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17a BACKUP TO 17 10-15-01
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions and assuming, among other matters, compliance-with certain covenants, interest on the Series E Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Series E Bonds is not a preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Series E Bonds. See "TAX MATTERS" herein. NEW ISSUE- BOOK-ENTRY ONLY $2,245,000* TUSTIN PUBLIC FINANCING AuTHORiTY REVENUE BONDS (Tustin Ranch) Series E Bank Qualified Bonds RATINGS: Moodys: S&P: (See "RATINGS" herein) Dated: Date of Delivery Due: September 2, as shown below The $2,245,000* Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series E (the "Series E Bonds") are being issued by the Tustin Public Financing Authority (the "Authority") pursuant to the Indenture of Trus,,t,. dated,~ of February 1, 1996, by and between the Authority and State Street Bank ahd Trust Company of California, N.A., as trustee (the Trustee ), as amended and supplemented by the First Supplemental Indenture of Trust, dated as of November 1, 1997, the Second Supplemental Indenture of Trust, dated as of November 1, 1998, the Third Supplemental Indenture of Trust, dated as of N,o,.vember 1;, 1999, and the Fourth Supplemental Indenture of Trust, dated as of 1, 2001 (as so amended and supplemented, the Indenture ), and will be secured as described herein. The Series E Bonds will'be 'bna parity with the Authority's previously ~ssued Revenue Bonds (Tustin Ranch) Series A {the "Series A Bonds"), Revenue Bonds (Tustin Ranch) Series B (the "Series B Bonds"), Revenue Bonds (Tustin Ranch) Series C (the "Series C Bonds"), Revenue Bonds (Tustin Ranch), Series D (the "Series D Bonds") and any additional bonds ("Additional BOnds'') issued by' the Authority pursuant to the Indenture. The Series A Bonds, the Series B Bonds, the Series C Bonds, the Series D Bonds, the Series E Bonds and any such Additional Bonds are collectively referred to as the "Bonds." The Series E Bonds are being issued to purchase the City of Tustin Limited Obligation Improvement Bonds Reassessment District No. 95-2 (Tustin Ranch), Fixed Rate Bonds, Group Four (the "Group Four Bonds"). The Group Four Bonds are being issued by the City of Tustin (the "City")pursuant to the Fiscal Agent Agreement, dated as of February 1, 1996, by and between the City and State Street Bank and Trust Company of California, N.A., as fiscal agent, as amended and supplemented by the First Supplemental Fiscal Agent Agreement, dated as of September 1, 1996, the Second Supplemental Fiscal Agent Agreement, dated as of November 1, 1997, the Third Supplemental Fiscal Agent Agreement, dated as of November 1, 1998, the Fourth Supplemental Fiscal Agent Agreement, dated as of November 1, 1999, and the Fifth Supplemental Fiscal Agent Agreement, dated as of 1, 2001 and will be secured by certain unpaid reassessments (the "Group F6ur Reassessments") levied by the City. ' The Series E Bonds will be issued in book-entry form, initially registered in the name of Cede & Co., New York, New York, as nominee of The Depository Trust Company ("DTC")," New York, New York. Interest on the Series E Bonds, payable at the rates set forth below, will be payable on September 2 and March 2 of each year, commencing March 2, 2002. purchasers will not receive certificates representing their~ interest in the Series E Bonds. Individual purchases will be in principal amounts of $5,000 or in any integral multiple of $5,000. Payments of principal and interest will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who will remit sUch payments to the ' beneficial owners of the Series E Bonds. · . The Series E Bonds will mature on September 2 in the years and in the amounts as shown on the Maturity Schedule set forth below. The Series E Bonds are subject to redemption prior to maturity as set forth herein. See "THE SERIES E BONDS - Redemption of the Series E Bonds" herein. The Bonds are payable solely from Revenues of the Authority, consisting primarily of debt service payments received from the City by the Trustee, as the owner of'certain assessment bonds (the "Assessment BOnds'') of the City, including the Group Four BondS. The Assessment Bonds are secured by Certain unpaid reassessments, including the Group Four Reassessments, as more fully described herein. Payments under the Assessment Bonds are calculated to be sufficient to permit the Authority to pay the principal of, premitim, if any, and interest on the Bonds when due..The City has determined that it will not obligate itself to adv.ance funds from its treasury to cover any delinquency on the Assessment Bonds. THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE PAYABLE SOLELY FROM THE REVENUES AND OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE. THE BONDS DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE CITY OR OF THE STATE OF CALIFORNIA, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE CITY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS. THE ASSESSMENT BONDS ARE LIMITED OBLIGATIONS OF THE CITY, PAYABLE SOLELY FROM THE REASSESSMENTS AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE FISCAL AGENT AGREEMENT PURSUANT TO WHICH SUCH ASSESSMENT BONDS ARE ISSUED. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE ASSESSMENT BONDS. The scheduled payment of principal of and interest on the Series E Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Series E Bonds by FINANCIAL SECURITY ASSURANCE INC. [Logo] This cover page contains information for reference only. It is not a summary of this issue. Investors-must read the entire Official Statement, including the section'entitled "SPECIAL RISK FACTORS", for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in making an informed investment decision about the Series E Bonds. preliminary, subject to change. D C)CSLA.1:397495.2 1-al qO40 MATURITY SCHEDULE Serial Series E Bonds Maturity Maturity (September 2) Principal Interest Yield (September 2) Principal Interest Yield $ __% Term Series E Bonds due September 2, 20 .... Yield: % The Series E Bonds are offered, when, as and if issued and accepted by the Underwriter, subject to approval as to their validity by Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed upon for the Authority and the City by Woodruff, Spradlin & Smart, a Professional Corporation, Orange, California. It is anticipated that the Series E Bonds will be available for delivery in bOok-entry form in New York, New York, on or about .... 