACTIONS WHEREAS, to finance the acquisition, construction and installation of certain improvements to its wastewater system (the “Prior Project”) the District caused the execution and delivery of $176,115,000 in aggregate principal amount of Orange County Sanitation District Refunding Certificates of Participation, Series 2008C (Certificate Anticipation Notes), of which $176,115,000 in principal amount is currently outstanding (the “Prior Certificates”); WHEREAS, the District desires to pay at maturity all of the Prior Certificates by paying all of the remaining principal components of the installment payment relating to the Prior Certificates (the “Prior Installment Payment”), and the interest components thereof to the maturity date; WHEREAS, to provide the funds necessary to pay the Prior Installment Payment to be so paid, the District and the Orange County Sanitation District Financing Corporation (the “Corporation”) desire that the Corporation purchase the Prior Project from the District and the District sell the Prior Project to the Corporation, and that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the installment payments (the “Installment Payment”) to be made by the District, pursuant to a new installment purchase agreement (the “Installment Purchase Agreement”), and the Corporation and the District have agreed to finance such payment by causing the execution and delivery of up to $181,000,000 in aggregate principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”) to be repaid from future certificates of participation, other notes or obligations or lawfully available funds of the District; WHEREAS, the Corporation intends to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to Union Bank, N.A., as trustee (the “Trustee”), pursuant to a Trust Agreement by and among the Trustee, the Corporation and the District (such Trust Agreement, in the form presented at this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Trust Agreement”); 85241728.4 2 WHEREAS, in consideration of such assignment and the execution and delivery of the Trust Agreement, the Trustee intends to execute and deliver the Notes, evidencing direct, undivided fractional interests in the Installment Payment, and the interest thereon; WHEREAS, the Corporation desires to assist the District to provide for the public sale of the Notes; WHEREAS, there have been prepared and submitted to this meeting forms of: (a) the Installment Purchase Agreement; (b) the Trust Agreement; and (c) the Preliminary Official Statement. WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the actions authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Corporation is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such actions for the purpose, in the manner and upon the terms herein provided. NOW, THEREFORE, the Board of Directors of the Corporation DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1. All of the recitals herein contained are true and correct and the Board of Directors of the Corporation so finds. Section 2. The Installment Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The President of the Corporation, the Vice-President of the Corporation, the Treasurer of the Corporation and the Secretary of the Corporation, and such other officers of the Corporation as the President may designate (the “Authorized Officers”) are, and each of them is, hereby authorized and directed, for and in the name of the Corporation, to execute and deliver the Installment Purchase Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Installment Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of Installment Payments in excess of $181,000,000, shall not result in a true interest cost for the Installment Payments in excess of 3.0% per annum and shall not result in a final Installment Payment later than December 15, 2010. Section 3. The Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the Corporation, to execute and deliver the Trust Agreement in the form presented to 85241728.4 3 this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Trust Agreement by such Authorized Officer. Section 4. The Preliminary Official Statement, in substantially the form presented to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Notes is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the Corporation that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain information permitted by Rule 15c2-12 to be omitted). The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Notes a reasonable number of copies of the Preliminary Official Statement. Section 5. The execution and delivery of Notes evidencing principal in an aggregate amount not to exceed $181,000,000, payable in the years and in the amounts, and evidencing direct, undivided fractional interests in the Installment Payment, and the interest thereon, as specified in the Trust Agreement as finally executed, are hereby authorized and approved. Section 6. The Authorized Officers of the Corporation are, and each of them hereby is, authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the execution and delivery of the Notes and the transactions contemplated by the agreements or documents referenced in this Resolution. The Authorized Officers are further authorized and directed to assist the District in delivering such additional notes as may be necessary or desirable to pay the Notes at maturity; provided, however, that the documents executed and delivered in connection with any such notes shall be in the form approved pursuant to this Resolution in connection with the Notes. Section 7. All actions heretofore taken by the officers and agents of the Corporation with respect to the execution, delivery and sale of the Notes, or in connection with or related to any of the agreements or documents referenced in this Resolution, are hereby approved, confirmed and ratified. Section 8. This Resolution shall take effect immediately upon its adoption. 85241728.4 4 PASSED AND ADOPTED at a meeting held on October 28, 2009. President, Orange County Sanitation District Financing Corporation ATTEST: Secretary, Orange County Sanitation District Financing Corporation APPROVED: General Counsel, Orange County Sanitation District Financing Corporation 85241728.4 STATE OF CALIFORNIA ) ) ss COUNTY OF ORANGE ) I, Penny M. Kyle, Secretary of the Orange County Sanitation District Financing Corporation, do hereby certify that the foregoing Resolution No. FC-10 was passed and adopted at a regular meeting of said Board on the 28th day of October, 2009, by the following vote, to wit: AYES: NOES: ABSTENTIONS: ABSENT: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of Orange County Sanitation District Financing Corporation this 28th day of October, 2009. Secretary of the Orange County Sanitation District Financing Corporation 85238425.4 Fulbright & Jaworski L.L.P. Draft – 10/14/09 TRUST AGREEMENT by and among UNION BANK, N.A., as Trustee, ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION and ORANGE COUNTY SANITATION DISTRICT Dated as of December 1, 2009 Relating to $[PAR] Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B TABLE OF CONTENTS Page 85238425.4 i ARTICLE I DEFINITIONS; EQUAL SECURITY Section 1.01. Definitions........................................................................................................ 2 Section 1.02. Definitions in Installment Purchase Agreement .............................................. 8 Section 1.03. Equal Security .................................................................................................. 8 ARTICLE II TERMS AND CONDITIONS OF NOTES Section 2.01. Preparation and Delivery of Notes ................................................................... 9 Section 2.02. Denomination, Medium and Dating of Notes .................................................. 9 Section 2.03. Payment Date of Notes; Interest Computation ................................................ 9 Section 2.04. Form of Notes .................................................................................................. 9 Section 2.05. Execution of Notes and Replacement Notes .................................................... 9 Section 2.06. Transfer and Payment of Notes; Exchange of Notes ....................................... 9 Section 2.07. Note Registration Books ................................................................................ 10 Section 2.08. Reserved ......................................................................................................... 10 Section 2.09. Notes Mutilated, Lost, Destroyed or Stolen................................................... 10 Section 2.10. Book-Entry System ........................................................................................ 11 ARTICLE III PROCEEDS OF NOTES Section 3.01. Delivery of Notes ........................................................................................... 13 Section 3.02. Deposit and Transfer of Proceeds of Notes ................................................... 13 Section 3.03. Costs of Issuance Fund .................................................................................. 13 ARTICLE IV NO PREPAYMENT OF NOTES Section 4.01. No Prepayment............................................................................................... 13 ARTICLE V ASSIGNMENT AND PLEDGE; FUNDS AND ACCOUNTS Section 5.01. Assignment and Pledge .................................................................................. 13 Section 5.02. Installment Payment Fund ............................................................................. 14 Section 5.03. Reserved ......................................................................................................... 14 Section 5.04. Reserved ......................................................................................................... 14 Section 5.05. Investment of Moneys.................................................................................... 15 Section 5.06. Brokerage Confirmations ............................................................................... 15 ARTICLE VI COVENANTS Section 6.01. Compliance with Trust Agreement ................................................................ 15 Section 6.02. Compliance with Installment Purchase Agreement ....................................... 16 Section 6.03. Compliance with Master Agreement ............................................................. 16 TABLE OF CONTENTS (continued) Page 85238425.4 ii Section 6.04. Observance of Laws and Regulations ............................................................ 16 Section 6.05. Other Liens..................................................................................................... 16 Section 6.06. Prosecution and Defense of Suits .................................................................. 16 Section 6.07. Accounting Records and Statements ............................................................. 16 Section 6.08. Tax Covenants ............................................................................................... 17 Section 6.09. Continuing Disclosure ................................................................................... 20 Section 6.10. Further Assurances......................................................................................... 20 ARTICLE VII DEFAULT AND LIMITATIONS OF LIABILITY Section 7.01. Action upon Event of Default ........................................................................ 20 Section 7.02. Other Remedies of the Trustee ...................................................................... 21 Section 7.03. Non-Waiver.................................................................................................... 21 Section 7.04. Remedies Not Exclusive ................................................................................ 21 Section 7.05. Application of Amounts After Default .......................................................... 22 Section 7.06. Trustee May Enforce Claims Without Possession of Notes .......................... 22 Section 7.07. Limitation on Suits ......................................................................................... 22 Section 7.08. No Liability by the Corporation to the Owner ............................................... 23 Section 7.09. No Liability by the District to the Owners..................................................... 23 Section 7.10. No Liability of the Trustee to the Owners ..................................................... 23 ARTICLE VIII THE TRUSTEE Section 8.01. Employment of the Trustee; Duties ............................................................... 23 Section 8.02. Removal and Resignation of the Trustee ....................................................... 24 Section 8.03. Compensation and Indemnification of the Trustee ........................................ 25 Section 8.04. Protection of the Trustee ................................................................................ 25 ARTICLE IX AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT Section 9.01. Amendment or Supplement ........................................................................... 27 Section 9.02. Disqualified Notes ......................................................................................... 28 Section 9.03. Endorsement or Replacement of Notes After Amendment or Supplement .................................................................................................... 28 Section 9.04. Amendment by Mutual Consent .................................................................... 28 ARTICLE X DEFEASANCE Section 10.01. Discharge of Notes and Trust Agreement ...................................................... 28 Section 10.02. Unclaimed Moneys ........................................................................................ 29 TABLE OF CONTENTS (continued) Page 85238425.4 iii ARTICLE XI MISCELLANEOUS Section 11.01. Benefits of Trust Agreement .......................................................................... 30 Section 11.02. Successor Deemed Included in all References to Predecessor ...................... 30 Section 11.03. Execution of Documents by Owners ............................................................. 30 Section 11.04. Waiver of Personal Liability .......................................................................... 31 Section 11.05. Reserved ......................................................................................................... 31 Section 11.06. Content of Notes ............................................................................................ 31 Section 11.07. Funds and Accounts ....................................................................................... 31 Section 11.08. Article and Section Headings, Gender and References ................................. 32 Section 11.09. Partial Invalidity............................................................................................. 32 Section 11.10. California Law ............................................................................................... 32 Section 11.11. Notices ........................................................................................................... 32 Section 11.12. Effective Date ................................................................................................ 33 Section 11.13. Execution in Counterparts.............................................................................. 33 EXHIBIT A - FORM OF NOTE 85238425.4 TRUST AGREEMENT THIS TRUST AGREEMENT (this “Trust Agreement”), is dated as of December 1, 2009, by and among UNION BANK, N.A., a national banking association organized and existing under the laws of the United States of America, as Trustee (the “Trustee”), the ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION, a nonprofit public benefit corporation organized and existing under the laws of the State of California (the “Corporation”), and the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the “District”). WITNESSETH: WHEREAS, to refinance the acquisition, construction and installation of certain improvements to its wastewater system (the “Prior Project”) the District caused the execution and delivery of $176,115,000 in aggregate principal amount of Orange County Sanitation District Refunding Certificates of Participation, Series 2008C (Certificate Anticipation Notes), of which $176,115,000 in principal amount is currently outstanding (the “Prior Notes”); WHEREAS, the District desires to pay at maturity all of the Prior Notes by prepaying all of the remaining principal components of the installment payment relating to the Prior Notes (the “Prior Installment Payment”), and the interest components thereof, thereby causing all of the Prior Notes to be paid; WHEREAS, to provide the funds necessary to pay the Prior Installment Payment to be so prepaid, the District and the Corporation desire that the Corporation purchase the Prior Project from the District and the District sell the Prior Project to the Corporation, and that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the installment payment (the “Installment Payment”) to be made by the District, pursuant to a new installment purchase agreement (the “Installment Purchase Agreement”), and the Corporation and the District have agreed to finance such prepayment by causing the execution and delivery of $[PAR] in aggregate principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”) evidencing direct, fractional undivided interests in the Installment Payment and the interest thereon, to be made by the District pursuant to the Installment Purchase Agreement; WHEREAS, pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000, by and between the District and the Corporation, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payment, and the interest thereon, are to be incurred and secured; WHEREAS, the Corporation proposes to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to the Trustee; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Trust Agreement do exist, have happened and have been performed in regular and due time, 85238425.4 2 form and manner as required by law, and the parties hereto are now duly authorized to execute and deliver this Trust Agreement. NOW, THEREFORE, in consideration of the promises and of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS; EQUAL SECURITY Section 1.01. Definitions. Except as provided in Section 1.02 hereof or 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 Notes 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: “Authorized Corporation Representative” means the President, the Vice President, the Treasurer and the Secretary of the Corporation, and any other Person authorized by the President of the Corporation to act on behalf of the Corporation under or with respect to this Trust Agreement. “Authorized Denominations” means $5,000 and integral multiples thereof. “Authorized District Representative” means the General Manager of the District, the Director of Finance and Administrative Services of the District, the Controller of the District and any other Person authorized by the Director of Finance and Administrative Services of the District to act on behalf of the District under or with respect to this Trust Agreement. “Beneficial Owners” means those individuals, partnerships, corporations or other entities for which the Participants have caused the Depository to hold Book-Entry Notes. “Book-Entry Notes” means the Notes registered in the name of the nominee of DTC, or any successor securities depository for the Notes, as the Owner thereof pursuant to the terms and provisions of Section 2.10 hereof. “Business Day” means a day other than (a) Saturday or Sunday, (b) a day on which banking institutions in the city in which the Principal Office is located are authorized or required by law to be closed, and (c) a day on which the New York Stock Exchange is authorized or obligated by law or executive order to be closed. “Cede & Co.” means Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to the Notes. “Closing Date” means December __, 2009. “Code” means the Internal Revenue Code of 1986. 85238425.4 3 “Continuing Disclosure Agreement” means the Continuing Disclosure Agreement, dated as of the date hereof, by and between the District and Digital Assurance Certification LLC, as dissemination agent thereunder, as originally executed and as it may from time to time be amended in accordance with the terms thereof. “Corporation” means the Orange County Sanitation District Financing Corporation, a nonprofit public benefit corporation organized and existing under the laws of the State. “Costs of Issuance” means all the costs of executing and delivering the Notes, including, but not limited to, all printing and document preparation expenses in connection with this Trust Agreement, the Installment Purchase Agreement, the Notes and any preliminary official statement and final official statement pertaining to the Notes, rating agency fees, market study fees, legal fees and expenses of counsel with respect to the execution and delivery of the Notes, the initial fees and expenses of the Trustee and its counsel and other fees and expenses incurred in connection with the execution and delivery of the Notes, to the extent such fees and expenses are approved by the District. “Costs of Issuance Fund” means the fund by that name established in accordance with Section 3.03 hereof. “Depository” means the securities depository acting as Depository pursuant to Section 2.10 hereof. “District” means the Orange County Sanitation District, a county sanitation district organized and existing under the laws of the State, and any successor thereto. “DTC” means The Depository Trust Company, New York, New York and its successors. “Event of Default” shall have the meaning set forth in Section 6.01 of the Installment Purchase Agreement. “Government Obligations” means any of the following which are noncallable by the issuer thereof except to the extent not permitted by the laws of the State as an investment for the moneys to be invested therein at the time of investment: (i) (a) direct general obligations of the United States of America, (b) obligations the payment of the principal of and interest on which are unconditionally guaranteed as to the full and timely payment by the United States of America, or (c) any fund or other pooling arrangement whose assets consist exclusively of the obligations listed in clause (a) or (b) of this clause (i) and which is rated at least “P-1” by Moody’s; provided that, such obligations shall not include unit investment trusts or mutual fund obligations; (ii) advance refunded tax-exempt obligations secured by the obligations specified in clause (i) which tax-exempt obligations are rated “Aaa” by Moody’s and “AAA” by S&P as a result of such obligations being secured by said obligations; 85238425.4 4 (iii) bonds, debentures or notes issued by any of the following federal agencies: Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation or Federal National Mortgage Association; provided that such bonds, debentures or notes shall be the senior obligations of such agencies (including participation certificates) and rated “Aaa” by Moody’s and “AAA” by S&P; and (iv) bonds, debentures or notes issued by any Federal agency hereafter created by an act of Congress, the payment of the principal of and interest on which are unconditionally guaranteed by the United States of America as to the full and timely payment; provided, that, such obligations shall not include unit investment trusts or mutual fund obligations. “Installment Payment Fund” means the fund by that name established in accordance with Section 5.02 hereof. “Installment Payment” means the Installment Payment required to be made by the District pursuant to Section 3.02 of the Installment Purchase Agreement. “Installment Purchase Agreement” means the Installment Purchase Agreement, dated as of the date hereof, by and between the District and the Corporation, as originally executed and as it may from time to time be amended in accordance with the provisions thereof. “Interest Account” means the account by that name within the Installment Payment Fund established in accordance with Section 5.02 hereof. “Letter of Representations” means the letter of the District delivered to and accepted by the Depository on or prior to the delivery of the Notes as Book-Entry Notes setting forth the basis on which the Depository serves as depository for such Book-Entry Notes, as originally executed or as it may be supplemented or revised or replaced by a letter to a substitute Depository. “Master Agreement” means the Master Agreement for District Obligations, dated as of August 1, 2000, by and between the District and the Corporation, as originally executed and as it may from time to time be amended or supplemented in accordance with the terms thereof. “Maturity Date” means December 1, 2010. “Moody’s” means Moody’s Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, except that if such corporation shall no longer perform the function of a securities rating agency for any reason, the term “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. “Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.11 hereof. 85238425.4 5 “Notes” means the $[PAR] Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B, executed and delivered by the Trustee pursuant hereto. “Opinion of Counsel” means a written opinion of Fulbright & Jaworski L.L.P. or any other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District. “Outstanding,” when used as of any particular time with reference to Notes, means (subject to the provisions of Section 9.02 hereof) all Notes except (a) Notes previously canceled by the Trustee or delivered to the Trustee for cancellation, (b) Notes paid or deemed to have been paid within the meaning of Section 10.01 hereof, and (c) Notes in lieu of or in substitution for which other Notes shall have been executed and delivered by the Trustee pursuant to Section 2.09 hereof. “Owner” means any Person who shall be the registered owner of any Outstanding Note as indicated in the registration books of the Trustee required to be maintained pursuant to Section 2.07 hereof. “Participants” means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Book-Entry Notes as securities depository. “Participating Underwriter” has the meaning ascribed thereto in the Continuing Disclosure Agreement. “Permitted Investments” means any of the following, except to the extent not permitted by the laws of the State as an investment for the moneys to be invested therein at the time of investment: (1) Government Obligations; (2) Bonds, debentures, notes, participation certificates or other evidences of indebtedness issued, or the principal of and interest on which are unconditionally guaranteed, by the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Government National Mortgage Association or any other agency or instrumentality of or corporation wholly owned by the United States of America when such obligations are backed by the full faith and credit of the United States for the full and timely payment of principal and interest; (3) Obligations of any state of the United States or any political subdivision thereof, which at the time of investment are rated “Aa3” or higher by Moody’s and “AA-” or higher by S&P; or which are rated by Moody’s “VMIG1” or better and by S&P “A-1+” or better with respect to commercial paper, or “VMIG1” and “SP-1”, respectively, with respect to municipal notes; (4) Bank time deposits evidenced by certificates of deposit, deposit accounts, and bankers’ acceptances, issued by any bank, trust company or national banking association insured by the Federal Deposit Insurance Corporation (including the Trustee); 85238425.4 6 provided that (a) such bank, trust company or national banking association be rated “Aa3” or better by Moody’s and “AA-” or better by S&P; and (b) the aggregate of such bank time deposits and bankers’ acceptances issued by any bank, trust company or banking association does not exceed at any one time 10% of the aggregate of the capital stock, surplus and undivided profits of such bank, trust company or banking association and that such capital stock, surplus and undivided profits shall not be less $15,000,000; (5) Repurchase agreements with any bank, trust company or national banking association insured by the Federal Deposit Insurance Corporation (including the Trustee), with subsidiaries (of a parent company), provided the obligations of the subsidiary under the agreement are unconditionally guaranteed by the parent, or with any government bond dealer recognized as a primary dealer by the Federal Reserve Bank of New York, which agreements are fully and continuously secured by a valid and perfected first priority security interest in obligations described in paragraph (1) or (2) of this definition, provided that either such bank, trust company or national banking association which (or senior debt or claims paying ability of the financial entity’s guarantor) is rated, at the time of investment, “Aa3” or better by Moody’s and “AA-” or better by S&P; (6) Repurchase agreements with maturities of not more than one year entered into with financial institutions such as banks or trust companies organized under state law or national banks or banking associations (including the Trustee), insurance companies or government bond dealers reporting to, trading with, and recognized as a primary dealer by, the Federal Reserve Bank of New York and a member of the Securities Investor Protection Corporation or with a dealer or parent holding company that is rated, at the time of investment, or whose long-term debt obligations (or senior debt or claims paying ability of the financial entity’s guarantor) are rated, at the time of investment, “Aa3” or better by Moody’s and “AA-” or better by S&P, provided such repurchase agreements are in writing, secured by obligations described in paragraphs (1) and (2) of this definition having a fair market value, exclusive of accrued interest, at least equal to the amount invested in the repurchase agreements and in which the Trustee has a perfected first lien in, and retains possession of, such obligations free from all third party claims; (7) Investment agreements, forward purchase agreements and reserve fund put agreements with any corporation, including banking or financial institutions, or agreements entered into with subsidiaries (of a parent company), provided the obligations of the subsidiary under the agreement are unconditionally guaranteed by the parent, the corporate debt of which (or senior debt or claims paying ability of the financial entity’s guarantor) is rated, at the time of investment, “Aa3” or better by Moody’s and “AA-” or better by S&P; (8) Guaranteed investment contracts or similar funding agreements issued by insurance companies, provided that either the long term corporate debt of such insurance company, at the time of investment, is rated, at the time of investment, “Aa3” or better by Moody’s and “AA-” or better by S&P or which agreements are fully and continuously secured by a valid and perfected first priority security interest in obligations described in paragraph (1) or (2) of this definition, or that the following conditions are met: (a) the market value of the collateral is maintained at levels acceptable to Moody’s and S&P, 85238425.4 7 (b) the Trustee or a third party acting solely as agent for the Trustee has possession of the collateral, (c) the Trustee has a perfected first priority security interest in the collateral, (d) the collateral is free and clear of third-party liens, and (e) failure to maintain the requisite collateral level will require the Trustee to liquidate collateral; (9) Corporate commercial paper rated “P-1” or better by Moody’s and “A-1+” or better by S&P at the time of investment; (10) Taxable government money market portfolios restricted to obligations the payment of principal and interest with respect to which is guaranteed by the United States of America or repurchase agreements secured by such obligations, and which are rated “AAAm” or “AAAm-G” by S&P and “P-1” by Moody’s (including funds for which the Trustee or an affiliate provides investment advice or similar services); (11) Deposits with the Local Agency Investment Fund of the State, as may otherwise be permitted by law; and (12) Shares in the Franklin Adjustable U.S. Government Securities Fund or any other similar fund having at least $1,000,000,000 in assets and invested solely in securities directly guaranteed by the U.S. government or its agencies and rated “AAAf” by S&P or a comparable rating by Moody’s. “Person” means an individual, corporation, limited liability company, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. “Principal Account” means the account by that name within the Installment Payment Fund established in accordance with Section 5.02 hereof. “Principal Office” means the Trustee’s principal corporate trust office in Los Angeles, California. “Prior Notes” has the meaning ascribed thereto in the recitals hereto. “Prior Notes Trustee” means Union Bank, N.A., as trustee for the Prior Notes. “Record Date” means, with respect to the interest payable on the Maturity Date or any other date fixed for payment, the 15th day of the calendar month immediately preceding such date, whether or not such day is a Business Day. “S&P” means 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, except that if such entity shall no longer perform the functions of a securities rating agency for any reason, the term “S&P” shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. “State” means the State of California. 85238425.4 8 “Tax Certificate” means the Tax Certificate executed by the District at the time of execution and delivery of the Notes relating to the requirements of section 148 of the Code, as originally executed and as it may from time to time be amended in accordance with the provisions thereof. “Trust Agreement” means this Trust Agreement, dated as of December 1, 2009, by and among the Trustee, the Corporation and the District, as originally executed and delivered and as it may from time to time be amended or supplemented in accordance with the provisions hereof. “Trustee” means Union Bank, N.A., a national banking association duly organized and existing under the laws of the United States of America, or any other bank or trust company which may at any time be substituted in its place as provided in Section 10.02 hereof. “Written Certificate” and “Written Request” mean (a) with respect to the Corporation, a written certificate or written request, respectively, signed in the name of the Corporation by an Authorized Corporation Representative, and (b) with respect to the District, a written certificate or written request, respectively, signed in the name of the District by an Authorized District Representative. Any such certificate or request 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. Section 1.02. Definitions in Installment Purchase Agreement. Except as otherwise herein defined and unless the context otherwise requires, the terms defined in the Installment Purchase Agreement shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein have the meanings defined therein, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined therein. With respect to any defined term which is given a different meaning under this Trust Agreement than under the Installment Purchase Agreement, as used herein it shall have the meaning given herein. Section 1.03. Equal Security. In consideration of the acceptance of the Notes by the Owners, this Trust Agreement shall be deemed to be and shall constitute a contract between the Trustee and the Owners to secure the full and final payment of the interest and principal evidenced by the Notes which may be executed and delivered hereunder, subject to each of the agreements, conditions, covenants and terms contained herein; 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 security or otherwise of any Notes over any other Notes by reason of the number or date thereof or the time of execution or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein. ARTICLE II TERMS AND CONDITIONS OF NOTES Section 2.01. Preparation and Delivery of Notes. The Trustee is hereby authorized, upon the Written Request of the District, to execute and deliver the Notes in the aggregate 85238425.4 9 principal amount of $[PAR], evidencing the aggregate principal amount of the Installment Payment and each evidencing a direct, fractional undivided interest in the Installment Payment, and the interest thereon. Section 2.02. Denomination, Medium and Dating of Notes. The Notes shall be designated as the “Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B” and shall be prepared in the form of fully registered Notes, without coupons, in Authorized Denominations and shall be payable in lawful money of the United States of America. The Notes shall be dated the Closing Date and shall evidence interest accruing from the Closing Date until the Maturity Date. Section 2.03. Payment Date of Notes; Interest Computation. Except as otherwise provided in the Letter of Representations, interest and principal evidenced by the Notes shall become due and payable on the Maturity Date. Interest evidenced by the Notes shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Except as otherwise provided in the Letter of Representations, payment of interest evidenced by the Notes shall be made to the Owners thereof (as determined at the close of business on the Record Date next preceding the Maturity Date or any other date fixed for payment) by check or draft of the Trustee mailed to the address of each such Owner as it appears on the registration books maintained by the Trustee pursuant to Section 2.07 hereof, or to such other address as may be furnished in writing to the Trustee by each such Owner. Except as otherwise provided in the Letter of Representations, payment of principal evidenced by the Notes, on the Maturity Date, shall be made only upon presentation and surrender of the Notes at the Principal Office. Section 2.04. Form of Notes. The Notes shall be in substantially the form of Exhibit A hereto, with necessary or appropriate insertions, omissions and variations as permitted or required hereby. Section 2.05. Execution of Notes and Replacement Notes. The Notes shall be executed by the Trustee by the manual signature of an authorized officer of the Trustee. The Trustee shall deliver any replacement Notes in the manner and as contemplated by this Article. Such replacement Notes, if any, shall be executed as herein provided and shall be in Authorized Denominations. Section 2.06. Transfer and Payment of Notes; Exchange of Notes. Each Note is transferable by the Owner thereof, in person or by his attorney duly authorized in writing, at the Principal Office, on the registration books maintained by the Trustee pursuant to the provisions of Section 2.07 hereof, upon surrender of such Note for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. The Trustee may treat the Owner of any Note as the absolute owner of such Note for all purposes, whether or not the principal or interest evidenced by such Note shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the interest and principal evidenced by such Note shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such Note to the extent of the sum or sums so paid. 85238425.4 10 Whenever any Note shall be surrendered for transfer, the Trustee shall execute and deliver a new Note or Notes evidencing principal in the same aggregate amount. The Trustee shall require the payment by any Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Each Note may be exchanged at the Principal Office for Notes evidencing principal in a like aggregate principal amount in such Authorized Denominations as the Owner thereof may request. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. Section 2.07. Note Registration Books. The Trustee shall keep at its Principal Office sufficient books for the registration and transfer of the Notes, which books shall be available for inspection and copying by the District at reasonable hours and under reasonable conditions; and upon presentation for such purpose the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer the Notes on such books as hereinabove provided. Section 2.08. Reserved. Section 2.09. Notes Mutilated, Lost, Destroyed or Stolen. If any Note shall become mutilated, the Trustee, at the expense of the Owner thereof, shall execute and deliver a new Note evidencing a like principal amount and number in exchange and substitution for the Note so mutilated, but only upon surrender to the Trustee of the Note so mutilated. Every mutilated Note so surrendered to the Trustee shall be canceled by it. If any Note 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, the Trustee, at the expense of the Owner thereof, shall execute and deliver a new Note evidencing a like principal amount, numbered as the Trustee shall determine, in lieu of and in substitution for the Note so lost, destroyed or stolen. The Trustee may require payment of a sum not exceeding the actual cost of preparing each new Note executed and delivered by it under this Section and of the expenses which may be incurred by it under this Section. Any Note executed and delivered under the provisions of this Section in lieu of any Note alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits hereof with all other Notes executed and delivered hereunder, and the Trustee shall not be required to treat both the original Note and any replacement Note as being Outstanding for the purpose of determining the amount of Notes which may be executed and delivered hereunder or for the purpose of determining any percentage of Notes Outstanding hereunder, but both the original and replacement Note shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of executing and delivering a new Note for a Note which has been lost, destroyed or stolen and which evidences principal that is then payable, the Trustee may make payment of such Note to the Owner thereof if so instructed by the District. Section 2.10. Book-Entry System. (a) The Notes shall be initially executed and delivered as Book-Entry Notes, and the Notes shall be in the form of a separate single fully registered Note. Upon initial execution and delivery of the Notes, the ownership of the Notes shall be registered in the registration books maintained by the Trustee in the name of the Nominee, as nominee of the Depository. 85238425.4 11 Payment of principal or interest evidenced by any Book-Entry Note registered in the name of the Nominee shall be made on the Maturity Date by wire transfer of New York clearing house or equivalent next day funds or by wire transfer of same day funds to the account of the Nominee. Such payments shall be made to the Nominee at the address which is, on the Record Date, shown for the Nominee in the registration books maintained by the Trustee. (b) With respect to Book-Entry Notes, the District, the Corporation and the Trustee shall have no responsibility or obligation to any Participant or to any Person on behalf of which such a Participant holds an interest in such Book-Entry Notes. Without limiting the immediately preceding sentence, the District, the Corporation and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee or any Participant with respect to any ownership interest in Book-Entry Notes, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books maintained by the Trustee, of any notice with respect to Book-Entry Notes, (iii) the selection by the Depository and its Participants of the beneficial interests in Book-Entry Notes to be prepaid in the event Notes are prepaid in part, (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books maintained by the Trustee, of any amount with respect to principal or interest evidenced by Book-Entry Notes, or (v) any consent given or other action taken by the Depository as Owner. (c) The District, the Corporation and the Trustee may treat and consider the Person in whose name each Book-Entry Note is registered in the registration books maintained by the Trustee as the absolute Owner of such Book-Entry Note for the purpose of payment of principal and interest evidenced by such Note, for the purpose of selecting any Notes, or portions thereof, to be prepaid, for the purpose of giving notices of matters with respect to such Note, for the purpose of registering transfers with respect to such Note, for the purpose of obtaining any consent or other action to be taken by Owners and for all other purposes whatsoever, and the District, the Corporation and the Trustee shall not be affected by any notice to the contrary. (d) Reserved. (e) The Trustee shall pay all principal and interest evidenced by the Notes to the respective Owner, as shown in the registration books maintained by the Trustee, or his respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the obligations with respect to payment of principal and interest evidenced by the Notes to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books maintained by the Trustee, shall receive a Note evidencing principal and interest evidenced by the Notes. Upon delivery by the Depository to the Owners, the Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Date, the word Nominee in this Trust Agreement shall refer to such nominee of the Depository. (f) To qualify the Book-Entry Notes for the Depository’s book-entry system, the District shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the Corporation, the District or the Trustee any obligation whatsoever with respect to Persons having, interests in such Book-Entry Notes other than the Owners, as shown on the registration books maintained by 85238425.4 12 the Trustee. Such Letter of Representations may provide the time, form, content and manner of transmission, of notices to the Depository. In addition to the execution and delivery of a Letter of Representations by the District, the District, the Corporation and the Trustee shall take such other actions, not inconsistent with this Trust Agreement, as are reasonably necessary to qualify Book-Entry Notes for the Depository’s book-entry program. (g) If the District determines that it is in the best interests of the Beneficial Owners that they be able to obtain certificated Notes and that such Notes should therefore be made available and notifies the Depository and the Trustee of such determination, the Depository will notify the Participants of the availability through the Depository of certificated Notes. In such event, the Trustee shall transfer and exchange certificated Notes as requested by the Depository and any other Owners in appropriate amounts. If (i) the Depository determines not to continue to act as securities depository for Book-Entry Notes, or (ii) the Depository shall no longer so act and gives notice to the Trustee of such determination, then the District shall discontinue the Book-Entry system with the Depository. If the District determines to replace the Depository with another qualified securities depository, the District shall prepare or direct the preparation of a new single, separate, fully registered Note for such Book-Entry Notes, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace the Depository, then the Notes shall no longer be restricted to being registered in the registration books maintained by the Trustee in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Notes shall designate, in accordance with the provisions of Sections 2.06 and 2.09 hereof. Whenever the Depository requests the District to do so, the District will cooperate with the Depository in taking appropriate action after reasonable notice (i) to make available one or more separate certificates evidencing the Book-Entry Notes to any Participant having Book-Entry Notes credited to its account with the Depository, and (ii) to arrange for another securities depository to maintain custody of certificates evidencing the Book- Entry Notes. (h) Notwithstanding any other provision of this Trust Agreement to the contrary, if DTC is the sole Owner of the Notes, so long as any Book-Entry Note is registered in the name of the Nominee, all payments of principal and interest evidenced by such Note and all notices with respect to such Note shall be made and given, respectively, as provided in the Letter of Representations or as otherwise instructed by the Depository. (i) In connection with any notice or other communication to be provided to Owners pursuant to the Trust Agreement by the District, the Corporation or the Trustee, with respect to any consent or other action to be taken by Owners, the Trustee shall establish a record date for such consent or other action and give the Depository notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. Notice to the Depository shall be given only when DTC is the sole Owner of the Notes. 