Contract analysis

ARTICLE I — DEFINITIONS AND INTERPRETATION

Section 1.01 — Definitions As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings assigned to them in the Indenture. "Agreement" means this Debt-Service Reserve Fund Surety Bond Agreement, dated as of October 24, 2023, among CSIA, the Trustee, and Olympia Guaranty, as the same may be

Section 1.02 — Rules of Interpretation (a) All terms defined in the Indenture and used but not defined herein shall have the meanings assigned to them in the Indenture. (b) References in this Agreement to Articles, Sections, and Exhibits are references to Articles and Sections of, and Exhibits to, this Agreement, unless the context otherwise requires. (c) The headings and captions in this Agreement are inserted for c

Section 1.03 — Exhibits The following Exhibits are attached to and incorporated by reference in this Agreement: • Exhibit A — Copy of Surety Bond (Surety Policy No. OG-2023-MUN-4718) • Exhibit B — Form of Demand for Payment • Exhibit C — Form of Replenishment Certificate • Exhibit D — Form of Annual Premium Invoice

ARTICLE II — ISSUANCE AND DEPOSIT OF SURETY BOND

Section 2.01 — Issuance of Surety Bond Olympia Guaranty has heretofore issued and delivered to the Trustee the Surety Bond, identified as Surety Policy No. OG-2023-MUN-4718, in the Surety Amount of $11,610,000. The Surety Bond is irrevocable and unconditional and constitutes a direct and primary obligation of Olympia Guaranty, payable upon a conforming Demand for Payment submitted by the Trustee in accordance with Ar

Section 2.02 — Deposit with Trustee The Trustee hereby acknowledges receipt of the original executed Surety Bond and agrees to hold the Surety Bond as part of the Debt Service Reserve Fund established under the Indenture for the benefit of the holders of the Bonds. The Surety Bond shall be maintained by the Trustee in a secure and segregated manner in accordance with its customary procedures for the safekeeping of va

Section 2.03 — Available Amount The "Available Amount" under the Surety Bond at any time shall equal the Surety Amount ($11,610,000) less the aggregate amount of all unreimbursed Draws then outstanding. The Available Amount represents the maximum amount that Olympia Guaranty is obligated to pay upon any Demand for Payment at such time. The Trustee shall maintain records reflecting the current Available Amount and sha

Section 2.04 — Surety Bond as Permitted Investment The parties acknowledge and agree that the Surety Bond constitutes a "Permitted Investment" of the Debt Service Reserve Fund under Article VI of the Indenture and satisfies the credit quality, form, and other requirements set forth therein for surety bonds deposited in the Debt Service Reserve Fund. The parties further acknowledge that the Surety Bond constitutes a "

Section 3.01 — Events Permitting a Draw The Trustee shall make a Demand for Payment under the Surety Bond only upon the occurrence of a deficiency in the Bond Fund on an Interest Payment Date (April 1 or October 1 of each year) or a principal payment date (October 1 of each year in which a principal installment is due), such that the amounts on deposit in the Bond Fund, together with all other amounts available to th

Section 3.02 — Form and Delivery of Demand for Payment Each Demand for Payment by the Trustee under the Surety Bond shall be submitted to Olympia Guaranty substantially in the form attached hereto as Exhibit B and shall be signed by the Trust Officer or another duly authorized officer of the Trustee. Each Demand for Payment shall specify the following: (a) The amount demanded (which shall not exceed the Available Amo

Section 3.03 — Payment by Olympia Guaranty Upon receipt of a conforming Demand for Payment delivered in accordance with Section 3.02, Olympia Guaranty shall pay the amount specified therein by wire transfer in immediately available funds to the Trustee's Bond Fund account as designated in the Demand for Payment. Such payment shall be made no later than 12:00 p.m. (New York City time) on the Business Day immediately p

Section 3.04 — Partial Draws Multiple Draws may be made under the Surety Bond from time to time, provided that the aggregate of all unreimbursed Draws outstanding at any time does not exceed the Surety Amount of $11,610,000. Each Draw shall reduce the Available Amount under the Surety Bond dollar-for-dollar by the amount of such Draw. The Trustee shall maintain accurate records of all Draws made and all reimbursement

Section 3.05 — Draw Upon Acceleration In the event that an Event of Default under the Indenture has occurred and is continuing and the outstanding principal of the Series 2023A Bonds has been declared immediately due and payable in accordance with the acceleration provisions of the Indenture, the Trustee may make a Demand for Payment under the Surety Bond in an amount up to, but not exceeding, the Available Amount at