2001. UBS PaineWebber Inc. Dated: ,2001 DOCSI~{1:397495.2 TUSTIN PUBLIC FINANCING AUTHORITY and CITY OF TUSTIN (Orange County, California) MEMBERS OF THE AUTHORITY BOARD OF DIRECTORS AND CITY COUNCIL Tracy Wills Worley, Mayor Jeffery M. Thomas, Mayor Pro Tem Mike Doyle, Board Member/Councilmember Tony Kawashima, Board Member/Councilmember Lou Bone, Board Member/Councilmember AUTHORITY OFFICERS AND CITY STAFF William A. Huston, Executive Director/City Manager George W. Jeffries, Authority Treasurer/City Treasurer Christine A. Shingleton, Assistant Executive Director/Assistant City Manager Pamela Stoker, Authority Secretary/City Clerk Ronald A. Nault, City Finance Director Tim Serlet, City Public Works Director PROFESSIONAL SERVICES Bond Counsel Orrick, Herrington & Sutcliffe LLP Los Angeles' California city Attorney Lois E. Jeffrey Woodruff, Spradlin & Smart A Professional Corporation Orange, California Reassessment Consultant MuniFinancial, Inc. Temecula, California Trustee State Street Bank and Trust Company of California, N.A. Los Angeles, California DOCSLAl:397495.2 1-415040 MVH No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations, other than as contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the Authority or the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy,-nor shall there be any sale of, the Series E BOnds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the Authority, the City, and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation of such by the Authority or the City. The information and expressions of opinion stated herein are subject to change without notice. The delivery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the affairs of the Authority, the City, the Fixed Rate Subject Area (as defined herein), or any property owner since the date hereof. The discussion and information herein relating to the Series E Bonds, the Fixed Rate Subject Area, the Authority, and the City do not purport to be comprehensive or definitive. All references to the Series E Bonds are qualified, in their entirety by reference to the Indenture setting forth the terms and descriptions thereof.' The summaries and references to any code, act, resolution, the Indenture or the Fiscal Agent Agreements (as defined herein), and to other statutes and documents in this Official Statement do not purport to be comprehensive or definitive, and are qualified in their entirety by reference to each statute and document. Other than with respect to information concerning Financial Security Assurance Inc. ("Financial Security") contained under the captions "BOND INSURANCE" and "APPENDIX D - Series E Bond Insurance Policy Specimen" herein, none of the information in this Official Statement has been supplied or verified by Financial Security and Financial Security makes no representation or. warranty, express or implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the Series E Bonds; or (iii) the tax exempt status of the interest on the Series E Bonds. IN CONNECTION WITH THIS BOND UNDERWRITING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES E BONDS DESCRIBED HEREIN AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. DOCSLAl:397495.2 1-415040 IvlVH INSERT LOCATION MAP -i- DOCSLAl:397495.2 1-41 r-,1'~4~'1 k4"Vl'4 TABLE OF cONTENTS i ~L ,, ,,,,,, , ,, PaRe INTRODUCTION ....................................................................................................................... .... 1 CONTINUING DISCLOSURE ..................................................................................................... 4 THE PLAN OF FINANCING ........................................................................................................ 5 ESTIMATED SOURCES AND USES ............................ - ............................................................ 6 Series E Bonds ................................................................................................................... 6 Group Four Bonds .............................................................................................................. 6 THE SERIES E BONDS ................................................................................................................ 7 Description of the Series E Bonds ..................................................................................... 7 Redemption of the Series E Bonds .................................................................................... 7 Transfers and Exchange .................................................... . ................................................ 9 Book-Entry System .......................................................................................................... 10 Debt Service Schedule ........................................ 13 SECURITY FOR THE BONDS ........................................... ' 13 General ............................................. ' .............................................................................. 13 Payments of Assessment Bonds ....................................... - 14 Debt Service Reserves .., ................................................. , ................................................ 17 Additional Authority Bonds .......................................... ' 19 Additional Assessment Bonds ...................... ' .................................................................. 21 Covenant. for Superior Court Foreclosure .................................................................... 22 Priority of Lien ................................................................................................................. 23 BOND INSURANCE .................................................................................................................. 24 Series E Bond Insurance Policy ..................................................................................... 24 Financial Security Assurance Inc ..................................................................................... 24 METHOD OF REASSESSMENT .............................. ' ............................................................... 25 THE FIXED RATE SUBJECT AREA ........................................................................................ 26 General ............................................................................................................................. 26 Status of Public Improvements Designated Parcels ......................................................... 27 Location and Terrain of' the Fixed Rate Subject Area ...................................................... 27 Land Uses and Development Status ................................................................................. 27 Largest Landowners by Reassessment Amount ............................................................... 29 Debt Service Coverage ........ - ............................................................................................ 31 Delinquency History ............. ' ........................................................................................ 32 Estimated Value-to-Lien Ratios ....................................................................................... 33 Direct and Overlapping Debt ........................................................................................... 34 Stares of Development ..................................................................................................... 37 SPECIAL RISK FACTORS .................................................................. .. ..................................... 38 The Bonds are Limited Obligations of the Authority ...................................................... 38 The Rcasscssmcnts are Not Personal Obligations of the Property Owners ..................... 38 The Assessment Bonds are Limited Obligations of the City ........................................... 39 Bankruptcy ......................................................................... - ............................................. 39 Payments by FDIC ........................................................................................................... 40 Existence of Undeveloped Propcr0d ............ · ................................................................. 