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Home My WebLink About06 CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 SPECIAL TAX BONDS Sir rn.1 nda 4)';. :4 AGENDA REPORT Reeeweld m 6 �Q,, City Manager I GS't1 Finance Director II' MEETING DATE: NOVEMBER 3, 2015 TO: JEFFREY C. PARKER, CITY MANAGER FROM: PAMELA ARENDS-KING, FINANCE DIRECTOR/CITY TREASURER SUBJECT: APPROVAL OF ISSUANCE OF TWO SERIES OF CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX BONDS, AND APPROVING RELATED DOCUMENTS AND ACTIONS SUMMARY: In 2007, after the receipt of a petition of the property owner the City formed Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the "District") pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982 as amended to finance the acquisition of public improvements ("the "Facilities") incident to the development of the Retail Center constructed by Vestar/Kimco. The District issued Bonds on September 11, 2007 in the amount of $13,680,000 with the final maturity in 2036 with a final maturity of 2037 (the "Prior Bonds"). The District is authorized to issue up to $16,000,000 principal amount of bonds to finance Facilities, and the District has to date only issued the Prior Bonds in the aggregate principal amount of $13,680,000, so that the District has additional bonding authority of $2,320,000. The City now wants to issue for the District, in addition to a series of special tax bonds to refund the Prior Bonds (the "Refunding Bonds"), a series of special tax bonds in order to provide financing for Facilities not yet completed (the "Additional Bonds"). The Retail Center is known as the District at Tustin Legacy and consists of approximately 1.0 million square feet of an open-air lifestyle and entertainment center. The special taxes are levied on approximately 35.5 net acres of land owned by Vestar/Kimco and leased out to many tenants such as Whole Foods, TJ Max and Lucilles BBQ and many others. RECOMMENDATION: Adopt Resolution No. 15-74, a Resolution of the City Council of the City of Tustin, California, Authorizing the Issuance of Two Series of City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds and Approving related Documents and Actions. Approval of Issuance of Special Tax Bonds November 3,2015 PAGE 2 FISCAL IMPACT: The District is authorized to levy special taxes to repay its indebtedness, and to pay the annual costs of administration of the District. The District is only authorized to levy special taxes on land included within the boundaries of the District. The Bonds will not be obligations of the City of Tustin, but will be limited obligations of the District secured solely by the special taxes of the District and amounts held in certain funds and accounts established under the Fiscal Agent Agreement for the District. All costs of issuance of the Bonds will be paid from the proceeds of the Bonds. All administrative costs of the District and the Bonds will be paid from proceeds of the special taxes levied in the District. BACKGROUND: In 2007, after the receipt of a petition of the property owner the City formed Community\ Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the "District") pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982 as amended to finance the acquisition of public improvements ("the "Facilities") incident to the development of the Retail Center constructed by Vestar/Kimco. The District issued Bonds on September 11 2007 in the amount of $13,680,000 with the final maturity in 2037 (the "Prior Bonds"). The District is authorized to issue up to $16,000,000 principal amount of bonds to finance Facilities, and the District has to date only issued the Prior Bonds in the aggregate principal amount of $13,680,000, so that the District has additional bonding authority of$2,320,000. The Prior Bonds final maturity date is September 1, 2037. From now until the final maturity date the interest rates on the various maturities of the Prior Bonds range from 5.00% to 6.00%. Due to favorable interest rates in the financial markets, the Prior Bonds can now be refunded with the debt to be payable on the Bonds less than the debt service due on the Prior Bonds. The proposed Bonds will mature in 2037 and are expected to have an initial principal amount of $14.805 million and net $880,000 for Facilities. The Bonds will require a reserve fund funded at 75% of Maximum Annual Debt Service and the estimated interest rates for the various maturities of the Bonds are estimated to range from 2.00% to 5.00%. The average annual savings on debt service payments until the bonds mature is approximately $50,000. These savings total approximately $1.2 million over the remaining twenty-two years of the bonds. The savings will be applied towards reducing property owner's special tax payments starting in FY 2016-2017 and is estimated to save the property owner on average approximately $54,000 per year. Actual savings are dependent upon market conditions at the time of sale of the Bonds. TONIGHT'S ACTIONS: The Bonds for CFD No. 07-1 are proposed to be issued pursuant to a Fiscal Agent Agreement setting forth the various terms and provisions for the Bonds. The proceeds of the Bonds are expected to be applied to the redemption of the Prior Bonds pursuant to the 2007 Escrow Agreement and to fund Facilities. The Bonds are expected to be offered to investors for sale pursuant to the Preliminary Official Statement (the "POS") prepared by the City's Disclosure Counsel (Quint & Thimmig). The POS contains Approval of Issuance of Special Tax Bonds November 3,2015 PAGE 3 specific information about CFD No. 07-1 to enable investors to make an informed decision about purchasing the Bonds. The POS was prepared pursuant to the City's adopted Continuing Disclosure Procedures approved by the City Council on December 16, 2014. The Bonds are expected to be sold to First Southwest, the underwriter for the Bonds, subject to parameters set forth in the respective resolution for the Bonds the title of which is set forth above and Bond Purchase Agreement (the "BPA"). Those parameters allow for the aggregate principal amount of the Series A Bonds shall not exceed the amount permitted to be issued for such purpose under Sections 53362.5 and 53362.7 of the California Government Code so as not to decrease the amount of Series B Bonds that may be issued, and the aggregate principal amount of the Series B Bonds shall not exceed $2,320,000. Also, the net interest cost of the Bonds shall not exceed 5.00% and the underwriter's discount (without regard to any original issue discount) is not in excess of 1.0% of the principal amount of the Bonds. The City will enter into a Continuing Disclosure Agreement for the Bonds, which will require that the City provide certain ongoing information for the District on an annual basis until the Bonds have been paid in full. City Staff and consultants have reviewed the documents described above and they are now in form ready for approval by the City Council so that the sale and issuance of the Bonds can occur. NEXT STEPS: Following tonight's action, the proposed schedule to complete the bond sale is as follows: • December 2, 2015: Bond Sale date • December 15, 2015: Bond Closing date Pamela Arends-King Finance Director/City Treasurer • Attachments: Resolution No. 15-74 Fiscal Agent Agreement Escrow Agreement Bond Purchase Agreement • Preliminary Official Statement Continuing Disclosure Agreement Attachment 1 Resolution No. 15-74 RESOLUTION NO. 15-74 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, AUTHORIZING THE ISSUANCE OF TWO SERIES OF COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX BONDS, AND APPROVING RELATED DOCUMENTS AND ACTIONS The City Council of the City of Tustin does hereby resolve as follows: WHEREAS , this City Council has conducted proceedings under and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the “Act”), to form the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the “District”), to authorize the levy of special taxes upon the land within the District, and to issue bonds secured by said special taxes to finance public improvements authorized to be funded by the District; and WHEREAS , on September 11, 2007, the District issued its $13,680,000 City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (the “Prior Bonds”), pursuant to an Indenture, dated as of September 1, 2007 (the “Prior Indenture”), between the District and MUFG Union Bank, N.A. (formerly known as Union Bank of California, N.A.), as trustee (the “Trustee”), in order to finance public improvements authorized to be funded by the District (the “Facilities”); and WHEREAS , due to favorable interest rates in the financial markets, the City Council has determined that it is in the best interests of the City, the District and the property owners in the District paying special taxes that the Prior Bonds be refunded; and WHEREAS , the District is authorized to issue up to $16,000,000 principal amount of bonds to finance the Facilities, and the District has to date only issued the Prior Bonds in the principal amount of $13,680,000, so that the District has additional bonding authority of $2,320,000; and WHEREAS , the City now desires to issue for the District, in addition to a series of special tax bonds to refund the Prior Bonds (the “Refunding Bonds”), a series of special tax bonds in order to provide financing for Facilities not yet completed (the “Additional Bonds”); and WHEREAS , there has been submitted to this City Council a fiscal agent agreement (the “Fiscal Agent Agreement”) providing for the issuance of the Refunding Bonds and the Additional Bonds, all pursuant to the authority provided in the Act, and this City Council, with the aid of City Staff, has reviewed the Fiscal Agent Agreement and found it to be in proper order, and now desires to approve the Fiscal Agent Agreement and the issuance of the Refunding Bonds and the Additional Bonds (collectively, the “Bonds”); and WHEREAS , there has been presented to this City Council an escrow agreement (the “Escrow Agreement”) providing for the creation of an escrow fund which will be used to defease and refund the Prior Bonds, and this City Council now desires to approve the Escrow Agreement in connection with the refunding of the Prior Bonds; and WHEREAS , the City proposes to sell the Bonds to First Southwest Company (the “Underwriter”) pursuant to the terms of a bond purchase agreement (the “Bond Purchase Agreement”) by and __________________ Resolution 15-74 Page 1 of 6 between the City and the Underwriter, and the Underwriter proposes to offer the Bonds to the investing public by means of a preliminary official statement (the “Preliminary Official Statement”); and WHEREAS , it appears that each of said documents and instruments which are now before the City Council at this meeting is in appropriate form and is an appropriate document or instrument to be executed and delivered for the purpose intended; and WHEREAS , all conditions, things and acts required to exist, to have happened and to have been performed precedent to and in the issuance of the Bonds as contemplated by this Resolution and the documents referred to herein exist, have happened and have been performed in due time, form and manner as required by the laws of the State of California, including the Act. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Tustin does hereby authorize staff to implement the provisions of this Resolution as follows: SECTION 1. Issuance of Bonds; Approval of Fiscal Agent Agreement and Escrow Agreement. Pursuant to the Act, this Resolution and the Fiscal Agent Agreement, special tax bonds of the City for the District designated as “City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Refunding Bonds, Series 2015A” (the “Series A Bonds”) and “City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2015B” (the “Series B Bonds” and referred to in this Resolution collectively with the Series A Bonds as the “Bonds”) are hereby authorized to be issued in an aggregate principal amount not to exceed the sum of: (a) the principal amount of Series A Bonds necessary, as determined by the City's financial advisor for the District and the Bonds, to refund the Prior Bonds, pay related costs of issuance and fund a related reserve fund, and (b) the principal amount of Series B Bonds necessary, as determined by the City Manager, upon consultation with the City's financial advisor for the District and the Bonds, to finance additional Facilities authorized to be financed by the District. Notwithstanding the foregoing, (i) the aggregate principal amount of the Series A Bonds shall not exceed the amount permitted to be issued for such purpose under Sections 53362.5 and 53362.7 of the California Government Code so as not to decrease the amount of Series B Bonds that may be issued, and (ii) the aggregate principal amount of the Series B Bonds shall not exceed $1,500,000. The Bonds shall be executed in the form set forth in and otherwise as provided in the Fiscal Agent Agreement. In furtherance of the issuance of the Bonds, the City Council hereby makes the following findings and determinations: (i) it is prudent in the management of the fiscal affairs of the City and the District to issue the Series A Bonds for the purpose of refunding the Prior Bonds, (ii) the total net interest cost to maturity on the Series A Bonds plus the principal amount of the Series A Bonds will not exceed the total net interest cost to maturity on the Prior Bonds to be refunded plus the principal amount of the Prior Bonds to be refunded, (iii) the Bonds satisfy the requirements of Section 53345.8(a) of the Act in that the assessed value of the land in the District is more than three times the principal amount of the Bonds, and (iv) the Bonds, when issued, will be in compliance with the applicable requirements of the City’s Mello-Roos Community Facilities Act of 1982 Local Goals and Policies, approved pursuant to Resolution No. 04-28 adopted by the City Council on March 1, 2004. __________________ Resolution 15-74 Page 2 of 6 For purposes of Section 53363.2 of the Act, (i) it is expected that the purchase of the Series A Bonds will occur on or after November 17, 2015, (ii) the date, denomination, maturity dates, places of payment and form of the Bonds shall be as set forth in the Fiscal Agent Agreement, (iii) the minimum rate of interest to be paid on the Series A Bonds shall be one-half percent (0.5%) with the actual rate or rates to be set forth in the Fiscal Agent Agreement as executed, (iv) the place of payment for the Prior Bonds shall be as set forth in the Prior Indenture; and (v) the designated costs of issuing the Series A Bonds shall be as described in Section 53363.8(a) of the Act, and as otherwise described in the Fiscal Agent Agreement, in the Official Statement for the Bonds and the closing certificates for the Bonds, including Bond Counsel and Disclosure Counsel fees and expenses, financial advisor fees, Underwriter's discount, printing costs for the Official Statement, initial fiscal agent and escrow bank fees, and costs of City staff incurred in connection with the sale and issuance of the Series A Bonds and the refunding of the Prior Bonds. The City Council hereby approves the Fiscal Agent Agreement in the form on file with the City Clerk. The City Manager is hereby authorized to execute the Fiscal Agent Agreement, for and in the name and on behalf of the City and the District, in such form, together with any additions thereto or changes therein deemed necessary or advisable by the Finance Director upon consultation with Bond Counsel. The proceeds of the Bonds shall be applied by the City for the purposes and in the amounts as set forth in the Fiscal Agent Agreement. The City Council hereby authorizes the delivery and performance by the City of the Fiscal Agent Agreement. The City Council hereby approves the refunding of the Prior Bonds with the proceeds of the Series A Bonds, in accordance with the provisions of the Prior Indenture and the Escrow Agreement between the City and MUFG Union Bank, N.A., as Escrow Bank. The City Council hereby approves the Escrow Agreement in the form on file with the City Clerk. The City Council hereby authorizes the City Manager to execute and deliver the Escrow Agreement for and in the name and on behalf of the City, in such form, together with any changes therein or additions thereto deemed advisable by the Finance Director upon consultation with Bond Counsel. The City Council hereby authorizes the delivery and performance by the City of the Escrow Agreement. SECTION 2. Delivery of the Bonds. The Bonds, when executed, shall be delivered to the Fiscal Agent for authentication. The Fiscal Agent is hereby requested and directed to authenticate the Bonds by executing the Fiscal Agent’s certificate of authentication and registration appearing thereon, and to deliver the Bonds, when duly executed and authenticated, to the Underwriter or its order in accordance with written instructions executed on behalf of the City by the City Manager, which instructions such officer is hereby authorized and directed, for and in the name and on behalf of the City, to execute and deliver to the Fiscal Agent. Such instructions shall provide for the delivery of the Bonds to the Underwriter or its order in accordance with the Bond Purchase Agreement, upon payment of the purchase price therefor. SECTION 3. Sale of the Bonds. This City Council hereby approves the sale of the Bonds to the Underwriter. The Bond Purchase Agreement, in the form on file with the City Clerk, is hereby approved and the City Manager is hereby authorized and directed to execute the Bond Purchase Agreement in said form, with such changes, insertions and omissions as may be approved by the Finance Director, provided that the initial aggregate principal amount of the Series A Bonds and the initial principal amount of the Series B Bonds do not exceed the respective amounts described in Section 1 of this Resolution, the net interest cost of the Bonds __________________ Resolution 15-74 Page 3 of 6 is not in excess of 5.0%, and the Underwriter’s discount (without regard to any original issue discount) is not in excess of 1.0% of the principal amount of the Bonds. The City Council hereby finds and determines that (i) the issuance of the Bonds should proceed for the public policy reason that, as a result of such issuance, the annual special taxes to be levied in the District will be lower than if the refunding contemplated with the proceeds of the Series A Bonds did not occur, and the District will provide financing needed for the completion of Facilities authorized to be funded by the District; and (ii) the sale of the Bonds by negotiated sale to the Underwriter as contemplated by the Bond Purchase Agreement will result in a lower overall cost. SECTION 4. Official Statement. This City Council hereby approves the preliminary official statement for the Bonds (the “Preliminary Official Statement”) in the form on file with the City Clerk, together with any changes therein or additions thereto deemed advisable by the Finance Director. The City Council authorizes and directs the City Manager, on behalf of the City and the District, to deem “final” pursuant to Rule 15c2-12 under the Securities Exchange Act of 1934 (the “Rule”) the Preliminary Official Statement prior to its distribution by the Underwriter to prospective purchasers of the Bonds. The Underwriter, on behalf of the City and the District, is authorized and directed to cause the Preliminary Official Statement to be distributed to such municipal bond broker-dealers, to such banking institutions and to such other persons as may be interested in purchasing the Bonds. The Finance Director is hereby authorized and directed to assist the Disclosure Counsel in causing the Preliminary Official Statement to be brought into the form of final official statement (the “Final Official Statement”), and the City Manager is hereby authorized to execute the Final Official Statement and a statement that the facts contained in the Final Official Statement, and any supplement or amendment thereto (which shall be deemed an original part thereof for the purpose of such statement) were, at the time of sale of the Bonds, true and correct in all material respects and that the Final Official Statement did not, on the date of sale of the Bonds, and do not, as of the date of delivery of the Bonds contain any untrue statement of material fact with respect to the City or the District or omit to state material facts with respect to the City or the District required to be stated where necessary to make any statement made therein not misleading in the light of the circumstances under which it was made. The execution and delivery by the City Manager of the Final Official Statement, which shall include such changes and additions thereto deemed advisable by the Finance Director and such information permitted to be excluded from the Preliminary Official Statement pursuant to the Rule, shall be conclusive evidence of the approval of the Final Official Statement by the City. The Final Official Statement, when prepared, is approved for distribution in connection with the offering and sale of the Bonds. SECTION 5. Continuing Disclosure Agreement. The Continuing Disclosure Agreement, in the form on file with the City Clerk, is hereby approved. The City Manager is hereby authorized to execute and deliver the Continuing Disclosure Agreement in said form, with such additions thereto or changes therein as are deemed necessary, desirable or appropriate by the Finance Director, the approval of such changes to be conclusively evidenced by the execution in order to finance public improvements authorized to be funded by the District (the “Facilities”); and delivery by the City Manager of the Continuing Disclosure Agreement. __________________ Resolution 15-74 Page 4 of 6 SECTION 6. Foreclosure Covenant. The City hereby covenants, for the benefit of the Bondowners, to commence and diligently pursue to completion any foreclosure action regarding delinquent installments of any amount levied as a special tax for the payment of interest or principal of the Bonds, said foreclosure action to be commenced and pursued as more completely set forth in the Fiscal Agent Agreement. SECTION 7. Official Actions. All actions heretofore taken by the officers and agents of the City with respect to the sale and issuance of the Bonds are hereby approved, confirmed and ratified, and the proper officers of the City are hereby authorized and directed to do any and all things and take any and all actions and execute any and all certificates, agreements and other documents, which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Bonds and the refunding of the Prior Bonds in accordance with this Resolution, and any certificate, agreement, and other document described in the documents herein approved. In furtherance of the foregoing, the Finance Director is hereby authorized to obtain municipal bond insurance and a reserve fund insurance policy for the Bonds, and to approve changes to the documents approved by this Resolution as required in connection therewith if the Finance Director, with the assistance of the City’s Financial Advisor for the Bonds, determines that the provision of such insurance is economic in the circumstances. Whenever in this Resolution any officer of the City is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer shall be absent or unavailable. SECTION 8. Effective Date. This Resolution shall take effect upon its adoption. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Tustin held on rd the 3 day of November, 2015. CHARLES E. PUCKETT Mayor ATTEST: ERICA N. RABE City Clerk __________________ Resolution 15-74 Page 5 of 6 STATE OF CALIFORNIA) COUNTY OF ORANGE ) CITY OF TUSTIN ) I, Erica N. Rabe, City Clerk and ex-officio Clerk of the City Council of the City of Tustin, California, do hereby certify that the whole number of the members of the City Council of the City of Tustin is five; and that the above and foregoing Resolution No. 15-74 was duly passed rd and adopted at a regular meeting of the Tustin City Council, held on the 3 day of November, 2015 by the following vote: COUNCILMEMBER AYES: COUNCILMEMBER NOES: COUNCILMEMBER ABSTAINED: COUNCILMEMBER ABSENT: ERICA N. RABE City Clerk __________________ Resolution 15-74 Page 6 of 6 Attachment 2 Fiscal Agent Agreement Quint & Thimmig LLP 8/20/15 9/4/15 10/12/15 FISCAL AGENT AGREEMENT by and between CITY OF TUSTIN, CALIFORNIA and MUFG UNION BANK, N.A., as Fiscal Agent dated as of December 1, 2015 relating to: $__________ City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Refunding Bonds, Series 2015A and $__________ City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2015B 20015.07:J13419 TABLE OF CONTENTS ARTICLE I STATUTORY AUTHORITY AND DEFINITIONS Section 1.01. Authority for this Agreement. ................................................................................................................. 3 Section 1.02. Agreement for Benefit of Bondowners.................................................................................................... 3 Section 1.03. Definitions. ............................................................................................................................................... 3 ARTICLE II THE 2015 BONDS Section 2.01. Principal Amount; Designation. ............................................................................................................ 13 Section 2.02. Terms of 2015 Bonds .............................................................................................................................. 13 Section 2.03. Redemption. ........................................................................................................................................... 15 Section 2.04. Form of 2015 Bonds. ............................................................................................................................... 18 Section 2.05. Execution of Bonds................................................................................................................................. 18 Section 2.06. Transfer of Bonds. .................................................................................................................................. 18 Section 2.07. Exchange of Bonds. ................................................................................................................................ 19 Section 2.08. Bond Register. ........................................................................................................................................ 19 Section 2.09. Temporary Bonds. .................................................................................................................................. 19 Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. ........................................................................................ 20 Section 2.11. Limited Obligation. ................................................................................................................................ 20 Section 2.12. No Acceleration ...................................................................................................................................... 20 Section 2.13. Book-Entry Only System ....................................................................................................................... 20 Section2.14. Issuance of Parity Bonds ........................................................................................................................ 22 ARTICLE III ISSUANCE OF 2015 BONDS Section 3.01. Issuance and Delivery of 2015 Bonds. ................................................................................................... 24 Section 3.02. Application of Proceeds of Sale of 2015 Bonds. .................................................................................... 24 Section 3.03. Improvement Fund ................................................................................................................................ 25 Section 3.04. Special Tax Fund. ................................................................................................................................... 26 Section 3.05. Administrative Expense Fund. .............................................................................................................. 27 Section 3.06. Costs of Issuance Fund. ......................................................................................................................... 28 Section 3.07. Validity of Bonds.................................................................................................................................... 28 ARTICLE IV SPECIAL TAX REVENUES; BOND FUND AND RESERVE FUND Section 4.01. Pledge of Special Tax Revenues. ........................................................................................................... 29 Section 4.02. Bond Fund. ............................................................................................................................................. 29 Section 4.03. Reserve Fund. ......................................................................................................................................... 30 ARTICLE V OTHER COVENANTS OF THE CITY Section 5.01. Punctual Payment. ................................................................................................................................. 33 Section 5.02. Limited Obligation. ................................................................................................................................ 33 Section 5.03. Extension of Time for Payment. ............................................................................................................ 33 Section 5.04. Against Encumbrances. ......................................................................................................................... 33 Section 5.05. Books and Records. ................................................................................................................................ 33 Section 5.06. Protection of Security and Rights of Owners. ....................................................................................... 33 Section 5.07. Compliance with Law. ........................................................................................................................... 33 Section 5.08. Private Activity Bond Limitation .......................................................................................................... 34 Section 5.09. Federal Guarantee Prohibition .............................................................................................................. 34 Section 5.10. Collection of Special Tax Revenues. ...................................................................................................... 34 -i- Section 5.11. Further Assurances. ............................................................................................................................... 35 Section 5.12. No Arbitrage. ......................................................................................................................................... 35 Section 5.13. Maintenance of Tax-Exemption ............................................................................................................ 35 Section 5.14. Covenant to Foreclose. ........................................................................................................................... 35 Section 5.15. No Additional Bonds ............................................................................................................................. 36 Section 5.16. Yield of the 2015 Bonds .......................................................................................................................... 36 Section 5.17. Continuing Disclosure ........................................................................................................................... 36 Section 5.18. Reduction of Special Taxes .................................................................................................................... 36 Section 5.19. State Reporting Requirements ............................................................................................................... 37 Section 5.20. Limits on Special Tax Waivers and Bond Tenders ............................................................................... 38 Section 5.21. City Bid at Foreclosure Sale ................................................................................................................... 38 ARTICLE VI INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS; LIABILITY OF THE CITY Section 6.01. Deposit and Investment of Moneys in Funds. ...................................................................................... 39 Section 6.02. Rebate of Excess Investment Earnings to the United States................................................................. 40 Section 6.03. Liability of City. ..................................................................................................................................... 41 Section 6.04. Engagement of Agents by City. ............................................................................................................. 42 ARTICLE VII THE FISCAL AGENT Section 7.01. Appointment of Fiscal Agent. ............................................................................................................... 43 Section 7.02. Liability of Fiscal Agent. ........................................................................................................................ 44 Section 7.03. Information; Books and Accounts. ........................................................................................................ 46 Section 7.04. Notice to Fiscal Agent. ........................................................................................................................... 46 Section 7.05. Compensation, Indemnification. ........................................................................................................... 46 ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT Section 8.01. Amendments Permitted. ........................................................................................................................ 48 Section 8.02. Owners’ Meetings. ................................................................................................................................. 49 Section 8.03. Procedure for Amendment with Written Consent of Owners. ............................................................ 49 Section 8.04. Disqualified Bonds. ................................................................................................................................ 50 Section 8.05. Effect of Supplemental Agreement. ...................................................................................................... 50 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. .................................................. 50 Section 8.07. Amendatory Endorsement of Bonds. .................................................................................................... 50 ARTICLE IX MISCELLANEOUS Section 9.01. Benefits of Agreement Limited to Parties. ............................................................................................ 51 Section 9.02. Successor is Deemed Included in All References to Predecessor. ....................................................... 51 Section 9.03. Discharge of Agreement. ....................................................................................................................... 51 Section 9.04. Execution of Documents and Proof of Ownership by Owners. ........................................................... 52 Section 9.05. Waiver of Personal Liability. ................................................................................................................. 52 Section 9.06. Notices to and Demands on City and Fiscal Agent. ............................................................................. 52 Section 9.07. Partial Invalidity. ................................................................................................................................... 53 Section 9.08. Unclaimed Moneys. ............................................................................................................................... 53 Section 9.09. Applicable Law. ..................................................................................................................................... 53 Section 9.10. Conflict with Act. ................................................................................................................................... 53 Section 9.11. Conclusive Evidence of Regularity. ...................................................................................................... 54 Section 9.12. Payment on Business Day...................................................................................................................... 54 Section 9.13. Counterparts........................................................................................................................................... 54 EXHIBIT A – FORM OF 2015 BOND -ii- FISCAL AGENT AGREEMENT THIS FISCAL AGENT AGREEMENT (the “Agreement”), dated as of December 1, 2015, is by and between the City of Tustin, California, a municipal corporation and general law city organized and existing under the laws of the State of California (the “City”), for and on behalf of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the “District”), and MUFG Union Bank, N.A., a national banking association duly organized and existing under the laws of the United States of America, as fiscal agent (the “Fiscal Agent”). RECITALS: WHEREAS, the City Council of the City (the “City Council”) has formed the District under the provisions of the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the California Government Code) (the “Act”) and Resolution No. 07-44 of the City Council adopted on June 19, 2007; WHEREAS, the City Council, as the legislative body with respect to the District, is authorized under the Act to levy special taxes to pay for the costs of facilities eligible to be financed by the District and to authorize the issuance of bonds, including bonds to refund any bonds issued for the District, secured by said special taxes under the Act; WHEREAS, under the provisions of the Act, on September 11, 2007, the District issued $13,680,000 initial principal amount of its City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (the “2007 Bonds”) to finance facilities eligible to be funded by the District; WHEREAS, due to favorable interest rates in the financial markets, the City Council now has determined to refund the 2007 Bonds in full, and to issue additional bonds for the District to finance improvements authorized to be funded by the District but not financed with proceeds of the Prior Bonds; WHEREAS, under the provisions of the Act, on November 3, 2015, the City Council adopted its Resolution No. 15-_____ (the “Resolution”), which Resolution, among other matters, authorized the issuance of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Refunding Bonds, Series 2015A and the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2015B (collectively, the “2015 Bonds”) to provide moneys to defease and advance refund in whole the outstanding 2007 Bonds and to finance improvements authorized to be financed by the District but not fully funded with proceeds of the 2007 Bonds, and provided that said issuance would be in accordance with this Agreement, and authorized the execution hereof; WHEREAS, it is in the public interest and for the benefit of the City, the District, the persons responsible for the payment of special taxes to be levied in the District and the owners of the 2015 Bonds that the City enter into this Agreement to provide for the issuance of the 2015 Bonds, the disbursement of proceeds of the 2015 Bonds, the disposition of the special taxes securing the 2015 Bonds and the administration and payment of the 2015 Bonds; and -1- WHEREAS, the City has determined that all things necessary to cause the 2015 Bonds, when authenticated by the City for the District and issued as in the Act, the Resolution and this Agreement provided, to be legal, valid and binding and special obligations of the City for the District in accordance with their terms, and all things necessary to cause the creation, authorization, execution and delivery of this Agreement and the creation, authorization, execution and issuance of the 2015 Bonds, subject to the terms hereof, have in all respects been duly authorized. AGREEMENT: NOW, THEREFORE, in consideration of the covenants and provisions herein set forth and for other valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows: -2- ARTICLE I STATUTORY AUTHORITY AND DEFINITIONS This Agreement is entered into pursuant Section 1.01. Authority for this Agreement. to the provisions of the Act and the Resolution. The provisions, covenants and Section 1.02. Agreement for Benefit of Bondowners. agreements herein set forth to be performed by or on behalf of the City shall be for the equal benefit, protection and security of the Owners. All of the Bonds, without regard to the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other thereof, except as expressly provided in or permitted by this Agreement. Any action by any Owner to enforce the provisions of this Agreement shall be for the equal benefit and protection of all Owners of the Bonds. The Fiscal Agent may become the owner of any of the Bonds in its own or any other capacity with the same rights it would have if it were not Fiscal Agent. Unless the context otherwise requires, the terms defined in Section 1.03. Definitions. this Section 1.03 shall, for all purposes of this Agreement, of any Supplemental Agreement, and of any certificate, opinion or other document herein mentioned, have the meanings herein specified. All references herein to “Articles”, “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement, and the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311 et seq. of the California Government Code. “Administrative Expenses” means any or all of the following: the fees and expenses of the Fiscal Agent (including any fees or expenses of its counsel), the expenses of the City in carrying out its duties hereunder (including, but not limited to, the levying and collection of the Special Taxes, and the foreclosure of the liens of delinquent Special Taxes) including the fees and expenses of its counsel, an allocable share of the salaries of City staff related thereto and a proportionate amount of City general administrative overhead related thereto, any amounts paid by the City from its general funds pursuant to Section 6.02, any amounts paid or payable to any persons or entities employed by the City in connection with the discharge of any of the City’s obligations hereunder (including, but not limited to, the calculation of the levy of the Special Taxes, foreclosures with respect to delinquent taxes, and the calculation of amounts subject to rebate to the United States), any fees or expenses of the Escrow Bank and any costs incurred by the City under or in connection with the Escrow Agreement, and all other costs and expenses of the City or the Fiscal Agent incurred in connection with the discharge of their respective duties hereunder or in connection with the 2015 Bonds or the refunding of the 2007 Bonds and, in the case of the City, in any way related to the administration of the Bonds or the District. Administrative Expenses shall include any such expenses incurred in prior years but not yet paid. -3- “Administrative Expense Fund” means the fund by that name established by Section 3.05(A) hereof. “Agreement” means this Fiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement adopted pursuant to the provisions hereof. “Annual Debt Service” means, for each Bond Year, the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled (including by reason of the provisions of Section 2.03(A)(ii) providing for mandatory sinking payments), and (ii) the principal amount of the Outstanding Bonds due in such Bond Year (including any mandatory sinking payment due in such Bond Year pursuant to Section 2.03(A)(ii)). “Auditor” means the auditor/controller of the County, as such other official at the County who is responsible for preparing property tax bills. “Authorized Officer” means the City Manager, the Finance Director, the City Clerk, or any other officer or employee of the City authorized by the City Council of the City or by an Authorized Officer to undertake the action referenced in this Agreement as required to be undertaken by an Authorized Officer. “Bond Counsel” means (i) Quint & Thimmig LLP, or (ii) any attorney or other firm of attorneys acceptable to the City and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt status of securities issued by public entities. “Bond Fund” means the fund by that name established by Section 4.02(A) hereof. “Bond Register” means the books for the registration and transfer of Bonds maintained by the Fiscal Agent under Section 2.08 hereof. “Bond Year” means the one-year period beginning on September 2 in each year and ending on September 1 in the following year except that the first Bond Year shall begin on the Closing Date and end on September 1, 2016. “Bonds” means, collectively, the 2015 Bonds, and, if the context requires, any Parity Bonds, at any time Outstanding under this Agreement or any Supplemental Agreement. “Business Day” means any day other than (i) a Saturday or a Sunday, or (ii) a day on which banking institutions in the state in which the Principal Office is located are authorized or obligated by law or executive order to be closed. “CDIAC” means the California Debt and Investment Advisory Commission of the office of the State Treasurer of the State of California or any successor agency or bureau thereto. “City” means the City of Tustin, California. -4- “Closing Date” means December __, 2015, being the date upon which there is a physical delivery of the 2015 Bonds in exchange for the amount representing the purchase price of the 2015 Bonds by the Original Purchaser. “Code” means the Internal Revenue Code of 1986 as in effect on the date of issuance of the 2015 Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the 2015 Bonds, together with applicable temporary and final regulations promulgated, and applicable official public guidance published, under the Code. “Continuing Disclosure Agreement” means the Continuing Disclosure Agreement, executed by the City and Willdan Financial Services as the initial Dissemination Agent, as originally executed and as it may be amended from time to time in accordance with the terms thereof. “Costs of Issuance” means items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of the 2015 Bonds and the refunding and defeasance of the 2007 Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, closing costs, filing and recording fees, initial fees and charges of the Fiscal Agent including its first annual administration fee, fees and expenses of Fiscal Agent’s counsel, expenses incurred by the City in connection with the issuance of the 2015 Bonds and the defeasance and refunding of the 2007 Bonds, Escrow Bank fees and expenses, special tax consultant fees and expenses, Bond (underwriter’s) discount, legal fees and charges, including bond counsel and disclosure counsel, financial advisor fees, rating agency fees, costs of bond insurance (if applicable), charges for execution, transportation and safekeeping of the 2015 Bonds and other costs, charges and fees in connection with the foregoing. “Cost of Issuance Fund” means the fund by that name established by Section 3.06(A) hereof. “County” means the County of Orange, California. “DTC” means The Depository Trust Company, New York, New York, and its successors and assigns. “Debt Service” means the scheduled amount of interest and amortization of principal (including principal payable by reason of Section 2.03(A)(ii)) on the Bonds and the scheduled amount of interest and amortization of principal payable on any Parity Bonds during the period of computation, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of such period. “Depository” means (a) initially, DTC, and (b) any other Securities Depository acting as Depository pursuant to Section 2.13. -5- “District” means the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center), formed pursuant to the Act and the Resolution of Formation. “Escrow Agreement” means the Escrow Agreement, dated as of December 1, 2015, by and between the City, for and on behalf of the District, and the Escrow Bank. “Escrow Bank” means MUFG Union Bank, N.A., in its capacity as escrow bank under the Escrow Agreement. “Fair Market Value” means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, or (iii) the investment is a United States Treasury Security--State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt. “Federal Securities” means any of the following which are non-callable and which at the time of investment are legal investments under the laws of the State of California for funds held by the Fiscal Agent: (i) direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the United States Department of the Treasury) and obligations, the payment of principal of and interest on which are directly or indirectly guaranteed by the United States of America, including, without limitation, such of the foregoing which are commonly referred to as “stripped” obligations and coupons; or (ii) any of the following obligations of the following agencies of the United States of America: (a) direct obligations of the Export-Import Bank, (b) certificates of beneficial ownership issued by the Farmers Home Administration, (c) participation certificates issued by the General Services Administration, (d) mortgage-backed bonds or pass-through obligations issued and guaranteed by the Government National Mortgage Association, (e) project notes issued by the United States Department of Housing and Urban Development, and (f) public housing notes and bonds guaranteed by the United States of America. “Finance Director” means the Finance Director of the City or any person otherwise acting as the chief financial officer of the City, or such person’s written designee. -6- “Fiscal Agent” means the Fiscal Agent appointed by the City and acting as an independent fiscal agent with the duties and powers herein provided, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in Section 7.01. “Fiscal Year” means the twelve-month period extending from July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive. “Improvement Fund” means the fund by that name established by Section 3.03(A) hereof. “Independent Financial Consultant” means any consultant or firm of such consultants appointed by the City or any Authorized Officer, and who, or each of whom: (i) is judged by the person or entity that approved them to have experience in matters relating to the issuance and/or administration of bonds under the Act; (ii) is in fact independent and not under the domination of the City; (iii) does not have any substantial interest, direct or indirect, with or in the City, or any owner of real property in the District, or any real property in the District; and (iv) is not connected with the City as an officer or employee of the City, but who may be regularly retained to make reports to the City. “Information Services” means the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Board, (at http://emma.msrb.org); and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such services providing information with respect to called bonds as the City may designate in an Officer’s Certificate delivered to the Fiscal Agent. “Interest Payment Dates” means March 1 and September 1 of each year, commencing March 1, 2016. “Maximum Annual Debt Service” means the largest Annual Debt Service for any Bond Year after the calculation is made through the final scheduled maturity date for any Outstanding Bonds. “Minimum Administrative Expense Requirement” means (a) for Fiscal Year 2015-2016, $36,048.79; (b) for Fiscal Year 2016-2017, $40,000.00; and (c) for each Fiscal Year after Fiscal Year 2016-2017, an amount equal to 102% of the Minimum Administrative Expense Requirement in effect for the immediately preceding Fiscal Year. “Officer’s Certificate” means a written certificate of the City signed by an Authorized Officer of the City. “Ordinance” means Ordinance No. 1339, adopted by the City Council of the City on July 3, 2007, and any other ordinance of the City levying the Special Taxes. “Original Purchaser” means the first purchaser of the 2015 Bonds from the City, being First Southwest Company. -7- “Outstanding”, when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 8.04) all Bonds except: (i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or deemed to have been paid within the meaning of Section 9.03; and (iii) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the City pursuant to this Agreement or any Supplemental Agreement. “Owner” or “Bondowner” means any person who shall be the registered owner of any Outstanding Bond. “Parity Bonds” means bonds issued by the City for the District payable and secured on a parity with any then Outstanding Bonds, pursuant to Section 2.14 hereof. “Participating Underwriter” shall have the meaning ascribed thereto in the Continuing Disclosure Agreement. “Permitted Investments” means the following, but only to the extent that the same are acquired at Fair Market Value and are otherwise legal investments for funds of the City: (a) Federal Securities. (b) Registered state warrants or treasury notes or bonds of the State of California (the “State”), including bonds payable solely out of the revenues from a revenue- producing property owned, controlled, or operated by the State or by a department, board, agency, or authority of the State, which are rated in one of the two highest short- term or long-term rating categories by either Moody’s Investors Service or Standard and Poor’s Ratings Group, and which have a maximum term to maturity not to exceed three years. (c) Time certificates of deposit or negotiable certificates of deposit issued by a state or nationally chartered bank or trust company, or a state or federal savings and loan association which may include the Fiscal Agent and its affiliates; provided, that the certificates of deposit shall be one or more of the following: continuously and fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, and/or continuously and fully secured by securities described in subdivision (a) or (b) of this definition of Permitted Investments which shall have a market value, as determined on a marked-to-market basis calculated at least weekly, and exclusive of accrued interest, or not less than 102 percent of the principal amount of the certificates on deposit. (d) Commercial paper which at the time of purchase is of “prime” quality of the highest ranking or of the highest letter and numerical rating as provided by either Moody’s Investors Service or Standard and Poor’s Ratings Services, which commercial paper is limited to issuing corporations that are organized and operating within the United States of America and that have total assets in excess of five hundred million dollars ($500,000,000) and that have an “A” or higher rating for the issuer’s debentures, -8- other than commercial paper, by either Moody’s Investors Service or Standard and Poor’s Ratings Services, provided that purchases of eligible commercial paper may not exceed 180 days’ maturity nor represent more than 10 percent of the outstanding commercial paper of an issuing corporation. Purchases of commercial paper may not exceed 20 percent of the total amount invested pursuant to this definition of Permitted Investments. (e) A repurchase agreement with a state or nationally charted bank or trust company or a national banking association or government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York, provided that all of the following conditions are satisfied: (1) the agreement is secured by any one or more of the securities described in subdivision (a) of this definition of Permitted Investments, (2) the underlying securities are required by the repurchase agreement to be held by a bank, trust company, or primary dealer having a combined capital and surplus of at least one hundred million dollars ($100,000,000) and which is independent of the issuer of the repurchase agreement, and (3) the underlying securities are maintained at a market value, as determined on a marked-to-market basis calculated at least weekly, of not less than 103 percent of the amount so invested. (f) An investment agreement or guaranteed investment contract with, or guaranteed by, a financial institution the long-term unsecured obligations of which are rated Aa2 and “AA” or better, respectively, by Moody’s Investors Service and Standard and Poor’s Ratings Services at the time of initial investment. The investment agreement shall be subject to a downgrade provision with at least the following requirements: (1) the agreement shall provide that within five business days after the financial institution’s long-term unsecured credit rating has been withdrawn, suspended, other than because of general withdrawal or suspension by Moody’s Investors Service or Standard and Poor’s Ratings Services from the practice of rating that debt, or reduced below “AA-” by Standard and Poor’s Ratings Services or below “Aa3” by Moody’s Investors Service (these events are called “rating downgrades”) the financial institution shall give notice to the City and, within the five-day period, and for as long as the rating downgrade is in effect, shall deliver in the name of the City or the Fiscal Agent to the City or the Fiscal Agent Federal Securities allowed as investments under subdivision (a) of this definition of Permitted Investments with aggregate current market value equal to at least 105 percent of the principal amount of the investment agreement invested with the financial institution at that time, and shall deliver additional allowed federal securities as needed to maintain an aggregate current market value equal to at least 105 percent of the principal amount of the investment agreement within three days after each evaluation date, which shall be at least weekly, and (2) the agreement shall provide that, if the financial institution’s long-term unsecured credit rating is reduced below “A3” by Moody’s Investors Service or below “A-” by Standard and Poor’s Ratings Services, the Fiscal Agent or the City may, upon not more than five business days’ written notice to the financial institution, withdraw the investment agreement, with accrued but unpaid interest thereon to the date, and terminate the agreement. (g) The Local Agency Investment Fund of the State of California. -9- (h) Investments in a money market mutual fund (including any funds of the Fiscal Agent or its affiliates and including any funds for which the Fiscal Agent or its affiliates provides investment advisory or other management services) rated in the highest rating category (without regard to plus (+) or minus (-) designations) by Moody’s Investors Service or Standard & Poor’s Ratings Services. (i) Any other lawful investment for City funds. “Principal Office” means the corporate trust office of the Fiscal Agent as identified pursuant to Section 9.06 hereof; provided, however, for the purpose of maintenance of the Registration Books and surrender of Bonds for payment, transfer or exchange such term means the office at which the Fiscal Agent conducts its corporate agency business, or such other or additional offices as may be designated by the Fiscal Agent. “Project” means the facilities eligible to be funded by the District, as specified by the Resolution of Formation. “Rate and Method of Apportionment” means the Rate and Method of Apportionment of Special Tax for the District, as approved by the Resolution of Formation, and as it may be amended from time to time in accordance with the provisions of the Act. “Record Date” means the fifteenth (15th) day of the month next preceding the month of the applicable Interest Payment Date, whether or not such fifteenth (15th) day is a Business Day. “Refunding Bonds” means bonds issued by the City for the District the net proceeds of which are used to refund all or a portion of the then Outstanding Bonds; provided that the debt service on the Refunding Bonds in any Bond Year is not in excess of the debt service on the Bonds being refunded, and the final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being refunded. “Refunding Fund” means the fund by that name created by and held by the Escrow Bank pursuant to the Escrow Agreement. “Registration Books” means the records maintained by the Fiscal Agent pursuant to Section 2.08 for the registration and transfer of ownership of the Bonds. “Regulations” means temporary and permanent regulations promulgated under the Code. “Reserve Fund” means the fund by that name established pursuant to Section 4.03(A) hereof. “Reserve Requirement” means, as of any date of calculation, an amount equal to seventy-five percent (75%) of the least of (i) the then Maximum Annual Debt Service, (ii) one hundred twenty-five percent (125%) of the then average Annual Debt Service, or (iii) ten percent (10%) of the initial principal amount of the Bonds. The Reserve Requirement as of the Closing Date is $__________. -10- “Resolution” means Resolution No. 15-____, adopted by the City Council of the City on November 3, 2015, authorizing the issuance of the 2015 Bonds and the refunding of the 2007 Bonds. “Resolution of Formation” means Resolution No. 07-44, adopted by the City Council of the City on June 19, 2007. “Securities Depositories” means The Depository Trust Company, 55 Water Street, 1SL, New York, New York 10041-0099, Fax (212) 855-7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the City may designate in an Officer’s Certificate delivered to the Fiscal Agent. “Series 2015A Bonds” means the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Refunding Bonds, Series 2015A, issued and outstanding under this Agreement. “Series 2015B Bonds” means the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2015B, issued and outstanding under this Agreement. “Special Tax A” has the meaning given to such term in the Rate and Method of Apportionment. “Special Tax B” has the meaning given to such term in the Rate and Method of Apportionment. “Special Tax Fund” means the fund by that name established by Section 3.04(A) hereof. “Special Tax Prepayments” means the proceeds of any prepayments of Special Taxes received by the City, as calculated pursuant to the Rate and Method of Apportionment, less any administrative fees or penalties collected as part of any such prepayment. “Special Tax Prepayments Account” means the account by that name within the Bond Fund established by Section 4.02(A) hereof. “Special Tax Revenues” means the proceeds of the Special Taxes received by the City, including any scheduled payments and any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien, but shall not include interest and penalties, if any, collected with the Special Taxes that are in excess of the rate of interest payable on the Bonds. “Special Taxes” means the Special Tax A levied within the District pursuant to the Act, the Ordinance and this Agreement. “Special Taxes” do not include any Special Tax B levied in the District. -11- “Supplemental Agreement” means an agreement the execution of which is authorized by a resolution which has been duly adopted by the City under the Act and which agreement is amendatory of or supplemental to this Agreement, but only if and to the extent that such agreement is specifically authorized hereunder. “2007 Bonds” means the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007. “2015 Bonds” means, collectively, the Series 2015A Bonds and the Series 2015B Bonds. -12- ARTICLE II THE 2015 BONDS Series 2015A Bonds in the aggregate Section 2.01. Principal Amount; Designation. principal amount of __________ Million __________ Hundred __________ Thousand Dollars ($__________) are hereby authorized to be issued by the City for the District under and subject to the terms of the Resolution, this Agreement, the Act and other applicable laws of the State of California. The Series 2015A Bonds are hereby designated the “City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Refunding Bonds, Series 2015A.” Series 2015B Bonds in the aggregate principal amount of __________ Million __________ Hundred Thousand Dollars ($__________) are hereby authorized to be issued by the City for the District under and subject to the terms of the Resolution, this Agreement, the Act and other applicable laws of the State of California. The Series 2015B Bonds shall be designated “City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2015B.” The Series 2015A Bonds shall be issued in fully Section 2.02. Terms of 2015 Bonds. registered form without coupons in denominations of $5,000 or any integral multiple in excess thereof. The Series 2015A Bonds shall be dated the Closing Date, shall be in the principal amounts, shall mature on September 1 in the years and shall bear interest (calculated on the basis of a 360-day year of twelve 30-day months) at the rates per annum as follows: Maturity Date Principal (September 1) Amount Interest Rate -13- The Series 2015B Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple in excess thereof. The Series 2015B Bonds shall be dated the Closing Date, shall be in the principal amounts, shall mature on September 1 in the years and shall bear interest (calculated on the basis of a 360-day year of twelve 30-day months) at the rates per annum as follows: Maturity Date Principal (September 1) Amount Interest Rate Interest on the 2015 Bonds shall be payable on each Interest Payment Date to the person whose name appears on the registration books maintained by the Fiscal Agent as the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check of the Fiscal Agent mailed by first class mail, postage prepaid, on each Interest Payment Date to the Owner at the address of such Owner as it appears on the registration books maintained by the Fiscal Agent as of the preceding Record Date. Principal of and premium (if any) on any 2015 Bond shall be paid by check upon presentation and surrender thereof, at maturity or the prior redemption thereof, at the Principal Office of the Fiscal Agent. The principal of and interest and premium (if any) on the 2015 Bonds shall be payable in lawful money of the United States of America. Each 2015 Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it shall bear interest from such Interest Payment Date; or (b) it is authenticated on or before February 15, 2016, in which event it shall bear interest from the Closing Date; provided, however, that if, as of the date of authentication of any 2015 Bond, interest thereon is in default, such 2015 Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. “CUSIP” identification numbers shall be imprinted on the 2015 Bonds, but such numbers shall not constitute a part of the contract evidenced by the 2015 Bonds, and any error or omission with respect thereto shall not constitute cause for refusal of any purchaser to accept delivery of and pay for the 2015 Bonds. In addition, failure on the part of the City or the Fiscal Agent to use such CUSIP numbers in any notice to Owners shall not constitute any violation of the City’s contract with such Owners and shall not impair the effectiveness of any such notice. All 2015 Bonds paid by the Fiscal Agent pursuant to this Article shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled 2015 Bonds and issue a certificate of destruction thereof to the City. -14- Section 2.03. Redemption. (A) Redemption Dates. (i) Optional Redemption. The 2015 Bonds maturing on and after September 1, ____ are subject to optional redemption prior to their stated maturity on any Interest Payment Date occurring on or after September 1, ____, as a whole, or in part among maturities as determined by the Finance Director and by lot within a maturity, at a redemption price equal to the principal amount of the 2015 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. (ii) Mandatory Sinking Payment Redemption. (a) The Series 2015A Bonds maturing on September 1, ____, are subject to mandatory sinking payment redemption in part on September 1, ____, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments (b) The Series 2015B Bonds maturing on September 1, ____, are subject to mandatory sinking payment redemption in part on September 1, ____, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments (c) The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain the same debt service profile for the Bonds as in effect prior to such redemption, as a result of any prior partial redemption of the 2015 Bonds pursuant to Section 2.03(A)(i) above or Section 2.03(A)(iii) below, as specified in writing by the Finance Director to the Fiscal Agent. (iii) Mandatory Redemption From Special Tax Prepayments. Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to clause (iii) of the second paragraph of Section 3.04(A) and Section 4.03(F), respectively, shall be -15- used to redeem 2015 Bonds on the next Interest Payment Date for which notice of redemption can timely be given under Section 2.03(E), by lot within a maturity and allocated among maturities and series of the 2015 Bonds so as to maintain substantially the same debt service profile for the Bonds as in effect prior to such redemption, at a redemption price (expressed as a percentage of the principal amount of the 2015 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates Redemption Prices any Interest Payment Date to and including % March 1, ____ September 1, ____ and March 1, ____ September 1, ____ and March 1, ____ September 1, ____ and thereafter (B) Notice to Fiscal Agent. The City shall give the Fiscal Agent written notice of its intention to redeem 2015 Bonds pursuant to subsection (A)(i) or (iii) above not less than forty- five (45) days prior to the applicable redemption date, or such lesser number of days as the Fiscal Agent shall allow. No notice need be given by the City to the Fiscal Agent of a redemption of 2015 Bonds pursuant to subsection (A)(ii) above. (C) Priority of Redemption. Whenever provision is made in this Agreement for the redemption of less than all of the 2015 Bonds or any given portion thereof pursuant to Section 2.03(A)(i), the Fiscal Agent shall select the 2015 Bonds to be redeemed, from all 2015 Bonds or such given portion thereof not previously called for redemption among series and maturities as directed in writing by the Finance Director, and within a maturity by lot in any manner which the Fiscal Agent in its sole discretion shall deem appropriate and fair. Whenever provision is made in this Agreement for the redemption of less than all of the 2015 Bonds or any given portion thereof pursuant to Section 2.03(A)(iii), the Fiscal Agent shall select the 2015 Bonds to be redeemed, from all 2015 Bonds or such given portion thereof not previously called for redemption among series and maturities so as to maintain substantially the same debt service profile for the Bonds as in effect prior to such redemption, and within a maturity by lot in any manner which the Fiscal Agent in its sole discretion shall deem appropriate and fair. In each case, for purposes of selection of Bonds to be redeemed, all Bonds shall be deemed to be comprised of separate $5,000 portions and such portions shall be treated as separate Bonds which may be separately redeemed. (D) Purchase of Bonds in lieu of Redemption. In lieu of redemption under Section 2.03(A) above, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2015 Bonds, upon the filing with the Fiscal Agent of an Officer’s Certificate requesting such purchase prior to the selection of 2015 Bonds for redemption, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer’s Certificate may provide, but in no event may 2015 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase. -16- (E) Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption, to the Securities Depositories and to one or more Information Services (or by such other means as permitted by such services), and to the respective registered Owners of any 2015 Bonds designated for redemption, at their addresses appearing on the 2015 Bond registration books in the Principal Office of the Fiscal Agent; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of such Bonds. Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, shall designate the CUSIP numbers and Bond numbers of the 2015 Bonds to be redeemed by giving the individual CUSIP number and Bond number of each Bond to be redeemed or shall state that all Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2015 Bonds of one or more maturities have been called for redemption, shall state as to any 2015 Bond called in part the principal amount thereof to be redeemed, and shall require that such Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on such Bonds will not accrue from and after the redemption date. Notwithstanding the foregoing, in the case of any redemption of the 2015 Bonds under Section 2.03(A)(i) or (iii) above, the notice of redemption may state that the redemption is conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the 2015 Bonds on the anticipated redemption date, and that the redemption shall not occur if by no later than the scheduled redemption date sufficient moneys to redeem the 2015 Bonds have not been deposited with the Fiscal Agent. In the event that the Fiscal Agent does not receive sufficient funds by the scheduled redemption date to so redeem the 2015 Bonds to be redeemed, the Fiscal Agent shall send written notice to the owners of the 2015 Bonds, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the 2015 Bonds for which notice of redemption was given shall remain Outstanding for all purposes of this Agreement. Upon the payment of the redemption price of 2015 Bonds being redeemed, each check or other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, of the 2015 Bonds being redeemed with the proceeds of such check or other transfer. Upon surrender of 2015 Bonds redeemed in part only, the City shall execute and the Fiscal Agent shall authenticate and deliver to the registered Owner, at the expense of the City, a new 2015 Bond or 2015 Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2015 Bond or 2015 Bonds. (F) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2015 Bonds so called for redemption shall have been deposited in the Bond Fund, such Bonds so called shall cease to be entitled to any benefit under this Agreement other than the right to receive payment -17- of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in such notice. All Bonds redeemed and purchased by the Fiscal Agent pursuant to this Section shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled Bonds and, upon written request of the City, issue a certificate of destruction thereof to the City. (G) Redemption of Parity Bonds. Redemption provisions, if any, pertaining to any Parity Bonds shall be set forth in the Supplemental Agreement providing for such Parity Bonds. The 2015 Bonds, the form of Fiscal Agent’s certificate Section 2.04. Form of 2015 Bonds. of authentication and the form of assignment, to appear thereon, shall be substantially in the forms, respectively, set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Agreement, the Resolution and the Act. The Bonds shall be executed on behalf of the City by Section 2.05. Execution of Bonds. the facsimile signatures of the Mayor of the City and the City Clerk who are in office on the date of adoption of this Agreement or at any time thereafter, and the seal of the City shall be impressed, imprinted or reproduced by facsimile signature thereon. If any officer whose signature appears on any Bond ceases to be such officer before delivery of the Bonds to the owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Bonds to the owner. Any Bond may be signed and attested on behalf of the City by such persons as at the actual date of the execution of such Bond shall be the proper officers of the City although at the nominal date of such Bond any such person shall not have been such officer of the City. Only such Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A executed manually and dated by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of authentication of the Fiscal Agent shall be conclusive evidence that the Bonds registered hereunder have been duly authenticated, registered and delivered hereunder and are entitled to the benefits of this Agreement. Any Bond may, in accordance with its terms, be Section 2.06. Transfer of Bonds. transferred, upon the books required to be kept pursuant to the provisions of Section 2.08 by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form approved by the Fiscal Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer shall be paid by the City from any lawfully available funds of the District, including but not limited to amounts in the Administrative Expense Fund. The Fiscal Agent shall collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer. -18- Whenever any Bond or Bonds shall be surrendered for transfer, the City shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds of the same series and maturity, for like aggregate principal amount. No transfers of Bonds shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, or (ii) with respect to a Bond after such Bond has been selected for redemption. Bonds may be exchanged at the Principal Office of Section 2.07. Exchange of Bonds. the Fiscal Agent for a like aggregate principal amount of Bonds of authorized denominations of the same series and of the same maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such exchange shall be paid by the City. The Fiscal Agent shall collect from the Owner requesting such exchange any tax or other governmental charge required to be paid with respect to such exchange. No exchanges of Bonds shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, or (ii) with respect to a Bond after such Bond has been selected for redemption. The Fiscal Agent will keep or cause to be kept, at its Section 2.08. Bond Register. Principal Office sufficient books for the registration and transfer of the Bonds which books shall show the series number, date, amount, rate of interest and last known owner of each Bond and shall at all times be open to inspection by the City during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the Bonds as hereinbefore provided. The City and the Fiscal Agent will treat the Owner of any Bond whose name appears on the Bond register as the absolute Owner of such Bond for any and all purposes, and the City and the Fiscal Agent shall not be affected by any notice to the contrary. The City and the Fiscal Agent may rely on the address of the Bondowner as it appears in the Bond register for any and all purposes. The Bonds may be initially issued in temporary form Section 2.09. Temporary Bonds. exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such authorized denominations as may be determined by the City, and may contain such reference to any of the provisions of this Agreement as may be appropriate. Every temporary Bond shall be executed by the City upon the same conditions and in substantially the same manner as the definitive Bonds. If the City issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds shall be surrendered, for cancellation, in exchange for the definitive Bonds at the Principal Office of the Fiscal Agent or at such other location as the Fiscal Agent shall designate, and the Fiscal Agent shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary bonds shall be entitled to the same benefits under to this Agreement as definitive Bonds authenticated and delivered hereunder. -19- If any Bond shall become Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. mutilated, the City, at the expense of the Owner of said Bond, shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be canceled by it and destroyed by the Fiscal Agent. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence be satisfactory to it and indemnity for the City and the Fiscal Agent satisfactory to the Fiscal Agent shall be given, the City, at the expense of the Owner, shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like series, tenor and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen. The City may require payment of a sum not exceeding the actual cost of preparing each new Bond delivered under this Section and of the expenses which may be incurred by the City and the Fiscal Agent for the preparation, execution, authentication and delivery. Any Bond delivered under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the City whether or not the Bond so alleged to be lost, destroyed or stolen is at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Agreement with all other Bonds issued pursuant to this Agreement. All obligations of the City under this Agreement and Section 2.11. Limited Obligation. the Bonds shall be special obligations of the City, payable solely from the Special Tax Revenues and the funds pledged therefore hereunder. Neither the faith and credit nor the taxing power of the City (except with respect to the levy of Special Taxes in the District, to the limited extent set forth herein) or the State of California or any political subdivision thereof is pledged to the payment of the Bonds. The principal of the Bonds shall not be subject to Section 2.12. No Acceleration. acceleration hereunder. Nothing in this Section shall in any way prohibit the prepayment or redemption of Bonds under Section 2.03 hereof, or the defeasance of the Bonds and discharge of this Agreement under Section 9.03 hereof. . DTC shall act as the initial Depository for the Section 2.13. Book-Entry Only System 2015 Bonds. One 2015 Bond for each maturity of each series of the 2015 Bonds shall be initially executed, authenticated, and delivered as set forth herein with a separate fully registered certificate (in print or typewritten form). Upon initial execution, authentication, and delivery, the ownership of the 2015 Bonds shall be registered in the Registration Books kept by the Fiscal Agent for the Bonds in the name of Cede & Co., as nominee of DTC or such nominee as DTC shall appoint in writing. The representatives of the City and the Fiscal Agent are hereby authorized to take any and all actions as may be necessary and not inconsistent with this Agreement to qualify the 2015 Bonds for the Depository’s book-entry system, including the execution of the Depository’s required representation letter. -20- With respect to Bonds registered in the Registration Books in the name of Cede & Co., as nominee of DTC, neither the City nor the Fiscal Agent shall have any responsibility or obligation to any broker-dealer, bank, or other financial institution for which DTC holds Bonds as Depository from time to time (the “DTC Participants”) or to any person for which a DTC Participant acquires an interest in the Bonds (the “Beneficial Owners”). Without limiting the immediately preceding sentence, neither the City nor the Fiscal Agent shall have any responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co., or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository of the beneficial interests in the Bonds to be redeemed in the event the City elects to redeem the Bonds in part, (iv) the payment to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any amount with respect to the principal of or interest on the Bonds, or (v) any consent given or other action taken by the Depository as Owner of the Bonds; except that so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, any Beneficial Owner of $1,000,000 or more in aggregate principal amount of any series of Bonds who has filed a written request to receive notices, containing such Beneficial Owner’s name and address, with the Fiscal Agent shall be provided with all notices relating to such Bonds by the Fiscal Agent. Except as set forth above, the Fiscal Agent may treat as and deem DTC to be the absolute Owner of each Bond for which DTC is acting as Depository for the purpose of payment of the principal of and interest on such Bonds, for the purpose of giving notices of redemption and other matters with respect to such Bonds, for the purpose of registering transfers with respect to such Bonds, and for all purposes whatsoever. The Fiscal Agent shall pay all principal of and interest on the Bonds only to or upon the order of the Owners as shown on the Registration Books, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to the principal of and interest on the Bonds to the extent of the sums or sums so paid. No person other than an Owner, as shown on the Registration Books, shall receive a physical Bond. Upon delivery by DTC to the Fiscal Agent of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the transfer provisions in Section 2.06 hereof, references to “Cede & Co.” in this Section 2.13 shall refer to such new nominee of DTC. DTC may determine to discontinue providing its services with respect to the 2015 Bonds at any time by giving written notice to the Fiscal Agent during any time that the 2015 Bonds are Outstanding, and discharging its responsibilities with respect thereto under applicable law. The City may terminate the services of DTC with respect to the 2015 Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the 2015 Bonds or that continuation of the system of book-entry transfers through DTC is not in the best interest of the Beneficial Owners, and the City shall mail notice of such termination to the Fiscal Agent. Upon the termination of the services of DTC as provided in the previous paragraph, and if no substitute Depository willing to undertake the functions hereunder can be found which is willing and able to undertake such functions upon reasonable or customary terms, or if the City -21- determines that it is in the best interest of the Beneficial Owners of the 2015 Bonds that they be able to obtain certificated Bonds, the 2015 Bonds shall no longer be restricted to being registered in the Registration Books of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or name the Owners shall designate at that time, in accordance with Section 2.06. To the extent that the Beneficial Owners are designated as the transferee by the Owners, in accordance with Section 2.06 the 2015 Bonds will be delivered to such Beneficial Owners as soon as practicable. . The City may issue one or more series of Parity Section2.14. Issuance of Parity Bonds Bonds, in addition to the 2015 Bonds authorized under Section 2.01 hereof, by means of a Supplemental Agreement and without the consent of any Bondowners, upon compliance with the provisions of this Section 2.14. Only Refunding Bonds that comply with the requirements of this Section 2.14 shall be Parity Bonds, and such Parity Bonds shall constitute Bonds hereunder and shall be secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds hereunder on a parity with all other Bonds Outstanding hereunder. The City may issue Refunding Bonds that are Parity Bonds subject to the following specific conditions precedent: (A) Current Compliance. The City shall be in compliance on the date of issuance of the Parity Bonds with all covenants set forth in this Agreement and all Supplemental Agreements. (B) Payment Dates. The Supplemental Agreement providing for the issuance of such Parity Bonds shall provide that interest thereon shall be payable on March 1 and September 1, and principal thereof shall be payable on September 1 in any year in which principal is payable (provided that there shall be no requirement that any Parity Bonds pay interest on a current basis). (C) Funds and Accounts; Reserve Fund Deposit. The Supplemental Agreement providing for the issuance of such Parity Bonds may provide for the establishment of separate funds and accounts, and shall provide for a deposit to the Reserve Fund (or to a separate account created for such purpose) in an amount necessary so that the amount on deposit in the Reserve Fund (together with the amount in any such separate account), following the issuance of such Parity Bonds, is equal to the Reserve Requirement. (D) Refunding Bonds. The Parity Bonds must be Refunding Bonds. (E) Officer’s Certificate. The City shall deliver to the Fiscal Agent an Officer’s Certificate certifying that the proposed issue of Parity Bonds constitute Refunding Bonds, and that the conditions precedent to the issuance of such Parity Bonds set forth in subsections (A), (B), (C) and (D) of this Section 2.14 have been satisfied. In delivering such Officer’s Certificate, the Authorized Officer that executes the same may conclusively rely upon such certificates of the Fiscal Agent and others selected with due care, without the need for independent inquiry or certification. -22- Nothing in this Section 2.14 shall prohibit the City from issuing bonds or otherwise incurring debt for the District secured by a pledge of Special Tax Revenues subordinate to the pledge thereof under Section 4.01 of this Agreement. -23- ARTICLE III ISSUANCE OF 2015 BONDS At any time after the execution of Section 3.01. Issuance and Delivery of 2015 Bonds. this Agreement, the City may issue the 2015 Bonds for the District in the aggregate principal amount set forth in Section 2.01 and deliver the 2015 Bonds to the Original Purchaser. The Authorized Officers of the City are hereby authorized and directed to deliver any and all documents and instruments necessary to cause the issuance of the 2015 Bonds in accordance with the provisions of the Act, the Resolution and this Agreement, to authorize the payment of Costs of Issuance (including the costs of the refunding of the 2007 Bonds from the proceeds of the 2015 Bonds), and to do and cause to be done any and all acts and things necessary or convenient for delivery of the 2015 Bonds to the Original Purchaser. (A) The proceeds of the Section 3.02. Application of Proceeds of Sale of 2015 Bonds. purchase of the Series 2015A Bonds by the Original Purchaser (being $__________) shall be paid to the Fiscal Agent, who shall forthwith set aside, pay over and deposit such proceeds on the Closing Date as follows: (i) Deposit in the Reserve Fund $__________. (ii) Deposit in the Costs of Issuance Fund $__________. (iii) Transfer to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund $__________. (B) The proceeds of the purchase of the Series 2015B Bonds by the Original Purchaser (being $__________) shall be paid to the Fiscal Agent, who shall forthwith set aside, pay over and deposit such proceeds on the Closing Date as follows: (i) Deposit in the Costs of Issuance Fund $__________. (ii) Deposit in the Reserve Fund $__________ (which amount, together with the amount set forth in Section 3.02(A)(i) is equal to the Reserve Requirement as of the Closing Date). (iii) Deposit in the Improvement Fund $__________. (C) In addition to the foregoing, on the Closing Date the City shall transfer or cause to be transferred certain moneys held with respect to the 2007 Bonds as follows: (i) Transfer from the administrative expense fund held with respect to the 2007 Bonds to the Fiscal Agent for deposit by the Fiscal Agent in the Administrative Expense Fund $__________, being, all amounts on deposit in such administrative expense fund. -24- (ii) Transfer from the special tax fund held with respect to the 2007 Bonds (a) to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund $__________; and (b) to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund, all remaining amounts on deposit in such special tax fund. (iii) Transfer from the reserve fund held with respect to the 2007 Bonds to the Escrow Bank for deposit by the Escrow Bank in the Refunding Fund, the $__________ on deposit in such reserve fund. (iv) Transfer from the bond fund and the redemption fund held with respect to the 2007 Bonds to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund, any amounts on deposit in such bond fund. (D) The Fiscal Agent may establish a temporary fund or account in its records to facilitate any of the deposits or transfers referred to in this Section 3.02. Section 3.03. Improvement Fund. (A) Establishment of Improvement Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Improvement Fund. Deposits shall be made to the Improvement Fund pursuant to Section 3.02(B)(iii) and Section 3.06(B). Moneys in the Improvement Fund shall be held by the Fiscal Agent for the benefit of the City, and shall be disbursed, except as otherwise provided in subsection (D) of this Section, for the payment or reimbursement of costs of the Project. (B) Procedure for Disbursements. Disbursements from the Improvement Fund shall be made by the Fiscal Agent upon receipt of an Officer’s Certificate which shall: (i) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made and the person to which the disbursement is to be paid; and (ii) certify that the disbursement is for a purpose eligible to be funded with the amount to be so disbursed, and in any event that no portion of the amount then being requested to be disbursed was set forth in any Officer’s Certificate previously filed requesting disbursement. In making disbursements from the Improvement Fund, the Fiscal Agent shall first use any amounts deposited therein pursuant to Section 3.02(B)(iii) and 3.06(B) and any investment earnings thereon, before using amounts deposited to the Improvement Fund pursuant to clauses (iii)(a) and (iv) of the second paragraph of Section 3.04(A) and any investment earnings thereon. (C) Investment. Moneys in the Improvement Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits from the investment of amounts in the Improvement Fund shall be retained in the Improvement Fund be used for the purposes thereof. -25- (D) Closing of Fund. Upon the filing of an Officer’s Certificate stating that the portion of the Project to be financed and any other expenses to be paid from the Improvement Fund have been completed and paid, respectively, the Fiscal Agent shall transfer the amount, if any, remaining in the Improvement Fund to the Bond Fund for application to the payment of principal of and interest on the Bonds in accordance with Section 4.02, and the Improvement Fund shall be closed. Section 3.04. Special Tax Fund. (A) Establishment of Special Tax Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Fund. The City shall transfer or cause to be transferred to the Fiscal Agent, as soon as practicable following receipt, all Special Tax Revenues received by the City (and expressly not including any Special Tax B, which is to be retained by the City) and any amounts required by Section 3.02(C)(ii)(b) and Section 3.02(C)(iv) to be deposited to the Special Tax Fund, all which amounts shall be deposited by the Fiscal Agent to the Special Tax Fund. In addition, the Fiscal Agent shall deposit in the Special Tax Fund amounts to be transferred thereto pursuant to Section 3.05(B) hereof. Notwithstanding the foregoing, (i) with respect to the first Special Tax Revenues collected by the City in any Fiscal Year (which do not include Special Tax B, which is to be retained by the City in any event) in the amount of the Minimum Administrative Expense Requirement for such Fiscal Year; first, the City may retain all or any portion thereof, and not remit the same to the Fiscal Agent, to the extent the City determines that it needs said amount to pay Administrative Expenses of the City (and the City shall so use such amount to pay Administrative Expenses); and second, any remaining portion of such amount shall be separately identified by the City and shall be deposited by the Fiscal Agent in the Administrative Expense Fund; (ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes shall be separately identified by the City and shall be deposited by the Fiscal Agent first, in the Bond Fund to the extent needed to pay any past due debt service on the Bonds; second, to the Reserve Fund to the extent needed to increase the amount then on deposit in the Reserve Fund up to the then Reserve Requirement; and third, to the Special Tax Fund for use as described in Section 3.04(B) below; and (iii) any proceeds of Special Tax Prepayments shall be separately identified by the City and shall be deposited by the Fiscal Agent in the Special Tax Prepayments Account established pursuant to Section 4.02(A). Moneys in the Special Tax Fund shall be held by the Fiscal Agent for the benefit of the City and the Owners of the Bonds, shall be disbursed as provided below and, pending and disbursement, shall be subject to a lien in favor of the Owners of the Bonds and the City. -26- (B) Disbursements. From time to time as needed to pay the obligations of the District, but no later than the Business Day before each Interest Payment Date, the Fiscal Agent shall withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority (i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from the Reserve Fund and the Special Tax Fund to the Bond Fund pursuant to Sections 3.03(D), 3.04(A), and 4.03(C), (E), (F) and (G), such that the amount in the Bond Fund equals the principal (including any sinking payment, or principal due pursuant to optional or special tax prepayment redemptions), premium, if any, and interest due on the Bonds on the next Interest Payment Date, and (ii) to the Reserve Fund an amount, taking into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement; provided that no such transfers shall exceed the amount then available to be transferred from the Special Tax Fund. In addition to the foregoing, if in any Fiscal Year there are sufficient funds in the Special Tax Fund to make the foregoing transfers to the Bond Fund and the Reserve Fund in respect of the Interest Payment Dates occurring in the Bond Year that commences in such Fiscal Year, the Finance Director may direct the Fiscal Agent to transfer to the Administrative Expense Fund, from time to time, any amount in the Special Tax Fund in excess of the amount needed to make such transfers to the Bond Fund and the Reserve Fund, if the Finance Director determines that monies are needed to pay Administrative Expenses in excess of the amount then on deposit in the Administrative Expense Fund. (C) Investment. Moneys in the Special Tax Fund shall be invested in accordance with Section 6.01. Interest earnings and profits resulting from investment of amounts in the Special Tax Fund shall be retained in the Special Tax Fund to be used for the purposes thereof. Section 3.05. Administrative Expense Fund. (A) Establishment of Administrative Expense Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Administrative Expense Fund, to the credit of which deposits shall be made as required by Section 3.02(C)(i) and clause (i) of the second paragraph of Section 3.04(A). Moneys in the Administrative Expense Fund shall be held by the Fiscal Agent for the benefit of the City, and shall be disbursed as provided below. (B) Disbursement. Amounts in the Administrative Expense Fund shall be withdrawn by the Fiscal Agent and paid to the City or its order upon receipt by the Fiscal Agent of an Officer’s Certificate stating the amount to be withdraw, that such amount is to be used to pay an Administrative Expense, and the nature of such Administrative Expense. Annually, on the last day of each Fiscal Year, the Fiscal Agent shall withdraw any amounts then remaining in the Administrative Expense Fund in excess of $20,000.00 that have not otherwise been allocated to pay Administrative Expenses incurred but not yet paid, and which are not otherwise encumbered, and transfer such amounts to the Special Tax Fund. -27- (C) Investment. Moneys in the Administrative Expense Fund shall be invested in accordance with Section 6.01. Interest earnings and profits resulting from said investment shall be retained in the Administrative Expense Fund to be used for the purposes of such fund. Section 3.06. Costs of Issuance Fund. (A) Establishment of Costs of Issuance Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) 2015 Special Tax Refunding Bonds Costs of Issuance Fund, to the credit of which a deposit shall be made as required by clause (ii) of Section 3.02(A) and by clause (i) of Section 3.02(B). Moneys in the Costs of Issuance Fund shall be held by the Fiscal Agent and shall be disbursed as provided in subsection (B) of this Section. (B) Disbursement. Amounts in the Costs of Issuance Fund shall be disbursed from time to time to pay Costs of Issuance, as set forth in a requisition containing respective amounts to be paid to the designated payees, signed by an Authorized Officer and delivered to the Fiscal Agent concurrently with the delivery of the 2015 Bonds. The Fiscal Agent shall pay all Costs of Issuance upon receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee in such requisition, or upon receipt of an Officer’s Certificate requesting payment of a Cost of Issuance not listed on the initial requisition delivered to the Fiscal Agent on the Closing Date. Each such Officer’s Certificate shall be sufficient evidence to the Fiscal Agent of the facts stated therein and the Fiscal Agent shall have no duty to confirm the accuracy of such facts. The Fiscal Agent shall maintain the Cost of Issuance Fund for a period of 90 days from the Closing Date and then shall transfer any moneys remaining therein, including any investment earnings thereon, to the Improvement Fund. (C) Investment. Moneys in the Cost of Issuance Fund shall be invested in accordance with Section 6.01. Interest earnings and profits resulting from said investment shall be retained by the Fiscal Agent in the Cost of Issuance Fund to be used for the purposes of such fund. The validity of the authorization and issuance of the Section 3.07. Validity of Bonds. Bonds shall not be dependent upon the performance by any person of his obligation with respect to the Project. -28- ARTICLE IV SPECIAL TAX REVENUES; BOND FUND AND RESERVE FUND The Bonds shall be secured by a first Section 4.01. Pledge of Special Tax Revenues. pledge of all of the Special Tax Revenues (other than the Special Tax Revenues to be retained by the City or deposited to the Administrative Expense Fund pursuant to clause (i) of the second paragraph of Section 3.04(A)) and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed as provided herein, in the Special Tax Fund. The Special Tax Revenues and all moneys deposited into said funds (except as otherwise provided herein) are hereby dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided herein and in the Act until all of the Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose in accordance with Section 9.03. Amounts in the Improvement Fund, the Administrative Expense Fund, the Costs of Issuance Fund, the Refunding Fund, the Special Tax Revenues to be retained by the City or deposited to the Administrative Expense Fund pursuant to clause (i) of the second paragraph of Section 3.04(A), and the proceeds of any Special Tax B levied in the District, are not pledged to the repayment of the Bonds. The facilities financed by the District are not in any way pledged to pay the debt service on the Bonds. Any proceeds of the sale, condemnation or destruction of any facilities financed by the District are not pledged to pay the debt service on the Bonds and are free and clear of any lien or obligation imposed hereunder. Section 4.02. Bond Fund. (A) Establishment of Bond Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Bond Fund to the credit of which deposits shall be made as required by the first subclause of clause (ii) of the second paragraph of Section 3.04(A), Section 3.04(B), and Section 4.03, and any other amounts required to be deposited therein by this Agreement or the Act, and within said fund a Special Tax Prepayments Account to the credit of which deposits shall be made as required by clause (iii) of the second paragraph of Section 3.04(A). Moneys in the Bond Fund and the account therein shall be held by the Fiscal Agent for the benefit of the Owners of the Bonds, shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below, and, pending such disbursement, shall be subject to a lien in favor of the Owners of the Bonds. (B) Disbursements. (i) Bond Fund Disbursements. On each Interest Payment Date, and following any transfers required pursuant to Sections 3.03(D), 3.04(B), 4.02(B)(ii) and 4.03(C), (E), (F) and (G) in connection with such Interest Payment Date, the Fiscal Agent shall withdraw from the Bond Fund and pay to the Owners of the Bonds the principal of, and interest and any premium, then due and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments set forth in Section 2.03(A)(ii), or a redemption of the Bonds required by Section 2.03(A)(i) or (iii), such payments to be made in the priority listed in the second succeeding paragraph. Notwithstanding the foregoing, amounts in the Bond Fund as a -29- result of a transfer pursuant to clause (ii) of the second paragraph of Section 3.04(A) shall be immediately disbursed by the Fiscal Agent to pay past due amounts owing on the Bonds. In the event that amounts in the Bond Fund are insufficient for the purpose set forth in the preceding paragraph, the Fiscal Agent shall withdraw from the Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund insufficiency. Amounts so withdrawn from the Reserve Fund shall be deposited by the Fiscal Agent in the Bond Fund. If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make the payments provided for in the first sentence of the first paragraph of this Section 4.02(B), the Fiscal Agent shall apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason of sinking payments, and then to payment of principal due on the Bonds by reason of sinking payments. Each such payment shall be made ratably to the Owners of the Bonds based on the then Outstanding principal amount of the Bonds, if there are insufficient funds to make the corresponding payment for all of the then Outstanding Bonds. Any sinking payment not made as scheduled shall be added to the sinking payment to be made on the next sinking payment date. (ii) Special Tax Prepayments Account Disbursements. Moneys in the Special Tax Prepayments Account shall be transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption of Bonds under Section 2.03(A)(iii) can timely be given by the Fiscal Agent under Section 2.03(E), and shall be used (together with any amounts transferred pursuant to Section 4.03(F)) to redeem Bonds on the redemption date selected in accordance with Section 2.03. (C) Investment. Moneys in the Bond Fund and the Special Tax Prepayments Account shall be invested in accordance with Section 6.01. Interest earnings and profits resulting from investment of amounts in the Bond Fund and the Special Tax Prepayments Account shall be retained in the Bond Fund and the Special Tax Prepayments Account, respectively, to be used for the purposes of such fund and account as applicable. (D) State Reporting. If at any time the Fiscal Agent fails to pay principal and interest due on any scheduled payment date for the Bonds, or if funds are withdrawn from the Reserve Fund to pay principal and/or interest on the Bonds, the Fiscal Agent shall notify the Finance Director in writing of such failure or withdrawal, and (in addition to any notice required under the Continuing Disclosure Agreement) the Finance Director shall notify CDIAC of such failure or withdrawal within 10 days of the failure to make such payment or the date of such withdrawal. Section 4.03. Reserve Fund. (A) Establishment of Reserve Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Reserve Fund to the credit of which a deposits shall be made as required by clause (i) of Section 3.02(A) and clause (ii) of Section 3.02(B), which deposits, in the aggregate, are equal to the initial Reserve Requirement, and deposits shall be made as provided in Section 2.14(C), subclause second of clause (ii) of the second paragraph of Section 3.04(A), and Section 3.04(B). -30- Moneys in the Reserve Fund shall be held by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment of principal of, and interest and any premium on, the Bonds and shall be subject to a lien in favor of the Owners of the Bonds. (B) Use of Reserve Fund. Except as otherwise provided in this Section, all amounts deposited in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any premium on, the Bonds or, in accordance with the provisions of this Section, for the purpose of redeeming Bonds from the Bond Fund. (C) Transfer of Excess of Reserve Requirement. Whenever, on the Business Day before any Interest Payment Date, or on any other date at the request of an Authorized Officer, the amount in the Reserve Fund exceeds the Reserve Requirement, the Fiscal Agent shall provide written notice to the City of the amount of the excess and shall transfer an amount equal to the excess from the Reserve Fund to the Bond Fund to be used for the payment of interest on the Bonds on the next Interest Payment Date in accordance with Section 4.02. (D) Transfer for Rebate Purposes. Amounts in the Reserve Fund shall be withdrawn, at the written request of an Authorized Officer, for purposes of making payment to the federal government to comply with Section 6.02. (E) Transfer When Balance Exceeds Outstanding Bonds. Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent shall transfer the amount in the Reserve Fund to the Bond Fund to be applied, on the next succeeding Interest Payment Date to the payment and redemption, in accordance with Section 4.02 or 2.03, as applicable, of all of the Outstanding Bonds. In the event that the amount so transferred from the Reserve Fund to the Bond Fund exceeds the amount required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund shall be transferred to the City to be used for any lawful purpose under the Act. Notwithstanding the foregoing, no amounts shall be transferred from the Reserve Fund pursuant to this Section 4.03(E) until after (i) the calculation, pursuant to Section 6.02, of any amounts due to the federal government following payment of the Bonds and withdrawal of any such amount under Section 4.03(D) for purposes of making such payment to the federal government, and (ii) payment of any fees and expenses due to the Fiscal Agent. (F) Transfer Upon Special Tax Prepayment. Whenever Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment pursuant to Section 2.03(A)(iii) and 4.02(B)(ii), a proportionate amount in the Reserve Fund (determined by the Finance Director on the basis of the principal of Bonds to be redeemed and the then original principal of the Bonds) shall be transferred on the Business Day prior to the redemption date by the Fiscal Agent to the Bond Fund to be applied to the redemption of the Bonds pursuant to Section 2.03(A)(iii). -31- (G) Investment. Moneys in the Reserve Fund shall be invested in accordance with Section 6.01. One Business Day before each Interest Payment Date, interest earnings and profits resulting from said investment shall be transferred by the Fiscal Agent to the Bond Fund to be used by the Fiscal Agent for the purposes of such fund, but any such transfer shall be made only to the extent that following such transfer the amount on deposit in the Reserve Fund equals the then Reserve Requirement. -32- ARTICLE V OTHER COVENANTS OF THE CITY The City will punctually pay or cause to be paid the Section 5.01. Punctual Payment. principal of and interest and any premium on, the Bonds when and as due in strict conformity with the terms of this Agreement and any Supplemental Agreement, and it will faithfully observe and perform all of the conditions, covenants and requirements of this Agreement and all Supplemental Agreements and of the Bonds. The Bonds are limited obligations of the City on Section 5.02. Limited Obligation. behalf of the District and are payable solely from and secured solely by the Special Tax Revenues and the amounts in the Bond Fund (including the Special Tax Prepayments Account therein), the Reserve Fund and the Special Tax Fund created hereunder. In order to prevent any accumulation of Section 5.03. Extension of Time for Payment. claims for interest after maturity, the City shall not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or funding said claims for interest or in any other manner. In case any such claim for interest shall be extended or funded, whether or not with the consent of the City, such claim for interest so extended or funded shall not be entitled, in case of default hereunder, to the benefits of this Agreement, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest which shall not have been so extended or funded. The City will not encumber, pledge or place any Section 5.04. Against Encumbrances. charge or lien upon any of the Special Tax Revenues or other amounts pledged to the Bonds superior to or on a parity with the pledge and lien herein created for the benefit of the Bonds, except as permitted by this Agreement. The City will keep, or cause to be kept, proper books Section 5.05. Books and Records. of record and accounts, separate from all other records and accounts of the City, in which complete and correct entries shall be made of all transactions relating to the Special Tax Revenues. Such books of record and accounts shall at all times during City business hours and following reasonable prior written notice be subject to the inspection of the Fiscal Agent and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing. The City will preserve and Section 5.06. Protection of Security and Rights of Owners. protect the security of the Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the City, the Bonds shall be incontestable by the City. The City will comply with all applicable Section 5.07. Compliance with Law. provisions of the Act in administering the District; provided that the City shall have no obligation to advance any of its own funds for any purpose whatsoever under this Agreement. -33- . The City shall assure that the proceeds Section 5.08. Private Activity Bond Limitation of the 2007 Bonds and of the 2015 Bonds are not so used as to cause the 2007 Bonds or the 2015 Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of section 141(c) of the Code. . The City shall not take any action or Section 5.09.Federal Guarantee Prohibition permit or suffer any action to be taken if the result of the same would be to cause any of the 2015 Bonds to be “federally guaranteed” within the meaning of section 149(b) of the Code. The City shall comply with all Section 5.10. Collection of Special Tax Revenues. requirements of the Act so as to assure the timely collection of Special Tax Revenues, including without limitation, the enforcement of delinquent Special Taxes. On or about July 1 of each year, the Fiscal Agent shall provide the Finance Director with a notice stating the amounts then on deposit in the Bond Fund and the Reserve Fund. The receipt of such notice by the Finance Director shall in no way affect the obligations of the City under the following three paragraphs. Upon receipt of such notice, the Finance Director shall communicate with the Auditor or other appropriate official of the County to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year. In computing the amount of Special Taxes to be levied, the City shall take into account funds available in the Bond Fund and the Special Tax Fund to make the payment of debt service on the Bonds due on the Interest Payment Dates occurring in the next calendar year, along with any transfers of investment earnings pursuant to Sections 4.03(C) or 4.03(G) to the Bond Fund expected to occur on such Interest Payment Date. The City shall effect the levy of the Special Taxes from time to time during each Fiscal Year in accordance with the Ordinance and the Rate and Method of Apportionment. Specifically, the City shall compute the amount of Special Taxes to be so levied each Fiscal Year before the final date on which the Auditor will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next secured or unsecured, as applicable, real property tax roll. Upon the completion of the computation of the amounts of the levy, the City shall prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next real property tax roll. The Special Taxes so levied shall be payable and be collected in the same manner and at the same time and in the same installment as the taxes on property levied on the tax roll are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general ad valorem taxes levied on the County tax roll. In the event that the City determines to levy all or a portion of the Special Taxes by means of direct billing of the property owners within the District, and to the extent permitted by the Ordinance, the City shall, not less than forty-five (45) days prior to the first Interest Payment Date for which the levy is being made, send bills to the property owners in the District for Special Taxes necessary to meet the financial obligations of the District due on the Interest Payment Dates for which the levy is being made, said bills to specify that the amounts so levied shall be due and payable in two equal installments with each installment due not less than -34- thirty (30) days prior to the related Interest Payment Date and each installment shall be delinquent if not paid when due. In any event, the City shall fix and levy the amount of Special Taxes within the District required for the timely payment of principal of and interest on any outstanding Bonds becoming due and payable, including any necessary replenishment or expenditure of the Reserve Fund for the Bonds and an amount estimated to be sufficient to pay the Administrative Expenses, and shall take into account any prepayments of Special Taxes theretofore received by the City. The Special Taxes so levied shall not exceed the maximum amounts as provided in the Rate and Method of Apportionment. The Finance Director is hereby authorized to employ consultants to assist in computing the levy of the Special Taxes hereunder and any reconciliation of amounts levied to amounts received. The fees and expenses of such consultants and the costs and expenses of the Finance Director (including a charge for City staff time) in conducting its duties hereunder shall be an Administrative Expense hereunder. The City will adopt, make, execute and deliver any Section 5.11. Further Assurances. and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and for the better assuring and confirming unto the Owners of the rights and benefits provided in this Agreement. The City shall not take, or permit or suffer to be taken by Section 5.12. No Arbitrage. the Fiscal Agent or otherwise, any action with respect to the proceeds of the 2015 Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the 2015 Bonds would have caused the 2015 Bonds to be “arbitrage bonds” within the meaning of section 148 of the Code. . The City shall take all actions necessary Section 5.13. Maintenance of Tax-Exemption to assure the exclusion of interest on the 2015 Bonds from the gross income of the owners of the 2015 Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the 2015 Bonds. The City hereby covenants with and for the Section 5.14. Covenant to Foreclose. benefit of the Owners of the Bonds that it will order, and cause to be commenced as hereinafter provided, and thereafter diligently prosecute to judgment (unless such delinquency is theretofore brought current), an action in the superior court to foreclose the lien of any Special Tax or installment thereof not paid when due as provided in the following paragraph. The Finance Director shall notify legal counsel of any such delinquency of which it is aware, and such legal counsel shall commence, or cause to be commenced, such proceedings. On or about August 15 of each Fiscal Year, the Finance Director shall compare the amount of Special Taxes theretofore levied in the District to the amount of Special Tax Revenues theretofore received by the City. Following such comparison, or if at any other time the Finance Director becomes aware of any delinquency in the payment of any Special Tax due and owing: -35- (A) Individual Delinquencies. If the Finance Director determines that any single parcel subject to the Special Tax in the District is delinquent in the payment of Special Taxes in the aggregate amount of $5,000 or more, the Finance Director shall send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner by the following October 1, and (if the delinquency remains uncured) foreclosure proceedings shall be commenced by the City against the delinquent parcel within 90 days of the sending of such notice and shall be diligently pursued by the City to completion. Notwithstanding the foregoing, the City need not take any such action so long as the amount then in the Reserve Fund is at least equal to the Reserve Requirement. (B) Aggregate Delinquencies. If the Finance Director determines that the aggregate amount of Special Taxes levied in the District for the preceding Fiscal Year and theretofore collected is less than ninety-five percent (95%) of the total amount of Special Taxes levied for such Fiscal Year, the Finance Director shall send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to each property owner with delinquent Special Taxes by the following October 1, and (if any such delinquency remains uncured) foreclosure proceedings shall be commenced by the City within 90 days of the sending of such notices against all such delinquent parcels. The Finance Director is hereby authorized to employ counsel to conduct any such foreclosure proceedings. The fees and expenses of any such counsel (including a charge for City staff time) in conducting foreclosure proceedings shall be an Administrative Expense hereunder. . Except as expressly permitted by Section 2.14 Section 5.15.No Additional Bonds hereof, the City shall not issue any additional bonds secured by (A) a pledge of Special Taxes on a parity with or senior to the pledge thereof under Section 4.01 hereof; or (B) any amounts in any funds or accounts established hereunder. . In determining the yield of the 2015 Bonds to Section 5.16. Yield of the 2015 Bonds comply with Section 5.12 and 6.02 hereof, the City will take into account redemption (including premium, if any) in advance of maturity based on the reasonable expectations of the City, as of the Closing Date, regarding prepayments of Special Taxes and use of prepayments for redemption of the 2015 Bonds, without regard to whether or not prepayments are received or 2015 Bonds redeemed. . The City hereby covenants and agrees that it will Section 5.17.Continuing Disclosure comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Agreement, failure of the City to comply with the Continuing Disclosure Agreement shall not be considered a default on the Bonds or a breach of any other provision of this Agreement; however, the Participating Underwriter or any 2015 Bondholder may take such actions as may be necessary and appropriate to compel performance by the City, of its obligations under the Continuing Disclosure Agreement, including seeking mandate or specific performance by court order. . The City covenants and agrees to not consent Section 5.18. Reduction of Special Taxes or conduct proceedings with respect to a reduction in the maximum Special Taxes that may be -36- levied in the District below an amount, for any Fiscal Year, equal to 110% of the aggregate of the debt service due on the Bonds in such Fiscal Year, plus a reasonable estimate of Administrative Expenses for such Fiscal Year. It is hereby acknowledged that Bondowners are purchasing the Bonds in reliance on the foregoing covenant, and that said covenant is necessary to assure the full and timely payment of the Bonds. . The following requirements shall apply Section 5.19. State Reporting Requirements to the 2015 Bonds, in addition to those requirements under Section 5.17: (A) Annual Reporting. Not later than October 30 of each calendar year, beginning with the October 30, 2016, and in each calendar year thereafter until the October 30 following the final maturity of the Bonds, the City shall cause the following information to be supplied to CDIAC: (i) the name of the City; (ii) the full name of the District; (iii) the name, title, and series of the Bond issue; (iv) any credit rating for the Bonds and the name of the rating agency; (v) the Closing Date of the Bond issue and the original principal amount of the Bond issue; (vi) the amount of the Reserve Requirement; (vii) the principal amount of Bonds outstanding; (viii) the balance in the Reserve Fund; (ix) that there is no capitalized interest account for the Bonds; (x) the number of parcels in the District that are delinquent with respect to Special Tax payments, the amount that each parcel is delinquent, the total amount of Special Taxes due on the delinquent parcels, the length of time that each has been delinquent, when foreclosure was commenced for each delinquent parcel, the total number of foreclosure parcels for each date specified, and the total amount of tax due on the foreclosure parcels for each date specified; (xi) the balance, if any, in the Improvement Fund; (xii) the assessed value of all parcels subject to the Special Tax to repay the Bonds as shown on the most recent equalized roll, the date of assessed value reported, and the source of the information; (xiii) the total amount of Special Taxes due, the total amount of unpaid Special Taxes, and whether or not the Special Taxes are paid under the County’s Teeter Plan (Chapter 6.6 (commencing with Section 54773) of the California Government Code); (xiv) the reason and the date, if applicable, that the Bonds were retired; and (xv) contact information for the party providing the foregoing information. The annual reporting shall be made using such form or forms as may be prescribed by CDIAC. (B) Other Reporting. If at any time the Fiscal Agent fails to pay principal and interest due on any scheduled payment date for the Bonds, or if funds are withdrawn from the Reserve Fund to pay principal and interest on the Bonds, the Fiscal Agent shall notify the City of such failure or withdrawal in writing. The City shall notify CDIAC and the Original Purchaser of such failure or withdrawal within 10 days of such failure or withdrawal, and the City shall provide notice under the Continuing Disclosure Agreement of such event as required thereunder. (C) Special Tax Reporting. The Finance Director shall file, or cause to be filed, a report with the City no later than January 1, 2016, and at least once a year thereafter, which annual report shall contain: (i) the amount of Special Taxes collected and expended with respect to the District, (ii) the amount of Bond proceeds collected and expended with respect to the District, and (iii) the status of the Project. It is acknowledged that the Special Tax Fund and the Special Tax Prepayments Account are -37- the accounts into which Special Taxes collected on the District will be deposited for purposes of Section 50075.1(c) of the California Government Code, and the funds and accounts listed in Section 4.01 are the funds and accounts into which Bond proceeds will be deposited for purposes of Section 53410(c) of the California Government Code, and the annual report described in the preceding sentence is intended to satisfy the requirements of Sections 50075.1(d), 50075.3(d) and 53411 of the California Government Code. (D) Amendment. The reporting requirements of this Section 5.19 shall be amended from time to time, without action by the City or the Fiscal Agent (i) with respect to subparagraphs (A) and (B) above, to reflect any amendments to Section 53359.5(b) or Section 53359.5(c) of the Act, and (ii) with respect to subparagraph (C) above, to reflect any amendments to Section 50075.1, 50075.3, 53410 or 53411 of the California Government Code. Notwithstanding the foregoing, any such amendment shall not, in itself, affect the City’s obligations under the Continuing Disclosure Agreement. The City shall notify the Fiscal Agent in writing of any such amendments which affect the reporting obligations of the Fiscal Agent under this Agreement. (E) No Liability. None of the City and its officers, agents and employees (including but not limited to the Finance Director), or the Fiscal Agent, shall be liable for any inadvertent error in reporting the information required by this Section 5.19. The Finance Director shall provide, or cause to be provided, copies of any reports prepared pursuant to this Section 5.19 to any Bondowner upon the written request of a Bondowner and payment by the person requesting the information of the cost of the City to produce such information and pay any postage or other delivery cost to provide the same, as determined by the Finance Director. The term “Bondowner” for purposes of this Section 5.19 shall include any beneficial owner of the Bonds. . The City covenants Section 5.20. Limits on Special Tax Waivers and Bond Tenders not to exercise its rights under the Act to waive delinquency and redemption penalties related to the Special Taxes or to declare Special Tax penalties amnesty program if to do so would materially and adversely affect the interests of the owners of the Bonds. The City further covenants not to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds that will remain Outstanding following such tender. . The City will not bid at a foreclosure sale of Section 5.21. City Bid at Foreclosure Sale property in respect of delinquent Special Taxes unless it expressly agrees to take the property subject to the lien for Special Taxes imposed by the District and that the Special Taxes levied on the property are payable while the City owns the property. -38- ARTICLE VI INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS; LIABILITY OF THE CITY Moneys in any fund or Section 6.01. Deposit and Investment of Moneys in Funds. account created or established by this Agreement and held by the Fiscal Agent shall be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer’s Certificate filed with the Fiscal Agent at least two (2) Business Days in advance of the making of such investments. The Officer’s Certificate shall contain a certification to the Fiscal Agent that the investments being directed are Permitted Investments as required hereunder. In the absence of any such Officer’s Certificate, the Fiscal Agent shall invest any such moneys in Permitted Investments described in clause (h) of the definition thereof; provided, however, that any such investment shall be made by the Fiscal Agent only if, prior to the date on which such investment is to be made, the Fiscal Agent shall have received an Officer’s Certificate specifying a specific money market fund into which the funds shall be invested and, if no such Officer’s Certificate is so received, the Fiscal Agent shall hold such moneys uninvested. Moneys in any fund or account created or established by this Agreement and held by the City shall be invested by the City in any lawful investments that the City may make or in any Permitted Investment, which in any event by their terms mature prior to the date on which such moneys are required to be paid out hereunder. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account, subject, however, to the requirements of this Agreement for transfer of interest earnings and profits resulting from investment of amounts in funds and accounts. Whenever in this Agreement any moneys are required to be transferred by the City to the Fiscal Agent, such transfer may be accomplished by transferring a like amount of Permitted Investments. The Fiscal Agent or the Finance Director may act as principal or agent in the acquisition or disposition of any investment, and all investments may be made through the Fiscal Agent’s investment department or that of its affiliates. The Fiscal Agent or its affiliates may act as sponsor, agent manager or depository with regard to any Permitted Investment. Neither the Fiscal Agent nor the Finance Director shall incur any liability for losses arising from any investments made pursuant to this Section. Except as otherwise provided in the next sentence, the City shall direct or make investments hereunder such that all investments of amounts deposited in any fund or account created by or pursuant to this Agreement, or otherwise containing gross proceeds of the Bonds (within the meaning of section 148 of the Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by this Agreement or the Code) at Fair Market Value. The City shall direct or make investments hereunder such that investments in funds or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Code and (unless valuation is undertaken at least annually) investments in the Reserve Fund shall be valued at their present value (within the meaning of section 148 of the Code). The Fiscal Agent shall have no duty in connection with the determination of the Fair Market Value of any -39- investment other than to follow: (A) its normal practices in the purchase, sale and determining the value of Permitted Investments; and (B) the investment directions of the City. Investments in any and all funds and accounts may be commingled in a separate fund or funds for purposes of making, holding and disposing of investments, notwithstanding provisions herein for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Fiscal Agent or the Finance Director hereunder, provided that the Fiscal Agent or the Finance Director, as applicable, shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in this Agreement. The Fiscal Agent shall sell in a commercially reasonably manner, or present for redemption, any investment security 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 investment security is credited and neither the Fiscal Agent nor the Finance Director shall be liable or responsible for any loss resulting from the acquisition or disposition of such investment security in accordance herewith. The City acknowledges that regulations of the Comptroller of the Currency grant the City the right to receive brokerage confirmations of security transactions to be effected by the Fiscal Agent hereunder as they occur. The City specifically waives the right to receive such notification to the extent permitted by applicable law and agrees that it will instead receive monthly cash transactions statements which include detail for the investment transactions effected by the Fiscal Agent hereunder; provided, however, that the City retains its rights to, upon written request to the Fiscal Agent, receive brokerage confirmation on any investment transaction requested by the City. The City Section 6.02. Rebate of Excess Investment Earnings to the United States. shall take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the 2015 Bonds. The City shall direct the Fiscal Agent to withdraw such amounts from the Reserve Fund pursuant to Section 4.03(D) as necessary to make any required rebate payments, and pay such amounts to the federal government as required by the Code and the Regulations. In the event of any shortfall in amounts available to make such payments under Section 4.03(D), the City shall make such payment from any amounts available in the Administrative Expense Fund or from any other lawfully available funds of the District. Any fees or expenses incurred by the City under or pursuant to this Section 6.02 shall be Administrative Expenses. In order to provide for the administration of this Section 6.02, the Finance Director may provide for the employment of independent attorneys, accountants and consultants compensated on such reasonable basis as the Finance Director may deem appropriate and in addition, and without limitation of the provisions of Sections 7.01 and 7.02, the Finance Director may rely conclusively upon and be fully protected from all liability in relying upon the opinions, determinations, calculations and advice of such agents, attorneys and consultants employed hereunder. -40- The Fiscal Agent may rely conclusively upon the City’s determinations, calculations and certifications required by this Section. The Fiscal Agent shall have no responsibility to independently make any calculation or determination or to review the City’s calculations hereunder. The City shall not incur any responsibility in respect of Section 6.03. Liability of City. the Bonds or this Agreement other than in connection with the duties or obligations explicitly herein or in the Bonds assigned to or imposed upon it. The City shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The City shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions covenants or agreements of the Fiscal Agent herein or of any of the documents executed by the Fiscal Agent in connection with the Bonds, or as to the existence of a default or event of default thereunder. In the absence of bad faith, the City, including the Finance Director, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the City and conforming to the requirements of this Agreement. The City, including the Finance Director, shall not be liable for any error of judgment made in good faith unless it shall be proved that it was negligent in ascertaining the pertinent facts. No provision of this Agreement shall require the City to expend or risk its own general funds or otherwise incur any financial liability (other than with respect to the Special Tax Revenues) in the performance of any of its obligations hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The City may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The City may consult with counsel, who may be the City Attorney, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The City shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactory established, if disputed. Whenever in the administration of its duties under this Agreement the City 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, in the absence of willful misconduct on the part of the City, be deemed to be conclusively proved and established by a certificate of the appropriate agent or consultant, and such certificate shall be full warrant to the City for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its -41- discretion the City may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. In order to perform its duties and Section 6.04. Engagement of Agents by City. obligations hereunder, the City and/or the Finance Director may employ such persons or entities as it deems necessary or advisable. The City shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities. -42- ARTICLE VII THE FISCAL AGENT MUFG Union Bank, N.A., at its corporate Section 7.01. Appointment of Fiscal Agent. trust office in Los Angeles, California is hereby appointed Fiscal Agent and paying agent for the Bonds. The Fiscal Agent undertakes to perform such duties, and only such duties, as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Fiscal Agent. Any company or association into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company or association resulting from any merger, conversion or consolidation to which it shall be a party or any company or association to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such company or association shall be eligible under the following paragraph of this Section, shall be the successor to such Fiscal Agent without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. The Fiscal Agent shall give the Finance Director written notice of any such succession hereunder. The City may remove the Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank, association or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least Fifty Million Dollars ($50,000,000), and subject to supervision or examination by federal or state authority. If such bank, association 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 7.01, combined capital and surplus of such bank, association 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 Fiscal Agent may at any time resign by giving written notice to the City and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such resignation, the City shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fiscal Agent. Upon such acceptance, the successor Fiscal Agent shall be vested with all rights and powers of its predecessor hereunder without any further act. If no appointment of a successor Fiscal Agent shall be made pursuant to the foregoing provisions of this Section within forty-five (45) days after the Fiscal Agent shall have given to the City written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent or any Bondowner may apply to any court of competent jurisdiction to appoint a successor Fiscal Agent. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fiscal Agent. If, by reason of the judgment of any court, or reasonable agency, the Fiscal Agent is rendered unable to perform its duties hereunder, all such duties and all of the rights and -43- powers of the Fiscal Agent hereunder shall be assumed by and vest in the Finance Director for the benefit of the Owners. The City covenants for the direct benefit of the Owners that its Finance Director in such case shall be vested with all of the rights and powers of the Fiscal Agent hereunder, and shall assume all of the responsibilities and perform all of the duties of the Fiscal Agent hereunder, in trust for the benefit of the Owners of the Bonds. In such event, the Finance Director may designate a successor Fiscal Agent qualified to act as Fiscal Agent hereunder. The recitals of facts, covenants and agreements Section 7.02. Liability of Fiscal Agent. herein and in the Bonds contained shall be taken as statements, covenants and agreements of the City, and the Fiscal Agent assumes no responsibility for the correctness of the same, or makes any representations as to the validity or sufficiency of this Agreement or of the Bonds, or shall incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it. The Fiscal Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The Fiscal Agent assumes no responsibility or liability for any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds. In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Fiscal Agent and conforming to the requirements of this Agreement; but in the case of any such certificates or opinions by which any provision hereof are specifically required to be furnished to the Fiscal Agent, the Fiscal Agent shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Agreement. Except as provided above in this paragraph, Fiscal Agent shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this Agreement, upon any resolution, order, notice, request, requisition, Officer’s Certificate, consent or waiver, certificate, statement, affidavit, or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper person or to have been prepared and furnished pursuant to any provision of this Agreement, and the Fiscal Agent shall not be under any duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument. The Fiscal Agent shall not be liable for any error of judgment made in good faith by a responsible officer unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts. No provision of this Agreement shall require the Fiscal Agent 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. The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Owners pursuant to this Agreement unless such Owners shall have offered to the Fiscal Agent security or indemnity -44- satisfactory to it against the fees, expenses and liabilities (including reasonable attorney’s fees) which might be incurred by it in compliance with such request or direction. The Fiscal Agent may become the owner of the Bonds with the same rights it would have if it were not the Fiscal Agent. The Fiscal Agent shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, and its liability shall be limited to the proper accounting for such funds as it shall actually receive. The Fiscal Agent may consult with counsel, who may be counsel of or to the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. In order to perform its duties and obligations hereunder, the Fiscal Agent may employ such persons or entities as it deems necessary or advisable. The Fiscal Agent shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities. The Fiscal Agent agrees to accept and act upon instructions or directions pursuant to this Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods; provided, however, that the Fiscal Agent shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the City elects to give the Fiscal Agent e-mail or facsimile instructions (or instructions by a similar electronic method) and the Fiscal Agent in its discretion elects to act upon such instructions, the Fiscal Agent’s reasonable understanding of such instructions shall be deemed controlling. The Fiscal Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Fiscal Agent’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The City agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Fiscal Agent, including without limitation the risk of interception and misuse by third parties. The Fiscal Agent shall not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of enforced delay (“unavoidable delay”) in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, acts of god or of the public enemy or terrorists, acts of a government, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, malicious mischief, condemnation, and unusually severe weather or delays of suppliers -45- or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Fiscal Agent. The Fiscal Agent shall provide to the Section 7.03. Information; Books and Accounts. City such information relating to the Bonds and the funds and accounts maintained by the Fiscal Agent hereunder as the City shall reasonably request, including but not limited to monthly statements reporting funds held and transactions by the Fiscal Agent. Upon the City’s election, such statements will be delivered via the Fiscal Agent’s online service and upon electing such service, paper statements will be provided only upon request. The Fiscal Agent will keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Improvement Fund, the Special Tax Fund, the Bond Fund, the Special Tax Prepayments Account, the Reserve Fund, the Administrative Expense Fund and the Costs of Issuance Fund. Such books of record and accounts shall upon reasonable prior notice at all times during business hours be subject to the inspection of the City and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing. The Fiscal Agent may rely and shall be protected Section 7.04. Notice to Fiscal Agent. in acting or refraining from acting upon any notice, resolution, request, requisition, Officer’s Certificate, consent, order, certificate, report, warrant, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties under this Agreement the Fiscal Agent 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, in the absence of willful misconduct on the part of the Fiscal Agent, be deemed to be conclusively proved and established by a certificate of the City, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The City shall pay to the Fiscal Agent Section 7.05. Compensation, Indemnification. from time to time, promptly upon written request, reasonable compensation for all services rendered as Fiscal Agent under this Agreement, and also all reasonable expenses, charges, counsel fees and other disbursements, including those of their attorneys, agents and employees, incurred in and about the performance of their powers and duties under this Agreement, but the Fiscal Agent shall not have a lien therefor on any funds at any time held by it under this Agreement. The City further agrees, to the extent permitted by applicable law, to indemnify -46- and save the Fiscal Agent, its officers, employees, directors and agents harmless against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder (including legal fees and expenses) which are not due to its negligence or willful misconduct. The obligation of the City under this Section shall survive resignation or removal of the Fiscal Agent under this Agreement and payment of the Bonds and discharge of this Agreement, but any monetary obligation of the City arising under this Section shall be limited solely to amounts on deposit in the Administrative Expense Fund. -47- ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT This Agreement and the rights and obligations Section 8.01. Amendments Permitted. of the City and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the written consent without a meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 8.04. No such modification or amendment shall (i) extend the maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the City to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation by the City of any pledge or lien upon the Special Taxes superior to or on a parity with the pledge and lien created for the benefit of the Bonds (except as otherwise permitted by the Act, the laws of the State of California or this Agreement), or reduce the percentage of Bonds required for the amendment hereof. Any such amendment may not modify any of the rights or obligations of the Fiscal Agent without its written consent. This Agreement and the rights and obligations of the City and of the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes: (A) to add to the covenants and agreements of the City in this Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or conferred upon the City; (B) to make modifications not adversely affecting any outstanding series of Bonds of the City in any material respect; (C) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in this Agreement, or in regard to questions arising under this Agreement, as the City may deem necessary or desirable and not inconsistent with this Agreement, and which shall not adversely affect the rights of the Owners of the Bonds; (D) to make such additions, deletions or modifications as may be necessary or desirable to assure the exclusion from gross income, for purposes of federal income taxation, of interest on the 2015 Bonds; and (E) in connection with the issuance of Parity Bonds under and pursuant to Section 2.14. The Fiscal Agent may in its discretion, but shall not be obligated to, enter into any such Supplemental Agreement authorized by this Section which materially adversely affects the -48- Fiscal Agent’s own rights, duties or immunities under this Fiscal Agent Agreement or otherwise with respect to the Bonds or any agreements related thereto. The Fiscal Agent may request and shall be fully protected in relying upon, an opinion of Bond Counsel that any proposed Supplemental Agreement complies with the applicable requirements of this Section 8.01 The City may at any time call a meeting of the Section 8.02. Owners’ Meetings. Owners. In such event the City is authorized to fix the time and place of said meeting and to provide for the giving of notice thereof, and to fix and adopt rules and regulations for the conduct of said meeting. The City Section 8.03. Procedure for Amendment with Written Consent of Owners. and the Fiscal Agent may at any time adopt a Supplemental Agreement amending the provisions of the Bonds or of this Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by Section 8.01, to take effect when and as provided in this Section. The City or the Fiscal Agent may obtain an opinion of Bond Counsel that such Supplemental Agreement complies with the provisions of this Article VIII, and the City and Fiscal Agent may rely conclusively upon such opinion. A copy of such Supplemental Agreement, together with a request to Owners for their consent thereto, shall be mailed by first class mail, by the Fiscal Agent to each Owner of Bonds Outstanding, but failure to mail copies of such Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as in this Section provided. Such Supplemental Agreement shall not become effective unless there shall be filed with the Fiscal Agent the written consents of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in Section 8.04) and a notice shall have been mailed as hereinafter in this Section provided. Each such consent shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given, which proof shall be such as is permitted by Section 9.04. Any such consent shall be binding upon the Owner of the Bonds giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Fiscal Agent prior to the date when the notice hereinafter in this Section provided for has been mailed. After the Owners of the required percentage of Bonds shall have filed their consents to the Supplemental Agreement, the City shall mail a notice to the Owners in the manner hereinbefore provided in this Section for the mailing of the Supplemental Agreement, stating in substance that the Supplemental Agreement has been consented to by the Owners of the required percentage of Bonds and will be effective as provided in this Section (but failure to mail copies of said notice shall not affect the validity of the Supplemental Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record, consisting of the papers required by this Section 8.03 to be filed with the Fiscal Agent, shall be proof of the matters therein stated until the contrary is proved. The Supplemental Agreement shall become effective upon the filing with the Fiscal Agent of the proof of mailing of such notice, and the Supplemental Agreement shall be deemed conclusively binding (except as otherwise hereinabove specifically provided in this Article) upon the City and the Owners of all Bonds at the expiration of sixty (60) days after such filing, except in the event of a final -49- decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty-day period. Bonds owned or held for the account of the City, Section 8.04. Disqualified Bonds. excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of any vote, consent or other action or any calculation of Outstanding Bonds provided for in this Article VIII, and shall not be entitled to vote upon, consent to, or take any other action provided for in this Article VIII. Upon written request, the City shall specify to the Fiscal Agent those Bonds disqualified pursuant to this Section 8.04. The Fiscal Agent may conclusively rely upon such request. From and after the time any Section 8.05. Effect of Supplemental Agreement. Supplemental Agreement becomes effective pursuant to this Article VIII, this Agreement shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations under this Agreement of the City and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such Supplemental Agreement shall be deemed to be part of the terms and conditions of this Agreement for any and all purposes. The Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. City may determine that Bonds issued and delivered after the effective date of any action taken as provided in this Article VIII shall bear a notation, by endorsement or otherwise, in form approved by the City, as to such action. In that case, upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Principal Office of the Fiscal Agent or at such other office as the City may select and designate for that purpose, a suitable notation shall be made on such Bond. The City may determine that new Bonds, so modified as in the opinion of the City is necessary to conform to such Owners’ action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the Fiscal Agent without cost to any Owner, for Bonds then Outstanding, upon surrender of such Bonds. The provisions of this Article VIII Section 8.07. Amendatory Endorsement of Bonds. shall not prevent any Owner from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds. -50- ARTICLE IX MISCELLANEOUS Nothing in this Agreement, Section 9.01. Benefits of Agreement Limited to Parties. expressed or implied, is intended to give to any person other than the City, the Fiscal Agent and the Owners, any right, remedy, claim under or by reason of this Agreement. Any covenants, stipulations, promises or agreements in this Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the Owners and the Fiscal Agent. Section 9.02. Successor is Deemed Included in All References to Predecessor. Whenever in this Agreement or any Supplemental Agreement either the City or the Fiscal Agent is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Agreement contained by or on behalf of the City or the Fiscal Agent shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. The City shall have the option to pay and Section 9.03. Discharge of Agreement. discharge the entire indebtedness on all or any portion of the Bonds Outstanding in any one or more of the following ways: (A) by well and truly paying or causing to be paid the principal of, and interest and any premium on, such Bonds Outstanding, as and when the same become due and payable; (B) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the funds and accounts provided for in Sections 4.02 and 4.03 is fully sufficient to pay such Bonds Outstanding, including all principal, interest and redemption premiums; or (C) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal Securities in such amount as the City shall determine as confirmed by Bond Counsel, an Independent Financial Consultant or an independent certified public accountant will, together with the interest to accrue thereon and moneys then on deposit in the fund and accounts provided for in Sections 4.02 and 4.03, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates. If the City shall have taken any of the actions specified in (A), (B) or (C) above, and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in this Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at the election of the City, and notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the Special Taxes and other funds provided for in this Agreement and all other obligations of the City under this Agreement with respect to such Bonds Outstanding shall cease and terminate. Notice of such election shall be filed with the Fiscal Agent. Notwithstanding the foregoing, the -51- obligations of the City to pay or cause to be paid to the Owners of the Bonds not so surrendered and paid all sums due thereon, to pay all amounts owing to the Fiscal Agent pursuant to Section 7.05, and otherwise to assure that no action is taken or failed to be taken if such action or failure adversely affects the exclusion of interest on the Bonds from gross income for federal income tax purposes, shall continue in any event. Upon compliance by the City with the foregoing with respect to all Bonds Outstanding, any funds held by the Fiscal Agent after payment of all fees and expenses of the Fiscal Agent, which are not required for the purposes of the preceding paragraph, shall be paid over to the City and any Special Taxes thereafter received by the City shall not be remitted to the Fiscal Agent but shall be retained by the City to be used for any purpose permitted under the Act. Any Section 9.04. Execution of Documents and Proof of Ownership by Owners. request, declaration or other instrument which this Agreement may require or permit to be executed by Owners may be in one or more instruments of similar tenor, and shall be executed by Owners in person or by their attorneys appointed in writing. Except as otherwise herein expressly provided, the fact and date of the execution by any Owner or his attorney of such request, declaration or other instrument, or of such 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 in which he purports to act, that the person signing such request, declaration 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. Except as otherwise herein expressly provided, the ownership of registered Bonds and the amount, maturity, number and date of holding the same shall be proved by the registry books. Any request, declaration or other instrument or writing of the Owner of any Bond shall bind all future Owners of such Bond in respect of anything done or suffered to be done by the City or the Fiscal Agent in good faith and in accordance therewith. No City Council member, officer, agent or Section 9.05. Waiver of Personal Liability. employee of the City shall be individually or personally liable for the payment of the principal of, or interest or any premium on, the Bonds; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law. Any notice or Section 9.06. Notices to and Demands on City and Fiscal Agent. demand which by any provision of this Agreement is required or permitted to be given or served by the Fiscal Agent to or on the City may be given or served by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the City with the Fiscal Agent) as follows: -52- City of Tustin, California 300 Centennial Way Tustin, California 92780 Attention: Finance Director Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the City to or on the Fiscal Agent may be given or served by (A) being deposited postage prepaid in a post office letter box addressed (until another address is filed by the Fiscal Agent with the City) as follows, (B) facsimile transmission to the fax number set forth below, or (C) email to the email address indicated below: MUFG Union Bank, N.A. 120 South San Pedro Street, Suite 400 Los Angeles, California 90012 Attention: Corporate Trust Department Fax: (213) 972-5694 Email: AccountAdministration-CorporateTrust@unionbank.com with a copy to: CashControlGroup-LosAngeles@unionbank.com If any Section, paragraph, sentence, clause or phrase of Section 9.07. Partial Invalidity. this Agreement shall for any reason be held illegal or unenforceable, such holding shall not affect the validity of the remaining portions of this Agreement. The City hereby declares that it would have adopted this Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Agreement may be held illegal, invalid or unenforceable. Anything contained herein to the contrary Section 9.08. Unclaimed Moneys. notwithstanding, any moneys held by the Fiscal Agent for the payment and discharge of the principal of, and the interest and any premium on, the Bonds which remains unclaimed for two (2) years after the date when the payments of such principal, interest and premium have become payable, if such moneys were held by the Fiscal Agent at such date, shall be repaid by the Fiscal Agent to the City as its absolute property free from any trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Bond Owners shall look only to the City for the payment of the principal of, and interest and any premium on, such Bonds. Any right of any Owner to look to the City for such payment shall survive only so long as required under applicable law. This Agreement shall be governed by and enforced in Section 9.09. Applicable Law. accordance with the laws of the State of California applicable to contracts made and performed in the State of California. In the event of a conflict between any provision of this Section 9.10. Conflict with Act. Agreement with any provision of the Act as in effect on the Closing Date, the provision of the Act shall prevail over the conflicting provision of this Agreement. -53- Bonds issued pursuant to this Section 9.11. Conclusive Evidence of Regularity. Agreement shall constitute conclusive evidence of the regularity of all proceedings under the Act relative to their issuance and the levy of the Special Taxes. In any case where the date of the maturity of Section 9.12. Payment on Business Day. interest or of principal (and premium, if any) of the Bonds or the date fixed for redemption of any Bonds or the date any action is to be taken pursuant to this Agreement is other than a Business Day, the payment of interest or principal (and premium, if any) or the action need not be made on such date but may be made on the next succeeding day which is a Business Day with the same force and effect as if made on the date required and no interest shall accrue for the period from and after such date. This Agreement may be executed in counterparts, each of Section 9.13. Counterparts. which shall be deemed an original. -54- IN WITNESS WHEREOF, the City has caused this Agreement to be executed in its name and the Fiscal Agent has caused this Agreement to be executed in its name, all as of December 1, 2015. CITY OF TUSTIN, CALIFORNIA, for and on behalf of the CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) By: Jeffrey C. Parker, City Manager MUFG UNION BANK, N.A., as Fiscal Agent By: Authorized Officer 20015.07:J13419 S-1 EXHIBIT A FORM OF 2015 BOND No. $ UNITED STATES OF AMERICA STATE OF CALIFORNIA CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX __________ BOND, SERIES 2015__ INTEREST RATE MATURITY DATE BOND DATE CUSIP September 1, ____ December __, 2015 901047 ___ REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS The City of Tustin, California (the “City”), for and on behalf of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the “District”), for value received, hereby promises to pay solely from the Special Tax (as hereinafter defined) to be collected in the District or amounts in the funds and accounts held under the Agreement (as hereinafter defined), to the registered owner named above, or registered assigns, on the maturity date set forth above, unless redeemed prior thereto as hereinafter provided, the principal amount set forth above, and to pay interest on such principal amount from the Bond Date shown above, or from the most recent Interest Payment Date (defined below) to which interest has been paid or duly provided for, semiannually on March 1 and September 1, commencing March 1, 2016 (each, an “Interest Payment Date”), at the interest rate set forth above, until the principal amount hereof is paid or made available for payment. The principal of this Bond is payable to the registered owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the principal corporate trust office of MUFG Union Bank, N.A. (the “Fiscal Agent”). Interest on this Bond shall be paid by check of the Fiscal Agent mailed on each Interest Payment Date to the registered owner hereof as of the close of business on the 15th day of the month preceding the month in which the Interest Payment Date occurs (the “Record Date”) at such registered owner’s address as it appears on the registration books maintained by the Fiscal Agent, or (i) if the Bonds are in book-entry-only form, or (ii) otherwise upon written request filed with the Fiscal Agent prior to any Record Date by a registered owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to the depository for the Bonds or to an account in the United States designated by such registered owner in such written request, respectively. Exhibit A Page 1 Interest on this Bond shall be payable from the interest payment date next preceding the date of authentication hereof, unless (i) it is authenticated on an interest payment date, in which event it shall bear interest for such Interest Payment Date, or (ii) such date of authentication is after a Record Date but on or prior to an Interest Payment Date, in which event interest will be payable from such Interest Payment Date, or (iii) such date of authentication is prior to the first Record Date, in which event interest will be payable from the Bond Date shown above; provided however, that if at the time of authentication of this Bond, interest is in default hereon, this Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment hereon. This Bond is one of a duly authorized issue of bonds in the aggregate principal amount of $__________ approved by the City Council of the City on November 3, 2015 pursuant to the California Government Code (the “Act”) for the purpose of refunding the City of Tustin \[ Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 financing costs of facilities authorized to be funded by the District, and is one of the \]\[\] series of Bonds designated “City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax __________ Bonds, Series 2015__” (the “Bonds”). The creation of the Bonds and the terms and conditions thereof are provided for the Fiscal Agent Agreement, dated as of December 1, 2015, between the City, for and on behalf of the District, and the Fiscal Agent (the “Agreement”) and this reference incorporates the Resolution and the Agreement herein, and by acceptance hereof the owner of this Bond assents to said terms and conditions. In addition to the Bonds, the Agreement provides for the issuance of the Series 2015__ Bonds (as defined in the Agreement), which Series 2015__ Bonds are secured on a parity with the Bonds under the Agreement. The Agreement also allows for the issuance of additional bonds by the City from time to time secured by a lien on certain funds held under the Agreement on a parity with the lien securing the Bonds and the Series ____ Bonds. The Agreement is authorized under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. The Bonds are not general obligations of the City, but are limited obligations payable solely from the revenues and funds pledged therefor under the Agreement. Neither the faith and credit nor the taxing power of the City (except to the extent of the Special Tax A levy in the District, as set forth in the Agreement) or the State of California or any political subdivision thereof is pledged to the payment of the Bonds. Pursuant to the Act, and the Agreement, the principal of and interest on this Bond are payable solely from the annual Special Tax A authorized under the Mello-Roos Community Facilities Act of 1982 to be collected within the District and certain funds held under the Agreement. Any tax for the payment hereof shall be limited to the Special Tax A, except to the extent that provision for payment has been made by the City, as may be permitted by law. The Bonds do not constitute obligations of the City for which said City is obligated to levy or pledge, or has levied or pledged, general or special taxation other than described hereinabove. The City has covenanted for the benefit of the owners of the Bonds that it will commence and pursue to completion appropriate foreclosure actions in the event of delinquencies of any Exhibit A Page 2 Special Tax A installments levied for payment of principal and interest as more particularly set forth in the Agreement. The Bonds maturing on or after September 1, ____ are subject to redemption prior to their stated maturity on any interest payment date occurring on or after September 1, ____, as a whole or in part among maturities as provided in the Agreement, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. The Bonds maturing on September 1, ____, are subject to mandatory sinking payment redemption in part on September 1, ____ and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments The Bonds are also subject to redemption from the proceeds of Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to the Agreement, on any Interest Payment Date, among maturities as specified in the Agreement and by lot within a maturity, at a redemption price (expressed as a percentage at the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates Redemption Prices any Interest Payment Date to and including % March 1, ____ September 1, ____ and March 1, ____ September 1, ____ and March 1, ____ September 1, ____ and thereafter Notice of redemption with respect to the Bonds to be redeemed shall be given to the registered owners thereof, in the manner, to the extent and subject to the provisions of the Agreement. Notices of optional redemption may be conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the Bonds on the anticipated redemption date, and if the Fiscal Agent does not receive sufficient funds by the scheduled redemption date the redemption shall not occur and the Bonds for which notice of redemption was given shall remain outstanding for all purposes of the Agreement. The Bonds are issuable as fully registered Bonds without coupons in denominations of $5,000 or any integral multiple thereof. Subject to the limitations and upon payment of the charges, if any, provided in the Agreement, Bonds may be exchanged at the Principal Office of Exhibit A Page 3 the Fiscal Agent for a like aggregate principal amount and maturity of Bonds of other authorized denominations. Each registration and transfer of registration of this Bond shall be entered by the Fiscal Agent in books kept by it for this purpose and authenticated by its manual signature upon the certificate of authentication endorsed hereon. No transfer or exchange hereof shall be valid for any purpose unless made by the registered owner, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof, interest hereon and any redemption premium shall be payable only to the registered owner or to such owner’s order. The Fiscal Agent shall require the registered owner requesting transfer or exchange to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. No transfer or exchange hereof shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption or (ii) with respect to a Bond after such Bond has been selected for redemption. The Agreement and the rights and obligations of the City thereunder may be modified or amended as set forth therein. The Agreement contains provisions permitting the City to make provision for the payment of the interest on, and the principal of the Series 2015 Bonds so that such Series 2015 Bonds will no longer be deemed to be outstanding under the terms of the Agreement. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and manually signed by the Fiscal Agent. Unless this Bond is presented by an authorized representative of The Depository Trust Company to the Fiscal Agent for registration of transfer, exchange or payment, and any Bond issued 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 since the registered owner hereof, Cede & Co., has an interest herein. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond have existed, happened and been performed in due time, form and manner as required by law, and that the amount of this Bond does not exceed any debt limit prescribed by the laws or Constitution of the State of California. Exhibit A Page 4 IN WITNESS WHEREOF, City of Tustin, California, has caused this Bond to be dated the Bond Date shown above, to be signed by the facsimile signature of the Mayor of the City and countersigned by the facsimile signature of the City Clerk. CITY OF TUSTIN, CALIFORNIA By: Mayor \[S E A L\] ATTEST: City Clerk FISCAL AGENT’S CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the Resolution and the Agreement which has been authenticated on . MUFG UNION BANK, N.A., as Fiscal Agent By: Authorized Signatory Exhibit A Page 5 ASSIGNMENT FOR VALUE RECEIVED, the undersigned do(es) hereby sell, assign and transfer unto (Name, address and Tax identification Number of Assignee) the within-mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the books of the Fiscal Agent with full power of substitution in the premises. Dated: Signatures Guaranteed: Note: Signature guarantee shall be made by a Note: The signature(s) on this Assignment must guarantor institution participating in the correspond with the name(s) as written on the Securities Transfer Agents Medallion Program face of the within Bond in every particular or in such other guarantee program acceptable without alteration or enlargement or any to the Fiscal Agent. change whatsoever. Exhibit A Page 6 Attachment 3 Escrow Agreement Quint & Thimmig LLP 8/20/15 9/4/15 10/12/15 ESCROW AGREEMENT by and between the CITY OF TUSTIN, CALIFORNIA and MUFG UNION BANK, N.A., as Escrow Bank dated as of December 1, 2015 relating to: City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 20015.07:J13454 TABLE OF CONTENTS Section 1. Appointment of Escrow Bank; Notice of Election to Discharge Indenture ................... 2 Section 2. Establishment of Refunding Fund ................................................................................... 2 Section 3. Deposit into Refunding Fund; Investment of Amounts ................................................. 3 Section 4. Instructions as to Application of Deposit ........................................................................ 3 Section 5. Compensation to Escrow Bank......................................................................................... 5 Section 6. Liabilities and Obligations of Escrow Bank ..................................................................... 5 Section 9. Amendment ....................................................................................................................... 7 Section 10. Severability ........................................................................................................................ 7 Section 11. Notices to Escrow Bank and City ..................................................................................... 8 Section 12. Merger or Consolidation of Escrow Bank........................................................................ 8 Section13. Unclaimed Moneys ........................................................................................................... 8 Section 14. Execution of Counterparts ................................................................................................ 8 Section 15. Governing Law .................................................................................................................. 