85238425.4 13 ARTICLE III PROCEEDS OF NOTES Section 3.01. Delivery of Notes. The Trustee is hereby authorized to execute the Notes and deliver them to the original purchaser thereof upon receipt of a Written Request of the District and on receipt of the proceeds of sale of the Notes. Section 3.02. Deposit and Transfer of Proceeds of Notes. The net proceeds received or acknowledged by the Trustee from the sale of the Notes in the amount of $______________ shall be deposited by the Trustee or transferred as follows: (a) the Trustee shall deposit in the Costs of Issuance Fund the amount of $______________; and (b) the Trustee shall cause to be transferred to the Prior Notes Trustee for deposit in the Installment Payment Fund relating to the Prior Notes the amount of $______________. Section 3.03. Costs of Issuance Fund. The Trustee shall establish and maintain a separate special fund to be held by the Trustee known as the Costs of Issuance Fund. There shall be deposited in the Costs of Issuance Fund on the Closing Date the amount required to be deposited therein pursuant to Section 3.02 hereof. The Trustee shall disburse moneys from the Costs of Issuance Fund on such dates and in such amounts as are necessary to pay Costs of Issuance, in each case upon the Written Request of the District stating the Person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against the Costs of Issuance Fund. On the date that is six months after the Closing Date, the Trustee shall transfer any amounts then remaining in the Costs of Issuance Fund to the Installment Payment Fund. Upon such transfer, the Costs of Issuance Fund shall be closed. ARTICLE IV NO PREPAYMENT OF NOTES Section 4.01. No Prepayment. The Notes are not subject to prepayment prior to the Maturity Date. ARTICLE V ASSIGNMENT AND PLEDGE; FUNDS AND ACCOUNTS Section 5.01. Assignment and Pledge. The Corporation hereby transfers, conveys and assigns to the Trustee, for the benefit of the Owners, all of the Corporation’s rights, title and interest in and to the Installment Purchase Agreement (excepting its rights to indemnification thereunder), including the right to receive the Installment Payment, and the interest thereon, from the District and the right to exercise any remedies provided therein in the event of a default by the District thereunder. The Trustee hereby accepts said transfer, conveyance and assignment, solely in its capacity as Trustee, for the benefit of the Owners, subject to the provisions of this 85238425.4 14 Trust Agreement. All of the Installment Payment, and the interest thereon, shall be paid directly by the District to the Trustee, and if received by the Corporation at any time shall be deposited by the Corporation with the Trustee immediately upon the receipt thereof. To secure the respective rights of the Owners to the payments required to be made thereto as provided herein, the Corporation and the District hereby irrevocably pledge to the Trustee, for the benefit of the Owners, all of their right, title and interest, if any, in and to all amounts on deposit from time to time in the funds and accounts established hereunder. This pledge shall constitute a first lien on the amounts on deposit in such funds and accounts. Section 5.02. Installment Payment Fund. (a) The Trustee shall establish and maintain the Installment Payment Fund until the required Installment Payment and the interest thereon, is paid in full pursuant to the Installment Purchase Agreement and until the first date upon which the Notes are no longer Outstanding. The Trustee shall deposit in the Installment Payment Fund the Installment Payment, and the interest thereon, paid by the District and received by the Trustee. The moneys in the Installment Payment Fund shall be held in trust by the Trustee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses herein authorized. (b) The Trustee shall transfer the amounts on deposit in the Installment Payment Fund, at the times and in the manner hereinafter provided, to the following respective accounts within the Installment Payment Fund, each of which the Trustee hereby agrees to establish and maintain until the required Installment Payment, and the interest thereon, is paid in full pursuant to the Installment Purchase Agreement and until the first date upon which the Notes are no longer Outstanding. The moneys in each of such accounts shall be held in trust by the Trustee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses herein authorized. (i) Interest Account. The Trustee, on the Maturity Date, shall deposit in the Interest Account that amount of moneys representing the interest on the Installment Payment coming due on such date. Moneys in the Interest Account shall be used by the Trustee for the purpose of paying the interest evidenced by the Notes when due and payable. (ii) Principal Account. The Trustee, on the Maturity Date, shall deposit in the Principal Account that amount of moneys representing the Installment Payment coming due on such date. Moneys in the Principal Account shall be used by the Trustee for the purpose of paying the principal evidenced by the Notes when due and payable. Section 5.03. Reserved. Section 5.04. Reserved. Section 5.05. Investment of Moneys. Except as otherwise provided herein, all moneys in any of the funds or accounts established pursuant to this Trust Agreement shall be invested by the Trustee solely in Permitted Investments, as directed by the District pursuant to a Written Request of the District at least two Business Days prior to the making of such investment. Moneys in all funds and accounts held by the Trustee shall be invested in Permitted Investments 85238425.4 15 maturing not later than the date on which it is estimated that such moneys will be required for the purposes specified in this Trust Agreement. Absent timely written direction from the District, the Trustee shall invest any funds held by it in Permitted Investments described in clause (10) of the definition thereof. Permitted Investments that are registerable securities shall be registered in the name of the Trustee. All interest, profits and other income received from the investment of moneys in any fund or account established pursuant to this Trust Agreement shall be retained therein. Permitted Investments acquired as an investment of moneys in any fund or account established under this Trust Agreement shall be credited to such fund or account. For the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued by the Trustee at the market value thereof. The Trustee or an affiliate may act as principal or agent in the making or disposing of any investment. The Trustee shall sell or present for redemption any Permitted Investment whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Permitted Investment is credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursuant to this Section. For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established hereunder. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with any one or more of its affiliates, whether or not such affiliate is acting as an agent of the Trustee or for any third Person or dealing as principal for its own account. Section 5.06. Brokerage Confirmations. The District acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the District the right to receive brokerage confirmations of securities transactions under this Trust Agreement, the District specifically waives receipt of such confirmations to the extent permitted by law. The Trustee is required hereunder to furnish the District with periodic cash transaction statements which include detail for all securities transactions made by the Trustee on behalf of the District hereunder. ARTICLE VI COVENANTS Section 6.01. Compliance with Trust Agreement. The Trustee will not execute or deliver any Notes in any manner other than in accordance with the provisions hereof, and the Corporation and the District will not suffer or permit any default by them to occur hereunder, but will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms hereof required to be complied with, kept, observed and performed by them. Section 6.02. Compliance with Installment Purchase Agreement. The Corporation and the District will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Installment Purchase Agreement required to be 85238425.4 16 complied with, kept, observed and performed by them and, together with the Trustee, will enforce the Installment Purchase Agreement against the other party thereto in accordance with its terms. Section 6.03. Compliance with Master Agreement. The Corporation and the District will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Master Agreement required to be complied with, kept, observed and performed by them and, together with the Trustee, will enforce the Master Agreement against the other party thereto in accordance with its terms. Section 6.04. Observance of Laws and Regulations. The Corporation and the District will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on them by contract, or prescribed by any law of the United States of America or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by them, including their right to exist and carry on their respective businesses, to the end that such franchises, rights and privileges shall be maintained and preserved and shall not become abandoned, forfeited or in any manner impaired. Section 6.05. Other Liens. None of the Trustee, the Corporation or the District shall create or suffer to be created any pledge of or lien on the amounts on deposit in any of the funds or accounts created hereunder, other than the pledge and lien hereof. Section 6.06. Prosecution and Defense of Suits. The District will defend against every action, suit or other proceeding at any time brought against the Trustee or any Owner upon any claim arising out of the receipt, deposit or disbursement of any of the Installment Payment, or the interest thereon, or involving the rights of the Trustee or any Owner hereunder; provided, however, that the Trustee or any Owner at its or his election may appear in and defend any such action, suit or other proceeding. Section 6.07. Accounting Records and Statements. The Trustee will keep proper accounting records in which complete and correct entries shall be made of all transactions made by the Trustee relating to the receipt, deposit and disbursement of the Installment Payment, and the interest thereon, and such accounting records shall be available for inspection by the Corporation and the District at reasonable hours and under reasonable conditions. The Trustee shall not be obligated to provide an accounting for any fund or account that (a) has a balance of $0.00 and (b) has not had any activity since the last reporting date. The Trustee will, upon written request, make copies of the foregoing available to any Owner (at the expense of such Owner). 85238425.4 17 Section 6.08. Tax Covenants. (a) Special Definitions. When used in this Section, the following terms shall have the following meanings: “Bond Counsel” means Fulbright & Jaworski L.L.P. or any other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District and reasonably satisfactory to and approved by the Trustee. “Computation Date” has the meaning set forth in section 1.148-1(b) of the Tax Regulations. “Computation Period” means, initially, that period commencing on the date of the execution and delivery of the Notes and concluding on the initial Computation Date and, thereafter, each period commencing on the day next following a Computation Date and concluding on the immediately succeeding Computation Date. “Gross Proceeds” of any issue of governmental obligations means any proceeds as defined in section 1.148-1(b) of the Tax Regulations (referring to sales, investment and transferred proceeds) of that issue, and any replacement proceeds as defined in section 1.148- 1(c) of the Tax Regulations, of that issue. “Investment” has the meaning set forth in section 1.148-1(b) of the Tax Regulations. “Nonpurpose Investment” means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of an issue are invested and that is not acquired to carry out the governmental purposes of that issue. “Opinion of Bond Counsel” means a written opinion of Fulbright & Jaworski L.L.P. or any other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District and reasonably satisfactory to and approved by the Trustee. “Prior Issue” shall refer to the Prior Notes (but in the case of any of the foregoing executed and delivered for multiple purposes, only to the portion thereof allocable pursuant to section 1.148-9(h)(4) of the Tax Regulations to other than refunding purposes). “Proceeds,” with respect to an issue of governmental obligations, has the meaning set forth in has the meaning set forth in section 1.148-1(b) of the Tax Regulations (referring to sales, investment and transferred proceeds, but not replacement proceeds). “Tax Regulations” means the United States Treasury Regulations promulgated pursuant to sections 103 and 141 through 150 of the Code. “Yield” of (i) any Investment has the meaning set forth in section 1.148-5 of the Tax Regulations and (ii) in respect of the Notes has the meaning set forth in section 1.148-4 of the Tax Regulations. 85238425.4 18 (b) Exclusion of Interest from Gross Income. The District will take all actions necessary to establish and maintain the exclusion pursuant to section 103(a) of the Code of interest on the Notes from the gross income of the owners thereof for federal income tax purposes, and will not use, permit the use of, or omit to use Gross Proceeds of the Notes or any other amounts (or any property the acquisition, construction or improvement of which is to be refinanced directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, would cause the interest on any Note to fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the Trustee receives a written Opinion of Bond Counsel to the effect that failure to comply with such covenant will not adversely affect the exclusion pursuant to section 103(a) of the Code of interest on any Note from the gross income of the owner thereof, the District shall comply with this covenant and each of the specific covenants in this Section. (c) No Private Use or Private Payments. Except as would not cause any Note to become a “private activity bond” within the meaning of section 141 of the Code and the Tax Regulations and rulings thereunder, the District shall at all times prior to the payment and cancellation of the last of the Notes to be retired: (i) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Notes and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds or the Gross Proceeds of any Prior Issue for any activity carried on by any person or entity (including the United States or any agency, department or instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (ii) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Notes or of any Prior Issue, or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the jurisdiction of the District or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. (d) No Private Loan. Except as would not cause any Note to become a “private activity bond” within the meaning of section 141 of the Code and the Tax Regulations and rulings thereunder, the District shall not use Gross Proceeds of the Notes to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be “loaned” to a person or entity if: (i) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction that creates a debt for federal income tax purposes; (ii) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (iii) indirect benefits of such Gross Proceeds, or burdens and benefits of ownership of any property acquired, constructed or improved with such Gross Proceeds, are otherwise transferred in a transaction that is the economic equivalent of a 85238425.4 19 loan. For purposes of this covenant, the District will treat any transaction constituting a loan of Gross Proceeds of any of the Prior Issues as resulting in a loan of Gross Proceeds of the Notes. (e) Not to Invest at Higher Yield. Except as would not cause any Note to become an “arbitrage bond” within the meaning of section 148 of the Code and the Tax Regulations and rulings thereunder, the District will not, at any time prior to the final cancellation of the last Note to be retired, directly or indirectly invest Gross Proceeds of the Notes in any Investment, if as a result of that investment the yield of any Investment acquired with Gross Proceeds of the Notes, whether then held or previously disposed of, would materially exceed the yield of the Notes within the meaning of said section 148. (f) Not Federally Guaranteed. Except to the extent such action or failure to act would not, pursuant to section 149(b) of the Code and the Tax Regulations and rulings thereunder, adversely affect the exclusion pursuant to section 103(a) of interest on the Notes from the gross income of the owners thereof for federal income tax purposes, the District will not take or omit to take any action that would cause any Note to be “federally guaranteed” within the meaning of section 149(b) of the Code and the Tax Regulations and rulings thereunder. (g) Information Report. The District will timely file any information necessary to the exclusion pursuant to section 103(a) of the Code of interest on the Notes required by section 149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary of the Treasury may prescribe. (h) Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Tax Regulations and rulings thereunder, the District will not at any time prior to the final cancellation of the last of the Notes to be retired, enter into any transaction that reduces the amount required to be paid to the United States pursuant to section 148(f) of the Code because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm’s length and had the yield on the Notes not been relevant to either party. (i) Notes Satisfy Section 149(g). The District represents that neither the Prior Issue nor the Notes are or will become “hedge bonds” within the meaning of section 149(g) of the Code. Without limitation of the foregoing, with respect to the Prior Issue, (i)(A) on the date of issuance of that issue the District reasonably expected (based upon its own knowledge and upon representations made by other governmental persons upon the issuance of those obligations) that within the three-year period commencing on such date no less than 85% of the spendable proceeds of that issue would be expended for the governmental purposes thereof and (B) the District believes and represents that at no time has more than 50% of the proceeds of that issue been invested in Nonpurpose Investments having a substantially guaranteed yield for a period of four years or more, and with respect to the application of Proceeds of the Notes other than for refunding purposes, (ii)(A) the District will not deliver the Notes unless on the date of the issuance of the Notes it reasonably expects that within the three-year period commencing on such date of issuance at least 85% of such spendable proceeds of the Notes will be expended for the governmental purpose of the Notes and (B) at no time will more than 50% of such spendable proceeds of the Notes be invested in Nonpurpose Investments having a substantially guaranteed yield for a period of four years or more. 85238425.4 20 (j) Elections. The District hereby directs and authorizes any Authorized Representative to make elections permitted or required pursuant to the provisions of the Code or the Tax Regulations, as such Authorized Representative (after consultation with Bond Counsel) deems necessary or appropriate in connection with the Notes, in the Tax Certificate relating to the Notes or similar or other appropriate certificate, form or document. (k) Tax Certificate. The District agrees to execute and deliver in connection with the execution and delivery of the Notes a Tax Certificate as to Arbitrage and the Provisions of Sections 141-150 of the Internal Revenue Code of 1986, or similar document containing additional representations and covenants pertaining to the exclusion of interest with respect to the Notes from the gross income of the owners thereof for federal income tax purposes (the “Tax Certificate”), which representations and covenants are incorporated as though expressly set forth herein. Section 6.09. Continuing Disclosure. The District will comply with and carry out all of the provisions of the Continuing Disclosure Agreement applicable to it. Notwithstanding any other provision of this Trust Agreement, failure of the District to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; provided, however, the Trustee may (and, at the request of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Notes and upon being indemnified to its reasonable satisfaction, shall) or any Owner or Beneficial Owner of Notes may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. Section 6.10. Further Assurances. The District will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to carry out the purposes and intentions of this Trust Agreement and for preserving and protecting the rights and interests of the Owners. ARTICLE VII DEFAULT AND LIMITATIONS OF LIABILITY Section 7.01. Action upon Event of Default. An Event of Default under the Installment Purchase Agreement shall constitute an Event of Default hereunder and an Event of Default under the Master Agreement shall constitute an Event of Default hereunder. The Trustee may give notice, as assignee of the Corporation, of an Event of Default under the Installment Purchase Agreement to the District, and shall do so if directed to do so by the Owners of not less than 5% of the aggregate principal evidenced by Notes then Outstanding. In each and every case during the continuance of an Event of Default, the Trustee may and, at the direction of the Owners of not less than a majority of the aggregate principal evidenced by Notes then Outstanding, shall, upon notice in writing to the District and the Corporation (a) exercise any of the remedies granted to the Corporation under the Installment Purchase Agreement, (b) exercise any of the remedies granted to the Trustee under the Master Agreement, and (c) take whatever action at law or in equity may appear necessary or desirable to enforce its rights pursuant to this Trust Agreement, the Installment Purchase Agreement or the Master Agreement or to protect and 85238425.4 21 enforce any of the rights vested in the Trustee or the Owners by this Trust Agreement, the Notes, the Installment Purchase Agreement or the Master Agreement, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement or for the enforcement of any other legal or equitable right, including any one or more of the remedies set forth in Section 9.02 hereof. Section 7.02. Other Remedies of the Trustee. Subject to the provisions of Section 7.01 hereof, the Trustee shall have the right: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Corporation or the District or any member, director, officer or employee thereof, and to compel the Corporation or the District or any such member, director, officer or employee to perform or carry out its or his or her duties under law and the agreements and covenants required to be performed by it or him or her contained herein; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee; or (c) by suit in equity upon the happening of any Event of Default hereunder to require the Corporation and the District to account as the trustee of an express trust. Section 7.03. Non-Waiver. A waiver of any default or breach of duty or contract by the Trustee or the Owners shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee or the Owners to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee or the Owners by law or by this Article may be enforced and exercised from time to time and as often the Trustee shall deem expedient. If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined adversely to the Trustee or any Owner, then subject to any adverse determination, the Trustee, such Owner, the Corporation and the District shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. Section 7.04. Remedies Not Exclusive. Subject to the provisions of Section 7.01 hereof, no remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent or subsequent assertion or employment of any other appropriate right or remedy. Section 7.05. Application of Amounts After Default. All damages or other payments received by the Trustee for the enforcement of any rights and powers of the Trustee under this 85238425.4 22 Article shall be deposited into the Installment Payment Fund and as soon as practicable thereafter applied: (a) to the payment of all amounts due the Trustee under Section 8.03 hereof; (b) unless the unpaid Installment Payment, and the interest thereon, shall have become, and shall remain, immediately due and payable pursuant to the Master Agreement: (i) to the payment of all amounts then due for interest evidenced by the Notes, in respect of which, or for the benefit of which, money has been collected (other than Notes which have become payable prior to such Event of Default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of interest evidenced by such Notes due and payable; and (ii) to the payment of all amounts then due for principal evidenced by the Notes, in respect of which, or for the benefit of which, money has been collected (other than Notes which have become payable prior to such Event of Default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of principal evidenced by such Notes due and payable. (c) if the unpaid Installment Payment, and the interest thereon, shall have become, and shall remain, immediately due and payable pursuant to the Master Agreement, to the payment of all amounts then due for principal and interest evidenced by the Notes and, if the amount available therefor shall not be sufficient to pay in full the whole amount so due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Note over any other Note, to the persons entitled thereto without any discrimination or preference. Section 7.06. Trustee May Enforce Claims Without Possession of Notes. All rights of action and claims under this Trust Agreement or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Owners of the Notes in respect of which such judgment has been recovered. Section 7.07. Limitation on Suits. No Owner shall have any right to institute any proceeding, judicial or otherwise, with respect to this Trust Agreement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Owner shall have previously given written notice to the Trustee of a continuing Event of Default hereunder, (b) the Owners of not less than a majority of the aggregate principal evidenced by Notes then Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder, (c) such Owner or Owners shall have afforded to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request, (d) the Trustee for 60 85238425.4 23 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceedings, and (e) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Owners of a majority of the aggregate principal evidenced by Notes then Outstanding; it being understood and intended that no one or more Owners of Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Trust Agreement to affect, disturb or prejudice the rights of any other Owner of Notes, or to obtain or seek to obtain priority or preference over any other Owner or to enforce any right under this Trust Agreement, except in the manner herein provided and for the equal and ratable benefit of all the Owners of Notes. Section 7.08. No Liability by the Corporation to the Owner. Except as expressly provided herein, the Corporation shall not have any obligation or liability to the Owners with respect to the payment when due of the Installment Payment, and the interest thereon, by the District, or with respect to the performance by the District of the other agreements and covenants required to be performed by it contained in the Installment Purchase Agreement, the Master Agreement or herein, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein. Section 7.09. No Liability by the District to the Owners. Except for the payment when due of the Installment Payment, and the interest thereon, and the performance of the other agreements and covenants required to be performed by it contained in the Installment Purchase Agreement, the Master Agreement or herein, the District shall not have any obligation or liability to the Owners with respect to this Trust Agreement or the preparation, execution, delivery or transfer of the Notes or the disbursement of the Installment Payment, and the interest thereon, by the Trustee to the Owners, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein. Section 7.10. No Liability of the Trustee to the Owners. Except as expressly provided herein, the Trustee shall not have any obligation or liability to the Owners with respect to the payment when due of the Installment Payment, and the interest thereon, by the District, or with respect to the performance by the Corporation or the District of the other agreements and covenants required to be performed by them, respectively contained in the Installment Purchase Agreement or herein. ARTICLE VIII THE TRUSTEE Section 8.01. Employment of the Trustee; Duties. The Corporation and the District hereby appoint and employ the Trustee to receive, deposit and disburse the Installment Payment, and the interest thereon, to prepare, execute, deliver and transfer the Notes and to perform the other functions contained herein, all in the manner provided herein and subject to the conditions and terms hereof. By executing and delivering this Trust Agreement, the Trustee accepts the appointment and employment hereinabove referred to and accepts the rights and obligations of the Trustee provided herein, subject to the conditions and terms hereof. Other than when an Event of Default hereunder has occurred and is continuing, the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Trust Agreement, and no 85238425.4 24 implied covenants or obligations shall be read into this Trust Agreement against the Trustee. In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs. Section 8.02. Removal and Resignation of the Trustee. The Corporation and the District may, by an instrument in writing, remove the Trustee initially a party hereto and any successor thereto unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee initially a party hereto and any successor thereto if at any time (a) requested to do so by an instrument or concurrent instruments in writing signed by the Owners of a majority of the aggregate principal evidenced by the Notes at the time Outstanding (or their attorneys duly authorized in writing), or (b) the Trustee shall cease to be eligible in accordance with the following paragraph, and shall appoint a successor Trustee. The Trustee shall be a bank having trust powers or a trust company in good standing in or incorporated under the laws of the United States or any state thereof, having (or if such bank or trust company is a member of a bank holding company system, its parent bank holding company shall have) a combined capital and surplus of at least $75,000,000, and be subject to supervision or examination by federal or state banking authorities. 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 purposes of this Section 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. The Trustee may at any time resign by giving written notice of such resignation to the Corporation and the District and by giving notice, by first class mail, postage prepaid, of such resignation to the Owners at their addresses appearing on the registration books maintained by the Trustee. Upon receiving such notice of resignation, the Corporation and the District shall promptly appoint a successor Trustee by an instrument in writing; provided, however, that in the event the District and the Corporation do not appoint a successor Trustee within 30 days following receipt of such notice of resignation, the resigning Trustee may, at the expense of the District, petition the appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or removal of a Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. Any successor Trustee appointed under this Trust Agreement shall signify its acceptance of such appointment by executing and delivering to the District and the Corporation and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless, at the written request of the District or of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Trust Agreement and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. 85238425.4 25 Any corporation, association or agency into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, provided that such entity meets the combined capital and surplus requirements of this Section, ipso facto, shall be and become successor trustee under this Trust Agreement and vested with all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 8.03. Compensation and Indemnification of the Trustee. The District shall from time to time, subject to any written agreement then in effect with the Trustee, pay the Trustee reasonable compensation for all its services rendered hereunder and reimburse the Trustee for all its reasonable advances and expenditures (which shall not include “overhead expenses” except as such expenses are included as a component of the Trustee’s stated annual fees or disclosed transaction fees) hereunder, including but not limited to advances to and reasonable fees and reasonable expenses of accountants, agents, appraisers, consultants or other experts, and counsel not directly employed by the Trustee but an attorney or firm of attorneys retained by the Trustee, employed by it in the exercise and performance of its rights and obligations hereunder; provided, however, that the Trustee shall not have any lien for such compensation or reimbursement against any moneys held by it in any of the funds or accounts established hereunder. The Trustee may take whatever legal actions are lawfully available to it directly against the Corporation or the District. Except as otherwise expressly provided herein, no provision of this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers hereunder. The District, to the extent permitted by law, agrees to indemnify and save the Trustee, its directors, officers, employees and agents harmless against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder, including but not limited to costs and expenses incurred in defending against any claim or liability, which are not due to its negligence or willful misconduct. Section 8.04. Protection of the Trustee. The Trustee shall be protected and shall incur no liability in acting or proceeding in good faith upon any affidavit, bond, certificate, consent, notice, request, requisition, resolution, statement, waiver or other paper or document which it shall in good faith believe to be genuine and to have been adopted, executed or delivered by the proper party or pursuant to any of the provisions hereof, and the Trustee shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Owners of the Notes pursuant to this Trust Agreement, unless such Owners shall have offered to the Trustee security or indemnity, reasonably satisfactory to the Trustee, against the reasonable 85238425.4 26 costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Trustee may consult with counsel, who may be counsel to the Corporation or the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect to any action taken or suffered by it hereunder in good faith in accordance therewith. The Trustee shall not be responsible for the sufficiency of the Notes or the Installment Purchase Agreement, or of the assignment made to it hereunder, or for statements made in the preliminary or final official statement relating to the Notes. The Trustee shall not be required to take notice or be deemed to have notice of any default or Event of Default hereunder, except failure of any of the payments to be made to the Trustee required to be made hereunder or under the Installment Purchase Agreement, unless the Trustee shall be specifically notified in writing of such default or Event of Default by the District, the Corporation or the Owners of not less than 5% of the aggregate principal evidenced by the Notes then Outstanding. Whenever in the administration of its rights and obligations hereunder the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate of the District or a Written Certificate of the Corporation, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it deems reasonable. The Trustee may buy, sell, own, hold and deal in any of the Notes and may join in any action which any Owner may be entitled to take with like effect as if the Trustee were not a party hereto. The Trustee, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Corporation or the District, and may act as agent, depository or trustee for any committee or body of Owners or of owners of obligations of the Corporation or the District as freely as if it were not the Trustee hereunder. The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers hereof and perform any rights and obligations required of it hereunder by or through agents, attorneys or receivers, and shall be entitled to advice of counsel concerning all matters of trust and its rights and obligations hereunder, and the Trustee shall not be answerable for the negligence or misconduct of any such agent, attorney or receiver selected by it with reasonable care; provided, however, that in the event of any negligence or misconduct of any such attorney, agent or receiver, the Trustee shall diligently pursue all remedies of the Trustee against such agent, attorney or receiver. The Trustee shall not be liable for any error of judgment made by it in good faith unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. The Trustee shall not be answerable for the exercise of any trusts or powers hereunder or for anything whatsoever in connection with the funds established hereunder, except only for its own willful misconduct, negligence or breach of an obligation hereunder. 85238425.4 27 The Trustee may, on behalf of the Owners, intervene in any judicial proceeding to which the Corporation or the District is a party and which, in the opinion of the Trustee and its counsel, affects the Notes or the security therefor, and shall do so if requested in writing by the Owners of at least 5% of the aggregate principal evidenced by Notes then Outstanding, provided the Trustee shall have no duty to take such action unless it has been indemnified to its reasonable satisfaction against all risk or liability arising from such action. ARTICLE IX AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT Section 9.01. Amendment or Supplement. (a) This Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee hereunder may be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding when the prior written consents of the Owners of a majority of the aggregate principal evidenced by the Notes then Outstanding, exclusive of Notes disqualified as provided in Section 9.02 hereof, are filed with the Trustee. No such amendment or supplement shall (i) extend the stated Maturity Date of any Note or reduce the rate of interest evidenced thereby or extend the time of payment of such interest or reduce the amount of principal evidenced thereby, (ii) reduce the percentage of Owners whose consent is required for the execution of any amendment hereof or supplement hereto without the prior written consent of the Owners of all Notes then Outstanding, (iii) modify any of the rights or obligations of the Trustee without the prior written consent of the Trustee, or (iv) amend this Section without the prior written consent of the Owners of all Notes then Outstanding. (b) This Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee hereunder may also be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding upon execution, without the written consents of any Owners, but only to the extent permitted by law and only for any one or more of the following purposes: (i) to add to the agreements, conditions, covenants and terms required by the Corporation or the District to be observed or performed herein other agreements, conditions, covenants and terms thereafter to be observed or performed by the Corporation or the District, or to surrender any right or power reserved herein to or conferred herein on the Corporation or the District; (ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the Corporation or the District may deem desirable or necessary and not inconsistent herewith; (iii) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of interest evidenced by the Notes; or 85238425.4 28 (iv) for any other reason, provided such amendment or supplement does not adversely affect the rights or interests of the Owners. Section 9.02. Disqualified Notes. Notes owned or held by or for the account of the District (but excluding Notes held in any pension or retirement fund of the District) shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Notes provided in this Article, and shall not be entitled to consent to or take any other action provided in this Article, and the Trustee may adopt appropriate regulations to require each Owner, before his consent provided for herein shall be deemed effective, to reveal if the Notes as to which such consent is given are disqualified as provided in this Section. Section 9.03. Endorsement or Replacement of Notes After Amendment or Supplement. After the effective date of any action taken as hereinabove provided in this Article, the Trustee may determine that the Notes may bear a notation by endorsement in form approved by the Trustee as to such action, and in that case upon demand of the Owner of any Outstanding Note and presentation of such Note for such purpose at the Principal Office a suitable notation as to such action shall be made on such Note. If the Trustee shall receive an Opinion of Counsel advising that new Notes modified to conform to such action are necessary, modified Notes shall be prepared, and in that case upon demand of the Owner of any Outstanding Notes such new Notes shall be exchanged at the Principal Office without cost to each Owner for Notes then Outstanding upon surrender of such Outstanding Notes. Section 9.04. Amendment by Mutual Consent. The provisions of this Article shall not prevent any Owner from accepting any amendment as to the particular Notes owned by such Owner, provided that due notation thereof is made on such Notes. ARTICLE X DEFEASANCE Section 10.01. Discharge of Notes and Trust Agreement. (a) If the Trustee shall pay or cause to be paid or there shall otherwise be paid (i) to the Owners of all Outstanding Notes the interest and principal evidenced thereby at the times and in the manner stipulated herein and therein, and (ii) all other amounts due hereunder and under the Installment Purchase Agreement, then such Owners shall cease to be entitled to the pledge of and lien on the amounts on deposit in the funds and accounts established hereunder, as provided herein, and all agreements and covenants of the Corporation, the District, and the Trustee to such Owners hereunder shall thereupon cease, terminate and become void and shall be discharged and satisfied. (b) Any Outstanding Note shall be deemed to have been paid within the meaning and with the effect expressed in this Section when the whole amount of the principal and interest evidenced by such Note shall have been paid or when there shall be on deposit with the Trustee, moneys, or Government Obligations, or any combination thereof, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which shall be sufficient to pay when due the principal and interest evidenced by such Note and due and to become due on or prior to the Maturity Date, and if the Maturity Date will not occur, and said Note is not to be prepaid, within the next succeeding 60 days, the District shall have given the 85238425.4 29 Trustee irrevocable instructions to give notice, as soon as practicable to the Owner of such Note, stating that the deposit of moneys or Government Obligations required by this subsection has been made with the Trustee and that such Note, or portion thereof, is deemed to have been paid in accordance with this Section and stating such Maturity Date upon which moneys are to be available for the payment of the principal and interest evidenced by said Note, or portion thereof. Neither the moneys nor the Government Obligations deposited with the Trustee pursuant to this Section nor principal or interest payments on any such Government Obligations shall be withdrawn or used for any purpose other than, and shall be held in trust for and pledged to, the payment of the principal and interest evidenced by said Note, or portions thereof. If payment of less than all of the Notes is to be provided for in the manner and with the effect expressed in this Section, the Trustee or the District, as applicable, shall select such Notes, or portions thereof in the principal amounts designated to the Trustee by the District. (c) After the payment of all the interest and principal evidenced by all Outstanding Notes and all other amounts due hereunder and under the Installment Purchase Agreement as provided in this Section, the Trustee shall execute and deliver to the Corporation and the District all such instruments as may be necessary or desirable to evidence the discharge and satisfaction of this Trust Agreement, the Trustee shall pay over or deliver to the District all moneys or securities held by it pursuant hereto which are not required for the payment of the interest and principal evidenced by such Notes and all other amounts due hereunder and under the Installment Purchase Agreement. (d) Prior to any defeasance becoming effective under this Article, the District shall cause to be delivered (i) an executed copy of a report, addressed to the Trustee and the District, in form and in substance acceptable to the Trustee and the District, of a nationally recognized certified public accountant, or firm of such accountants, verifying that the Government Obligations and cash, if any, satisfy the requirements of subsection (b) of this Section (a “Verification”), (ii) a copy of the escrow deposit agreement entered into in connection with such defeasance, which escrow deposit agreement shall provide that no substitution of Government Obligations shall be permitted except with other Government Obligations and upon delivery of a new Verification and no reinvestment of Government Obligations shall be permitted except as contemplated by the original Verification or upon delivery of a new Verification, and (iii) a copy of an Opinion of Counsel, dated the date of such defeasance and addressed to the Trustee and the District, in form and in substance acceptable to the Trustee and the District, to the effect that such Notes have been paid within the meaning and with the effect expressed in this Trust Agreement, and that all agreements and covenants of the Corporation, the District and the Trustee to the Owners of such Notes under this Trust Agreement have ceased, terminated and become void and have been discharged and satisfied. Section 10.02. Unclaimed Moneys. Any moneys held by the Trustee in trust for the payment and discharge of the interest or principal evidenced by any of the Notes which remain unclaimed for two years after the date when such interest or principal evidenced by such Notes have become payable, if such moneys were held by the Trustee at such date, or for two years after the date of deposit of such moneys if deposited with the Trustee after the date when the interest and principal evidenced by such Notes have become payable, shall be repaid by the Trustee to the District as its absolute property free from trust, and the Trustee shall thereupon be 85238425.4 30 released and discharged with respect thereto and the Owners shall look only to the District for the payment of the interest and principal evidenced by such Notes. ARTICLE XI MISCELLANEOUS Section 11.01. Benefits of Trust Agreement. Nothing contained herein, expressed or implied, is intended to give to any Person other than the Corporation, the District, the Trustee and the Owners any claim, remedy or right under or pursuant hereto, and any agreement, condition, covenant or term required herein to be observed or performed by or on behalf of the Corporation or the District shall be for the sole and exclusive benefit of the Trustee and the Owners. Section 11.02. Successor Deemed Included in all References to Predecessor. Whenever the Corporation, the District or the Trustee, or any officer thereof, is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Corporation, the District or the Trustee, or such officer, and all agreements, conditions, covenants and terms required hereby to be observed or performed by or on behalf of the Corporation, the District or the Trustee, or any officer thereof, shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 11.03. Execution of Documents by Owners. Any declaration, request or other instrument which is permitted or required herein to be executed by Owners may be in one or more instruments of similar tenor and may be executed by Owners in person or by their attorneys appointed in writing. The fact and date of the execution by any Owner or his attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state or territory in which he purports to act that the Person signing such declaration, request or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer, or by such other proof as the Trustee may accept which it may deem sufficient. The ownership of any Notes and the amount, payment date, number and date of owning the same may be proved by the registration books maintained by the Trustee pursuant to the provisions of Section 2.07 hereof. Any declaration, request or other instrument in writing of the Owner of any Note shall bind all future Owners of such Note with respect to anything done or suffered to be done by the Corporation, the District or the Trustee in good faith and in accordance therewith. Section 11.04. Waiver of Personal Liability. Notwithstanding anything contained herein to the contrary, no member, officer or employee of the District or the Corporation shall be individually or personally liable for the payment of any moneys, including without limitation, the interest or principal evidenced by the Notes, but nothing contained herein shall relieve any 85238425.4 31 member, officer or employee of the District or the Corporation from the performance of any official duty provided by any applicable provisions of law, by the Installment Purchase Agreement or hereby. Section 11.05. Reserved. Section 11.06. Content of Notes. Every Written Certificate of the District and every Written Certificate of the Corporation with respect to compliance with any agreement, condition, covenant or term contained herein shall include (a) a statement that the Person making or giving such certificate has read such agreement, condition, covenant or term and the definitions herein relating thereto, (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate are based, (c) a statement that, in the opinion of the signer, the signer has made or caused to be made such examination or investigation as is necessary to enable the signer to express an informed opinion as to whether or not such agreement, condition, covenant or term has been complied with, and (d) a statement as to whether, in the opinion of the signer, such agreement, condition, covenant or term has been complied with. Any Written Certificate of the District and any Written Certificate of the Corporation may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless the Person making or giving such certificate knows that the Opinion of Counsel with respect to the matters upon which each Person’s certificate may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters, upon information which is in the possession of the District or the Corporation upon a representation by an officer or officers of the District or the Corporation, as the case may be, unless the counsel executing such Opinion of Counsel knows that the representation with respect to the matters upon which such counsel’s opinion may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Section 11.07. Funds and Accounts. Any fund or account required to be established and maintained herein by the Trustee may be established and maintained in the accounting records of the Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund, but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with sound accounting practice and with due regard for the protection of the security of the Notes and the rights of the Owners. The Trustee may establish such funds and accounts as it deems necessary to perform its obligations hereunder. Trustee may commingle any of the moneys held by it hereunder for investment purposes only; provided, however, that the Trustee shall account separately for the moneys in each fund or account established pursuant to this Trust Agreement. Section 11.08. Article and Section Headings, Gender and References. The singular form of any word used herein, including the terms defined in Section 1.01 hereof, shall include the plural, and vice versa, unless the context otherwise requires. The use herein of a pronoun of 85238425.4 32 any gender shall include correlative words of the other genders. The headings or titles of the several Articles and Sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to “Articles,” “Sections,” subsections or clauses are to the corresponding Articles, Sections, subsections or clauses hereof, and the words “hereby,” “herein,” “hereof,” “hereto,” “herewith,” “hereunder” and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section, subsection or clause thereof. Section 11.09. Partial Invalidity. If any one or more of the agreements, conditions, covenants or terms required herein to be observed or performed by or on the part of the Corporation, the District or the Trustee shall be contrary to law, then such agreement or agreements, such condition or conditions, such covenant or covenants or such term or terms shall be null and void to the extent contrary to law and shall be deemed separable from the remaining agreements, conditions, covenants and terms hereof and shall in no way affect the validity hereof or of the Notes, and the Owners shall retain all the benefit, protection and security afforded to them under any applicable provisions of law. The Corporation, the District and the Trustee hereby declare that they would have executed this Trust Agreement, and each and every Article, Section, paragraph, subsection, sentence, clause and phrase hereof and would have authorized the execution and delivery of the Notes pursuant hereto irrespective of the fact that any one or more Articles, Sections, paragraphs, subsections, sentences, clauses or phrases hereof or the application thereof to any Person or circumstance may be held to be unconstitutional, unenforceable or invalid. Section 11.10. California Law. This Trust Agreement shall be governed by and construed in accordance with the laws of the State. Section 11.11. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the District: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Fax: (714) 962-3954 Attention: Director of Finance and Administrative Services If to the Corporation: Orange County Sanitation District Financing Corporation c/o Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Fax: (714) 962-3954 Attention: Treasurer If to the Trustee: Union Bank, N.A. 120 South San Pedro Street, Suite 400 Los Angeles, California 90012 85238425.4 33 Fax: (213) 972-5694 Attention: Corporate Trust Department Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, e.g. facsimile or telecopier, upon the sender’s receipt of an appropriate written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (e) if given by any other means, upon delivery at the address specified in this Section. Section 11.12. Effective Date. This Trust Agreement shall become effective upon its execution and delivery. Section 11.13. Execution in Counterparts. This Trust Agreement may be simultaneously executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. 85238425.4 34 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be executed by their respective officers thereunto duly authorized, all as of the day and year first written above. ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION By: Treasurer ORANGE COUNTY SANITATION DISTRICT By: Chair of the Board of Directors (S E A L) Attest: By: ______________________________ Clerk of the Board of Directors UNION BANK, N.A., as Trustee By: Authorized Officer 85238425.4 A-1 EXHIBIT A FORM OF NOTE No. R–1 $[PAR] Unless this Note is presented by an authorized representative of The Depository Trust Company to the Trustee for registration of transfer, exchange or payment, and any Note executed and delivered is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the Registered Owner hereof, Cede & Co., has an interest herein. ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATES OF PARTICIPATION, SERIES 2009B (CERTIFICATE ANTICIPATION NOTE) DATED DATE INTEREST RATE MATURITY DATE CUSIP December __, 2009 ___% December 1, 2010 68428P___ REGISTERED OWNER: Cede & Co. PRINCIPAL AMOUNT: DOLLARS THIS IS TO CERTIFY that the Registered Owner of this Revenue Refunding Certificate of Participation, Series 2009B (Certificate Anticipation Note) (this “Note”), as identified above, is the owner of a direct, fractional undivided interest in certain installment payments (“Installment Payment”), and the interest thereon, payable under and pursuant to the Installment Purchase Agreement, dated as of December 1, 2009 (the “Installment Purchase Agreement”), by and between the Orange County Sanitation District (the “District”), a county sanitation district organized and existing under the laws of the State of California, and the Orange County Sanitation District Financing Corporation (the “Corporation”), a nonprofit public benefit corporation organized and existing under the laws of the State of California. Certain of the rights of the Corporation under the Installment Purchase Agreement, including the right to receive the Installment Payment, and the interest thereon, have been assigned without recourse by the Corporation to Union Bank, N.A., a national banking association duly organized and existing under the laws of the United States of America, as trustee (the “Trustee”) under the Trust Agreement, dated as of December 1, 2009 (the “Trust Agreement”), by and among the Trustee, the District and the Corporation. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Trust Agreement. 85238425.4 A-2 The District has executed and delivered the Master Agreement for District Obligations, dated as of August 1, 2000 (the “Master Agreement”), by and between the District and the Corporation, pursuant to which the District establishes and declares the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payment and the interest thereon, will be incurred and secured. This Note is one of the duly authorized Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”) evidencing principal in the aggregate amount of $[PAR], executed pursuant to the terms of the Trust Agreement. The Notes evidence direct, fractional undivided interests in the Installment Payment, and the interest thereon, payable under the Installment Purchase Agreement. The Notes are executed and delivered to refinance certain improvements to the wastewater collection, treatment and disposal facilities of the District (the “Wastewater System”) and to pay the costs of issuance incurred in connection therewith. The Installment Payment, and the interest thereon, are to be paid by the District pursuant to the Installment Purchase Agreement in consideration for the purchase of certain improvements to the Wastewater System and for the other agreements and obligations undertaken by the Corporation under the Installment Purchase Agreement and the Trust Agreement. The Notes evidence direct, fractional undivided interests in the Installment Payment, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payment and the interest thereon and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided under the Installment Purchase Agreement, from Net Revenues, and other lawfully available funds of the District, as provided in the Installment Purchase Agreement. Net Revenues generally consist of all income and revenue received by the District from the operation or ownership of the Wastewater System remaining after payment of Maintenance and Operation Costs, all as further provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, shall be subject to the provisions of the Master Agreement, and shall be afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The Installment Purchase Agreement is payable on a parity with the other existing Senior Obligation. The District may at any time incur Senior Obligations in addition to existing Senior Obligations and the Installment Purchase Agreement payable from Net Revenues as provided in the Master Agreement on a parity with all other Senior Obligations theretofore incurred, but only subject to the conditions and upon compliance with the procedures set forth in the Master Agreement. The obligation of the District to pay the Installment Payment and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, from Net Revenues and other lawfully available funds of the District, as provided in the Installment Purchase Agreement, and does not constitute a debt of the District or of the State, or of any political subdivision thereof, in contravention of any constitutional or statutory debt 85238425.4 A-3 limitation or restriction. Neither the faith and credit nor the taxing power of the District or the State or any political subdivision thereof, is pledged to the payment of the Installment Payment, or the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. Reference is hereby made to the Master Agreement, the Installment Purchase Agreement and to the Trust Agreement and any and all amendments thereof and supplements thereto for a description of the terms under which the District’s obligation to pay the Installment Payment, and the interest thereon, is incurred, the Notes are executed and delivered, the provisions with regard to the nature and extent of the Net Revenues and other lawfully available funds of the District, and the rights of the Owners of the Notes. All of the terms of the Master Agreement, the Installment Purchase Agreement and the Trust Agreement are hereby incorporated herein. The Trust Agreement constitutes a contract among the District, the Corporation and the Trustee for the benefit of the Owners of the Notes, to all the provisions of which the Owner of this Note, by acceptance hereof, agrees and consents. The Registered Owner of this Note is entitled to receive, subject to the terms of the Trust Agreement on the Maturity Date set forth above, upon presentation and surrender of this Note at the principal corporate trust office of the Trustee in Los Angeles, California (the “Principal Office”), the Principal Amount specified above, evidencing the Owner’s interest in the Installment Payment coming due on the Maturity Date, and to receive on the Maturity Date, interest accrued thereon at the Interest Rate specified above, computed on the basis of a 360-day year consisting of twelve 30-day months, until such Principal Amount is paid in full, evidencing the Registered Owner’s interest in the interest evidenced by the Installment Payment coming due on such date. Payments of interest evidenced by the Notes shall be made to the Owners thereof (as determined at the close of business on the Record Date next preceding the Maturity Date or any other date fixed for payment) by check or draft of the Trustee mailed to the address of each such Owner as it appears on the registration books maintained by the Trustee pursuant to the Trust Agreement, or to such other address as may be furnished in writing to the Trustee by such Owner. Payment of principal evidenced by the Notes, on the Maturity Date, shall be made only upon presentation and surrender of the Notes at the Principal Office. All such amounts are payable in lawful money of the United States of America. The Notes are authorized to be executed and delivered in the form of fully registered notes in denominations of $5,000 or any integral multiple thereof. This Note may be transferred or exchanged by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office, but only in the manner, subject to the limitations and upon payment of the charges provided in the Trust Agreement. The Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, whether or not the principal or interest evidenced by this Note shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the 85238425.4 A-4 principal and interest evidenced by this Note shall be made only to such Registered Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by this Note to the extent of the sum or sums so paid. The Notes are not subject to prepayment prior to the Maturity Date. To the extent and in the manner permitted by the terms of the Trust Agreement, the Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee under the Trust Agreement may be amended or supplemented at any time by an amendment or supplement thereto which shall become binding when the prior written consents of the Owners of a majority of the aggregate principal evidenced by the Notes then outstanding, exclusive of Notes disqualified as provided under the Trust Agreement, are filed with the Trustee. No such supplement or amendment shall (a) extend the stated Maturity Date or reduce the rate of interest evidenced thereby or extend the time of payment of such interest or reduce the amount of principal evidenced thereby, (b) reduce the percentage of Owners whose consent is required for the execution of any amendment of or supplement to the Trust Agreement without the prior written consent of the Owners of all Notes then outstanding, (c) modify any of the rights or obligations of the Trustee without the prior written consent of the Trustee, or (d) amend the amendment provisions of the Trust Agreement without the prior written consent of the Owners of all Notes then outstanding. To the extent and in the manner permitted by the terms of the Trust Agreement, the Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee under the Trust Agreement may also be amended or supplemented at any time by an amendment or supplement thereto which shall become binding upon execution, without the written consents of any Owners, but only to the extent permitted by law and only (a) to add to the agreements, conditions, covenants and terms required by the Corporation or the District to be observed or performed under the Trust Agreement other agreements, conditions, covenants and terms thereafter to be observed or performed by the Corporation or the District, or to surrender any right or power reserved therein to or conferred therein on the Corporation or the District, and which in either case shall not adversely affect the rights or interests of the Owners, (b) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained in the Trust Agreement or in regard to questions arising thereunder which the Corporation or the District may deem desirable or necessary and not inconsistent therewith, (c) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of interest evidenced by the Notes, or (d) for any other reason, provided such amendment or supplement does not adversely affect the rights or interests of the Owners. THE DISTRICT HAS CERTIFIED that all acts, conditions and things required by the statutes of the State of California and by the Trust Agreement to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Note do exist, have happened and have been performed in regular and due time, form and manner as required by law, and that the Trustee is duly authorized to execute and deliver this Note. IN WITNESS WHEREOF, this Note has been executed by the manual signature of an authorized signatory of the Trustee as of the date set forth below. 85238425.4 A-5 Date: [December __, 2009] UNION BANK, N.A., as Trustee By: Authorized Officer 85238425.4 A-6 ASSIGNMENT For value received, the undersigned do(es) hereby sell, assign and transfer unto _____________________________________________ the within-mentioned Note and hereby irrevocably constitute(s) and ________________________________________________ appoint(s) _____________________________________________ attorney, to transfer the same on the books of the Trustee with full power of substitution in the premises. Dated: __________________ Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within registered Note in every particular, without alteration or enlargement or any change whatsoever. Tax I.D. #: _____________________ Signature Guaranteed: _______________________ Note: Signature(s) must be guaranteed by an eligible guarantor. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Note in every particular without alteration or enlargement or any change whatsoever. 85238427.4 Fulbright & Jaworski L.L.P. Draft – 10/14/09 INSTALLMENT PURCHASE AGREEMENT by and between ORANGE COUNTY SANITATION DISTRICT and ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION Dated as of December 1, 2009 Relating to $______________ Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B TABLE OF CONTENTS Page 85238427.4 -i- ARTICLE I DEFINITIONS ................................................................................................. 2 Section 1.01. Definitions............................................................................................ 2 Section 1.02. Definitions in Master Agreement and Trust Agreement...................... 3 ARTICLE II PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE CORPORATION; PAYMENT ........................................................................ 3 Section 2.01. Acquisition, Construction and Installation of the Project .................... 3 Section 2.02. Payment................................................................................................ 4 ARTICLE III PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE DISTRICT; INSTALLMENT PAYMENTS ................................................... 4 Section 3.01. Purchase and Sale of Project ................................................................ 4 Section 3.02. Installment Payment............................................................................. 4 Section 3.03. Reserved ............................................................................................... 4 Section 3.04. Obligation Absolute ............................................................................. 4 Section 3.05. Nature of Agreement............................................................................ 5 ARTICLE IV NO PREPAYMENT OF INSTALLMENT PAYMENTS; DISCHARGE ................................................................................................... 5 Section 4.01. No Prepayment of Installment Payment .............................................. 5 Section 4.02. Discharge of Obligations ..................................................................... 5 ARTICLE V COVENANTS ................................................................................................. 5 Section 5.01. Compliance with Master Agreement ................................................... 5 Section 5.02. Compliance with Installment Purchase Agreement ............................. 5 Section 5.03. Protection of Security and Rights ........................................................ 6 Section 5.04. Indemnification of Corporation ........................................................... 6 Section 5.05. Further Assurances............................................................................... 6 ARTICLE VI EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION ............................................................................................. 6 Section 6.01. Events of Default ................................................................................. 6 Section 6.02. Remedies on Default ............................................................................ 7 Section 6.03. Non-Waiver.......................................................................................... 7 Section 6.04. Remedies Not Exclusive ...................................................................... 8 ARTICLE VII AMENDMENTS ............................................................................................. 8 Section 7.01. Amendments ........................................................................................ 8 ARTICLE VIII MISCELLANEOUS ........................................................................................ 9 Section 8.01. Liability of District Limited ................................................................. 9 Section 8.02. Limitation of Rights ............................................................................. 9 Section 8.03. Assignment .......................................................................................... 9 Section 8.04. Notices ................................................................................................. 9 Section 8.05. Successor Is Deemed Included in all References to Predecessor ...... 10 Section 8.06. Waiver of Personal Liability .............................................................. 10 Section 8.07. Article and Section Headings, Gender and References ..................... 10 TABLE OF CONTENTS (continued) Page 85238427.4 -ii- Section 8.08. Partial Invalidity................................................................................. 10 Section 8.09. Governing Law .................................................................................. 11 Section 8.10. Execution in Counterparts.................................................................. 11 EXHIBIT A - DESCRIPTION OF PROJECT .......................................................................... A-1 85238427.4 INSTALLMENT PURCHASE AGREEMENT THIS INSTALLMENT PURCHASE AGREEMENT (this “Installment Purchase Agreement”), dated as of December 1, 2009, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the “District”), and the ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION, a nonprofit public benefit corporation organized and existing under the laws of the State of California (the “Corporation”). W I T N E S S E T H: WHEREAS, to finance the acquisition, construction and installation of certain improvements to its wastewater system (the “Prior Project”) the District caused the execution and delivery of $176,115,000 in aggregate principal amount of Orange County Sanitation District Refunding Certificates of Participation, Series 2008C, of which $176,115,000 in principal amount is currently outstanding (the “Prior Notes”); WHEREAS, the District desires to pay all of the Prior Notes by paying at maturity all of the remaining principal components of the installment payment relating to the Prior Notes (the “Prior Installment Payment”), and the interest components thereof; WHEREAS, to provide the funds necessary to pay the Prior Installment Payment to be so paid, the District and the Corporation desire that the Corporation purchase the Prior Project from the District and the District sell the Prior Project to the Corporation, and that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the installment payment (the “Installment Payment”) to be made by the District, pursuant to a new installment purchase agreement (the “Installment Purchase Agreement”),and the Corporation and the District have agreed to finance such prepayment by causing the execution and delivery of $______________ in aggregate principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”) evidencing direct, fractional undivided interests in the Installment Payment and the interest thereon, to be made by the District pursuant to the Installment Purchase Agreement; WHEREAS, pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000, by and between the District and the Corporation, the District has established and declared the conditions and terms upon which obligations such as this Installment Purchase Agreement, and the Installment Payment, and the interest thereon, are to be incurred and secured; WHEREAS, the Corporation proposes to assign without recourse certain of its rights under and pursuant to this Installment Purchase Agreement to Union Bank, N.A., as trustee (the “Trustee”); WHEREAS, in consideration of such assignment and the execution and delivery of the Trust Agreement, dated as of the date hereof, by and among the Trustee, the Corporation and the 85238427.4 2 District, the Trustee has agreed to execute and deliver the Notes, evidencing direct, undivided fractional interests in the Installment Payment, and the interest thereon, payable hereunder; WHEREAS, a portion of the proceeds of the Notes, together with other available funds, will be used to prepay the Prior Installment Payment; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Installment Purchase 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 Installment Purchase Agreement; NOW, THEREFORE, in consideration of the covenants and provisions herein set forth and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. Except as provided in Section 1.02 hereof or 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 any report 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: “Business Day” means a day other than (a) Saturday or Sunday, (b) a day on which banking institutions in the city in which the Principal Office is located are authorized or required by law to be closed, and (c) a day on which the New York Stock Exchange is authorized or obligated by law or executive order to be closed. “Closing Date” means December 1, 2009. “Corporation” means the Orange County Sanitation District Financing Corporation, a nonprofit public benefit corporation organized and existing under the laws of the State, and any successor thereto. “District” means the Orange County Sanitation District, a county sanitation district organized and existing under and by virtue of the laws of the State, and any successor thereto. “Event of Default” means an event described in Section 6.01 hereof. “Installment Payment” means the Installment Payment required to be made by the District pursuant to Section 3.02 hereof. “Installment Payment Date” means December 1, 2010. 85238427.4 3 “Installment Purchase Agreement” means this Installment Purchase Agreement, dated as of December 1, 2009, by and between the District and the Corporation, as originally executed and as it may from time to time be amended or supplemented in accordance with the terms hereof. “Master Agreement” means the Master Agreement for District Obligations, dated as of August 1, 2000, by and between the District and the Corporation, as originally executed and as it may from time to time be amended or supplemented in accordance with the terms thereof. “Notes” means the Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B, executed and delivered by the Trustee pursuant to the Trust Agreement. “Person” means an individual, corporation, limited liability company, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. “Principal Office” means the Trustee’s principal corporate trust office in Los Angeles, California. “Project” means the improvements to the Wastewater System, as described in Exhibit A hereto. “Trust Agreement” means the Trust Agreement, dated as of December 1, 2009, by and among the Trustee, the Corporation and the District, as originally executed and as it may from time to time be amended or supplemented in accordance with its terms. “Trustee” means Union Bank, N.A., a national banking association duly organized and existing under the laws of the United States of America, or any other bank or trust company which may at any time be substituted in its place as provided in the Trust Agreement. Section 1.02. Definitions in Master Agreement and Trust Agreement. Except as otherwise herein defined and unless the context otherwise requires, the terms defined in the Master Agreement or the Trust Agreement shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein have the meanings defined therein, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined therein. With respect to any defined term which is given a different meaning under this Installment Purchase Agreement than under the Master Agreement or the Trust Agreement, as used herein it shall have the meaning given herein. ARTICLE II PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE CORPORATION; PAYMENT Section 2.01. Acquisition, Construction and Installation of the Project. The District represents and warrants that it is the sole and exclusive owner of the Project. The Corporation hereby purchases from the District, and the District hereby sells to the Corporation, the Project in 85238427.4 4 accordance with the provisions of this Installment Purchase Agreement. All right, title and interest in and to the Project shall immediately vest in the Corporation on the Closing Date without further action on the part of the Corporation or the District. Section 2.02. Payment. On the Closing Date, the Corporation shall pay to the District, as the purchase price of the Project, the amount of $______________, which amount shall be paid from the proceeds of the Notes. ARTICLE III PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE DISTRICT; INSTALLMENT PAYMENTS Section 3.01. Purchase and Sale of Project. The District hereby purchases from the Corporation, and the Corporation hereby sells to the District, the Project in accordance with the provisions of this Installment Purchase Agreement. All right, title and interest in and to the Project shall immediately vest in the District on the Closing Date without further action on the part of the District or the Corporation. Section 3.02. Installment Payment. The District shall pay to the Corporation, from Net Revenues and other lawfully available funds of the District, the purchase price of the Project in a single Installment Payment, with interest thereon, as provided herein. The Installment Payment shall be in the aggregate principal amount of $______________, and shall be payable on the Installment Payment Date. The Installment Payment shall accrue interest from the Closing Date, at the rate of ___% per annum, payable on the Installment Payment Date. Such interest shall accrue on the basis of a 360-day year consisting of twelve 30-day months. The Installment Payment, and the payment of interest thereon, shall be deposited with the Trustee, as assignee of the Corporation, no later than the Installment Payment Date, in lawful money of the United States of America, in immediately available funds. If and to the extent that, on any such date, there are amounts on deposit in the Installment Payment Fund established under the Trust Agreement, or in any of the accounts therein, which amounts are not being held for the payment of specific Notes, such amounts shall be credited against the Installment Payment, or payment of interest thereon, as applicable, due on such date. Section 3.03. Reserved. Section 3.04. Obligation Absolute. The obligation of the District to make the Installment Payment, and payment of interest thereon, and other payments required to be made by it under this Article, from Net Revenues and other lawfully available funds of the District, is absolute and unconditional, and until such time as the Installment Payment, payments of interest thereon, and such other payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to Article IV), the District shall not discontinue or suspend any Installment Payment, or payments of interest thereon, or other payments required to be made by it hereunder when due, whether or not the Project or any part thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced or curtailed or 85238427.4 5 terminated in whole or in part, and such Installment Payment, payments of interest thereon, and other payments shall not be subject to reduction whether by offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever. Section 3.05. Nature of Agreement. This Installment Purchase Agreement constitutes a Senior Obligation and, as such, shall be subject to the provisions of the Master Agreement and shall be afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. ARTICLE IV NO PREPAYMENT OF INSTALLMENT PAYMENTS; DISCHARGE Section 4.01. No Prepayment of Installment Payment. (a) The Installment Payment shall not be subject to prepayment prior to the Installment Payment Date. Section 4.02. Discharge of Obligations. If the Installment Payment, and the interest thereon, shall be paid as and when due in accordance with the terms hereof, or prepaid in accordance with Section 4.01 hereof, and if all Notes shall be fully paid, or provision therefor made in accordance with Article X of the Trust Agreement, and the Trust Agreement shall be discharged by its terms, then all agreements, covenants and other obligations of the District hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. ARTICLE V COVENANTS Section 5.01. Compliance with Master Agreement. The District will faithfully observe and perform all the agreements, conditions, covenants and terms contained in the Master Agreement required to be observed and performed by it and will not cause, suffer or permit any default to occur thereunder. Section 5.02. Compliance with Installment Purchase Agreement. The District will punctually pay the Installment Payment, and interest thereon, and other payments required to be made by it hereunder in strict conformity with the terms hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, will not cause, suffer or permit any default to occur hereunder and will not terminate this Installment Purchase Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either or any failure of the Corporation to observe or perform any agreement, condition, covenant or term contained herein required to be observed and performed by it, whether express or implied, or any duty, liability or obligation arising out of or connected herewith or the insolvency, or deemed insolvency, or bankruptcy or liquidation of the Corporation or any force majeure, including acts of God, tempest, storm, earthquake, war, 85238427.4 6 rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, strikes, industrial disputes, lock outs, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities. Section 5.03. Protection of Security and Rights. The District will preserve and protect the security hereof and the rights of the Trustee, as assignee of the Corporation, to the Installment Payment, and interest thereon, and other payments required to be made by the District hereunder and will warrant and defend such rights against all claims and demands of all Persons. Section 5.04. Indemnification of Corporation. To the extent permitted by law, the District hereby agrees to indemnify and hold the Corporation and its members and officers harmless against any and all liabilities which might arise out of or are related to the Project, this Installment Purchase Agreement or the Notes, and the District further agrees to defend the Corporation and its members and officers in any action arising out of or related to the Project, this Installment Purchase Agreement or the Notes. Section 5.05. Further Assurances. The District will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring and confirming unto the Corporation, or unto the Trustee, as assignee of the Corporation, the rights and benefits provided herein to the Corporation, or to the Trustee, as assignee of the Corporation. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION Section 6.01. Events of Default. The following shall be Events of Default under this Installment Purchase Agreement, and “Event of Default” shall mean any one or more of the following events: (a) if default shall be made by the District in the due and punctual payment of or on account of any Senior Obligation as the same shall become due and payable; (b) if default shall be made by the District in the performance of any of the agreements or covenants required herein, in the Trust Agreement or in the Master Agreement to be performed by it (other than as specified in (a) above), and such default shall have continued for a period of 30 days after the District shall have been given notice in writing of such default by the Corporation or the Trustee; provided, however, that the party or parties giving such notice may agree in writing to a reasonable extension of such period prior to the expiration of such 30 day period and, provided further, that if the District shall proceed to take curative action which, if begun and prosecuted with due diligence, cannot be completed within such a period of 30 days, then such period shall be increased without such written extension to such extent as shall be necessary to enable the District to diligently complete such curative action and such default shall not become an Event of Default for so long as shall be necessary to diligently complete such curative action; or 85238427.4 7 (c) if the District shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the District seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the District or of the whole or any substantial part of its property. Section 6.02. Remedies on Default. Upon the occurrence of an Event of Default, the Trustee, as assignee of the Corporation, shall have the right: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the District and to compel the District to perform and carry out its duties under applicable law and the agreements and covenants required to be performed herein; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee, as assignee of the Corporation; (c) by suit in equity to require the District to account as the trustee of an express trust; and to have a receiver or receivers appointed for the Wastewater System and of the issues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer. Section 6.03. Non-Waiver. Nothing in this Article or in any other provision hereof shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the Installment Payment, and the interest thereon, to the Trustee, as assignee of the Corporation, at the respective due dates from the Net Revenues and the other funds herein committed for such payment, or shall affect or impair the right of the Trustee, as assignee of the Corporation, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein. A waiver of any default or breach of duty or contract by the Trustee, as assignee of the Corporation, shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee, as assignee of the Corporation, to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee, as assignee of the Corporation, by applicable law or by this Article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee, as assignee of the Corporation. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Trustee, as assignee of the Corporation, the District and the Trustee, as assignee of the Corporation, shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. 85238427.4 8 Section 6.04. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee, as assignee of the Corporation, is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by law. ARTICLE VII AMENDMENTS Section 7.01. Amendments. (a) This Installment Purchase Agreement and the rights and obligations of the District, the Corporation and the Trustee, as assignee of the Corporation, may be amended or modified from time to time and at any time by a written amendment hereto executed by the District, the Corporation and the Trustee, as assignee of the Corporation, with the written consent of the Owners of a majority of the aggregate principal evidenced by Notes then Outstanding. No such amendment shall (i) extend the payment date of any Installment Payment or reduce the amount of any Installment Payment, or the interest rate applicable thereto, without the prior written consent of the Owner of each affected Note, or (ii) reduce the percentage of Owners of the Notes whose consent is required to effect any such amendment or modification, without the prior written consent of the Owners of all Notes then Outstanding. (b) This Installment Purchase Agreement and the rights and obligations of the District, the Corporation and the Trustee, as assignee of the Corporation, may be amended or modified from time to time and at any time by a written amendment hereto executed by the District, the Corporation and the Trustee, as assignee of the Corporation, without the written consents of any Owners of the Notes, but only to the extent permitted by law and only for any one or more of the following purposes: (i) to add to the agreements, conditions, covenants and terms required by the District, the Corporation or the Trustee, as assignee of the Corporation, to be observed or performed herein other agreements, conditions, covenants and terms thereafter to be observed or performed by the District, the Corporation or the Trustee, as assignee of the Corporation, or to surrender any right or power reserved herein to or conferred herein on the District, the Corporation or the Trustee, as assignee of the Corporation; (ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the District, the Corporation or the Trustee, as assignee of the Corporation, may deem desirable or necessary and not inconsistent herewith; (iii) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of interest on the Installment Payment; and (iv) to make such other changes herein or modifications hereto as the District, the Corporation or the Trustee, as assignee of the Corporation, may deem desirable or 85238427.4 9 necessary, and which shall not materially adversely affect the interests of the Owners of the Notes. ARTICLE VIII MISCELLANEOUS Section 8.01. Liability of District Limited. Notwithstanding anything contained herein to the contrary, the District shall not be required to advance any moneys derived from any source of income other than Net Revenues and the other funds provided herein for the payment of the Installment Payment, and the interest thereon, and other payments required to be made by it hereunder, or for the performance of any agreements or covenants required to be performed by it contained herein. The District may, however, but in no event shall be obligated to, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the District for such purpose. The obligation of the District to pay the Installment Payment, and the interest thereon, and other payments required to be made by it hereunder is a special obligation of the District payable, in the manner provided herein, from Net Revenues and other funds provided for herein, and does not constitute a debt of the District or of the State, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District or the State, or any political subdivision thereof, is pledged to the payment of the Installment Payment, or the interest thereon, or other payments required to be made hereunder. Section 8.02. Limitation of Rights. Nothing in this Installment Purchase Agreement expressed or implied is intended or shall be construed to give to any Person other than the District, the Corporation and the Trustee, as assignee of the Corporation, any legal or equitable right, remedy or claim under or in respect of this Installment Purchase Agreement or any covenant, condition or provision therein or herein contained, and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the District, the Corporation and the Trustee, as assignee of the Corporation. Section 8.03. Assignment. The District and the Corporation hereby acknowledge the transfer, conveyance and assignment by the Corporation to the Trustee of all of the Corporation’s rights, title and interest in and to this Installment Purchase Agreement (excepting its rights to indemnification hereunder), including the right to receive Installment Payment, and the interest thereon, from the District, pursuant to the Trust Agreement. Section 8.04. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: 85238427.4 10 If to the District: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Fax: (714) 962-3954 Attention: Director of Finance and Administrative Services If to the Corporation: Orange County Sanitation District Financing Corporation c/o Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Fax: (714) 962-3954 Attention: Treasurer If to the Trustee: Union Bank, N.A. 120 South San Pedro Street, Suite 400 Los Angeles, California 90012 Fax: (213) 972-5694 Attention: Corporate Trust Department Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, e.g. facsimile or telecopier, upon the sender’s receipt of an appropriate answerback or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (e) if given by any other means, upon delivery at the address specified in this Section. Section 8.05. Successor Is Deemed Included in all References to Predecessor. Whenever the District or the Corporation is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the District or the Corporation, and all agreements and covenants required hereby to be performed by or on behalf of the District or the Corporation shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 8.06. Waiver of Personal Liability. No official, officer or employee of the District shall be individually or personally liable for the payment of the Installment Payment, or the interest thereon, or other payments required to be made by the District hereunder, but nothing contained herein shall relieve any official, officer or employee of the District from the performance of any official duty provided by any applicable provisions of law or hereby. Section 8.07. Article and Section Headings, Gender and References. The headings or titles of the several Articles and Sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof, and words of any gender shall be deemed and construed to include all genders. All references herein to “Articles,” “Sections” and other subsections or clauses are to the corresponding articles, sections, subsections or clauses hereof; and the words “hereby,” “herein,” “hereof,” “hereto,” “herewith” and other words of similar import refer to this Installment 85238427.4 11 Purchase Agreement as a whole and not to any particular Article, Section, subdivision or clause hereof. Section 8.08. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the District or the Corporation shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants and portions thereof and shall in no way affect the validity hereof. Section 8.09. Governing Law. This Installment Purchase Agreement shall be construed and governed and construed in accordance with the laws of the State. Section 8.10. Execution in Counterparts. This Installment Purchase Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. 85238427.4 12 IN WITNESS WHEREOF, the parties hereto have executed this Installment Purchase Agreement by their officers thereunto duly authorized as of the day and year first written above. ORANGE COUNTY SANITATION DISTRICT By: Chair of the Board of Directors (S E A L) Attest: By: Clerk of the Board of Directors ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION By: Treasurer 85238427.4 A-1 EXHIBIT A DESCRIPTION OF PROJECT The Project will include in general the acquisition, construction and installation of certain improvements to the wastewater collection, treatment and disposal facilities of the District and in particular including, without limitation, the financing of improvements to the Wastewater System including particularly, but without limitation, the District's collection system, two wastewater treatment plants, and Ocean Outfall, and further as follows: the acquisition, construction, installation, rehabilitation, replacement, or repair of the North County Yard, Bushard Trunk Sewer, Gisler-Redhill Trunk Sewer, Magnolia Trunk Sewer, Bay Bridget Pump Station, Bitter Point Pump Station, Ellis Avenue Pumps Station, Rocky Point Pump Station, Headworks at Plant 2, Primary Clarifiers at Plant 1, Primary Treatment System at Plant 2 Secondary Treatment System at Plant 1, Activated Sludge at Plant 1, Trickling Filters at Plant 1 and 2; Sludge Digester at Plant 1, Sludge Dewatering at Plant 1 and 2, Truck Wash and Dewatering Beds at Plant 1, Primary sludge Feed System at Plant 2, Digester at Plant 2, Effluent Pump Station Annex, Groundwater Replenishment System, and Odor Control Facilities. 