41 Price Realized Upon Foreclosure ........... · ............. ' ........................................................ 4 ! Uncertainties of Future Development ................................................................ ' ............ 42 DOCSLAl:397495.2 -i- TABLE OF CONTENTS (continued) pa~e Direct and Overlapping Indebtedness .............................................................................. 43 Earthquakes ............................................................................. - ......................................... 43 Drought Conditions .......................................................................................................... 43 Land Values ..................................................................................................................... 44 Hazardous Substances ...................................................................................................... 44 Endangered and Threatened Species ............................................. - ................................. 45 Cumulative Burden of Parity Taxes, Special Assessments and Development Costs ...... 45 Loss of Tax Exemption .................................................................................................... 46 California Constitution Article XIiIC and Article XIIID ................................................. 46 THE AUTHORITY ...................................................................................................................... 47 THE CITY ..................................... : .............................................................................................. 47 CONCLUDING INFORMATION .................................................. . ............................................. 47 Underwriting .................................................................................................................... 47 Legal Opinion .................................................................................................................. '/[8 Tax Matters ........................... ' ........................................................................................... 48 Bank Qualified Tax-Exempt Obligations ........................................................................ 50 No Litigation .................................................................................................................... 50 Ratings ............................................................................................................................. 50 Miscellaneous ......................... ' ........................................................................................ 50 APPENDIX A - Summary of Indenture and Fiscal Agent Agreements .................................... A-1 APPENDIX B - Proposed Form of Bond Counsel Opinion ...................................................... B- 1 APPENDIX C - Form of Continuing Disclosure Agreement .................................................... C-1 APPENDIX D- Series E Bond Insurance Policy Specimen ...................................................... D-1 DOCSLAl:397495.2 1-415040 -ii- $2,245,000* TUSTIN PUBLIC FINANCING AUTHORITY REVENUE BONDS (Tustin Ranch) Series E ' INTRODUCTION This Official Statement, including the cover, inside cover, the table of contents and the Appendices, is provided to furnish information in connection with the sale by the Tustin Public Financing Authority (the "Authority") of its $2,245,000* aggregate principal mount of Revenue Bonds (Tustin Ranch), Series E (the "Series E Bonds"). The Series E Bonds will be issued by the Authority pursuant to an Indenture of Trust, dated as of February 1, I996 (the "Original Indenture"), .as amended and supplemented by a First Supplemental Indenture of Trust, dated as of November 1, 1997 (the "First Supplemental Indenture"), a Second Supplemental Indenture of Trust, dated as of November 1, .1998 (the "Second Supplemental Indenture"), a Th/rd Supplemental Indenture of Trust, dated as of November 1, 1999 (the "Third Supplemental Indenture) and a Fourth Supplemental Indenture of Trust (the "Fourth Supplemental Indenture"), each by and between the Authority and State. Street Bank and Trust Company of Califomia, N.A., as trustee (the "Trustee") , (as so amended, the "Indenture"). The proceeds from the sale of the Series E Bonds will be used to purchase $2,245,000* aggregate principal amount of City of Tustin Limited Obligation .Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch), Fixed Rate Bonds, Group Four (the "Group Four Bonds"). The Group Four Bonds are being issued by the City of Tustin (the "City") pursuant to a Fiscal Agent Agreement, dated as of February 1, 1996 (the "Original 95-2 Agreement"), as amended and supplemented by a First Supplemental Fiscal Agent Agreement, dated as .of September 1, 1996 (the "First Supplemental 95-2 Agreement"), a-Second Supplemental Fiscal Agent Agreement, dated as of November 1, 1997 (the "Second Supplemental 95-2 Agreement"), Third Supplemental Fiscal Agent Agreement, dated as of November 1, 1998 (the "Third Supplemental 95-2 Agreement"), a Fourth Supplemental Fiscal Agent Agreement, dated as of November 1, 1999 (the "Fourth Supplemental 95-2 Agreement") and a Fifth Supplemental Fiscal Agent Agreement, dated as of 1, 2001 (the "Fifth Supplemental 95-2 Agreement") each by and between the City and State Street Bank and Trust Company of Califomia, N.A., as fiscal agent (the "95-2 Fiscal Agent~') (as so amended, the "95-2 Fiscal Agent Agreement"). On February 29, 1996, the Authority issued its $35,705,000 aggregate principal amount of Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series A (the "Series A Bonds"), pursuant to the Original Indenture. The proceeds of the Series A Bonds were used to purchase $35,705,000 aggregate principal amount of City of Tustin Limited Obligation Improvement Bonds, Reassessment District No. 95-1 (Tustin Ranch) (the "Assessment Bonds (95- 1)"). The Assessment Bonds '(95-1) were issued pursuant to the Refimding Act of 1984 for 1915 Preliminary, subject to change. DOCSLA 1:397495.2 1-415040 MVI-t 1 Improvement Act Bonds (the "Refunding Law") and the Improvement Bond Act of 1915 (the "1915 Act" and together with the Refunding Law, the "Act") and a Fiscal Agent Agreement, dated as of February 1, 1996 (the "95-1 Fiscal Agent Agreement"), by and between the City and State Street Bank and Trust Company of California, N.A., as fiscal agent (the "95-1 Fiscal Agent"). The 95-1 Fiscal Agent Agreement and the 95-2 Fiscal Agent Agreement are herein referred to collectively as the "Fiscal Agent Agreements." The 95-1 Fiscal Agent and the 95-2 Fiscal Agent are herein referred to collectively as the "Fiscal Agent." On November 1, 1997, the AUthority issued its $3,300,000 aggregate principal amount of Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series B (the "Series B Bonds"), pursuant to the First Supplemental Indenture. The proceeds of the Series B Bonds were used to purchase $3,300,000 aggregate principal amount of the City of Tustin Limited Obligation Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch), Fixed Rate Bonds, Group One (the "Group One Bonds"), which Were issued pursuant to the Second Supplemental 95-2 Agreement. On November 1, 1998, the Authority issued its $4,185,000 aggregate