8 EXHIBIT A: SCHEDULE OF ESCROWED FEDERAL SECURITIES EXHIBIT B: SCHEDULE OF PAYMENTS ON THE PRIOR BONDS EXHIBIT C: FORM OF NOTICE OF REDEMPTION EXHIBIT D: NOTICE OF DEFEASANCE -i- ESCROW AGREEMENT This ESCROW AGREEMENT, dated as of December 1, 2015 (this “Escrow Agreement”), is by and between the CITY OF TUSTIN, CALIFORNIA, a municipal corporation and general law city organized and existing under the laws of the State of California (the “City”), for and on behalf of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the “District”), and MUFG UNION BANK, N.A., a national banking association organized and existing under the laws of the United States of America, in its capacity as trustee under the Indenture (as defined below), and in its capacity as escrow bank hereunder (the “Escrow Bank”). RECITALS: WHEREAS, the District has heretofore issued its $13,680,000 initial principal amount of Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (the “Prior Bonds”) pursuant to an Indenture, dated as of September 1, 2007 (the “Indenture”), between the District and the Escrow Bank, formerly known as Union Bank of California, N.A., as trustee (the “Trustee”); and WHEREAS, Section 10.01 of the Indenture provides that if the District shall pay or cause to be paid or there shall otherwise be paid to the owners of all outstanding Prior Bonds the principal thereof and the interest and premium, if any, thereon at the times and in the manner stipulated in the Indenture and in the Prior Bonds, then the owners of the Prior Bonds shall cease to be entitled to the pledge of the Net Special Tax Revenues (as defined in the Indenture) and the other assets as provided in the Indenture, and all agreements, covenants and other obligations of the District to the owners of the Prior Bonds under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied; and WHEREAS, Section 10.02 of the Indenture provides that outstanding Prior Bonds shall prior to their maturity date or redemption date be deemed to have been paid pursuant to Section 10.01 of the Indenture if (a) in case such Prior Bonds are to be redeemed on any date prior to their maturity date, the District shall have given to the Trustee irrevocable instructions to mail notice of redemption of such Prior Bonds on said redemption date, (b) there shall have been deposited with the Trustee either (i) money in an amount which shall be sufficient, or (ii) Federal Securities (as defined in the Indenture) the interest on and principal of which when paid will provide money which, together with the money, if any deposited with the Trustee shall, as verified by an independent certified public accountant, be sufficient to pay when due the interest to become due on such Prior Bonds on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and premium, if any, on such Prior Bonds, and (c) in the event such Prior Bonds are not by their terms subject to redemption within the next succeeding 60 days, the District shall have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to the owners of such Prior Bonds that the deposit required by clause (b) above has been made with the Trustee and that such Prior Bonds, are deemed to have been paid in accordance with Section 10.02 of the -1- Indenture and stating the maturity date or redemption date upon which money is to he available for the payment of the principal of and premium, if any, on such Prior Bonds; and WHEREAS, the City has determined, for and on behalf of the District, to provide for the refunding in full of the outstanding Prior Bonds and the discharge of the Indenture; and WHEREAS, for the purpose of providing funds for the discharge of the Indenture, as amended, the City has determined to issue, for and on behalf of the District, its $__________ City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Refunding Bonds, Series 2015A (the “2015 Bonds”), pursuant to a Fiscal Agent Agreement, dated as of December 1, 2015 (the “Fiscal Agent Agreement”), by and between the City and MUFG Union Bank, N.A., as fiscal agent (the “Fiscal Agent”); and WHEREAS, the City wishes to make a deposit of proceeds of the 2015 Bonds with the Escrow Bank as contemplated by Section 10.02 of the Indenture, and the City desires to enter into this Escrow Agreement for the purpose of providing the terms and conditions for the deposit and application of amounts so deposited with the Escrow Bank; and WHEREAS, the Escrow Bank has full powers to act with respect to the irrevocable escrow created herein and to perform the duties and obligations to be undertaken by it pursuant to this Escrow Trust Agreement. AGREEMENT: NOW, THEREFORE, in consideration of the above premises and of the mutual promises and covenants herein contained and for other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows: Section 1. Appointment of Escrow Bank; Notice of Election to Discharge Indenture. The City hereby appoints the Escrow Bank as escrow bank for all purposes of this Escrow Agreement and in accordance with the terms and provisions of this Escrow Agreement, and the Escrow Bank hereby accepts such appointment. The City, for and on behalf of the District, hereby gives notice to the Escrow Bank, in its capacity as the Trustee, of the City’s irrevocable election to defease the Prior Bonds and terminate the Indenture, as provided in Section 10.02 of the Indenture. Section 2. Establishment of Refunding Fund. There is hereby created by the City with, and to be held by, the Escrow Bank, as security for the payment of the principal of and interest on the Prior Bonds as hereinafter set forth, an irrevocable escrow to be maintained in trust by the Escrow Bank for the benefit of the owners of the Prior Bonds, said escrow to be designated the “Refunding Fund.” All moneys deposited in and any securities held in the Refunding Fund shall constitute a special fund for the payment of the principal of and interest on the Prior Bonds in accordance with this Escrow Agreement and the provisions of the Indenture. If at any time the Escrow Bank shall receive actual knowledge that the moneys in the Refunding Fund will not be sufficient to make any payment required by Section 4(a) hereof, the -2- Escrow Bank shall notify the City of such fact and the City shall immediately cure such deficiency from any lawful funds of the District. Section 3. Deposit into Refunding Fund; Investment of Amounts. (a) Concurrent with delivery of the 2015 Bonds, the City shall cause to be transferred to the Escrow Bank for deposit into the Refunding Fund the amount of $__________ in immediately available funds derived as follows: (i) $__________ from the proceeds of sale of the 2015 Bonds, (ii) $__________ from funds held in the Reserve Fund for the Prior Bonds, and (iii) $__________ from funds held in the Special Tax Fund for the Prior Bonds. The Escrow Bank, in its capacity as Trustee for the Prior Bonds, is hereby directed by the City to make the transfers of funds from the Reserve Fund and the Special Tax Fund under the Indenture to the Refunding Fund as described in clauses (ii) and (iii) of the preceding sentence. (b) The Escrow Bank shall invest $__________ of the moneys deposited into the Refunding Fund pursuant to the preceding paragraph in the Federal Securities (as defined in the Indenture) described in Exhibit A attached hereto and by this reference incorporated herein (the “Escrowed Federal Securities”) and shall hold the remaining $__________ in cash, uninvested. The Escrowed Federal Securities shall be deposited with and held by the Escrow Bank in the Refunding Fund solely for the uses and purposes set forth herein. (c) The Escrow Bank may rely upon the conclusion of _______________, as contained in its opinion and accompanying schedules (the “Report”) dated December __, 2015, that the Escrowed Federal Securities mature and bear interest payable in such amounts and at such times as, together with cash on deposit in the Refunding Fund, will be sufficient to provide for the payment and redemption of the Prior Bonds as required by Section 4(a) below. Section 4. Instructions as to Application of Deposit. (a) The total amount held in the Refunding Fund pursuant to Section 3 shall be applied by the Escrow Bank to: (i) pay the scheduled interest and any principal due on the Prior Bonds on March 1, 2016, September 1, 2016, March 1, 2017 and September 1, 2017; and (ii) redeem in full on September 1, 2017 the remaining outstanding Prior Bonds maturing on and after September 1, 2018, by paying on such date from the amount in the Refunding Fund the redemption price of such Prior Bonds, being the then outstanding principal amount thereof, plus accrued interest to the Redemption Date; in each case as more fully set forth in Exhibit B hereto. (b) Pursuant to Section 10.02 of the Indenture, the Escrow Bank, in its capacity as Trustee, is hereby directed, and the Escrow Bank, in its capacity as Trustee, hereby agrees to give notice of the defeasance of the Prior Bonds in the form of defeasance notice attached hereto as Exhibit D. (c) Pursuant to Section 10.02 of the Indenture, the Escrow Bank, in its capacity as Trustee, is hereby directed, and the Escrow Bank, in its capacity as Trustee, hereby agrees, to give notice of the redemption on September 1, 2017 of the Prior Bonds maturing on and after September 1, 2018, said notice to be given not less than thirty (30) nor more than sixty (60) days prior to September 1, 2017 in accordance with the provisions of Section 4.02 of the Indenture and a redemption notice substantially in the form attached hereto as Exhibit C. -3- (d) All of the terms of the Indenture relating to the making of payments of the principal of and interest on the Prior Bonds are incorporated in this Escrow Agreement as if set forth in full herein. (e) Following the final payment of the Prior Bonds, the Escrow Bank shall transfer any remaining amounts held by it as Escrow Bank or Trustee relating to the Prior Bonds or the Indenture on September 2, 2017, to the Fiscal Agent for deposit by the Fiscal Agent to the Special Tax Fund established under the Fiscal Agent Agreement. Section 5. Investment of Any Remaining Moneys. The Escrow Bank shall invest and reinvest the proceeds received from any of the Escrowed Federal Securities, and the cash originally deposited into the Refunding Fund, in Federal Securities pursuant to written directions of the City; provided, however, that (a) such written directions of the City shall be accompanied by (i) a certification of an independent certified public accountant or firm of certified public accountants of favorable national reputation experienced in the refunding of obligations of political subdivisions that the Federal Securities then to be so deposited in the Refunding Fund, together with the cash then on deposit in the Refunding Fund, together with the interest to be derived therefrom, shall be in an amount at all times at least sufficient to make the payments specified in Section 4(a) hereof, and (ii) an opinion of nationally recognized bond counsel (“Bond Counsel”) that investment in accordance with such directions will not affect, for Federal income tax purposes, the exclusion from gross income of interest on the Prior Bonds or on the 2015 Bonds, and (b) if the City directs such investment or reinvestment to be made in United States Treasury Securities-State and Local Government Series, the City shall, at its cost, cause to be prepared all necessary subscription forms therefor in sufficient time to enable the Escrow Bank to acquire such securities. In the event that the City shall fail to file any such written directions with the Escrow Bank concerning the reinvestment of any such proceeds, such proceeds shall be held uninvested by the Escrow Bank. Any interest income resulting from investment or reinvestment of moneys pursuant to this Section 5 and not required for the purposes set forth in Section 4(a), as indicated by the certification referred to in clause (a) above, shall, promptly upon the receipt of such interest income by the Escrow Bank, be paid to the City. Section 6. Substitution or Withdrawal of Federal Securities. The City may, at any time, direct the Escrow Bank in writing to substitute Federal Securities for any or all of the Escrowed Federal Securities then deposited in the Refunding Fund, or to withdraw and transfer to the City any portion of the Federal Securities then deposited in the Refunding Fund, provided that any such direction and substitution or withdrawal shall be simultaneous and shall be accompanied by (a) a certification of an independent certified public accountant or firm of certified public accountants of favorable national reputation experienced in the refunding of obligations of political subdivisions that the Federal Securities then to be so deposited in the Refunding Fund together with interest to be derived therefrom, or in the case of withdrawal, the Federal Securities to be remaining in the Refunding Fund following such withdrawal together with the interest to be derived therefrom, together with any cash then on deposit in the Refunding Fund, shall be in an amount at all times at least sufficient to make the payments specified in Section 4(a) hereof; and (b) an opinion of Bond Counsel that the substitution or withdrawal will not affect, for Federal income tax purposes, the exclusion from gross income of -4- interest on the Prior Bonds or the 2015 Bonds. In the event that, following any such substitution of Federal Securities pursuant to this Section 6, there is an amount of moneys or Federal Securities in excess of an amount sufficient to make the payments required by Section 4(a) hereof, as indicated by the certification referred to in clause (a) above, such excess shall be paid by the Escrow Bank to the City. Section 7. Compensation to Escrow Bank. The City shall pay the Escrow Bank compensation for its duties under this Escrow Agreement, including out-of-pocket costs such as publication costs, legal fees and other costs and expenses relating hereto, pursuant to a separate agreement between the City and the Escrow Bank. Under no circumstances shall amounts deposited in the Refunding Fund or any general funds of the City be deemed to be available for said purposes. The obligation of the City under this Section 7 to pay compensation already earned by the Escrow Bank and to pay costs and expenses already incurred shall survive termination of this Escrow Agreement and shall survive the resignation or removal of the Escrow Bank. Section 8. Liabilities and Obligations of Escrow Bank. The Escrow Bank shall furnish the City with periodic cash transaction statements which include detail for all investment transactions with respect to the Refunding Fund. Upon the City’s election, such statements will be delivered via the Escrow Bank’s online service and upon electing such service; paper statements will be provided only upon request. The City waives the right to receive brokerage confirmations of security transactions effected by the Escrow Bank as they occur, to the extent permitted by law. The City further understands that trade confirmations for securities transactions effected by the Escrow Bank will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker. The Escrow Bank shall have no obligation to make any payment or disbursement of any type or incur any financial liability in the performance of its duties under this Escrow Agreement unless the City shall have deposited sufficient funds with the Escrow Bank. The Escrow Bank may rely and shall be protected in acting upon the written or oral instructions of the City or its agents relating to any matter or action as Escrow Bank under this Escrow Agreement. The protections, immunities and limitations from liability provided to the Trustee under the Indenture shall be afforded the Escrow Bank hereunder and are incorporated herein by this reference. The Escrow Bank and its respective successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort, contract, or otherwise, in connection with the execution and delivery of this Escrow Agreement, the establishment of the Refunding Fund, the acceptance of the moneys deposited therein, the sufficiency of the moneys held in the Refunding Fund hereunder to accomplish the discharge of the Prior Bonds, or any payment, transfer or other application of moneys by the Escrow Bank in accordance with the provisions of this Escrow Agreement or by reason of any non-negligent act, non-negligent omission or non-negligent error of the Escrow Bank made in good faith in the conduct of its duties. The recitals of fact contained in the recital clauses herein shall be taken as the statements of the City and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes no representations as to the sufficiency of the moneys in the Refunding Fund to accomplish the redemption of the Prior Bonds pursuant to the Indenture, or to the validity of -5- this Escrow Agreement as to the City and, except as otherwise provided herein, the Escrow Bank shall incur no liability in respect thereof. The Escrow Bank shall not be liable in connection with the performance of its duties under this Escrow Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Bank shall be determined by the express provisions of this Escrow Agreement and no implied duties shall be read into this Escrow Agreement against the Escrow Bank. The Escrow Bank may consult with counsel, who may or may not be counsel to the City, and in reliance upon the written opinion of such counsel selected by it with due care shall have full and complete authorization and protection in respect of any action taken, suffered or omitted by it in good faith in accordance therewith. The City hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated), to the extent permitted by law, to indemnify, protect, save and hold harmless the Escrow Bank and its respective successors, assigns, agents and servants from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, at any time, the Escrow Bank (whether or not also indemnified against by any other person under any other agreement or instrument) and in any way relating to or arising out of the execution and delivery of this Escrow Agreement, the establishment of the Refunding Fund, the retention of the moneys therein and any payment, transfer or other application of moneys by the Escrow Bank in accordance with the provisions of this Escrow Agreement, or as may arise by reason of any act, omission or error of the Escrow Bank made in good faith in the conduct of its duties; provided, however, that the City shall not be required to indemnify the Escrow Bank against its own negligence or willful misconduct and any liability of the City under this paragraph shall be payable solely from funds of the District. The indemnities contained in this Section 8 and the compensation and reimbursement of expenses set forth in Section 7 shall survive the termination of this Escrow Agreement. Whenever, in the administration of this Escrow Agreement, the Escrow Bank 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, in the absence of negligence or willful misconduct on the part of the Escrow Bank, be deemed to be conclusively proved and established by a certificate of an authorized representative of the City, and such certificate shall, in the absence of negligence or willful misconduct on the part of the Escrow Bank, be full warrant to the Escrow Bank for any action taken or suffered in good faith by it under the provisions of this Escrow Agreement. The Escrow Bank shall not be responsible for any of the recitals or representations contained herein. The Escrow Bank shall not be liable for the accuracy of any calculations provided as to the sufficiency of moneys deposited with it to pay the redemption price of the Prior Bonds. The Escrow Bank shall incur no liability for losses arising from any disposition made pursuant to and in accordance with this Escrow Agreement. -6- No provision of this Escrow Agreement shall require the Escrow Bank to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder or in the exercise of its rights or powers. Any bank, federal savings association or trust company into which the Escrow Bank may be merged or with which it may be consolidated shall become the Escrow Bank without any action of the City. The Escrow Bank shall have no liability or obligation to the holders of the Prior Bonds with respect to the payment of debt service by the City on any of such bonds or with respect to the observance or performance by the City of the other conditions, covenants and terms contained in the Indenture, or with respect to the investment of any moneys in any fund or account established, held or maintained by the City pursuant to the Indenture. The Escrow Bank shall not be liable for any error of judgment made in good faith by an authorized officer. The Escrow Bank may at any time resign by giving written notice to the City, which notice shall indicate the date (not earlier than 60 days after receipt by the City of such notice) on which the resignation is to be effective (the “resignation date”). The City shall promptly appoint a successor Escrow Bank by the resignation date. Resignation of the Escrow Bank will be effective upon acceptance of appointment by a successor Escrow Bank. If the City does not appoint a successor Escrow Bank by the resignation date, the Escrow Bank may petition any court of competent jurisdiction for the appointment of a successor Escrow Bank, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Escrow Bank. The City may at any time terminate the services of the Escrow Bank and appoint a new Escrow Bank hereunder, such termination to take effect only upon acceptance of the appointment by the replacement Escrow Bank. Section 9. Amendment This Escrow Agreement may be modified or amended at any . time by a supplemental agreement which shall become effective when the written consents thereto of the owners of one hundred percent (100%) in aggregate principal amount of the Prior Bonds then outstanding shall have been filed with the Escrow Bank. This Escrow Agreement may be modified or amended at any time by a supplemental agreement, without the consent of any such Prior Bondowners, but only (a) to add to the covenants and agreements of any party, other covenants to be observed, or to surrender any right or power herein or therein reserved to the City, (b) to cure, correct or supplement any ambiguous or defective provision contained herein, or (c) in regard to questions arising hereunder as the parties hereto may deem necessary or desirable and which, in the opinion of counsel, shall not materially adversely affect the interests of the owners of the Prior Bonds, and that such amendment will not cause interest on the Prior Bonds to become subject to federal income taxation. Section 10. Severability. If any section, paragraph, sentence, clause or provision of this Escrow Agreement shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, sentence, clause or provision shall not affect any of the remaining provisions of this Escrow Agreement. -7- Section 11. Notices to Escrow Bank and City. Any notice to or demand upon the Escrow Bank may be served and presented, and such demand may be made, at the principal corporate trust office of the Escrow Bank at MUFG Union Bank, N.A., 120 South San Pedro Street, Suite 400, Los Angeles, California 90012, Attention: Corporate Trust Department; Fax: (213) 972-5694; Email: AccountAdministration-CorporateTrust@unionbank.com with a copy to: CashControlGroup-LosAngeles@unionbank.com (or such other address as may have been filed in writing by the Escrow Bank with the City). Any notice to or demand upon the City shall be deemed to have been sufficiently given or served for all purposes by being mailed by registered or certified mail, and deposited, postage prepaid, in a post office letter box, addressed to the City of Tustin, 300 Centennial Way, Tustin, California 92780, Attention: Finance Director (or such other address as may have been filed in writing by the City with the Escrow Bank). Section 12. Merger or Consolidation of Escrow Bank. Any company into which the Escrow Bank may be merged or converted or with which may it be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Escrow Bank may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible to act as trustee under the Indenture, shall be the successor hereunder to the Escrow Bank without the execution or filing of any paper or any further act. Section13.Unclaimed Moneys. Anything contained herein to the contrary notwithstanding, any moneys held by the Escrow Bank in trust for the payment and discharge of the principal of, and the interest and any premium on, the Prior Bonds which remains unclaimed for two (2) years after the date when the payment of such principal, interest and premium have become payable, if such moneys were held by the Escrow Bank at such date, shall be repaid by the Escrow Bank to the City as its absolute property free from any trust, and the Escrow Bank shall thereupon be released and discharged with respect thereto and the owners of such Prior Bonds shall look only to the City for the payment of the principal of, and interest and any premium on, such Prior Bonds. Any right of any Prior Bondowner to look to the City for such payment shall survive only so long as required under applicable law. Section 14. Execution of Counterparts. This Escrow Agreement may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and all of which shall together constitute but one and the same instrument. Section 15. Governing Law. This Escrow Agreement shall be construed and governed in accordance with the laws of the State of California applicable to contracts made and performed in such State. -8- IN WITNESS WHEREOF, the CITY OF TUSTIN, CALIFORNIA has caused this Escrow Agreement to be signed in its name by its City Manager, and MUFG UNION BANK, N.A., has caused this Escrow Agreement to be signed in its corporate name by its officer identified below, all as of the day and year first above written. CITY OF TUSTIN, CALIFORNIA, for and on behalf of the CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) By: Jeffrey C. Parker, City Manager MUFG UNION BANK, N.A., as Escrow Bank By: Authorized Officer 20015.07:J13454 -9- EXHIBIT A SCHEDULE OF ESCROWED FEDERAL SECURITIES Type of Maturity Par Accrued Security Date Amount Rate Yield Price Cost Interest Total Cost Exhibit A EXHIBIT B SCHEDULE OF PAYMENTS ON THE PRIOR BONDS Redemption Maturing Principal Accrued Total Date Principal Redeemed Interest Payment March 1, 2016 $0.00 $0.00 $387,356.25 $387,356.25 September 1, 2016 145,000.00 0.00 387,356.25 532,355.90 March 1, 2017 0.00 0.00 383,731.25 383,731.25 September 1, 2017 170,000.00 12,935,000.00 383,731.25 13,488,731.25 Exhibit B EXHIBIT C NOTICE OF FULL/FINAL REDEMPTION OF City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 Maturity Principal Redemption Interest CUSIP Date Amount Called Price Rate Number (1) 09/01/2018 $ 200,000.00 100% 5.000% 901047 BH2 09/01/2019 230,000.00 100 5.125 901047 BJ8 09/01/2020 260,000.00 100 5.250 901047 BK5 09/01/2021 295,000.00 100 5.300 901047 BL3 09/01/2022 330,000.00 100 5.375 901047 BM1 09/01/2023 370,000.00 100 5.375 901047 BN9 09/01/2024 410,000.00 100 5.400 901047 BP4 09/01/2025 455,000.00 100 5.500 901047 BQ2 09/01/2037 10,385,000.00 100 6.000 901047 BR0 (1) Accrued interest to be added. NOTICE is hereby given that the City of Tustin, California (the “City”), for and on behalf of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the “District”), has irrevocably called for redemption on September 1, 2017 (the “Redemption Date”), the outstanding City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007, originally issued on September 11, 2007 (the “Bonds”), as described above, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the date fixed for redemption (the “Redemption Price”). On the Redemption Date, the Redemption Price will become due and payable upon each Bond and interest with respect thereto shall cease to accrue from and after the Redemption Date. Payment of principal of and premium on the Bonds will be made upon presentation of the Bonds for payment on and after the Redemption Date, at one of the following addresses of MUFG Union Bank, N.A. (as Escrow Bank): If by Mail: (Registered Bonds) If by Hand or Overnight Mail: MUFG Union Bank, N.A. MUFG Union Bank, N.A. Attn: Corporate Trust Department—Redemptions Attn: Corporate Trust Department—Redemptions 120 South San Pedro Street, Suite 410 120 South San Pedro Street, Suite 410 Los Angeles, CA 90012 Los Angeles, CA 90012 Owners of Bonds presenting their Bond certificates in person for the same day payment must surrender their certificates by 1:00 p.m. on the Redemption Date and a check will be Exhibit C Page 1 available for pickup after 2:00 p.m. Checks not picked up by 4:30 p.m. will be mailed to the applicable Bondholders by first class mail. Interest on the Bonds shall cease to accrue on and after the Redemption Date. If payment of the Redemption Price is to be made to the registered owner of a Bond the owner of such Bond is not required to endorse the Bond to collect the Redemption Price. Under the Economic Growth and Tax Relief Reconciliation Act of 2002 (the “Act”) 28% will be withheld if a tax identification number is not properly certified by or on behalf of the Bondowner. The Form W-9 may be obtained from the Internal Revenue Service. None of the City, the District or the Escrow Bank shall be held responsible for the selection or use of the CUSIP numbers shown above, nor is any representation made as to their correctness as shown in this Notice of Full/Final Redemption. CUSIP numbers are included solely for convenience of the owners of the Bonds. Dated: ______________, 2017 MUFG Union Bank, N.A., as Escrow Bank Exhibit C Page 2 EXHIBIT D NOTICE OF DEFEASANCE City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 Principal Maturity Amount CUSIP Date Defeased Number 09/01/2016 $ 145,000.00 901047 BF6 09/01/2017 170,000.00 901047 BG4 09/01/2018 200,000.00 901047 BH2 09/01/2019 230,000.00 901047 BJ8 09/01/2020 260,000.00 901047 BK5 09/01/2021 295,000.00 901047 BL3 09/01/2022 330,000.00 901047 BM1 09/01/2023 370,000.00 901047 BN9 09/01/2024 410,000.00 901047 BP4 09/01/2025 455,000.00 901047 BQ2 09/01/2037 10,385,000.00 901047 BR0 NOTICE IS HEREBY GIVEN, on behalf of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the “District”), to the owners of the outstanding City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center), Special Tax Bonds, Series 2007 described above (the “Bonds”), that pursuant to the Indenture under which the Bonds were issued (the “Indenture”), the lien of the Indenture with respect to the Bonds has been discharged through the irrevocable deposit of cash and certain federal securities to an escrow fund (the “Refunding Fund”). The Refunding Fund has been established and is being maintained pursuant to that certain Escrow Agreement, dated as of December 1, 2015, by and between the City of Tustin, California, for and on behalf of the District, and MUFG Union Bank, N.A., as escrow bank. As a result of such deposit, the Bonds are deemed to have been paid and defeased in accordance with the Indenture. The pledge of the funds provided for under the Indenture and all other obligations of the District to the owners of the Bonds are hereafter limited to the application of moneys in the Refunding Fund for the payment of the Bonds as described below. The cash and securities held in the Refunding Fund is calculated to provide sufficient moneys to pay the scheduled principal and interest due on the Bonds to and including September 1, 2017, and to redeem the Bonds maturing on and after September 1, 2018 in full on September 1, 2017 at a redemption price equal to 100% of the principal thereof plus accrued interest to such date. Dated this ____ day of _____________, 2015 Exhibit D Page 1 MUFG UNION BANK, N.A., as Trustee for the Bonds Exhibit D Page 2 Attachment 4 Bond Purchase Agreement $_________ $_________ CITY OF TUSTIN CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX REFUNDING BONDS, SERIES 2015A SPECIAL TAX BONDS, SERIES 2015B BOND PURCHASE AGREEMENT _________, 2015 City of Tustin, California Ladies and Gentlemen: First Southwest Company, LLC (the “Underwriter”), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (the “Purchase Agreement”) with the City of Tustin (the “City”) acting on behalf of City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the “District”) which, upon acceptance, will be binding upon the City and upon the Underwriter. This offer is made subject to acceptance of it by the City on the date hereof, and if not accepted will be subject to withdrawal by the Underwriter upon notice delivered to the City at any time prior to the acceptance hereof by the City. The only obligations the Underwriter has to the City with respect to the transactions contemplated hereby are expressly set forth in this Purchase Agreement. The City acknowledges and agrees that: (i) the purchase and sale of the Bonds (defined below) pursuant to this Purchase Agreement is an arm’s-length commercial transaction between the City and the Underwriter; (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as a principal and is not acting as a Municipal Advisor (as defined in Section 15B of The Securities Exchange Act of 1934, as amended); (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the City with respect to the offering contemplated hereby or the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the City on other matters); and (iv) the City has consulted its own legal, financial and other advisors to the extent it has deemed appropriate in connection with this transaction. 1.Purchase, Sale and Delivery of the Bonds. (a)Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter agrees to purchase from the City, and the City agrees to sell to the Underwriter, all (but not less than all) of the: (i) City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Refunding Bonds, Series 2015A (the “Refunding Bonds”) and (ii) City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2015B (the “New Money Bonds,” and with the Refunding Bonds, the “Bonds”), in the aggregate principal amounts specified in Exhibit A hereto. The Bonds shall be dated the Closing Date (hereinafter defined), and bear interest from said date (payable semiannually on March 1 and September 1 in each year, commencing March 1, 2016) at the rates per annum and maturing on the dates and in the amounts set forth in Exhibit A hereto. The purchase price for the Bonds shall be the amounts specified as such in Exhibit A hereto. (b)The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable and subject to redemption as provided in, the Fiscal Agent Agreement by and between the City, for and on behalf of the District, and MUFG Union Bank, N.A., as Fiscal Agent (the “Fiscal Agent”), dated as of December 1, 2015 (the “Fiscal Agent Agreement”), approved by Resolution No. _____ adopted by the City Council of the City (the “City Council”), as the legislative body of the District, on _________, 2015 (the “Resolution of Issuance”). The Bonds and interest thereon will be payable from a special tax (the “Special Tax”) levied and collected on the taxable land within the District in accordance with Resolution No. 07-44 adopted by the City Council on July 19, 2004 (the “Resolution of Formation”) and Ordinance No. 1339 adopted on July 3, 2007 (the “Ordinance”). Proceeds of the sale of the Bonds will be used in accordance with the Fiscal Agent Agreement and the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the “Act”): (a) to refund in full the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (the “Refunded Bonds”); (b) to finance public improvements authorized to be financed by the District; (c) to fund a reserve fund for the Bonds; and (d) to pay the costs of issuing the Bonds. In connection with the refunding of the Refunded Bonds, the City will enter into an Escrow Deposit and Trust Agreement, dated as of December 1, 2015 (the “Escrow Agreement”), by and between the City, for and on behalf of the District, and MUFG Union Bank, N.A., as escrow bank (the “Escrow Bank”). The Resolution of Issuance, the Ordinance, and the Resolution of Formation are collectively referred to herein as the “District Resolutions.” (c)At or prior to the acceptance hereof by the City, the City shall cause to be delivered to the Underwriter a certificate (the “Rule 15c2-12 Certificate”), in substantially the form attached hereto as Exhibit B, and a certificate of Vestar/Kimco Tustin L.P., a California limited partnership (“Vestar”), owner of the majority of the land within the District, in the form attached hereto as Exhibit C (the “Vestar Letter of Representations”), with only such changes therein as shall have been accepted by the Underwriter. (d)Subsequent to its receipt of the Rule 15c2-12 Certificate deeming the Preliminary Official Statement for the Bonds, dated _________, 2015 (which Preliminary Official Statement, together with the cover page and all appendices thereto, is herein collectively referred to as the “Preliminary Official Statement”), final for purposes of Rule 15c2-12 of the Securities and Exchange Commission (“Rule 15c2-12”), the Underwriter has distributed copies of the Preliminary Official Statement in connection with the offer and sale of the Bonds. The City hereby ratifies the use by the Underwriter of the Preliminary Official Statement and authorizes the Underwriter to use and distribute the final Official Statement dated the date hereof (including all information previously permitted to have been omitted by Rule 15c2-12, and any supplements and amendments thereto as have been approved by the City as evidenced by the execution and delivery of such document by an officer of the City, the “Official Statement”), the Fiscal Agent Agreement, the Continuing Disclosure Agreement dated as of December 1, 2015, by and between the City and Willdan Financial Services, as Dissemination Agent (the “Disclosure Agreement”), this Purchase Agreement, and all other documents, certificates and statements furnished by the City to the Underwriter in connection with the transactions contemplated by this Purchase Agreement, in connection with the offer and sale of the Bonds by the Underwriter. The Underwriter hereby agrees to deliver a copy of the Official Statement to the Municipal Securities Rulemaking Board (the “MSRB”) through the Electronic Municipal Marketplace Access website of the MSRB on or before the Closing Date and otherwise to 2 comply with all applicable statutes and regulations in connection with the offering and sale of the Bonds, including, without limitation, MSRB Rule G-32 and Rule 15c2-12. (e)At 8:00 A.M., Pacific Daylight Time, on December ___, 2015, or at such earlier time or date as shall be agreed upon by the Underwriter and the City (such date being herein referred to as the “Closing Date”), the City will deliver (i) to the Depository Trust Company in New York, New York, the Bonds in definitive form (all Bonds being in book-entry form registered in the name of Cede & Co. and having the CUSIP numbers assigned to them printed thereon), duly executed by the officers of the City, as provided in the Fiscal Agent Agreement, and (ii) to the Underwriter, at the offices of Bond Counsel, or at such other place as shall be mutually agreed upon by the City and the Underwriter, the other documents herein mentioned; and the Underwriter shall accept such delivery and pay the purchase price of the Bonds in immediately available funds (such delivery and payment being herein referred to as the “Closing”). Notwithstanding the foregoing, the Underwriter may, in its discretion, accept delivery of the Bonds in temporary form upon making arrangements with the City which are satisfactory to the Underwriter relating to the delivery of the Bonds in definitive form. (f)Except as otherwise disclosed in writing and agreed to by the City, the Underwriter agrees to make a bona fide public offering of the Bonds at the initial public offering price or prices set forth on the inside cover page of the Official Statement and in Exhibit A hereto; provided, however, the Underwriter reserves the right to change such initial public offering prices as the Underwriter deems necessary or desirable, in its sole discretion, in connection with the marketing of the Bonds, and to sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) and others at prices lower than the initial offering prices set forth in the Official Statement. A “bona fide public offering” shall include an offering to institutional investors or registered investment companies, regardless of the number of such investors to which the Bonds are sold. The Underwriter shall provide to the City on the Closing Date a certificate stating that the Underwriter made a bona fide public offering of the Bonds at the initial public offering price or prices set forth on the inside cover page of the Official Statement and in Exhibit A, in a form reasonably acceptable to Bond Counsel. 2.Representations, Warranties and Agreements of the City. The City represents, warrants and covenants to and agrees with the Underwriter that: (a)The City is duly organized and validly existing as a municipal corporation under the laws of the State of California and has duly authorized the formation of the District pursuant to the Resolution of Formation and the Act. The City Council, as the legislative body of the District, has duly adopted the District Resolutions, and has caused to be recorded on June 28, 2007 in the real property records of the County of Orange as Document No. 2Notice of Special Tax 007000409546, a Lien (the “Notice of Special Tax Lien”) (such District Resolutions and Notice of Special Tax Lien being collectively referred to herein as the “Formation Documents”). Each of the Formation Documents remains in full force and effect as of the date hereof and has not been amended. The District is duly organized and validly existing as a community facilities district under the laws of the State of California. The City has, and at the Closing Date will have, as the case may be, full legal right, power and authority (i) to execute, deliver and perform its obligations under this Purchase Agreement, the Fiscal Agent Agreement, the Escrow Agreement and the Disclosure Agreement, and to carry out all transactions contemplated by each of such agreements, (ii) to issue, sell and deliver the Bonds to the Underwriter pursuant to the Resolution of Issuance and the Fiscal Agent Agreement as provided herein, and (iii) to carry out, give effect to and consummate the transactions on its part contemplated by the Formation Documents and by the Fiscal Agent Agreement, the Escrow 3 Agreement, this Purchase Agreement, and the Disclosure Agreement (collectively, the “District Documents”) and the Official Statement; (b)The City has complied, and will at the Closing Date be in compliance, in all material respects, with the Formation Documents and the District Documents, and any immaterial compliance by the City, if any, will not impair the ability of the City to carry out, give effect to or consummate the transactions on its part contemplated by the foregoing. From and after the date of issuance of the Bonds, the City will continue to comply with the covenants of the City contained in the District Documents; (c)The City Council has duly and validly: (i) adopted the District Resolutions, (ii) called, held and conducted in accordance with all requirements of the Act an election within the District to approve the levy of the Special Taxes within the District and the issuance of the Refunded Bonds, and directed the recording of the Notice of Special Tax Lien which established a continuing lien on certain real property within the District securing the payment of the Special Tax, (iii) authorized and approved the execution, delivery and due performance by the City for the District of the Bonds and the District Documents, (iv) authorized the preparation, delivery and distribution of the Preliminary Official Statement and the Official Statement, and (v) authorized and approved the performance by the City of its obligations contained in, and the taking of any and all action as may be necessary to carry out, give effect to and consummate the transactions on its part contemplated by, each of the District Documents (including, without limitation, the collection of the Special Taxes), the Bonds and the Official Statement, and at the Closing Date, the Formation Documents will be in full force and effect and the District Documents and the Bonds will constitute the valid, legal and binding obligations of the City for the District and (assuming due authorization, execution and delivery by other parties thereto, where necessary) will be enforceable upon the City in accordance with their respective terms, subject to bankruptcy, insolvency, debt adjustment, fraudulent conveyance or transfer, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in general and to the application of equitable principles if equitable remedies are sought and to the limitations on legal remedies against public entities in the State; (d)To the best of the City’s knowledge, neither the District nor the City is in breach of or default under any applicable law or administrative rule or regulation of the State of California (the “State”) or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, fiscal agent agreement, contract, agreement or other instrument to which the District or the City is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the performance by the District or the City of their respective obligations under the Bonds, the Formation Documents or the District Documents, and compliance with the provisions of each thereof will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State or the United States, or of any department, division, agency or instrumentality thereof, or under any applicable court or administrative decree or order, or a material breach of or default under any loan agreement, note, resolution, trust agreement, contract, agreement or other instrument to which the District or the City, as the case may be, is a party or is otherwise subject or bound; (e)Except for compliance with the blue sky or other states securities law filings, as to which the City makes no representations, to the best of the City’s knowledge all approvals, consents, authorizations, elections and orders of or filings or registrations with any State governmental authority, board, agency or commission having jurisdiction which would constitute a condition 4 precedent to, or the absence of which would materially adversely affect, the performance by the City of its obligations hereunder, or under the Formation Documents or the District Documents, have been obtained and are in full force and effect; (f)The Special Tax constituting the source of funds for the repayment of the Bonds has been duly and lawfully authorized and may be levied under the Act, the State Constitution and the applicable laws of the State, and such Special Tax, when levied, will, pursuant to the Act, constitute a valid and legally binding continuing lien on the properties on which it has been levied; (g)Until the date which is twenty-five (25) days after the “end of the underwriting period” (as hereinafter defined), if any event shall occur of which the City is aware, as a result of which it may be necessary to supplement the Official Statement in order to make the statements in the Official Statement, in light of the circumstances existing at such time, not misleading, the City shall forthwith notify the Underwriter of any such event of which it has knowledge and shall cooperate fully in furnishing any information available to it for any supplement to the Official Statement necessary, in the Underwriter’s reasonable opinion, so that the statements therein as so supplemented will not be misleading in light of the circumstances existing at such time and the City shall promptly furnish to the Underwriter a reasonable number of copies of such supplement. As used herein, the term “end of the underwriting period” means the later of such time as (i) the City delivers the Bonds to the Underwriter, or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public; and unless the Underwriter gives notice to the contrary, the “end of the underwriting period” shall be deemed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the City at or prior to the Closing Date, and shall specify a date (other than the Closing Date) to be deemed the “end of the underwriting period”; (h)The Fiscal Agent Agreement creates a valid pledge of the Special Tax Revenues and the moneys in the Special Tax Fund, the Bond Fund, and the Reserve Fund established pursuant to the Fiscal Agent Agreement, including the investments thereof, subject in all cases to the provisions of the Fiscal Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein; and, until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon to maturity or to the date of redemption if redeemed prior to maturity, and premium, if any, the City will faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Fiscal Agent Agreement; (i)Except as disclosed in the Official Statement, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body is pending with respect to which the City has been served with process or, to the best knowledge of the City, is threatened (i) which would materially adversely affect the ability of either the City to perform its obligations under the Bonds, the Formation Documents or the District Documents, or (ii) seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Fiscal Agent Agreement, or the collection or application of the Special Taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Bonds, the Formation Documents, the District Documents, or any action contemplated by any of said documents, or (iii) in any way contesting the completeness or accuracy of the Preliminary Official Statement or the powers or authority of the City or the District with respect to the Bonds, the Formation Documents, the District Documents, or any action of the City or the District contemplated 5 by any of said documents; nor is there any action pending with respect to which the City has been served with process or, to the best knowledge of the City, threatened against the City or the District which alleges that interest on the Bonds is not excludable from gross income for federal income tax purposes or is not exempt from California personal income taxation; (j)The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order for the Underwriter to qualify the Bonds for offer and sale under the “Blue Sky” or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate; provided, however, the City shall not be required to register as a dealer or a broker of securities or to consent to service of process in connection with any blue sky filing; (k)Any certificate signed by any official of the City authorized to do so in connection with the offer, sale or closing for the Bonds shall be deemed a representation and warranty to the Underwriter as to the statements made therein; (l)The City will apply the proceeds of the Bonds in accordance with the Fiscal Agent Agreement and as described in the Official Statement; (m)The information contained in the Preliminary Official Statement (other than any information regarding the Depository Trust Company (“DTC”) and its Book-Entry Only System, CUSIP numbers and any information provided by the Underwriter, as to which no view is expressed) was as of the date thereof, and the information contained in the Official Statement (other than any information regarding DTC and its Book-Entry Only System, as to which no view is expressed) as of its date and on the Closing Date shall be, true and correct in all material respects and such information does not and shall not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (n)The Preliminary Official Statement heretofore delivered to the Underwriter has been deemed final by the City as of its date, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of Rule 15c2-12; and the City hereby covenants and agrees that, within seven (7) business days from the date hereof, the City shall cause a final printed form of the Official Statement to be delivered to the Underwriter in a quantity mutually agreed upon by the Underwriter and the City so that the Underwriter may comply with paragraph (b)(4) of Rule 15c2-12 and Rules G-12, G-15, G-32 and G-36 of the Municipal Securities Rulemaking Board; (o)Except as otherwise disclosed in the Preliminary Official Statement, the City is, and has been, in material compliance with respect to all reporting obligations in the last five years that it has undertaken under Rule 15c2-12 for all indebtedness issued by the City; (p)Except as otherwise disclosed in the Preliminary Official Statement, the Formation Documents have not been amended, terminated, rescinded or modified; and (q)The City shall not knowingly take or omit to take any action that, under existing law, may adversely affect the exemption from state income taxation or the exclusion from gross income for federal income tax purposes of the interest on the Bonds. 6 3.Conditions to the Obligations of the Underwriter. The obligations of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the City contained herein, as of the date hereof and as of the Closing Date, to the accuracy in all material respects of the statements of the officers and other officials of the City made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the City of its obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (a)At the Closing Date, the Formation Documents and the District Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds and with the transactions contemplated thereby and by this Purchase Agreement, all such actions as, in the opinion of Quint & Thimmig LLP, Bond Counsel for the City, and Stradling Yocca Carlson & Rauth, a Professional Corporation, counsel to the Underwriter, shall be necessary and appropriate; (b)The information contained in the Official Statement will, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, be true and correct in all material respects and will not, as of the Closing Date or as of the date of any supplement or amendment thereto pursuant to Section 2(g) hereof, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (c)Between the date hereof and the Closing Date, the market price or marketability of the Bonds at the initial offering prices set forth in the Official Statement shall not have been materially adversely affected, in the reasonable judgment of the Underwriter (evidenced by a written notice to the City terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following: (1)legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department or the Internal Revenue Service of the United States of America, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon the interest that would be received by the owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; (2)legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America, or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, or the Bonds, including any or all underlying arrangements, are not 7 exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Fiscal Agent Agreement is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, or of the Bonds, including any or all underwriting arrangements, as contemplated hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws, rules or regulations as amended and then in effect; (3)any amendment to the federal or California Constitution or action by any federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the City or the District, their property, income, securities (or interest thereon), or the validity or enforceability of the Special Taxes; (4)any event occurring, or information becoming known, which, in the judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Preliminary Official Statement or the Official Statement, or results in the Preliminary Official Statement or the Official Statement containing any untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (5)the declaration of war or the escalation of, or engagement in, military hostilities by the United States or the occurrence of any other national or international emergency or calamity relating to the effective operation of the government of, or the financial community in, the United States which, in the reasonable judgment of the Underwriter, makes it impracticable or inadvisable to proceed with the offering or the delivery of the Bonds on the terms and in the manner contemplated in the Preliminary Official Statement or the Official Statement; (6)the declaration of a general banking moratorium by federal, State of New York or State of California authorities, or the general suspension of trading on any national securities exchange or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on the New York Stock Exchange or other national securities exchange, whether by virtue of determination by that exchange or by order of the Securities and Exchange Commission (the “SEC”) or any other governmental authority having jurisdiction that, in the Underwriter’s reasonable judgment, makes it impracticable for the Underwriter to market the Bonds or enforce contracts for the sale of the Bonds; (7)the imposition by the New York Stock Exchange or other national securities exchange, or any governmental authority, of any material restrictions not now in force with respect to the Bonds or obligations of the general character of the Bonds or securities generally, or the material increase of any such restrictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; (8)a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; (9)there shall have been any material adverse change in the affairs of the City that in the Underwriter’s reasonable judgment will materially adversely affect the market for the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; 8 (10)there shall be filed or threatened any litigation described in Section 2(i) hereof; (11)there shall be established any new restriction on transactions in securities materially affecting the free market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a change to the net capital requirements of, underwriters established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or (12)a stop order, release, regulation, or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made to the effect that the issuance, offering, or sale of the Bonds, including all the underlying obligations as contemplated hereby or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of 1939, as amended. (d)On the Closing Date, the Underwriter shall have received counterpart originals or certified copies of the following documents, in each case satisfactory in form and substance to the Underwriter: (1)The Formation Documents and the District Documents, together with a certificate dated as of the Closing Date of the City Clerk to the effect that each Formation Document (other than the Notice of Special Tax Lien) is a true, correct and complete copy of the one duly adopted by the City Council; (2)The Official Statement; (3)An approving opinion for the Bonds, dated the Closing Date and addressed to the City, of Quint & Thimmig LLP, Bond Counsel for the City, in the form attached to the Official Statement as Appendix D (the “Approving Opinion”), and an unqualified letter of such counsel, dated the Closing Date and addressed to the Underwriter, to the effect that the Approving Opinion may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it; (4)A supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Quint & Thimmig LLP, Bond Counsel for the City, to the effect that (i) the Escrow Agreement, this Purchase Agreement and the Disclosure Agreement have been duly authorized, executed and delivered by the City, and, assuming such agreements constitute a valid and binding obligation of the other parties thereto, constitute the legally valid and binding agreements of the City enforceable upon the City in accordance with their terms, except as enforcement may be limited by bankruptcy, moratorium, insolvency or other laws affecting creditor’s rights or remedies and may be subject to general principles of equity (regardless of whether such enforceability is considered in equity or at law); (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Fiscal Agent Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended; (iii) the information contained in the Official Statement on the cover and under the captions “INTRODUCTION,” “THE 2015 BONDS,” “SECURITY FOR THE 2015 BONDS” and “TAX MATTERS” and in Appendices C and D thereof (except that no opinion or belief need be expressed as to any financial or statistical data contained in the Official Statement or DTC and its Book-Entry Only System), is accurate insofar as it purports to summarize or replicate 9 certain provisions of the Act, the Bonds and the Fiscal Agent Agreement and the exclusion from gross income for federal income tax purposes and exemption from State of California personal income taxes of interest on the Bonds; and (iv) the Special Taxes have been duly and validly authorized in accordance with the provisions of the Act; (5)A defeasance opinion of Bond Counsel with respect to the Refunded Bonds, dated the Closing Date and addressed to the Underwriter and the Fiscal Agent, to the effect that, upon the deposit with the Escrow Bank as provided for in the Escrow Agreement, the Refunded Bonds will no longer be considered Outstanding within the meaning of the fiscal agent agreement under which such obligations were issued, and will not have any lien on, or be payable from, the Special Tax Revenues (as such term is defined in the fiscal agent agreement pursuant to which the Refunded Bonds were issued); (6)An opinion of Quint & Thimmig LLP, as Disclosure Counsel (“Disclosure Counsel”), dated the Closing Date and addressed to the City and to the Underwriter, to the effect that, based upon information made available to such counsel in the course of such counsel’s participation in the transaction as Disclosure Counsel, and assuming the accuracy, completeness and fairness of the statements contained in the Official Statement, nothing has come to such counsel’s attention which has led such counsel to believe that the Official Statement as of its date (excluding financial statements and other statistical data; forecasts, projections, estimates, assumptions and expressions of opinions; information about the book-entry only system and DTC; statements relating to the treatment of the Bonds or the interest, discount or premium related thereto for tax purposes under the law of any jurisdiction; and, without limiting the foregoing, the statements contained in the Official Statement under the caption “TAX MATTERS” and Appendices A, B, C, D and F; as to all of which Disclosure Counsel need express no view) contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; (7)An opinion, dated the Closing Date and addressed to the Underwriter, of Stradling Yocca Carlson & Rauth, a Professional Corporation, counsel for the Underwriter, in form and substance satisfactory to the Underwriter; (8)A certificate or certificates, dated the Closing Date and signed by an authorized officer of the City, ratifying the use and distribution by the Underwriter of the Preliminary Official Statement and the Official Statement in connection with the offering and sale of the Bonds; and certifying that (i) the representations and warranties of the City contained in Section 2 hereof are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date except that all references therein to the Preliminary Official Statement shall be deemed to be references to the Official Statement; (ii) to the best of his or her knowledge, no event has occurred since the date of the Official Statement affecting the matters contained therein which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make the statements and information contained in the Official Statement not misleading in any material respect, and the Bonds, the Formation Documents and the District Documents conform as to form and tenor to the descriptions thereof contained in the Official Statement; and (iii) the City has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Formation Documents and the District Documents at or prior to the Closing Date; (9)An opinion, dated the Closing Date and addressed to the Underwriter, of Woodruff, Spradlin & Smart, A Professional Corporation, as counsel to the City, to the effect that 10 (i) the City is a municipal corporation duly organized and existing under and by virtue of the Constitution and laws of the State; (ii) the District is a community facilities district duly organized and existing under and by virtue of the Constitution and laws of the State; (iii) the Resolution of Issuance adopted by the City Council of the City, authorizing the issuance of the Bonds and the execution and delivery of the District Documents, was duly adopted at a meeting of such City Council, which meeting was called and held on _________, 2015, pursuant to law, with all public notice required by law and at which a quorum was present and acting throughout; (iv) the Resolution of Issuance is in full force and effect; and (v) there is no litigation, action, suit, proceeding or investigation at law or in equity before or by any court, governmental agency or body, pending and notice of which has been served on and received by the City or, to the best of our knowledge, threatened against the City, challenging the creation, organization or existence of the City or the District, or the validity of the Bonds or the District Documents or contesting the authority of the City to enter into or perform its obligations under any of such documents, or which, in any manner, questions the right of the City to issue the Bonds, or the allocation and payment of the Special Taxes to the City and the other security for the Bonds provided by the Fiscal Agent Agreement; (10)One or more certificates dated the Closing Date from Willdan Financial Services (“Willdan”) to the effect that: (i) the description of the Rate and Method in the Official Statement under the caption “SECURITY FOR THE 2015 BONDS — Summary of Rate and Method” is true and correct in all material respects, (ii) all information supplied by Willdan for use in the Official Statement is true and correct as of the date of the Official Statement and as of the Closing Date, and (iii) the information set forth in the Official Statement attributed to Willdan as a source, including such information set forth under the captions “SECURITY FOR THE 2015 BONDS,” “THE DISTRICT” and “SPECIAL RISK FACTORS,” was fairly and accurately presented as of the date of the Official Statement; (11)A certificate of the City dated the Closing Date, in a form acceptable to Bond Counsel, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; (12)A certificate of the Fiscal Agent and an opinion of counsel to the Fiscal Agent dated the Closing Date and addressed to the City and the Underwriter to the effect that the Fiscal Agent has authorized the execution and delivery of the Fiscal Agent Agreement and that the Fiscal Agent Agreement is a valid and binding obligation of the Fiscal Agent, enforceable in accordance with its terms; (13)A certificate of the Escrow Bank and an opinion of counsel to the Escrow Bank dated the Closing Date and addressed to the City and the Underwriter to the effect that the Escrow Bank has authorized the execution and delivery of the Escrow Agreement and that the Escrow Agreement is a valid and binding obligation of the Escrow Bank, enforceable in accordance with its terms; (14)A certified copy of the general resolution of the Fiscal Agent authorizing the execution and delivery of certain documents by certain officers of the Fiscal Agent, which resolution authorizes the execution and delivery of the Fiscal Agent Agreement; (15)A certified copy of the general resolution of the Escrow Bank authorizing the execution and delivery of certain documents by certain officers of the Escrow Bank, which resolution authorizes the execution and delivery of the Escrow Agreement; 11 (16)Written confirmation from Willdan in a form acceptable to the Underwriter that, except as disclosed in the Official Statement, the City has timely filed, or caused to be timely filed, materially complete continuing disclosure reports with respect to all of its community facilities districts’ continuing disclosure requirements relating to Rule 15c2-12 in each of the last five fiscal years; (17)Written confirmation from Applied Best Practices, Inc., in a form acceptable to the Underwriter that, except as disclosed in the Official Statement, the City has timely filed, or caused to be timely filed, materially complete continuing disclosure reports with respect to itself and each of its non-community facilities district entities’ continuing disclosure requirements relating to Rule 15c2-12 in each of the last five fiscal years; (18)A certificate of Vestar dated as of the Closing Date certifying that the representations and warranties of Vestar contained in the Vestar Letter of Representations are true and correct in all material respects as of the Closing Date; and (19)Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the statements and information contained in the Preliminary Official Statement and the Official Statement, of the City’s representations and warranties contained herein and the due performance or satisfaction by the City at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the City and the District in connection with the transactions contemplated hereby and by the Official Statement. If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Underwriter nor the City shall be under any further obligation hereunder, except that the respective obligations of the City and the Underwriter set forth in Section 5, Section 6 and Section 8 hereof shall continue in full force and effect. 