85238430.3 Fulbright & Jaworski L.L.P. – Draft 9/30/09 CONTINUING DISCLOSURE AGREEMENT by and between ORANGE COUNTY SANITATION DISTRICT and DIGITAL ASSURANCE CERTIFICATION LLC, as Dissemination Agent Dated as of December 1, 2009 Relating to $___________ Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B 85238430.3 CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT (this “Disclosure Agreement”), dated as of December 1, 2009, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the “District”), and DIGITAL ASSURANCE CERTIFICATION LLC, as Dissemination Agent (the “Dissemination Agent”). WITNESSETH: WHEREAS, the District has caused to be executed and delivered Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”), evidencing principal in the aggregate amount of $___________, pursuant to a Trust Agreement, dated as of the date hereof (the “Trust Agreement”), by and among Union Bank, N.A., as trustee (the “Trustee”), the Orange County Sanitation District Financing Corporation (the “Corporation”) and the District; and WHEREAS, this Disclosure Agreement is being executed and delivered by the District and the Dissemination Agent for the benefit of the owners and beneficial owners of the Notes and in order to assist the underwriter of the Notes in complying with the Rule (as defined herein); NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows: Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Trust Agreement or, if not defined therein, in the Master Agreement, dated as of August 1, 2000, by and between the District and the Corporation. In addition, the following capitalized terms shall have the following meanings: “Disclosure Representative” means the Director of Finance and Administrative Services of the District, or such other officer or employee of the District as the District shall designate in writing to the Dissemination Agent and the Trustee from time to time. “Dissemination Agent” means an entity selected and retained by the District, or any successor thereto selected by the District. The initial Dissemination Agent shall be Digital Assurance Certification LLC. “Listed Events” means any of the events listed in subsection (a) of Section 4 hereof. “MSRB” means the Municipal Securities Rulemaking Board. “Participating Underwriter” means the original underwriter of the Notes required to comply with the Rule in connection with the offering of the Notes. “Repository” means, until otherwise designated by the Securities and Exchange Commission, the Electronic Municipal Market Access website of the MSRB located at http://emma.msrb.org. 85238430.3 2 “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. Section 2. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Notes, if material: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions or events affecting the tax-exempt status of the security. (7) Modifications to rights of security holders. (8) Contingent or unscheduled Note calls. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities. (11) Rating changes. (b) The District shall, within one business day of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the District promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f) of this Section. (c) Whenever the District obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Dissemination Agent pursuant to subsection (b) of this Section or otherwise, the District shall as soon as possible determine if such event would be material under applicable Federal securities law. (d) If the District has determined that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the District shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f) of this Section. 85238430.3 3 (e) If in response to a request under subsection (b) of this Section, the District determines that the Listed Event would not be material under applicable Federal securities law, the District shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (f) of this Section. (f) If the Dissemination Agent has been instructed by the District to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB and each Repository. Notwithstanding the foregoing, notice of Listed Events described in paragraphs (8) and (9) of subsection (a) of this Section need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Notes pursuant to the Trust Agreement. Section 3. Filings with the MSRB. All information, operating data, financial statements, notices and other documents provided to the MSRB in accordance with this Disclosure Agreement shall be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. Section 4. Termination of Reporting Obligation. The District’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance or payment in full of all of the Notes. If such termination occurs prior to the final maturity of the Notes, the District shall give notice of such termination in the same manner as for a Listed Event under subsection (f) of Section 2 hereof. Section 5. Dissemination Agent. The District may, from time to time, appoint or engage another Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent; provided, it shall receive written notice of such designation at the time of such designation. Section 6. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the District and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the District), and any provision of this Disclosure Agreement may be waived; provided, that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Section 2 hereof, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Notes, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Notes, after taking into account any amendments or interpretations of the Rule, and any change in circumstances; and (c) the proposed amendment or waiver (i) is approved by holders of the Notes in the manner provided in the Trust Agreement for amendments to the Trust Agreement with the 85238430.3 4 consent of holders, or (ii) does not, in the opinion of the Trustee and nationally recognized bond counsel, materially impair the interests of holders. Section 7. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. Section 8. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the written direction of any Participating Underwriter or the holders of at least 25% of the aggregate amount of principal evidenced by Outstanding Notes and upon being indemnified to its reasonable satisfaction, shall), or any holder or beneficial owner of the Notes may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the District or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 9. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall not be responsible for the form or content of any notice of Listed Event. The Dissemination Agent shall receive reasonable compensation for its services provided under this Disclosure Agreement. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Notes. Section 10. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Notes, and shall create no rights in any other person or entity. Section 11. Counterparts. This Disclosure 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. IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. ORANGE COUNTY SANITATION DISTRICT 85238430.3 5 By: Lorenzo Tyner Director of Finance and Administrative Services DIGITAL ASSURANCE CERTIFICATION LLC, as Dissemination Agent By: Authorized Representative Fulbright & Jaworski L.L.P. Draft – 10/20/09 PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 30, 2009 85240462.7 NEW ISSUE—BOOK-ENTRY-ONLY RATINGS: S&P: “____” Fitch: “____” (See “RATINGS” herein.) In the opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Special Counsel, under existing law the Interest Component of the Installment Payment, and the allocable portion thereof distributable in respect of any Note, is exempt from personal income taxes of the State of California and, assuming compliance with the tax covenants described herein, the Interest Component of the Installment Payment, and the allocable portion thereof distributable in respect of any Note, is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986 (the “Code”) from the gross income of the owners thereof for federal income tax purposes and will not be included in computing the alternative minimum taxable income of the owners thereof for federal income tax purposes. See “TAX MATTERS” herein. [District Logo] $______________* [DAC Logo] ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B Dated: Date of Delivery Maturity Date: December 1, 2010 Interest Rate: % Yield: % CUSIP No. 68428P The $____________* Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”) evidence direct, fractional undivided interests of the Owners thereof in the installment payment (the “Installment Payment”), and the interest thereon, to be made by the Orange County Sanitation District (the “District”) pursuant to the Installment Purchase Agreement, dated as of December 1, 2009 (the “Installment Purchase Agreement”), by and between the District and the Orange County Sanitation District Financing Corporation (the “Corporation”). Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the “Master Agreement”), by and between the District and the Corporation, the District has established conditions and terms upon which obligations such as the Installment Payment and the interest thereon, will be incurred and secured. The Installment Payment under the Installment Purchase Agreement is payable from (i) Net Revenues (as more fully described in the Master Agreement, the “Net Revenues”), consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the “Wastewater System”) remaining after payment of Maintenance and Operation Costs, and (ii) other lawfully available funds of the District, as further described in “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” herein. The Notes will mature on December __, 2010 (the “Maturity Date”). The District expects the principal of and interest on the Notes to be paid from proceeds of the sale, prior to the Maturity Date, of a future series of certificates of participation, notes or other obligations of the District. The sale and delivery of a future series of certificates of participation, notes or other obligations of the District will depend on market conditions, certain approvals by the District and the Corporation and other factors. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” herein. The proceeds of the Notes, together with other amounts, will be used to (i) pay at maturity all of the Orange County Sanitation District Refunding Certificates of Participation, Series 2008C (Certificate Anticipation Notes), currently outstanding in the aggregate principal amount of $176,115,000, and (ii) pay the costs incurred in connection with the execution and delivery of the Notes. See “PLAN OF FINANCE” herein. Interest evidenced by the Notes will accrue from the date of their initial delivery and will be payable on the Maturity Date. See “THE NOTES” herein. The Notes initially will be delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Notes. Individual purchases of the Notes will be made in book-entry form only. Purchasers of Notes will not receive physical certificates representing their ownership interests in the Notes purchased. The Notes will be delivered in denominations of $5,000 and any integral multiple thereof. Payments of principal and interest evidenced by the Notes are payable directly to DTC by Union Bank, N.A., as trustee (the “Trustee”). Upon receipt of payments of such principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Notes. See APPENDIX E — “BOOK-ENTRY SYSTEM” herein. THE OBLIGATION OF THE DISTRICT TO PAY THE INSTALLMENT PAYMENT, AND THE INTEREST THEREON, AND OTHER PAYMENTS REQUIRED TO BE MADE BY IT UNDER THE INSTALLMENT PURCHASE AGREEMENT IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE, IN THE MANNER PROVIDED IN THE INSTALLMENT PURCHASE AGREEMENT, FROM NET REVENUES AND OTHER LAWFULLY AVAILABLE FUNDS OF THE DISTRICT, AS PROVIDED IN THE INSTALLMENT PURCHASE AGREEMENT, AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA, OR OF ANY POLITICAL SUBDIVISION THEREOF, IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE INSTALLMENT PAYMENT, OR THE INTEREST THEREON, OR OTHER PAYMENTS REQUIRED TO BE MADE UNDER THE INSTALLMENT PURCHASE AGREEMENT. SEE “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” HEREIN. This cover page contains information intended for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision. BIDS FOR THE PURCHASE OF THE NOTES WILL BE RECEIVED BY THE DISTRICT UNTIL 11:30 A.M. NEW YORK TIME ON NOVEMBER 10, 2009 UNLESS POSTPONED OR CANCELLED AS SET FORTH IN THE OFFICIAL NOTICE INVITING BIDS. The Notes are offered when, as and if executed and delivered and received by ________________, as the Initial Purchaser, subject to the approval of Fulbright & Jaworski L.L.P., Los Angeles, California, Special Counsel and Disclosure Counsel to the District, and certain other conditions. Certain legal matters will be passed on for the District and the Corporation by Woodruff, Spradlin & Smart, a Professional Corporation, Costa Mesa, California. Public Resources Advisory Group, Los Angeles, California, served as financial advisor to the District in connection with the execution and delivery of the Notes. It is anticipated that the Notes in definitive form will be available for delivery through the book-entry facilities of DTC on or about December __, 2009. Dated: ____________, 2009 * Preliminary; subject to change. Th i s P r e l i m i n a r y O f f i c i a l S t a t e m e n t a n d t h e i n f o r m a t i o n c o n t a i n e d h e r e i n a r e s u b j e c t t o c o m p l e t i o n or a m e n d m e n t . U n d e r n o c i r c u m s t a n c e s s h a l l t h i s P r e l i m i n a r y O f f i c i a l S t a t e m e n t c o n s t i t u t e a n of f e r t o s e l l o r t h e s o l i c i t a t i o n o f a n o f f e r t o b u y , n o r s h a l l t h e r e b e a n y s a l e o f t h e s e s e c u r i t i e s i n a n y j u r i s d i c t i o n i n wh i c h s u c h o f f e r , s o l i c i t a t i o n o r s a l e w o u l d b e u n l a w f u l . 85240462.7 [MAP] 85240462.7 ORANGE COUNTY SANITATION DISTRICT Board of Directors Doug Davert (Chair) — Tustin Larry Crandall — (Vice Chair) — Fountain Valley Harry Sidhu — Anaheim Jon Dumitru — Orange Roy Moore — Brea Constance Underhill — Placentia Patsy Marshall — Buena Park Sal Tinajero — Santa Ana Phil Luebben — Cypress Charles Antos — Seal Beach Sharon Quirk-Silva — Fullerton David Shawver — Stanton Bill Dalton — Garden Grove Brad Reese — Villa Park Keith Bohr — Huntington Beach John Anderson — Yorba Linda Christina Shea — Irvine James Ferryman — Costa Mesa Sanitary District Tom Beamish — La Habra John Withers — Irvine Ranch Water District Mark Waldman — La Palma Joy L. Neugebauer — Midway City Sanitary District Troy Edgar — Los Alamitos Chris Norby — Member of the Orange County Don Webb — Newport Beach Board of Supervisors Executive Management of the District James D. Ruth, General Manager Robert P. Ghirelli, Ph.D., Assistant General Manager Lorenzo Tyner, Director of Finance and Administrative Services James Herberg, Director of Engineering Ed Torres, Director of Technical Services Nick Arhontes, Director of Operations & Maintenance Special Services Special Counsel and Disclosure Counsel Fulbright & Jaworski L.L.P. Los Angeles, California District General Counsel Bradley R. Hogin Woodruff, Spradlin & Smart, a Professional Corporation Costa Mesa, California Financial Advisor Public Resources Advisory Group Los Angeles, California Trustee Union Bank, N.A. Los Angeles, California 85240462.7 This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Notes by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. The information set forth herein has been provided by the District and other sources that are believed by the District to be reliable. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement. If given or made, such other information or representations must not be relied upon as having been authorized by the District, the Corporation or the Initial Purchaser in connection with any reoffering. This Official Statement is not to be construed as a contract with the purchasers of the Notes. Statements contained in this Official Statement which involve estimates, projections, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or the Corporation since the date hereof. This Official Statement is submitted with respect to the sale of the Notes referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the District. All summaries of the documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions. Preparation of this Official Statement and its distribution have been duly authorized and approved by the District and the Corporation. In connection with the offering of the Notes, the Initial Purchaser in connection with any reoffering may over-allot or effect transactions which stabilize or maintain the market price of the Notes at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Initial Purchaser in connection with any reoffering may offer and sell the Notes to certain dealers, institutional investors and others at prices lower than the public offering prices stated on the cover page hereof and such public offering prices may be changed from time to time by the Initial Purchaser. Certain statements included or incorporated by reference in this Official Statement constitute forward- looking statements. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The CUSIP number herein is provided by Standard & Poor’s CUSIP Service Bureau and is for convenience of reference only. The District does not assume any responsibility for the accuracy of such number. CUSIP® is a registered trademark of the American Bankers Association. Copyright © 1999-2009 Standard & Poor’s, a Division of The McGraw-Hill Companies, Inc. All rights reserved. TABLE OF CONTENTS Page 85240462.7 i INTRODUCTION ............................................................................................................................................... 1 General .................................................................................................................................................. 1 The District............................................................................................................................................. 2 Security and Sources of Payment for the Notes ..................................................................................... 2 Continuing Disclosure ............................................................................................................................ 3 Miscellaneous ......................................................................................................................................... 3 PLAN OF FINANCE ........................................................................................................................................... 3 ESTIMATED SOURCES AND USES OF FUNDS ........................................................................................... 4 THE NOTES ........................................................................................................................................................ 4 General .................................................................................................................................................. 4 No Prepayment ....................................................................................................................................... 5 SECURITY AND SOURCES OF PAYMENT FOR THE NOTES .................................................................... 5 Sale Proceeds of Future Obligations ...................................................................................................... 5 Installment Payment ............................................................................................................................... 5 Available Funds of the District .............................................................................................................. 6 Net Revenues ......................................................................................................................................... 7 Rate Stabilization Account ..................................................................................................................... 8 Allocation of Revenues .......................................................................................................................... 8 Rate Covenant ........................................................................................................................................ 9 Limitations on Issuance of Additional Obligations ................................................................................ 9 Insurance .............................................................................................................................................. 11 Allocation of Installment Payment ....................................................................................................... 11 THE DISTRICT ................................................................................................................................................. 12 Background .......................................................................................................................................... 12 Organization and Administration ......................................................................................................... 13 Services 14 Service Area ......................................................................................................................................... 15 Employees ............................................................................................................................................ 16 Retirement Plan .................................................................................................................................... 17 Other Post-Employment Benefits ......................................................................................................... 18 Risk Management ................................................................................................................................. 19 Existing Facilities ................................................................................................................................. 19 Permits, Licenses and Other Regulations ............................................................................................. 20 Capital Improvement Program ............................................................................................................. 22 Groundwater Replenishment System ................................................................................................... 24 Preferred Level of Treatment ............................................................................................................... 25 Biosolids Management ......................................................................................................................... 25 Urban Runoff ....................................................................................................................................... 26 Integrated Emergency Response Program ........................................................................................... 27 Five-Year Strategic Planning ............................................................................................................... 28 DISTRICT REVENUES .................................................................................................................................... 29 Sewer Service Charges ......................................................................................................................... 29 Additional Revenues ............................................................................................................................ 32 Wastewater Treatment History ............................................................................................................. 33 Customers ............................................................................................................................................. 33 Assessed Valuation .............................................................................................................................. 35 TABLE OF CONTENTS (continued) Page 85240462.7 ii Tax Levies and Delinquencies ............................................................................................................. 36 Budgetary Process ................................................................................................................................ 37 Reserves ............................................................................................................................................... 38 Summary of Operating Data ................................................................................................................ 39 Projected Operating Data ..................................................................................................................... 40 Management’s Discussion and Analysis of Operating Data ................................................................ 42 Investment of District Funds ................................................................................................................ 43 FINANCIAL OBLIGATIONS .......................................................................................................................... 43 Existing Indebtedness ........................................................................................................................... 43 Variable Rate Obligations .................................................................................................................... 44 Anticipated Financings ......................................................................................................................... 44 Direct and Overlapping Bonded Debt .................................................................................................. 44 THE CORPORATION ...................................................................................................................................... 46 LIMITATIONS ON TAXES AND REVENUES .............................................................................................. 47 Article XIIIA of the California Constitution ........................................................................................ 47 Legislation Implementing Article XIIIA .............................................................................................. 47 Article XIIIB of the California Constitution ........................................................................................ 47 Proposition 1A ..................................................................................................................................... 48 Article XIIIC and Article XIIID of the California Constitution ........................................................... 49 Other Initiative Measures ..................................................................................................................... 51 LEGAL MATTERS ........................................................................................................................................... 51 FINANCIAL ADVISOR ................................................................................................................................... 51 ABSENCE OF LITIGATION ........................................................................................................................... 52 FINANCIAL STATEMENTS ........................................................................................................................... 52 TAX MATTERS................................................................................................................................................ 52 CONTINUING DISCLOSURE ......................................................................................................................... 54 RATINGS .......................................................................................................................................................... 54 PURCHASE AND REOFFERING ................................................................................................................... 55 MISCELLANEOUS .......................................................................................................................................... 55 APPENDIX A – COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2009 .......................................................................................... A-1 APPENDIX B – THE COUNTY OF ORANGE – ECONOMIC AND DEMOGRAPHIC INFORMATION ..................................................................................................... B-1 APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ......................................... C-1 APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENT ................................... D-1 APPENDIX E – BOOK-ENTRY SYSTEM ....................................................................................... E-1 APPENDIX F – FORM OF APPROVING OPINION OF SPECIAL COUNSEL .............................F-1 85240462.7 OFFICIAL STATEMENT $_____________* ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B INTRODUCTION This introduction contains only a brief summary of certain of the terms of the Notes being offered and a brief description of the Official Statement. All statements contained in this introduction are qualified in their entirety by reference to the entire Official Statement. References to, and summaries of, provisions of the Constitution and laws of the State of California (the “State”) and any documents referred to herein do not purport to be complete and such references are qualified in their entirety by reference to the complete provisions. All capitalized terms used in this Official Statement and not otherwise defined herein have the meanings set forth in the Trust Agreement, the Installment Purchase Agreement and the Master Agreement (each, as hereinafter defined). See APPENDIX C – “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Definitions” herein. General This Official Statement, including the cover page and all appendices hereto, provides certain information concerning the sale and delivery of $___________* aggregate principal amount of the Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”) evidencing direct, fractional undivided interests in the Installment Payment (the “Installment Payment”) and the interest thereon, to be made by the Orange County Sanitation District (the “District”) pursuant to the Installment Purchase Agreement, dated as of December 1, 2009 (the “Installment Purchase Agreement”), by and between the District and the Orange County Sanitation District Financing Corporation (the “Corporation”). Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the “Master Agreement”), by and between the District and the Corporation, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payment and the interest thereon, will be incurred and secured. The Installment Payment under the Installment Purchase Agreement is payable from (i) Net Revenues (as defined hereinafter) as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the “Wastewater System”) remaining after payment of Maintenance and Operation Costs, and (ii) other lawfully available funds of the District, as further described in “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” herein. The Notes are to be executed and delivered pursuant to a Trust Agreement, dated as of December 1, 2009 (the “Trust Agreement”), by and among the District, the Corporation and Union Bank, N.A., as trustee (the “Trustee”). Proceeds from the sale of the Notes will be used to (i) pay at maturity all of the Orange County Sanitation District Refunding Certificates of Participation, Series 2008C (Certificate Anticipation Notes), currently outstanding in the aggregate principal amount of $176,115,000 (the “Refunded Notes”), and (ii) pay the costs incurred in connection with the execution and delivery of the Notes. See “PLAN OF FINANCE” herein. The Notes will be executed and delivered in the form of fully registered certificates, dated as of the date of initial delivery thereof and will mature on December 1, 2010 (the “Maturity Date”). Interest evidenced by the Notes will be payable on the Maturity Date. See “THE NOTES” herein. The Notes initially will be delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The * Preliminary; subject to change. 85240462.7 2 Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Notes. The Notes will be delivered in denominations of $5,000 and any integral multiple thereof. So long as the Notes are in the DTC book-entry system, the interest and principal due with respect to the Notes will be payable by the Trustee, or its agent, to DTC or its nominee. DTC, in turn, will make payments pursuant to its procedures as described under APPENDIX E – “BOOK–ENTRY SYSTEM” herein. The District The District is a public agency responsible for regional wastewater collection, treatment and disposal. The District is the sixth largest wastewater discharger in the United States. The District provides service to an area with a population of more than 2.5 million people in the northern and central portion of the County of Orange (the “County”), in a service area of approximately 471 square miles, treating 221 million gallons per day (“mg/d”) of wastewater in Fiscal Year 2008-09. See “THE DISTRICT,” “DISTRICT REVENUES” and “FINANCIAL OBLIGATIONS” herein. Security and Sources of Payment for the Notes The Notes evidence direct, fractional undivided interests in the Installment Payment, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payment and the interest thereon and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided under the Installment Purchase Agreement, from Net Revenues, and other lawfully available funds of the District, as provided in the Installment Purchase Agreement. Net Revenues generally consist of all income and revenue received by the District from the operation or ownership of the Wastewater System remaining after payment of Maintenance and Operation Costs, all as further provided in the Master Agreement. The District expects the principal of and interest on the Notes to be paid from proceeds of the sale, prior to the Maturity Date, of a future series of certificates of participation, notes or other obligations of the District. The sale and delivery of a future series of certificates of participation, notes or other obligations of the District will depend on market conditions, certain approvals by the District and the Corporation and other factors. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES — Sale Proceeds of Future Obligations.” The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The District currently has Outstanding Senior Obligations payable from Net Revenues on a parity with the Installment Payment under the Installment Purchase Agreement. See “FINANCIAL OBLIGATIONS – Existing Indebtedness” and “THE DISTRICT” herein and APPENDIX C – “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Master Agreement” attached hereto. The District has no Subordinate Obligations currently outstanding. Pursuant to the Master Agreement, the District will, to the extent permitted by law, fix, prescribe and collect fees and charges for the services and facilities of the Wastewater System which will be at least sufficient to yield during each Fiscal Year (a) Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b) Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year, as such terms are defined in the Master Agreement. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. See “SECURITY AND SOURCE OF PAYMENT FOR THE NOTES – Rate Covenant” herein. The obligation of the District to pay the Installment Payment and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of 85240462.7 3 the District payable, in the manner provided in the Installment Purchase Agreement, from Net Revenues and other lawfully available funds of the District, as provided in the Installment Purchase Agreement, and does not constitute a debt of the District or of the State, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District or the State or any political subdivision thereof, is pledged to the payment of the Installment Payment, or the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” herein. Continuing Disclosure The District has covenanted for the benefit of holders and beneficial owners of the Notes to provide notices of the occurrence of certain enumerated events, if material. See “CONTINUING DISCLOSURE” herein and APPENDIX D – “FORM OF CONTINUING DISCLOSURE AGREEMENT.” Miscellaneous The descriptions herein of the Trust Agreement, the Master Agreement, the Installment Purchase Agreement, the Escrow Agreement and any other agreements relating to the Notes are qualified in their entirety by reference to such documents. Copies of the documents are on file and available for inspection at the corporate trust office of the Trustee at Union Bank, N.A., 120 South San Pedro Street, Suite 400, Los Angeles, California 90012, Attention: Corporate Trust. PLAN OF FINANCE A portion of the net proceeds from the sale of the Notes, together with other available moneys, will be used to pay at maturity the prior installment payment (the “Refunded Installment Payment”) to be made by the District in connection with the Refunded Notes. Under the terms of the Trust Agreement, dated as of December 1, 2008 (the “Prior Trust Agreement”), pursuant to which the Refunded Notes were executed and delivered, the payment of the Refunded Notes will be effected by depositing a portion of the proceeds of the Notes in the Installment Payment Fund established under the Prior Trust Agreement (the “Payment Fund”). Such proceeds and other moneys deposited by the District in the Escrow Fund will be held uninvested in cash in an amount sufficient to provide for the payment of the interest on the Refunded Installment Payment through and including December 10, 2009 (the “Payment Date”) and to provide for the payment of the principal represented by the Refunded Installment Payments. In accordance with the Prior Trust Agreement, the Refunded Installment Payment will be applied to the payment of accrued but unpaid interest with respect to the outstanding Refunded Notes and to the prepayment of the principal of the outstanding Refunded Notes on the maturity date thereof. The amounts deposited in the Payment Fund will be held in trust solely for the Refunded Notes and will not be available to pay the principal and interest evidenced by the Notes or any obligations other than the Refunded Notes. ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds and other amounts in connection with the delivery of the Notes are presented below. 85240462.7 4 Sources Principal Amount of Notes $[PAR] Original Issue Premium Total Sources $ Uses Payment of Refunded Notes $ Initial Purchaser’s Discount Costs of Issuance(1) Total Uses $ ____________________ (1) Costs of Issuance include, among other things, the fees and expenses of rating agencies, Special Counsel and the Escrow Agent and the initial fees of the Trustee. THE NOTES General The Notes will be prepared in the form of fully registered certificates in denominations of $5,000 and any integral multiple thereof. The Notes will be dated the date of initial delivery thereof and will mature on the Maturity Date. The principal evidenced by the Notes shall be payable on the Maturity Date. Interest evidenced by the Notes will accrue from their date of initial delivery and will be payable on the Maturity Date. Interest evidenced by the Notes shall be computed on the basis of a 360-day year consisting of twelve 30-day months. See APPENDIX C — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Trust Agreement.” The Notes initially will be delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Notes. Individual purchases of the Notes will be made in book-entry form only. Purchasers of Notes will not receive physical certificates representing their ownership interests in the Notes purchased. Payments of principal and interest evidenced by the Notes are payable directly to DTC by the Trustee. Upon receipt of payments of such principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Notes. So long as the Notes are held in the DTC book-entry system, the interest and principal due with respect to the Notes will be payable by the Trustee, or its agent, to DTC or its nominee. DTC, in turn, will make payments pursuant to its procedures as described under APPENDIX E – “BOOK- ENTRY SYSTEM” herein. No Prepayment The Notes are not subject to prepayment prior to their maturity. SECURITY AND SOURCES OF PAYMENT FOR THE NOTES Sale Proceeds of Future Obligations The District expects the principal of and interest on the Notes to be paid from proceeds of the sale, prior to the Maturity Date, of a future series of certificates of participation, notes or other obligations of the District, that will amortize over a term of approximately 25 years (the “Future Obligations”). The issuance of the Future Obligations will require future authorizations by the governing boards of the District and the Corporation, as well as the preparation of suitable legal and disclosure documents for the issue. The District is currently unaware of any material impediment to obtaining such authorizations and documents. In addition, the issuance and sale of the Future Obligations will be contingent on the District’s 85240462.7 5 ability to access the municipal capital markets, which will depend on the District’s creditworthiness and market conditions during the weeks immediately preceding the Maturity Date. The District is unable to predict such matters with certainty and therefore cannot guarantee that the Future Obligations will be successfully issued and sold. Installment Payment The Notes evidence direct, fractional undivided interests in the Installment Payment, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payment and the interest thereon and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided under the Installment Purchase Agreement, from Net Revenues and other lawfully available funds of the District, as provided in the Installment Purchase Agreement. Net Revenues generally consist of all income and revenue received by the District from the operation or ownership of the Wastewater System remaining after payment of Maintenance and Operation Costs, all as further provided in the Master Agreement. See “DISTRICT REVENUES.” Pursuant to the Master Agreement, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payment and the interest thereon payable under the Installment Purchase Agreement, will be incurred and secured. The obligation of the District to make the Installment Payment, and payments of interest thereon, and other payments required to be made by it under the Installment Purchase Agreement, from Net Revenues, and other lawfully available funds of the District, is absolute and unconditional, and until such time as the Installment Payment, payments of interest thereon, and such other payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to the Installment Purchase Agreement), the District has covenanted that it will not discontinue or suspend any Installment Payment when due, whether or not the Project or any part thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such Installment Payment, payments of interest thereon, and other payments shall not be subject to reduction whether offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement or any cause whatsoever. The District’s obligation to make the Installment Payment from Net Revenues is on a parity with the District’s obligation to make payments with respect to its Outstanding Senior Obligations. See “– Net Revenues” below. Pursuant to the Trust Agreement, the Corporation has assigned to the Trustee for the benefit of the Owners of the Notes substantially all of its rights, title and interest in the Installment Purchase Agreement, including its right to receive Installment Payment and the interest thereon. The District has certain Existing Senior Obligations Outstanding payable from Net Revenues on a parity with the Installment Payment under the Installment Purchase Agreement. The term “Existing Senior Obligations” as used in this Official Statement refers to the 2000 Installment Purchase Agreement, the 2003 Installment Purchase Agreement, the 2007A Installment Purchase Agreement, the 2007B Installment Purchase Agreement, the 2008A Installment Purchase Agreement, the 2008B Installment Purchase Agreement, the 2008C Installment Purchase Agreement, and the 2009A Installment Purchase Agreement and the term “Senior Obligations” as used in this Official Statement refers to the Existing Senior Obligations and to any additional Senior Obligations, such as the Installment Purchase Agreement, that may be made payable on a parity basis to the Installment Payment as provided in the Master Agreement. Senior Obligations, together with any Subordinate Obligations payable on a subordinate basis to the Installment Payment executed and delivered as provided in the Master Agreement, are referred to collectively as the “Obligations.” The District has no Subordinate Obligations currently outstanding. See “FINANCIAL OBLIGATIONS — Existing Indebtedness” herein and APPENDIX C — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement” attached hereto. The obligation of the District to pay the Installment Payment, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement and Master Agreement, is a 85240462.7 6 special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, from Net Revenues and other lawfully available funds of the District, as provided for in the Installment Purchase Agreement, and does not constitute a debt of the District, the State or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District, the State or any political subdivision thereof, is pledged to the payment of the Installment Payment, or the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” herein. Available Funds of the District As Senior Obligations under the Master Agreement, the Installment Payment is payable from and secured by a pledge of Net Revenues. Should Net Revenues prove insufficient, the Installment Purchase Agreement further provides that the Installment Payment are payable from any other lawfully available funds of the District. The primary lawfully available funds of the District are its reserve funds, other than Debt Service Required Reserves. Debt Service Required Reserves consist of trustee-held amounts credited to debt service reserve funds securing the District’s Existing Senior Obligations, as well as additional amounts set aside by the District for the payment of debt service in accordance with the District’s reserve policy. See “DISTRICT REVENUES — Reserves.” The District’s existing reserves at November 1, 2009, excluding Debt Service Required Reserves, were approximately $____ million. The District’s reserves at June 30, 2010 and June 30, 2011, excluding Debt Service Required Reserves, are projected to be approximately $___ million and $___ million, respectively. See “DISTRICT REVENUES — Reserves,” “— Summary of Operating Data” and “— Projected Operating Data.” Net Revenues The Installment Purchase Agreement provides for the Installment Payment to be payable from, among other things, Net Revenues as provided in the Master Agreement, which consist of Revenues remaining after payment of costs paid by the District for maintaining and operating the Wastewater System (“Maintenance and Operation Costs”). Revenues are defined in the Master Agreement to mean, for any period, all income and revenue received by the District during such period from the operation or ownership of the Wastewater System, determined in accordance with generally accepted accounting principles, including all fees and charges received during such period for the services of the Wastewater System, investment income received during such period (but only to the extent that such investment income is generally available to pay costs with respect to the Wastewater System, including Maintenance and Operation Costs), Net Proceeds of business interruption insurance received during such period, ad valorem taxes received during such period, payments under the Agreement Acquiring Ownership Interests, Assigning Rights and Establishing Obligations, entered into on February 13, 1986, and amendment No. 1 thereto dated December 10, 1986, by and between predecessor County Sanitation District No. 14 of Orange County and the Irvine Ranch Water District (the “IRWD Agreement”) received during such period and all other money received during such period howsoever derived by the District from the operation or ownership of the Wastewater System or arising from the Wastewater System (including any standby or availability charges), but excluding (a) Capital Facilities Capacity Charges, (b) payments received under Financial Contracts, and (c) refundable deposits made to establish credit and advances or contributions in aid of construction (which, for purposes of the Master Agreement, shall not include payments under the IRWD Agreement); provided, however, that (i) Revenues shall be increased by the amounts, if any, transferred during such period from the Rate Stabilization Account to the Revenue Account and shall be decreased by the amounts, if any, transferred during such period from the Revenue Account to the Rate Stabilization Account, and (ii) Revenues shall include Capital Facilities Capacity Charges collected during such period to the extent that such Capital Facilities Capacity Charges could be 85240462.7 7 properly expended on a Capital Facilities Capacity Charge Eligible Project for which the proceeds of Subject Obligations were used or are available to be used. See “DISTRICT REVENUES — Additional Revenues” herein. The District’s obligation to make the Installment Payment from its Net Revenues is on a parity with the District’s obligation to make payments with respect to its other outstanding obligations described as Senior Obligations and all Reimbursement Obligations with respect to Senior Obligations, as provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. Pursuant to the Master Agreement, the District pledges all Net Revenues to the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations, and the Net Revenues will not be used for any other purpose while any of the Senior Obligations or Reimbursement Obligations with respect to Senior Obligations remain unpaid; provided, however, that out of the Net Revenues there may be apportioned such sums for such purposes as are expressly permitted by the Master Agreement. This pledge constitutes a first lien on the Net Revenues for the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. The term Senior Obligations, generally means all revenue bonds or notes (including bond anticipation notes and commercial paper) of the District authorized, executed, issued and delivered under and pursuant to applicable law, the Installment Purchase Agreement and all other contracts (including financial contracts) or leases of the District authorized and executed by the District under and pursuant to applicable law, the installment, lease or other payments under which are, in accordance with the provisions of the Master Agreement, payable from Net Revenues on a parity with the payments under the Master Agreement. The District may at any time incur Subordinate Obligations payable on a subordinate basis to the Installment Payment executed and delivered as provided in the Master Agreement; provided, however, that prior to incurring such Subordinate Obligations, the District will have determined that the incurrence thereof will not materially adversely affect the District’s ability to comply with the requirements of the Master Agreement. The District may at any time incur Reimbursement Obligations with respect to Subordinate Obligations. For a description of the District’s Outstanding Senior Obligations and Subordinate Obligations, see “FINANCIAL OBLIGATIONS — Existing Indebtedness” herein. There are currently no Subordinate Obligations or Reimbursement Obligations with respect to Subordinate Obligations outstanding. The District may, in connection with the incurrence of Subordinate Obligations, pledge Net Revenues to the payment of Subordinate Obligations and Reimbursement Obligations with respect to Subordinate Obligations; provided, however, that such pledge, and any lien created thereby, shall be junior and subordinate to the pledge of, and lien on, Net Revenues for the payment of Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. Rate Stabilization Account To avoid fluctuations in its fees and charges for the Wastewater System, from time to time the District may deposit in the Rate Stabilization Account from Net Revenues such amounts as the District deems necessary or appropriate. From time to time, the District may also transfer moneys from the Rate Stabilization Account to the Revenue Account to be used by the District, first to pay all Maintenance and Operations Costs as and when the same shall be due and payable. In addition, any such amount transferred from the Rate Stabilization Account to the Revenue Account by the District is included as Revenues for any period, but such transferred amount is excluded from determining Operating Revenues for any period. Revenues will be decreased by the amounts, if any, transferred from the Revenue Account to the Rate Stabilization Account. There are presently no funds in the Rate Stabilization Account. 