principal amount of Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series C (the "Series C Bonds") pursuant to the Second Supplemental Indenture. The proceeds of the Series C Bonds were used to purchase $4,185,000 aggregate principal amount of the City'of Tustin Limited Obligation Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch) Fixed Rate Bonds, Group Two (the "Group Two Bonds"), which were issued pursuant to the Third Supplemental 95-2 Agreement. On November 1, 1999, the.Authority issued its $4,995,000 aggregate principal amount of Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series D (the "Series D Bonds") pursuant to the Third Supplemental Indenture. The proceeds of the Series D Bonds were used to purchase $4,995,000 aggregate principal amount of the City of Tustin Limited Obligation Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch) Fixed Rate Bonds, Group Three (the "Group Three Bonds"), which were issued pursuant to the Fourth Supplemental 95-2 Agreement. The Assessment Bonds '(95-1) are secured by unpaid reassessmems (the "95-1 Reassessments") levied on all taxable parcels within the City's Reassessment District No. 95-1 (Tustin Ranch) ("Reassessment District No. 95-1"). The Group One Bonds, the Group Two Bonds, the Group Three Bonds and the Group Four Bonds are secured by unpaid reassessments (the "Group One Reassessments," the "Group Two Reassessments," the "Group Three Reassessments" and the "GrOup Four Reassessments," respectively) levied on certain non-overlapping parcels (the "Group One Designated Parcels," the "Group Two Designated Parcels," the "Group Three Designated Parcels" and the "Group Four Designated Parcels," respectively) within the City's Reassessment District No. 95-2 (Tustin Ranch) ("Reassessment District No. 95-2"). The Group One Bonds are secured only by reassessments levied on the Group One Designated Parcels and not by reassessments levied on any other parcels within Reassessment District No. 95-2. The Group Two Bonds are secured only by reassessments levied on the Group Two Parcels and not by reassessments levied on any other parcels within Reassessment District No. 95-2. The Group Three Bonds are secured only by reassessments levied on the Group Three Designated Parcels and not by reassessments levied on any other Parcels within Reassessment District No. 95-2. The Group Four D OCSLA 1: 397495.2 1-415040 MVH Bonds are secured only by reasses,sments levied on the Group Four Designated Parcels and .not bY reassessments levied on any other parcels within Reassessment District No. 95-2. The Assessment Bonds (95-1), the Group One Bonds, the Group Two Bonds and the Group Three Bonds are collectively referred to herein as the "Prior Fixed Rate Assessment Bonds." The Prior Fixed Rate Assessment Bonds and the Group Four Bonds are herein referred to collectively as the "Fixed Rate Assessment Bonds." -The 95-1 Reassessments, the Group One Reassessments, the Group Two Reassessments, the Group Three Reassessments and the Group Four Reassessments are herein referred to collectively as the "Fixed Rate Reassessments." Reassessment District No. 95-1 and Reassessment District No. 95-2 are herein referred to collectively as the "Reassessment Districts." Reassessment District No. 95-1, the Group One Designated Parcels, the Group Two Designated Parcels, the Group Three Designated Parcels and the Group Four Designated Parcels are herein referred to collectively as the "Fixed Rate Subject Area." The Series A Bonds, the Series B Bonds, the Series C Bonds and the Series D Bonds are collectively referred to herein as the "Prior Authority Bonds." The Series E Bonds are on a parity with' the Prior Authority Bonds. Pursuant to the Indenture, the Authority may issue additional bonds ("Additional Bonds")on a parity with the Prior Authority Bonds and the Series E Bonds. The Prior Authority Bonds, the Series E Bonds and any such Additional Bonds are herein collectively referred to as the "Bonds." The Bonds are secured by all amounts derived from the · Fixed Rate Assessment Bonds or any other Reassessment District No. 95-2 fixed rate bonds (the "Assessment Bonds (95-2)") issued pursuant to the 95-2 Fiscal Agent Agreement and acquired by the Authority pursuant to the Indenture, including but ~.not limited to all payments of principal thereof, premium, if any, and interest thereon (the ',Revenues"). The Fixed Rate Assessment Bonds and any such Assessment Bonds (95-2) are herein collectively referred to as the "Assessment Bonds." Pursuant to the Indenture, the Authority has assigned tO the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues and all right, title and interest of the Authority in the Assessment Bonds. See "SECURITY FOR THE BONDS" herein. The scheduled payment of principal of and interest on the Series E Bonds when due.will be guaranteed under a Municipal Bond Insurance Policy (the "Series E Bond Insurance Policy") to be issued concurrently with. the delivery of the Series E Bonds by Financial Security Assurance Inc. ("Financial' Security" or the "Bond Insurer"). See "BOND INSURANCE" herein. Financial Security has also provided a Municipal Bond Insurance Policy for each issue of the Prior Authority Bonds. THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM THE REVENUES AND OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE. THE BONDS DO NOT CONSTITUTE A DEBT OR' LIABILITY OF THE CITY OR OF THE STATE' OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE . I)OCSLA 1:397495.2 1-415040 MVH CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS'. The City is located in central Orange County, about 40 miles southeast of Los Angeles and 80 miles north of San Diego. The City spans approximately 11.2 square miles'and adjoins the cities of Irvine, Orange and Santa Ana, as well as unincorporated areas of the County of Orange. At January 1, 2001, the City's population was estimated at , representing an approximate % [increase/decrease] from January 1, 1996. The Fixed Rate Subject Area is generally bounded by the Santa Ana Freeway (Interstate'5), Browning Avenue and Tustin Ranch Road, Santiago Canyon Road, and Jamboree Road. Reassessment District NO. 95-1 is comprised of approximately 4,528 assessed parcels and covers approximately 2,782 acres. [Reassessment District No. 95-2 is comprised of approximately 108 assessed parcels covering approximately 1,446 acres. TWelve of such parcels constitute the Group One Designated Parcels, forty-eight of Such parcels constitute the 'Group Two Designated Parcels and ninety-eight of such parcels constitute the Group Three Designated Parcels and of such parcels constitute the Group Four Designated parcels.] See "THE FIXED RATE SUBJECT AREA" herein. Brief descriptions of the Fixed Rate Subject Area, the Series E Bonds, the Assessment Bonds, the Indenture and the Fiscal Agent Agreements are included in this Official Statement. The descriptions of the Series E Bonds, the Assessment Bonds, and other documents are qualified in their entirety by reference to them. Copies of such documents may be obtained from the City at 300 Centennial Way, Tustin, Califomia 92680, Attention: Finance Department; and, during the initial public offering period, from UBS PaineWebber Inc. at 777 South Figueroa Street, 50th Floor, Los Angeles, California 90017, Attention: Public Finance Department, and, after initial delivery of the Series E