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SECURITY FOR THE BONDS Source of Payment The City is obligated to satisfy its obligations under the Bonds from any legally available funds. The obligations of the City under the Bonds, including the obligation to make all payments of principal of and interest on the Bonds when due and the obligation of the City to make the deposits required under the Indenture for the security of the Bonds, are obligations of the City imposed by law and are absolute and unconditional, without any right of set -off or counterclaim. The City has other obligations payable from its General Fund, and the Indenture does not limit the amount of General Fund obligations that the City may incur. The Bonds do not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation. Neither the Bonds nor the obligations of the City to make payments on the Bonds constitute an indebtedness of the City, the State of California, or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. Pursuant to the Indenture, the City covenants to take such action as may be necessary to include in each of its annual budgets the payments required to be made by the City to pay principal of and interest on the Bonds, and to make the necessary annual appropriations for all such payments. If any payment of debt service requires the adoption by the City of a supplemental budget or appropriation, the City has covenanted in the Indenture to promptly adopt the same. The covenants on the part of the City are deemed to constitute duties imposed by law and it is the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in the Indenture. As required pursuant to the Indenture, each year promptly following the adoption of an annual budget which includes the appropriations required with respect to payment of debt service on the Bonds, but in any event not later than July 15 in each fiscal year, the City must certify to the Trustee that it has complied with the requirements of the Indenture with respect to the annual budget and appropriation of annual debt service payments on the Bonds with respect to such fiscal year. The assets of PERS are not available for payment of the Bonds and the Bonds do not constitute an obligation of PERS. Moreover, any changes in future pension plan benefits and any pension reform measures will not impact the obligation of the City to pay the Bonds, which obligation is absolute and unconditional. Debt Service Fund Pursuant to the Indenture, the City will transfer an amount of legally available funds to the Trustee for deposit in the debt service fund established pursuant to the Indenture (the "Debt Service Fund ") at the times and in the amounts sufficient to pay debt service on the Bonds. The Debt Service Fund will be held by the Trustee and so long as any Bonds are outstanding, the amounts on deposit therein will be used to pay principal of, premium, if any, and interest on the Bonds. M