85240462.7 8 Allocation of Revenues To carry out and effectuate the pledge of Net Revenues under the Master Agreement as described above, the District agrees and covenants that all Operating Revenues received by the District will be deposited when and as received in the Revenue Account. Additionally, amounts may, from time to time as the District deems necessary or appropriate, be transferred from the Rate Stabilization Account and deposited in the Revenue Account, as described above under “— Rate Stabilization Account.” The District will pay from the Revenue Account all Maintenance and Operations Costs (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operations Costs, the payment of which is not immediately required) as and when the same shall be due and payable. After having paid, or having made provisions for the payment of, Maintenance and Operations Costs, the District shall set aside and deposit or transfer, as the case may be, from the Revenue Account such amounts at such times as provided in the Master Agreement in the following order of priority: (1) Senior Obligation Payment Account; (2) Senior Obligation Reserve Funds; (3) Subordinate Obligation Payment Account; (4) Subordinate Obligation Reserve Funds; and (5) Rate Stabilization Account. Amounts required or permitted to be deposited or transferred as described in items 2, 3, 4 and 5 above, shall not be so deposited or transferred unless the District shall have determined that there will be sufficient Net Revenues available to make the required deposits or transfers on the dates on which such deposits or transfers are required to be made as described above. So long as the District has determined that Net Revenues will be sufficient to make all of the deposits or transfers required to be made pursuant to items 1, 2, 3, 4 and 5 above, on the dates on which such deposits or transfers are required to be made, Net Revenues on deposit in the Revenue Account may from time to time be used for any purpose for which the District funds may be legally applied. For additional information, see APPENDIX C — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement.” Rate Covenant Pursuant to the Master Agreement, the District will, to the extent permitted by law, fix, prescribe and collect fees and charges for the services of the Wastewater System which will be at least sufficient to yield during each Fiscal Year (a) Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b) Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but will not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. In addition, the District has covenanted in the Master Agreement to prepare and adopt an annual budget for the Wastewater System for each Fiscal Year. Such budget will set forth in reasonable detail the Revenues anticipated to be derived in such Fiscal Year and the expenditures anticipated to be paid or provided for therefrom in such Fiscal Year, including, without limitation, the amounts required to pay or provide for the payment of the Obligations during such Fiscal Year, the amounts required to pay or provide for the payment of Maintenance and Operations Costs during such Fiscal Year and the amounts required to pay or provide for the payment of all other claims or obligations required to be paid from Revenues in such Fiscal Year, and will show that Revenues and Net Revenues will be at least sufficient to satisfy the requirements of the Master Agreement. On or before September 1 of each Fiscal Year, the District will file with the Trustee a copy of the adopted budget for such Fiscal Year. See APPENDIX C — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement” for additional information. 85240462.7 9 The District has an established reserve policy with eight separate reserve fund categories. Collectively, these reserves total over $475 million for each year of the current ten-year cash flow forecast of the District. At its election, the District may use unrestricted reserves to help satisfy the rate covenant described above. See “DISTRICT REVENUES — Reserves” herein. Limitations on Issuance of Additional Obligations Senior Obligations. The District may at any time incur Senior Obligations in addition to the Existing Senior Obligations payable from Net Revenues as provided in the Master Agreement on a parity with all other Senior Obligations theretofore incurred but only subject to the following conditions under the Master Agreement: (1) Upon the incurrence of such Senior Obligations, no Event of Default will be continuing under the Master Agreement; and (2) Subject to the provisions of the Master Agreement, the District will have received either one of the following: (i) A Written Certificate of the District certifying that, for a 12 consecutive calendar month period during the 24 consecutive calendar month period ending in the calendar month prior to the incurrence of such Senior Obligations (which 12 consecutive calendar month period will be specified in such certificate or certificates): (A) Net Revenues, as shown by the books of the District, will have amounted to at least 125% of Maximum Annual Debt Service on all Senior Obligations to be outstanding immediately after the incurrence of such Senior Obligations, and (B) Net Operating Revenues, as shown by the books of the District, will have amounted to at least 100% of Maximum Annual Debt Service on all Obligations to be outstanding immediately after the incurrence of such Senior Obligations. For purposes of demonstrating compliance with the foregoing, Net Revenues and Net Operating Revenues may be adjusted for (x) any changes in fees and charges for the services of the Wastewater System which have been adopted and are in effect on the date such Senior Obligations are incurred, but which, during all or any part of such 12 consecutive calendar month period, were not in effect, (y) customers added to the Wastewater System subsequent to such 12 consecutive calendar month period but prior to the date such Senior Obligations are incurred, and (z) the estimated change in available Net Revenues and Net Operating Revenues which will result from the connection of existing residences or businesses to the Wastewater System within one year following completion of any project to be funded or any system to be acquired from the proceeds of such Senior Obligations; or (ii) A certificate or certificates from one or more Consultants which, when taken together, project that, for each of the two Fiscal Years next succeeding the incurrence of such Senior Obligations: (A) Net Revenues will amount to at least 125% of Maximum Annual Debt Service on all Senior Obligations to be outstanding immediately after the incurrence of such Senior Obligations, and 85240462.7 10 (B) Net Operating Revenues will amount to at least 100% of Maximum Annual Debt Service on all Obligations to be outstanding immediately after the incurrence of such Senior Obligations. For purposes of demonstrating compliance with the foregoing, Net Revenues and Net Operating Revenues may be adjusted for (x) any changes in fees and charges for the services of the Wastewater System which have been adopted and are in effect on the date such Senior Obligations are incurred or will go into effect prior to the end of such two Fiscal Year period, (y) customers expected to be added to the Wastewater System prior to the end of such two Fiscal Year period, and (z) the estimated change in available Net Revenues and Net Operating Revenues which will result from the connection of existing residences or businesses to the Wastewater System within one year following completion of any project to be funded or any system to be acquired from the proceeds of such Senior Obligations. For purposes of preparing the certificate or certificates described above, the Consultant may rely upon financial statements prepared by the District that have not been subject to audit by an independent certified public accountant if audited financial statements for the period are not available. See, also “FINANCIAL OBLIGATIONS – Existing Indebtedness” herein. The provisions described above in paragraph (2) need not be complied with if the Senior Obligations being incurred are Short-Term Obligations excluded from the calculation of Assumed Debt Service pursuant to clause (H) of the definition thereof. See APPENDIX C – “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Definitions” herein. The determination of Net Revenues for use in the calculation described above is more fully described in APPENDIX C – “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS – Master Agreement – Senior Obligations” attached hereto. The provisions described in paragraph (2) above need not be complied with for such portion of such Senior Obligations incurred for the purpose of providing funds to refund or refinance such Obligations if (i) a portion (which may be all) of the Senior Obligations are incurred for the purpose of providing funds to refund or refinance any Obligations, (ii) upon such refunding or refinancing, debt service on such refunded or refinanced Obligations, or debt service on bonds, notes or other obligations of an entity other than the District, the debt service on which is payable from Obligation Payments for such Obligations (the “Related Bonds”), will no longer be included in the calculation of Assumed Debt Service either because such Obligations, or the Related Bonds of such Obligations, will have been paid in full or because such debt service is disregarded pursuant to clause (L) of the definition of Assumed Debt Service, and (iii) Assumed Debt Service in each Fiscal Year for the portion of such Senior Obligations incurred for the purpose of providing funds to refund or refinance such Obligations is less than or equal to 105% of Assumed Debt Service in such Fiscal Year for such Obligations being refunded or refinanced (assuming for such purposes that debt service on such refunded or refinanced Obligations, or debt service on the Related Bonds of such Obligations, is not disregarded pursuant to clause (L) of the definition of Assumed Debt Service). See APPENDIX C — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement” attached hereto for additional information. The District may at any time incur Reimbursement Obligations with respect to Senior Obligations. Subordinate Obligations. The District may at any time incur Subordinate Obligations upon satisfaction of the conditions provided in the Master Agreement. See APPENDIX C — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement” herein for a description of such conditions. Insurance The District will procure and maintain or cause to be procured and maintained casualty insurance on the Wastewater System with responsible insurers, or provide self insurance (which may be provided in the 85240462.7 11 form of risk-sharing pools), in such amounts and against such risks (including accident to or destruction of the Wastewater System) as are usually covered in connection with facilities similar to the Wastewater System. The District will procure and maintain such other insurance which it will deem advisable or necessary to protect its interests and the interests of the Corporation. See “THE DISTRICT — Risk Management” and APPENDIX C — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement” herein. Allocation of Installment Payment Table 1 below sets forth the estimated Installment Payment with respect to the Notes. Also set forth are the payments due on Outstanding Senior Obligations, excluding the Refunded Notes. The District expects the Notes to be refinanced on or about the Maturity Date with obligations that will amortize over a term of approximately 25 years, but there is no guarantee that such refinancing will occur. Table 1 Estimated Installment Payment and Outstanding Senior Obligation Payments of the District Fiscal Year Ending June 30(3) Installment Payment Relating to Notes Outstanding Senior Obligation Payments(1) Total Principal Interest Principal Interest(2) 2010 $ 7,485,000 $ 23,538,867.00 2011 25,895,000 45,508,889.81 2012 26,670,000 44,400,892.95 2013 27,865,000 43,398,952.24 2014 43,040,000 42,243,608.42 2015 30,920,000 41,041,435.73 2016 32,080,000 39,928,801.27 2017 37,940,000 38,670,025.29 2018 35,310,000 37,385,843.91 2019 36,815,000 36,062,606.27 2020 38,455,000 34,682,080.29 2021 44,615,000 33,315,997.66 2022 31,270,000 32,263,196.67 2023 32,815,000 30,727,358.04 2024 34,420,000 29,119,395.81 2025 36,125,000 27,426,617.78 2026 37,900,000 25,654,971.92 2027 39,805,000 23,791,473.28 2028 41,675,000 21,931,018.76 2029 43,620,000 19,982,385.44 2030 46,485,000 17,946,201.04 2031 50,075,000 15,793,277.40 2032 50,550,000 13,379,500.00 2033 80,490,000 10,852,000.00 2034 26,045,000 6,827,500.00 2035 27,350,000 5,525,250.00 2036 28,715,000 4,157,750.00 2037 30,155,000 2,722,000.00 85240462.7 12 2038 11,845,000 1,214,250.00 2039 12,440,000 622,000.00 Total $1,048,870,000 $750,114,146.98 ______________ (1) Excludes the Refunded Notes. (2) Assumes a per annum interest rate of 3.0% for all variable rate obligations. See “FINANCIAL OBLIGATIONS – Existing Indebtedness” and APPENDIX A – “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2009” herein. (3) Excludes interest and principal due prior to November 2, 2009. THE DISTRICT Background The Orange County Sanitation District is a public agency responsible for regional wastewater collection, treatment and disposal. The District is the sixth largest wastewater discharger in the United States. The District provides service to an area with a population of more than 2.5 million people in the northern and central portion of the County by treating 221 mg/d of wastewater in Fiscal Year 2008-09. The District serves approximately 81% of the County population in approximately 471 square miles, or 59% of the County. The service area which comprises the District was originally formed in 1954 pursuant to the County Sanitation District Act, as amended, Section 4700 et seq. of the Health and Safety Code of the State. The District’s service area originally consisted of seven independent special districts in the County which were each responsible for matters relating to their individual districts. These special districts were jointly responsible for the treatment and disposal facilities which they each used. The seven independent districts were successors to the Joint Outfall Sewer Organization, which was formed in 1923 among the Cities of Anaheim, Santa Ana, Fullerton, and Orange, and the sanitary districts of Placentia, Buena Park, La Habra, and Garden Grove. The Joint Outfall Sewer Organization constructed a treatment plant and outfall in the early 1920’s to serve its members. It was reorganized in 1947 and 1948 into seven county sanitation districts – District Nos. 1, 2, 3, 5, 6, 7 and 11. These prior districts were formed based on engineers’ analyses of the gravity flows in the service area. District No. 13 was formed in 1985 and District No. 14 was added in 1986. These districts were co-participants in a Joint Agreement which provided for the joint construction, ownership, and operation of the prior districts’ joint facilities. In April 1998, at the request of the District’s Board of Directors (the “Board of Directors”), the Board of Supervisors of the County of Orange (the “County Board”) passed Resolution No. 98-140 approving the consolidation of the then existing nine special districts into a new, single sanitation district, to be known as the Orange County Sanitation District. This action was designed to simplify governance structures, reduce the size of the Board of Directors, ease administrative processes, streamline decision-making and consolidate accounting and auditing processes. The consolidation was effective on July 1, 1998. Pursuant to the Resolution and Government Code Section 57500, the prior districts transferred and assigned all of their powers, rights, duties, obligations, functions and properties to the District, and the District assumed all obligations of the prior districts which were several and not joint including, without limitation, their obligations to repay the then outstanding certificates of participation. See “FINANCIAL OBLIGATIONS – Existing Indebtedness” herein. The boundaries of the nine predecessor special districts were initially used by the District to delineate separate revenue areas (the “Revenue Areas”) for budgeting and accounting purposes and in order to facilitate the imposition of fees and charges imposed by the District. See “DISTRICT REVENUES – Sewer Service Charges” herein. The District is managed by the Board of Directors, whose members are appointed by twenty-five member cities and agencies which are serviced by the District. The District is responsible for construction and maintenance of a major portion of the wastewater collection, treatment and disposal facilities within its boundaries. Revenue Area No. 7 is responsible for approximately 152 miles of local sewers in its service area, 85240462.7 13 whereas local sanitary districts, water districts and cities are responsible for local sewers in the remainder of the District’s service area. Organization and Administration The District is independent of and overlaps other political jurisdictions. There are many governmental entities, including the County, that operate within the District’s jurisdiction. These entities are exclusively responsible for the administration of their own fiscal affairs, and the District is not entitled to operating surpluses of, or responsible for operating deficits of, any of the other entities. The twenty-five member Board of Directors is comprised of representatives from twenty-one cities, unincorporated areas of the County and three special districts, including mayors of cities, members of city councils, directors of independent special districts and one member from the County Board of Supervisors. Several board committees, made up of members of the Board of Directors, consider topics for action by the Board of Directors and make recommendations to the Board of Directors. The Chair and the Vice Chair of the Board of Directors are elected every year by a majority of the Board of Directors, and serve at the pleasure of the majority of the Board of Directors. The District has a general manager, general counsel, administrative and operating staff, with offices located at Reclamation Plant No. 1 in Fountain Valley, California. The District currently employs an administrative and operating staff of over 600 under the direction of its General Manager, James D. Ruth. James D. Ruth is the District’s General Manager, and has served in that capacity since December 2005. Prior to that time, from January 2003 to October 2004, Mr. Ruth served as Chief Executive Officer for the County of Orange. Mr. Ruth had previously provided 22 years of service to the city of Anaheim as parks and recreation director, deputy city manager, assistant city manager and chief executive officer, a post he held for 11 years. Robert P. Ghirelli, Ph.D. is the District’s Assistant General Manager, and has served in that capacity since July 2006. Mr. Ghirelli previously served as Director of Technical Services for the District since his joining the District in 1998. Prior to joining the District, Mr. Ghirelli served for just over a year as managing principal of the Los Angeles office of a national environmental consulting firm, served 20 years in supervisory positions with the State and Regional Water Boards, with 13 years Executive Officer of the California Regional Water Quality Control Board, Los Angeles/Ventura Region. Lorenzo Tyner is the District’s Director of Finance and Administrative Services. In September 2005, Mr. Tyner joined the District with nearly 15 years of public finance and budgeting experience, most recently serving as the Los Angeles Unified School District Budget Director and Deputy Chief Financial Officer. Mr. Tyner previously worked in large government organizations including the City of Los Angeles and the Los Angeles County Metropolitan Transportation Authority and private sector companies IBM Global Services and Northrop. James Herberg, P.E. is the District’s Director of Engineering, and has served in that capacity since November 2006. Prior to becoming Director of Engineering, he was the District’s Director of Operations and Maintenance. Mr. Herberg has over twenty years of experience in water and wastewater including project management, construction management, design, strategic planning, and operations & maintenance. Ed Torres is the District’s Director of Technical Services for the District. He has served in this position since November 2006. Prior to joining the District in 1991, Mr. Torres served in a professional capacity for the California State University System and TRW Electronics and Defense Sector. Mr. Torres has twenty-four years of public and private sector experience in protecting public health and the environment. 85240462.7 14 Nick Arhontes, P.E. is the District’s Director of Operations and Maintenance and has served the District since 1988. Mr. Arhontes has over 30 years of experience managing various engineered systems in the private and public sectors regionally, nationally, and internationally. Services The District owns and operates regional wastewater collection, treatment, and disposal facilities for the metropolitan area in the northern and central portion of the County. The District receives wastewater from the collection systems of the cities, sanitary districts and unincorporated areas of the County located within the District. See “THE DISTRICT – Service Areas” herein. Generally, local agency systems collect wastewater from residential and industrial customers and convey the wastewater to District trunk sewer pipelines for conveyance to the District’s wastewater treatment plants. The District’s staff is responsible for operating and maintaining the District’s infrastructure, although some operations are provided by external contractors. Currently, the District has established supply contracts for all chemicals necessary to the operation and maintenance of the facilities of the District. The District has sufficient standby systems in the event of equipment failures or system outages. Service Area The map on the inside cover of this Official Statement shows the District’s boundaries and selected cities located within the District. District boundaries were originally established in 1947 and 1948 based on drainage basins. As the existing cities have grown and new areas have incorporated, city limits have come to overlap District boundaries. The District currently serves an approximately 471 square-mile area including 23 of the County’s 33 cities and unincorporated areas of the County. The District serves a population of more than 2.5 million residents and owns sanitary sewerage facilities with a replacement value of approximately $6.26 billion. [Remainder of page intentionally left blank.] 85240462.7 15 Table 2 below sets forth the estimated populations of cities and unincorporated areas served by the District as of January 1, 2009. Table 2 Estimated Populations of Cities and Unincorporated Areas Served by the Orange County Sanitation District As of January 1, 2009 City Population Anaheim 348,470 Brea 40,180 Buena Park 83,390 Costa Mesa 116,480 Cypress 49,650 Fountain Valley 58,310 Fullerton 137,620 Garden Grove 174,720 Huntington Beach 202,480 Irvine 212,790 La Habra 62,820 La Palma 16,210 Los Alamitos 12,220 Newport Beach 86,250 Orange 141,630 Placentia 51,930 Santa Ana 355,660 Seal Beach 25,910 Stanton 39,480 Tustin 74,830 Villa Park 6,280 Westminster 93,280 Yorba Linda 68,400 Cities Subtotal 2,458,990 Unincorporated Areas (estimated) 81,000 Total 2,539,990 ____________________ Sources: State of California Department of Finance, Demographic Research Unit for city population data; Orange County Sanitation District for population of unincorporated areas. Employees As of October 1, 2009, the District had 641 full-time equivalent (“FTE”) staff positions. Most of the employees who occupy these positions are represented by recognized employee organizations, which include the following: the Orange County Employees Association (“OCEA”), the International Union of Operating Engineers – Local 501 (“Local 501”), the Supervisor Group, and the Professional Group. As of October 1, 2009, the District had 610 represented and non-represented employees. Total represented employees as of October 1, 2009 numbered 555, as follows: 95 were represented by the OCEA, 207 were represented by Local 501 and 253 were represented by the Supervisor and Professional Groups. New agreements with each of these employee organizations took effect on July 1, 2007. The OCEA and Local 501 agreements are in effect through June 30, 2011; the Supervisor and Professional Group agreements are in effect through June 30, 2010. The OCEA has represented administrative/clerical, technical services and engineering employees since 1979. Local 501 has represented operations and maintenance employees since October 1985. The Supervisor and Professional Groups have represented supervisory and professional employees since 1991. The District has 85240462.7 16 historically enjoyed a good working relationship with the employee organizations and has experienced no work stoppages by represented personnel in the past. For a description of the Orange County Employee’s Retirement System, in which the District participates, and the District’s deferred compensation plan, see “Retirement Plan” below and Note 7 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Fiscal Year Ended June 30, 2009, set forth in Appendix A. Retirement Plan The District participates in the Orange County Employee’s Retirement System (“OCERS”), a cost- sharing multiple-employer, defined benefit pension plan which is governed and administered by a nine- member Board of Retirement. OCERS was established in 1945 under the provisions of the County Employees Retirement Law of 1937, and provides members with retirement, death, disability, and cost of-living benefits. All District full-time employees participate in OCERS. The amount of the retirement allowance is based upon the member’s age at retirement, the member’s “final compensation” as defined in Section 31462 of the Retirement Law of 1937, the total years of service under OCERS, and the employee’s classification as a Tier I or Tier II member. As of July 1, 2006, the formula to calculate retirement benefits was enhanced to 2.5% at age 55, or employees retiring at age 55 or older receive 2.5% of their average salary for every year of service. Average salary is the highest consecutive 12 months of compensation for Tier I employees and the highest consecutive 36 months of compensation divided by three for Tier II employees. Benefits fully vest under the OCERS retirement plan on reaching five years of service. Employees who retire at or after age 50 with ten or more years of service are entitled to an annual retirement allowance. OCERS also provides death and disability benefits. As a condition of participation under the provisions of the County Employees Retirement Law of 1937, members are required to contribute a percentage of their annual compensation to OCERS. The District is required to make periodic contributions to OCERS in amounts that are estimated to remain a constant percentage of covered employees’ compensation such that, when combined with covered employees’ contributions, will fully provide for all covered employees’ benefits by the time they retire. A current comparison of OCERS costs for Fiscal Years 2004-05 through 2008-09 and projected costs for Fiscal Years 2009-10 through 2010-11 is shown in the following table. Table 3 Orange County Sanitation District Comparison of OCERS Costs for Fiscal Years 2003-04 through 2007-08 and Projected Costs for Fiscal Years 2008-09 through 2009-10 Fiscal Year Rate(1) Cost(2) 2004-05 12.37% $ 5,524,673 2005-06 15.21 7,416,556 2006-07 19.78 9,848,854 2007-08 20.55 11,011,693 2008-09 21.14 12,193,601 2009-10(3) 21.95 14,179,988 2010-11(3) 24.20 15,874,370 ____________________ (1) Required contribution as a percent of covered payroll. Includes amortization of Unfunded Actuarial Accrued Liability. (2) Amounts represent employer contributions made by the District. (3) Projected. 85240462.7 17 Source: Orange County Sanitation District. For Fiscal Years 2004-05 through 2008-09, the District’s required contribution was equal to the contribution that the District actually made. As noted, the required contribution set forth above includes amortization of Unfunded Actuarial Accrued Liability (“UAAL”). For the Fiscal Year ended June 30, 2009, total payroll costs of employees covered by OCERS was $61,110,535. As of the December 31, 2008 valuation, OCERS has an aggregate UAAL ratio of 71.34%, for a total UAAL of $3.11 billion. The District expects the next OCERS valuation to occur on or about December 31, 2009. For more information regarding OCERS and the District’s retirement plan as of June 30, 2009, see Note 6 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Fiscal Year Ended June 30, 2009 set forth in Appendix A. According to OCERS, its investment portfolio had a loss of $1.65 billion, or 20.71%, in 2008. The Comprehensive Annual Financial Reports of the Orange County Employees Retirement System are available on the OCERS website at http://www.ocers.org. The information on such website is not incorporated herein by such reference or otherwise. The District cannot predict whether the OCERS investment portfolio will experience additional losses in the future; however, any future losses could result in material increases in the District’s required contributions. Other Post-Employment Benefits The Governmental Accounting Standards Board (“GASB”) in April 2004 issued Statement No. 43, which requires state and local governmental employers to determine, on an actuarial basis, the total liability of post-employment benefits other than pension benefits (known as other post-employment benefits or “OPEB”), including healthcare and life insurance expenses and related liabilities, and an annual required contribution to fund such liabilities. In June 2004, GASB issued Statement No. 45, which requires state and local governmental employers to fund the actuarially determined annual required contribution (“ARC”) for its OPEB or record the entire amount of the unfunded liability of its OPEB in its financial statements. The District was required to implement GASB Statement No. 43 for the Fiscal Year ended June 30, 2007, and was required to implement GASB Statement No. 45 for the Fiscal Year ended June 30, 2008. The District has implemented GASB Statements Nos. 43 and 45. The District’s OPEB program currently includes medical and prescription drug benefits and a program of cash payments, known as Additional Retiree Benefit Account (“ARBA”) benefits. Benefits vest upon retirement after qualifying public service of ten years. Most of the District’s retirees under the age of 65 are covered under the same medical and prescription drug plans as active employees of the District, but an additional retiree-only fee for service plan called “Blue Card” is also available. According to the District’s actuary, Demsey Filliger Associates (the “Actuary”), the unfunded OPEB liability as of July 1, 2007 is approximately $17.4 million. The ARC is $1,764,000 for Fiscal Year 2008-09. Calculation of the ARC is based on the present value of benefits accruing in the current year, a 30-year amortization of the unfunded OPEB liability and an assumed rate of return on investments in the retiree fund of 5% per annum. The District does not believe that its OPEB liability will have a material impact on its operational results. Risk Management As of the date hereof, the District has in force basic all risk property and casualty insurance, including theft, fire, flood, terrorism and boiler and machinery losses to the Wastewater System. The District is self- insured for portions of workers’ compensation, property damage and general liability. The self-insurance portion of workers’ compensation is $500,000 per person per occurrence with outside excess insurance coverage to the statutory limit. The self-insured portion for property damage covering fire and other disasters is $250,000 per occurrence with outside excess insurance coverage to $1 billion. The self-insured portion for property damage covering flood is $100,000 per occurrence with outside excess insurance coverage to $300 85240462.7 18 million. The District is self-insured for all property damage from the perils of earthquakes. See “DISTRICT REVENUES – Reserves.” The District also maintains outside comprehensive boiler and machinery insurance, including business interruption insurance, with a $100 million limit with deductibles ranging from $25,000 to $350,000. The District is self-insured for general liability coverage up to $250,000 per occurrence, with excess general liability coverage up to $25 million. During the past five fiscal years there have been no settlements in excess of covered amounts. Claims against the District are processed by outside insurance administrators. The District believes that there are no unrecorded claims as of June 30, 2008 that would materially affect the financial position of the District. For more information regarding the District’s insurance coverage as of June 30, 2009, see Note 1 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Fiscal Year Ended June 30, 2009 set forth in Appendix A. Existing Facilities The District’s Wastewater System presently consists of two wastewater treatment plants, an influent metering and diversion structure, 15 off-plant pump stations, various interplant pipelines and connections, and the ocean outfall facilities. The District’s Wastewater System includes approximately 403 miles of sewers within 11 trunk sewer systems, 176 miles of local sewers located within Revenue Area No. 7, two treatment plants, two discharge outfalls and two emergency weir outlets. The existing treatment plants have a rated primary treatment capacity of 372 mg/d, including standby capacity. Treatment Plant No. 1 (“Plant No. 1”) is located in the City of Fountain Valley, about four miles from the coast, adjacent to the Santa Ana River. Secondary treatment capabilities are provided by a trickling filter plant and a conventional air activated sludge plant. Up to 105 mg/d of secondary treated effluent is conveyed to an Orange County Water District (the “OCWD”) plant for tertiary treatment prior to reclamation and ground water recharge. Treatment Plant No. 2 (“Plant No. 2”) is located in the City of Huntington Beach, 1,500 feet from the ocean, at the mouth of the Santa Ana River. Secondary treatment capabilities are provided by a pure oxygen activated sludge plant. The District employs several phases in the treatment of wastewater. The first phase, preliminary treatment, removes debris such as eggshells, sand and other non-biodegradable items. See also “Preferred Level of Treatment” and “Biosolids Management” below. In the next phase, primary treatment, wastewater is pumped to large settling basins. The liquids are separated from the remaining solids which settle or float as the wastewater passes through large settling basins called clarifiers. The settled solids are sent to solids treatment facilities. Approximately 25 percent of the primary treated wastewater flows into the ocean outfall pumping station where it is blended with secondary treated wastewater before being discharged into the ocean. The other 75 percent is sent to secondary treatment for further processing. During secondary treatment, the wastewater is placed in aeration basins to which naturally occurring bacteria are used to remove most of the remaining dissolved and suspended microscopic organic solids. The treated wastewater from both plants is mixed together at Plant No. 2, where it is then pumped through the ocean outfall pipe that extends five miles offshore. 85240462.7 19 Table 4 below sets forth the treatment plants’ approximate current and future treatment capacities. Table 4 Wastewater System Treatment Capacities (mg/d) 2008-09 Actual Flows Existing Primary Treatment Capacity Existing Secondary Treatment Capacity(1) Total Planned Secondary Capacity(2) Plant No. 1 86 204 122 182 Plant No. 2 125 168 90 150 Aggregate Treatment Plant Facilities 211 372 212 332 ____________________ (1) The existing secondary capacity is being expanded to meet secondary treatment standards by 2012. (1) The District’s “Planned Total Capacity” is based on the 2002 Interim Strategic Plan Update for planned capacity by 2020, which estimated the District’s requirements to meet future expected primary and secondary capacity demands. Source: Orange County Sanitation District. The District also has the capability to divert a portion of the influent flow from Plant No. 1 to Plant No. 2 through interplant connections. A portion of the flow destined for Plant No. 2 can also be diverted to Plant No. 1. Another interplant facility allows gas generated during solids treatment to be transported between Plant No. 1 and Plant No. 2 and allows digester gas (which is used as fuel for many of the facilities’ engines) from one plant to be used at the other to balance the supply and demand, which results in efficient gas utilization. Permits, Licenses and Other Regulations The Wastewater System is subject to regulations imposed by the 1972 Clean Water Act, Public Law 92-500 (the “Clean Water Act”), the California Environmental Quality Act of 1970, as amended (“CEQA”) and the Federal Clean Air Act. The regulatory requirements are administered by the United States Environmental Protection Agency (the “EPA”) and the California Regional Water Quality Control Board (“RWQCB”). Regulations of these agencies deal primarily with the quality of effluent which may be discharged from the treatment plants and the nature of waste material discharged into the collection system. The Clean Water Act directs the EPA to monitor and to regulate the discharge of pollution into navigable waterways and to enforce the requirements that all wastewater treatment plants in the nation provide full secondary treatment for sewage. In 1977, Congress amended the Clean Water Act to allow waivers of secondary treatment standards for certain ocean dischargers if they can demonstrate, to the satisfaction of the EPA, that significant adverse environmental impacts would not occur. The District currently has all applicable permits and licenses necessary to operate its facilities. The District has discharged treated wastewater into the Pacific Ocean under a permit issued by the EPA and the RWQCB. The discharge permit included a waiver under the 301(h) provisions of the Clean Water Act, allowing for less than full secondary treatment based on an ocean discharge of sufficient depth, distance and dilution. The permit was initially issued in 1985 and was the first modified Section 301(h) permit issued to a major wastewater treatment facility. The District’s permit, which included the Section 301(h) waiver of secondary treatment requirements, was issued on May 6, 1998 and expired on June 8, 2003. In July 2002, the Board of Directors approved a change from the existing level of treatment, a blend of 50% advanced primary and 50% secondary treated wastewater, to full secondary treatment standards. See “Preferred Level of Treatment” and “Urban Runoff” below. As a result, the District established a policy to subject all wastewater discharges into the ocean to secondary treatment standards. See “Preferred Level of 85240462.7 20 Treatment” below. To implement this policy, District staff was directed to immediately proceed with the planning, design, and implementation of treatment methods with the expressed purposes of eliminating the need for the permit waiver received under Section 301(h). Following the determination by the Board of Directors in July 2002 to implement full secondary standards, staff prepared the Secondary Treatment National Pollutant Discharge Elimination System (“NPDES”) Permit Application that was required to be submitted to the regional office of the EPA and the RWQCB in December 2002. The NPDES Permit is separate and apart from the permit waiver received under Section 301(h), and once awarded would negate any necessary waiver. Achieving secondary treatment standards was originally projected to take six years to complete, with completion expected in December 2012. Because ocean discharge permits are issued for only five years, and the EPA has no authority to waive the discharge limits requirements or grant a longer permit (except in accordance with Sec. 301(h)), the District decided to voluntarily seek a consent decree concurrently with the issuance of the new ocean discharge permit. This negotiated consent decree (the “Consent Decree”) approves the schedule and decrees that no penalties will be imposed for discharges that exceed the secondary treatment limits during the period of construction. The Consent Decree was signed by the District, the EPA and the RWQCB and filed with the U.S. District Court on November 15, 2004. The District is in compliance with the decree and has successfully completed four of the seven milestones within the specified deadlines required by the decree. The South Coast Air Quality Management District (“AQMD”) is the regional governmental agency charged with implementing the Federal Clean Air Act. AQMD permits are required before a sewage treatment improvement project can be constructed. Such permits are project specific and contain construction process requirements, required equipment and standards for predicted air quality. After construction is completed, the AQMD issues an operation permit. These permits are also project specific and contain air quality standards and other appropriate operational guidelines. Most of the District’s facilities are enclosed in order to trap emissions, which are cleaned by air scrubbers that remove odors. In addition, the District has implemented an air quality risk reduction program which includes a 20-year plan to improve treatment plant operations and reduce industrial toxic pollutants. The District currently has all necessary AQMD permits to operate the Wastewater System. Capital Improvement Program The Master Plan. The District’s 1989 master plan consisted of a 30-year plan of action for managing wastewater activities to the year 2020, entitled “2020 Vision, Action Plan for Wastewater Management and Environmental Protection 1990-2020” (the “Master Plan”). The Master Plan integrated research facilities planning, environmental analysis, toxic control, water conservation and reclamation, sludge reuse, other wastewater programs and financial planning into a single unified approach. In connection with the preparation of the Master Plan, an in-depth land use study was performed, resulting in the creation of a uniform land use classification system and a map of the District’s service area. Land use designations and unit flow factors were used to project wastewater flows in the District’s trunk sewers for then present conditions, through the year 2020. These flows were included in a computer model of the District’s Wastewater System which identified future sewer capacity improvements. A thirty-year capital improvement program was developed to implement the required sewer capacity improvements. This land use study included the collection and compilation of the latest available land use plans, reports, maps and studies from the cities within the District and the County, and interviews with the planning directors or key staff within the District. Land use planning within the District’s service area is the responsibility of the County for unincorporated areas and cities for areas within their boundaries. The California Coastal Commission has some land use authority within the District’s coastal areas. The Strategic Plan. In October 1999, the District updated the Master Plan with a strategic plan (the “Strategic Plan”). The Strategic Plan updated the planning process set forth in the Master Plan through the year 2020 and defined the District’s goals, responsibilities, and requirements over the then following twenty years, including projections through the assumed “build-out” of the District’s service area to the year 2050. In 85240462.7 21 addition to updating the population and flow assumptions, the Strategic Plan provided for an operations and financial plan, including a review of the collection, treatment and disposal facilities, and the District’s ocean outfalls. Studies on a preferred level of wastewater treatment and in-sourcing of the ocean monitoring program were prepared and incorporated in the Strategic Plan. Water and air regulatory agencies require that all wastewater facilities be designed to meet the needs of anticipated growth and provide a reasonable reserve capacity. With the adoption of the Strategic Plan, the District’s planning process met these requirements by shifting its approach for the development of master plans from a “size and build” approach to a broad-based, multi-agency cooperative evaluation process. Many of the assumptions used to develop the Strategic Plan, such as inflation, the projected service population, the level of building activity, and the volume of wastewater treated, were quite different from what was assumed ten years earlier under the Master Plan. Critical factors such as population growth, new construction, the volume of wastewater delivered to the plants and viable water conservation and reclamation programs were reevaluated. Interim Strategic Plan. In June 2002, an Interim Strategic Plan Update (the “Interim Strategic Plan”) was completed to further update and revise many of the assumptions used to develop the District’s previous planning documents, including population and land-use projections, the level of building activity in the District’s service area and the volume of wastewater to be treated. The Interim Strategic Plan also provides for an operations and financial plan including a review of the District’s collection, treatment and disposal facilities, and a study of the District’s ocean outfall system. In addition, potential changes in the regulatory climate for the beneficial reuse of biosolids were also considered. On July 17, 2002, the Board of Directors approved Resolution No. OCSD 02-14, “Establishing the Policy for Level of Treatment of Wastewater Discharged into the Ocean.” This resolution established the District’s policy to treat all wastewater discharges into the ocean to secondary treatment standards thereby providing for continued public safety, marine ecosystem protection, and water reclamation opportunities. To implement this policy, District staff was directed to immediately proceed with the planning, design, and implementation of treatment methods that will allow the agency to meet Clean Water Act secondary treatment standards. The District currently