Bonds, at the principal corporate trust office of the Fiscal Agent at 633 West 5th Street, 12th Floor, Los Angeles, California 90071. Capitalized undef'med terms used herein shall have the meanings ascribed thereto in the Indenture. CONTINUING DISCLOSURE The Authority has determined that no financial or operating data concerning the Authority (other than the balance in certain funds and accounts established under the Indenture) is material to any decision to purchase, hold or sell the Series E Bonds, and the Authority will not provide any -. such information. The City has undertaken all responsibilities for any continuing disclosure to Bond Owners as described below, and the Authority shall have no liability to the Owners of the Bonds or any other person with respect to such disclosure. The City has covenanted for the benefit of holders and beneficial owners of the Series E Bonds (1) to provide certain financial information and operating data (the "Annual Report") relating to the City and the property in the Fixed Rate Subject Area not later than eight (8) months after the end of the City's Fiscal Year (which currently would be March 1), commencing with the report for the 2001-2002 Fiscal Year, and (2) to provide notices of the occurrence of certain enumerated events, if material. The Annual Report will be filed by the Trustee .on behalf of the DOCSLAl:397495.2 1-415040 MVI .q. City, with each Nationally' Recognized Municipal Securities Information Repository .and with each State Repository~ if any. The' notices of material eVents will be filed by the Trustee on behalf of the City with the Municipal Securities Rulemaking Board and with each State Repository, if any. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in the Cominuing Disclosure Agreement. See "APPENDIX C - FORM OF CONTINUING DISCLOSURE AGREEMENT." These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the "Rule"). The City has not failed to comply in all material respects with any previous undertaking with respect to the Rule to provide annual reports or notices of material events. THE PLAN OF FINANCING The Series E Bonds are being issued under the Indenture in order to .purchase the Group Four Bonds. On February 29, 1996, pursuant to the Original 95-2 Agreement, the City issued $41,500,000 aggregate principal amount of City of Tustin Limited Obligation Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch), Series A (the "Adjustable Assessment Bonds (95-2)") as Adjustable Rate Bonds (as defined in the Original 95-2 Agreement). Under/he Original 95-2 Agreement, a portion of the Adjustable Assessment'Bonds (95-2) are required to be converted to Fixed Rate Bonds when the. title of properties upon which the reassessments securing such Adjustable Assessment Bonds (95-2) are levied is transferred' by The Irvine Company to third parties. On the delivery date, $1,946,088.64 aggregate principal mount of the Adjustable Assessment Bonds (95-2) are being purchased with a portion of the proceeds of the Group Four Bonds, The Group Four Bonds consist of two components' the Group Four Fixed Rate Bonds and the Series Four Bonds (each defined below). As the Adjustable Assessment Bonds (95-2) are purchased, such Adjustable Assessment Bonds (95-2) will be canceled and reissued as Fixed Rate Bonds designated as the "Group Four Fixed Rate Bonds." Additionally, the 95-2 Fiscal Agent Agreement provides that, in connectiOn with the conversion (or purchase .and reissuance) of each group of Adjustable Assessment Bonds (95-2) to Fixed Rate Bonds, the City may, subject to the requirements of the Act and upon compliance with the provisions of the 95-2 Fiscal Agent Agreement, establish one or more series of bonds by supplemental agreement. In connection with the reissuance of the Group Four Fixed Rate Bonds, the City is issuing an additional series of bonds in the aggregate principal amount of $298,911.36, designated as the "Series Four Bonds," as Related Additional Bonds to the Group Four Fixed Rate Bonds. The 95-2 Fiscal Agent Agreement def'mes "Related Additional Bonds" as, with respeCt to a group of Fixed Rate Bonds, the additional series of bonds which is being issued in connection with the conversion of such group of Fixed Rate Bonds and which is designated by the City to represent the same parcels as such additional Series of Bonds. 'As such, both the Group Four Fixed Rate Bonds and the Series Four Bonds are designated to represent the Group Four Designated Parcels pursuant to the 95-2 Fiscal Agent Agreement. In order to provide for the authentication and delivery of the Group Four Bonds, and to establish and declare the terms and conditions upon which the Group Four Bonds are issued and secured, the City and the 95-2 Fiscal Agent are entering into the Fifth Supplemental 95-2 Agreement, DOCSl~a\l:397495.2 1-415040 MVH ESTIMATED SOURCES AND USES Series E Bonds The estimated sources and uses of proceeds of sale of the Series E Bonds are as follows: Sources PrinciPal Amount of Series E Bonds Less Original Issue Discount Less Underwriter's Discount Total Sources: '$2,245,000.00* ,) ). Uses Program Fund(~) Total Uses: (t) Applied to the purchase of $ principal-amount of Group Four Bonds. Group Four Bonds The estimated sources and uses of proceeds of sale of the Group Four Bonds are as follows: Source's · Principal Amount of Group Four Bonds Less Original Issue Discount Less Purchaser's Discount TranSfer from Interest Reserve Fund under 95-2 Fiscal Agent Agreement Total Sources' , Uses Purchase of Adjustable Assessment Bonds (95-2) Reserve Account (Group Four)(2) Costs Account (Group Four)(3)' Total Uses: $1,947,000 (~) $1,946,088.64 aggregate principal amount of Adjustable. Assessment Bonds (95-2) will be purchased with the proceeds of the Group Four Fixed Rate Bonds, and the remaining $298,911.36 aggregate principal amount will be purchased with moneys constituting other sources. (2) An amount equal to the Reserve Requirement (Group Four). (3) To pay costs of issuance, including legal fees, printing fees and Series E Bond Insurance Policy premium. * Preliminary, subject to change. ¢ DOCSLA1:397495.2 1-415040 NM-t THE SERIES E BONDS DesCription ,of the Series E Bonds The Series E Bonds will be issued in the aggregate principal amount of $2,245,000*. The Series E Bonds will' be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Series E Bonds will be dated their date of delivery. The Series E Bonds will bear interest at the rates per annum and will mature, subject to the redemption provisions set forth below, on the dates and in the principal mounts, all as set forth on the 'cover page hereof. Interest on the Series E Bonds is payable semiannually on March 2 and September 2 of each year, commencing March 2, 2002 (each an "Interest Payment Date") to the persons in whose names ownership of the Series E Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided in the Indenture. Such interest will be paid bY check of the Trustee ma/led by first class mail, postage prepaid on each Interest Payment Date to the Series E Bond Owners at their respective addresses shown on the Registration Bonds as of the close of business on the preceding Record Date. Interest on the Series E Bonds will be calculated on the basis of a 360-day year comprised of twelve 30-day months.. Principal of, and premium, if any, on the Series E Bonds will be payable upon presentation