Section 3.06 — Trustee's Duty to Draw The Trustee shall make a Demand for Payment under the Surety Bond before applying any other moneys or investments then on deposit in the Debt Service Reserve Fund (if any) to cure a deficiency in the Bond Fund. The Surety Bond shall be the first source of DSRF funds applied to any debt-service shortfall on the Series 2023A Bonds. To the extent cash or Permitted Investments are on

Section 4.01 — Amount of Annual Premium CSIA shall pay to Olympia Guaranty an Annual Premium of $23,220 for the Surety Bond, calculated as 0.20% of the Surety Amount ($11,610,000 × 0.0020 = $23,220 per annum). The Annual Premium shall remain fixed at $23,220 per annum throughout the term of the Surety Bond, regardless of any changes in the outstanding principal amount of the Bonds, any Draws made under the Surety Bon

Section 4.02 — Premium Payment Dates The initial Annual Premium of $23,220 shall be due and payable on the Closing Date (October 24, 2023) and shall cover the premium period from October 24, 2023 through October 23, 2024. CSIA acknowledges that the initial Annual Premium has been paid to Olympia Guaranty on the Closing Date from a portion of the proceeds of the Bonds, as provided in the Indenture. Subsequent installm

Section 4.03 — Payment Instructions All premium payments under this Article IV shall be made by CSIA by wire transfer of immediately available funds to such account of Olympia Guaranty as Olympia Guaranty may designate in writing to CSIA from time to time. The initial wire transfer instructions for premium payments are set forth in the Form of Annual Premium Invoice attached hereto as Exhibit D. Olympia Guaranty shal

Section 4.04 — Late Payment If any installment of the Annual Premium is not received by Olympia Guaranty within thirty (30) days of the applicable Premium Payment Date, interest shall accrue on the unpaid amount at the rate of 1.0% per month (or the maximum rate permitted by applicable law, whichever is less) from and including the applicable Premium Payment Date to but not including the date on which such payment is

Section 4.05 — Source of Premium Payments The Annual Premium payable by CSIA under this Article IV is an Operation and Maintenance Expense of CSIA's water treatment system under the flow-of-funds provisions of the Indenture and the Revenue Pledge Agreement. As such, premium payments are senior in the flow of funds to debt-service payments on the Bonds and all other Parity Obligations. CSIA shall pay the Annual Premiu

ARTICLE V — REIMBURSEMENT OBLIGATIONS

Section 5.01 — CSIA's Obligation to Reimburse CSIA hereby unconditionally and irrevocably agrees to reimburse Olympia Guaranty for all amounts paid by Olympia Guaranty under the Surety Bond pursuant to any Demand for Payment, together with interest thereon as provided in Section 5.02 hereof. Each such reimbursement shall be due and payable within thirty (30) days following receipt by CSIA of written notice from Olymp

Section 5.02 — Interest on Unreimbursed Draws Unreimbursed Draw amounts shall bear interest from the date of payment by Olympia Guaranty to the Trustee until the date of full reimbursement by CSIA at a rate equal to the Bond rate (3.25% per annum) plus 2.00%, resulting in an interest rate of 5.25% per annum. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months (30/360 basis)

Section 5.03 — Reinstatement Upon Reimbursement Upon full reimbursement by CSIA of any Draw, including the payment of all accrued interest thereon as provided in Section 5.02, the Available Amount under the Surety Bond shall be automatically reinstated to the extent of the principal amount so reimbursed (without giving effect to the interest component of such payment). For the avoidance of doubt, upon reinstatement,

Section 5.04 — Priority of Reimbursement Obligations Reimbursement Obligations of CSIA under this Article V constitute Operation and Maintenance Expenses under the Indenture for purposes of the flow-of-funds provisions thereof. As such, Reimbursement Obligations are payable from CSIA's operating revenues prior to the application of Net Pledged Revenues to debt-service payments on the Bonds and other Parity Obligation

Section 5.05 — Application of Payments All payments received by Olympia Guaranty from CSIA in respect of Reimbursement Obligations shall be applied in the following order of priority: (a) First, to accrued and unpaid interest on unreimbursed Draws, in chronological order of the Draws to which such interest relates (with the earliest unreimbursed Draw satisfied first); and (b) Second, to the principal amount of unreim

ARTICLE VI — REPRESENTATIONS AND WARRANTIES

Section 6.01 — Representations of CSIA CSIA hereby represents and warrants to Olympia Guaranty and the Trustee, as of the date hereof, as follows: (a) CSIA is a Washington State governmental instrumentality and public body corporate, duly created and validly existing under and by virtue of Chapter 43.160A RCW, with full legal capacity to own property, incur obligations, and conduct its affairs as presently conducted.