estimates that it will take approximately three remaining years (through December 2012) and total capital improvement costs of $627.1 million to reach secondary treatment discharge standards. In the interim, the District will operate the plants to maximize available secondary treatment and to reduce effluent biochemical oxygen demand and suspended solid discharges below currently allowed limits. The then current 50% secondary portion would increase incrementally as operations change and new facilities are constructed and placed in service. See “Preferred Level of Treatment” below. The District’s planning process for development of the Interim Strategic Plan incorporated an analysis of population growth, dry weather and peak wet weather flows and the maximum use of existing facilities. The population of the District’s service area was projected to grow to 2.7 million by the year 2020. Average flow rates at both treatment plants were projected to increase to 278 mg/d by 2020 (134 mg/d of treatment at Plant No. 1 and 144 mg/d at Plant No. 2), up 32% from the Fiscal Year 2008-09 flow. In combination with the Interim Strategic Plan, the District developed its current Capital Improvement Program (“CIP”). The District expects to meet future demands on the Wastewater System through the CIP. This program has been developed to satisfy anticipated regulatory requirements, increased population, additional treatment requirements, conservation, energy and other resource savings considerations, odor control improvements, and air quality protection needs. Through 2020, the District’s CIP is scheduled to accomplish: • Major rehabilitation of the existing headworks, primary treatment, secondary treatment, outfall pumping, and solids handling facilities at both treatment plants; 85240462.7 22 • Replace and rehabilitate 16 of the District’s outlying pumping stations, and 44 trunk sewer improvement projects; • Reduce fence line odor to levels that do not generate odor complaints; • Disinfect the District’s ocean discharge to reduce bacterial levels below State bathing standards; • Reclaim 70 mg/d of the District’s effluent, or nearly one-third of the total daily flow (Groundwater Replenishment System); and • Achieve full secondary treatment standards. CIP Validation Study. In preparation of each year’s Budget, the District conducts an annual CIP validation study to ensure that all projects are necessary and that most recent cost estimates are accurate. As identified in the Interim Strategic Plan, and verified through the 2008 CIP Validation Study and Secondary Treatment Review, $627 million of additional capital improvements over the next three years (through December 2012) are needed to reach full secondary standards. The 2009 CIP Validation Study resulted in proposed revisions to the CIP. The proposed CIP now consists of 123 individual capital projects through Fiscal Year 2020-21 at a total cost of $2.52 billion, approximately $1.2 billion of which has been spent to date. The bulk of construction is scheduled during the next four years, with average annual expenditures of $200 million. Implementation of full secondary treatment standards is scheduled to be completed on or before December 31, 2012. A summary of total estimated capital costs for the proposed CIP for Fiscal Years 2009-10 through 2020-21 is set forth in Table 5 below. Table 5 Capital Improvement Program – Estimated Costs Fiscal Years 2009-10 through 2020-21 Project Cost Collection System Capacity $ 99,268,450 Collection System Repair, Rehabilitation, Replacement 152,277,450 Treatment Plant Capacity 20,593,750 Additional Secondary Treatment 331,685,000 Groundwater Replenishment System, Phase 1 537,000 Improved Treatment 164,842,250 Treatment Plant Repair, Rehabilitation, Replacement 489,091,250 Support Facilities 58,115,850 Total Validated Capital Improvement Program $1,316,411,000 ____________________ Source: Orange County Sanitation District. The proposed CIP contemplates expenditures of $259.1 million in Fiscal Year 2009-10. Of this total, the largest cash outlay within the plant facilities category is $65.7 million for a new secondary treatment system at Reclamation Plant No. 1, with a total project cost of $260.3 million. New trickling filters at Treatment Plant No. 2 will require $63.9 million in Fiscal Year 2008-09, with a total project cost of $223.2 million. Another $10.9 million is required for Headworks improvements at Treatment Plant No. 2, with a total project cost of $254.5 million. The proposed CIP contemplates expenditures of $200.4 million in Fiscal Year 2010-11. Of this total, the largest expenditure within the plant facilities category is $32.3 million for the rehabilitation of the digesters at Reclamation Plant No. 1, with a total cost of $60.4 million. The new secondary treatment system at Reclamation Plant No. 1 is expected to require $24.9 million in Fiscal Year 85240462.7 23 2010-11. Another $20.6 million during this period is proposed for new trickling filters at Treatment Plant No. 2. The proposed CIP’s largest collection system project for Fiscal Year 2009-10 is $16.3 million for the Newport Trunk Sewer and Force Mains project. For Fiscal Year 2010-11, the three largest projects include $15.3 million for replacement of the Rocky Point Pump Station, $14.7 million for replacement of the Bitter Point Pump Station and $9.9 million for the Rehabilitation of Magnolia Trunk Sewer project. The total budgets for these three projects are $30.9 million, $31.9 million and $27.9 million, respectively. Groundwater Replenishment System The District has taken a multi-jurisdictional approach to planning for capital facilities because many of the methods for reducing or managing flows involve other jurisdictions. One such project is the Groundwater Replenishment System (“GWRS”). In March 2001, the District entered into an agreement with the OCWD to design and construct Phase 1 of the GWRS. The cost of this Phase is to be paid equally (50% shares) by each agency. The GWRS is a joint effort by the two agencies to provide reclaimed water for replenishment of the Orange County Groundwater Basin and to augment the seawater intrusion barrier. The GWRS is planned for phased expansions. Phase 1 recently commenced and once it becomes fully operational Phase 1 is expected to produce approximately 72,000 acre-feet per year of recycled water. Future phases will be funded solely by OCWD and could expand capacity up to 145,600 acre-feet per year. With the completion of Phase 1, the GWRS has the capacity to divert up to 100 mg/d of flow from the District’s ocean discharge. As of June 30, 2009, the total estimated cost of GWRS Phase 1 was $496.8 million. Of this amount, approximately $90.0 million has been reimbursed through grants from the U.S. Environmental Protection Agency, the U.S. Bureau of Reclamation, the State Water Resources Control Board and others. The District’s estimated share of this project is 50 percent, or $248.4 million, less 50 percent of all grant revenues received to support the project. Total District cash outlay for this project totaled $247.9 million through June 30, 2009 as the District was credited with $40.04 million in grant revenues received through June 30, 2009 by OCWD. As noted above, Phase 1 of the GWRS has commenced operations and the GWRS will require a cash outlay of $0.5 million in Fiscal Year 2009-10 to complete construction, commissioning and contract close-out retention payments. Preferred Level of Treatment In July 2002, the Board of Directors approved a change from the existing level of treatment, a blend of 50% advanced primary and 50% secondary treated wastewater, to full secondary treatment standards. The reasoning behind the decision to move to full secondary standards included (1) the possibility (no matter how remote) that bacteria from the ocean outfall may at times reach the shoreline, (2) upgraded treatment will aid additional water reclamation with the Orange County Water District, and (3) and the clearly stated public preference for upgrading wastewater treatment at the time. In an effort to eliminate most bacteria from being released from the ocean outfall, in 2002 the District began to use chlorine bleach to disinfect the effluent and then apply sodium bisulfate to remove remaining chlorine prior to releasing the treated wastewater to the ocean. The District continues to take measures to limit the chlorine residual to a very low level prior to release. This mode of disinfection is expected to continue while the District studies, designs and constructs permanent facilities, and considers alternate disinfection technologies. Beginning in Fiscal Year 2006-07, the addition of disinfection treatment required an annual outlay of $7.2 million for additional chemicals from the operating budget of the District. Following determination by the Board of Directors in July 2002 to implement full secondary standards, staff prepared the Secondary Treatment NPDES Permit Application that was required to be submitted to the regional office of EPA and the RWQCB in December 2002. An NPDES permit has been 85240462.7 24 issued to the District and the District is currently operating under the Consent Decree. See “THE DISTRICT – Permits, Licenses and Other Regulations.” Currently, the District estimates that it will take approximately three more years and require approximately $331.7 million to complete the additional secondary treatment capacity project. In addition, operating costs will increase by approximately $[7.2] million annually upon completion of facilities necessary to meet secondary treatment standards. In the interim, the District will operate the plants to maximize available secondary treatment and to reduce effluent biochemical oxygen demand and suspended solid discharges below those currently allowed limits. The District expects its secondary treatment capacity to increase incrementally each year as operations change and new facilities are constructed and placed in service. Biosolids Management The District produces approximately 650 tons per day (tpd) of digested and dewatered biosolids. By 2012, when new secondary treatment processes are expected to be fully operational, the District’s biosolids production is projected to increase to 830 tpd, though with the planned installation of centrifuges, such production is expected to decrease to 750 tpd in 2014 and 700 tpd in 2016. The District relies on the following technologies and locations for the management of its biosolids: land application of biosolids in Arizona, land, composting to high-grade soil amendment in Kern County and La Paz County, Arizona, conversion to a renewable coal substitute e-fuel in Rialto, California, and landfilling of biosolids in Yuma County, Arizona. Counties throughout California and Arizona have developed, or are in the process of developing, ordinances that severely restrict or ban the land application of biosolids. In June 2006, Kern County voters approved an anti-sludge initiative that bans the land application of biosolids. It has become clear that certain land application options currently available to the District are anticipated to be eliminated in the near future due to these developments. As of February 2009, the District is no longer engaged in land application of biosolids in Kern County. The District, and most of California’s wastewater agencies, is working to develop sustainable products and management locations for its biosolids. The dynamic regulatory issues, land application ordinances and bans, and public perception challenges prompted the District, with the help of CH2MHill, to develop a Long-Range Biosolids Management Plan (“LRBMP”). This LRBMP was approved by the Board in December 2003. The goal of the LRBMP was to develop a sustainable, reliable, and economical program for long-range biosolids management providing environmentally sound practices that meet the stringent federal, state, and local regulatory requirements. The LRBMP recommendations included new in-plant technologies to reduce the volume of biosolids, explore the production of high-grade biosolids products, and move into the energy and fuel production and compost markets. As a result of the LRBMP recommendations, the existing Synagro biosolids management contract was amended in April 2004 to have 250 tons per day of the District’s biosolids composted at Synagro’s South Kern Compost Manufacturing Facility. This composting facility is receiving its full allocation of contracted biosolids. In May 2006, the District entered into a contract with EnerTech Environmental, Inc. to convert 225 tons of biosolids per day to a renewable fuel at EnerTech’s proposed facility in Rialto, California. The EnerTech solution is a relatively new, patented heat treatment process that increases the ability to dewater biosolids in order to maximize the efficiency of the production of fuel. By decreasing the moisture content of biosolids prior to drying, a smaller dryer is needed, thus reducing capital and energy consumption. The fuel product is being recycled and reused, under agreements with area cement kilns and other fuel users. Residual ash from the fuel combustion becomes part of the cement product, resulting in no residual waste product liability. The EnerTech facility began receiving biosolids from the District in November 2008. Currently, the balance of the biosolids not managed by either Synagro or EnerTech are being managed by Tule Ranch pursuant to a five-year contract by either land application or landfill disposal in Arizona. The 85240462.7 25 District anticipates releasing a Request for Proposals for long-term biosolids management for the remainder of the biosolids not managed via existing long-term contracts by either Synagro or EnerTech by June 2010. As a result of the transition to biosolids-based compost and energy products the cost to the District for biosolids management has increased. The Fiscal Year 2007-08 management budget for biosolids was $14.3 million. The Fiscal Year 2008-09 management budget for biosolids was $19.89 million. The actual cost of biosolids management in Fiscal Year 2007-08 and Fiscal Year 2008-09 was $13.5 million and $16.65 million, respectively. The Fiscal Year 2009-10 biosolids management budget is $20.58 million. Urban Runoff In June 2002, legislation was passed that allows the District’s charter to include permissive language authorizing the diversion and management of dry weather urban runoff flows. This legislation allows the District to acquire, construct, operate, maintain, and furnish facilities for the diversion of urban runoff from drainage courses within the District, the treatment of the urban runoff, the return of the water to the drainage courses, or the beneficial use of the water. The legislation allows the District to divert up to 10 million gallons a day and consider more extensive options, such as building artificial wetlands that would naturally filter the runoff, or building a runoff treatment plant, similar to a $9.5 million facility built in Santa Monica that recycles 500,000 gallons of runoff a day. The County’s beaches have been affected by storm water and urban runoff pollution. As a result, the Santa Ana Regional Water Quality Control Board has taken direct action to control discharge of pollutants to tributaries and recreational water bodies in the County by issuing a Storm Water Permit to the County and certain cities within the County. To comply with the provisions of the permit, the County and such cities have increased resources to fund municipal storm water/urban runoff management and treatment services. Integrated Emergency Response Program In recognition of the potential damage which could occur in the event of a major earthquake, flood, or other disaster, the District implemented an Integrated Emergency Response Program (the “IERP”) in 1979. The IERP is a two-volume plan which contains policies, plans and procedures preparing for, and responding to, emergencies. The District also analyzed disaster preparedness issues and policies within the Master Plan, and within a 1994 document titled Fault Rupture Hazard Investigation – Wastewater Treatment Plant No. 2. According to the Master Plan, earthquakes are considered to be the most potentially devastating natural disaster events which confront the District. The disaster preparedness plan included in the Master Plan reviewed two possible major earthquake scenarios: an 8.3 Richter magnitude (“M”) earthquake on the southern San Andreas fault system and an M 7.0 earthquake on the Newport-Inglewood fault zone, which includes Plant No. 2. An M 8.3 earthquake on the southern San Andreas fault, while on the whole more destructive than the M 7.0 Newport-Inglewood fault, would probably result in less damage to the District’s service area due to the distance of the fault from most of the service area. However, the 1989 Master Plan stated that damage from such a major earthquake on the San Andreas fault would be extensive. Also, the Master Plan indicated that an M 7.0 earthquake on the Newport-Inglewood fault within five miles of the District’s sewerage facilities could cause major destruction to those facilities. The disaster preparedness plan in the Master Plan indicated that it would not be economically feasible to upgrade all of the existing sanitary sewerage facilities to survive an earthquake of this magnitude along the Newport-Inglewood fault. The IERP outlines the policies and employee actions to be taken before, during and after an earthquake, earthquake response guidelines and damage assessment procedures. The Master Plan analyzed the vulnerability of the sanitary sewerage facilities and operations of the District and planned a risk reduction program wherein the vulnerability of many of the District’s sanitary sewerage facilities to an earthquake could be reduced by recommended retrofit construction measures. The 85240462.7 26 Master Plan also recommended that designs of existing major structures which were constructed prior to development of current seismic design standards be reviewed and the structures strengthened, if necessary. Since the 1989 Master Plan and the 1994 Report, the District has completed retrofitting where deemed appropriate. Pursuant to the Master Plan, all recent and future projects have been, and will be, designed to the same high earthquake code standards as set for other essential services, such as hospitals and fire stations. Many of the older buildings analyzed in the Master Plan have been replaced by structures built after 1989. The Army Corps of Engineers’ “All-River Plan” has mitigated any future flooding of the Santa Ana River system and potential threats to the District’s Wastewater System. Also, both Plant No. 1 and Plant No. 2 are surrounded by three-foot to six-foot high walls, built to federal standards. The disaster preparedness plan in the Strategic Plan investigates the damage potential posed by coastal flooding, tsunamis (large ocean waves generated by seismic activity) and windstorms. However, based on available information, the District does not believe that any such events would have a material adverse impact on the Wastewater System. The Strategic Plan also makes recommendations regarding fire protection of the Wastewater System. Most of the structures at Plant No. 1 and Plant No. 2 are constructed of fire-resistant materials. The IERP describes the procedures needed to respond to a possible disaster. For more information regarding emergency response policies, the disaster preparedness plan described in the Strategic Plan and the IERP can be reviewed at the District’s office. Five-Year Strategic Planning In November 2007, the Board of Directors adopted a new comprehensive five-year strategic plan (the “Five-Year Plan”) to drive the District’s efforts and engage the organization to envision service and operations for the next five years. In November 2008, the Five-Year Plan was updated to continue looking at a five-year horizon. Following a similar process that was used in the original November 2007 plan, the General Manager's Office initiated the planning effort with the District’s Executive Management Team, then solicited input and ideas from managers and supervisors. In October 2008, the staff-generated ideas were presented to the Board of Directors for discussion and deliberation of changes and additions to the Five-Year Plan. Driven by the District’s mission, vision and core values, the updated Five-Year Plan continues the District’s efforts to meet the sanitation, health, and safety needs of its more than 2.5 million customers while protecting the environment. In the past year, nearly 30 percent of the goals of the Five-Year Plan were achieved. The Fiscal Year 2009-10 Five-Year Plan presents the following five new goals: • Reaffirming the District’s commitment to expand the Groundwater Replenishment System, including completion of the Steve Anderson Lift Station and studying the potential to include flows from the Santa Ana River Interceptor. • Analyzing whether adding chlorine to disinfect effluent into the ocean is cost-effective in comparison to other alternatives that maintain protection of public health and safety. • Evaluating and promoting the District’s environmental initiatives and seeking additional opportunities to utilize emerging technologies. • Continuing to assess and identify risks to the District, including political and financial risks, and developing mitigation strategies. 85240462.7 27 • Developing a comprehensive human resources strategic plan to connect employees with the overall mission, values, and vision of the organization and preparing employees for future leadership opportunities. DISTRICT REVENUES Sewer Service Charges General. The District has the power to establish fees and charges for services of the Wastewater System. Such fees and charges are established by the District’s Board of Directors and are not subject to review or approval by any other agencies. In Fiscal Year 1997-98, a Rate Advisory Committee (the “RAC”) was established comprised of representatives from industrial, commercial and residential users. The goal of the RAC was to examine the then current rate structure and, if needed, develop recommendations for change. The RAC analyzed the District’s rate structure to determine whether its then current sewer service user fees (now known as “Sewer Service Charges”) were equitable among residential and industrial customers. This review resulted in a proposal to expand the number of non-residential user categories from one to twenty-three and to provide for gradual rate increases in seven of the nine Revenue Areas. The increase in the number of categories provided a more equitable fee structure and also provided for future reductions in single-family residential Sewer Service Charges. The Sewer Service Charges for those categories were based on the average flow and strength of wastewater discharged for each property type and remain currently in use. The Board of Directors establishes the annual sanitary sewer service charges by ordinance. The sanitary sewer service charge ordinances are adopted by a two-thirds vote of the Board of Directors as required under law after conducting a noticed public hearing in compliance with Proposition 218. See “LIMITATIONS ON TAXES AND REVENUES – Article XIIIC and Article XIIID of the California Constitution.” In May 2002, the Board of Directors adopted District Ordinance No. OCSD 18 (the “2002 Ordinance”) which became effective on July 1, 2002. The 2002 Ordinance included a single family residential (“SFR”) rate increase, the underlying basis for all sanitary sewer service charges including sanitary sewer rates for multi- family residential units as well as most commercial and industrial properties, of $7.50 per year, or 9.4%, to $87.50 per year. In June 2003, the Board of Directors authorized a Proposition 218 notice on proposed “not to exceed” rate increases for each year over the next five years. Each year thereafter, the Board of Directors has ratified the next year’s actual rate. The District collects Sewer Service Charges from property owners through the semi-annual property tax bill distributed by the County throughout the District, except in Revenue Area No. 14. Pursuant to the IRWD Agreement, the District receives quarterly fee payments from the Irvine Ranch Water District (the “IRWD”) which directly collects fees from customers through a monthly billing procedure in Revenue Area No. 14. The District has covenanted in the Master Agreement to fix, prescribe and collect fees and charges to satisfy certain coverage requirements as further described under “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES – Rate Covenant” herein. Residential and Commercial Sewer Service Charges. Pursuant to the 2002 Ordinance, the District established residential Sewer Service Charges upon a rational basis between the fees charged each customer and the services and facilities provided to each customer of the District, except those located in Revenue Area No. 14. The noticed public hearing held in connection with the 2002 Ordinance considered increases in the amount of the annual charges by of approximately 20% per year for each of the then following five years. In May 2005, the Board of Directors adopted Ordinance No. OCSD-26 increasing the Fiscal Year 2005-06 single family residential rate, the underlying basis for all sewer service charges, by 31%, from $115.00 to $151.00 for 85240462.7 28 all ratepayers, except those located in Revenue Area No. 14. In June 2007, the Board of Directors adopted Ordinance No. OCSD-32 increasing the Fiscal Year 2007-08 single family residential rate by 9.8%. On February 27, 2008, the Board of Directors approved increases in its sanitary sewer service charges for all single family and multi-family residential units, and for all commercial properties. The Board increased the single family residential rate, which is the basis for all of the District’s sewer service charges, by 10.5% for Fiscal Year 2008-09, 10% for Fiscal Year 2009-10, 10% for Fiscal Year 2010-11, 9.8% for Fiscal Year 2011- 12 and 9.8% for Fiscal Year 2012-13. Table 6 below sets forth the annual ordinance adoptions following the last Proposition 218 notice and presents a five-year comparison of the Sewer Service Charge rate for single-family residences. Table 6 Annual Sewer Service Charges Single Family Residence Rate Five Year Rate Schedule Fiscal Years 2005-06 through 2009-10 Fiscal Year Ordinance No. Effective Date Sewer Service Charge Percent Increase 2005-06 OCSD-26 07/01/05 $151.00 31.3% 2006-07 OCSD-30B 07/01/06 165.80 9.8 2007-08 OCSD-32 07/01/07 182.00 9.8 2008-09 OCSD-35 07/01/08 201.00 10.5 2009-10 OCSD-35 07/01/09 221.10 10.0 _________________________ Source: Orange County Sanitation District. [Remainder of page intentionally left blank.] 85240462.7 29 Table 7 below sets forth total average annual Sewer Service Charge for single-family residences within the District, together with comparable total average annual charges for wastewater service within the jurisdictions of certain other cities and districts within the State as of July 1, 2009. The District’s projected SFR rate of $293 in Fiscal Year 2012-13 remains below the current average annual sewer rate of $406 according to a Fiscal Year 2007-08 survey of 726 agencies encompassing all 58 counties in California conducted by the State Water Resources Control Board. Table 7 Comparison of Total Sewer Service Charges For Single-Family Residences As of July 1, 2009 Entity Average Dry Weather Flow (mg/d) (3) Annual Sewer Service Charge(1) Treatment Level(2) (3) Collection Responsibility(3) Property Tax Income(3) City of San Diego 168 $568 2 Yes No City of Los Angeles 428 360 4 Yes No East Bay MUD 80 259 4 No Yes Sacramento 140 237 3 No Yes Orange County Sanitation District 221 221 2 No Yes Los Angeles County 497 128 4 No Yes ____________________ (1) Source: Information obtained from respective entities listed. (2) Treatment Level Categories: “1” – Primary treatment. “2” – Advanced primary or primary with some secondary treatment. “3” – Secondary treatment. “4” – Advanced secondary or secondary with some tertiary treatment. “5” – Tertiary treatment. (3) Source: 2007-08 Wastewater User Charge Survey Report by the California State Water Resources Control Board. Industrial Sewer Service Charges. The District charges industrial Sewer Service Charges to customers discharging high-strength or high-volume wastes into the sewer systems. Customers subject to industrial Sewer Service Charges are billed directly by the District. The fee charged to each customer is based on the customer’s sewage volume, the concentration of suspended solids and biochemical oxygen demand. Pursuant to the 2002 Ordinance, rates for each component factor were revised for certain industrial users in order to be consistent with the rates charged to residential users. Total industrial Sewer Service Charges in Fiscal Year 2008-09 were approximately $99 million. Industrial Sewer Service Charges are applied to both operating and capital funds. The Sewer Service Charge increases described above are necessary to meet the District’s cash flow needs arising from the addition of disinfection treatment and other operating requirements. As discussed under the caption “THE DISTRICT – Capital Improvement Program,” the CIP Validation Study in the Spring of 2005 (as further updated in the 2008 CIP Validation Study) developed a capital improvement program to meet secondary treatment standards as quickly as possible while providing for increased flows and rehabilitation and refurbishment of existing facilities. As projected out to Fiscal Year 2020-21 the cash flow needs of the CIP total approximately $2.48 billion, approximately $1 billion of which has been spent to date. The bulk of construction is scheduled during the next six years, with average annual expenditures of approximately $[170] million. 85240462.7 30 Additional Revenues The District has several sources of additional revenue, including property taxes, Capital Facilities Capacity Charges, capacity rights, permit and inspection fees and interest earnings. Property Taxes. The District receives approximately 2.5% of the one percent County ad valorem property tax levy, based on the allocation procedure under State law. Property tax revenues were $44.6 million in Fiscal Year 2002-03, $46.9 million in Fiscal Year 2003-04, $35.8 million in Fiscal Year 2004-05, $40.0 million in Fiscal Year 2005-06, $60.6 million in Fiscal Year 2006-07 and $65.2 million in Fiscal Year 2007- 08. The $11.2 million decrease in property tax revenues from Fiscal Year 2003-04 to Fiscal Year 2004-05 is reflective of the State of California’s then current fiscal crisis and the implementation of the first year of a two- year 40% secured property tax shift away from independent special districts. During the 2004-05 State Budget process, the State Legislature and the Governor enacted Senate Bill 1096 and Assembly Bill 2115, effectively shifting an additional $1.3 billion in local property tax revenues from counties, cities, special districts and redevelopment agencies to schools and community colleges. This shift was effective for Fiscal Year 2004-05 and Fiscal Year 2005-06, resulting in a 40% secured property loss for the District. See “LIMITATIONS ON TAXES AND REVENUES –Proposition 1A.” This 40% reduction for Fiscal Year 2004-05 was somewhat offset by the then existing strength in the real estate market. Total assessed valuations increased in the 2005- 06 Fiscal Year by 10.3% over the 2004-05 Fiscal Year, and the full value of these increases was received on all non-secured property tax distributions. The District received its full allotment of property tax revenues (no State property tax shift) of $65.2 million in Fiscal Year 2007-08 and $66.4 million in Fiscal Year 2008-09. The District expects its property tax receipts to be approximately $65.2 million in Fiscal Year 2009-10. See Table 15 below. The District currently projects its property tax receipts to remain approximately level through Fiscal Year 2012-13. The apportionment of the ad valorem tax is pursuant to a revenue program adopted by the District in April 1979 to comply with EPA and RWQCB mandates, legal and contractual requirements and Board of Directors policy. Capital Facilities Capacity Charges. Capital Facilities Capacity Charges (formerly known as connection fees) are one-time fees with two components, paid at the time property is developed and connected to the Wastewater System. The fees are imposed by the District pursuant to Section 5471 of the California Health and Safety Code and are levied to pay a portion of the District’s capital costs and for access to capacity in the Wastewater System. Currently, the District has Capital Facilities Capacity Charges of $4,517 per residential unit (three-bedroom); however, under the current industrial use ordinance, additional Capital Facilities Capacity Charges can be imposed on industrial users who place larger than average demand on the Wastewater System. Member cities and sanitary districts collect Capital Facilities Capacity Charges for the District when building permits are issued. Capital Facilities Capacity Charges are reviewed annually to reflect the changes in the value of the Wastewater System to which a new customer is connecting. On December 15, 1999, the Board of Directors approved District Ordinance No. OCSD 99-11 (the “1999 Ordinance”) which established a comprehensive Capital Facilities Capacity Charge. The 1999 Ordinance, effective as of January 1, 2000, renamed connection fees as Capital Facilities Capacity Charges and provided a more equitable schedule of fees among industrial, commercial and residential users. Pursuant to the 1999 Ordinance, Capital Facilities Capacity Charges were revised for high demand industrial users in five incremental increases from 1999 through 2001. For a summary of historical and projected revenues derived from Capital Facilities Capacity Charges, see Table 14 and Table 15 below. Pursuant to an agreement with the IRWD, the IRWD is not required to pay Capital Facilities Capacity Charges and in exchange, the IRWD provides funding to the District for the construction costs of certain wastewater collection, transmission, treatment and disposal facilities to be used by the IRWD and is obligated to make certain payments to the District for certain services arising from the Wastewater System (including any standby or availability charges). 85240462.7 31 Sale of Capacity. The District has entered into agreements with the Santa Ana Watershed Project Authority (“SAWPA”) whereby wastewater from Upper Santa Ana River Basin dischargers can be transported through the District’s Santa Ana River Interceptor to the District’s wastewater treatment facilities. This program was developed in the early 1970’s. The agreements establish control mechanisms regarding the quality of wastes deposited into the Wastewater System. At the present time, SAWPA has purchased and paid for 30 mg/d of maximum regulated flow capacity rights in the District’s Santa Ana River Interceptor and 17 mg/d of monthly average flow capacity in the District’s wastewater treatment plants. Additional treatment plant capacity can be purchased in increments at the District’s current replacement cost. The Santa Ana River Interceptor Line (“SARI”) was built in the Chino Basin Preserve Area in order to remove dairy farm wastes and accommodate future urban development. Salts in the washwater generated from the cleaning of cows and milking equipment were leaching into the groundwater in the Chino Basin and the SARI was built to divert the washwater from this area. However, due to the nature of the Chino Basin Preserve, the development of any infrastructure in the area to accommodate the SARI was limited. The current SARI multi-phase project is designed to connect several dairies to the SARI. Future expansions of this project could include connecting other dairies and other waste streams with the SARI line. See “THE DISTRICT – Capital Improvement Program” herein. Wastewater Treatment History The average yearly influent flow to the District has remained relatively stable for the preceding four years. The wastewater flow for Fiscal Year 2005-06 was 235 mg/d, for Fiscal Year 2006-07 was 229 mg/d, for Fiscal Year 2007-08 was 221 mg/d and for Fiscal Year 2008-09 was 211 mg/d. The highest flow rate experienced was during El Niño storm periods. Peak flows of 500 mg/d were recorded in December 1997 and February 1998. There were no sewer failures or overflows during these events. Customers The historical number of customers served by the District for the Fiscal Years 2004-05 through 2008- 09 and the projected number of customers served by the District for the Fiscal Years 2009-10 through 2013-14, identified in Equivalent Dwelling Units (“EDUs”), are set forth in Table 8 below. As discussed below, sewer service charges are based on the expected amount of wastewater flow for a single family dwelling. This base amount is considered the “equivalent dwelling unit.” The EDUs set forth in Tables 8 and 9 below equate to total Sewer Service Charge levies. Table 8 Historical and Projected Equivalent Dwelling Units Fiscal Years 2004-05 through 2013-14 Fiscal Year Historical EDUs Fiscal Year Projected EDUs(1) 2004-05(2) 893,501 2009-10 922,270 2005-06 910,469 2010-11 925,037 2006-07 907,986 2011-12 927,812 2007-08 911,033 2012-13 930,595 2008-09 938,996 2013-14 933,387 ____________________ (1) EDU growth during the projection period is estimated at approximately 0.4% per annum. (2) With respect to such Fiscal Years, presentation in the Statistical Section of the District’s Comprehensive Annual Financial Report set forth in Appendix A includes EDUs that equate to total Sewer Service Charge collections rather than levies. Source: Orange County Sanitation District. 85240462.7 32 Table 9 below shows the number of residential and commercial customers and industrial customers and the approximate percentages of Sewer Service Charge revenues derived from the combined residential and commercial use and industrial use for the last five fiscal years. Table 9 Number of Accounts and Revenues by Customer Class for the Fiscal Years 2004-05 through 2008-09 ($ in Millions) Residential/Commercial Industrial Fiscal Year Number of Equivalent Single- Family Dwellings Total Revenue Percentage of Sewer Service Charge Revenues Number of Customer Accounts Total Revenue Percentage of Sewer Service Charge Revenues 2004-05(1) 860,634 $ 99.0 90% 568 $10.5 10% 2005-06 872,859 132.0 92 557 12.2 8 2006-07 867,035 143.8 91 531 13.4 9 2007-08 875,739 159.4 93 520 12.1 7 2008-09 910,637 183.0 95 515 9.9 5 ____________________ (1) With respect to such Fiscal Years, presentation in the Statistical Section of the Comprehensive Annual Financial Report set forth in Appendix A includes EDUs that equate to total Sewer Service Charge collections rather than levies. Source: Orange County Sanitation District. 85240462.7 33 The ten largest principal sewer service customers of the District for the Fiscal Year ended June 30, 2009 are shown in Table 10 below. Table 10 Largest Principal Sewer Service Customers of the District for the Fiscal Year Ended June 30, 2009 User Sewer Service Charges Kimberly-Clark Worldwide, Inc. $1,091,757 MPC Foods, Inc. 1,045,850 Alstyle Apparel – A&G Inc. 849,942 Stremicks Heritage Foods, LLC 573,353 House Foods America Corp. 543,277 Ameripec Inc. 459,905 Pepsi-Cola Bottling Group 391,780 Nor-Cal Beverage Co. Inc. (NCB) 357,354 Favorite Foods, Inc. 324,637 Orange City Mills Ltd. Partnership 346,794 Total $5,984,649 ____________________ Source: Orange County Sanitation District. Assessed Valuation The assessed valuation of property in the County is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization. Due to changes in assessment required under State Constitution Article XIIIA, the County assessment roll no longer purports to be proportional to market value. See “LIMITATIONS ON TAXES AND REVENUES” herein. Generally, property can be reappraised to market value only upon a change in ownership or completion of new construction. The assessed value of property that has not incurred a change of ownership or new construction must be adjusted annually to reflect inflation at a rate not to exceed 2% per year based on the State consumer price index. In the event of declining property value caused by substantial damage, destruction, economic or other factors, the assessed value must be reduced temporarily to reflect market value. For the definition of full cash value and more information on property tax limitations and adjustments, see “LIMITATIONS ON TAXES AND REVENUES” herein. The County Assessor determines and enrolls a value for each parcel of taxable real property in the County every year. The value review may result in a reduction in value. Taxpayers in the County also may appeal the determination of the County Assessor with respect to the assessed value of their property. Table 11 below shows a five-year history of assessed valuations in the District since Fiscal Year 2005- 06. 85240462.7 34 Table 11 Assessed Valuations of Property in the District Fiscal Years 2005-06 through 2009-10 ($ in Billions) Fiscal Year Value % Change 2005-06 $241.8 10.30% 2006-07 270.7 11.93 2007-08 292.7 8.13 2008-09 307.6 5.09 2009-10 305.2 (0.98) ____________________ Source: County of Orange Auditor-Controller. Prior to 2006, the housing market in Southern California experienced significant price appreciation and accelerated demand. During this period, many homebuyers financed the purchase of their new homes using non-conventional loans. Such loans were made with little or no down payment and included adjustable interest rates subject to being reset at higher rates on a specified date or upon the occurrence of specified conditions. In addition, many of these loans allow the borrower to pay interest only for an initial period, in some cases up to ten years. Starting in 2006, housing developers, appraisers and real estate consultants began to report weakening of prices for single-family homes. There has been tightening of underwriting criteria for mortgage loans such that most lenders now require down payments, stricter verification, higher income to loan ratios, higher credit ratios or some combination of such factors. These factors have contributed to a decrease in home sales as prospective purchasers are unable to qualify for loans. Declining home sales in some areas of Southern California have resulted in a decrease in home prices. As home values decline, homebuyers may not be able to obtain replacement financing because the outstanding loan balances exceed the value of their homes. Due to the limiting effect of Proposition 13 on assessed valuations, declines in the market value of property in the County will not necessarily result in decreased property tax revenue in the near term. In fact, assessed valuations of property in the District for Fiscal Year 2008-09 have increased by $14.9 billion, or 5.09%, over Fiscal Year 2007-08 valuations. For Fiscal Year 2009-10, however, the County reduced assessed valuations by 0.98% as a result of further decreases in market value, leading to decreased property tax collections. Assessed valuations tend to lag economic activity. Given the severity of the current recession, the sharp decline in the market value of real estate, and the complexity of the methodology by which property is assessed, the District cannot accurately forecast the long-term impact of the current recession on assessed valuations and property tax receipts. Tax Levies and Delinquencies Property taxes are based on assessed valuation which is determined as described under “DISTRICT REVENUES – Assessed Valuation” herein. In accordance with the California Revenue and Taxation Code, the County tax collector collects secured tax levies for each Fiscal Year. Property taxes on the secured roll are due in two installments, on November 1 and February 1. The District currently participates in the County’s Teeter Plan under which the District receives annually 100% of the secured property tax levies and Sewer Service Charges to which it otherwise is entitled, regardless of whether the County has actually collected the levies. This alternative method provides for funding each taxing entity included in the Teeter Plan with its total secured property taxes during the year the taxes are levied, including any amount uncollected at fiscal year end. Under this plan, the District’s general fund receives the full amount of secured property taxes levied each year on its behalf and, for so long as such plan remains in effect, the participating entities, such as the District, no longer experience delinquent taxes. The County’s general fund is the designated recipient of future collections of penalties and interest on all delinquent taxes collected on behalf of participants in this alternative 85240462.7 35 method of apportionment. In recent years, the County has experienced delinquencies of Sewer Service Charges in the District of approximately 2%. Table 12 below presents a five-year history of the District’s ad valorem total property tax and Sewer Service Charge levies. Table 12 Total Property Tax and Sewer Service Charge Levies in the District for Fiscal Years 2004-05 through 2008-09 (In Thousands) Fiscal Year Total Tax and Sewer Service Charge Levy 2004-05 $152,745 2005-06 191,290 2006-07 209,206 2007-08 228,622 2008-09 254,092 ____________________ Source: Orange County Auditor-Controller’s Office. Budgetary Process The District’s operating fund budget relies on revenues from property taxes and Sewer Service Charges, both of which are collected on the property tax bill. See “DISTRICT REVENUES — Sewer Service Charges” and “ — Additional Revenues.” The District receives tax revenues from the County in eight allocations, with the largest receipts in December and April. The District operates on a Fiscal Year beginning each July 1. The operating fund budgets include funds to cover the dry period of each tax year, i.e., the period from the beginning of the Fiscal Year until the first taxes are received. The dry-period requirement is budgeted at one-half of the annual operating fund budgeted expenditures. The District uses the accrual method of accounting in its budgets. The District has conformed to its budgets for the last five fiscal years and is conforming to its budget for the current fiscal year. The District’s annual budget preparation process begins in January of each year and concludes in June upon its adoption. The General Manager reviews the final operating budgets and then distributes them to the Directors and District Committees for consideration. The Board of Directors then adopts the proposed annual budgets, with any revisions, in June of each year. Budgetary control is exercised at the individual Department level and administrative policies provide guidelines on budget transfers and the authorization necessary to implement transfers. A budget adjustment is a transfer which does not change the total appropriated amount and does not require Board of Directors action. Approval may be granted by the General Manager or the Department Head in certain circumstances. Department Heads have the discretion to reapportion funds between certain line items within a division but may not exceed total appropriated amounts for each department. They may also transfer staff across divisional lines. The General Manager and Board of Directors must approve additional capital outlay items. A budget amendment is an adjustment to the total appropriated amount which was not included in the original budget. These supplemental appropriations require formal action by the Board of Directors. Prior year reserves or fund balances may be appropriated to fund items not previously included in the adopted budget. Reserves or fund balances exceeding minimum amounts required by fiscal policies may be appropriated if it is determined to be in the best interest of the District. Directors may also appropriate reserves in case of emergencies or unusual circumstances. 