and surrender thereof at' the principal corporate trust office (the "Trust Office") of the Trustee in Los Angeles, California. Principal of and premium, if any, and interest on the Series E Bonds will be paid in lawful money of the United States of America. , The Series E Bonds will be issued in book-entry form, initially registered in the name of Cede & Co., New York, New York' as nominee of The Depository Trust Company ("DTC"), New York, New York. Payment of interest with respect to any Series E Bond registered as of each Record Date in the name of Cede & Co. will be made by wire transfer of same-day fimds to the account of Cede & Co. See "Book-Entry System" herein. Redemption of the Series ~E B ,0ntis,, Ootional Redemotion The Series E Bonds maturing on or after September 2, 20 , are subject to optional redemption in whole, or in part in authorized denominations, among maturities on such basis as shall be designated by the Authority in a Written Certificate of the Authority filed with the Trustee, on any Interest Payment Date on or after September 2, 20 , at the following respective Redemption Prices (expressed as percentages of the principal amount of the Series E Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Preliminary, subject to change. DOCSLA 1:397495.2 1-415040 MVH Redemption Dates Redemption Price September 2, 20 September 2, 20 September 2, 20 and March 2, 20 and March 2, 20 and thereafter Mandatory, Redemption From Principal Prepayments, The Series E Bonds are subject to mandatory redemption, in whole, or in part in authorized denominations, on any Interest Payment Date, from and to the extent of any Principal Prepayments with respect to the Group Four Bonds, at the following respective Redemption Prices (expressed as' percentages of the principal mount of the Series E Bonds to be redeemed), plus accrued imerest thereon to the date of redemption: Redemption Date.s Redemption Price March 2, 20 through March 2, 20 September 2, 20 and March 2, 20 September 2, 20~ and March 2, 20 September 2, 20 and thereafter The principal amount of series E Bonds to be redeemed from principal Prepayments with respect to the Group Four Bonds will be the greatest-principal mount of Series E BOnds, the Redemption Price of which is less than or equal to such Principal Prepayments, as specified in a Written Request of the Authority delivered to the Trustee. In the event that the 95-2 Fiscal Agent shall mail notice of the redemption, of.any Group Four Bonds which will produce Principal' Prepayments, the Trustee will concurrently mail. notice of the redemption of Series E Bonds, such redemption to occur on the date fixed for such redemption of the Group Four Bonds. The proceeds of any such redemption of the Group Four Bonds will be applied by the Trustee to pay the Redemption Price of Series E Bonds on the date of such redemption of the Group Four Bonds. For purposes of the selectiori of Series E Bonds for mandatory redemption, the Series E Bonds will be selected for redemption among maturities by the Authority (evidenced pursuant to a Written Certificate of the Authority delivered to the Trustee at least 60 days prior to the redemption date or such later date as shall be acceptable to the Trustee) on such basis that the remaining payments of principal of and interest on the Group Four Bonds, together with other available Revenues attributable thereto, will be sufficient on a timely basis to pay debt service on the Series E Bonds, as shall be demonstrated in a report of an Independent Financial Consultant filed with the Trustee. - Mandatory. Sinking Fund Redemotion The Series E Bonds maturing on September 2, 20 are subject to mandatory, sinking fund redemption, in part, on September 2 in each year, commencing September 2, 20 , at a Redemption Price equal to the principal amount of the Series E Bonds to be redeemed, without ( DOCSLA 1:397495.2 1-415040 MVH premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows: Redemption Date (September 2) Principal Amount * Maturity If some but not all of the Series E Bonds maturing on September 2, 20 are optionally redeemed, the principal amount of Series E Bonds maturing on September 2, 20 to be redeemed pursuant to mandatory sinking fund redemptions on any subsequent September 2 will be reduced, by $5,000 or an integral multiple thereof, as designated by the Authority in a Written Certificate of the Authority filed with the Trustee; provided, however, that the aggregate amount of such reductions will not exceed the aggregate amount of Series E Bonds maturing on September 2, 20 so optionally redeemed. If some but not all of the Series E Bonds maturing on September 2, 20 are redeemed pursuant to mandatory redemption from Principal Prepayments, the principal amount of Series E Bonds maturing on September 2, 20 to be subsequently redeemed pursuant to mandatory sinking fund redemptions will be reduced by the aggregate principal amount of the Series E Bonds maturing on September 2, 20 so mandatorily redeemed from Principal Prepayments, Such reduction to be allocated as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as determined by the Authority, notice of which determination will be given by the Authority to the Trustee at least 45 days prior to such redemption date. Transfers and Exchange So 'long as the Series E Bonds remain in book-entry, transfer and exchange of any of the Series E Bonds will be accomplished in accordance with the provisions of such book-entry system. In the event of termination of such book-entry system with respect to the Series E Bonds, then any Series E Bond may be transferred upon the Registration Books by the person in whose name it is registered, in person or by his duly authorized attomey, upon surrender of such Series E Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Whenever any Series E Bond or Bonds are surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver a new Series E Bond or Bonds for a like aggregate principal amount of the same series and maturity, in any authorized denomination. The Trustee will require the Series E Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. DOCSLA 1.:397495.2 1-415040 MVH The Series E Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of Series E Bonds of the same series and maturity, of other authorized denominations. The Trustee will require the payment by the Series E Bond Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to' such exchange. The Trustee will not be obligated to make any transfer or exchange of Series E Bonds during the period established by the Trustee for the selection of Series E Bonds for redemption, or with respect to any Series E Bonds selected for redemption. Book-Entry System The description that follows of the procedures and reco'rdkeeping 'with respect to beneficial ownership interests in the Series E Bonds, payment of principal of and interest on the Series E Bonds to Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Series E Bonds, and other Bonds-related transactions by and between DTC, Participants and Beneficial Owners, is based on information furnished by DTC which the Authority and the City each believes to be reliable, but the Authority and the City take no responsibility for the completeness or accuracy thereof. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Series E Bonds. The Series E Bonds 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 Series E Bond will be issued for each maturity of the Series E Bonds, in the.aggregate principal amount of such maturity, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New 'York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (the "Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic. computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities 'Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The roles applicable to DTC and its Participants are on file with the Securities and Exchange Commission. DOCSI'.,Al:397495.2 1-41.5040 NM-I 10 Purchases of Series E Bonds under the DTC syStem must be made by or through Direct Participants, which will receive a credit for the Series E Bonds on DTC's records. The ownership interest of each actual purchaser of each Series E Bond ("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, but Beneficial Owners are 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 Series E Bonds are to be accomplished by entries made on the books of Participants. acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series E Bonds, except in the event that use of the book-entry system for the Series E Bonds is discontinued. To facilitate subsequent transfers, all Series E Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., 'or such other name as requested by an authorized rePresentative of DTC. The deposit of Series E Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any changes in beneficial oWnership. DTC has no knowledge of the actual Beneficial Owners of the Series E Bonds; DTC's records reflect only the identity of the Direct Participants to whose' accounts such Series E Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct P ~articipants 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 which may be in effect from time to time. Beneficial Owners of the Series E Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series E Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. Beneficial Owners of Series E Bonds may wish to ascertain that the nominee holding the Series E Bonds for their benefit has agreed to obtain and transmit notice to Beneficial Owners, or in the alte. mative, Beneficial Owners may wish to provide their names and addresSes to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the bonds within, an issue are being redeemed, DTC's practice is to determine by lot the amount of interest or-.each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to Series E Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to an issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s DOCSLAl.:397495.2 1-415040 MVH 11 consenting or voting rights to those Direct Participants to whose accounts Series E Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Series E Bonds 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 on payment dates in accordance with their respective holdings shown on DTC's records unleSs D.TC has reason to believe that it will not receive payment on the date payable. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form' or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), the Trustee or the Authority, ..subject to any statutory or regulatory requirements as may be in effect from time to time. ,Payment of principal and interest to Cede & Co. (or such other nominee as may be requested 'by an authorized representative of DTC) is the responsibility of the Trustee or the Authority, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to Beneficial Owners is the responsibility of Direct and Indirect Participants. NONE OF THE AUTHORITY, THE CITY OR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS; INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS WITH RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS OR THE SELECTION OF BOND'S FOR REDEMPTION. The Authority, 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 Series E 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 Authority, 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 Series E Bonds or an error or delay relating thereto. The .foregoing description of the procedures and record-keeping with respect to beneficial oWnership interests in the Series E Bonds, payment of principal, interest and other payments on the Series E Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such Series E 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. DOCSI.,Al:397495.2 1-415040 MVH 12 DTC (or a successor securities depository) may discontinue providing its services as securities depository with respect to the Series E Bonds at any time by giving reb. sonable notice to the Authority. The Authority, in its sole discretion and without the consent of any other person, may terminate the services of DTC (or a successor securities depository) with respect to the Series E Bonds. The Authority and the City undertake no obligation to investigate matters that would enable the Authority and the City to make such a determination. In the event that the book-entry system is discontinued as described above, Series E Bonds will be printed and delivered and the requirements of the Indenture will apply. Debt Service Schedule The schedule of annual debt service payments for the Series E Bonds is as follows: Annual Year Debt (September 2) Principal Interest , Service General · , , SECURITY FOR THE BONDS The Bonds, including the Series E Bonds, are limited obligations of the Authority payable solely from the Revenues and other assets pledged therefor under the Indenture. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture, all of the RevenUes and any other amounts held in any fund or account established pursuant to the Indenture are pledged by the Authority to secure payment of the principal of and interest on the Bonds. Said pledge constitutes a first lien on and security interest .in such assets. Revenues are defined in the Indenture to mean all mounts derived from or .with respect to the Assessment Bonds, which, as of the date of delivery of the Series E Bonds, consist of the Fixed Rate Assessment Bonds, including but not limited to all payments of principal thereof, premium, if any, and interest thereon. Pursuant to the Indenture, the Authority transfers in trust and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues and all of the fight, title and interest of the Authority in the Assessment Bonds. Under the Indenture, the Trustee is entitled to and will collect and receive all of the Revenues, and any Revenues collected or received by the 13 .DOCSI'_~1:397495.2 1-415040 MVH Authority will be deemed to be held, and to have been collected or received, by the Authority and will forthwith be paid by the Authority to the Trustee. The Trustee also will be emitled to and may take all steps, actions and proceedings reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under and with respect to the Assessment Bonds. In accordance with the provisions of the Indenture, the Trustee is the registered Owner of the Prior FiXed Rate Assessment Bonds and, upon the issuance thereof, will be the registered Owner of the Group Four Bonds and will therefore receive from .the Fiscal Agent the payments, of the principal of and the premiums, if any, and interest on the Assessment Bonds. Pursuant to the Act, the City is required annually to transmit to the Auditor of the County of Orange (the "County") the respective amounts of individual Fixed Rate