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<br />Attachment III <br /> <br />Summary of Principal Legal Documents <br /> <br />Indenture of Trust <br /> <br />This document establishes a trust estate for the benefit of bond investors. It <br />establishes a lien on installment purchase payments received by the Redwood <br />City Public Financing Authority (the "Authority") for the payment of interest on <br />and the principal of bonds issued by the Authority to advance the purchase price <br />of the recycled water improvements to the City. The trust indenture serves as a <br />contract with bondholders. It fixes the denominations, payment terms, and <br />similar such terms of the bonds, establishes a pledge of installment purchase <br />contract revenues as security for the bonds, establishes covenants of the <br />Authority, establishes events of default, remedies of bondholders, duties of the <br />trustee, bond redemption provisions, and miscellaneous other provisions relating <br />to the bonds and the security therefor. <br /> <br />Installment Purchase Contract <br /> <br />This is the agreement whereby the Authority agrees to permit the use of the bond <br />proceeds for the acquisition of the project, the Authority appoints the City as its - <br />agent in connection with the acquisition of the project, the Authority sells the <br />project to the City, and the City agrees to make installment purchase payments, <br />together with interest thereon, in satisfaction of the purchase price of the project. <br />I nstallment purchase payments are a special fund obligation of the City's water <br />fund, and, pursuant to the Installment Purchase Contract, the City pledges water <br />fund Net Revenues in satisfaction of its annual payment obligations. The <br />Installment Purchase Contract is assigned to the bond trustee as security for the <br />bonds. The Installment Purchase Contract places a first priority lien on the Net <br />Revenues of the water system enterprise, establishes certain performance, <br />financial and other covenants of the City, including a promise to establish rates <br />annually in an amount sufficient to produce annual Net Revenues that exceed <br />annual debt service by 120%, establishes the conditions under which additional <br />bonds secured by the water system Net Revenues may be sold, establishes <br />certain financial and other duties of the City in connection with the operation and <br />maintenance of the water system enterprise, and establishes events of default <br />and the remedies therefor. <br /> <br />Preliminary Official Statement <br /> <br />The preliminary official statement is the primary disclosure document provided to <br />investors in connection with the Authority's issuance of bonds. Disclosure of <br />these risks is a prudent and necessary condition to the issuance of bonds. It <br />discloses material information regarding the City, the water system enterprise <br />and the Authority, the authority for and purpose of the bonds, the project to be <br /> <br />AIII-1 <br />