85240462.7 36 Reserves The District has an established reserve policy with eight separate categories for its reserve funds. Collectively, these individual reserve requirements total over $475 million for each year of the current ten-year cash flow forecast. Financial Management staff and the Board of Directors have concluded that given the nature of the likely events that may cause a withdrawal from the District’s reserves and the degree of overlap among reserve categories, the total amount reserved need not equal the sum of each separate reserve category. As a result, the District adjusted the application of its reserve policy, leading to a reduction of approximately 7% of the accumulated total, or $34 million. The following table sets forth actual reserves at June 30, 2008 and June 30, 2009, and projected reserves at June 30, 2010, for each fund. Reserve levels are calculated in accordance with the District’s reserve policy. Table 13 Actual and Projected Reserves June 30, 2008 through 2010 (In Millions) June 30, 2008 June 30, 2009 June 30, 2010(1) Cash Flow Requirements Reserve — Operating Expenses $ 70 $ 73 78 Certificates of Participation Payments 65 84 92 Operating Contingencies Reserve 14 15 16 Capital Improvement Program Reserve 165 83 87 Catastrophe and Self Insurance 57 58 57 Capital Replacement and Refurbishment 54 55 56 Debt Service Required Reserves 108 133(2) 129 Overlapping Reserve Adjustment - (34) (38) Total $533 $534 $477 ____________________ (1) Projected. (2) Not available to pay the Notes. Source: Orange County Sanitation District. Other than amounts in Debt Service Required Reserves, all of the categories of District reserve funds described above are available to pay principal of and interest on the Notes if Net Revenues are insufficient and the Notes are not refinanced with Future Obligations. The Cash Flow Requirements Reserve was established to fund operation, maintenance and certificates of participation debt service expenses for the first half of the fiscal year, prior to the receipt of the first installment of the property tax allocation and sewer service user fees which are collected as a separate line item on the property tax bill. The level of this reserve is established as the sum of an amount equal to six months operations and maintenance expense and the total of certificates of participation debt service expenses due in the subsequent fiscal year. The Operating Contingencies Reserve was established to provide for non-recurring expenditures that were not anticipated when the annual budget and Sewer Service Charges were adopted. The level of this reserve is equal to 10% of the District’s annual operating budget. The Capital Improvement Program Reserve was established to fund annual increments of the Capital Improvement Program with a target level at one-half of the average annual Capital Improvement Program through the year 2020. Levels higher and lower than the target can be expected while the long-term financing and capital improvement programs are being finalized. The Catastrophic Loss, or Self-Insurance Reserve is established for property damage including fire, flood and earthquake, general liability and workers’ compensation. The level of reserve in this fund is maintained at a level to fund the District’s non-reimbursed costs which are estimated to be $57 million. The Capital Replacement and Refurbishment Reserve was established to provide 30% of the funding to replace or refurbish the current collection, treatment and disposal facilities. The current replacement value of these facilities is estimated to be approximately $6.26 billion. The initial reserve level for this fund was established 85240462.7 37 at $50 million and is augmented by interest earnings and a portion of the annual Sewer Service Charges. Debt Service Required Reserves (or Obligation Reserve Funds as defined in the Master Agreement) are controlled by a trustee pursuant to the provisions of certificates of participation issues and are not available for the general needs of the District. The Rate Stabilization Reserve accumulates all available funds which exceed the targets for all other reserves. The Rate Stabilization Reserve is a separate fund from the Rate Stabilization Account established under the Trust Agreement. These funds are applied to future years’ needs and must be maintained at specified levels. There is currently no established target for this reserve and, because the reserves of all other funds have not been exceeded, the reserve level for this reserve fund is zero for Fiscal Years 2005-06 through 2008-09. See APPENDIX A — “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2009” herein. Summary of Operating Data Set forth in Table 14 below is a summary of historic operating results for the District for Fiscal Years 2004-05 through 2008-09. The information presented in the summary should be read in conjunction with the financial statements and notes. See APPENDIX A — “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2009” herein. Table 14 Summary of Historical District Revenues and Expenses and Other Financial Information For Fiscal Years 2004-05 through 2008-09 ($ in Millions) 2004-05 2005-06 2006-07 2007-08 2008-09 Revenues: Sewer Service Charges(1) $ 99.0 $ 132.0 $143.8 $159.4 $183.0 Industrial Sewer Service Charges 10.5 12.2 13.4 12.1 9.9 Revenue Area No. 14 Fees 6.9 5.3 5.2 7.1 10.3 Ad Valorem Taxes 35.8 40.0 60.6 65.2 66.4 Interest Earnings 15.1 10.4 22.2 20.2 14.8 Capital Facilities Capacity Charges (“CFCC”) 9.8 15.6 31.3 19.8 9.8 Other Revenues 6.1 9.2 8.3 6.9 5.8 Total Revenues $183.2 $224.7 $284.8 $290.7 $300.0 Operations and Maintenance Expenses(2) $101.8 $105.6 $112.2 $131.9 $164.6 Net Revenues $ 81.4 $119.1 $172.6 $158.8 $135.4 Debt Service $ 37.9 $ 41.9 $ 48.6 $ 42.8 $ 57.6 Coverage Ratios(3) 1.89x 2.47x 2.90x 3.25x 2.18x CIP Outlay $187.9 $260.8 $287.5 $275.5 $254.9 Ending Reserves(4) $407.0 $406.0 $287.0 $434.0 $439.0 ____________________________________ (1) Net of rebates, if any, to commercial users. (2) Excludes depreciation and amortization expenses. (3) Calculated in accordance with the Master Agreement, which excludes CFCC from Net Revenues. (4) Excludes Debt Service Required Reserves in accordance with the District’s reserve policy. Source: Orange County Sanitation District. 85240462.7 38 Projected Operating Data Set forth in Table 15 below are projected operating results for the District for Fiscal Years 2009-10 through 2013-14. These projections assume the number of projects and scheduled build out set forth in the CIP Validation Study, and reflect Board-approved annual increases in sewer service rates of 10.5%, 10%, 10%, 9.8% and 9.8% over this five-year period. Principal expenditure components of these projections are derived from the CIP Validation Study, which identified 114 large capital projects managed by the Engineering Department through 2020-21 at a total cost of $2.48 billion, and currently projected to include over $1.1 billion in the next five years. The District’s CIP cash flow budget for Fiscal Year 2008-09 is $373.7 million, an increase of $94.4 million from the prior year actual total outlay. This CIP budget finances joint works treatment and disposal system improvement projects, and collection system improvement projects. This increase is attributable to the additional infrastructure needs identified in the CIP Validation Study. The preparation of such projections was based upon certain assumptions and certain forecasts with respect to conditions that may occur in the future. While the District believes that these assumptions and forecasts are reasonable for the purposes of the projected selected operating data, it makes no representations that they will in fact occur. To the extent that actual future conditions differ from those assumed herein, the data will vary. Table 15 Summary of Projected District Revenues and Expenses and Other Financial Information for Fiscal Years 2009-10 through 2013-14 ($ in Millions) 85240462.7 39 2009-10 2010-11 2011-12 2012-13 2013-14 Revenues: Residential & Commercial Sewer Service Charges $210.4 $232.6 $254.8 $280.8 $301.1 Industrial Sewer Service Charges 9.2 10.1 11.1 12.2 13.1 Revenue Area No. 14 Fees 22.7 18.9 18.7 26.1 22.6 Ad Valorem Taxes 65.2 65.2 65.2 65.2 68.5 Interest Earnings 15.2 15.6 17.6 20.2 22.2 Capital Facilities Capacity Charges (“CFCC”) 10.6 11.1 11.7 12.3 13.0 Other Revenues 17.2 22.6 18.4 19.0 39.3 Total Revenues $350.6 $376.2 $397.5 $435.9 $479.7 Operations and Maintenance Expenses 156.1 166.7 178.9 193.1 204.4 Net Revenues(1) $183.9 $198.4 $206.9 $230.5 $262.3 Debt Proceeds (excluding refundings) $ 70.0 $110.0 $ 60.0 $170.0 0 Debt Service(2) $ 77.1 $ 92.3 $ 97.6 $105.2 $124.5 CIP Outlays $259.1 $200.4 $150.0 $188.2 $ 94.2 Ending Reserves(3) $348.0 $362.9 $385.5 $418.1 $413.4 Coverage Ratios(4) 2.39x 2.15x 2.12x 2.19x 2.11x _________________ (1) Calculated in accordance with the Trust Agreement, which excludes CFCC from Net Revenues. (2) Excludes debt service with respect to the Refunded Notes, and assumes the refinancing of the Notes with Future Obligations amortizing over a term of approximately 25 years. (3) Excludes Debt Service Required Reserves in accordance with the District’s reserve policy. (4) Calculated in accordance with the Master Agreement, which excludes CFCC from Net Revenues. Assumptions: (a) Annual growth in equivalent dwelling units is projected to increase 0.4% over the next five years. (b) The Residential and Commercial Sewer Service Charge and the Industrial Sewer Service Charges are forecasts based on the total projected equivalent dwelling units, the actual 10% increase for 2009-10, and the approved rate increases of 10.0% and 9.8%, respectively, for the following two fiscal years. (c) The Capital Facilities Capacity Charge forecast is based on the total projected equivalent dwelling units along with a 5.0% project annual increase in the rate. (d) Revenue Area No. 14 fees are derived based on the projected contribution of sewage flows to the District from the Irvine Ranch Water District. (e) Ad valorem tax revenues are projected to remain level through Fiscal Year 2012-13. (f) Interest earnings are projected as 4.0% of average annual cash balances. (g) Operating and Maintenance Expenses are projected to increase 7.0% per year. (h) Annual CIP Outlays based on the cash flow projections developed from the CIP Validation Study. Source: Orange County Sanitation District. 85240462.7 40 Management’s Discussion and Analysis of Operating Data The District’s Fiscal Year 2009-10 total operating and capital improvement budget is $495.1 million, a 17.6% decrease over the prior year budget of $601.0 million. The District’s Fiscal Year 2009-10 budget includes $259.1 million in capital improvement outlays as the District moves towards reaching secondary treatment standards by the target date of December 31, 2012, as specified by the Board of Directors’ July 2002 resolution and in keeping with the terms and conditions of its ocean discharge permit and related Consent Decree. The Fiscal Year 2009-10 operations budget for the collection, treatment, and disposal of wastewater is $____ million, an $____ million [increase] from the prior year budget of $148.8 million. This [increase is primarily attributable to the proposed increase in personnel costs due mostly to the current capital improvement program, totaling $2.48 billion. Personnel costs increased $____ million, or ____%. The contractual services budget increased $____ million, or ____%. The major component of this category is biosolids removal and transport costs. Contracts have been executed with firms for agricultural reuse of residual solids. The utility budget decreased by $____ million, or ____%, primarily as a result of utility rates not increasing as much as anticipated. Electricity is the largest utility cost incurred by the District and is used to run the plant processes. The Fiscal Year 2009-10 budget reflects an increase in imported electricity because new government regulations on air emission limits has forced a reduction in electrical power production at the District’s central generation facilities, a process that converts methane gas into electricity. The Fiscal Year 2009-10 CIP cash flow budget was approved at $259.1 million a decrease of $114.6 million from the prior year actual total outlay. In preparation for the Fiscal Year 2006-07 and 2007-08 budgets, the Board of Directors established a CIP Oversight Committee to review the CIP program and ensure that the scope of the projects was appropriate and that the cost estimates were accurate, and to gain an understanding of the impact from the CIP to the current rate structure. The Fiscal Year 2009-10 CIP includes 86 large capital projects and 28 special projects with a projected 15-year cash outlay of $1.47 billion. Over this time period, the CIP will accomplish: • Rehabilitation of the existing headworks, primary treatment, secondary treatment, outfall pumping, and solids handling facilities at both treatment plants; • Replacement and rehabilitation of nine of the District’s outlying pumping stations, and rehabilitation and upgrade of 29 trunk sewer improvement projects; • Optimization of the production of “power” and “biosolids” at each of the treatment plants; • Reclamation of 70 mg/d of the District’s effluent, or nearly one-third of the total daily flow through the Groundwater Replenishment System; and • Secondary treatment standards by December 2012. The 2008 CIP Validation Study reaffirmed the need for further rate increases in future years. Based on the results of the CIP Validation Study and the Five-Year Plan, the Board of Directors adopted Ordinance No. OCSD-35 which increased the sanitary sewer service charges by approximately 10% each year for the five years beginning in Fiscal Year 2008-09. These rate increases were approved by a vote of two-thirds of the members of the Board of Directors and are not subject to reaffirmation in any of the future fiscal years covered by this five-year period. This action increased the single family residence user rate, the basis for all sewer user fee rates, from $201 to $221 in Fiscal Year 2009-10. See “DISTRICT REVENUES – Sewer Service Charges.” 85240462.7 41 Investment of District Funds State statutes authorize the District to invest in obligations of the United States Government, state and local governmental agencies, negotiable certificates of deposits, bankers acceptances, commercial paper, reverse repurchase agreements and a variety of other investment instruments which are allowable under California Government Code Section 53600 et seq. All District funds, except for Obligation Reserve Funds controlled by a bank trustee pursuant to the provisions of Existing Senior Obligations, are managed by an external money manager, Pacific Investment Management Company (“PIMCO”). Mellon Trust (“Mellon Trust”) serves as the District’s independent custodian bank for its investment program. Callan Associates (“Callan”) serves as the District’s independent advisor. At June 30, 2009, the District’s externally managed fund consisted of a short-term investment portfolio of $54.4 million with an average maturity of 73 days, and a long-term investment portfolio of $356.5 with average maturities of 3.6 years. Investments consist of United States government securities, corporate bonds and commercial paper. The District’s portfolio contains no structured investment vehicles (“SIVs”) or reverse repurchase agreements. Deposits in banks are maintained in financial institutions which provide deposit protection on the bank balance from the Federal Deposit Insurance Corporation. The California Government Code requires State banks and savings and loans to secure local government deposits by pledging government securities equal to 110% of the deposits or by pledging first trust deed mortgage notes equal to 150% of the deposits. The District’s Investment Policy requires that the District invest public funds in a manner which ensures the safety and preservation of capital while meeting reasonable anticipated operating expenditure needs, achieving a reasonable rate of return and conforming to all state and local statutes governing the investment of public funds. The primary objectives, in order, of the District’s investment activities are safety, liquidity and return on investment. FINANCIAL OBLIGATIONS Existing Indebtedness Currently, the District has Senior Obligations Outstanding payable on a parity with the Installment Payment under the Installment Purchase Agreement. The table below describes the District’s outstanding certificates of participation as of December 1, 2009. The payment obligations in connection with each series of these certificates constitute Senior Obligations, subject to the provisions of the Master Agreement and shall be afforded all of the benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The District has no outstanding general obligation bonds. Table 16 Outstanding Certificates of Participation Debt As of December 1, 2009 85240462.7 42 Original Principal Amount Issue Date Outstanding Balance Final Maturity 2000 Certificates $218,600,000 08/31/00 $ 194,900,000 08/01/30 2003 Certificates 280,000,000 08/26/03 191,500,000 02/01/33 2007A Certificates 95,180,000 05/22/07 93,465,000 02/01/30 2007B Certificates 300,000,000 12/20/07 295,185,000 02/01/37 2008A Certificates 77,165,000 05/29/08 46,430,000 08/01/13 2008B Certificates 27,800,000 09/11/08 27,390,000 08/01/16 2008C Certificates(1) 176,115,000 12/10/08 176,115,000 12/10/09 2009A Certificates 200,000,000 05/07/09 200,000,000 02/01/39 Total Long-Term Debt $1,224,985,000 _______________________________ (1) To be refunded with the sale proceeds of the Notes and other sources of funds. See “PLAN OF FINANCE.” In connection with the execution and delivery of the above-referenced outstanding certificates of participation, the district entered into certain installment purchase agreements, or equivalent documents, providing for the payment of installment payments or similar payments. Variable Rate Obligations In August 2000, the District caused the execution and delivery of the Orange County Sanitation District Refunding Certificates of Participation, Series 2000-A (the “2000-A Certificates”) and the Orange County Sanitation District Refunding Certificates of Participation, Series 2000-B (the “2000-B Certificates” and, together with the 2000-A Certificates, the “2000 Certificates”) in the original aggregate principal amount of $218,600,000, of which $194,900,000 will be outstanding as of December 1, 2009. In connection with the execution and delivery of the 2000 Certificates, the District entered into an installment purchase agreement (the “2000 Installment Purchase Agreement”) and a Standby Agreement, dated as of August 1, 2000 (the “2000 Standby Agreement”), by and among the District, the Trustee and Dexia Crédit Local, acting through its New York Agency. The 2000 Standby Agreement currently expires on August 31, 2010. The 2000 Standby Agreement constitutes a Credit Facility Agreement and a Credit Facility under the Master Indenture. The obligation of the District to repay amounts drawn on or paid under the 2000 Standby Agreement, to pay interest on such amounts and to pay any other amounts in connection with such draw or payment constitutes a Reimbursement Obligation, each with respect to a Senior Obligation. Anticipated Financings From time to time the District expects to incur other obligations to finance and refinance portions of the CIP. Over the next four years, the District expects to incur further Additional Senior Obligations in an aggregate principal amount of approximately $410 million. Direct and Overlapping Bonded Debt Table 17 below presents the aggregate direct and overlapping bonded debt of the District as of June 30, 2009. Table 17 Direct and Overlapping Bonded Debt of the District as of June 30, 2009 2008-09 Assessed Valuation (Land & Improvements Only): $268,132,967,248 Redevelopment Incremental Valuation: 39,478,515,588 Adjusted Assessed Valuation: $307,611,482,836 85240462.7 43 OVERLAPPING TAX AND ASSESSMENT DEBT (Based on redevelopment adjusted all property assessed valuation of $273,700,529,675): Total Debt District’s Share of 6/30/09 % Applicable (1) Debt 6/30/09 The Metropolitan Water District of Southern California $293,425,000 14.820 43,485,585 Coast Community College District 341,668,867 99.508 339,987,856 North Orange County Joint Community College District 227,859,001 96.926 220,854,615 Rancho Santiago Community College District 316,405,071 98.342 311,159,075 Brea-Olinda and Laguna Beach Unified School Districts 58,434,029 99.941 & 14.596 29,113,416 Los Alamitos Unified School District School Facilities Improvement Dist. No. 1 27,000,000 99.152 26,771,040 Newport Mesa Unified School District 166,073,480 100. 166,073,480 Placentia-Yorba Linda Unified School District 165,776,100 98.703 163,625,984 Saddleback Valley Unified School District 140,200,000 12.165 17,055,330 Santa Ana Unified School District 221,191,491 100. 221,191,491 Tustin Unified School District School Facilities Improvement District No. 2002-1 40,345,617 99.103 39,983,717 Anaheim Union High School District 120,533,955 100. 120,553,955 Fullerton Joint Union High School District 60,452,910 90.157 54,502,530 Huntington Beach Union High School District 231,234,998 98.910 228,714,537 School Districts 271,819,367 97.309-100. 271,051,518 City of Anaheim 4,750,000 99.079 4,706,253 Irvine Ranch Water District Improvement Districts 404,407,929 Various 404,290,738 Rossmoor Community Services District Special Tax Obligations 575,000 100. 575,000 Bonita Canyon Community Facilities District No. 98-1 41,990,000 100. 41,990,000 Irvine Unified School District Community Facilities Districts 447,406,803 99.998-100. 447,405,247 Tustin Unified School District Community Facilities Districts 230,680,345 100. 230,680,345 Orange County Community Facilities District No. 87-4 55,931,062 99.934 55,894,147 Other Community Facilities Districts 400,332,00 99.998-100 400,257,842 Orange County Assessment Districts 112,907,296 100. 112,907,296 City of Irvine 1915 Act Bonds 887,163,771 100. 887,163,771 City of Tustin 1915 Act Bonds 48,755,000 100. 48,775,000 Other 1915 Act bonds 25,436,549 100. 25,436,549 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $4,914,186,317 Total Debt District’s Share of DIRECT AND OVERLAPPING GENERAL FUND DEBT: 6/30/09 % Applicable (1) Debt 6/30/09 Orange County General Fund Obligations $462,152,000 72.151% $ 333,447,290 Orange County Pension Obligations 69,713,001 72.151 50,298,627 Orange County Board of Education Certificates of Participation 19,430,000 72.151 14,018,939 South Orange County Community College District Certificates of Participation 32,875,000 36.253 11,918,174 Brea-Olinda Unified School District Certificates of Participation 28,830,000 99.941 28,812,990 Orange Unified School District Certificates of Participation & Benefit Obligations 144,265,000 96.879 139,762,489 Placentia-Yorba Linda Unified School District Certificates of Participation 86,810,315 98.703 85,684,385 Santa Ana Unified School District Certificates of Participation 62,396,493 100. 62,396,493 Other Unified School District Certificates of Participation 38,285,651 Various 38,007,622 Union High School District Certificates of Participation 116,036,090 Various 113,278,500 School District Certificates of Participation 57,230,000 Various 56,928,705 City of Anaheim General Fund Obligations 660,722,465 99.079 654,637,211 City of Costa Mesa General Fund Obligations 43,335,000 100. 43,335,000 City of Garden Grove General Fund Obligations 31,745,000 100. 31,475,000 City of Huntington Beach General Fund and Judgment Obligations 72,330,000 99.979 72,314,811 City of La Habra General Fund Obligations 21,020,000 100. 21,020,000 City of Santa Ana General Fund Obligations 111,345,000 100. 111,345,000 Other City General Fund Obligations 152,123,055 Various 126,640,634 Orange County Sanitation District Certificates of Participation 0 100. 0(2) (Continued on next page.) (Continued from previous page.) Irvine Ranch Water District Certificates of Participation 103,100,000 89.701 92,481,731 Municipal Water District of Orange County Water Facilities Corporation 17,685,000 67.032 11,854,609 Yorba Linda County Water District Certificates of Participation 9,645,000 97.765 9,429,434 Orange County Fire Authority 7,040,000 51.049 3,593,850 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $2,112,681,494 Less: Santa Ana Unified School District self-supporting Qualified Zone Academy Bonds 16,500,000 City of Anaheim self-supporting obligations 640,924,677 Other City self-supporting obligations 35,556,258 MWDOC Water Facilities Corporation (100% self-supporting) 11,854,609 TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,407,845,950 85240462.7 44 GROSS COMBINED TOTAL DEBT $7,026,867,811(3) NET COMBINED TOTAL DEBT $6,322,032,267 (1) Percentage of overlapping agency’s redevelopment adjusted all property assessed valuation ($273,700,529,675) located within boundaries of the district. (2) Excludes wastewater revenue certificates of participation. Previously classified certificates of participation have been reclassified as district revenue supported issues and are no longer included as direct debt in the debt statement. (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to: 2008-09 Land and Improvement Assessed Valuation Total Overlapping Tax and Assessment Debt 1.60% Adjusted Adjusted All Property Land & Improvement Assessed Valuation Gross Combined Total Debt 2.62% 2.57% Net Combined Total Debt 2.36% 2.31% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/09: $0 ________________________ Source: California Municipal Statistics. THE CORPORATION The Corporation was organized June 19, 2000 as a nonprofit public benefit corporation pursuant to the Nonprofit Public Corporation law of the State. The Corporation’s purpose is to render assistance to the District in its acquisition of equipment, real property and improvements on behalf of the District. Under its articles of incorporation, the Corporation has all powers conferred upon nonprofit public benefit corporations by the laws of the State, provided that it will not engage in any activity other than that which is necessary or convenient for, or incidental to the purposes for which it was formed. The Corporation is a separate legal entity from the District. It is governed by a twenty-five member Board of Directors. The Corporation has no employees. All staff work is performed by employees of the District. The members of the Corporation’s Board of Directors are the Board of Directors of the District. The District’s Director of Finance and Administrative Services and other District employees are available to provide staff support to the Corporation. The Corporation has not entered into any material financing arrangements other than those referred to in this Official Statement. Further information concerning the Corporation may be obtained from the Orange County Sanitation District office at 10844 Ellis Avenue, Fountain Valley, California, 92708-7018. LIMITATIONS ON TAXES AND REVENUES Article XIIIA of the California Constitution On June 6, 1978, California voters approved Proposition 13 (“Proposition 13”), which added Article XIIIA to the State Constitution (“Article XIIIA”). Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i) indebtedness approved by the voters prior to July 1, 1978, (ii) (as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two- third of the voters on such indebtedness, and (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under 85240462.7 45 “full cash value,” or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year or to reflect a reduction in the consumer price index or comparable data for the area under the taxing jurisdiction, or reduced in the event of declining property values caused by substantial damage, destruction, or other factors. Legislation enacted by the State Legislature to implement Article XIIIA provides that notwithstanding any other law, local agencies may not levy any ad valorem property tax except to pay debt service on indebtedness approved by the voters as described above. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The one percent property tax is automatically levied by the County and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years. Beginning in the 1981-82 fiscal year, assessors in the State no longer record property values on tax rolls at the assessed value of 25% of market value which was expressed as $4 per $100 assessed value. All taxable property is now shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value. Article XIIIB of the California Constitution An initiative to amend the State Constitution entitled “Limitation of Government Appropriations” was approved on September 6, 1979, thereby adding Article XIIIB to the State Constitution (“Article XIIIB”). Under Article XIIIB, the State and each local governmental entity has an annual “appropriations limit” and is not permitted to spend certain moneys that are called “appropriations subject to limitation” (consisting of tax revenues, state subventions and certain other funds) in an amount higher than the appropriations limit. Article XIIIB does not affect the appropriations of moneys that are excluded from the definition of “appropriations subject to limitation,” including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the appropriations limit is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities’ revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. “Appropriations subject to limitation” are authorizations to spend “proceeds of taxes,” which consist of tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or service,” but “proceeds of taxes” excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on appropriations of funds which are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax funds. Not included in the Article XIIIB limit are appropriations for the debt service costs of bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government and appropriations for qualified capital outlay projects. The appropriations limit may also be exceeded in certain cases of emergency. 85240462.7 46 The appropriations limit for the District in each year is based on the District’s limit for the prior year, adjusted annually for changes in the cost of living and changes in population, and adjusted, where applicable, for transfer of financial responsibility of providing services to or from another unit of government. The change in the cost of living is, at the District’s option, either (1) the percentage change in State per capita personal income, or (2) the percentage change in the local assessment roll on nonresidential property. Either test is likely to be greater than the change in the cost of living index, which was used prior to Proposition 111. Change in population is to be measured either within the jurisdiction of the District or the County as a whole. As amended by Proposition 111, the appropriations limit is tested over consecutive two-year periods. Any excess of the aggregate “proceeds of taxes” received by a District over such two-year period above the combined appropriations limits for those two years is to be returned to taxpayers by reductions in tax rates or fee schedules over the subsequent two years. As originally enacted in 1979, the District’s appropriations limit was based on 1978-79 authorizations to expend proceeds of taxes and was adjusted annually to reflect changes in cost of living and population (using different definitions, which were modified by Proposition 111). Starting with Fiscal Year 1990-91, the District’s appropriations limit was recalculated by taking the actual Fiscal Year 1986-87 limit, and applying the annual adjustments as if Proposition 111 had been in effect. The District does not anticipate that any such appropriations limitations will impair its ability to make the Installment Payment as required by the Installment Purchase Agreement. Proposition 1A Proposition 1A (“Proposition 1A”), proposed by the Legislature in connection with the 2004-05 Budget Act and approved by the voters in November 2004, restricts State authority to reduce major local tax revenues such as the tax shifts permitted to take place in Fiscal Years 2004-05 and 2005-06. Proposition 1A provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition 1A provides, however, that beginning in Fiscal Year 2008-09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. Such a shift may not occur more than twice in any ten-year period. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also provides that if the State reduces the vehicle license fee (“VLF”) rate currently in effect, 0.65% of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition 1A requires the State to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates. Article XIIIC and Article XIIID of the California Constitution Proposition 218, a State ballot initiative known as the “Right to Vote on Taxes Act,” was approved by the voters on November 5, 1996. The initiative added Articles XIIIC and XIIID to the California Constitution, creating additional requirements for the imposition by most local governments of “general taxes,” “special taxes,” “assessments,” “fees,” and “charges.” Proposition 218 became effective, pursuant to its terms, as of November 6, 1996, although compliance with some of its provisions was deferred until July 1, 1997, and certain of its provisions purport to apply to any tax imposed for general governmental purposes (i.e., “general taxes”) imposed, extended or increased on or after January 1, 1995 and prior to November 6, 1996. 85240462.7 47 Article XIIID imposes substantive and procedural requirements on the imposition, extension or increase of any “fee” or “charge” subject to its provisions. A “fee” or “charge” subject to Article XIIID includes any levy, other than an ad valorem tax, special tax or assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership. Article XIIID prohibits, among other things, the imposition of any proposed fee or charge, and, possibly, the increase of any existing fee or charge, in the event written protests against the proposed fee or charge are presented at a required public hearing on the fee or charge by a majority of owners of the parcels upon which the fee or charge is to be imposed. Except for fees and charges for water, sewer and refuse collection services, the approval of a majority of the property owners subject to the fee or charge, or at the option of the agency, by a two-thirds vote of the electorate residing in the affected area, is required within 45 days following the public hearing on any such proposed new or increased fee or charge. The California Supreme Court decisions in Richmond v. Shasta Community Services District, 32 Cal.4th 409 (2004) (“Richmond”), and Bighorn-Desert View Water Agency v. Verjil, 39 Cal.4th 205 (2006) (“Bighorn”) have clarified some of the uncertainty surrounding the applicability of Section 6 of Article XIIID to service fees and charges. In Richmond, the Shasta Community Services District charged a water connection fee, which included a capacity charge for capital improvements to the water system and a fire suppression charge. The Court held that both the capacity charge and the fire suppression charge were not subject to Article XIIID because a water connection fee is not a property-related fee or charge because it results from the property owner’s voluntary decision to apply for the connection. In both Richmond and Bighorn, however, the Court stated that a fee for ongoing water service through an existing connection is imposed “as an incident of property ownership” within the meaning of Article XIIID, rejecting, in Bighorn, the water agency’s argument that consumption-based water charges are not imposed “as an incident of property ownership” but as a result of the voluntary decisions of customers as to how much water to use. Article XIIID also provides that “standby charges” are considered “assessments” and must follow the procedures required for “assessments” under Article XIIID and imposes several procedural requirements for the imposition of any assessment, which may include (1) various notice requirements, including the requirement to mail a ballot to owners of the affected property; (2) the substitution of a property owner ballot procedure for the traditional written protest procedure, and providing that “majority protest” exists when ballots (weighted according to proportional financial obligation) submitted in opposition exceed ballots in favor of the assessments; and (3) the requirement that the levying entity “separate the general benefits from the special benefits conferred on a parcel” of land. Article XIIID also precludes standby charges for services that are not immediately available to the parcel being charged. Article XIIID provides that all existing, new or increased assessments are to comply with its provisions beginning July 1, 1997. Existing assessments imposed on or before November 5, 1996, and “imposed exclusively to finance the capital costs or maintenance and operations expenses for [among other things] water” are exempted from some of the provisions of Article XIIID applicable to assessments. Article XIIIC extends the people’s initiative power to reduce or repeal existing local taxes, assessments, fees and charges. This extension of the initiative power is not limited by the terms of Article XIIIC to fees, taxes, assessment fees and charges imposed after November 6, 1996 and absent other authority could result in retroactive reduction in any existing taxes, assessments, fees or charges. In Bighorn, the Court concluded that under Article XIIIC local voters by initiative may reduce a public agency’s water rates and delivery charges. The Court noted, however, that it was not holding that the authorized initiative power is free of all limitations, stating that it was not determining whether the electorate’s initiative power is subject to the public agency’s statutory obligation to set water service charges at a level that will “pay the operating expenses of the agency, . . . provide for repairs and depreciation of works, provide a reasonable surplus for improvements, extensions, and enlargements, pay the interest on any bonded debt, and provide a sinking or other fund for the payment of the principal of such debt as it may become due.” The District implemented a five-year plan beginning in Fiscal Year 2002-03 which included a rate increase of $7.50 per year, or 9.4%, for all ratepayers to $87.50 per year. In May 2003, the Board of Directors approved consideration of a 15% rate increase a year, for each year, over the then following five years, upon 85240462.7 48 2/3 vote of the Board of Directors after conducting a noticed public hearing in compliance with Article XIIID. The Board of Directors considered this increase necessary to provide needed capital improvements, to cover additional treatment and disinfection costs, and to minimize rate increases over an extended period of time. On July 2, 2003, the Board of Directors adopted Ordinance No. OCSD-20 increasing sanitary sewer service charges for all single family and multi-family residential units as well as most commercial and industrial properties. The Ordinance was adopted by a 2/3 vote of the Board of Directors as required under law after conducting a noticed public hearing in compliance with all laws. The Ordinance increases the amount of the annual charges by approximately 15% per year for each of the following five years, commencing with Fiscal Year 2003-04, thereby raising the single family residence user rate from the then current $87.50 to $100.00, $115.00, $132.00, $152.00, and $175.00 annually. The Ordinance discounted by 5% the annual increases which were the subject of the required protest hearings on the fee increase as described above. After the completion of the CIP Validation Study for Fiscal Year 2005-06 that increased its ten year CIP cash flow projects to $2.2 billion, or an average of $220 million per year, the Board of Directors adopted Ordinance No. OCSD-26 increasing the Fiscal Year 2005-06 single family residential rate 31%, from $115 to $151 for such year. In May 2006, the Board of Directors adopted Ordinance No. OCSD-30B increasing the Fiscal Year 2006-07 single family residential rate 9.8%, from $151.00 to $165.80 for such year, except those located in Revenue Area 14. These increases represented the increase permitted under the protest hearings on the fee increase which was held in 2003. In June 2007, the Board of Directors adopted Ordinance No. OCSD-32 increasing the Fiscal Year 2007-08 single family residential rate by 9.8%. In February 2008, after a noticed public hearing, the Board of Directors adopted Ordinance No. OCSD-35, which provides for annual increases in the single family residential rate of 10.5%, 10%, 10%, 9.8% and 9.8%, respectively, for Fiscal Years 2008- 09 through 2012-13. Pursuant to the Master Agreement, the District will, to the extent permitted by law, fix, prescribe and collect fees and charges for the services of the Wastewater System which will be at least sufficient to yield during each Fiscal Year (a) Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year, and (b) Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but will not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. In the event that service charges are determined to be subject to Article XIIID, and proposed increased service charges cannot be imposed as a result of a majority protest, such circumstances may adversely effect the ability of the District to generate revenues in the amounts required by the Master Agreement, and to make the Installment Payment as provided in the Installment Purchase Agreement. No assurance may be given that Articles XIIIC and XIIID will not have a material adverse impact on Net Revenues. Other Initiative Measures Articles XIIIA, XIIIB, XIIIC and XIIID were adopted pursuant to California’s constitutional initiative process. From time to time other initiative measures could be adopted by California voters, placing additional limitations on the ability of the District to increase revenues. LEGAL MATTERS The validity of the Notes and certain other legal matters are subject to the approving opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Special Counsel to the District. A complete copy of the proposed form of Special Counsel opinion is attached as Appendix F hereto. Special Counsel, in its capacity as Special Counsel to the District, undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed on for the District and the Corporation by Woodruff, Spradlin & Smart, a Professional Corporation, Costa Mesa, California, and for the District by Fulbright & Jaworski L.L.P. as Disclosure Counsel to the District. 85240462.7 49 FINANCIAL ADVISOR The District has retained Public Resources Advisory Group as financial advisor (the “Financial Advisor”) in connection with the execution and delivery of the Notes. The Financial Advisor has not been engaged, nor have they undertaken, to audit, authenticate or otherwise verify the information set forth in the Official Statement, or any other related information available to the District, with respect to accuracy and completeness of disclosure of such information. The Financial Advisor has reviewed this Official Statement but makes no guaranty, warranty or other representation respecting accuracy and completeness of the information contained in this Official Statement. ABSENCE OF LITIGATION There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the best knowledge of the District, threatened against the District affecting the existence of the District or the titles of its directors or officers to their offices or seeking to restrain or to enjoin the sale or delivery of the Notes, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Notes, the Trust Agreement, the Master Agreement, the Installment Purchase Agreement or any action of the District contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement, or contesting the powers of the District or its authority with respect to the Notes or any action of the District contemplated by any of said documents, nor, to the knowledge of the District is there any basis therefor. There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body pending or, to the best knowledge of the District, threatened against the District contesting or affecting the ability of the District to collect amounts from which the Installment Payment is payable, or which would have a material adverse effect on the District’s ability to make the Installment Payment. FINANCIAL STATEMENTS The basic financial statements of the District included in Appendix A to this Official Statement have been audited by Mayer Hoffman McCann P.C., independent certified public accountants. See APPENDIX A – “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2009” herein. The District has received the Government Finance Officer’s Association Certificate of Achievement for “Excellence in Financial Reporting” for [13] consecutive years. The audited financial statements, including the footnotes thereto, should be reviewed in their entirety. Mayer Hoffman McCann P.C. has consented to the inclusion of its report as Appendix A but has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by Mayer Hoffman McCann P.C. with respect to any event subsequent to its report dated _________, 2009. TAX MATTERS The Internal Revenue Code of 1986 (the “Code”) imposes certain requirements that must be met subsequent to the issuance and delivery of the Notes for the interest component of the Installment Payment (the “Interest Component”), and the allocable portion thereof distributable in respect of each Note (the “Note Interest Distribution”), to be and remain excluded from the gross income of the owner thereof for federal income tax purposes. Noncompliance with such requirements could cause such amounts to be included in gross income for federal income tax purposes retroactive to the date of delivery of the Installment Purchase Agreement and the Notes. The District and the Corporation have covenanted in the Installment Purchase Agreement and in the Trust Agreement to maintain the exclusion pursuant to section 103(a) of the Code of the 85240462.7 50 Interest Component and the Note Interest Distribution from the gross income of the owners thereof for federal income tax purposes. Upon the delivery of the Notes, Fulbright & Jaworski L.L.P., Los Angeles, California, Special Counsel, will deliver its opinion that, under existing law, and assuming compliance with the aforementioned covenants, the Interest Component allocable to and the Note Interest Distributions in respect of a Note are excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes and will not be included in computing the alternative minimum taxable income of the owners thereof for federal income tax purposes. Further, on that same day Special Counsel will render its opinion, based solely on the foregoing, and upon existing provisions of the laws of California, that such Interest Component and Note Interest Distributions are exempt from personal income taxes of the State of California. Notice 94-84, 1994-2 C.B. 559, states that the Internal Revenue Service (the “Service”) is studying whether the stated interest portion of the payment at maturity on a short-term debt obligation (such as the Notes), that matures not more than one year from the date of issue, bears a stated fixed rate of interest and is described in section 103(a) of the Code, is (i) qualified stated interest that is excluded from the stated redemption price at maturity of the obligation (within the meaning of section 1273 of the Code) but is excluded from gross income pursuant to section 103(a) of the Code, or (ii) is not qualified stated interest and, therefore, is included by the taxpayer in the stated redemption price at maturity of the obligation, creating or increasing (as to that taxpayer) original issue discount on the obligation that is excluded from gross income pursuant to section 103(a) of the Code. Notice 94-84 states that until the Service provides further guidance with respect to tax-exempt short-term debt obligations, a taxpayer holding such obligations may treat the stated interest payable at maturity either as qualified stated interest or as included in the stated redemption price at maturity of the obligation. However, the taxpayer must treat the amounts to be paid at maturity on all tax-exempt short- term debt obligations in a consistent manner. Notice 94-84 does not address various aspects necessary to the application of the latter method (including, for example, the treatment of a holder acquiring its Note other than in the original public offering or at a price other than the original offering price). Each person considering acquiring the Notes should consult its own tax advisor with respect to the tax consequences of ownership of and of the election between the choices of treatment of the stated interest payable at maturity on the Notes. Special Counsel has not undertaken to advise in the future whether any events after the date of delivery of the Installment Purchase Agreement and the Notes may affect the tax status of the Interest Component and Note Interest Distributions. No assurance can be given that future legislation, or amendments to statutes of the State of California or of the United States, if enacted into law, will not contain provisions that could directly or indirectly reduce the benefit of the exemption of such amounts from personal income taxes of the State of California or of the exclusion of such amounts from the gross income of the owners of Notes for Federal income tax purposes. Furthermore, Special Counsel will express no opinion as to any federal, state, or local tax law consequences with respect to the Installment Purchase Agreement, Notes, Interest Component, or Note Interest Distributions, if any action is taken with respect to the Installment Purchase Agreement, the Notes, or the proceeds thereof, or the Trust Agreement permitted or predicated upon the advice or approval of counsel if such advice or approval is given by counsel other than Fulbright & Jaworski L.L.P. Although Special Counsel is of the opinion that Interest Component and Note Interest Distributions in respect of a Note are exempt from state personal income taxation and excluded from the gross income of the owner thereof for federal income tax purposes, an owner’s federal, state or local tax liability may be otherwise affected by the ownership or disposition of the Note. The nature and extent of these other tax consequences will depend upon the owner’s other items of income or deduction. Without limiting the generality of the foregoing, prospective purchasers of Notes should be aware that: (i) section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Notes or, in the case of a financial institution, that portion of an owner’s interest expense allocated to the Notes; (ii) with respect to insurance companies subject to the tax imposed by section 831 of the Code, section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15% of the sum of certain items, including Interest Component and Note Interest 85240462.7 51 Distributions in respect of Notes owned by such companies; (iii) Interest Component and Note Interest Distributions accrued in respect of Notes owned by certain foreign corporations doing business in the United States for federal income tax purposes could be subject to a branch profits tax imposed by section 884 of the Code; (iv) passive investment income, including Interest Component and Note Interest Distributions accrued in respect of Notes, accruing to a Subchapter S corporation that at the close of a taxable year has Subchapter C earnings and profits may be subject to federal income taxation under section 1375 of the Code if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income; (v) section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining the taxability of such benefits, Installments Interest and Note Interest Distributions accrued in respect of Notes owned by such recipients for federal income tax purposes; and (vi) under section 32(i) of the Code, receipt of investment income, including Interest Component and Note Interest Distributions accrued in respect of Notes, may disqualify the owner thereof from obtaining the earned income credit. Special Counsel has expressed no opinion regarding any such other tax consequences. Special Counsel’s opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the District and the Corporation described above. No ruling has been sought from the Service with respect to the matters addressed in the opinion of Special Counsel, and Special Counsel’s opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Notes is commenced, under current procedures the Service is likely to treat the District as the “taxpayer,” and the Owners would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest with respect to the Notes, the District may have different or conflicting interest from the Owners. Further, the disclosure of the initiation of an audit may adversely affect the market price of the Notes, regardless of the final disposition of the audit. The proposed form of opinion of Special Counsel is attached hereto as Appendix F. CONTINUING DISCLOSURE The District has covenanted for the benefit of holders and beneficial owners of the Notes to provide notices of the occurrence of certain enumerated events, if material. The notices of material events, if any, will be filed by the Dissemination Agent on behalf of the District with the Municipal Securities Rulemaking Board, with each Repository and with the State Repository, if any. See APPENDIX D – “FORM OF CONTINUING DISCLOSURE AGREEMENT.” This covenant has been made in order to assist the Initial Purchaser in complying with S.E.C. Rule 15c2-12 (the “Rule”). During the past five years, the District has never failed to comply in all material respects with any previous undertaking with respect to the Rule. RATINGS The Notes will be rated “________” by Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc. (“S&P”), and “________” by Fitch Ratings (“Fitch”). Such ratings reflect only the views of the rating agencies, and do not constitute a recommendation to buy, sell or hold the Notes. Explanation of the significance of such ratings may be obtained only from the respective organizations at: Standard & Poor’s Ratings Group, 55 Water Street, New York, New York 10041 and Fitch Ratings, One State Street Plaza, New York, New York 10004. There is no assurance that any such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by the respective rating agencies, if in the judgment of any such rating agency circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Notes. 