Section 6.02 — Representations of Olympia Guaranty Olympia Guaranty hereby represents and warrants to CSIA and the Trustee, as of the date hereof, as follows: (a) Olympia Guaranty is a financial guaranty insurance corporation duly organized, validly existing, and in good standing under the laws of the State of New York, and has all requisite corporate power and authority to conduct its business as presently conducted

Section 6.03 — Representations of the Trustee PNTC hereby represents and warrants to CSIA and Olympia Guaranty, as of the date hereof, as follows: (a) PNTC is a national banking association duly organized and validly existing under the laws of the United States of America, with full power and authority to act as Trustee under the Indenture and to enter into and perform its obligations under this Agreement. (b) PNTC h

Section 7.01 — Covenants of CSIA CSIA hereby covenants and agrees with Olympia Guaranty and the Trustee as follows for so long as the Surety Bond remains in effect and any Reimbursement Obligations remain outstanding: (a) Rate Covenant Maintenance. CSIA shall set, impose, charge, and collect rates, fees, and charges for the use of and services provided by its water treatment system in amounts sufficient to produce Ne

Section 7.02 — Covenants of the Trustee The Trustee hereby covenants and agrees with CSIA and Olympia Guaranty as follows: (a) The Trustee shall safeguard the Surety Bond and maintain it in a secure location in accordance with its customary procedures for the safekeeping of valuable documents. The Trustee shall not surrender, release, modify, amend, or permit the cancellation of the Surety Bond without the prior writ

Section 7.03 — Covenants of Olympia Guaranty Olympia Guaranty hereby covenants and agrees with CSIA and the Trustee as follows: (a) Olympia Guaranty shall honor all conforming Demands for Payment submitted by the Trustee in accordance with the terms of the Surety Bond and Section 3.03 hereof, subject to the limitations set forth in Article III. (b) Olympia Guaranty shall use commercially reasonable efforts to maintai

Section 8.01 — Termination Events This Agreement and the Surety Bond shall terminate upon the earliest to occur of the following events: (a) Payment in full of all principal of and interest on the Series 2023A Bonds (whether at the final scheduled maturity date of October 1, 2053, upon earlier optional or mandatory redemption, or otherwise); (b) Delivery to the Trustee of a substitute credit facility (in the form of

Section 8.02 — Survival of Reimbursement Obligations Notwithstanding the termination of this Agreement and the Surety Bond, CSIA's Reimbursement Obligations under Article V hereof shall survive such termination with respect to any Draws paid by Olympia Guaranty prior to the effective date of termination. Interest on unreimbursed Draws shall continue to accrue at the rate specified in Section 5.02 from the date of pay

Section 8.03 — Return of Surety Bond Upon termination of this Agreement and the Surety Bond in accordance with Section 8.01, the Trustee shall promptly (and in any event within ten (10) Business Days following the effective date of termination) return the original Surety Bond to Olympia Guaranty, with a notation thereon stating "CANCELLED" and the date of cancellation, signed by the Trust Officer. Upon receipt of the

ARTICLE IX — EVENTS OF DEFAULT AND REMEDIES

Section 9.01 — Events of Default by CSIA Each of the following events shall constitute an "Event of Default" by CSIA under this Agreement: (a) Failure by CSIA to pay the Annual Premium within sixty (60) days of the applicable Premium Payment Date (a "Premium Default"), as described in Section 4.04 hereof; (b) Failure by CSIA to reimburse Olympia Guaranty for any Draw within the thirty (30) day period specified in Sec

Section 9.02 — Remedies of Olympia Guaranty Upon the occurrence and during the continuance of an Event of Default by CSIA under Section 9.01, Olympia Guaranty shall have the following remedies, which remedies are cumulative and not exclusive: (a) Olympia Guaranty may give written notice to CSIA (with a copy to the Trustee) specifying the Event of Default and requiring CSIA to cure such Event of Default within any app

Section 9.03 — Trustee Remedies Nothing in this Agreement shall limit, restrict, or impair the right of the Trustee to exercise any remedy available to it under the Indenture, at law, or in equity for the benefit of the holders of the Bonds. The Trustee may exercise its remedies under the Indenture independently of and without regard to any remedy exercised or available to Olympia Guaranty under this Agreement. The r

Section 10.01 — Trustee Acting in Dual Capacity PNTC acts under this Agreement in its capacity as Trustee under the Indenture. PNTC also serves as Paying Agent, Registrar, and Escrow Agent for the Series 2023A Bonds pursuant to its appointment under the Ind