4.Conditions of the City’s Obligations. The City’s obligations hereunder are subject to the Underwriter’s performance of its obligations hereunder, and are also subject to the following conditions: (a)As of the Closing Date, no litigation shall be pending or, to the knowledge of the duly authorized officer of the City executing the certificate referred to in Section 3(d)(8) hereof, threatened, to restrain or enjoin the issuance or sale of the Bonds or in any way affecting any authority for or the validity of the Bonds, the Formation Documents, the District Documents or the existence or powers of the City or of the District; and (b)As of the Closing Date, the City shall receive the approving opinion of Bond Counsel referred to in Section 3(d)(3) hereof, dated as of the Closing Date. 12 5.Expenses. Whether or not the Bonds are delivered to the Underwriter as set forth herein: (a)The City will pay or cause to be paid the approved expenses incident to the performance of its obligations hereunder and certain expenses relating to the sale of the Bonds, including, but not limited to, (a) the cost of the preparation and printing or other reproduction of the District Documents (other than this Purchase Agreement); (b) the fees and disbursements of Bond Counsel, Disclosure Counsel, the Fiscal Agent, the Escrow Bank and any other experts or other consultants retained by the City; (c) the cost of preparing and delivering the definitive Bonds; (d) the cost of the printing or other reproduction of the Preliminary Official Statement and Official Statement and any amendment or supplement thereto, including a reasonable number of certified or conformed copies thereof; and (e) the fees of Willdan and Applied Best Practices, Inc., for their continuing disclosure undertaking compliance reviews. The Underwriter will pay the expenses of the preparation of this Purchase Agreement and all other expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds, and the fee and expenses of Underwriter’s Counsel. The Underwriter is required to pay the fees of the California Debt and Investment Advisory Commission (“CDIAC”) in connection with the offering of the Bonds. The City acknowledges that it has had an opportunity, in consultation with such advisors as it may deem appropriate, if any, to evaluate and consider such fees. Notwithstanding that such fees are solely the legal obligation of the Underwriter, the City agrees to reimburse the Underwriter for such CDIAC fees as an expense component of the Underwriter’s discount. (b)The Underwriter shall pay, and the City shall be under no obligation to pay, all expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds. 6.Notices. Any notice or other communication to be given to the City under this Purchase Agreement may be given by delivering the same in writing to the City at 300 Centennial Way, Tustin, California 92780, Attention: Director of Finance; and any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to First Southwest Company, LLC, 1620 26th Street, Suite 230 South, Santa Monica, California 90404, Attention: Elena Zaretsky, Senior Vice President. 7.Parties in Interest. This Purchase Agreement is made solely for the benefit of the City and the Underwriter (including their successors or assigns), and no other person shall acquire or have any right hereunder or by virtue hereof. 8.Survival of Representations and Warranties. The representations and warranties of the City set forth in or made pursuant to this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of this Purchase Agreement and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the City and regardless of delivery of and payment for the Bonds. 9.Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the City and shall be valid and enforceable as of the time of such acceptance. 13 10.No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understandings between the parties hereto in relation to the sale of Bonds. 11.Governing Law. This Purchase Agreement shall be governed by the laws of the State of California applicable to contracts made and performed in California. \[Remainder of page intentionally left blank.\] 14 12.Counterparts. This Purchase Agreement may be executed simultaneously in several counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. Very truly yours, FIRST SOUTHWEST COMPANY, LLC By: Authorized Representative ACCEPTED: CITY OF TUSTIN By: Mayor Time: ____ 15 EXHIBIT A MATURITY SCHEDULE $_________ CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX REFUNDING BONDS, SERIES 2015A Maturity Date Principal (September 1) Amount Interest Rate Yield Price The purchase price of the Refunding Bonds shall be $_________, which is the principal amount thereof ($_________), \[plus/less\] a net original issue \[premium/discount\] of $_________ and less Underwriter’s discount of $_________. A-1 $_________ CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX BONDS, SERIES 2015B Maturity Date Principal (September 1) Amount Interest Rate Yield Price The purchase price of the New Money Bonds shall be $_________, which is the principal amount thereof ($_________), \[plus/less\] a net original issue \[premium/discount\] of $_________ and less Underwriter’s discount of $_________. A-2 EXHIBIT B $_________ $_________ CITY OF TUSTIN CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX REFUNDING BONDS, SERIES 2015A SPECIAL TAX BONDS, SERIES 2015B RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents that he is the City Manager of the City of Tustin (the “City”), and, as such, is duly authorized to execute and deliver this certificate and further hereby certifies that: (1) this certificate is being delivered in connection with the sale and issuance of the above- captioned bonds (the “Bonds”) in order to enable the underwriter of the Bonds to comply with Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934, as amended (the “Rule”); (2) in connection with the sale and issuance of the Bonds, there has been prepared a Preliminary Official Statement dated _________, 2015 setting forth information concerning the Bonds and the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the “Preliminary Official Statement”); and (3) except for the Permitted Omissions, the Preliminary Official Statement is deemed final within the meaning of the Rule. As used herein, the term “Permitted Omissions” refers to the offering price(s), interest rates(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates and other terms of the Bonds depending on such matters, all as set forth in the Rule. IN WITNESS WHEREOF, I have hereunto set my hand as of _________, 2015. CITY OF TUSTIN By: Its: City Manager B-1 EXHIBIT C $_________ $_________ CITY OF TUSTIN CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX REFUNDING BONDS, SERIES 2015A SPECIAL TAX BONDS, SERIES 2015B CERTIFICATE OF DEVELOPER In connection with the issuance and sale of the above-captioned bonds (the “Bonds”), and pursuant to the Bond Purchase Agreement (the “Bond Purchase Agreement”) to be executed by and between the City of Tustin, acting on behalf of the City of Tustin Community Facilities District No. 07-I (Tustin Legacy/Retail Center) (the “District”) and the Underwriter named therein, Vestar/Kimco Tustin L.P., a California limited partnership (“Vestar”), hereby certifies, represents, warrants and covenants that: 1. While the Bonds or any refunding obligations related thereto are outstanding, Vestar will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way seeks to challenge or overturn the formation of the District, to challenge the adoption of the ordinance levying Special Taxes within the District, to invalidate the District or any of the Bonds or any refunding obligations, or to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent Vestar in any way from bringing any other action, suit, proceeding, inquiry, or investigation at law or in equity relating to the following: (a) that the Special Tax has not been levied in accordance with the methodologies contained in the District’s Rate and Method of Apportionment (the “Rate and Method of Apportionment”) pursuant to which the Special Taxes are levied; (b) the application or use of the Special Taxes levied and collected; or (c) the enforcement of the obligations of the District under any agreement between Vestar and the City of Tustin (the “City”), acting on behalf of itself or the District, or to which Vestar is a party or of which it is a beneficiary. 2. All information submitted by Vestar to the Underwriter, its counsel, the District’s disclosure counsel (Quint & Thimmig LLP), the District’s special tax consultant (Willdan Financial Services), the District or the City in connection with the preparation of the Preliminary Official Statement, dated _________ __, 2015 (the “Preliminary Official Statement”), was, to the Actual Knowledge of the Undersigned (as such term is defined herein), when given, true and correct in all material respects and, except for any such information that was modified or supplemented by subsequent information submitted by or on behalf of Vestar or the information that is otherwise contained in the Preliminary Official Statement, no material change has occurred with respect to such information as of the date hereof. 3. As of the date hereof, the information in the Preliminary Official Statement provided by or sourced to Vestar, as such information pertains to Vestar, its Affiliates (as such term is defined herein), the property owned and the property previously owned by Vestar and its Affiliates in the District (the “Property”), and Vestar’s operation of the Property, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. C-1 4. Except as disclosed in the Preliminary Official Statement, Vestar has never been adjudicated as bankrupt or discharged from any or all of its debts or obligations or granted an extension of time to pay its debts or a reorganization or readjustment of its debts. Except as disclosed in the Preliminary Official Statement, Vestar does not have any proceedings pending (with service of process to Vestar having been accomplished) or, to the Actual Knowledge of the Undersigned, overtly threatened in which Vestar may be adjudicated as bankrupt, become the debtor in a bankruptcy proceeding, be discharged from any or all of its debts or obligations, be granted an extension of time to pay its debts or obligations, or be granted a reorganization or readjustment of its debts or obligations. 5. As used in this Certificate, the term “Actual Knowledge of the Undersigned” means the knowledge that the undersigned currently has or has obtained through: (a) interviews with such officers and responsible employees of Vestar and its Affiliates, members and agents as the undersigned has reasonably determined are likely, in the ordinary course of his or her respective duties, to have knowledge of the matters set forth in this Certificate, including the chief financial officer of Vestar or, if Vestar does not have a chief financial officer, the person who performs the functions usually associated with such officer (unless the undersigned is the chief financial officer or such person); and (b) reviews of documents that were reasonably necessary for the undersigned to obtain knowledge of the matters set forth in this Certificate; but with the exception of such interviews and reviews of documents, the undersigned has not conducted any inspection or inquiry. 6. As used in this Certificate, the term “Affiliate” of Vestar means any person directly (or indirectly through one or more intermediaries) that exercises managerial control over Vestar or that is under managerial control of Vestar, and about whom information could be material to potential investors in their investment decision regarding the Bonds. 7. Until the date which is twenty-five days after the “end of the underwriting period” (as such term is defined in Section 2(g) of the Bond Purchase Agreement), if any event shall occur of which Vestar becomes aware, as a result of which it may be necessary to supplement the Official Statement in order to make the statements in the Official Statement referenced in Section 3 hereof, in light of the circumstances existing at such time, not misleading in any material respect, Vestar shall forthwith give written notice thereof to the District and the Underwriter and shall reasonably cooperate with them in furnishing any information available to Vestar for any supplement to the Official Statement necessary so that the statements in the Official Statement referenced in Section 3 hereof, as so supplemented, will not be misleading in any material respect in light of the circumstances existing at such time. 8. All capitalized terms not otherwise defined herein shall have the meaning set forth in the Bond Purchase Agreement. Dated: _________ __, 2015 \[VESTAR SIGNATURE BLOCK TO COME\] C-2 Attachment 5 Preliminary Official Statement U o PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER , 2015 NEW ISSUE - BOOK ENTRY ONLY NOT RATED In the opinion of Quint & Thimmig LLP, Larkspur, California, Bond Counsel, subject however, to certain qualifications described in this Official Statement, under existing law, interest on the 2015 Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended, but such interest is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In the further opinion of Bond Counsel, interest on the 2015 Bonds is exempt from personal income taxation imposed by the State of California. See "TAX MATTERS." $13,825,000 $980,000 CITY OF TUSTIN CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX REFUNDING BONDS, 0 SERIES 2015A SPECIAL TAX BONDS, SERIES 2015B Dated: date of issuance Due: September 1, as shown on inside cover The City of Tustin, California (the "City"), for and on behalf of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/ Retail Center) (the "District"), is issuing the above -captioned bonds (collectively, the "2015 Bonds") to (i) refund in full and defease the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2007 (the "2007 Bonds"), (ii) finance public improvements authorized to be funded by the District, (iii) fund a reserve fund for the 2015 Bonds, and (iv) pay costs of issuing the 2015 Bonds and refunding the 2007 Bonds. See "PLAN OF FINANCING." The 2007 Bonds were issued by the District to finance public improvements authorized to be funded by the District. The 2015 Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of December 1, 2015 (the "Fiscal Agent Agreement"), by and between the City, for and on behalf of the District, and MUFG Union Bank, N.A., as fiscal agent (the "Fiscal Agent"). The 2015 Bonds are payable from the proceeds of an annual Special Tax A (as defined in the Fiscal Agent Agreement) being levied on property located within the District (see "THE DISTRICT"), and from certain funds pledged under the Fiscal Agent Agreement. The Special Tax A is being levied according to a rate and method of apportionment of Special Taxes approved in 2004 by the then -qualified elector of the District. See "SECURITY FOR THE 2015 BONDS—Special Tax A" and Appendix B - "Rate and Method." Interest on the 2015 Bonds is payable on March 1 and September 1 of each year, commencing on March 1, 2016. The 2015 Bonds will be issued in book -entry form only and, when delivered, 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 2015 Bonds. Individual purchases of the 2015 Bonds will be made in book -entry form only. Purchasers of the 2015 Bonds will not receive physical certificates representing their ownership interests in the 2015 Bonds purchased. The 2015 Bonds will be issued in the principal amount of $5,000 and any integral multiple thereof. Principal of and interest on the 2015 Bonds are payable directly to DTC by the Fiscal Agent. Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to the beneficial owners of the 2015 Bonds. See "THE 2015 BONDS" and Appendix F - "DTC and the Book -Entry Only System." The 2015 Bonds are subject to optional and mandatory redemption prior to maturity. See "THE 2015 BONDS — Redemption." The City may issue additional bonded indebtedness that is secured by a lien on the Special Tax Revenues and by funds pledged under the Fiscal Agent Agreement for the payment of the 2015 Bonds on a parity with the 2015 Bonds ("Parity Bonds"), but only for the purpose of refunding all or a portion of the 2015 Bonds or of any outstanding Parity Bonds. See "SECURITY FOR THE 2015 BONDS —Issuance of Additional Bonds." NONE OF THE FAITH AND CREDIT OF THE DISTRICT, THE CITY OR THE STATE OF CALIFORNIA OR OF ANY OF THEIR RESPECTIVE POLITICAL SUBDIVISIONS IS PLEDGED TO THE PAYMENT OF THE 2015 BONDS. EXCEPT FOR THE SPECIAL TAX REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE 2015 BONDS. THE 2015 BONDS ARE NEITHER GENERAL NOR SPECIAL OBLIGATIONS OF THE CITY NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE CITY FOR THE DISTRICT, PAYABLE SOLELY FROM CERTAIN AMOUNTS PLEDGED THEREFOR UNDER THE FISCAL AGENT AGREEMENT, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. This cover page contains certain information for quick reference only. Investors should read the entire Official Statement to obtain information essential to the making of an informed investment decision with respect to the 2015 Bonds. The purchase of the 2015 Bonds involves significant risks, and the 2015 Bonds are not appropriate investments for all types of investors. See "SPECIAL RISK FACTORS" in this Official Statement for a discussion of certain risk factors that should be considered, in addition to the other matters set forth in this Official Statement, in evaluating the investment quality of the 2015 Bonds. The 2015 Bonds are offered when, as and if issued, subject to approval as to their legality by Quint & Thimmig LLP, Larkspur, California, Bond Counsel, and certain other conditions. Certain legal matters with respect to the 2015 Bonds will be passed upon for the City by Woodruff, Spradlin & Smart, A Professional Corporation, Costa Mesa, California, acting as City Attorney, and by Quint & Thimmig LLP in its capacity as Disclosure Counsel to the City for the 2015 Bonds. Certain legal matters related to the 2015 Bonds will be passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, acting as Underwriter's Counsel. It is anticipated that the 2015 Bonds in definitive form will be available for delivery to DTC on or about December , 2015. FirstSouthwest The date of this Official Statement is November , 2015. " Preliminary, subject to change. $ % Term Bonds Due September 1, 20 YieldJo, Price CUSIP Number * Copyright 2015, American Bankers Association. CUSIP data is provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. Preliminary, subject to change. C Priced to September 11 , the first optional call date at par. $13,825,000** CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX REFUNDING BONDS, SERIES 2015A Maturity Schedule $ Serial Bonds, CUSIP Prefix Maturity Date Principal Interest CUSIP (September 1) Amount Rate Yield Price Suffix* $ % Term Bonds Due September 1, Yield Jo, Price CUSIP Number $980,000** CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX BONDS, SERIES 2015B Maturity Schedule $ Serial Bonds, CUSIP Prefix Maturity Date Principal Interest CUSIP (September 1) Amount Rate Yield Price Suffix* $ % Term Bonds Due September 1, 20 YieldJo, Price CUSIP Number * Copyright 2015, American Bankers Association. CUSIP data is provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. Preliminary, subject to change. C Priced to September 11 , the first optional call date at par. GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT The information contained in this Official Statement has been obtained from sources that are believed to be reliable. No representation, warranty or guarantee, however, is made by the Underwriter as to the accuracy or completeness of any information in this Official Statement, including, without limitation, the information contained in the Appendices, and nothing contained in this Official Statement should be relied upon as a promise or representation by the Underwriter. Neither the City nor the Underwriter has authorized any dealer, broker, salesperson or other person to give any information or make any representations with respect to the offer or sale of 2015 Bonds other than as contained in this Official Statement. If given or made, any such information or representations must not be relied upon as having been authorized by the City or the Underwriter. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the 2015 Bonds shall under any circumstances create any implication that there has been no change in the affairs of any party described in this Official Statement, or in the status of any property described in this Official Statement, subsequent to the date as of which such information is presented. This Official Statement and the information contained in this Official Statement are subject to amendment without notice. The 2015 Bonds may not be sold, and no offer to buy the 2015 Bonds may be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the 2015 Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. When used in this Official Statement and in any continuing disclosure by the City, in any press release and in any oral statement made with the approval of an authorized officer of the City or any other entity described or referenced in this Official Statement, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend" and similar expressions identify "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized, and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. All summaries of the documents referred to in this Official Statement are qualified by the provisions of the respective documents summarized and do not purport to be complete statements of any or all of such provisions. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or the completeness of such information. In connection with the offering of the 2015 Bonds, the Underwriter may overallot or effect transactions that stabilize or maintain the market prices of the 2015 Bonds at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the 2015 Bonds to certain dealers, dealer banks and banks acting as agent at prices lower than the public offering prices stated on the inside cover page of this Official Statement, and those public offering prices may be changed from time to time by the Underwriter. The 2015 Bonds have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption from the registration requirements contained in the Securities Act. The 2015 Bonds have not been registered or qualified under the securities laws of any state. The City maintains an Internet website, but the information on the website is not incorporated in this Official Statement. -i- This Page Intentionally Left Blank CITY OF TUSTIN City Council Charles E. "Chuck" Puckett, Mayor John Nielsen, Mayor Pro Tem Elwyn A. Murray, Councilmember Rebecca "Beckie" Gomez, Councilmember Dr. Allan Bernstein, Councilmember City Officials Jeffrey C. Parker, City Manager Pamela Arends-King, Finance Director Sean Tran, Administrative Services Manager PROFESSIONAL SERVICES City Attorney Woodruff, Spradlin & Smart, A Professional Corporation Costa Mesa, California Municipal Advisor Fieldman, Rolapp & Associates Irvine, California Fiscal Agent and Escrow Bank MUFG Union Bank, N.A. Los Angeles, California District Administrator and Dissemination Agent Willdan Financial Services Temecula, California Verification Agent Grant Thornton LLP Minneapolis, Minnesota Bond Counsel and Disclosure Counsel Quint & Thimmig LLP San Francisco, California This Page Intentionally Left Blank TABLE OF CONTENTS INTRODUCTION.............................................................1 General..........................................................................1 Projected Debt Service Coverage ............................32 Authority for Issuance................................................1 SPECIAL RISK FACTORS.............................................33 The 2015 Bonds............................................................2 No General Obligation of the City or the Security for the 2015 Bonds........................................2 District.........................................................................33 ReserveFund................................................................3 Payment of the Special Tax is not a Personal TheDistrict...................................................................3 Obligation...................................................................34 Limited Obligation......................................................4 Concentration of Ownership...................................34 Issuance of Additional Bonds....................................4 PropertyValue...........................................................34 Bondowners' Risks......................................................4 Exempt Properties.....................................................34 Continuing Disclosure................................................5 Parity Taxes and Special Assessments ...................35 Other Information.......................................................5 Insufficiency of Special Taxes..................................35 PLAN OF FINANCING .................................................. 5 Refunding of 2007 Bonds............................................5 Bankruptcy Delays....................................................36 Funding of Additional Improvements .....................6 Proceeds of Foreclosure Sales..................................37 Estimated Sources and Uses of Funds......................6 Natural Disasters and Potential Drought THE 2015 BONDS.............................................................6 Conditions..................................................................37 Authority for Issuance................................................6 Hazardous Substances..............................................38 General Provisions......................................................7 Disclosure to Future Purchasers..............................38 Redemption..................................................................7 Transfer or Exchange of Bonds................................10 Discontinuance of DTC Services .............................10 Scheduled Debt Service............................................11 SECURITY FOR THE 2015 BONDS .............................11 General........................................................................11 Limited Obligation....................................................12 SpecialTax A..............................................................12 Special Tax Fund........................................................13 Summary of Rate and Method.................................14 Reserve Fund..............................................................16 Covenant for Superior Court Foreclosure .............16 NoTeeter Plan............................................................18 Investment of Moneys..............................................18 Issuance of Additional Bonds..................................18 THE DISTRICT...............................................................19 Location and Description of the District ................19 History of the District...............................................20 Land Ownership and Current Special Tax Levy ..23 The Landowner and the Tenants ............................23 Direct and Overlapping Governmental Obligations.................................................................29 Projected Debt Service Coverage ............................32 SPECIAL RISK FACTORS.............................................33 No General Obligation of the City or the District.........................................................................33 Payment of the Special Tax is not a Personal Obligation...................................................................34 Concentration of Ownership...................................34 PropertyValue...........................................................34 Exempt Properties.....................................................34 Parity Taxes and Special Assessments ...................35 Insufficiency of Special Taxes..................................35 Tax Delinquencies.....................................................36 Bankruptcy Delays....................................................36 Proceeds of Foreclosure Sales..................................37 Natural Disasters and Potential Drought Conditions..................................................................37 46 Hazardous Substances..............................................38 46 Disclosure to Future Purchasers..............................38 FDIC/ Federal Government Interests in Properties....................................................................39 No Acceleration Provision.......................................40 Taxability Risk............................................................40 Enforceability of Remedies......................................41 No Secondary Market...............................................41 Proposition 218..........................................................41 Ballot Initiatives.........................................................42 IRS Audit of Tax -Exempt Bond Issues ...................42 Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption...................................................................43 TAX MATTERS...............................................................43 LEGAL MATTERS.........................................................46 MUNICIPAL ADVISOR................................................46 NORATING...................................................................46 LITIGATION................................................................... 46 UNDERWRITING.......................................................... 46 Assessed Property Values........................................26 VERIFICATION .............................................................. 47 Value -to -Burden Ratio..............................................27 CONTINUING DISCLOSURE.....................................47 Special Tax Levies and Delinquencies ....................28 MISCELLANEOUS........................................................47 APPENDIX A CITY AND COUNTY GENERAL DEMOGRAPHIC INFORMATION APPENDIX B RATE AND METHOD APPENDIX C SUMMARY OF THE FISCAL AGENT AGREEMENT APPENDIX D FORM OF OPINION OF BOND COUNSEL APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT APPENDIX F DTC AND THE BOOK -ENTRY ONLY SYSTEM -v- ■ Burbank ■ Los Angeles os Ange?es Jntemationai Airport ~ ■Anaheim Icb ■+ , a Parc of . _ ■ Testi n wgseod� f49TUSTIN LEGACY oo?n'NoyneAirport � ■IrvinC Costa Mesa ■ ORANGE Newport ■ COUNTY Beach Lagu na ■. Beach LOS ANGELES COUNTY �X SAN BERNADINO 0 San Bernadino COUNTY n a -vi- ■ Riverside RIVERSIDE COUNTY SAN DIEGO ... COUNTY OFFICIAL STATEMENT $13,825,000* $980,000* CITY OF TUSTIN CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/RETAIL CENTER) (TUSTIN LEGACY/RETAIL CENTER) SPECIAL TAX REFUNDING BONDS, SPECIAL TAX BONDS, SERIES 2015B SERIES 2015A INTRODUCTION This introduction is not a summary of this Official Statement and is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in this entire Official Statement and the documents summarized or described in this Official Statement. A full review should be made of this entire Official Statement by those interested in purchasing the 2015 Bonds. The sale and delivery of 2015 Bonds to potential investors is made only by means of this entire Official Statement. Certain capitalized terms used in this Official Statement and not defined herein have the meaning set forth in Appendix C— "Summary of the Fiscal Agent Agreement—Definitions" and in Appendix B— "Rate and Method." General The purpose of this Official Statement, which includes the cover page, the inside cover page, the table of contents and the attached appendices (the "Official Statement"), is to provide certain information concerning the issuance by the City of Tustin, California (the "City"), for and on behalf of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/ Retail Center) (the "District'), of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Refunding Bonds, Series 2015A (the "Series 2015A Bonds") and the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2015B (the "Series 2015B Bonds" and together with the Series 2015A Bonds, the "2015 Bonds"). The 2015 Bonds are being issued to (i) refund in full and defease the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/ Retail Center) Special Tax Bonds, Series 2004 (the "2007 Bonds") of which $13,250,000 principal amount is currently outstanding, (ii) finance public improvements authorized to be funded by the District (the "Improvements"), (iii) fund a reserve fund for the 2015 Bonds, and (iv) pay costs of issuing the 2015 Bonds and the refunding of the 2007 Bonds. See "PLAN OF FINANCING—Estimated Sources and Uses of Funds." The 2007 Bonds were issued to finance other Improvements authorized to be funded by the District. Authority for Issuance General. The District was formed under the authority of the Mello -Roos Community Facilities Act of 1982, as amended, commencing at Section 53311, et seq., of the California Government Code (the "Act'), which was enacted by the California Legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. The Act authorizes local governmental entities to establish community facilities districts as legally constituted governmental entities within defined boundaries, with the legislative body of the local applicable governmental entity acting on behalf of the district. Subject to approval by at least a two-thirds vote of the votes cast by the qualified electors within a district and compliance with the provisions of the Act, the legislative * Preliminary, subject to change. -1- body may issue bonds for the community facilities district established by it and may levy and collect a special tax within such district to repay such bonds. Bond Authority. The 2015 Bonds are authorized to be issued pursuant to the Act, a resolution adopted on November 3, 2015 by the City Council of the City (the "City Council") acting as the legislative body of the District, and the Fiscal Agent Agreement dated as of December 1, 2015 (the "Fiscal Agent Agreement"), between the City, for and on behalf of the District, and MUFG Union Bank, N.A., as fiscal agent (the "Fiscal Agent"). For more detailed information about the formation of the District and the authority for issuance of the 2015 Bonds, see "THE 2015 BONDS—Authority for Issuance" and "THE DISTRICT—History of the District." The 2015 Bonds General. The 2015 Bonds will be issued only as fully registered bonds, in denominations of $5,000 or any integral multiple thereof, and will bear interest at the rates per annum and will mature on the dates and in the principal amounts set forth on the inside cover page of this Official Statement. The 2015 Bonds will be dated the date of their issuance and interest on the 2015 Bonds will be payable on March 1 and September 1 of each year (individually an "Interest Payment Date"), commencing March 1, 2016. See "THE 2015 BONDS." The 2015 Bonds will be issued in book -entry form only and, when delivered, 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 2015 Bonds. See "THE 2015 BONDS—General Provisions." Redemption Prior to Maturity. The 2015 Bonds are subject to optional and mandatory redemption prior to maturity. See "THE 2015 BONDS—Redemption." Security for the 2015 Bonds Pledge Under the Fiscal Agent Agreement. Pursuant to the Fiscal Agent Agreement, the 2015 Bonds are secured by a first pledge of all of the Special Tax Revenues (other than the first Special Tax Revenues in the amount of the Minimum Administrative Expense Requirement received by the City in each Fiscal Year, which are to be used to pay Administrative Expenses) and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed in accordance with the Fiscal Agent Agreement, in the Special Tax Fund. "Special Tax Revenues," as defined in the Fiscal Agent Agreement, means the proceeds of the Special Tax A levied on the Taxable Property in the District and received by the City, including any scheduled payments and any prepayments thereof, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Tax A to the amount of said lien, but does not include interest and penalties, if any, collected with the Special Tax A that are in excess of the rate of interest payable on the Bonds. "Minimum Administrative Expense Requirement" means (a) for Fiscal Year 2015-2016, $36,048.79; (b) for Fiscal Year 2016- 2017, $40,000.00; and (c) for each Fiscal Year after Fiscal Year 2016-2017, an amount equal to 102% of the Minimum Administrative Expense Requirement in effect for the immediately preceding Fiscal Year. The Special Tax Revenues (other than the first Special Tax Revenues in the amount of the Minimum Administrative Expense Requirement received by the City in each Fiscal Year, which are to be used to pay Administrative Expenses) and all moneys deposited into said funds are dedicated to the payment of the principal of, and interest and any premium on, the 2015 Bonds in accordance with the Fiscal Agent Agreement until all of the 2015 Bonds have been paid or defeased. See "SECURITY FOR THE 2015 BONDS—Special Taxes" and Appendix B— "Rate and Method." -2- Special Tax A; Rate and Method. The Special Tax A to be used to pay debt service on the 2015 Bonds will be levied in accordance with the Rate and Method (as described under the heading "THE 2015 BONDS—Authority for Issuance"). "Special Taxes' as defined in the Fiscal Agent Agreement, means the Special Tax A levied on the Taxable Property within the District pursuant to the Rate and Method and the Fiscal Agent Agreement. However, under the Rate and Method, certain Privately Owned Specific Retail Property, as defined herein, consisting of several of the improved parcels located in the District, is not subject to the levy of Special Tax A. The Rate and Method also allows for a Special Tax B to be levied on Taxable Property in the District to fund certain Authorized Services, but proceeds of the levy of Special Tax B are not pledged to, and will not be available for, the repayment of the 2015 Bonds. See "SECURITY FOR THE 2015 BONDS—Special Tax A" and "—Summary of Rate and Method." Limitations. The first Special Tax Revenues in the amount of the Minimum Administrative Expense Requirement received by the City in each Fiscal Year, as well as amounts in the Administrative Expense Fund, the Improvement Fund and the Costs of Issuance Fund, each of which is established under the Fiscal Agent Agreement, are not pledged to the repayment of the 2015 Bonds. Proceeds of the 2015 Bonds and other amounts deposited to the Refunding Fund established under the Escrow Agreement (see "PLAN OF FINANCING— Refunding of 2007 Bonds") are not pledged to, and are not available for, the repayment of the 2015 Bonds. Proceeds of the levy of Special Tax B are not pledged to the repayment of the 2015 Bonds. The Improvements are not pledged to pay the debt service on the 2015 Bonds. The proceeds of condemnation or destruction of any of the Improvements are not pledged to pay the debt service on the 2015 Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to repay the 2015 Bonds are amounts held by the Fiscal Agent in the Bond Fund, the Special Tax Fund and the Reserve Fund established under the Fiscal Agent Agreement, and the proceeds, if any, from foreclosure sales of land and improvements within the District in respect of delinquent Special Taxes. Reserve Fund The Fiscal Agent Agreement establishes a Reserve Fund as a reserve for the payment of principal of and interest on the 2015 Bonds. The Reserve Fund is required to be funded in an amount equal to seventy-five percent (75%) of the least of (i) the then Maximum Annual Debt Service, (ii) one hundred twenty-five percent (125%) of the then average Annual Debt Service, or (iii) ten percent (10%) of the initial principal amount of the Bonds (the "Reserve Requirement"). The Reserve Fund will be available to pay the debt service on the 2015 Bonds and any Parity Bonds in the event of a shortfall in the amount in the Bond Fund for such purpose, which Parity Bonds may be issued only for refunding purposes. The Reserve Requirement as of the date of issuance of the 2015 Bonds will be $ See " SECURITY FOR THE 2015 BONDS—Reserve Fund." The District The District was formed by the City Council pursuant to proceedings conducted under the Act on June 19, 2007. The District currently includes 9 separate Orange County Assessor's parcels in the City that are subject to the levy of Special Taxes, include a total of 35.496 acres on which an approximately one million square foot open-air lifestyle and entertainment shopping center, known as The District at Tustin Legacy, has been constructed. The District at Tustin Legacy was developed by Vestar/Kimco Tustin L.P., a California limited partnership (the "Landowner"), with respect to which Vestar California XXX, L.L.C., an Arizona limited liability -3- company is the sole general partner, and Kimco Tustin, Inc., a Delaware corporation is the sole limited partner. See "THE DISTRICT—Location and Description of the District," "—History of the District" and "—The Landowner and the Tenants." The District constitutes one of the phases of development of the former Marine Air Corps Station Tustin (the "Air Station"). The portion of the Air Station located in the City and certain adjacent property is being developed as an approximately 1,511 gross acre master planned community called Tustin Legacy. Approximately 95 acres of the former Air Station are located in the City of Irvine. The land and improvements comprising the Taxable Property subject to the levy of Special Taxes in the District were valued by the Orange County Assessor for ad valorem property tax purposes on the 2015-16 property tax roll at an aggregate of $203,984,804. Based on the County's Fiscal Year 2015-16 property valuation, all of the parcels of Taxable Property in the District have assessed value to estimated share of principal of total bonded indebtedness (including the 2015 Bonds) ratios in excess of 6:1. See "THE DISTRICT—Value-to-Burden Ratio." The parcels in the District have been improved with different size buildings and other improvements, and the value of the individual parcels vary significantly. In addition, County assessed values may not reflect current market values. No recent independent appraisal of the Taxable Property subject to the levy of Special Taxes has been conducted in connection with the 2015 Bonds, and no assurance can be given that should Special Taxes levied on one or more of the parcels become delinquent, and should the delinquent parcels be offered for sale at a judicial foreclosure sale, that any bid would be received for the property or, if a bid is received, that such bid would be sufficient to pay such parcel's delinquent Special Taxes. See "SPECIAL RISK FACTORS—Property Value" and "SPECIAL RISK FACTORS—Insufficiency of Special Taxes." Limited Obligation NONE OF THE FAITH AND CREDIT OF THE DISTRICT, THE CITY OR THE STATE OF CALIFORNIA OR OF ANY OF THEIR RESPECTIVE POLITICAL SUBDIVISIONS IS PLEDGED TO THE PAYMENT OF THE 2015 BONDS. EXCEPT FOR THE SPECIAL TAX REVENUES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE 2015 BONDS. THE 2015 BONDS ARE NEITHER GENERAL NOR SPECIAL OBLIGATIONS OF THE CITY NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE CITY FOR THE DISTRICT PAYABLE SOLELY FROM CERTAIN AMOUNTS PLEDGED THEREFOR UNDER THE FISCAL AGENT AGREEMENT, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. Issuance of Additional Bonds The City may issue additional bonded indebtedness that is secured by a lien on the Special Tax Revenues and on the funds pledged under the Fiscal Agent Agreement for the payment of the 2015 Bonds on a parity with the 2015 Bonds ("Parity Bonds"), but only for the purpose of refunding the 2015 Bonds or any outstanding Parity Bonds. See "SECURITY FOR THE 2015 BONDS—Issuance of Additional Bonds." Bondowners' Risks Certain events could affect the ability of the City to pay the principal of and interest on the 2015 Bonds when due. Except for the Special Tax A, no other taxes are pledged to the payment of the 2015 Bonds. See "SPECIAL RISK FACTORS" for a discussion of certain factors that should be considered in evaluating an investment in the 2015 Bonds. The purchase of the -4- 2015 Bonds involves significant risks, and the 2015 Bonds are not appropriate investments for all types of investors. Continuing Disclosure For purposes of complying with Rule 15c2 -12(b)(5) promulgated under the Securities Exchange Act of 1934, as amended (the "Rule"), the City has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board (the "MSRB") certain annual financial information and operating data and notice of certain significant events. These covenants have been made in order to assist the Underwriter in complying with the Rule. See "CONTINUING DISCLOSURE" and Appendix E for a description of the specific nature of the annual reports and notices of significant events, as well as the terms of the Continuing Disclosure Agreement pursuant to which such reports and notices are to be made. Also see "CONTINUING DISCLOSURE" for a description of certain failures by the City and related entities to fully comply with certain prior obligations under the Rule. Other Information This Official Statement speaks only as of its date, and the information contained in this Official Statement is subject to change without notice. Except where otherwise indicated, all information contained in this Official Statement has been provided by the City on behalf of the District. Copies of the Fiscal Agent Agreement and certain other documents referenced in this Official Statement are available for inspection at the office of, and (upon written request and payment to the City of a charge for copying, mailing and handling) are available for delivery from, the City's Finance Director, 300 Centennial Way, Tustin, California 92780. PLAN OF FINANCING Refunding of 2007 Bonds The net proceeds of the sale of the 2015 Bonds, together with certain other funds held under the Indenture, dated as of September 1, 2007, pursuant to which the 2007 Bonds were issued (the "2007 Indenture"), will be deposited in an escrow account (the "Refunding Fund") held by MUFG Union Bank, N.A., as escrow bank (the "Escrow Bank") pursuant to an Escrow Deposit and Trust Agreement, dated as of December 1, 2015, and applied to legally defease all of the outstanding 2007 Bonds on the date of delivery of the 2015 Bonds. Amounts in the Refunding Fund will be invested by the Escrow Bank in certain Federal Securities (as defined in the 2007 Indenture), and the cash and proceeds of such Federal Securities will be sufficient to pay the principal and interest accruing on the 2007 Bonds to and including on September 1, 2017, and to redeem on September 1, 2017 all of the 2007 Bonds maturing after September 1, 2017 at a redemption price equal to the principal amount thereof to be redeemed plus accrued interest to the redemption date. Upon the deposit of funds with the Escrow Bank in the Refunding Fund and in accordance with the Escrow Agreement, the 2007 Bonds will be legally defeased and will no longer be entitled to the benefits of, or be secured by, the 2007 Indenture or any pledge of, or lien on, the Special Taxes levied in the District. Amounts deposited in the Refunding Fund are not in any way pledged to the payment of, or available to pay, the debt service on the 2015 Bonds. -5- Funding of Additional Improvements The net proceeds of the sale of the Series 2015B Bonds will be deposited to the Improvement Fund established under the Fiscal Agent Agreement, and will be withdrawn by the City to pay costs of public improvements authorized to be funded by the District. The City currently plans to use funds deposited to the Improvement Fund to finance traffic circulation improvements within or adjacent to property in the District. Estimated Sources and Uses of Funds The sources and uses of funds in connection with the 2015 Bonds are expected to be as follows: Series Series Total 2015A Bonds 2015B Bonds 2015 Bonds Principal of 2015 Bonds $ $ $ Amounts relating to the 2007 Bonds Plus: Net Original Issue Premium Less: Underwriter's Discount Total Sources $ $ $ Deposit to Refunding Fund(') $ $ $ Deposit to Improvement Fund(z) Deposit to Reserve Fund(3) Deposit to Costs of Issuance Fund(4) Total Uses $ $ $ (1) See "PLAN OF REFUNDING—Redemption of 2007 Bonds." (2) To be used to finance improvements authorized to be funded by the District. See "PLAN OF FINANCING—Funding of Additional Improvements." (3) Equal to the initial Reserve Requirement. See "SECURITY FOR THE 2015 BONDS—Reserve Fund." (4) Costs of issuance include, without limitation, Fiscal Agent fees and expenses, Municipal Advisor fees and expenses, Bond Counsel and Disclosure Counsel and other legal fees and expenses, Escrow Bank fees and expenses, rating agency fees and printing costs. THE 2015 BONDS Authority for Issuance Pursuant to the Act, on June 19, 2007, the City Council adopted Resolution No. 07-44 establishing the District ("Resolution of Formation'). Also on June 19, 2007 the then owners of the land in the District and thereby the qualified electors for the District, authorized the issuance of bonded indebtedness to finance certain public facilities, and approved the rate and method of apportionment of Special Tax (the "Rate and Method"), a copy of which is attached to this Official Statement as Appendix B. See "THE DISTRICT." The 2015 Bonds are authorized to be issued pursuant to the Act, a resolution adopted on November 3, 2015, by the City Council, acting as the legislative body of the District, and the Fiscal Agent Agreement. The Special Tax A to be used to pay debt service on the 2015 Bonds will be levied in accordance with the Rate and Method. General Provisions The 2015 Bonds will be issued only as fully registered 2015 Bonds, in the denomination of $5,000 or any integral multiple thereof, and will bear interest at the rates per annum and will mature on the dates set forth on the inside cover page of this Official Statement. The 2015 Bonds will be dated the date of their issuance and interest will be payable on each Interest Payment Date, commencing March 1, 2016. Each 2015 Bond will bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it will bear interest from such Interest Payment Date; or (b) it is authenticated on or before February 15, 2016, in which event it will bear interest from the date of issuance of the 2015 Bonds; provided, however, that if, as of the date of authentication of any 2015 Bond, interest thereon is in default, such 2015 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. The term "Record Date' as defined in the Fiscal Agent Agreement means the fifteenth (15-) day of the month next preceding the month of the applicable Interest Payment Date, whether or not such fifteenth (15-) day is a Business Day. The 2015 Bonds will be payable both as to principal and interest, and as to any premium upon the redemption thereof, in lawful money of the United States of America. The principal of the 2015 Bonds and any premium due upon the redemption thereof will be payable by check of the Fiscal Agent upon presentation and surrender of the applicable 2015 Bonds at the Principal Office of the Fiscal Agent. Interest with respect to each Bond will be computed using a year of 360 days comprised of twelve 30 -day months. The 2015 Bonds will be issued in book -entry form only and, when delivered, will be registered in the name of Cede & Co., as nominee of DTC, which will act as securities depository for the 2015 Bonds. Individual purchases of the 2015 Bonds will be made in book - entry form only. Purchasers of the 2015 Bonds will not receive physical certificates representing their ownership interests in the 2015 Bonds purchased. Principal and interest payments represented by the 2015 Bonds are payable directly to DTC by the Fiscal Agent. Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to the beneficial owners of the 2015 Bonds. See Appendix F—"DTC and the Book -Entry Only System." So long as the 2015 Bonds are registered in the name of Cede & Co., as nominee of DTC, references in this Official Statement to the owners shall mean Cede & Co., and shall not mean the purchasers or Beneficial Owners of the 2015 Bonds. Redemption Optional Redemption. The 2015 Bonds maturing on and after September 1, 2024 are subject to optional redemption prior to their stated maturity on any Interest Payment Date occurring on or after September 1, as a whole, or in part among maturities as determined by the Finance Director and by lot within a maturity, at a redemption price equal to the principal amount of the 2015 Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Payment Redemption. The Series 2015A Bonds maturing on September 1, are subject to mandatory sinking payment redemption in part on September 1, and on September 1, , by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: -7- Redemption Date (September 11 Sinking Payments The Series 2015B Bonds maturing on September 1, are subject to mandatory sinking payment redemption in part on September 1, and on September 1, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments The amounts in the foregoing tables shall be reduced as a result of any prior partial redemption of the 2015 Bonds pursuant to the optional redemption or redemption from special tax prepayments provisions of the Fiscal Agent Agreement, so as to maintain the same debt service profile for the Bonds as in effect prior to such redemption, as specified in writing by the Finance Director to the Fiscal Agent. Mandatory Redemption From Special Tax Prepayments. The 2015 Bonds are subject to mandatory redemption prior to their stated maturity on any Interest Payment Date, from the proceeds of Special Tax Prepayments and corresponding transfers of funds from the Reserve Fund (as described below under "SECURITY FOR THE 2015 BONDS—Reserve Fund"), as a whole or in part by lot and allocated among maturities and series of the 2015 Bonds so as to maintain substantially the same debt service profile for the Bonds as in effect prior to such redemption, at a redemption price (expressed as a percentage of the principal amount of the 2015 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Section 1.01 Redemption Redemption Prices Dates any Interest Payment Date to and including % March 1, September 1, and March 1, September 1, and March 1, September 1, and any Interest Payment Date thereafter [There have been no Special Tax Prepayments since the District was formed in 2007; however, no assurance can be given that Special Tax Prepayments will not occur in the future.] Purchase of 2015 Bonds In Lieu of Redemption. In lieu of redemption as described above, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2015 Bonds, upon the filing with the Fiscal Agent of an Officer's Certificate requesting such purchase prior to the selection of 2015 Bonds for redemption, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer's Certificate may provide, but in no event may 2015 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase. Selection of 2015 Bonds for Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the 2015 Bonds or any given portion so thereof pursuant to the optional redemption provisions of the Fiscal Agent Agreement, the Fiscal Agent shall select the 2015 Bonds to be redeemed, from all 2015 Bonds or such given portion thereof not previously called for redemption among series and maturities as directed in writing by the Finance Director, and within a maturity by lot in any manner which the Fiscal Agent in its sole discretion shall deem appropriate and fair. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the 2015 Bonds pursuant to the Special Tax Prepayment provisions of the Fiscal Agent Agreement, the Fiscal Agent will select the 2015 Bonds to be redeemed, from all 2015 Bonds or such given portion thereof not previously redeemed, so as to maintain substantially the same debt service profile for the Bonds as in effect prior to such redemption, and within a maturity by lot in any manner which the Fiscal Agent in its sole discretion shall deem appropriate and fair. In each case, for purposes of selection of 2015 Bonds to be redeemed, all 2015 Bonds shall be deemed to be comprised of separate $5,000 portions, and such portions shall be treated as separate 2015 Bonds that may be separately redeemed. Notice of Redemption. The Fiscal Agent will cause notice of any redemption to be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories and to one or more Information Services, and to the respective registered Owners of any 2015 Bonds designated for redemption, at their addresses appearing on the Bond registration books in the Principal Office of the Fiscal Agent; but such mailing is not a condition precedent to redemption and failure to mail or to receive any such notice, or any defect therein, will not affect the validity of the proceedings for the redemption of such 2015 Bonds. The redemption notice will state the redemption date and the redemption price and, if less than all of the then Outstanding 2015 Bonds are to be called for redemption, will designate the CUSIP numbers and Bond numbers of the 2015 Bonds to be redeemed by giving the individual CUSIP number and Bond number of each Bond to be redeemed or will state that all 2015 Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the 2015 Bonds of one or more maturities have been called for redemption, will state as to any Bond called in part the principal amount thereof to be redeemed, and will require that such 2015 Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and will state that further interest on such 2015 Bonds will not accrue after the redemption date. Notwithstanding the foregoing, any notice of redemption in connection with an optional redemption or redemption from Special Tax Prepayments may state that the redemption is conditioned upon receipt by the Fiscal Agent of sufficient moneys to redeem the 2015 Bonds on the anticipated redemption date, and that the redemption will not occur if by no later than the scheduled redemption date sufficient moneys to redeem the 2015 Bonds have not been deposited with the Fiscal Agent. In the event that the Fiscal Agent does not receive sufficient funds by the scheduled redemption date to so redeem the 2015 Bonds to be redeemed, the Fiscal Agent will send written notice to the owners of the 2015 Bonds, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the 2015 Bonds for which notice of redemption was given will remain Outstanding for all purposes of the Fiscal Agent Agreement. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2015 Bonds so called for redemption have been deposited in the Bond Fund, such 2015 Bonds so called will cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no interest will accrue thereon on or after the redemption date specified in such notice. BE Tender of 2015 Bonds in Payment of Special Taxes. The City has covenanted in the Fiscal Agent Agreement not to permit the tender of 2015 Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the City having insufficient Special tax Revenues to pay the principal or and interest on the 2015 Bonds that will remain Outstanding following such tender. Transfer or Exchange of 2015 Bonds So long as the 2015 Bonds are registered in the name of Cede & Co., as nominee of DTC, transfers and exchanges of 2015 Bonds shall be made in accordance with DTC procedures. See Appendix F—"DTC and the Book -Entry Only System." If the book -entry only system for the 2015 Bonds is ever discontinued, any Bond may, in accordance with its terms, be transferred or exchanged by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form approved by the Fiscal Agent. Whenever any 2013 Bond or 2015 Bonds are surrendered for transfer or exchange, the City will execute and the Fiscal Agent will authenticate and deliver a new 2013 Bond or 2015 Bonds, for a like aggregate principal amount of 2015 Bonds of authorized denominations and of the same maturity. The Fiscal Agent will collect from the Owner requesting such transfer any tax or other governmental charge required to be paid with respect to such transfer or exchange. No transfers or exchanges of 2015 Bonds will be required to be made (i) within the 15 days prior to the date designated by the Fiscal Agent as the date for selecting 2015 Bonds for redemption, or (ii) with respect to any 2015 Bond after such 2015 Bond has been selected for redemption. Discontinuance of DTC Services DTC may determine to discontinue providing its services with respect to the 2015 Bonds at any time by giving written notice to the Fiscal Agent during any time that the 2015 Bonds are Outstanding, and discharging its responsibilities with respect to the 2015 Bonds under applicable law. The City may terminate the services of DTC with respect to the 2015 Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the 2015 Bonds or that continuation of the system of book -entry transfers through DTC is not in the best interest of the Beneficial Owners. The City will mail any such notice of termination to the Fiscal Agent. Upon the termination of the services of DTC as provided in the previous paragraph, and if no substitute Depository willing to undertake the functions can be found which is willing and able to undertake such functions upon reasonable or customary terms, or if the City determines that it is in the best interest of the Beneficial Owners of the 2015 Bonds that they obtain certificated Bonds, the 2015 Bonds will no longer be restricted to being registered in the Registration Books of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or name the Owners designate at that time, in accordance with the Fiscal Agent Agreement. To the extent that the Beneficial Owners are designated as the transferee by the Owners, the 2015 Bonds will be delivered to such Beneficial Owners as soon as practicable in accordance with the Fiscal Agent Agreement. -10- Scheduled Debt Service The following is the debt service schedule for the 2015 Bonds, assuming no optional redemption of the 2015 Bonds or any redemption of 2015 Bonds with proceeds of Special Tax Prepayments: Period Ending Series 2015A Bonds Series 2015B Bonds Total Debt September 1 Principal Interest Principal Interest Service * Indicates a mandatory sinking fund payment. SECURITY FOR THE 2015 Bonds General Pursuant to the Fiscal Agent Agreement, the 2015 Bonds are secured by a first pledge of all of the Special Tax Revenues (other than the first Special Tax Revenues in the amount of the applicable Minimum Administrative Expense Requirement received by the City in each Fiscal Year, which are to be used to pay Administrative Expenses), and all moneys deposited in the Bond Fund, the Reserve Fund and, until disbursed in accordance with the Fiscal Agent Agreement, the Special Tax Fund. Special Tax Revenues do not include interest and penalties on foreclosure of the lien of Special Taxes in excess of the rate of interest payable on the 2015 Bonds, and do not include the proceeds of any Special Tax B levied on Taxable Property in the District. The Special Tax Revenues and all moneys deposited into said funds (except as otherwise provided in the Fiscal Agent Agreement) are dedicated to the payment of the principal of, and interest and any premium on, the 2015 Bonds in accordance with the Fiscal Agent Agreement until all of the 2015 Bonds have been paid or defeased. Amounts in the Administrative Expense Fund, the Improvement Fund and the Costs of Issuance Fund are not pledged to the repayment of the 2015 Bonds. The Improvements are not pledged to pay the Debt Service on the 2015 Bonds. The proceeds of condemnation or -11- destruction of any of the Improvements are not pledged to pay the Debt Service on the 2015 Bonds. Proceeds of the levy of Special Tax B are not pledged to the repayment of the 2015 Bonds. Limited Obligation The 2015 Bonds are limited obligations of the City on behalf of the District and are payable solely from and secured solely by the Special Tax Revenues (other than the first Special Tax Revenues in the amount of the applicable Minimum Administrative Expense Requirement received by the City in each Fiscal Year, which are to be used to pay Administrative Expenses), and the amounts in the Bond Fund, the Reserve Fund and the Special Tax Fund created pursuant to the Fiscal Agent Agreement. In the event that the Special Taxes are not paid when due, the only sources of funds available to repay the 2015 Bonds are amounts held by the Fiscal Agent under the Fiscal Agent Agreement in the Bond Fund, the Special Tax Fund and the Reserve Fund, and the proceeds, if any, from foreclosure sales of parcels with delinquent Special Tax A levies. Special Tax A In accordance with the provisions of the Act, the Rate and Method was approved in 2007 by the then qualified electors and owners of land in the District and is set forth in its entirety in Appendix B. The Rate and Method provides for the levy of (a) a "Special Tax A" in order to fund the annual "Special Tax Requirement for Facilities," which includes the amounts needed to pay the debt service on the Bonds, to pay a proportionate share of the costs of administering the District, and to replenish any draws on the Reserve Fund; and (b) a "Special Tax B" in order to fund the annual "Special Tax Requirement for Services" which includes amounts needed to pay for services authorized to be funded by the District (see "THE DISTRICT—Location and Description of the District" for a description of the services authorized to be funded by the District) and a proportionate share of the costs of administering the District. Under the Fiscal Agent Agreement, and as used in this Official Statement, the capitalized term "Special Taxes" only includes the Special Tax A, and the capitalized term "Special Tax Revenues," which are pledged to the payment of the Bonds, only includes the Special Tax A levied and actually collected by the City, subject in any event to the provisions of the Fiscal Agent Agreement regarding the use of the Special Tax Revenues (see "SECURITY FOR THE 2015 BONDS— Special Tax Fund"). The Special Tax B is not pledged to the payment of the debt service on the Bonds and will not be available for that purpose. Under the Fiscal Agent Agreement, the City is obligated to fix and levy the amount of Special Taxes within the District required for the timely payment of principal of and interest on the outstanding 2015 Bonds becoming due and payable, including any necessary replenishment of the Reserve Fund and an amount estimated to be sufficient to pay the Administrative Expenses, taking into account any prepayments of Special Taxes previously received by the City. The Special Tax A levied on any parcel of Taxable Property (as defined in "—Summary of Rate and Method") may not exceed the maximum amount as provided in the Rate and Method. The Special Tax A is not levied on certain parcels in the District identified in the Rate and Method as the "Privately Owned Specific Retail Property," which includes seven parcels improved with a COSTCO, Target, Lowes, Wells Fargo Bank, In -N -Out Burger and Chick-fil-A, as well as certain parking areas. The Special Taxes are payable and are collected in the same manner, at the same time and in the same installment as the County ad valorem taxes on property levied on the secured tax roll are payable, and pursuant to the Act have the same priority, become delinquent at the -12- same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the taxes levied on the tax roll; provided, however, that the Special Taxes may be collected at a different time or in a different manner if necessary to meet the District's financial obligations. Although the Special Taxes will constitute a lien on taxed parcels within the District, they do not constitute a personal indebtedness of the owners of the property within the District. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax on a parcel of Taxable Property, the City may order the institution of a superior court action to foreclose the lien on the parcel of Taxable Property within specified time limits. In such an action, the real property subject to the unpaid amount of the Special Tax lien may be sold at judicial foreclosure sale. The Act provides that the Special Taxes are secured by a continuing lien which is subject to the same lien priority in the case of delinquency as ad valorem property taxes. See "—Summary of Rate and Method," "—Covenant for Superior Court Foreclosure" and "SPECIAL RISK FACTORS—Parity Taxes and Special Assessments." Other liens for taxes and assessments already exist on the property located within the District and others could come into existence in the future. See "SPECIAL RISK FACTORS— Parity Taxes and Special Assessments." There is no assurance that any owner of a parcel subject to the Special Tax levy will be financially able to pay the annual Special Taxes or that it will pay such taxes even if financially able to do so. See "SPECIAL RISK FACTORS." For historic information regarding the payment of, or delinquencies with respect to, Special Taxes in the District, see "THE DISTRICT—Special Tax Levies and Delinquencies." Special Tax Fund Deposit of Special Tax Revenues. The City is obligated by the Fiscal Agent Agreement to transfer, or cause to be transferred, to the Fiscal Agent, as soon as practicable following receipt, all Special Tax Revenues received by the City, which amounts shall be deposited by the Fiscal Agent in the Special Tax Fund. Notwithstanding the foregoing, (i) with respect to the first Special Tax Revenues collected by the City in any Fiscal Year (which do not include Special Tax B, which is to be retained by the City in any event) in the amount of the Minimum Administrative Expense Requirement for such Fiscal Year; first, the City may retain all or any portion thereof, and not remit the same to the Fiscal Agent, to the extent the City determines that it needs said amount to pay Administrative Expenses of the City; and second, any remaining portion of such amount will be separately identified by the City and will be deposited by the Fiscal Agent in the Administrative Expense Fund; (ii) any Special Tax Revenues constituting the collection of delinquencies in payment of Special Taxes will be separately identified by the City and will be disposed of by the Fiscal Agent first, in the Bond Fund to pay any past due debt service on the Bonds; second, in the Reserve Fund to the extent needed to increase the amount then on deposit in the Reserve Fund to the then Reserve Requirement; and third, to be held in the Special Tax Fund and used for its purposes; and (iii) any proceeds of Special Tax Prepayments will be separately identified by the City and will be deposited by the Fiscal Agent in the Special Tax Prepayments Account and used to redeem Bonds. -13- Moneys in the Special Tax Fund will be held by the Fiscal Agent for the benefit of the City and the Owners of the Bonds, will be disbursed as provided below and, pending and disbursement, will be subject to a lien in favor of the Owners of the Bonds and the City. Disbursements. From time to time as needed to pay the obligations of the District, but no later than the Business Day before each Interest Payment Date, the Fiscal Agent will withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority: (i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers under the Fiscal Agent Agreement from the Improvement Fund, the Reserve Fund and the Special Tax Fund to the Bond Fund, such that the amount in the Bond Fund equals the principal (including any mandatory sinking payment), premium, if any, and interest due on the Bonds on the next Interest Payment Date, and (ii) to the Reserve Fund an amount, taking into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement; provided that no such transfers shall exceed the amount then available to be transferred from the Special Tax Fund. In addition to the foregoing, if in any Fiscal Year there are sufficient funds in the Special Tax Fund to make the foregoing transfers to the Bond Fund and the Reserve Fund in respect of the Interest Payment Dates occurring in the Bond Year that commences in such Fiscal Year, the Finance Director may direct the Fiscal Agent to transfer to the Administrative Expense Fund, from time to time, any amount in the Special Tax Fund in excess of the amount needed to make such transfers to the Bond Fund and the Reserve Fund, if the Finance Director determines that monies are needed to pay Administrative Expenses in excess of the amount then on deposit in the Administrative Expense Fund. Summary of Rate and Method The Rate and Method is used to allocate the amount of the Special Tax A that is needed to be collected each fiscal year to fund the Special Tax Requirement for Facilities, and the amount of the Special Tax B that is needed to be collected each fiscal year to fund the Special Tax Requirement for Services, in each case among the Taxable Property within the District based upon the development status of the Taxable Property and its size, subject to a maximum tax rate. The Rate and Method is set forth in full in Appendix B and the following is a summary of the Rate and Method. The Rate and Method classifies the special taxes as Special Tax A and Special Tax B. The Special Tax A is the Special Tax levied to fund the Special Tax Requirement for Facilities. The Special Tax B is the Special Tax levied to fund the provision of certain services and is not pledged to the payment of the Bonds. Only the proceeds of the levy of Special Tax A levied and collected by the City are pledged to the payment of the Bonds. The Rate and Method provides that no Special Tax A be levied on Privately Owned Specific Retail Property or Public Property, and no Special Tax B be levied on Public Property or Undeveloped Property. The Rate and Method then classifies all Taxable Property, i.e., all assessor's parcels in the District not exempt pursuant to law or the Rate and Method, into two -14- categories: Developed Property and Undeveloped Property. Developed Property is further classified into nine different categories, based on the 'lots" identified in the Rate and Method. The amount of Special Taxes that the District may levy is limited by the Maximum Special Tax rates set forth in the Rate and Method. The Maximum Special Tax A for each Parcel of Developed Property for Fiscal Year 2015-16 is shown in Table 3 under the hearing "THE DISTRICT—The Landowner and the Tenants" below, and is subject to increase on July 1 of each Fiscal Year by two percent (2%) of the respective Maximum Special Tax A in effect for the prior Fiscal Year. The Maximum Special Tax B for Developed Property for Fiscal Year 2015-16 is $ per square foot of Floor Area of the buildings on the respective Parcel, and is subject to annual increases as described in Section C2 of the Rate and Method. Each fiscal year, the City determines the Special Tax Requirement for Facilities and will levy the Special Tax A until the total Special Tax Levy A equals the Special Tax Requirement for Facilities. The Special Tax Requirement for Facilities is defined in the Rate and Method as the amount required in any fiscal year for the District to pay the sum of (a) debt service on all outstanding Bonds, (b) periodic costs on the Bonds, including but not limited to credit enhancement and rebate payments thereon, (c) Administrative Expenses, (d) reasonably anticipated Special Tax A delinquencies based on the delinquency rate for the Special Tax A levy in the previous Fiscal Year, and (e) any amounts required to establish or replenish any reserve funds for the Bonds. In arriving at the Special Tax Requirement for Facilities, a credit is to be given for funds available to reduce the annual Special Tax A levy. The City levies the Special Tax A in two steps, in the following order, until the amount of the levy equals the amount needed to be collected to satisfy the Special Tax Requirement for Facilities: First: the Special Tax A is levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the applicable Maximum Special Tax A for Developed Property; and Second: if additional moneys are needed, the Special Tax A is levied Proportionately on each assessor's parcel of Undeveloped Property at up to 100% of the Maximum Special Tax A for Undeveloped Property. The term "Proportionately" as used in the above steps means that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Lots of Taxable Property. The Rate and Method also provides that the Special Tax A will be levied on each assessor's parcel for a period not to exceed forty-five years commencing with fiscal year 2007- 08. The amount of Special Tax A that may be levied on Taxable Property in the District in any year is strictly limited by the Maximum Special Tax A rates set forth in the Rate and Method, as described above. The Special Tax A obligation applicable to a lot within the District may be prepaid and the obligation to pay any Special Tax A for such lot may be fully or partially satisfied as described in the Rate and Method. No prepayment of Special Tax A has occurred in the District, however no assurance can be given that prepayments of Special Tax A will not occur in the future. Prepayments of Special Tax A will result in a mandatory redemption of the Bonds. See "THE 2015 BONDS—Redemption – Mandatory Redemption From Special Tax Prepayments." -15- Reserve Fund The Fiscal Agent Agreement establishes a debt service reserve fund (the "Reserve Fund") as a separate fund to be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds (which include the 2015 Bonds and any Parity Bonds), as a reserve for the payment of principal of, and interest and any premium on, the Bonds and moneys in the Reserve Fund are subject to a lien in favor of the Owners of the Bonds. The Reserve Fund is required by the Fiscal Agent Agreement to be funded in an amount equal to the Reserve Requirement which amount is, as of any date of calculation, an amount equal to seventy-five percent of the least of (i) the then Maximum Annual Debt Service, (ii) one hundred twenty-five percent (125%) of the then average Annual Debt Service, or (iii) ten percent (10%) of the initial principal amount of the Bonds. The Reserve Requirement as of the date of issuance of the 2015 Bonds will be Except as otherwise provided in the Fiscal Agent Agreement (with respect to the use of moneys in the Reserve Fund for the payment of any rebate liability due to the federal government, and the use of excess moneys in the Reserve Fund to pay debt service on the Bonds), all amounts deposited in the Reserve Fund will be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any premium on, the Bonds. See Appendix C—"Summary of Fiscal Agent Agreement." Whenever the balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent will transfer the amount in the Reserve Fund to the Bond Fund to be applied, on the next succeeding Interest Payment Date, to the payment and redemption of all of the Outstanding Bonds. In the event that the amount transferred from the Reserve Fund to the Bond Fund exceeds the amount required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund will be transferred to the City to be used for any lawful purpose under the Act. Notwithstanding the foregoing, no amounts will be transferred from the Reserve Fund until after (i) amounts in the Reserve Fund are withdrawn, at the written request of the Treasurer, for purposes of making payment to the federal government in accordance with the Fiscal Agent Agreement following payment of the 2015 Bonds, and (ii) payment of any fees and expenses due to the Fiscal Agent. See Appendix C—"Summary of Fiscal Agent Agreement." Covenant for Superior Court Foreclosure Foreclosure Under the Act. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special Tax on the taxed parcel, the City may order the institution of a superior court action to foreclose the lien on the taxed parcel within specified time limits. In such an action, the real property subject to the unpaid amount of the Special Tax lien may be sold at judicial foreclosure sale. City Foreclosure Covenant. Judicial foreclosure proceedings in the event of delinquent Special Taxes are not mandatory. However, the City has covenanted in the Fiscal Agent Agreement for the benefit of the Bondowners that on or about July 1 of each Fiscal Year, the Finance Director of the City will compare the amount of Special Taxes theretofore levied in the District to the amount of Special Tax Revenues theretofore received by the City. Following such comparison, or if at any other time the Finance Director becomes aware of any delinquency in the payment of any Special Tax due and owing: -16- (a) Individual Delinquencies. If the Finance Director determines that any single parcel subject to the Special Tax in the District is delinquent in the payment of Special Taxes in the aggregate amount of $5,000 or more, the Finance Director will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner by the following October 1, and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the City against the delinquent parcel within 90 days of the sending of such notice and shall be diligently pursued by the City to completion. Notwithstanding the foregoing, the City need not take any such action so long as the amount then in the Reserve Fund is at least equal to the Reserve Requirement. (b) Aggregate Delinquencies. If the Finance Director determines that the aggregate amount of Special Taxes levied in the District for the preceding Fiscal Year and theretofore collected is less than ninety-five percent (95%) of the total amount of Special Taxes levied for such Fiscal Year, the Finance Director will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to each property owner with delinquent Special Taxes by the following October 1, and (if any such delinquency remains uncured) foreclosure proceedings will be commenced by the City within 90 days of the sending of such notices against all such delinquent parcels. No assurance can be given as to the time necessary to complete any foreclosure sale or that any foreclosure sale will be successful. The City is not required to be a bidder at any foreclosure sale. In a foreclosure proceeding the City is entitled to recover penalties and interest on the delinquent Special Taxes through the date that an order of sale is entered. However, under the Fiscal Agent Agreement, the Special Taxes pledged to the payment of the Bonds does not include any such penalties and interest collected by the City that are in excess of the rate of interest payable on the Bonds. Also it should be noted that prompt commencement of foreclosure proceedings may not, in and of itself, result in a timely or complete payment of delinquent Special Taxes. Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. Subject to the maximum rates, the Rate and Method is designed to generate from all Taxable Property within the District the current year's debt service, administrative expenses, and replenishment of the Reserve Fund to the Reserve Requirement. However, if foreclosure proceedings are necessary, and the Reserve Fund has been depleted, there could be a delay in payments to owners of the 2015 Bonds pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. The ability of the City to foreclose the lien of delinquent unpaid Special Taxes may be limited in certain instances and may require prior consent of the obligee in the event the property is owned by or in receivership of the Federal Deposit Insurance Corporation. See "SPECIAL RISK FACTORS—FDIC /Federal Government Interests in Properties." No assurances can be given that a judicial foreclosure action, once commenced, will be completed or that it will be completed in a timely manner. If a judgment of foreclosure and order of sale is obtained, the judgment creditor (the City for the District) must cause a Notice of Levy to be issued. Under current law, a judgment debtor (property owner) has 120 days from the date of service of the Notice of Levy in which to redeem the property to be sold, which -17- period may be shortened to 20 days for parcels other than those on which a dwelling unit for not more than four persons is located. If a judgment debtor fails to redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such an action, a foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made (Section 701.680 of the California Code of Civil Procedure). The constitutionality of the aforementioned legislation, which repeals the former one-year redemption period, has not been tested; and there can be no assurance that, if tested, such legislation will be upheld. Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be sold for not less than the amount of judgment in the foreclosure action, plus post- judgment interest and authorized costs, unless the consent of the owners of 75% of the outstanding Bonds is obtained. However, under Section 53356.6 of the Act, the City, as judgment creditor, is entitled to purchase any property sold at foreclosure using a "credit bid," where the City could submit a bid crediting all or part of the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the City becomes the purchaser under a credit bid, the City must pay the amount of its credit bid into the redemption fund established for the 2015 Bonds, but this payment may be made up to 24 months after the date of the foreclosure sale. Neither the Act nor the Fiscal Agent Agreement requires the City to purchase or otherwise acquire any lot or parcel of property foreclosed upon if there is no other purchaser at such sale, and the City has no intent to be such a purchaser. The City will levy the Special Tax to pay the current year's debt service and related administrative expenses and to replenish the Reserve Fund to the Reserve Requirement, subject to Maximum Special Tax A rates. However, if superior court foreclosure proceedings are necessary to collect delinquent Special Taxes, and if the Reserve Fund is depleted, there could be a delay in payments of principal of and interest on the 2015 Bonds pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. See "SPECIAL RISK FACTORS—Bankruptcy Delays" and "—Proceeds of Foreclosure Sales." No Teeter Plan Collection of the Special Taxes is not subject to the "Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds," as provided for in Section 4701 et seq. of the California Revenue and Taxation Code (known as the "Teeter Plan"). Accordingly, collections of Special Taxes will reflect actual delinquencies, if any. Investment of Moneys Except as otherwise provided in the Fiscal Agent Agreement, all moneys in any of the funds or accounts established pursuant to the Fiscal Agent Agreement will be invested by the Fiscal Agent solely in Permitted Investments, as directed by the City. See Appendix C— "Summary of the Fiscal Agent Agreement" for a definition of "Permitted Investments" and for additional provisions regarding the investment of funds held under the Fiscal Agent Agreement. Issuance of Additional Bonds Parity Bonds. The Fiscal Agent Agreement does not authorize the City to issue any additional "new money" bonds for the District on a parity with the 2015 Bonds, but it does authorize the City to issue one or more series of "Refunding Bonds." The Fiscal Agent -18- Agreement defines Refunding Bonds as bonds issued by the City for the District the net proceeds of which are used to refund all or a portion of the then Outstanding Bonds; provided that the debt service on the Refunding Bonds in any Bond Year is not in excess of the debt service on the Bonds being refunded, and the final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being refunded. Subject to meeting the additional conditions summarized below, Refunding Bonds will be "Parity Bonds" that will be secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds under the Fiscal Agent Agreement on a parity with all other Bonds Outstanding under the Fiscal Agreement; the Fiscal Agent Agreement defines "Bonds" as the 2015 Bonds and any Parity Bonds. The City may issue the Parity Bonds subject to the following specific conditions precedent, among others set forth in the Fiscal Agent Agreement: (A) Current Compliance. The City must be in compliance on the date of issuance of the Parity Bonds with all covenants set forth in the Fiscal Agent Agreement and all Supplemental Agreements. (B) Payment Dates. The interest on the Parity Bonds must be payable on March 1 and September 1, and principal of the Parity Bonds must be payable on September 1 in any year in which principal is payable (provided that there is no requirement that any Parity Bonds pay interest on a current basis). (C) Reserve Fund Deposit. There must be a deposit to the Reserve Fund (or to a separate account created for such purpose) in an amount necessary so that the amount on deposit in the Reserve Fund (together with the amount in any such separate account), following the issuance of such Parity Bonds, is equal to the Reserve Requirement. (D) Refunding Bonds. The Parity Bonds must be Refunding Bonds. (E) Officer's Certificate. The City must certify to the Fiscal Agent that the conditions for the issuance of Parity Bonds in the Fiscal Agent Agreement have been met. Subordinate Bonds. Nothing in the provisions described above will prohibit the City from issuing bonds or otherwise incurring debt secured by a pledge of Special Tax Revenues subordinate to the pledge of such Special Tax Revenues under the Fiscal Agent Agreement. THE DISTRICT Location and Description of the District The District, located in the City, is a community facilities district established by the City Council of the City pursuant to the Act in 2007 to finance (a) certain public facilities (referred to in this Official Statement as the "Improvements"), consisting of street improvements, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and landscaping related thereto, storm drains, utilities, public parks and recreation facilities, public library facilities, fire protection facilities and equipment and land, rights-of-way and easements necessary for any of such facilities; and (b) to finance certain services, including police protection services, fire protection services, ambulance and paramedic services, -19- recreation program services, maintenance of parks, parkways and open space and flood and storm protection services. The District is located at the northwest corner of Barranca Parkway and Jamboree Road. An extension of Tustin Ranch Road from Walnut Avenue to Barranca Parkway borders the west side of the District. The District includes approximately 83 gross acres of land, with approximately 35.5 acres constituting Taxable Property subject to the levy of Special Tax A. The District includes nine separate Orange County Assessor's parcels of Taxable Property, which have been improved with an approximately one million square foot open-air lifestyle and entertainment shopping center known as The District at Tustin Legacy. The District at Tustin Legacy includes three "big box" buildings, freestanding retail and restaurant pads, inline retail tenant spaces, and a movie theater complex, with supporting parking facilities and landscaping. The movie theater complex contains 14 screens and approximately 3,000 stadium -style seats. The three "big box" buildings are occupied by Costco, Lowe's, and Target. Pursuant to the Rate and Method, Privately Owned Specific Retail Property is not subject to the Special Tax. The Privately Owned Specific Retail Property consists of seven parcels improved with a Costco, Lowe's, Target, Wells Fargo Bank, In -N -Out Burger and Chick- fil-A. Costco and Lowe's own the property on which their buildings are situated. The owner of all of the Taxable Property in the District, Vestar/Kimco Tustin L.P., a California limited partnership, maintains a website for The District at Tustin Legacy at http: / / thedistricttl.com, but such internet site is not included in this Official Statement and the City and the District have no responsibility with respect to the information on such website. The District encompasses approximately % of Tustin Legacy (based on gross acreage) and the development of the property in the District constitutes the first phase of commercial development in Tustin Legacy. Tustin Legacy is an approximately 1,511 acre planned community in central Orange County. Tustin Legacy is the City's proposed development for that portion of the former Marine Corps Air Station (MCAS) Tustin located in the City and an additional four acre parcel acquired from The Irvine Company. Approximately 95 acres of the original Air Station are located in the City of Irvine and are not a part of Tustin Legacy. Tustin Legacy currently includes over 1,680 homes and an additional 2,100 planned residential units, and includes or is expected to include schools, parks, and numerous business and commercial uses. Tustin Legacy is generally bounded by single-family residential and business park uses to the north, light industrial and research and development uses to the west, light industrial and commercial uses to the south, and residential uses to the east in the City of Irvine. The Tustin Legacy project area is bounded by the Costa Mesa, Santa Ana, Laguna and San Diego Freeways. Jamboree Road provides access to the Eastern Transportation Corridor. John Wayne Airport is located approximately three miles to the south. For more information regarding Tustin Legacy, see the website at www.tustinlegacy.com; however, the City has not reviewed the website and cannot make any representation regarding the accuracy or completeness of the information therein and the information on the website is not incorporated into this Official Statement. History of the District Pursuant to the Act, the City Council of the City, acting in its capacity as the legislative body for the District, adopted Resolution No. 07-35 (the "Resolution of Intention') on May 1, 2007, stating its intention to establish the District and to levy the special tax within the District. On June 19, 2007, the City Council formed the District and adopted Resolution No. 07-44, authorizing a special election with respect to the incurrence of indebtedness and the levy of the -20- Special Tax. Also on June 19, 2007, the then qualified electors within the boundaries of the District authorized the issuance of up to $16,000,000 principal amount of special tax bonds to finance the Improvements and approved the Rate and Method. On June 28, 2007, the City recorded a Notice of Special Tax Lien in the Orange County Recorder's Office as document number 2007000409546. On July 3, 2007, the City Council of the City, acting as the legislative body for the District, adopted Ordinance No. 1339, levying the Special Tax A and the Special Tax B on Taxable Property in the District at the rates and in accordance with the Rate and Method. On September 11, 2007, the District issued $13,680,000 initial principal amount of the 2007 Bonds, the net proceeds of which were used to finance the Improvements. At the time of formation of the District in 2007, all of the Taxable Property (as defined in the Rate and Method) was owned by and . Grading in the District began in January of 2006, and construction of the shopping center was substantially completed by the end of 2007. Pursuant to the Act, on November 3, 2015, the City Council of the City, acting as the legislative body of the District, adopted a resolution authorizing the issuance of the 2015 Bonds and the use of the proceeds of the 2015 Bonds to redeem the outstanding 2007 Bonds, and approving related documents and actions. The net proceeds of the 2015 Bonds will be used to legally defease the outstanding 2007 Bonds on the date of issuance of the 2015 Bonds and to make a deposit to the Improvement Fund to be used to pay costs of Improvements authorized to be funded by the District. See "PLAN OF FINANCING." The following page contains an aerial photo of the Tustin Legacy area of the City. -21- V Mo a) J 3 �mm -22- Land Ownership and Current Special Tax Levy The Special Tax A and Special Tax B for fiscal year 2015-16 have been levied on all Taxable Property in the District. The following Table 1 presents the Special Tax A levy by classification of "Lot" of Taxable Property under the Rate and Method based on the County's 2015-16 secured property tax roll, and the acreage of each such Lot (each now being its own Orange County Assessor's Parcel), and the principal lessee or lessees of the building(s) located on the respective parcel. Table 1 City of Tustin Community Facilities District No. 07-1 Ownership within the Community Facilities District Parcel(') Acres Owner 434-431-36 1.037 Vestar Kimco Tustin L.P 434-441-08 1.147 Vestar Kimco Tustin L.P 434-441-16 9.046 Vestar Kimco Tustin L.P 434-441-18 3.880 Vestar Kimco Tustin L.P 434-441-27 0.919 Vestar Kimco Tustin L.P 434-441-29 1.312 Vestar Kimco Tustin L.P 434-441-33 15.861 Vestar Kimco Tustin L.P 434-441-34 1.147 Vestar Kimco Tustin L.P 434-441-35 1.147 Vestar Kimco Tustin L.P Total Acres 35.496 Primary Lessees Lucilles BBQ J Zhou Oriental Cuisine The District Shopping Center AT&T, Off.Depot, Petsmart, Ritz Nails Shops Pei Wei, Farmers Merchant Bank Whole Foods, TJ Max, Shops The Winery, Aki Home, Shops Red Robin Gourmet Burgers (1) Parcels are identified by the applicable Orange County Assessor's parcel number. Source: Orange County Secured Roll, as complied by Willdan Financial Services. The Landowner and the Tenants The following information regarding ownership and leasing status of the property in the District has been provided by the Landowner. The information provided under this caption has been included because it may be considered relevant to an informed evaluation and analysis of the 2015 Bonds and the District. No assurance can be given, however, that the Landowner will retain its ownership of all or any portion of the property in the District for the term of the 2015 Bonds. No representation is made by the City or the Underwriter as to the accuracy or adequacy of such information provided by the Landowner. The District at Tustin Legacy was developed by Vestar/Kimco Tustin L.P., a California limited partnership (the "Landowner"), with respect to which Vestar California XXX, L.L.C., an Arizona limited liability company is the sole general partner, and Kimco Tustin, Inc., a Delaware corporation is the sole limited partner. The Landowner is a single purpose entity that was formed in 2003 as a partnership between affiliates of Vestar Development Co. and Kimco Realty Corporation for the purpose of purchasing the property in the District and constructing the improvements thereon. Kimco Realty Corporation is one of the nation's largest owner and operator of neighborhood and community shopping centers with interests in more than properties in states, comprising over million square feet of leaseable space. Vestar Development Co. was founded in 1989 by the five senior executives of the commercial division of a large Arizona homebuilder. Vestar Development Co., through affiliated entities and joint ventures (collectively, "Vestar"), develops and manages commercial real estate across the United States, with significant holdings and development activities in the Phoenix, Los Angeles, and San Diego metropolitan areas. Vestar specializes in the development and management of large, unenclosed shopping and entertainment centers, also called "power centers," that serve as community focal points. -23- The following Table 2 describes the status of leases with respect to the parcels in the shopping center, most of which are located in buildings on Taxable Property. Note, however, that the obligation to pay the Special Taxes when due is ultimately the responsibility of the Landowner or any future owner of the Taxable Property, and not any tenant. Parcel APN 434-441-36 APN 434-441-08 APN 434-441-16 APN 434-441-18 APN 434-441-27 Table 2 City of Tustin Community Facilities District No. 07-01 (Tustin Legacy/Retail Center) Lessees and Retail Uses of Parcels Subject to the Special TaxM Owner/Lessee -24- Current Approx. Lease Square Lease Expiration Renewal Footage Term Date Options APN 434-441-29 APN 434-441-33 APN 434-441-34 APN 434-441-35 Total (1) Does not include property designated as Privately Owned Specific Retail Property in the Rate and Method, which is not subject to the Special Tax A. However, all parcels within the District, including parcels designated as Privately Owned Specific Retail Property in the Rate and Method, are subject to the Special Tax B. Source: The Landowner. Table 3 below sets forth, for each Assessor's Parcel of Taxable Property in the District, the acreage of the Parcel, the square footage of the building improvements located on the Parcel, the Maximum Special Tax A for Fiscal Year 2015-16 for the Parcel, the actual Fiscal Year 2015-16 Special Tax A on the Parcel, the percentage of the Fiscal Year Special Tax A levy applicable to the Parcel, and the assessed value of the Parcel based on the Orange County Assessor's Roll for Fiscal Year 2015-16 (based on value as of January 1, 2015). -25- Parcel 434-431-36 434-441-08 434-441-16 434-441-18 434-441-27 434-441-29 434-441-33 434-441-34 434-441-35 Totals Acres 1.037 1.147 9.046 3.880 0.919 1.312 15.861 1.147 1.147 35.496 Table 3 City of Tustin Community Facilities District No. 07-1 Assessed Values and Maximum Special Tax Building Square Footage 10,000 8,000 248,348 44,908 11,793 12,028 192,326 7,834 6,500 541,737 Maximum Fiscal Year 2015-16 Special Tax(') $ 19,332.38 15,465.90 480,115.55 86,817.62 22,798.15 23,252.75 371,812.04 15,144.87 12,566.05 $1,047,305.31 Actual Fiscal Year 2015-16 Special Tax(2) $17,629.51 14,103.60 437,825.04 79,170.37 20,790.00 21,204.56 339,061.34 13,810.85 11,459.18 $955,054.45 Pro Rate Share of 2015 Bonds(3) $ 273,287.97 218,630.26 6,787,047.29 1,227,278.01 322,281.05 328,707.45 5,256,038.69 214,092.12 177,637.16 $14,805,000.00 Percent of Actual Fiscal Year 2015-16 Special Tax 1.85% 1.48 45.84 8.29 2.18 2.22 35.50 1.45 1.20 100.0070 Assessed Value(4) $ 2,521,429.00 3,304,183.00 53,402,039.00 7,861,867.00 2,248,768.00 2,649,940.00 57,059,826.00 2,795,980.00 3,990,181.00 $135,834,213.00 (1) Based on the Maximum Special Tax A for Developed Property for fiscal year 2015-16. Pursuant to the Rate and Method, on July 1 of each fiscal year, the Maximum Special Tax A increases by an amount equal to two percent of the amount in effect for the previous fiscal year. (2) Based on the actual levy of the Special Tax A required to fund the Fiscal Year 2015-16 Special Tax Requirement for Facilities. Does not include the Special Tax B levied to fund the Special Tax Requirement for Services. (3) Allocated based proportionate share of Actual Fiscal Year 2015-16 Special Tax and an estimated amount of $14,805,000 initial principal amount of the 2015 Bonds. Preliminary, subject to change. (4) Based on the Orange County Assessor Roll for Fiscal Year 2015-16, as of January 1, 2015. Source: Willdan Financial Services. Assessed Property Values No Appraisal of Property in the District. The City has not commissioned an appraisal of the taxable property in the District in connection with the issuance of the 2015 Bonds. Therefore, the valuation of the taxable property in the District will be estimated for the purposes of the Act, and set forth in this Official Statement, based on the most recently obtainable County Assessor's values. Assessed Valuation. The valuation of real property in the City is established by the County Assessor. Assessed valuations are reported at 100% of the full cash value of the property, as defined in Article XIIIA of the California Constitution. Article XIIIA of the California Constitution defines "full cash value" as the appraised value as of February 1, 1975, plus adjustments not to exceed 2% per year to reflect inflation, and requires assessment of "full cash value" upon change of ownership or new construction. Accordingly, the gross assessed valuation of any particular parcel presented in this Official Statement may not necessarily be representative of the actual market value of that parcel. The fiscal year 2015-16 total assessed value of nine parcels of Taxable Property in the District is $135,834,213. Historical Assessed Values. The following Table 4 shows the historical assessed valuation for the Taxable Property in the District for fiscal years 2007-08 through 2015-16 and the historical growth rate for Taxable Property in the District for those fiscal years. -26- Table 4 City of Tustin Community Facilities District No. 07-1 Annual Change in Assessed Value (Taxable Property) Assessed Value(z) Percent Change From Prior Fiscal Year Number of Parcels Fiscal Year Subject To Levy(l) 2007-08 180,831,085 11 2008-09 3.65 13 2009-10 192,730,618 14 2010-11 2.00 15 2011-12 203,984,804 15 2012-13 15 2013-14 15 2014-15 15 2015-16 15 Assessed Value(z) Percent Change From Prior Fiscal Year $85,620,601 0% 196,532,400 129.54 180,831,085 -7.99 187,434,078 3.65 188,951,593 0.81 192,730,618 2.00 196,585,224 2.00 197,477,713 0.45 203,984,804 3.30 (1) Includes Parcels that are subject to Special Tax A and/or Special Tax B. For Fiscal Year 2015-16, only nine Parcels are subject to Special Tax A. See Table 3 above. (2) Based on the applicable Orange County Assessor Roll for each fiscal year. Source: Orange County Secured Rolls, as compiled by Willdan Financial Services. Value -to -Burden Ratio General Information Regarding Value -to -Burden Ratios. The value -to -burden ratio on bonds secured by special taxes will generally vary over the life of those bonds as a result of changes in the value of the property that is security for the special taxes and the principal amount of the bonds. In comparing the aggregate assessed value of the real property within the District and the principal amount of the 2015 Bonds, it should be noted that an individual parcel may only be foreclosed upon to pay delinquent installments of the Special Taxes attributable to that parcel. The principal amount of the 2015 Bonds is not allocated equally among the parcels within the District; rather, the principal amount of the 2015 Bonds has been allocated among the parcels within the District based on their respective share of the total Special Tax A levied in fiscal year 2015-16. Economic and other factors beyond the property owners' control, such as economic recession, deflation of land values, financial difficulty or bankruptcy by one or more property owners, or the complete or partial destruction of Taxable Property caused by, among other possibilities, earthquake, flood, fire or other natural disaster, could cause a reduction in the assessed value within the District. See "SPECIAL RISK FACTORS—Property Value" and "— Bankruptcy Delays." Value -to -Burden Ratio Distribution. Table 5 below sets forth the estimated value -to -lien ratios for the nine parcels of Taxable Property in the District based upon each Parcel's respective share of total bonded indebtedness (including the initial principal amount of the 2015 Bonds) allocated by the Parcel's respective share of the Fiscal Year 2015-16 Special Tax A and its County 2015-16 assessed valuation. -27- (1) Based on the levy of the Special Tax A required to fund the Fiscal Year 2015-16 Special Tax Requirement for Facilities. Does not include Special Tax B. (2) Allocated based on Percent of Actual Fiscal Year 2015-16 Special Tax A, and the estimated initial principal amount of the 2015 Bonds of $14,805,000. Preliminary, subject to change. (3) Includes the initial principal amount of 2015 Bonds, plus overlapping tax and assessment debt outstanding. See Table 7 for a description of the overlapping indebtedness. (4) Based on the Orange County Assessor Roll for Fiscal Year 2015-16, as of January 1, 2015. (5) Calculated by dividing the Assessed Valuation column by the Total Debt Outstanding column. (6) Based on development status pursuant to the Rate and Method for Fiscal Year 2015-16. Source: Willdan Financial Services. Special Tax Levies and Delinquencies Special Taxes were first levied in the District in fiscal year 2007-08. The following Table 6 is a summary of Special Tax levies, collections and delinquency rates on Taxable Properties in the District for fiscal years 2007-08 through 2014-15, based on amounts levied and outstanding delinquencies as of June 30 of each year. -28- Table 5 City of Tustin Community Facilities District No. 07-1 Estimated Assessed Value -to -Lien Ratios (Including Overlapping Assessment and Special Tax Debt) Estimated Percent of Assessed Actual Fiscal Actual Fiscal Pro Rate Total Bond Value -to - Year 2015-16 Year 2015-16 Share of 2015 Debt Out- Assessed Lien Parcel Special Tax(') Special Tax Bonds(2) standing(3) Valuation(4) Ratio(5) 434-431-36 $17,629.51 1.85% $ 273,287.97 $ 357,063.00 $ 2,521,429.00 7.06:1 434-441-08 14,103.60 1.48 218,630.26 328,412.45 3,304,183.00 10.06:1 434-441-16 437,825.04 45.84 6,787,047.29 8,561,341.61 53,402,039.00 6.24:1 434-441-18 79,170.37 8.29 1,227,278.01 1,488,490.25 7,861,867.00 5.28:1 434-441-27 20,790.00 2.18 322,281.05 396,996.85 2,248,768.00 5.66:1 434-441-29 21,204.56 2.22 328,707.45 416,752.28 2,649,940.00 6.36:1 434-441-33 339,061.34 35.50 5,256,038.69 7,151,863.78 57,059,826.00 7.98:1 434-441-34 13,810.85 1.45 214,092.12 306,989.16 2,795,980.00 9.11:1 434-441-35 11,459.18 1.20 177,637.16 310,211.79 3,990,181.00 12.86:1 Totals $955,054.45 100.00% $14,805,000.00 $19,318,121.17 $135,834,213.00 7.03:1 (1) Based on the levy of the Special Tax A required to fund the Fiscal Year 2015-16 Special Tax Requirement for Facilities. Does not include Special Tax B. (2) Allocated based on Percent of Actual Fiscal Year 2015-16 Special Tax A, and the estimated initial principal amount of the 2015 Bonds of $14,805,000. Preliminary, subject to change. (3) Includes the initial principal amount of 2015 Bonds, plus overlapping tax and assessment debt outstanding. See Table 7 for a description of the overlapping indebtedness. (4) Based on the Orange County Assessor Roll for Fiscal Year 2015-16, as of January 1, 2015. (5) Calculated by dividing the Assessed Valuation column by the Total Debt Outstanding column. (6) Based on development status pursuant to the Rate and Method for Fiscal Year 2015-16. Source: Willdan Financial Services. Special Tax Levies and Delinquencies Special Taxes were first levied in the District in fiscal year 2007-08. The following Table 6 is a summary of Special Tax levies, collections and delinquency rates on Taxable Properties in the District for fiscal years 2007-08 through 2014-15, based on amounts levied and outstanding delinquencies as of June 30 of each year. -28- Table 6 City of Tustin Community Facilities District No. 07-1 Special Tax Delinquency History (1) Includes Special Tax A and Special Tax B. (2) Delinquency information as of June 30 in the fiscal year in which the Special Taxes were levied. Source: Orange County Tax Collector, as compiled by Willdan Financial Services. Direct and Overlapping Governmental Obligations General. Property within the District is subject to general obligation and general fund overlapping debt. Currently, no other assessment liens or special taxes are currently imposed upon property within the District by other taxing entities. However, the lien for the Special Taxes is co -equal to the lien for the community facilities districts and assessment districts, if any, and the lien for general property taxes. Additional indebtedness could be authorized by other public agencies at any time. Presently, land within the District is subject to approximately $19,318,121 of total outstanding general obligation overlapping debt (including the 2015 Bonds, but not the 2007 Bonds). To repay direct and overlapping debt the owners of the land within the District must pay the annual Special Taxes, special assessments, and the general property tax levy. The ability of the City to collect the Special Taxes could be adversely affected if additional debt is issued with respect to the Taxable Property in the District. The land, at any time, could become subject to additional parity debt either by the formation of additional community facilities districts or the imposition of other taxes and assessments by public agencies other than the City on behalf of the property owners within the District. The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of the landowners to pay the Special Taxes and may increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes. Bonded Indebtedness. As shown on Table 7 below, the property in the District is located within the Irvine Ranch Water District's (the "IRWDs") Improvement District Nos. 113 and 213 (collectively, the "IRWD Improvement Districts"), and the property receives water and sewer service from such public agency. At an election held on August 31, 2004, IRWD received authorization to issue not to exceed $25,770,000 aggregate principal amount of general obligation bonds for Improvement District No. 113 and $87,648,000 aggregate principal amount of general obligation bonds for Improvement District No. 213. The District's share of outstanding debt of the two IRWD Improvement Districts is $3,159,248.16. The City understands that the remaining unissued bonds authorized for the IRWD Improvement Districts are expected to relate to the financing of water and sewer facilities for the undeveloped portion of the Tustin Legacy project. Accordingly, the Taxable Property's share of the authorized but unissued debt of the two IRWD Improvement Districts is expected to be zero. -29- Number of Annual Special Parcels Subject Amount Amount Fiscal Year Tax Levied(l) to Levy Collected Delinquent(2) 2007-08 $ 906,049.36 11 $ 906,049.36 $0 2008-09 905,898.36 13 905,898.36 0 2009-10 984,850.14 14 984,850.14 0 2010-11 1,056,479.14 15 1,056,479.14 0 2011-12 1,081,348.19 15 1,081,348.19 0 2012-13 1,101,839.38 15 1,101,839.38 0 2013-14 1,127,494.25 15 1,127,494.25 0 2014-15 1,148,046.67 15 1,148,046.67 0 (1) Includes Special Tax A and Special Tax B. (2) Delinquency information as of June 30 in the fiscal year in which the Special Taxes were levied. Source: Orange County Tax Collector, as compiled by Willdan Financial Services. Direct and Overlapping Governmental Obligations General. Property within the District is subject to general obligation and general fund overlapping debt. Currently, no other assessment liens or special taxes are currently imposed upon property within the District by other taxing entities. However, the lien for the Special Taxes is co -equal to the lien for the community facilities districts and assessment districts, if any, and the lien for general property taxes. Additional indebtedness could be authorized by other public agencies at any time. Presently, land within the District is subject to approximately $19,318,121 of total outstanding general obligation overlapping debt (including the 2015 Bonds, but not the 2007 Bonds). To repay direct and overlapping debt the owners of the land within the District must pay the annual Special Taxes, special assessments, and the general property tax levy. The ability of the City to collect the Special Taxes could be adversely affected if additional debt is issued with respect to the Taxable Property in the District. The land, at any time, could become subject to additional parity debt either by the formation of additional community facilities districts or the imposition of other taxes and assessments by public agencies other than the City on behalf of the property owners within the District. The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of the landowners to pay the Special Taxes and may increase the possibility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes. Bonded Indebtedness. As shown on Table 7 below, the property in the District is located within the Irvine Ranch Water District's (the "IRWDs") Improvement District Nos. 113 and 213 (collectively, the "IRWD Improvement Districts"), and the property receives water and sewer service from such public agency. At an election held on August 31, 2004, IRWD received authorization to issue not to exceed $25,770,000 aggregate principal amount of general obligation bonds for Improvement District No. 113 and $87,648,000 aggregate principal amount of general obligation bonds for Improvement District No. 213. The District's share of outstanding debt of the two IRWD Improvement Districts is $3,159,248.16. The City understands that the remaining unissued bonds authorized for the IRWD Improvement Districts are expected to relate to the financing of water and sewer facilities for the undeveloped portion of the Tustin Legacy project. Accordingly, the Taxable Property's share of the authorized but unissued debt of the two IRWD Improvement Districts is expected to be zero. -29- The IRWD Improvement Districts' bonds are general obligation bonds payable from ad valorem taxes; the amount of the tax levy on each parcel is based on the assessed valuation of the land only. If the assessed valuation of parcels increases disproportionately to other parcels in the IRWD Improvement Districts, then such parcels' share of the debt of the IRWD Improvement Districts would increase. The City cannot predict the amount of authorized but unissued bonds for the IRWD Improvement Districts that will ultimately be issued, nor can it predict when such debt would be issued or the debt service payments thereon. In addition, as stated above, other public agencies may issue additional indebtedness on property within the District at any time. Direct and overlapping bonded indebtedness as of August 11, 2015 is shown in the following Table 7 compiled National Tax Data, Inc. and as reported by Willdan Financial Services. Neither the City nor the Underwriter has independently verified the information in Table 7 and they make no representation as to its completeness or accuracy. -30- Table 7 City of Tustin Community Facilities District No. 07-1 Direct and Overlapping Debt Summary(l,z) L Assessed Value 2015-2016 Secured Roll Assessed Value $135,834,213 IL Secured Property Taxes Description on Tax Bill Type Total Parcels Total Levy % Applicable Parcels Levy Basic 1% Levy PROP13 843,845 $4,472,368,692.49 0.02922% 9 $1,306,620.93 City of Tustin CFD 07-1 CFD 9 954,496.00 100.00000 9 954,496.00 Irvine Ranch Water District Water ID No. 113 GOB 2,106 202,185.63 8.03233 9 16,240.22 Irvine Ranch Water District Water ID No. 213 GOB 2,106 256,092.47 8.03260 9 20,570.89 Metropolitan Water District of Southern California Debt GOB 550,008 10,454,303.76 0.04374 9 4,573.15 Service Metropolitan Water District of Southern California STANDBY 549,790 6,366,592.48 0.00563 9 358.74 Water Standby Charge Orange County Vector Control Assessment VECTOR 781,734 1,532,270.44 0.00282 9 43.20 Orange County Vector Control Mosquito & Fire Ant VECTOR 781,679 4,148,480.71 0.00738 9 306.22 Assessment Tustin Unified School District SFID No. 2002-1, Series A GOB 23,051 1,331.59 0.98003 9 13.05 Tustin Unified School District SFID No. 2002-1, Series B GOB 23,051 450,447.55 0.98045 9 4,416.40 Tustin Unified School District SFID No. 2002-1, Series C GOB 23,051 1,501,911.54 0.98046 9 14,725.64 Tustin Unified School District SFID No. 2002-1, Series D GOB 23,051 1,393,982.43 0.98045 9 13,667.25 Tustin Unified School District SFID No. 2008-1, Series A GOB 21,816 1,386,320.05 1.01697 9 14,098.44 Tustin Unified School District SFID No. 2008-1, Series B GOB 21,816 1,292,533.01 1.01697 9 13,144.61 Tustin Unified School District SFID No. 2008-1, Series C GOB 21,816 1,223,153.32 1.01696 9 12,439.04 Tustin Unified School District SFID No. 2012-1, Series A GOB 31,999 $2,747,681.78 0.66860 9 18,371.02 2015-2016 TOTAL PROPERTY TAX LIABILITY (ESTIMATE) $2,394,084.80 TOTAL PROPERTY TAX LIABILITY AS A PERCENTAGE OF 2014-2015 ASSESSED VALUATION 1.76% III. Land Secured Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels Amount City of Tustin CFD 07-1 CFD $14,805,000 $14,805,000 100.00000% 9 $14,805,000 TOTAL LAND SECURED BOND INDEBTEDNESS (3) $14,805,000 TOTAL OUTSTANDING LAND SECURED BOND INDEBTEDNESSM $14,805,000 Authorized Direct and Overlapping Bonded Debt Type Authorized Unissued % Applicable Parcels Amount City of Tustin CFD 07-1 CFD $16,000,000 $1,195,000 100.00000% 9 $1,195,000 TOTAL UNISSUED LAND SECURED BOND INDEBTEDNESSM $1,195,000 TOTAL OUTSTANDING AND UNISSUED LAND SECURED BOND INDEBTEDNESS (3) $16,000,000 IV. General Obligation Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels Amount Irvine Ranch Water District Water ID No. 113 GOB $ 14,800,000 $ 13,900,000 8.92758% 9 $1,240,933.93 Irvine Ranch Water District Water ID No. 213 GOB 23,800,000 21,487,500 8.92758 9 1,918,314.23 Metropolitan Water District of Southern California GOB 850,000,000 110,420,000 0.00587 9 6,479 GOB 1966 Tustin Unified School District SFID No. 2002-1 GOB 79,998,528 49,484,562 0.94854 9 469,381 Tustin Unified School District SFID No. 2008-1 GOB 75,000,000 69,435,000 0.98186 9 681,757 Tustin Unified School District SFID No. 2012-1 GOB 35,000,000 29,830,000 0.65791 9 196,255 TOTAL GENERAL OBLIGATION BOND INDEBTEDNESSM $4,513,121 TOTAL OUTSTANDING GENERAL OBLIGATION BOND INDEBTEDNESS (3) $4,513,121 Authorized Direct and Overlapping Bonded Debt Type Authorized Unissued % Applicable Parcels Amount Irvine Ranch Water District Water ID No. 113 GOB $ 25,769,500 $10,969,500 8.92758% 9 $ 979,311.13 Irvine Ranch Water District Water ID No. 213 GOB 87,647,500 63,847,500 8.92758 9 5,700,038.07 Metropolitan Water District of Southern California GOB 850,000,000 0 0.00587 9 0 GOB 1966 Tustin Unified School District SFID No. 2002-1 GOB 80,000,000 1,472 0.94854 9 14 Tustin Unified School District SFID No. 2008-1 GOB 95,000,000 0 0.98186 9 0 Tustin Unified School District SFID No. 2012-1 GOB 135,000,000 100,000,000 0.65791 9 657,912 TOTAL UNISSUED GENERAL OBLIGATION BONDED DEBT(3) $7,337,275 TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION BOND INDEBTEDNESS (3) $11,850,397 TOTAL OF ALL OUTSTANDING AND OVERLAPPING BONDED DEBT $19,318,121 VALUE TO ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT 7.03:1 TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING BONDED DEBT $27,850,397 VALUE TO ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING BONDED DEBT 4.88:1 (1) As of August 11, 2015. (2) Preliminary, subject to change. (3) Additional bonded indebtedness or available bond authorization may exist but are not shown because a tax was not levied for the referenced fiscal year. Source: Willdan Financial Services. -31- Overlapping Public Debt. Contained within the boundaries of the District are certain overlapping local agencies providing public services and assessing property taxes, assessments, special taxes and other charges on the property in the District. Many of these local agencies have outstanding debt. The current and estimated direct and overlapping obligations affecting the property in the District are shown in the following table. The table was prepared by California Municipal Statistics, Inc., and is included for general information purposes only. Neither the City nor the Underwriter has independently verified the information in the table and they make no representation as to its completeness or accuracy. Other Potential Debt. The City has no control over the amount of additional debt payable from taxes or assessments levied on all or a portion of the Taxable Property within the District which may be incurred in the future by other governmental agencies having jurisdiction over all or a portion of the Taxable Property within the District. Furthermore, nothing prevents the owners of Taxable Property within the District from consenting to the issuance of additional debt by other governmental agencies which would be secured by taxes or assessments on a parity with the Special Taxes. To the extent such indebtedness is payable from assessments, other special taxes levied pursuant to the Act or taxes, such assessments, special taxes and taxes will be secured by liens on the Taxable Property within the District on a parity with the lien of the Special Taxes. Accordingly, the debt on the property within the District could increase, without any corresponding increase in the value of the property therein, and thereby severely reduce the estimated value -to -lien ratio that exists at the time the Bonds are issued. The imposition of such additional indebtedness could reduce the willingness and ability of the owners of the Taxable Property within the District to pay the Special Taxes when due. See "SPECIAL RISK FACTORS—Parity Taxes and Special Assessments." Moreover, in the event of a delinquency in the payment of Special Taxes, no assurance can be given that the proceeds of any foreclosure sale of Taxable Property with delinquent Special Taxes would be sufficient to pay the delinquent Special Taxes. See "SPECIAL RISK FACTORS—Property Value." Projected Debt Service Coverage The Maximum Special Tax A that can be levied on Taxable Property in the District in any fiscal year increases by two percent (2%) over the Maximum Special Tax A for the prior fiscal year. See "SECURITY FOR THE 2015 BONDS—Special Tax A" and "—Summary of Rate and Method." Set forth in Table 8 below is the projected Maximum Special Tax A from the nine parcels in the District subject to the levy of Special Tax A, assuming no delinquencies in the payment of Special Tax A, that could be available to pay the debt service on the Bonds. -32- Year Ending September 1st 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Table 8 City of Tustin Community Facilities District No. 07-1 Estimated Maximum Taxing Capacity Maximum Special Taxes(l) $1,047,305.31 1,068,251.41 1,089,616.40 1,111,408.69 1,133,636.83 1,156,309.51 1,179,435.65 1,203,024.32 1,227,084.76 1,251,626.42 1,276,658.90 1,302,192.02 1,328,235.82 1,354,800.51 1,381,896.46 1,409,534.35 1,437,725.00 1,466,479.45 1,495,808.99 1,525,725.14 1,556,239.59 1,587,364.33 Administrative Expenses(2) $36,048.79 40,000.00 40,800.00 41,616.00 42,448.32 43,297.29 44,163.23 45,046.50 45,947.43 46,866.38 47,803.70 48,759.78 49,734.97 50,729.67 51,744.27 52,779.15 53,834.73 54,911.43 56,009.66 57,129.85 58,272.45 59,437.90 2015 Bonds Debt Service(3) $ 917,097.78 934,250.00 948,950.00 970,400.00 990,950.00 1,010,600.00 1,030,600.00 1,049,200.00 1,071,400.00 1,092,000.00 1,116,000.00 1,137,500.00 1,161,500.00 1,182,750.00 1,206,250.00 1,231,750.00 1,254,000.00 1,278,000.00 1,308,500.00 1,335,000.00 1,357,500.00 1,386,000.00 Estimated Maximum Taxing Capacity(4) 110.270 110.06 110.52 110.24 110.12 110.13 110.16 110.37 110.24 110.33 110.11 110.19 110.07 110.26 110.27 110.15 110.36 110.45 110.03 110.01 110.35 110.24 (1) Based on the levy of the Maximum Special Tax A. (2) Based on the amount of the Minimum Administrative Expense Requirement pursuant to the Fiscal Agent Agreement. See "INTRODUCTION—Security for the 2015 Bonds - Pledge Under the Fiscal Agent Agreement. (3) Preliminary, subject to change. (4) Maximum Special Taxes, less Minimum Administrative Expense Requirement, divided by 2015 Bonds Debt Service. Source: Willdan Financial Services. SPECIAL RISK FACTORS The following is a description of certain risk factors affecting the District, the property owners in the District, the parcels subject to the levy of Special Taxes and the payment of and security for the 2015 Bonds. The following discussion of risks is not meant to be a complete list of the risks associated with the purchase of the 2015 Bonds and does not necessarily reflect the relative importance of the various risks. Potential investors are advised to consider the following factors along with all other information in this Official Statement in evaluating the investment quality of the 2015 Bonds. There can be no assurance that other risk factors will not become material in the future. No General Obligation of the City or the District The City's obligations under the 2015 Bonds and under the Fiscal Agent Agreement are limited obligations of the City on behalf of the District and are payable solely from and secured solely by the Special Tax Revenues and amounts in the Special Tax Fund, the Bond Fund and the Reserve Fund. The 2015 Bonds are neither general or special obligations of the City nor general obligations of the District, but are limited obligations of the City for the District payable solely from the revenues and funds pledged therefor and under the Fiscal Agent Agreement. Neither the faith and credit nor the taxing power of the City or the State of California or of any of their respective political subdivisions is pledged to the payment of the 2015 Bonds. -33- Payment of the Special Tax is not a Personal Obligation The owner and users of the parcels in the District are not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation that is secured only by a lien against the Taxable Property on which it is levied. If the value of a Taxable Property is not sufficient to secure fully the payment of the Special Tax levied and to be levied on it, the City has no recourse against the owners of the Taxable Property. Concentration of Ownership All of the Taxable Parcels in the District are currently owned by the Landowner. See "THE DISTRICT—The Landowner and the Tenants." While there has never been a delinquency in payment of the Special Taxes levied in the District, no assurance can be given that the Landowner or any subsequent owner of property in the District will continue to timely pay Special Taxes levied in the future. Property Value If a landowner defaults in the payment of the Special Tax, the only legal remedy is the institution of a superior court action to foreclose on the delinquent Taxable Property in an attempt to obtain funds with which to pay the Special Tax. The value of the Taxable Property in the District could be adversely affected by economic factors beyond the City's control, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property in the event of sale or foreclosure; (ii) changes in real estate tax rates and other expenses of owning Taxable Property, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural disasters (including, without limitation, wildfire, earthquakes, tsunamis and floods), which may result in uninsured losses. See "SPECIAL RISK FACTORS—Natural Disasters and Potential Drought Conditions." No assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay the delinquent Special Tax installment. No appraisal of the Taxable Property in the District has been conducted (see, however, "THE DISTRICT—Value-to-Burden Ratio" for a description of the Orange County Assessor's valuation of the parcels in the District). Although the Act authorizes the City to cause such an action to be commenced and diligently pursued to completion, the Act does not specify any obligation of the City with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale in any such action if there is no other purchaser at such sale. The City is not obligated and does not expect to be a bidder at any such foreclosure sale. See "SECURITY FOR THE BONDS—Covenant for Superior Court Foreclosure" and "SPECIAL RISK FACTORS—Proceeds of Foreclosure Sales." Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method. In addition, the Act provides that properties or entities of the state, federal or local government are exempt from the Special Tax; provided, however, that property within the District acquired by a public entity through a negotiated transaction, or by gift or devise, that is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. It is -34- possible that property acquired by a public entity following a tax sale or foreclosure based upon failure to pay taxes could become exempt from the Special Tax. In addition, the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property, for outstanding Bonds only, is to be treated as if it were a special assessment. The constitutionality and operation of these provisions of the Act have not been tested. See "SECURITY FOR THE 2015 BONDS—Special Tax A." In particular, insofar as the Act requires payment of the Special Tax by a federal entity acquiring property within the District, it may be unconstitutional. See "SPECIAL RISK FACTORS—FDIC /Federal Government Interests in Properties." If for any reason property within the District becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency, subject to the limitation of the Maximum Special Tax A, the Special Tax will be reallocated to the remaining taxable properties within the District. This would result in the owners of such property paying a greater amount of the Special Tax A and could have an adverse impact upon the timely payment of the Special Tax A. Moreover, if a substantial portion of land within the District becomes exempt from the Special Tax A because of public ownership, or otherwise, the maximum rate that could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the 2015 Bonds when due and a default would occur with respect to the payment of such principal and interest. The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax. Parity Taxes and Special Assessments The Special Taxes and any penalties thereon will constitute liens against the taxable parcels in the District until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is coequal to and independent of the lien for general property taxes regardless of when they are imposed upon the taxable parcel. The Special Taxes have priority over all existing and future private liens imposed on the property. The Special Tax A and the Special Tax B have the same lien priority with respect to the Taxable Property. See "THE DISTRICT—Direct and Overlapping Governmental Obligations" for a description of existing overlapping liens on the Taxable Property. The City has no control over the ability of other entities and districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the taxable property within the District subject to the levy of Special Taxes. In addition, the landowners within the District may, without the consent or knowledge of the City, petition other public agencies to issue public indebtedness secured by special taxes or assessments, and any such special taxes or assessments may have a lien on such property on a parity with the Special Taxes. The imposition of additional indebtedness could reduce the willingness and the ability of the property owners within the District to pay the Special Taxes when due. Insufficiency of Special Taxes In order to pay debt service on the 2015 Bonds, it is necessary that the Special Taxes levied against taxable parcels within the District be paid in a timely manner. The City has established the Reserve Fund in an amount equal to the Reserve Requirement to pay debt service on the 2015 Bonds and any Parity Bonds to the extent Special Taxes are not paid on time and other funds are not available. See "SECURITY FOR THE 2015 BONDS—Reserve Fund" and -35- Appendix C—"Summary of the Fiscal Agent Agreement." Under the Fiscal Agent Agreement, the City has covenanted to maintain in the Reserve Fund an amount equal to the Reserve Requirement; subject, however, to the limitation that the City may not levy the Special Tax in any fiscal year at a rate in excess of the Maximum Special Tax A rates permitted under the Rate and Method. In addition, the Act imposes certain limitations on increases in Special Taxes on residential parcels as a consequence of delinquencies in payment of the Special Taxes. See "SECURITY FOR THE 2015 Bonds—Special Tax A." Consequently, if a delinquency occurs, the City may be unable to replenish the Reserve Fund to the Reserve Requirement due to the limitation of the Maximum Special Tax rates. If such defaults were to continue in successive years, the Reserve Fund could be depleted and a default on the 2015 Bonds would occur if proceeds of a foreclosure sale did not yield a sufficient amount to pay the delinquent Special Taxes. The City has made certain covenants regarding the institution of foreclosure proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay debt service on the 2015 Bonds. See "SECURITY FOR THE 2015 Bonds—Covenant for Superior Court Foreclosure." If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest. Tax Delinquencies Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the 2015 Bonds are derived, are being billed to the Taxable Property within the District on the regular property tax bills sent to owners of the parcels. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and Special Tax installment payments in the future. See "SECURITY FOR THE 2015 BONDS—Reserve Fund" and "-Covenant for Superior Court Foreclosure" for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Fiscal Agent Agreement, in the event of delinquency in the payment of Special Tax installments. See also "THE DISTRICT—Special Tax Levies and Delinquencies" for historical Special Tax delinquency history. Bankruptcy Delays The payment of the Special Tax and the ability of the City to commence a superior court action to foreclose the lien of a delinquent unpaid Special Tax, as discussed in "SECURITY FOR THE 2015 Bonds—Covenant for Superior Court Foreclosure," may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. Any legal opinion to be delivered concurrently with the delivery of the 2015 Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or any other person claiming an interest in the property could result in a delay in superior court foreclosure proceedings and could result in the possibility of Special Tax installments not being paid in part or in full. Such a delay would -36- increase the likelihood of a delay or default in payment of the principal of and interest on the 2015 Bonds. Proceeds of Foreclosure Sales Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax, the City Council, as the legislative body of the District, may order that the Special Taxes be collected by a superior court action to foreclose the lien within specified time limits. The City has covenanted in the Fiscal Agent Agreement that it will, under certain circumstances, commence such a foreclosure action. See "SECURITY FOR THE 2015 Bonds— Covenant for Superior Court Foreclosure." No assurances can be given that a taxable parcel in the District that would be subject to a judicial foreclosure sale for delinquent Special Taxes will be sold or, if sold, that the proceeds of such sale will be sufficient to pay the delinquent Special Tax installment. Although the Act authorizes the City to cause such an action to be commenced and diligently pursued to completion, the Act does not specify any obligation of the City with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale in any such action if there is no other purchaser at such sale and the City has not in any way agreed nor does it expect to be such a bidder. In a foreclosure proceeding, a judgment debtor (i.e., the property owner) has 140 days from the date of service of the notice of levy in which to redeem the property to be sold and may have other redemption rights afforded by law. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale if the purchaser at the sale was the judgment creditor. If a foreclosure sale is thereby set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made. If foreclosure proceedings were ever instituted, any holder of a mortgage or deed of trust on the affected property could, but would not be required to, advance the amount of tie delinquent Special Tax installment to protect its security interest. In the event such superior court foreclosure or foreclosures are necessary, there could be a delay in principal and interest payments to the owners of the 2015 Bonds pending prosecution of the foreclosure proceedings and receipt by the District of the proceeds of the foreclosure sale, if any. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions and other factors beyond the control of the City, including delay due to crowded local court calendars or legal tactics and, in any event could take several years to complete. In particular, bankruptcy proceedings involving the Landowner or any other owner of a taxable parcel in the District could cause a delay, reduction or elimination in the flow of Special Tax Revenues to the Fiscal Agent. See "SPECIAL RISK FACTORS—Bankruptcy Delays." Natural Disasters and Potential Drought Conditions The value of the Taxable Property in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Property and the continued habitability and enjoyment of such private improvements. Such occurrences include, without limitation, wildfire, earthquakes and floods. Known active faults that could cause significant ground shaking in the District include, but are not limited to, the San Andreas Fault and the Newport Beach/ Inglewood Fault. -37- One or more of such natural disasters could occur and could result in damage to improvements of varying seriousness. The damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances, the value of the Taxable Property may well depreciate or disappear. From time to time the desert southwest and much of California experiences extended drought conditions. In recent years, rainfall and snowpack has approximated historic normal conditions. Water service within the District is provided by the Irvine Ranch Water District and it anticipates being able to supply water within its service area for the foreseeable future. However, there can be no assurance that any renewal of drought conditions will not adversely affect the Irvine Ranch Water District's ability to do so. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of a parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The City has not independently verified, but is not aware of, the presence of any hazardous substances within the District. Disclosure to Future Purchasers The willingness or ability of an owner of a parcel to pay the Special Tax, even if the value of the property is sufficient to justify payment, may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and, at the time of such a levy, has the ability to pay it as well as pay other expenses and obligations. The City has caused a notice of the Special Tax to be recorded in the Office of the Recorder for the County against the Taxable Property in the District. Although title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation when purchasing a Taxable Property within the District or lending money thereon, as applicable. California Civil Code Section 1102.6b requires that, in the case of transfers, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. -38- FDIC/Federal Government Interests in Properties General. The ability of the City to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation (the "FDIC"), the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. The supremacy clause of the United States Constitution reads as follows: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution or Laws of any State to the contrary notwithstanding." This means that, unless Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the District but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association ("FNMA") is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. The City has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels subject to the Special Taxes within the District, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the 2015 Bonds are outstanding. FDIC. In the event that any financial institution making any loan which is secured by real property within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the City to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement") provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will -39- pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC -owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement states that the FDIC generally will not pay non -ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello -Roos Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello -Roos special taxes. The City is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes to be extinguished at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the 2015 Bonds. No Acceleration Provision The 2015 Bonds and the Fiscal Agent Agreement do not contain a provision allowing for the acceleration of the 2015 Bonds in the event of a payment default or other default under the terms of the 2015 Bonds or the Fiscal Agent Agreement or in the event interest on the 2015 Bonds becomes included in gross income for federal income tax purposes. Taxability Risk As discussed herein under the caption "TAX MATTERS," interest on the 2015 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the 2015 Bonds were issued, as a result of future acts or omissions of the City in violation of its covenants in the Fiscal Agent Agreement. There is no provision in the 2015 Bonds or the Fiscal Agent Agreement for special redemption or acceleration or for the payment of additional interest should such an event of taxability occur, and the 2015 Bonds will remain outstanding until maturity or until redeemed under one of the redemption provisions contained in the Fiscal Agent Agreement. In addition, as discussed under the caption "TAX MATTERS," Congress is or may be considering in the future legislative proposals, including some that carry retroactive effective dates, that, if enacted, would alter or eliminate the exclusion from gross income for federal income tax purposes of interest on municipal bonds, such as the 2015 Bonds. Prospective purchasers of the 2015 Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. The City can provide no assurance that federal tax law will not change while the 2015 Bonds are outstanding or that any such changes will not adversely affect -40- the exclusion of interest on the 2015 Bonds from gross income for federal income tax purposes. If the exclusion of interest on the 2015 Bonds from gross income for federal income tax purposes were amended or eliminated, it is likely that the market price for the 2015 Bonds would be adversely impacted. Enforceability of Remedies The remedies available to the Fiscal Agent and the registered owners of the 2015 Bonds upon a default under the Fiscal Agent Agreement or any other document described in this Official Statement are in many respects dependent upon regulatory and judicial actions that are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. Any legal opinions to be delivered concurrently with the issuance of the 2015 Bonds will be qualified to the extent that the enforceability of the legal documents with respect to the 2015 Bonds is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. Judicial remedies, such as foreclosure and enforcement of covenants, are subject to exercise of judicial discretion. A California court may not strictly apply certain remedies or enforce certain covenants if it concludes that application or enforcement would be unreasonable under the circumstances and it may delay the application of such remedies and enforcement. No Secondary Market No representation is made concerning any secondary market for the 2015 Bonds. There can be no assurance that any secondary market will develop for the 2015 Bonds. Investors should understand the long-term and economic aspects of an investment in the 2015 Bonds and should assume that they will have to bear the economic risks of their investment to maturity. An investment in the 2015 Bonds may be unsuitable for any investor not able to hold the 2015 Bonds to maturity. Proposition 218 An initiative measure entitled the "Right to Vote on Taxes Act" (the "Initiative') was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property -related assessments, fees and charges." Provisions of the Initiative have been and will continue to be interpreted by the courts. The Initiative could potentially impact the Special Taxes otherwise available to the District to pay the principal of and interest on the 2015 Bonds as described below. Among other things, Section 3 of Article XIIIC states, "...the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Act provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, the Governor of the State signed a bill into law enacting Government Code Section 5854, which states that: -41- Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution. Accordingly, although the matter is not free from doubt, it is likely that Article XIIIC has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the 2015 Bonds. It may be possible, however, for voters or the City Council acting as the legislative body of the District to reduce the Special Taxes in a manner that does not interfere with the timely repayment of the 2015 Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the 2015 Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses (as defined in the Fiscal Agent Agreement). Nevertheless, the City has covenanted that it will not consent to, or conduct proceedings with respect to, a reduction in the maximum Special Taxes that may be levied in the District below an amount, for any fiscal year, equal to 110% of the aggregate of the debt service due on the 2015 Bonds in such fiscal year, plus a reasonable estimate of Administrative Expenses for such fiscal year. However, no assurance can be given as to the enforceability of the foregoing covenant. The interpretation and application of Article XIIIC and Article XIIID will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See "—Enforceability of Remedies." Ballot Initiatives Articles XIIIC and XIIID of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process, and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995 in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State, the City, or local districts to increase revenues or to increase appropriations. IRS Audit of Tax -Exempt Bond Issues The Internal Revenue Service has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the 2015 Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the 2015 Bonds might be affected as a result of such an audit of the 2015 Bonds (or by an audit of similar bonds). -42- Impact of Legislative Proposals, Clarifications of the Code and Court Decisions on Tax Exemption Future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the 2015 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Owners of the 2015 Bonds from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the 2015 Bonds. Examples of such proposals include a proposal in the fall of 2011 which would have reduced the tax value of all itemized deductions and targeted tax expenditures for high-income taxpayers in tax years commencing on or after January 1, 2013. The concept of "high-income taxpayers" in the proposal generally captured taxpayers with adjusted gross income of $250,000 or more for married couples filing jointly (or $200,000 for single taxpayers). Among the targeted tax expenditures was interest on any bond excludable from gross income under Section 103 of the Code, whether the bond is outstanding on the enactment date of the proposed legislation or is issued thereafter. Another example of such proposal from the fall of 2011 would have required the Office of Management and Budget to establish steadily declining annual ratios for debt as a percentage of gross domestic product, effective for taxable years beginning on or after January 1, 2013. Under the proposal, if the ratios were not met, automatic cuts in spending and tax preferences, such as tax-exempt interest, would be triggered. Prospective purchasers of the 2015 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation as to which Bond Counsel expresses no opinion. TAX MATTERS Federal tax law contains a number of requirements and restrictions which apply to the 2015 Bonds, including investment restrictions, periodic payments of arbitrage profits to the United States, requirements regarding the proper use of bond proceeds and the facilities financed therewith, and certain other matters. The City has covenanted in the Fiscal Agent Agreement to comply with all requirements that must be satisfied in order for the interest on the 2015 Bonds to be excludable from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the 2015 Bonds to become includable in gross income for federal income tax purposes retroactively to the date of issuance of the 2015 Bonds. Subject to the City's compliance with the above -referenced covenants, under present law, in the opinion of Quint & Thimmig LLP, Bond Counsel, interest on the 2015 Bonds (i) is excludable from the gross income of the owners thereof for federal income tax purposes, and (ii) is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations, but interest on the 2015 Bonds is taken into account, however, in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. In rendering its opinion, Bond Counsel will rely upon certifications of the City with respect to certain material facts within the City's knowledge. Bond Counsel's opinion represents its legal judgment based upon its review of the law and the facts that it deems relevant to render such opinion and is not a guarantee of a result. The Internal Revenue Code of 1986, as amended (the "Code"), includes provisions for an alternative minimum tax ("AMT") for corporations in addition to the corporate regular tax in -43- certain cases. The AMT, if any, depends upon the corporation's alternative minimum taxable income ("AMTI"), which is the corporation's taxable income with certain adjustments. One of the adjustment items used in computing the AMTI of a corporation (with certain exceptions) is an amount equal to 75% of the excess of such corporation's "adjusted current earnings" over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss deduction). "Adjusted current earnings" would include certain tax-exempt interest, including interest on the 2015 Bonds. Ownership of the 2015 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, corporations subject to the branch profits tax, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax exempt obligations. Prospective purchasers of the 2015 Bonds should consult their tax advisors as to applicability of any such collateral consequences. The issue price (the "Issue Price") for each maturity of the 2015 Bonds is the price at which a substantial amount of such maturity of the 2015 Bonds is first sold to the public. The Issue Price of a maturity of the 2015 Bonds may be different from the price set forth, or the price corresponding to the yield set forth, on the inside cover page of this Official Statement. If the Issue Price of a maturity of the 2015 Bonds is less than the principal amount payable at maturity, the difference between the Issue Price of each such maturity, if any, of the 2015 Bonds (the "OID 2015 Bonds") and the principal amount payable at maturity is original issue discount. For an investor who purchases an OID 2015 Bond in the initial public offering at the Issue Price for such maturity and who holds such OID 2015 Bond to its stated maturity, subject to the condition that the City comply with the covenants discussed above, (a) the full amount of original issue discount with respect to such OID 2015 Bond constitutes interest which is excludable from the gross income of the owner thereof for federal income tax purposes; (b) such owner will not realize taxable capital gain or market discount upon payment of such OID 2015 Bond at its stated maturity; (c) such original issue discount is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Code, but is taken into account in computing an adjustment used in determining the alternative minimum tax for certain corporations under the Code, as described above; and (d) the accretion of original issue discount in each year may result in an alternative minimum tax liability for corporations or certain other collateral federal income tax consequences in each year even though a corresponding cash payment may not be received until a later year. Owners of OID 2015 Bonds should consult their own tax advisors with respect to the state and local tax consequences of original issue discount on such OID 2015 Bonds. Owners of 2015 Bonds who dispose of 2015 Bonds prior to the stated maturity (whether by sale, redemption or otherwise), purchase 2015 Bonds in the initial public offering, but at a price different from the Issue Price or purchase 2015 Bonds subsequent to the initial public offering should consult their own tax advisors. If a 2015 Bond is purchased at any time for a price that is less than the 2015 Bond's stated redemption price at maturity or, in the case of an OID 2015 Bond, its Issue Price plus accreted original issue discount reduced by payments of interest included in the computation of original issue discount and previously paid (the "Revised Issue Price"), the purchaser will be treated as having purchased a 2015 Bond with market discount subject to the market discount rules of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated as taxable -44- ordinary income and is recognized when a 2015 Bond is disposed of (to the extent such accrued discount does not exceed gain realized) or, at the purchaser's election, as it accrues. Such treatment would apply to any purchaser who purchases an OID 2015 Bond for a price that is less than its Revised Issue Price even if the purchase price exceeds par. The applicability of the market discount rules may adversely affect the liquidity or secondary market price of such 2015 Bond. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the 2015 Bonds. An investor may purchase a 2015 Bond at a price in excess of its stated principal amount. Such excess is characterized for federal income tax purposes as "bond premium' and must be amortized by an investor on a constant yield basis over the remaining term of the 2015 Bond in a manner that takes into account potential call dates and call prices. An investor cannot deduct amortized bond premium relating to a tax-exempt bond. The amortized bond premium is treated as a reduction in the tax-exempt interest received. As bond premium is amortized, it reduces the investor's basis in the 2015 Bond. Investors who purchase a 2015 Bond at a premium should consult their own tax advisors regarding the amortization of bond premium and its effect on the 2015 Bond's basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the 2015 Bond. There are or may be pending in the Congress of the United States legislative proposals, including some that carry retroactive effective dates, that, if enacted, could alter or amend the federal tax matters referred to above or affect the market value of the 2015 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, it would apply to bonds issued prior to enactment. Prospective purchasers of the 2015 Bonds should consult their own tax advisors regarding any pending or proposed federal tax legislation. Bond Counsel expresses no opinion regarding any pending or proposed federal tax legislation. The Internal Revenue Service (the "Service") has an ongoing program of auditing tax- exempt obligations to determine whether, in the view of the Service, interest on such tax- exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the 2015 Bonds. If an audit is commenced, under current procedures the Service may treat the City as a taxpayer and the 2015 Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the 2015 Bonds until the audit is concluded, regardless of the ultimate outcome. Payments of interest on, and proceeds of the sale, redemption or maturity of, tax exempt obligations, including the 2015 Bonds, are in certain cases required to be reported to the Service. Additionally, backup withholding may apply to any such payments to any 2015 Bond owner who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number and Certification, or a substantially identical form, or to any 2015 Bond owner who is notified by the Service of a failure to report any interest or dividends required to be shown on federal income tax returns. The reporting and backup withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes. In the further opinion of Bond Counsel, interest on the 2015 Bonds is exempt from California personal income taxes. Ownership of the 2015 Bonds may result in other state and local tax consequences to certain taxpayers. Bond Counsel expresses no opinion regarding any such collateral consequences arising with respect to the 2015 Bonds. Prospective purchasers of the 2015 Bonds should consult their tax advisors regarding the applicability of any such state and local taxes. -45- The complete text of the final opinion that Bond Counsel expects to deliver upon issuance of the 2015 Bonds is set forth in Appendix D. LEGAL MATTERS Concurrent with the issuance of the 2015 Bonds, Quint & Thimmig LLP, Larkspur, California, Bond Counsel, will render its opinion substantially in the form set forth in Appendix D to this Official Statement. Quint & Thimmig LLP is also acting as Disclosure Counsel to the City with respect to the 2015 Bonds. Certain legal matters will be passed upon for the City by Woodruff, Spradlin & Smart, A Professional Corporation, Costa Mesa, California, acting as City Attorney. Certain legal matters related to the 2015 Bonds will be passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. Payment of the fees and expenses of Bond and Disclosure Counsel, and of Underwriter's Counsel, is contingent on the issuance of the 2015 Bonds. MUNICIPAL ADVISOR The City has retained Fieldman, Rolapp & Associates, Irvine, California, as Municipal Advisor in connection with the issuance of the 2015 Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement. The Municipal Advisor is an independent financial advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. Compensation paid to the Municipal Advisor is contingent upon the successful issuance of the 2015 Bonds. NO RATING The City has not made, and does not intend to make, any application to any rating agency for the assignment of a rating to the 2015 Bonds. LITIGATION The City is not aware of any pending or threatened litigation challenging the validity of the 2015 Bonds, the Special Taxes securing the 2015 Bonds, or any action taken by the City in connection with the formation of the District, the levying of the Special Taxes or the issuance of the 2015 Bonds. UNDERWRITING The 2015 Bonds are being purchased through negotiation by First Southwest Company, LLC (the "Underwriter"). The Bond Purchase Agreement for the 2015 Bonds provides that the Underwriter will purchase all of the 2015 Bonds, if any are purchased. The Underwriter agreed to purchase the Series 2015A Bonds at a price of $ (which is equal to the par amount of the Series 2015A Bonds, plus a net original issue premium of $ and less an underwriter's discount of $ ). The Underwriter agreed to purchase the Series 2015B Bonds at a price of $ (which is equal to the par amount of the Series 2015B Bonds, plus a net original issue premium of $ and less an underwriter's discount of -46- The initial public offering prices set forth on the inside cover page may be changed by the Underwriter. The Underwriter may offer and sell the 2015 Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside cover page hereof. VERIFICATION Grant Thornton LLP has verified from the information provided to them the mathematical accuracy as of the date of the closing of the 2015 Bonds of the computations contained in the provided schedules to determine that the anticipated receipts from the cash deposit and federal securities listed in the Underwriter's schedules to be held in the Refunding Fund, will be sufficient to pay, when due, the principal, interest and the redemption price of the 2007 Bonds as described under "PLAN OF FINANCING—Refunding of 2007 Bonds." Grant Thornton LLP expresses no opinion on the assumptions provided to them, nor as to the exemption from taxation of the interest on the 2015 Bonds. CONTINUING DISCLOSURE The City has covenanted in a Continuing Disclosure Agreement for the benefit of the Owners of the 2015 Bonds to provide certain annual financial information and operating data, and to provide notices of the occurrence of certain enumerated events. The City agreed in its certificate to file, or cause to be filed, with the MSRB such report and notices. See Appendix E— "Form of Continuing Disclosure Agreement" for the complete text of the City's Continuing Disclosure Agreement. The covenants of the City have been made in order to assist the Underwriter in complying with the Rule. During the past five years, the City, one of its community facilities districts (the "Other CFD"), and the former Tustin Community Redevelopment Agency (the "Agency") have on occasion failed to comply in certain material respects with previous continuing disclosure undertakings pursuant to Rule 15c2 -12(b)(5) promulgated under the Securities and Exchange Act of 1934, as amended, including, but not limited to, the failure to timely file certain notices of bond calls, and failure to timely file annual reports and audited financial statements for some of the City's and the Agency's debt obligations. However, the City has since brought current all past delayed filings and is currently in compliance with its, the Other CFD's and the former Agency's continuing disclosure undertakings. In addition, on December 16, 2014, the City Council of the City approved disclosure procedures for public debt issuances and related disclosure obligations applicable to the City and other entities created by the City Council, including the District. 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 City or the District and the purchasers or Owners of any of the 2015 Bonds. -47- The execution and delivery of this Official Statement has been duly authorized by the City Council. CITY OF TUSTIN, CALIFORNIA FOR AND ON BEHALF OF THE CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT NO. 07-1 (TUSTIN LEGACY/ RETAIL CENTER) al -48- City Manager APPENDIX A GENERAL INFORMATION ABOUT THE CITY OF TUSTIN The information in this section of the Official Statement is presented as general background data. The 2015 Bonds are payable solely from the Special Tax Revenues and amounts held in certain funds under the Fiscal Agent Agreement, as described in the Official Statement. Although reasonable efforts have been made to include up-to-date information in this Appendix A, some of the information is not current due to delays in reporting of information by various sources. It should not be assumed that the trends indicated by the following data would continue beyond the specific periods reflected herein. General The City of Tustin (the "City") is located in central Orange County (the "County"). The City is located next to the county seat, Santa Ana. According to the United States Census Bureau, the City has a total area of 11.1 square miles (28.7 km2). The City was chosen in 2009 by Forbes as one of the top 25 towns to live well in America. The County is the third -most populous county in California, the sixth -most populous in the United States, and it more populous than twenty-one U.S. states. Orange County is included in the Los Angeles -Long Beach -Anaheim, CA Metropolitan Statistical Area. Thirty-four incorporated cities are located in the county; the newest is Aliso Viejo, which was incorporated in 2001. Whereas most population centers in the United States tend to be identified by a major city, there is no defined urban center in Orange County. The County is mostly suburban except for some traditionally urban areas at the centers of the older cities of Anaheim, Fullerton, Huntington Beach, Orange, and Santa Ana. Organization The City was incorporated on September 21, 1927 as a general law city. The City operates under a Council/ Manager form of government. The five City Council members, are elected at large. The policies of the City Council are carried out by the appointed City Manager. Population The table below summarizes population of the City and the County for the past five years. CITY OF TUSTIN and ORANGE COUNTY Population Year City of Tustin Orange County 2011 75,771 3,028,846 2012 76,599 3,057,233 2013 78,129 3,087,715 2014 78,347 3,114,209 2015 79,601 3,147,655 Source: California Department of Finance, E-4 Population Estimate for Cities, Counties, and the State, 2011-2015, with 2010 Census Benchmark. A-1 Employment The following table summarizes the historical numbers of workers by industry in Orange County for the last five years: ORANGECOUNTY SANTA ANA ANAHEIM IRVINE MD Labor Force and Industry Employment Annual Averages by Industry Source: California Employment Development Department, based on March 2014 benchmark. Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households, and persons involved in labor/ management trade disputes. Employment reported by place of work. Items may not add to totals due to independent rounding. (1) Last available full year data. The following tables summarize historical employment and unemployment for Orange County, the State of California and the United States for the past five years: ORANGE COUNTY, CALIFORNIA, and UNITED STATES Civilian Labor Force, Employment, and Unemployment (Annual Averages) Unemployment Year 2010 2011 2012 2013 2014(1) Total, All Industries 1,370,400 1,385,600 1,422,400 1,462,400 1,498,700 Total Farm 3,700 3,200 2,800 2,900 2,800 Mining and Logging 600 600 600 600 700 Construction 68,000 69,200 71,300 76,800 82,000 Manufacturing 150,500 154,300 158,300 158,000 158,800 Wholesale Trade 77,800 77,300 77,200 79,400 81,700 Retail Trade 141,300 142,600 144,000 145,500 148,700 Transportation, Warehousing & Utilities 26,700 27,500 28,000 27,500 26,600 Information 24,800 23,800 24,300 25,000 24,200 Financial Activities 103,500 104,800 108,300 113,100 114,100 Professional & Business Services 244,900 247,700 260,600 267,300 275,800 Educational & Health Services 165,500 168,000 173,800 184,200 190,300 Leisure & Hospitality 168,600 174,000 180,600 187,800 193,500 Other Services 42,200 43,200 44,600 45,600 47,700 Government 152,300 149,300 147,900 148,700 151,900 Source: California Employment Development Department, based on March 2014 benchmark. Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households, and persons involved in labor/ management trade disputes. Employment reported by place of work. Items may not add to totals due to independent rounding. (1) Last available full year data. The following tables summarize historical employment and unemployment for Orange County, the State of California and the United States for the past five years: ORANGE COUNTY, CALIFORNIA, and UNITED STATES Civilian Labor Force, Employment, and Unemployment (Annual Averages) Unemployment Year Area Labor Force Employment Unemployment Rate« 2010 Orange County 1,592,500 1,441,500 151,000 9.5% California 18,316,400 16,051,500 2,264,900 12.4 United States 153,889,000 139,064,000 14,825,000 9.6 2011 Orange County 1,600,100 1,460,100 140,000 8.80 California 18,384,900 16,226,600 2,158,300 11.7 United States 153,617,000 139,869,000 13,747,000 8.9 2012 Orange County 1,613,600 1,491,600 122,000 7.6% California 18,494,900 16,560,300 1,934,500 10.5 United States 154,975,000 142,469,000 12,506,000 8.1 2013 Orange County 1,610,900 1,510,600 100,400 6.2% California 18,596,800 16,933,300 1,663,500 8.9 United States 155,389,000 143,929,000 11,460,000 7.4 2014 Orange County 1,573,800 1,487,400 86,400 5.5% California 18,811,400 17,397,100 1,414,300 7.5 United States 155,922,000 146,305,000 9,617,000 6.2 Sources: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Averages 2010-2014 and US Bureau of Labor Statistics. Data not seasonally adjusted. (1) Last available full year data. A-2 Major Employers The table below sets forth the principal employers of the City and the County. CITY of TUSTIN 2014 Principal Employers Source: City of Tustin 2014 Comprehensive Annual Financial Report. ORANGECOUNTY 2014 Principal Employers % of Total Employer Employees Employment Tustin Unified School District 1,313 3.070 Rockwell Collins Inc 600 1.40 Ricoh Electronics Inc 500 1.17 Costco 450 1.05 City of Tustin 360 .84 Newport Speciality Hospital 300 .70 Tustin Hospital Medical Center 300 .70 Toshiba America Medical Systems 300 .70 Micro Vention Inc. 300 .70 Balboa Water Group 253 .59 Totals 4,676 10.92 Source: City of Tustin 2014 Comprehensive Annual Financial Report. ORANGECOUNTY 2014 Principal Employers Source: Orange County 2014 Comprehensive Annual Financial Report. A-3 % of Total Employer Employees Employment Walt Disney Co. 25,000 1.567% UC Irvine 22,253 1.39 Orange County 18,035 1.12 St. Joseph Health System 12,062 .75 Boeing Co. 6,890 .43 Kaiser Permanente 6,040 .38 Bank of America 6,000 .37 Walmart 6,000 .37 Memorial Care Health System 5,635 .35 Target Corporation 5,400 .34 Totals 113,315 7.06 Source: Orange County 2014 Comprehensive Annual Financial Report. A-3 Construction Activity The following tables reflects the five-year history of building permit valuation for the City and the County: CITY of TUSTIN Building Permits and Valuation (Dollars in Thousands) 2010 2011 2012 2013 2014«) Permit Valuation: 2010 2011 New Single-family 2013 2014(1) New Multi -family Res. Alterations/ Additions Total Residential 492,529 518,681 Total Nonresidential 1,237,994 1,234,498 Total All Building 208,046 378,559 New Dwelling Units: 994,873 985,454 Single Family 16 94 Multiple Family - 237 Total 16 331 2,835 20,613 19,200 - 919 25,667 6,570 105,137 - 2,326 5,041 1,785 2,171 1,780 5,162 51,321 27,555 107,309 2,700 15,395 14,606 25,301 141,259 21,188 20,558 65,927 52,857 248,569 23,889 Source: Construction Industry Research Board: 'Building Permit Summary." Note: Totals may not add due to independent rounding. (1) Last available full year data. 70 - 3 27 758 - 97 758 3 ORANGECOUNTY Building Permits and Valuation (Dollars in Thousands) A-4 2010 2011 2012 2013 2014(1) Permit Valuation: New Single-family 492,529 518,681 752,931 1,237,994 1,234,498 New Multi -family 208,046 378,559 438,118 994,873 985,454 Res. Alterations/ Additions 328,830 450,105 363,854 363,674 413,518 Total Residential 1,029,406 1,347,345 1,544,904 2,596,542 2,633,471 Total Nonresidential 1,515,928 1,188,198 1,271,034 4,208,209 2,000,167 Total All Building 2,181,334 2,535,543 2,825,938 6,804,752 4,633,639 New Dwelling Units: Single Family 1,553 1,908 2,438 3,889 3,646 Multiple Family 1,538 2,897 3,725 6,564 6,990 Total 3,091 4,805 6,163 10,453 10,636 Source: Construction Industry Research Board: 'Building Permit Summary." Note: Totals may not add due to independent rounding. (1) Last available full year data. A-4 Commercial Activity Taxable sales in the City and County are shown below. Beginning in 2009, reports summarize taxable sales and permits using the NAICS codes. As a result of the coding change, however, industry - level data for 2009 are not comparable to that of prior years. Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax) Note: Totals may not add due to independent rounding. (1) Last available full year data. A-5 CITY OF TUSTIN Taxable Sales, 2009-2013 (Dollars in thousands) 2009 2010 2011 2012 2013(1) Retail and Food Services Motor Vehicles and Parts Dealers 313,105 335,458 374,766 474,101 509,977 Furniture and Home Furnishings Stores 119,143 130,725 129,782 115,242 115,965 Bldg Mtrl. and Garden Equip. and Supplies 66,179 68,929 70,497 70,845 75,361 Food and Beverage Stores 71,396 74,366 79,920 87,379 86,907 Gasoline Stations 91,745 104,183 133,217 142,931 139,527 Clothing and Clothing Accessories Stores 95,627 96,688 100,836 107,726 114,935 General Merchandise Stores 234,341 261,861 279,384 # # Food Services and Drinking Places 165,565 161,402 173,260 179,279 187,321 Other Retail Group 142,719 145,245 165,632 455,543# 447,231# Total Retail and Food Services 1,299,819 1,378,857 1,507,294 1,633,046 1,677,223 All Other Outlets 246,317 249,124 249,483 268,015 257,554 Totals All Outlets 1,546,136 1,627,981 1,756,777 1,901,061 1,934,777 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax). Note: Totals may not add due to independent rounding. (1) Last available full year data. (#) Sales omitted because their publication would result in the disclosure of confidential information. ORANGE COUNTY Taxable Sales, 2009-2013 (Dollars in thousands) 2009 2010 2011 2012 2013(1) Retail and Food Services Motor Vehicles and Parts Dealers 4,902,480 5,244,266 5,777,582 6,551,466 7,147,516 Furniture and Home Furnishings Stores 850,889 869,868 909,455 964,018 1,050,308 Electronics and Appliance Stores 1,978,869 2,058,383 2,319,992 2,536,415 2,488,963 Bldg Mtrl. and Garden Equip. and Supplies 2,039,686 2,112,467 2,267,363 2,351,574 2,581,968 Food and Beverage Stores 1,894,642 1,911,192 1,990,893 2,056,803 2,111,209 Health and Personal Care Stores 784,067 824,719 894,003 948,220 983,067 Gasoline Stations 3,383,678 3,801,651 4,826,228 5,063,762 4,706,666 Clothing and Clothing Accessories Stores 2,742,626 2,923,680 3,164,857 3,510,757 3,764,088 Sporting Goods, Hobby, Book and Music Stores 1,074,579 1,075,996 1,101,159 1,133,702 1,176,097 General Merchandise Stores 4,376,154 4,527,201 4,771,143 5,026,911 5,169,057 Miscellaneous Store Retailers 1,625,880 1,611,739 1,656,162 1,738,855 1,766,848 Nonstore Retailers 484,692 481,563 459,841 635,707 893,254 Food Services and Drinking Places 5,024,379 5,109,383 5,449,177 5,853,267 6,186,883 Total Retail and Food Services 31,162,619 32,552,107 35,587,795 38,372,456 40,025,929 All Other Outlets 14,550,164 15,115,073 16,143,344 16,858,156 17,565,288 Totals All Outlets 45,712,784 47,667,179 51,731,139 55,230,612 57,591,217 Source: California Board of Equalization, Taxable Sales in California (Sales & Use Tax) Note: Totals may not add due to independent rounding. (1) Last available full year data. A-5 Median Household Income The following table summarizes the median household effective buying income for the City, the County, the State of California and the nation for the past five years. CITY OF TUSTIN, ORANGE COUNTY, STATE and UNITED STATES Effective Buying Income Total Effective Buying Income Median Household Year Area (000's Omitted) Effective Buying Income 2010 City of Tustin 1,810,838 54,397 Orange County 75,063,558 57,849 California 801,393,028 47,177 United States 6,365,020,076 41,368 2011 City of Tustin 1,786,448 52,614 Orange County 76,315,505 57,607 California 814,578,457 47,062 United States 6,438,704,663 41,253 2012 City of Tustin 2,026,168 56,223 Orange County 81,079,398 57,181 California 864,088,827 47,307 United States 6,737,867,730 41,358 2013 City of Tustin 2,012,100 57,740 Orange County 81,151,078 59,589 California 858,676,636 48,340 United States 6,982,757,379 43,715 2014 City of Tustin 2,074,525 59,744 Orange County 83,607,615 60,931 California 901,189,699 50,072 United States 7,357,153,421 45,448 Source: The Nielsen Company (US), Inc. Education The City is served by the Tustin Unified School District, which operates 18 elementary schools, 5 middle schools, 4 high schools and alternative and adult education programs, totaling over 22,000 students. In addition, there are 10 private and parochial schools serving the community. Eight community colleges are located from 5 to 20 miles from the City. The Rancho Santiago Community College District (RSCCD) and South Orange County Community College District (SOCCCD) operate two facilities with the City; The RSCCCD operates the Regional Law Enforcement Training Facility and the SOCCCD operates and Advanced Technology Education Campus. Chapman University, CSU -Fullerton, Concordia College, UC -Irvine among several institutions also offer college and graduate level courses of study within easy reach of the City. Health Care The closest hospital services provided to Tustin are located on the City's northwesterly boundary within the City of Santa Ana at Western Medical Center. Western Medical Center is a 283 -licensed bed acute care hospital designated as a Level II trauma center and centrally located in the heart of Orange County. The trauma center services are composed of physicians in the specialties of General Surgery, Emergency Medicine, Anesthesiology, Orthopedic Surgery and Neurosurgery. The Trauma Services department at Western Medical provides immediate care and on-going follow-up for designated trauma patients in a collaborative setting. Multidisciplinary practice planning, coordinating and facilitating total care of all trauma admissions is under the direction of the Trauma Medical Director and the Associate Medical Director. The program operates 24 hours, 7 days a week and cares for a total spectrum of patients and of all ages. Emergency care is also provided for other conditions, including chronic medical problems and minor injuries and illnesses. The hospital provides emergency services for more than 20,000 patients per year. Other Community Facilities In November 2009, the City completed construction of an expanded new 32,000 square foot Tustin Library. Orange County Public Libraries leases the new Tustin Library from the City and operates the building through the County's library system services. The system contains over 124,195 volumes, and a collection of recordings, tapes and films. Transportation The Santa Ana Freeway (Interstate 5), a major northwest -southeast corridor, crosses through the central section of the City, the Costa Mesa Freeway (State Route 55) crosses north -south along the western edge of the City and the West Leg of the Eastern Transportation Corridor (State Route 261) is located to the east of the City's boundaries, with a transitional area of the West Leg of the Eastern Transportation Corridor traversing the southerly portion of the City adjacent to Jamboree Road. The City is also within minutes of the San Diego Freeway (Interstate 405, traveling north to the Los Angeles International Airport), the Riverside Freeway (State Route 91, traveling east -west) to the north and the Orange Freeway (State Route 57, traveling north -south) to the west and the San Joaquin Toll Road. Air cargo and passenger flight services are provided at several nearby facilities, including John Wayne Airport in Orange County (2 miles south) and the Ontario International Airport (50 miles northeast). The Orange County Transportation Authority (OCTA) also serves the area. Greyhound Bus Lines provides service to other local areas and additional transcontinental service. Commercial and passenger rail services are provided by Union Pacific and an Amtrak passenger station is located approximately two miles from the City. Trucking services are provided through numerous common and contract carriers. The Port of Long Beach is approximately 45 miles to the northwest and the Port of Los Angeles is approximately 50 miles northwest of the City. Both ports are within easy freeway access. Recreation The City operates the Clifton C. Miller Community Center, the Tustin Area Senior Center, the Columbus -Tustin Sports Fields and Gymnasium, and the Tustin Family Youth Center. In addition, there are more than a dozen parks and recreational facilities located throughout the City. City residents are offered the use of the City's facilities depending on their intended purpose for both active recreational facilities and passive open space uses such as ball fields, multi-purpose fields and open turf, game courts, tot lots, and picnic facilities, natural open pace, pedestrian and bicycle paths, community buildings and on-site parking. The County also currently operates the Peters Canyon Regional Park within the northwesterly portion of the City, an 84 acre urban regional park is proposed in the MCAS Tustin Project Area, and the County maintains a coordinated system of trails including bikeways, equestrian trails and hiking trails within the City. Tustin also has many private recreational facilities. While some facilities (e.g., private parks, tennis courts, swimming pools) are available only to residents of a general area or development, others are available to the public for a fee (the Tustin Ranch Golf Course), In addition, the City is centrally located for a wide variety of entertainment and recreational activities, including, among many others, Disneyland and Knott's Berry Farm. The ocean to the south along the Southern California coastline offer a variety of water sports and the mountains to the north and east provide other kinds of outdoor recreational activities, including hiking, lake recreation, and winter skiing. A-7 APPENDIX B RATE AND METHOD RATE AND METHOD OF APPORTIONMENT FOR CITY OF TUSTIN COMMUNITY FACILITIES DISTRICT No. 07-01 (TUSTIN LEGACY/ RETAIL CENTER) A Special Tax shall be levied and collected on all Assessor's Parcels located within the boundaries of City of Tustin Community Facilities District No. 07-01 (Tustin Legacy / Retail Center) ("CFD No. 07-01"). The amount of Special Tax to be levied in each Fiscal Year on an Assessor's Parcel in CFD No. 07-01, commencing in Fiscal Year 2007-2008, shall be determined through the application of this Rate and Method of Apportionment as described below. All of the real property in CFD No. 07-01, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS In addition to the capitalized terms set forth in the preceding paragraph, capitalized terms used in this Section A shall have the following meanings: "Acre" or "Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County parcel map. The square footage of an Assessor's Parcel is equal to the Acreage of such parcel multiplied by 43,560. "Act" means the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2 of Title 5 of the Government Code of the State of California. "Administrative Expenses" means the actual or reasonably estimated costs directly related to the administration of CFD No. 07-01, including but not limited to the following: (i) the costs of computing the Special Taxes and of preparing the annual Special Tax collection schedules (whether by the CFD Administrator or designee thereof, or both); (ii) the costs of collecting the Special Taxes (whether by the City, County, or otherwise); (iii) the costs of remitting the Special Taxes to the fiscal agent or Trustee for any Bonds; (iv) the costs of commencing and pursuing to completion any foreclosure action arising from delinquent Special Taxes; (v) the costs of the fiscal agent or Trustee (including its legal counsel) in the discharge of the duties required of it under any Indenture; (vi) the costs of the City, or its designee of complying with arbitrage rebate and disclosure requirements of applicable federal and State of California securities laws, the Act, and the California Government Code, including property owner or Bond owner inquiries regarding the Special Taxes; (vii) the costs associated with the release of funds from any escrow account; (viii) the costs of the City, or its designee related to any appeal of a Special Tax; and (ix) an allocable share of the salaries of the City staff and City overhead expense directly relating to the foregoing. Administrative Expenses shall also include amounts advanced by the City or the City for any administrative purposes of CFD No. 07-01. B-1 "Assessor's Parcel" or "AP" means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessor's parcel number. "Assessor's Parcel Map" means an official map of the County Assessor designating parcels by Assessor's Parcel number. "Authorized Facilities" means those authorized facilities proposed to be financed by CFD No. 07-01 pursuant to the Act and listed in Exhibit A to this Rate and Method of Apportionment. "Authorized Services" means those authorized services proposed to be financed by CFD No. 07-01 pursuant to the Act and listed in Exhibit A to this Rate and Method of Apportionment. "Bonds" means any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by CFD No. 07-01 under the Act. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities and the Special Tax Requirement for Services and providing for the levy and collection of the Special Taxes. "CFD No. 07-01" means City of Tustin Community Facilities District No. 2007-01 (Tustin Legacy/ Retail Center). "City" means the City of Tustin, California. "Council" means the City Council of the City, acting as the legislative body of CFD No. 07-01. "County" means the County of Orange, California. "Developed Property" means for a Fiscal Year, all Taxable Property (i) which was within a Final Map that was recorded prior to January 1 of the previous Fiscal Year, and (ii) for which a building permit for new construction, other than the construction of a garage, parking lot, parking structure or street, was issued after January 1, 2005, but prior to January 1 of the previous Fiscal Year. "Exempt Property" means any Lot located within the boundaries of CFD No. 07- 01 which is exempt from the Special Tax pursuant to law or Section G below. "Final Map" means a final map, lot line adjustment, or parcel map, or portion thereof, approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) and recorded with the County Recorder that creates individual Lots for which building permits may be issued. The term "Final Map" shall not include any Assessor's Parcel Map or subdivision map or portion thereof that does not create individual Lots for which a building permit may be issued. "Fiscal Year" means the twelve month period starting on July 1 of any calendar year and ending the following June 30. "Floor Area" or "FA" for Residential or Non-residential Property means the total of the gross area of the floor surfaces within the exterior wall of the building, not B-2 including space devoted to stairwells, basement storage, required corridors, public restrooms, elevator shafts, light courts, vehicle parking and areas incident thereto, mechanical equipment incidental to the operation of such building, and covered public pedestrian circulation areas, including atriums, lobbies, plazas, patios, decks, arcades and similar areas, except such public circulation areas or portions thereof that are used solely for commercial purposes. The determination of Floor Area shall be made by reference to appropriate records kept by the Department of City Planning or Department of Building and Safety. Notwithstanding the above, for purposes of determining the square footages of Floor Area for the Original Parcels in order to determine the allocation of Special Tax A to Successor Parcels, the square footages listed in Table 3 shall apply. "Future Public Property" means Taxable Property at the time of formation of CFD No. 07-01 that becomes Public Property at some point thereafter. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time. "Land Use" means the classification of Taxable Property, as identified in Section B below. "Lot" means a lot created by a Final Map for which building permits may or have already been issued for either residential or non-residential structures. "Maximum Special Tax" means the Maximum Special Tax A and/ or Maximum Special Tax B, as applicable. "Maximum Special Tax A" means the Maximum Special Tax A, determined in accordance with Section C, that can be levied in any Fiscal Year on any Assessor's Parcel. "Maximum Special Tax B" means the Maximum Special Tax B, determined in accordance with Section C, that can be levied in any Fiscal Year on any Assessor's Parcel. "Non-residential Property" means all Lots of Developed Property for which a building permit permitting the construction of one or more non-residential buildings or facilities has been issued by the City. "Original Parcel" means a Lot which was valid for Fiscal Year 2007-2008, as listed in Table 1 and Table 3 of Section C below. "Privately Owned Specific Retail Property" means property consisting of the following Lots: B-3 "Proportionately" means that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Lots of Taxable Property. "Public Property" means (i) any Assessor's Parcel for which the owner of record, as determined from the County Assessor's secured tax roll for the Fiscal Year in which the Special Tax is being levied, is the federal government, the State of California, the County, the City, or any local government or other governmental agency, (ii) any property within a Final Map that is located within the boundaries of CFD No. 07-01 and was recorded as of the January 1 preceding the Fiscal Year in which the Special Tax is being levied and which, as determined from such Final Map, is or will be a public street, or (iii) any Assessor's Parcel which, as of the April 1 preceding the Fiscal Year for which the Special Tax is being levied, has been conveyed, irrevocably dedicated to, or irrevocably offered to the federal government, the State of California, the County, the City, or any local government or other governmental agency, provided such conveyance, dedication, or offer is submitted to the CFD Administrator prior to the May 1 preceding the Fiscal Year for which the Special Tax is being levied. "Remainder Lot" means Successor Parcels designated as a remainder lot by the CFD administrator for which a no building permit will be issued for a Taxable Property use (e.g., Public Property). "Residential Property" means all Lots of Developed Property for which a building permit permitting the construction thereon of one or more residential dwelling units has been issued by the City. "Special Tax" means the Special Tax A and/or Special Tax B, as applicable. "Special Tax A" means the special taxes to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement for Facilities. "Special Tax B" means the special taxes to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement for Services. "Special Tax Requirement for Facilities" means (a) that amount with respect to CFD No. 07-01 required in any Fiscal Year to pay (i) for annual debt service on all outstanding Bonds due in the calendar year which commences in such Fiscal Year; (ii) periodic costs on the Bonds, including, but not limited to, the costs of remarketing, credit enhancement, and liquidity facility fees (including such fees for instruments that serve B-4 Instrument Number Lot Lot Line Adjustment (Recording Date) 2006000276405 Parcel 2 2006-01 (4/25/06) 2006000744979 Parcel 1 2006-07 (11/13/06) 2006000744979 Parcel 2 2006-07 (11/03/06) 2006000419431 Parcell 2006-02 (6/22/06) 2006000419912 Parcel 4 2006-03 (6/23/06) AP: 434-431-24 NA NA AP: 434-441-12 NA NA "Proportionately" means that the ratio of the actual Special Tax levy to the Maximum Special Tax is equal for all Lots of Taxable Property. "Public Property" means (i) any Assessor's Parcel for which the owner of record, as determined from the County Assessor's secured tax roll for the Fiscal Year in which the Special Tax is being levied, is the federal government, the State of California, the County, the City, or any local government or other governmental agency, (ii) any property within a Final Map that is located within the boundaries of CFD No. 07-01 and was recorded as of the January 1 preceding the Fiscal Year in which the Special Tax is being levied and which, as determined from such Final Map, is or will be a public street, or (iii) any Assessor's Parcel which, as of the April 1 preceding the Fiscal Year for which the Special Tax is being levied, has been conveyed, irrevocably dedicated to, or irrevocably offered to the federal government, the State of California, the County, the City, or any local government or other governmental agency, provided such conveyance, dedication, or offer is submitted to the CFD Administrator prior to the May 1 preceding the Fiscal Year for which the Special Tax is being levied. "Remainder Lot" means Successor Parcels designated as a remainder lot by the CFD administrator for which a no building permit will be issued for a Taxable Property use (e.g., Public Property). "Residential Property" means all Lots of Developed Property for which a building permit permitting the construction thereon of one or more residential dwelling units has been issued by the City. "Special Tax" means the Special Tax A and/or Special Tax B, as applicable. "Special Tax A" means the special taxes to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement for Facilities. "Special Tax B" means the special taxes to be levied in each Fiscal Year on each Assessor's Parcel of Taxable Property to fund the Special Tax Requirement for Services. "Special Tax Requirement for Facilities" means (a) that amount with respect to CFD No. 07-01 required in any Fiscal Year to pay (i) for annual debt service on all outstanding Bonds due in the calendar year which commences in such Fiscal Year; (ii) periodic costs on the Bonds, including, but not limited to, the costs of remarketing, credit enhancement, and liquidity facility fees (including such fees for instruments that serve B-4 as the basis of a reserve fund in lieu of cash related to any such Bonds) and rebate payments; (iii) the Administrative Expenses; (iv) any reasonably anticipated delinquent Special Taxes based on the delinquency rate for Special Taxes levied in the previous Fiscal Year or otherwise reasonably expected; (v) any amounts required to establish or replenish any reserve funds established for the Bonds, and less (b) available funds as directed under the Indenture. "Special Tax Requirement for Services" means the amount required in any Fiscal Year for CFD No. 07-01 to (i) pay directly for Authorized Services due in the calendar year commencing in such Fiscal Year, (ii) pay a proportionate share of Administrative Expenses; less (iii) a credit for funds available to reduce the annual Special Tax B levy, as determined by the CFD administrator. "State" means the State of California. "Successor Parcel" means a Lot created by a Final Map, lot line adjustment, or similar instrument that is not an Original Parcel. "Taxable Property" means all Lots which are not exempt from the Special Tax pursuant to law or Section G below. "Trustee" means the trustee or fiscal agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property or Public Property. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, commencing with Fiscal Year 2007-2008, all Taxable Property shall be classified as either Developed Property, Undeveloped Property, or Public Property and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment determined pursuant to Sections C, D, and E below. C. MAXIMUM SPECIAL TAX 1. Special Tax A Only the Lots identified in Table 1 below are subject to Special Tax A. a. Developed Property The Maximum Special Tax A for each Lot of Developed Property shall be the applicable Maximum Special Tax A identified in Table 1 below. Table 1 Fiscal Year 2007-2008 Maximum Special Tax A Community Facilities District No. 07-01 Lot Recording Date (Instrument Number) Maximum Special Tax A 2006-07 APN 434-441-18 NA $74,098 Parcel 1 of LLA No. 2006-01 06/22/2006 (No. 2006000419431) $19,458 2006-07 APN 434-441-16 NA $409,774 Parcel 1 of LLA No. 2006-05 11/03/2006 (No. 2006000744977) $16,500 Parcel 1 of LLA No. 2006-04 06/23/2006 (No. 2006000421177) $13,200 Parcel 2 of LLA No. 2006-03 06/23/2006 (No. 2006000419912) $12,926 Parcel 3 of LLA No. 2006-03 06/23/2006 (No. 2006000419912) $10,725 Parcel 1 of LLA No. 2006-02 06/22/2006 (No. 2006000419431) $19,846 Parcel 2 of LLA No. 2006-04 06/23/2006 (No. 2006000421177) $317,338 The Fiscal Year 2007-2008 Maximum Special Tax A, identified in Table 1 above, shall increase, commencing on July 1, 2008 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. b. Undeveloped Property The Fiscal Year 2007-2008 Maximum Special Tax A for each Assessor's Parcel of Undeveloped Property shall be $26,051 per Acre, and shall increase, commencing on July 1, 2008 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Maximum Special Tax A for the previous Fiscal Year. 2. Special Tax B All Assessor's Parcels of Developed Property within CFD No. 07-01 will be subject to Special Tax B, unless exempted pursuant to Section G below. a. Maximum Special Tax B The Fiscal Year 2007-2008 Maximum Special Tax B shall be $0.06 per square foot of Floor Area. b. Increase in the Maximum Special Tax B The Fiscal Year 2008-2009 Maximum Special Tax B for Developed Property shall be $0.12 per square foot of Floor Area. The Fiscal Year 2009-2010 Maximum Special Tax B for Developed Property shall be $0.18 per square foot of Floor Area. The Fiscal Year 2010-2011 Maximum Special Tax B for Developed Property shall be $0.25 per square foot of Floor Area. On each July 1, commencing July 1, 2011, after the Maximum Special Tax B has been increased to $0.25 per square foot of Floor Area, the Maximum Special Tax B shall be increased by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. :: Table 2 Maximum Special Tax B 2007-08 through 2011-12 Fiscal Year Maximum Special Tax B 2007-08 $0.06 2008-09 $0.12 2009-10 $0.18 2010-11 $0.25 2011-12 Escalates by 2% annually D. ALLOCATION OF MAXIMUM SPECIAL TAX A 1. Original Parcels Square footage of Floor Area for the Original Parcels is shown in Table 3 below. Table 3 FA of Original Parcels Community Facilities District No. 07-01 Original Parcels Square Footage of Floor Area* 2006-07 APN 434-441-18 44,908 Parcel 1 of LLA No. 2006-01 11,793 2006-07 APN 434-441-16 248,348 Parcel 1 of LLA No. 2006-05 10,000 Parcel 1 of LLA No. 2006-04 8,000 Parcel 2 of LLA No. 2006-03 7,834 Parcel 3 of LLA No. 2006-03 6,500 Parcel 1 of LLA No. 2006-02 12,028 Parcel 2 of LLA No. 2006-04 192,326 *Square footage amounts contained herein are for the purpose of setting Special Tax A rates and may not conform to the square foot amounts as shown on a building permit. The square foot amounts contained herein will govern for purposes of implementing this Rate and Method of Apportionment. 2. Methodology for Allocating Maximum Special Tax A to Successor Parcels If any Original Parcel reflected in Table 3 above is subsequently changed or modified by the recordation of a Final Map, lot line adjustment or similar instrument, the total Maximum Special Tax A for all of the newly created Successor Parcels affected B-7 by such Final Map, lot line adjustment or similar instrument, excluding any Lot classified as a Remainder Lot, shall be equal to the Maximum Special Tax A of the Original Parcel(s). Maximum Special Tax for Successor Parcels shall be computed as follows: a. Determine the square footage of Floor Area for each Lot and Remainder Lot located within the Final Map, lot line adjustment or similar instrument that created the Successor Parcels. b. Divide the square footage of Floor Area for each newly created Lot by the aggregate square footage of Floor Area of all Lots of Taxable Property calculated in paragraph "a," to determine the percentage of the aggregate square footage of Floor Area to be allocated to each such Lot. C. Multiply the percentages(s) computed in paragraph "b" by the Maximum Special Tax A of the Original Parcel to determine the Maximum Special Tax A for each Lot. The aggregate Special Tax for the Lots will be levied on the corresponding Assessor's Parcels. E. METHOD OF APPORTIONMENT OF THE SPECIAL TAX 1. Special Tax A Commencing with Fiscal Year 2007-2008 and for each following Fiscal Year, the Council shall determine the Special Tax Requirement for Facilities and shall levy the Special Tax A until the total Special Tax A levy equals the Special Tax Requirement for Facilities. The Special Tax A shall be levied each Fiscal Year as follows: First: The Special Tax A shall be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the applicable Maximum Special Tax A for Developed Property; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax A shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the applicable Maximum Special Tax A for Undeveloped Property. Notwithstanding the above, under no circumstances will the Special Tax A levied against any Assessor's Parcel of Residential Property for which a certificate of occupancy has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 07- 01. 2. Special Tax B Commencing with Fiscal Year 2007-2008 and for each following Fiscal Year, the Council shall levy the Special Tax B until the total Special Tax B levy equals the Special Tax Requirement for Services. The Special Tax B shall be levied each Fiscal Year as follows: The Special Tax B shall be levied Proportionately on each Assessor's Parcel of Developed Property within CFD No. 07-01 at up to 100% of the applicable Maximum Special Tax B for such parcel. F. FUTURE PUBLIC PROPERTY If any of the Original Parcels identified in Table 1 are acquired by a public entity through negotiated transaction, by gift, or devise, the present owner of that Parcel will be required to prepay and permanently satisfy the Special Tax A associated with such Parcel. G. EXEMPTIONS 1. Special Tax A No Special Tax A shall be levied on Privately Owned Specific Retail Property or Public Property. 2. Special Tax B No Special Tax B shall be levied on Public Property or Undeveloped Property. H. MANNER OF COLLECTION The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes and shall be subject to the same penalties, the same procedure, sale and lien priority in the case of delinquency; provided, however, that the Special Tax may be billed directly and/or may be collected at a different time or in a different manner if necessary or convenient to meet the financial obligations of CFD No. 07-01, or as otherwise determined by the CFD Administrator. The foreclosure remedies provided for in the Indenture shall apply upon the nonpayment of Special Tax A. I. REVIEWS AND APPEALS Any taxpayer may file a written appeal of the Special Tax levied on his/her property with the CFD Administrator, provided that the appellant is current in his/her payments of Special Taxes. During the pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The appeal must specify the reasons why the appellant claims the Special Tax is in error. The CFD Administrator shall review the appeal, meet with the appellant if the CFD Administrator deems necessary, and advise the appellant of its determination. If the CFD Administrator agrees with the appellant, the CFD Administrator shall grant a credit to eliminate or reduce future Special Taxes on the appellant's property. No refunds of previously paid Special Taxes shall be made. J. PREPAYMENT OF SPECIAL TAX A 1. Prepayment in Full The obligation of an Assessor's Parcel to pay the Special Tax A may be prepaid and permanently satisfied as described herein; provided that a prepayment may be made only for Assessor's Parcels of Developed Property, or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued, and only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax A obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount of such Assessor's Parcel. The CFD Administrator may charge a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given to the Trustee pursuant to the Indenture. The following additional definitions apply to this Section J: "Buildout" means, for CFD No. 07-01, that all expected building permits have been issued. "Previously Issued Bonds" means, for any Fiscal Year, all Outstanding Bonds that are deemed to be outstanding under the Indenture after the first interest and / or principal payment date following the current Fiscal Year. The Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): Bond Redemption Amount plus Redemption Premium plus Defeasance Amount plus Administrative Fees and Expenses less Reserve Fund Credit less Capitalized Interest Credit Total: equals Prepayment Amount As of the proposed date of prepayment, the Prepayment Amount (defined below) shall be calculated as follows: Paragraph No.: Confirm that no Special Tax delinquencies apply to such Assessor's Parcel. 2. For Assessor's Parcels of Developed Property, determine the Maximum Special Tax A. For Assessor's Parcels of Undeveloped Property for which a building permit has been issued, compute the Maximum Special Tax A for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Parcel. 3. Divide the Maximum Special Tax A computed pursuant to paragraph 2 by the total estimated Maximum Special Tax A for the entire CFD No. 07-01 based on the Developed Property Special Tax A which could be levied in the current Fiscal Year on all expected development through Buildout of CFD No. 07-01, excluding any Assessor's Parcels which have been prepaid. 4. Multiply the quotient computed pursuant to paragraph 3 by the amount of Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption Amount"). 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium (e.g., the redemption price -100%), if any, on the Previously Issued Bonds to be redeemed (the "Redemption Premium"). B-10 6. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date not covered by the current Fiscal Year Special Taxes until the earliest redemption date for the Previously Issued Bonds. 7. Determine the Special Tax A levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 8. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount less the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment. 9. Add the amounts computed pursuant to paragraphs 6 and 7 and subtract the amount computed pursuant to paragraph 8(the "Defeasance Amount"). 10. The administrative fees and expenses of CFD No. 07-01 are as calculated by the CFD Administrator and include the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses"). 11. The reserve fund credit (the "Reserve Fund Credit") shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Previously Issued Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Previously Issued Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the Previously Issued Bonds is below 100% of the reserve requirement (as defined in the Indenture). 12. If any capitalized interest for the Previously Issued Bonds will not have been expended as of the date immediately following the first interest and / or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the quotient computed pursuant to paragraph 3 by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and / or principal payment (the "Capitalized Interest Credit-). 13. The Special Tax A prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 9, and 10, less the amounts computed pursuant to paragraphs 11 and 12 (the "Prepayment Amount"). From the Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 9, 11 and 12 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Previously Issued Bonds or to make scheduled debt service payments or to pay administrative expenses related to the prepayment of the Special Tax. The amount computed pursuant to paragraph 10 shall be retained by CFD No. 07-01. B-11 The Special Tax A Prepayment Amount may be insufficient to redeem a full $5,000 increment of Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next prepayment of Bonds or to make debt service payments. Upon confirmation of the payment of the current Fiscal Year's Special Tax A levy as determined under paragraph 7 (above), the CFD Administrator shall remove the current Fiscal Year's Special Tax A levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Special Tax A and the release of the Special Tax A lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax A shall cease. Notwithstanding the foregoing, no Special Tax A prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Tax A that may be levied on Taxable Property within CFD No. 07-01 (after excluding Privately Owned Specific Retail Property and Public Property that are exempt from the Special Tax as set forth in Section G.1) both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Previously Issued Bonds, plus the Administrative Expenses. 2. Prepayment in Part The Special Tax A on an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section J.1; except that a partial prepayment shall be calculated according to the following formula: PP = [(P, — A) x F] + A These terms have the following meaning: PP = the partial prepayment PE = the Special Tax A Prepayment Amount calculated according to Section J.1 A = the Administrative Fees and Expenses calculated according to Section J.1 F = the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is partially prepaying the Special Tax A The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax A and the percentage by which the Special Tax A shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax A for an Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the Council shall (i) distribute the funds remitted to it according to Section J.1, and (ii) indicate in the records of CFD No. 07-01 that there has been a partial prepayment of the Special Tax A and that a portion of the Special Tax A with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax A, shall continue to be levied on such Assessor's Parcel pursuant to Section E.1. K. PREPAYMENT OF SPECIAL TAX B 01. No prepayment of Special Tax B is allowed for any Assessor's Parcel within CFD No. 07- B-12 L. TERM OF SPECIAL TAX The Special Tax A shall be levied for a period not to exceed forty-five years commencing with Fiscal Year 2007-2008. The Special Tax B shall be levied as long as necessary to meet the Special Tax Requirement for Services. B-13 EXHIBIT A TYPES OF FACILITIES AND SERVICES Facilities The types of facilities to be financed by the Community Facilities District are street improvements, including grading, paving, curbs and gutters, sidewalks, street signalization and signage, street lights and parkway and landscaping related thereto, storm drains, utilities, public parks and recreation facilities, public library facilities, fire protection facilities and equipment and land, rights-of-way and easements necessary for any of such facilities. Services The types of services to be financed by the Community Facilities District are police protection services, fire protection services, ambulance and paramedic services, recreation program services, maintenance of parks, parkways and open space and flood and storm protection services. B-14 APPENDIX C SUMMARY OF THE FISCAL AGENT AGREEMENT The following is a summary of certain provisions of the Fiscal Agent Agreement not otherwise described in the text of this Official Statement. This summary does not purport to be comprehensive or definitive and is subject to all of the complete terms and provisions of the Fiscal Agent Agreement, to which reference is hereby made. [to come] C-1 APPENDIX D FORM OF OPINION OF BOND COUNSEL December _, 2015 City Council City of Tustin, California 300 Centennial Way Tustin, California 92780 OPINION: $ City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Refunding Bonds, Series 2015A and $ City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/ Retail Center) Special Tax Bonds, Series 2015B Members of the City Council: We have acted as bond counsel to the City of Tustin, California (the "City") in connection with the issuance by the City, for and on behalf of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/ Retail Center) (the "District"), of its $ City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Refunding Bonds, Series 2015A and its $ City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) Special Tax Bonds, Series 2015B (collectively, the 'Bonds"), pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, constituting Sections 53311 et seq. of the California Government Code (the "Act"), a Fiscal Agent Agreement, dated as of December 1, 2015 (the "Fiscal Agent Agreement"), by and between the City, for and on behalf of the District, and MUFG Union Bank, N.A., as fiscal agent, and Resolution No. 15- adopted by the City Council of the City on November 3, 2015 (the "Resolution"). In connection with this opinion, we have examined the law and such certified proceedings and other documents as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the City contained in the Resolution and in the Fiscal Agent Agreement, and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The City is a municipal corporation and general law city organized and existing under the laws of the State of California, with the power to enter into the Fiscal Agent Agreement and perform the agreements on its part contained therein and issue the Bonds. 2. The Fiscal Agent Agreement has been duly entered into by the City and constitutes a valid and binding obligation of the City enforceable upon the City in accordance with its terms. 3. Pursuant to the Act, the Fiscal Agent Agreement creates a valid lien on the funds pledged by the Fiscal Agent Agreement for the security of the Bonds, on a parity with the pledge thereof with respect to any Parity Bonds that may be issued under, and as such term is defined in, the Fiscal Agent Agreement. D-1 4. The Bonds have been duly authorized, executed and delivered by the City and are valid and binding limited obligations of the City for the District, payable solely from the sources provided therefor in the Fiscal Agent Agreement. 5. Subject to the City's compliance with certain covenants, interest on the Bonds (i) is excludable from gross income of the owners thereof for federal income tax purposes, and (ii) is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Internal Revenue Code of 1986, as amended, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure by the City to comply with certain of such covenants could cause interest on the Bonds to be includable in gross income for federal income tax purposes retroactively to the date of issuance of the Bonds. 6. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds, the Resolution and the Fiscal Agent Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in accordance with general principles of equity. In rendering this opinion, we have relied upon certifications of the City and others with respect to certain material facts. Our opinion represents our legal judgment based upon such review of the law and facts that we deem relevant to render our opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Respectfully submitted, D-2 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT (the "Disclosure Agreement"), dated as of December 1, 2015, is by and between WILLDAN FINANCIAL SERVICES, as dissemination agent (the "Dissemination Agent"), and the CITY OF TUSTIN, CALIFORNIA, a municipal corporation and general law city duly organized and existing under the laws of the State of California (the "City"). RECITALS: WHEREAS, the City has issued, for and on behalf of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the "District"), its City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center), 2015 Special Tax Refunding Bonds (the 'Bonds") in the initial principal amount of $ ; and WHEREAS, the Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of December 1, 2015 (the "Fiscal Agent Agreement"), by and between MUFG Union Bank, N.A., as fiscal agent (the "Fiscal Agent") and the City, for and on behalf of the District; and WHEREAS, this Disclosure Agreement is being executed and delivered by the City and the Dissemination Agent for the benefit of the holders and beneficial owners of the Bonds and in order to assist the underwriter of the Bonds in complying with S.E.C. Rule 15c2 -12(b)(5). AGREEMENT: NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, and for other consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. In addition to the definitions of capitalized terms set forth in Section 1.03 of the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section or in the Recitals above, the following capitalized terms shall have the following meanings when used in this Disclosure Agreement: "Annual Report" means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including persons holding any Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for federal income tax purposes. "Disclosure Representative" means the Finance Director or her designee, or such other officer or employee as the City shall designate as the Disclosure Representative hereunder in writing to the Dissemination Agent from time to time. "Dissemination Agent" means Willdan Financial Services, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. E-1 "EMMA" or "Electronic Municipal Market Access' means the centralized on-line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments. "Listed Events" means any of the events listed in Section 5(a) or 5(b) of this Disclosure Agreement. "MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. "Official Statement" means the Official Statement, dated November 2015, relating to the Bonds. "Participating Underwriter" means the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Rule" means Rule 15c2 -12(b)(5) 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. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City and the Dissemination Agent for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. Section 3. Provision of Annual Reports. (a) Delivery of Annual Report. The City shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the City's fiscal year (which currently ends on June 30), commencing with the report for the 2014-15 Fiscal Year, which is due not later than March 31, 2016, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. (b) Change of Fiscal Year. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c), and subsequent Annual Report filings shall be made no later than six months after the end of such new fiscal year end. (c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) (or, if applicable, subsection (b) of this Section 3 for providing the Annual Report to EMMA), the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the City. E-2 (d) Report of Non -Compliance. If the City is the Dissemination Agent and is unable to file an Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the City shall send in a timely manner a notice to EMMA substantially in the form attached hereto as Exhibit A. If the City is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall send in a timely manner a notice to EMMA in substantially the form attached hereto as Exhibit A. (e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Agreement, stating the date it was so provided and filed. Section 4. Content of Annual Reports. It is acknowledged that the Closing Date for the Bonds occurred after the end of the 2014-2015 fiscal year of the City. In light of the foregoing, submission of the Official Statement shall satisfy the City's obligation to file an Annual Report for fiscal year 2014-2015. The Annual Report for each fiscal year commencing with the Annual Report for the 2015-2016 fiscal year, shall contain or incorporate by reference the following: (a) Financial Statements. Audited financial statements of the City for the most recently completed fiscal year, prepared in accordance generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board, together with the following statement: THE CITY'S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF'S INTERPRETATION OF RULE 15C2-12 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. NO FUNDS OR ASSETS OF THE CITY ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE CITY IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE BONDS. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Other Annual Information. To the extent not included in the audited final statements of the City, the Annual Report shall also include the following information: (i) The most recent annual information required to be provided to the California Debt and Investment Advisory Commission pursuant to Section 5.19 of the Fiscal Agent Agreement. (ii) The aggregate levy of the Special Taxes (as defined in the Fiscal Agent Agreement), for the most recent fiscal year. (iii) Any amendments or changes to the Rate and Method of Apportionment of the Special Taxes since the last Annual Report. E-3 (iv) The status of foreclosure proceedings in respect of delinquent Special Taxes, and a summary of the results of any foreclosure, since the last Annual Report. (v) A land ownership summary table of all of the owners of property subject to the levy of Special Taxes as of the date of the Annual Report, including the number of parcels in the District, the most recent Orange County Assessor's assessed value for all of the parcels in the District, the outstanding principal amount of the Bonds, and the most recent aggregate annual Special Tax A levied on property in the District. (c) Cross References. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on EMMA. The City shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from EMMA. (d) Further Information. In addition to any of the information expressly required to be provided under paragraph (b) of this Section 4, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Listed Events. (a) Reportable Events. The City shall, or shall cause the Dissemination (if not the City) to, give notice of the occurrence of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies. (2) Unscheduled draws on debt service reserves reflecting financial difficulties. (3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Defeasances. (6) Rating changes. (7) Tender offers. (8) Bankruptcy, insolvency, receivership or similar event of the obligated person. (9) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security. Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, E-4 fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Material Reportable Events. The City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Non-payment related defaults. (2) Modifications to rights of security holders. (3) Bond calls. (4) The release, substitution, or sale of property securing repayment of the securities. (5) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. (6) Appointment of a successor or additional trustee, or the change of name of a trustee. (c) Time to Disclose. The City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of any Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Fiscal Agent Agreement. Section 6. Identifing Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Agreement shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The City's obligations under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. (a) Appointment of Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure E-5 Agreement and may discharge any such agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Willdan Financial Services. If the Dissemination Agent is not the City, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Agreement. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the City. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Agreement and has no liability to any person, including any Bond owner, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the City shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the City. (b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the City for its services provided hereunder as agreed to between the Dissemination Agent and the City from time to time and all expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the City, owners of the Bonds or Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any direction from the City or an opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the City. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct. (c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the City to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to provide or receive any such request shall not affect the obligations of the City under Section 3. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the City that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that all of the following conditions are satisfied: (a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a) or (b), 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 Bonds, or the type of business conducted. (b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. E-6 (c) Consent of Holders; Non -impairment Opinion. The amendment or waiver either (i) is approved by the Bond owners in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Bond owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bond owners or Beneficial Owners. If this Disclosure Agreement is amended or any provision of this Disclosure Agreement is waived, the City shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City 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 in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Agreement, any Bond owner or Beneficial Owner, or the Fiscal Agent or the Participating Underwriter, may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Agreement. The sole remedy under this Disclosure Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action to compel performance. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 13. 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. E-7 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. CITY OF TUSTIN, CALIFORNIA Jeffrey C. Parker, City Manager WILLDAN FINANCIAL SERVICES, as Dissemination Agent is E-8 Authorized Officer EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: City of Tustin, California Name of Bond Issue: $ City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/ Retail Center), 2015 Special Tax Refunding Bonds Date of Issuance: December _, 2015 NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Bonds as required by Section 5.17 of the Fiscal Agent Agreement, dated as of December 1, 2015, between the Obligor and MUFG Union Bank, N.A., as Fiscal Agent. The Obligor anticipates that the Annual Report will be filed by Date: E-9 WILLDAN FINANCIAL SERVICES, as Dissemination Agent on behalf of the City of Tustin, California APPENDIX F DTC AND THE BOOK -ENTRY ONLY SYSTEM The information in this Appendix F has been provided by The Depository Trust Company ("DTC"), New York, NY, for use in securities offering documents, and the City does not take responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute the Beneficial Owners either (a) payments of interest, principal or premium, if any, with respect to the 2015 Bonds or (b) certificates representing ownership interest in or other confirmation of ownership interest in the 2015 Bonds, or that they will so do on a timely basis or that DTC, DTC Direct Participants or DTC Indirect Participants mill act in the manner described in this Official Statement. The following description of DTC, the procedures and record keeping with respect to beneficial ownership interests in the 2015 Bonds, payment of principal, interest and other payments on the 2015 Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the 2015 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. Neither the issuer of the 2015 Bonds (the "Issuer") nor the trustee, fiscal agent or paying agent appointed with respect to the 2015 Bonds (the "Agent") take any responsibility for the information contained in this Appendix. No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the 2015 Bonds, (b) certificates representing ownership interest in or other confirmation or ownership interest in the 2015 Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the 2015 Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current "Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. 1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the 2015 Bonds (the "Securities"). The Securities 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 Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue. 2. DTC, the world's largest securities depository, 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 issues of 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 F-1 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"). On August 8, 2011, Standard & Poor's downgraded its rating of DTC from AAA to AA+. 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 contained on this Internet site is not incorporated herein by reference. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("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 Securities 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 Securities, except in the event that use of the book -entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities 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 authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities 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. 5. 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 Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities 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 notices be provided directly to them. 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. THE FISCAL AGENT, AS LONG AS A BOOK -ENTRY -ONLY SYSTEM IS USED FOR THE 2015 Bonds, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES ONLY TO CEDE & CO., OR ITS SUCCESSOR AS DTC'S PARTNERSHIP NOMINEE. ANY FAILURE OF CEDE & CO., OR ITS SUCCESSOR AS DTC'S PARTNERSHIP NOMINEE TO ADVISE ANY PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 2015 Bonds CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). F-2 8. Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or Agent, on 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, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption 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 Issuer or Agent, 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. 9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10. The Issuer may decide to discontinue use of the system of book -entry -only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. 12. THE DISTRICT, THE CITY AND THE UNDERWRITER CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, THE PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS OF PRINCIPAL, INTEREST OR PREMIUM, IF ANY, WITH RESPECT TO THE 2015 Bonds PAID TO DTC OR ITS NOMINEE AS THE REGISTERED OWNER, OR WILL DISTRIBUTE ANY REDEMPTION NOTICES OR OTHER NOTICES, TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE DISTRICT, THE CITY AND THE UNDERWRITER ARE NOT RESPONSIBLE OR LIABLE FOR THE FAILURE OF DTC OR ANY PARTICIPANT TO MAKE ANY PAYMENT OR GIVE ANY NOTICE TO A BENEFICIAL OWNER WITH RESPECT TO THE 2015 Bonds OR AN ERROR OR DELAY RELATING THERETO. F-3 Attachment 6 Continuing Disclosure Agreement Quint & Thimmig LLP 8/17/15 CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT (the “Disclosure Agreement”), dated as of December 1, 2015, is by and between WILLDAN FINANCIAL SERVICES, as dissemination agent (the “Dissemination Agent”), and the CITY OF TUSTIN, CALIFORNIA, a municipal corporation and general law city duly organized and existing under the laws of the State of California (the “City”). RECITALS: WHEREAS, the City has issued, for and on behalf of the City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center) (the “District”), its City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center), 2015 Special Tax Refunding Bonds (the “Bonds”) in the initial principal amount of $__________; and WHEREAS, the Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of December 1, 2015 (the “Fiscal Agent Agreement”), by and between MUFG Union Bank, N.A., as fiscal agent (the “Fiscal Agent”) and the City, for and on behalf of the District; and WHEREAS, this Disclosure Agreement is being executed and delivered by the City and the Dissemination Agent for the benefit of the holders and beneficial owners of the Bonds and in order to assist the underwriter of the Bonds in complying with S.E.C. Rule 15c2-12(b)(5). AGREEMENT: NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, and for other consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. In addition to the definitions of capitalized terms set forth in Section 1.03 of the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section or in the Recitals above, the following capitalized terms shall have the following meanings when used in this Disclosure Agreement: “Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. “Beneficial Owner” shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond (including persons holding any Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bond for federal income tax purposes. 20015.07:J13416 “Disclosure Representative” means the Finance Director or her designee, or such other officer or employee as the City shall designate as the Disclosure Representative hereunder in writing to the Dissemination Agent from time to time. “Dissemination Agent” means Willdan Financial Services, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. “EMMA” or “Electronic Municipal Market Access” means the centralized on-line repository for documents to be filed with the MSRB, such as official statements and disclosure information relating to municipal bonds, notes and other securities as issued by state and local governments. “Listed Events” means any of the events listed in Section 5(a) or 5(b) of this Disclosure Agreement. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information which may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the Official Statement, dated November __, 2015, relating to the Bonds. “Participating Underwriter” means the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds. “Rule” means Rule 15c2-12(b)(5) 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. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the City and the Dissemination Agent for the benefit of the owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. Section 3. Provision of Annual Reports. (a) Delivery of Annual Report. The City shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the City’s fiscal year (which currently ends on June 30), commencing with the report for the 2014-15 Fiscal Year, which is due not later than March 31, 2016, file with EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the -2- City may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. (b) Change of Fiscal Year. If the City’s fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c), and subsequent Annual Report filings shall be made no later than six months after the end of such new fiscal year end. (c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) (or, if applicable, subsection (b) of this Section 3 for providing the Annual Report to EMMA), the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the City. (d) Report of Non-Compliance. If the City is the Dissemination Agent and is unable to file an Annual Report by the date required in subsection (a) (or, if applicable, subsection (b)) of this Section 3, the City shall send in a timely manner a notice to EMMA substantially in the form attached hereto as Exhibit A. If the City is not the Dissemination Agent and is unable to provide an Annual Report to the Dissemination Agent by the date required in subsection (c) of this Section 3, the Dissemination Agent shall send in a timely manner a notice to EMMA in substantially the form attached hereto as Exhibit A. (e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been filed with EMMA pursuant to Section 3 of this Disclosure Agreement, stating the date it was so provided and filed. Section 4. Content of Annual Reports. It is acknowledged that the Closing Date for the Bonds occurred after the end of the 2014-2015 fiscal year of the City. In light of the foregoing, submission of the Official Statement shall satisfy the City’s obligation to file an Annual Report for fiscal year 2014-2015. The Annual Report for each fiscal year commencing with the Annual Report for the 2015-2016 fiscal year, shall contain or incorporate by reference the following: (a) Financial Statements. Audited financial statements of the City for the most recently completed fiscal year, prepared in accordance generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board, together with the following statement: THE CITY’S ANNUAL FINANCIAL STATEMENT IS PROVIDED SOLELY TO COMPLY WITH THE SECURITIES EXCHANGE COMMISSION STAFF’S INTERPRETATION OF RULE 15C2-12 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. NO FUNDS OR ASSETS OF THE CITY ARE REQUIRED TO BE USED TO PAY DEBT SERVICE ON THE BONDS. INVESTORS SHOULD NOT RELY ON THE FINANCIAL CONDITION OF THE CITY IN EVALUATING WHETHER TO BUY, HOLD OR SELL THE BONDS. -3- If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Other Annual Information. To the extent not included in the audited final statements of the City, the Annual Report shall also include the following information: (i) The most recent annual information required to be provided to the California Debt and Investment Advisory Commission pursuant to Section 5.19 of the Fiscal Agent Agreement. (ii) The aggregate levy of the Special Taxes (as defined in the Fiscal Agent Agreement), for the most recent fiscal year. (iii) Any amendments or changes to the Rate and Method of Apportionment of the Special Taxes since the last Annual Report. (iv) The status of foreclosure proceedings in respect of delinquent Special Taxes, and a summary of the results of any foreclosure, since the last Annual Report. (v) A land ownership summary table of all of the owners of property subject to the levy of Special Taxes as of the date of the Annual Report, including the number of parcels in the District, the most recent Orange County Assessor’s assessed value for all of the parcels in the District, the outstanding principal amount of the Bonds, and the most recent aggregate annual Special Tax A levied on property in the District. (c) Cross References. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on EMMA. The City shall clearly identify each such other document so included by reference. If the document included by reference is a final official statement, it must be available from EMMA. (d) Further Information. In addition to any of the information expressly required to be provided under paragraph (b) of this Section 4, the City shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Listed Events. (a) Reportable Events. The City shall, or shall cause the Dissemination (if not the City) to, give notice of the occurrence of any of the following events with respect to the Bonds: (1) Principal and interest payment delinquencies. -4- (2) Unscheduled draws on debt service reserves reflecting financial difficulties. (3) Unscheduled draws on credit enhancements reflecting financial difficulties. (4) Substitution of credit or liquidity providers, or their failure to perform. (5) Defeasances. (6) Rating changes. (7) Tender offers. (8) Bankruptcy, insolvency, receivership or similar event of the obligated person. (9) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security. Note: For the purposes of the event identified in subparagraph (8), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Material Reportable Events. The City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (1) Non-payment related defaults. (2) Modifications to rights of security holders. (3) Bond calls. (4) The release, substitution, or sale of property securing repayment of the securities. -5- (5) The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. (6) Appointment of a successor or additional trustee, or the change of name of a trustee. (c) Time to Disclose. The City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with EMMA, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of any Listed Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) above need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to owners of affected Bonds under the Fiscal Agent Agreement. Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA under this Disclosure Agreement shall be accompanied by identifying information as prescribed by the MSRB. Section 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. (a) Appointment of Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement and may discharge any such agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Willdan Financial Services. If the Dissemination Agent is not the City, the Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Agreement. It is understood and agreed that any information that the Dissemination Agent may be instructed to file with EMMA shall be prepared and provided to it by the City. The Dissemination Agent has undertaken no responsibility with respect to the content of any reports, notices or disclosures provided to it under this Disclosure Agreement and has no liability to any person, including any Bond owner, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the City shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition, except as may be provided by written notice from the City . -6- (b) Compensation of Dissemination Agent. The Dissemination Agent shall be paid compensation by the City for its services provided hereunder as agreed to between the Dissemination Agent and the City from time to time and all expenses, legal fees and expenses and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the City, owners of the Bonds or Beneficial Owners, or any other party. The Dissemination Agent may rely, and shall be protected in acting or refraining from acting, upon any direction from the City or an opinion of nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of such resignation to the City. The Dissemination Agent shall not be liable hereunder except for its negligence or willful misconduct. (c) Responsibilities of Dissemination Agent. In addition of the filing obligations of the Dissemination Agent set forth in Sections 3(e) and 5, the Dissemination Agent shall be obligated, and hereby agrees, to provide a request to the City to compile the information required for its Annual Report at least 30 days prior to the date such information is to be provided to the Dissemination Agent pursuant to subsection (c) of Section 3. The failure to provide or receive any such request shall not affect the obligations of the City under Section 3. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the City may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the City that does not impose any greater duties or risk of liability on the Dissemination Agent), and any provision of this Disclosure Agreement may be waived, provided that all of the following conditions are satisfied: (a) Change in Circumstances. If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a) or (b), 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 Bonds, or the type of business conducted. (b) Compliance as of Issue Date. The undertaking, as amended or taking into account such waiver, would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances. (c) Consent of Holders; Non-impairment Opinion. The amendment or waiver either (i) is approved by the Bond owners in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Bond owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Bond owners or Beneficial Owners. If this Disclosure Agreement is amended or any provision of this Disclosure Agreement is waived, the City shall describe such amendment or waiver in the next following Annual Report and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the -7- presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(c), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the City 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 in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the City to comply with any provision of this Disclosure Agreement, any Bond owner or Beneficial Owner, or the Fiscal Agent or the Participating Underwriter, may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Agreement. The sole remedy under this Disclosure Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an action to compel performance. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 13. 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. -8- IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. CITY OF TUSTIN, CALIFORNIA By Jeffrey C. Parker, City Manager WILLDAN FINANCIAL SERVICES, as Dissemination Agent By Authorized Officer 20015.07:J13416 -9- EXHIBIT A NOTICE OF FAILURE TO FILE ANNUAL REPORT Name of Obligor: City of Tustin, California Name of Bond Issue: $_________ City of Tustin Community Facilities District No. 07-1 (Tustin Legacy/Retail Center), 2015 Special Tax Refunding Bonds Date of Issuance: December __, 2015 NOTICE IS HEREBY GIVEN that the Obligor has not provided an Annual Report with respect to the above-named Bonds as required by Section 5.17 of the Fiscal Agent Agreement, dated as of December 1, 2015, between the Obligor and MUFG Union Bank, N.A., as Fiscal Agent. The Obligor anticipates that the Annual Report will be filed by __________________. Date: WILLDAN FINANCIAL SERVICES, as Dissemination Agent on behalf of the City of Tustin, California A-1