85240462.7 52 PURCHASE AND REOFFERING ____________, (the “Initial Purchaser”) has purchased the Notes from the District at a competitive sale for a purchase price of $________________ (representing the aggregate principal amount of the Notes, plus a net original issue premium of $_____________, and less an Initial Purchaser discount of $___________). The public offering prices may be changed from time to time by the Initial Purchaser. The Initial Purchaser may offer and sell Notes to certain dealers and others at prices lower than the offering price shown on the cover page hereof. MISCELLANEOUS Included herein are brief summaries of certain documents and reports, which summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the District and the purchasers or Owners of any of the Notes. The execution and delivery of this Official Statement has been duly authorized by the District. ORANGE COUNTY SANITATION DISTRICT By: Chair of the Board of Directors 85240462.7 A-1 APPENDIX A COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2009 85240462.7 B-1 APPENDIX B THE COUNTY OF ORANGE – ECONOMIC AND DEMOGRAPHIC INFORMATION 85240462.7 C-1 APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS 85240462.7 D-1 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT 85240462.7 E-1 APPENDIX E BOOK-ENTRY SYSTEM The description that follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Notes, payment of principal and interest evidenced by the Notes to Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Notes, and other Note-related transactions by and between DTC, Participants and Beneficial Owners, is based on information furnished by DTC which the District and the Corporation each believes to be reliable, but the District and the Corporation take no responsibility for the completeness or accuracy thereof. The Depository Trust Company – Book-Entry System The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Notes”). The Notes will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered note will be issued for the Notes in the aggregate principal amount of such issue, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million 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 Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. The information on such websites is not incorporated herein by such reference or otherwise. Purchases of Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC’s records. The ownership interest of each actual purchaser of each 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 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 Notes, except in the event that use of the book-entry system for the Notes is discontinued. To facilitate subsequent transfers, all 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 85240462.7 E-2 authorized representative of DTC. The deposit of Notes with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 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 Notes may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Notes, such as prepayments, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Notes may wish to ascertain that the nominee holding the 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 registrar and request that copies of the notices be provided directly to them. Prepayment notices shall be sent to DTC. If less than all of the Notes within an issue are being prepaid, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be prepaid. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the 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 District 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 Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy). Prepayment proceeds, distributions, and dividend payments on the 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 Trustee on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, nor its nominee, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of prepayment proceeds, distributions, and dividend payments 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 Trustee, 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 Notes at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Notes are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Notes will be printed and delivered to DTC. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. 85240462.7 E-3 Discontinuance of DTC Services In the event (i) DTC determines not to continue to act as securities depository for the Notes, (ii) DTC shall no longer act and give notice to the Trustee of such determination or (iii) the District determines that it is in the best interest of the Beneficial Owners that they be able to obtain Notes and delivers a written certificate to the Trustee to that effect, DTC services will be discontinued. If the District determines to replace DTC with another qualified securities depository, the District shall prepare or direct the preparation of a new single, separate, fully registered Note for each of the maturities of the Notes, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace DTC then the Notes shall no longer be restricted to being registered in the certificate registration books in the name of Cede & Co., but shall be registered in such names as are requested in a certificate of the District, in accordance with the Trust Agreement. All Notes may be presented for transfer by the Owner thereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, on the books required to be kept by the Trustee pursuant to the provisions of the Trust Agreement, upon surrender of such Certifications for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. The Trustee may treat the Owner of any Note as the absolute owner of such Note for all purposes, whether or not such Note shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the interest and principal evidenced by such Note shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such Note to the extent of the sum or sums so paid. Whenever any Notes shall be surrendered for transfer, the Trustee shall execute and deliver new Notes representing the same principal amount in Authorized Denominations. The Trustee shall require the payment of any Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Notes may be presented for exchange at the Principal Office of the Trustee for a like aggregate principal amount of Notes of other Authorized Denominations. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee shall not be required to transfer or exchange any Note during the period in which the Trustee is selecting Notes for prepayment, nor shall the Trustee be required to transfer or exchange any Note or portion thereof selected for prepayment from and after the date of mailing the notice of prepayment thereof. 85240462.7 F-1 APPENDIX F FORM OF APPROVING OPINION OF SPECIAL COUNSEL Upon the execution and delivery of the Notes, Fulbright & Jaworski L.L.P., Los Angeles, California, Special Counsel to the District, will render its final approving opinion with respect to the Notes in substantially the following form: [Date of Delivery] Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708-7018 $_____________ Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B Ladies and Gentlemen: We have acted as Special Counsel in connection with the $___________ aggregate principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”) which evidence direct, fractional undivided interests of the Owners thereof in the installment payment (the “Installment Payment”), and the interest thereon, to be made by the Orange County Sanitation District (the “District”) pursuant to the Installment Purchase Agreement, dated as of December 1, 2009 (the “Installment Purchase Agreement”), by and between the District and the Orange County Sanitation District Financing Corporation (the “Corporation”). Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the “Master Agreement”), by and between the District and the Corporation, the District has established conditions and terms upon which obligations such as the Installment Payment and the interest thereon, will be incurred and secured. The Installment Payment under the Installment Purchase Agreement is payable from (i) Net Revenues as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the “Wastewater System”) remaining after payment of Maintenance and Operation Costs, and (ii) other lawfully available funds of the District. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Installment Purchase Agreement. The Notes are to be executed and delivered pursuant to a Trust Agreement, dated as of December 1, 2009 (the “Trust Agreement”), by and among the District, the Corporation and Union Bank, N.A., as trustee (the “Trustee”). Proceeds from the sale of the Notes will be used to (i) pay at maturity all of the Orange County Sanitation District Refunding Certificates of Participation, Series 2008C (Certificate Anticipation Notes), currently outstanding in the aggregate principal amount of $176,115,000, and (ii) pay the costs incurred in connection with the execution and delivery of the Notes. As Special Counsel, we have examined copies certified to us as being true and complete copies of the Master Agreement, the Trust Agreement and the Installment Purchase Agreement and the proceedings of the District in connection with the execution and delivery of the Notes. We have also examined such certificates of officers of the District, the Corporation and others as we have considered necessary for the purposes of this opinion. Based upon the foregoing, we are of the opinion that: 85240462.7 F-2 1. The Master Agreement, the Installment Purchase Agreement and the Trust Agreement each has been duly and validly authorized, executed and delivered by the District and, assuming the Master Agreement, the Installment Purchase Agreement and the Trust Agreement each constitutes the legally valid and binding obligation of the other parties thereto, enforceable against such parties in accordance with its respective terms, each constitutes the legally valid and binding obligation of the District, enforceable against the District in accordance with its respective terms. 2. Assuming due authorization, execution and delivery of the Trust Agreement and the Notes by the Trustee, the Notes are entitled to the benefits of the Trust Agreement. 3. The Internal Revenue Code of 1986 (the “Code”) imposes certain requirements that must be met subsequent to the execution and delivery of the Notes for the component of each payment designated as interest in the Installment Purchase Agreement (the “Payment Interest”), and the allocable portion thereof distributable in respect of each Note (the “Note Interest Distribution”), to be and remain excluded from the gross income of the owner thereof for federal income tax purposes. Noncompliance with such requirements could cause such amounts to be included in gross income of such owner for federal income tax purposes retroactive to the date of delivery of the Notes. The Corporation and the District have covenanted in the Trust Agreement, and the District has covenanted in the Installment Purchase Agreement, to maintain the exclusion pursuant to section 103(a) of the Code of the Payment Interest from the gross income of the owners thereof for federal income tax purposes. In our opinion, under existing law, and assuming compliance with the aforementioned covenant, the Payment Interest allocable to and the Note Interest Distributions in respect of a Note are excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes and will not be included in computing the alternative minimum taxable income of the owners thereof for federal income tax purposes. Further, based solely on the foregoing, and upon existing provisions of the California Revenue and Taxation Code, we are of the opinion that Payment Interest allocable to and the Note Interest Distributions in respect of a Note are not subject to taxation under the California personal income tax. We have not undertaken to advise in the future whether any events after the date of delivery of the Installment Purchase Agreement may affect the tax status of the Payment Interest or Note Interest Distributions. No assurance can be given that future legislation, if enacted into law, will not contain provisions that could directly or indirectly reduce the benefit of the exclusion of such amounts from the gross income of the owner of Notes for federal income tax purposes. Furthermore, we express no opinion as to any federal, state, or local tax law consequences with respect to the Installment Purchase Agreement, Notes, Payment Interest, or Note Interest Distributions, if any action is taken with respect to the Installment Purchase Agreement, the Master Agreement, the Trust Agreement, the Notes, or the proceeds thereof, permitted or predicated upon the advice or approval of counsel if such advice or approval is given by counsel other than us. Except as stated in the preceding three paragraphs, we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Installment Purchase Agreement or the Notes. We have not been requested to express, and do not express, any view as to the compliance by any person with federal and state securities laws. With the exception of the opinions expressed above, we have not been requested to express and do not express, any opinion as to any matter affected by any taxing or other law of the State of California. The rights of the owners of the Notes and the enforceability of the Notes, the Master Agreement, the Trust Agreement and the Installment Purchase Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. The enforceability of the 85240462.7 F-3 Notes, the Master Agreement, the Trust Agreement and the Installment Purchase Agreement is subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and to the limitations on legal remedies against governmental entities in California. No opinion is expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating to 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 and are not binding on the Internal Revenue Service; 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. Respectfully submitted, Fulbright & Jaworski L.L.P. Draft – 10/14/09 85240530.4 OFFICIAL NOTICE INVITING BIDS $__________∗ ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B (Book-Entry-Only) NOTICE IS HEREBY GIVEN that bids will be received by the Orange County Sanitation District (the “District”) for the purchase of $__________* original principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”). Bids for less than all of the Notes will not be accepted. The bids will be received in the form, at the place, and up to the time specified below (unless postponed as described herein): Date: Tuesday, November 10, 2009 11:30 a.m., New York Time Place: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708-7018 Electronic Bids: As an accommodation to bidders, electronic proposals may be submitted to Ipreo LLC; at www.newissuehome.i-deal.com and the Parity bid delivery system (the “Electronic Service”). The Electronic Service will act as agent of the bidder and not of the District in connection with the submission of bids and the District assumes no responsibility or liability for bids submitted through the Electronic Service. See “Information Regarding Electronic Proposals” herein. No Facsimile Bids: No bids will be accepted by facsimile. Terms of the Notes The Preliminary Official Statement for the Notes, dated October 30, 2009, including the cover page and all appendices thereto (the “Preliminary Official Statement”), provides certain information concerning the sale and delivery of $__________* aggregate principal amount of the Notes evidencing direct, undivided fractional interests in the Installment Payment (the “Installment Payment”), and the interest thereon, payable by the District pursuant to the Installment Purchase Agreement, dated as of December 1, 2009 (the “Installment Purchase Agreement”), by and between the District and the Orange County Sanitation District Financing Corporation (the “Corporation”). Each bidder must have obtained and reviewed the Preliminary Official Statement prior to bidding for the Notes. This Official Notice Inviting Bids contains certain information for quick reference only, is not a summary of the issue and governs only the terms of the sale of, bidding for and closing procedures with respect to the Notes. Bidders must read the entire Preliminary Official Statement to obtain information essential to making an informed investment decision. Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the “Master Agreement”), by and between the District and the Corporation, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon, will be incurred and secured. The Installment * Preliminary, subject to change. 85240530.4 2 Payment under the Installment Purchase Agreement is payable solely from Net Revenues, as provided in the Master Agreement and the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the “Wastewater System”) remaining after payment of Maintenance and Operation Costs. The Issue The proceeds from the sale of the Notes will be used to: (i) pay at maturity all of the Orange County Sanitation District Refunding Certificates of Participation, Series 2008C (Certificate Anticipation Notes) currently outstanding in the aggregate principal amount of $176,115,000 and (ii) pay the costs incurred in connection with the execution and delivery of the Notes. The Notes are to be executed and delivered pursuant to a Trust Agreement, dated as of December 1, 2009 (the “Trust Agreement”), by and among the District, the Corporation and Union Bank, N.A., as trustee (the “Trustee”). Capitalized terms not defined herein shall have the same definitions as used in the Trust Agreement or the Master Agreement. Authorization On October 28, 2009, the District and the Corporation authorized the execution and delivery of the Installment Purchase Agreement and the Trust Agreement in connection with the execution and delivery of the Notes. Outstanding Senior Obligations The District has outstanding Senior Obligations payable on a parity with the Installment Payment under the Installment Purchase Agreement. The term “Existing Senior Obligations” as used in the Preliminary Official Statement refers to the 2000 Installment Purchase Agreement, the 2003 Installment Purchase Agreement, the 2007A Installment Purchase Agreement, the 2007B Installment Purchase Agreement, the 2008A Installment Purchase Agreement, the 2008B Installment Purchase Agreement, the 2008C Installment Purchase Agreement and the 2009A Installment Purchase Agreement. Security and Source of Payments The Notes evidence direct, undivided fractional interests in the Installment Payment, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payment and the interest thereon and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided under the Installment Purchase Agreement, solely from Net Revenues and other funds as provided in the Installment Purchase Agreement. Net Revenues generally consist of all income and revenue received by the District from the operation or ownership of the Wastewater System remaining after payment of Maintenance and Operation Costs, all as further provided in the Master Agreement. The District’s obligation to make the Installment Payment from Net Revenues is on a parity with the District’s obligation to make payments with respect to its other outstanding obligations described as Senior Obligations and all Reimbursement Obligations with respect to Senior Obligations, as provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security for Senior Obligations pursuant to the Master Agreement. Pursuant to the Master Agreement, the District pledges all Net Revenues to the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations, and the Net Revenues will not be used for any other purpose while any of the Senior Obligations or Reimbursement Obligations with respect to 85240530.4 3 Senior Obligations remain unpaid; provided, however, that out of the Net Revenues there may be apportioned such sums for such purposes as are expressly permitted by the Master Agreement. This pledge constitutes a first lien on the Net Revenues for the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. The term Senior Obligations, generally means all revenue bonds or notes (including bond anticipation notes and commercial paper) of the District authorized, executed, issued and delivered under and pursuant to applicable law, the Installment Purchase Agreement and all other contracts (including financial contracts) or leases of the District authorized and executed by the District under and pursuant to applicable law, the installment, lease or other payments under which are, in accordance with the provisions of the Master Agreement, payable from Net Revenues on a parity with the payments under the Master Agreement. The District may at any time incur Subordinate Obligations; provided, however, that prior to incurring such Subordinate Obligations, the District will have determined that the incurrence thereof will not materially adversely affect the District’s ability to comply with the requirements of the Master Agreement. The District may at any time incur Reimbursement Obligations with respect to Subordinate Obligations. For a description of the District’s outstanding Senior Obligations and Subordinate Obligations, see “FINANCIAL OBLIGATIONS — Existing Indebtedness” in the Preliminary Official Statement. The District may, in connection with the incurrence of Subordinate Obligations, pledge Net Revenues to the payment of Subordinate Obligations and Reimbursement Obligations with respect to Subordinate Obligations; provided, however, that such pledge, and any lien created thereby, shall be junior and subordinate to the pledge of, and lien on, Net Revenues for the payment of Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. Pursuant to the Master Agreement, the District is required, to the extent permitted by law, to fix, prescribe and collect fees and charges for the services and facilities of the Wastewater System which will be at least sufficient to yield during each Fiscal Year (a) Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b) Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES — Rate Covenant” in the Preliminary Official Statement. Additional Obligations In addition to the Existing Senior Obligations, the District may at any time incur Obligations payable on a parity or on a subordinate basis to the payment by the District of the Installment Payment upon satisfaction of conditions provided in the Master Agreement. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES — Limitations on Issuance of Additional Obligations” in the Preliminary Official Statement. Book-Entry-Only The Notes will be executed and delivered in the form of fully registered certificates payable in lawful money of the United States of America. The Notes will be initially delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Notes. Individual purchases of the Notes will be made in book-entry form only. Purchasers of Notes will not receive 85240530.4 4 physical certificates representing their ownership interests in the Notes purchased. The Notes will be delivered in Authorized Denominations of $5,000 and any integral multiple thereof. Payments of principal and interest evidenced by the Notes are payable directly to DTC by the Trustee. Upon receipt of payments of such principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Notes. So long as the Notes are in the DTC book-entry system, the interest, principal and prepayment premiums, if any, due with respect to the Notes will be payable by the Trustee, or its agent, to DTC or its nominee. Principal and Interest Payments The Notes will mature on December __, 2010 (the “Maturity Date”). The District expects the principal of and interest on the Notes to be paid from proceeds of the sale, prior to the Maturity Date, of a future series of certificates of participation, notes or other obligations of the District. The sale and delivery of a future series of certificates of participation, notes or other obligations of the District will depend on market conditions, certain approvals by the District and the Corporation and other factors. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” in the Preliminary Official Statement. No Prepayment The Notes are not subject to prepayment prior to their maturity. Interest Rates, Reoffering Prices, and Premium Bids Bidders must bid to purchase all and not part of the Notes and must submit their bids on the Official Bid Form. Bidders must specify a rate of interest for the Notes, expressed in multiples of one- eighth (1/8) or one-twentieth (1/20) of one percent (1%); provided, that the interest rate cannot exceed 3.5% per annum. The successful bidder will, within 30 minutes after being notified of the award of the Notes, advise the District of the initial bona fide public reoffering prices of the Notes on the date of award. The successful bidder will also be required, prior to delivery of the Notes, to furnish to the District a certificate (“Bidder’s Certificate”) acceptable to Special Counsel, which states with respect to the Notes that such successful bidder either (A) has purchased the Notes for its own account and not with a view to distribution or resale and not in the capacity of a bond house, broker or other intermediary and the price at which such purchase was made, or (B) (1) has made a bona fide public offering to the public of each of the Notes at the prices indicated in the information supplied on the date of the award, and (2) an amount at least equal to 10 percent of the Notes was sold to the public at the price indicated on the date of the award, with the exception, if any, identified in such Bidder’s Certificate, as to which such certificate shall explain the reasons why at least 10 percent of the Notes were not sold to the public at the price indicated on the date of the award. For the purposes of the information submitted on the date of the award and the Bidder’s Certificate, the “public” does not include bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers. In making such representations, the successful bidder must reflect the anticipated existence, if any, of a “derivative product” (e.g., a tender option) offered or to be offered by the bidder or its affiliate in connection with the initial sale of any of the Notes. The successful bidder may also be asked by Special Counsel to clarify any discrepancies between the Bidder’s Certificate and publicly available information relating to trades of the Notes and to explain the failure to sell at least 10% of the Notes to the public at the price indicated on the date of the award. 85240530.4 5 Bidders may bid to purchase Notes from the District with a premium; however, no bid will be considered if the bid is to purchase Notes at an aggregate price less than 100% or more than 102.5% of the aggregate principal amount of the Notes. No bid will be accepted which contemplates the waiver of any interest or other concession by the bidder as substitute for payment in full of the purchase price. Bids which do not conform to the terms of this section may be rejected. See “Right to Reject Bids, Waive Irregularities” below. No Insurance THE SUCCESSFUL BIDDER MAY NOT PURCHASE MUNICIPAL BOND INSURANCE FOR ANY OF THE NOTES. Form of Bid BIDS FOR LESS THAN ALL OF THE NOTES WILL NOT BE ACCEPTED. Each bid must be on the Official Bid Form. All electronic proposals shall be deemed to incorporate the provisions of the Official Bid Form and must be unconditional and irrevocable. In addition, each bidder is requested to supply an estimate of the true interest cost resulting from its bid, computed as prescribed below under the caption “Award, Delivery and Payment,” which shall be considered as informative only and not binding on either the bidder or the District. Each bid must be in accordance with the terms and conditions set forth in this Official Notice Inviting Bids. The District will make its best efforts to accommodate the electronic bids; however, the District, the Financial Advisor (Public Resources Advisory Group) and Special Counsel assume no responsibility for any error contained in any electronic bid, or for the failure of any electronic bid to be transmitted or received at the official time for receipt of such bids. The official time for receipt of bids will be determined by the District at the place of the bid opening, and the District shall not be required to accept the time kept by Electronic Service as the official time. The District assumes no responsibility for informing any bidder prior to the deadline that its bid is incomplete, or not received. If multiple timely bids are received from a single bidder the District shall accept the best of such bids and each bidder agrees by submitting any bid to be bound by its best bid. Adjustments of Principal Amounts after Receipt of Bids The principal amount of the Notes set forth in the Official Bid Form reflects an estimate of the District as to the likely interest rate of the winning bid and the premium contained in the winning bid. After selecting the winning bid, the principal amount of the Notes will be adjusted in $5,000 increments, to reflect the actual interest rates and any premium in the winning bid to generate a dollar amount bid of $_____________ while maintaining the same “per Note” purchaser’s discount and original issue premium, if any, provided in such bid. Any such adjustment will be communicated to the winning bidder within 24 hours after receipt of such bid by the District. Changes in the principal amount of the Notes made as described in this paragraph will not affect the determination of the winning bidder or give the winning bidder any right to reject the Notes. Information Regarding Electronic Proposals Electronic proposals must be submitted through the Electronic Service. If any provision of this Official Notice Inviting Bids conflicts with information provided by the Electronic Service, this Official Notice Inviting Bids shall control. The District is not responsible for the proper operation of, and shall 85240530.4 6 have no liability for any delays or interruptions of or any damages caused by the Electronic Service. The District is using the Electronic Service as a communication mechanism and not as the District’s agent to conduct electronic bidding for the Notes. The District is not bound by any advice of or determination by the Electronic Service to the effect that any particular bid complies with the terms of this Official Notice Inviting Bids. All costs and expenses incurred by prospective bidders in connection with their submission of bids through the Electronic Service are the sole responsibility of such bidders and the District is not responsible for any such costs or expenses. Further information about the Electronic Service, including any fee charged, may be obtained from Ipreo LLC, 1359 Broadway, Second Floor, New York, NY 10018 (212-849-5021). The District assumes no responsibility or liability for bids submitted through the Electronic Service. The District shall be entitled to assume that any bid submitted through the Electronic Service has been made by a duly authorized agent of the bidder. Bid Security Deposit The successful bidder will be required to wire $1,750,000 in immediately available federal funds to the District as a bid security deposit within two (2) hours after verbal award of the bid. The District, or its representative, will contact the successful bidder to provide wire instructions for the bid security deposit. The bid security deposit shall be held in an escrow fund or account or a similar fund and applied to the purchase price of the Notes at the time of delivery of the Notes. If after the award of the Notes, the successful bidder fails to complete the purchase on the terms stated in its proposal, unless such failure of performance shall be caused by any act or omission of the District, the bid security deposit shall be retained by the District as stipulated liquidated damages. No interest will be paid upon the bid security deposit. Official Statement The District has approved a Preliminary Official Statement for the Notes, dated the date of this Official Notice Inviting Bids, which the District has “deemed final” for purposes of Rule 15c2-12 promulgated by the Securities and Exchange Commission, as amended (the “Rule”), although subject to revision, amendment and completion in conformity with the Rule. The District will provide the successful bidder such reasonable number of printed copies of the final Official Statement as such bidder may reasonably request no later than seven business days after the day the Notes are awarded. Up to 100 copies of the final Official Statement will be furnished without cost to the successful bidder and further copies, if desired, will be made available at the successful bidder’s expense. The successful bidder shall file the final Official Statement with a nationally recognized municipal securities information repository on a timely basis. The successful bidder shall, by accepting the award, agree at all times to comply with the provisions of the Rule and with all applicable rules of the Municipal Securities Rulemaking Board. Award, Delivery and Payment If satisfactory bids are received, the Notes will be awarded to the highest responsible bidder not later than two hours after the time established for the receipt of bids. The highest bidder shall be the bidder submitting the best price for the Notes, which best price shall be that resulting in the lowest true interest cost with respect to the Notes. The true interest cost shall be computed by doubling the semi- annual interest rate compounded semi-annually on the Notes necessary to discount the Installment Payment from the Maturity Date to the date of the Notes and to the price bid. If two or more bidders have bid the same true interest cost, the award shall be made at the sole discretion of the District. Delivery of the Notes is expected to occur on or about December __, 2009. The Notes will be delivered through the facilities of DTC, New York, New York. The successful bidder shall pay for the Notes on the date of delivery in Los Angeles, California in immediately available federal funds. Any 85240530.4 7 expenses of providing federal funds shall be borne by the purchaser. Payment on the delivery date shall be made in amount equal to the price bid for the Notes less the amount of the bid security deposit. Right to Reject Bids, Waive Irregularities The District reserves the right to reject any and all bids and to the extent permitted by law to waive any irregularity or informality in any bid. CUSIP Number It is anticipated that CUSIP number will be printed on the Notes, but the District will assume no obligation for the assignment or printing of such number on the Notes or for the correctness of such number, and neither the failure to print such number on any Note nor any error with respect thereto shall constitute cause for a failure or refusal by the purchasers thereof to accept delivery of and make payment for the Notes. The cost for the assignment of CUSIP number to the Notes will be the responsibility of the successful bidder. California Debt and Investment Advisory Commission The successful bidder will be required to pay all fees due to the California Debt and Investment Advisory Commission (“CDIAC”) under California law. CDIAC will invoice the successful bidder after the delivery of the Notes. Legal Opinions The District will furnish to the successful bidder at the closing of the Notes, the legal opinion of Special Counsel to the effect that, in the opinion of Special Counsel, based upon 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, the interest component of the Installment Payment and the allocable portion thereof distributable in respect of each Note is excluded from gross income for federal income tax purposes under section 103 of the Internal Revenue Code of 1986 and is not a specific preference item for purposes of the federal alternative minimum tax and is exempt from State of California personal income taxes. Special Counsel will express no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Notes. Change in Tax Exempt Status At any time before the Notes are tendered for delivery, the successful bidder may disaffirm and withdraw its proposal if the interest on the same type and character as that evidenced by the Notes (as determined by Special Counsel) shall be declared to be includable in gross income under federal income tax laws, either by a ruling of the Internal Revenue Service or by a final decision of any federal court, or shall be declared taxable by the terms of any federal income tax law enacted subsequent to the date of this Official Notice Inviting Bids. Closing Documents The District will furnish to the successful bidder at the time of delivery of the Notes: (1) a certificate certifying (i) that as of and at the time of delivery of the Notes, there is no action, suit, proceeding or investigation, pending or, to the best knowledge of the District, threatened against or affecting the District, (A) which affects or seeks to prohibit, restrain or enjoin the execution and delivery of the Notes or the Trust Agreement, (B) in any way contesting the validity of the Notes, the Installation 85240530.4 8 Purchase Agreement or the Trust Agreement or the powers of the District to enter into or perform its obligations under such documents to which it is a party or the existence of the District, or (C) wherein an unfavorable decision, ruling or finding would materially and adversely affect the District, or the validity or enforceability of the Notes, the Installation Purchase Agreement or the Trust Agreement or the ability of the District to perform its obligations under such documents to which it is a party, (ii) that the Preliminary Official Statement did not on the date of sale of the Notes and the Official Statement does not on the date of delivery contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading, and (2) a receipt of the District showing that the purchase price of the Notes has been received by the District. Continuing Disclosure To assist the successful bidder in complying with the Rule, the District will undertake, pursuant to the Continuing Disclosure Agreement, to provide notices of the occurrence of certain events, if material. A description of the Continuing Disclosure Agreement is set forth in the Preliminary Official Statement and will be set forth in the final Official Statement. Additional Information Electronic copies of the Trust Agreement, the Installment Purchase Agreement, the Master Agreement, this Official Notice Inviting Bids, the Official Bid Form, and the Preliminary Official Statement will be furnished to any potential bidder upon request made to the District’s Financial Advisor at: Public Resources Advisory Group, 11845 West Olympic Boulevard, Suite 640, Los Angeles, CA 90064, (310) 477-8487, via e-mail at lchoi@pragla.com. Right to Modify or Amend The District reserves the right to modify or amend this Official Notice Inviting Bids, including but not limited to the right to adjust and change the principal amount of the Notes being offered; provided, however, that such notifications or amendments shall be made not later than November 9, 2009, by 3:00 p.m., New York Time and communicated through Thomson Municipal Market Monitor (available at http://www.tm3.com) and by facsimile transmission to any qualified bidder timely requesting such notice. Bidders are required to bid upon the Notes as so modified. Cancellation or Postponement The District reserves the right to cancel or postpone, from time to time, the date established for the receipt of bids for any reason at any time. Any such postponement will be announced by Thomson Municipal Market Monitor. If any date fixed for the receipt of bids and the sale of the Notes is postponed, any alternative sale date will be announced via Thomson Municipal Market Monitor at least 24 hours prior to such alternative sale date and will be provided by facsimile transmission to any qualified bidder timely requesting such notice. On any such alternative sale date, any bidder may submit a sealed bid for the purchase of the Notes in conformity in all respects with the provisions of this Official Notice Inviting Bids except for the date of sale and except for the changes announced by Thomson Municipal Market Monitor at the time the sale date and time are announced. Dated: October 30, 2009 85240530.4 OFFICIAL BID FORM $__________∗ ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2009B November 10, 2009 Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708-7018 Attn: Lorenzo Tyner Ladies and Gentlemen: We hereby offer to purchase all of the $__________* aggregate principal amount of the Orange County Sanitation District (the “District”) Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”), more particularly described in your Official Notice Inviting Bids, dated October 29, 2009, which is incorporated herein by reference, and made a part thereof, at a purchase price of $_________________ (which purchase price is not less than __% or more than ___% of the aggregate principal amount of the Notes). This offer is for Notes evidencing interest at the rate per annum of __%. The bid is subject to acceptance not later than two hours after the expiration of the time established for the final receipt of bids. Our calculation of the true interest cost, which is considered to be informative only and not a part of the bid, is ________%. We have noted that payment of the purchase price is to be made in immediately available Federal Funds at the time of delivery of the Notes. If we are the successful bidder, we will (1) within one hour after being notified of the verbal award of the Notes, advise the District of the initial public offering price of the Notes; (2) within two hours after being notified of the verbal award of the Notes, wire $___________ in immediately available federal funds as a bid security deposit, to an account specified by the District or its representative, in accordance with the Official Notice Inviting Bids, dated October 29, 2009; and (3) prior to delivery of the Notes, furnish a certificate, acceptable to Special Counsel, Fulbright & Jaworski L.L.P., as to the “issue price” of the Notes within the meaning of Section 1273 of the Internal Revenue Code of 1986. * Preliminary, subject to change. 85240530.4 2 We represent that we have full and complete authority to submit this bid on behalf of our bidding syndicate and the undersigned will serve as the lead manager for the group if the Notes are awarded pursuant to this bid. We certify (or declare) under penalty of perjury under the laws of the State of California that this proposal is genuine, and not a sham or collusive, nor made in the interest of or on behalf of any person not herein named, and that the bidder has not directly or indirectly induced or solicited any other bidder to put in a sham bid or any other person, firm or corporation to refrain from bidding, and that the bidder has not in any manner sought by collusion to secure for himself an advantage over any other bidder. Respectfully Submitted, Account Manager: By: Address: City: State: Telephone: Following (or attached) is a list of the members of our account on whose behalf this bid is made. Fulbright & Jaworski L.L.P. Draft – 10/20/09 85241468.5 NOTICE OF INTENTION TO SELL $_____________∗ Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2009B NOTICE IS HEREBY GIVEN that the Orange County Sanitation District (the “District”) intends to receive sealed bids and electronic bids until 11:30 a.m., New York time, on Tuesday, November 10, 2009, through the use of an electronic bidding service offered by Ipreo LLC; at www.newissuehome.i- deal.com and the Parity bid delivery service, for the purchase of all of the District’s Revenue Refunding Certificate Anticipation Notes, Series 2009B (the “Notes”), dated as of the date of initial delivery, and maturing on such dates as described in the related Official Notice Inviting Bids (the “Notice”). No bids will be accepted by facsimile. Bids for less than all of the Notes will not be accepted. The District reserves the right to postpone the date established for the receipt of bids as more fully described under the paragraph “Cancellation or Postponement” in the Notice. NOTICE IS HEREBY FURTHER GIVEN that electronic copies of the Notice and the Preliminary Official Statement issued in connection with the sale of the Notes may be obtained from the District’s financial advisor, Public Resources Advisory Group, 11845 West Olympic Boulevard, Suite 640, Los Angeles, California 90064, (310) 477-8487, via e-mail: lchoi@pragla.com. Orange County Sanitation District Dated: October 28, 2009 ∗ Preliminary, subject to change. Page 1 BOARD OF DIRECTORS Meeting Date To Bd. of Dir. 10/28/09 AGENDA REPORT Item Number Item Number 14 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Director of Engineering Project Manager: Andy DaSilva SUBJECT: PLANT NO. 2 PRIMARY CLARIFIER SWEEP MECHANISM REPAIRS, PROJECT NO. FE09-03-R GENERAL MANAGER'S RECOMMENDATION 1. Authorize the General Manager to competitively bid and subsequently award a facility repair contract to the lowest responsive and responsible bidder for the Plant No. 2 Primary Clarifier Sweep Mechanism Repairs, Project No. FE09-03-R, for an amount not to exceed $1,400,000, and, 2. Approve a contingency of $280,000 (20%). SUMMARY • While conducting construction work inside a Plant No. 2 primary clarifier, staff discovered severe corrosion damage to the steel structure of the clarifier arms and associated components. • Emergency repairs were conducted on that clarifier and an inspection of all clarifiers were undertaken. • The inspection revealed severe corrosion on most Plant No. 2 clarifiers and that urgent repairs were required. • This is an urgent repair project that will replace and repair the corroded steel clarifier scraper arms inside eleven clarifiers at the Plant No. 2 Primary Clarifiers. Work elements include tank dewatering and cleaning, structural steel replacement, sand blasting of new steel, and spraying of protective coating. • Due to the construction of Headworks Improvements at Plant No. 2, Job No. P2-66, coordination with Primary Treatment Rehabilitation/ Refurbishment, Job No. P2-80, and providing reliable plant operations for the rainy season, we need to complete the primary clarifier repair work as fast as possible. The repair work must be completed between February and July 2010. Page 2 • Staff estimates that repairs will range between $1,000,000 and $1,400,000. The project award is based on unit prices for steel, welding, painting, among other services. Repair and replacement work will be directed and inspected by staff. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION This repair project complies with authority levels of the Sanitation District’s Delegation of Authority. This item has been budgeted (2009-2010 and 2010-2011 Budget Update, Appendix Page A-11, Item 112 (SP-34). Award Date: 10/28/09 Contract Amount: $1,400,000 Contingency: $280,000 (20%) JDH:AD:ct H:\dept\agenda\Board Agenda Reports\2009 Board Agenda Reports\1009\Item 14.FE09-03-R.docx