Reassessment installments on all unpaid Fixed Rate Reassessments, the sum of which individual Fixed Rate Reassessment installments is sufficient to pay the principal of and interest on the Fixed Rate Assessment Bonds as such principal and interest become due and payable. Said Fixed Rate Reassessment installments are then billed on the regular County property tax bills and are remitted to the City in accordance with established procedures for such remittances. Assuming timely payment by the respective property owners of the obligations (including the Fixed Rate Reassessment installments) billed on the regular County property tax bills, and further assuming timely remittance by the County to the City of the amount of such Fixed Rate Reassessment installments thereby collected, the City will have sufficient funds from the Fixed Rate Reassessment installments to make timely payment to the Fiscal Agent of each March 2 interest payment and each September 2 principal and interest payment on the Fixed Rate Assessment Bonds, as the same become due and payable. See "SPECIAL RISK FACTORS" herein for a discussion of factors which could affect the collection of Fixed Rate Reassessment installments. THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM THE REVENUES AND OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE. THE BONDS DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE CITY OR OF THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY OR THE STATE, OR ANY POLITICAL SUBDIVISION THEREOF, PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE BONDS. Payments of Assessment Bonds The Assessment Bonds (95-1) are secured by the unpaid 95-1 Reassessments levied upon private property within Reassessment District No. 95-1. Such unpaid 95-1 Reassessments (together with interest thereon) and moneys in the Redemption Fund established for the Assessment Bonds (95-1) (the "Redemption Fund (95-1)") established under the 95-1 Fiscal Agent Agreemem constitute a trust fund for the redemption and payment of the principal of, premium, if any, and £ D OCSLA 1.:397495.2 1-415040 NM-I 14 interest on the Assessment Bonds (95-1). Principal of, premium, if any, and interest on the Assessment Bonds (95-1) are payable exclusively out of the Redemption Fund (95-1). The Group One Bonds are secured by the unpaid Group One Reassessment levied upon private property consisting of the Group One Designated Parcels. Such unpaid Group One Reassessments (together with interest thereon) and moneys in the Redemption Account established for the Group One Bonds (the "Redemption Account (Group One)") within the RedemPtion Fund established under the 95-2 Fiscal Agent Agreement (the '.'Redemption Fund (95-2)"), constitute a trust fund for the redemption and payment of the principal of, premium, if any, and interest on the Group One Bonds.-Principal of, premium, if any, and interest on the Group One Bonds are payable exclusively out of the Redemption Account (Group One). The Group Two Bonds are secured by the unpaid Group Two Reassessment levied upon private property consisting of the Group Two Designated Parcels. Such unpaid Group Two Reassessments (together with interest thereon) and moneys in the Redemption Account established for the Group Two Bonds (the "Redemption Account (Group Two)") within the Redemption Fund (95-2), constitute a trust fund for the redemption and payment of the principal of, premium, if any, and interest on the GroUp Two Bonds. Principal of, premium, if any, and interest on the Group Two Bonds are payable exclusively out of the Redemption Account (Group Two). The Group Three Bonds are secured by the unpaid GroUp Three Reassessment levied upon private property consisting of the Group Three Designated Parcels. Such unpaid Group Three Reassessments (together -with interest thereon) and moneys in the Redemption Account established for the Group Three Bonds (the "Redemption Account (Group Three)") within the Redemption Fund (95-2), constitute a trust fund for the redemption and payment of the principal of, premium, if any, and interest on the Group Three Bonds. Principal of, premium, if any, and interest on the Group Three Bonds are payable exclusively out of the Redemption Account (Group Three). The Group Four Bonds are secured by the unpaid Group Four Reassessmem levied upon private property consisting of the Group Four Designated Parcels. Such unpaid Group Four Reassessments (together with interest thereon) and moneys in the Redemption Account established for the Group Four Bonds (the "Redemption Account (Group Four)") within the Redemption Fund (95-2), constitute a trust fund for the redemption and payment of the principal of, premium, if any, and interest on the Group Four Bonds. Principal of, premium, if any, and interest on the Group Four Bonds are payable exclusively out of the Redemption Account (Group Four). THE OBLIGATIONS OF THE CITY UNDER THE ASSESSMENT BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY, BUT ARE LIMITED OBLIGATIONS, PAYABLE SOLELY FROM THE FIXED RATE REASSESSMENTS AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE RESPECTIVE FISCAL AGENT AGREEMENTS. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE FIXED RATE ASSESSMENT BONDS. 1.30 CS[~A 1. :397495.2 1-415040 MVI.-I 15 _ The Fixed Rate Reassessments levied in the Fixed Rate Subject Area and each installment thereof and any interest and penalties thereon constitute liens against the parcels of land on which they are levied until the same are paid. The liens imposed in the Fixed Rate Subject Area are subordinate to fixed special assessment liens previously imposed upon the same property but have priority over existing and furore private liens and over any fixed special assessment liens which hereafter be created against the property. Such liens are co-equal to and independent of the lien for general property taxes and special taxes. While there are no prior special assessment liens on any of the parcels of land in the Fixed Rate Subject Area, there are liens for special taxes and the recurring lien for general property taxes. See "THE F1XED RATE SUBJECT AREA - Direct and Overlapping Debt" herein. ALTHOUGH THE UNPAID FIXED RATE REASSESSMENTS CONSTITUTE LIENS ON THE PARCELS OF LAND ASSESSED, THEY DO NOT CONSTITUTE A PERSONAL INDEBTEDNESS OF THE RESPECTIVE PROPERTY OWNERS. THERE IS NO ASSURANCE THAT PRESENT PROPERTY OWNERS WILL REMAIN THE PROPERTY OWNERS, THAT PROPERTY OWNERS WILL BE FINANCIALLY ABLE TO PAY THEIR FIXED REASSESSMENTS, OR THAT PROPERTY OWNERS WILL IN FACT PAY SUCH FIXED REASSESSMENTS EVEN THOUGH FINANCIALLY ABLE TO DO SO. Under provisions of the Act, Fixed Rate Reassessment installments sufficient to meet annual payments of principal of and interest on the Fixed Rate Assessment Bonds are to be collected on the regular property tax bills sent by the County Tax Collector to owners of the parcels of land against which there are unpaid Fixed Rate Reassessments. Annual installments of 95-1 Reassessments are to be paid into the Redemption Fund (95-1), whiCh will be held by the 95-1 Fiscal Agent and used to pay the principal of and interest on the Assessment Bonds (95-1) as they become due. Annual installments of the Group One Reassessments, the Group Two Reassessments, the Group Three Reassessments and of the Group Four Reassessments are to be paid into the Redemption Account (Group One), the Redemption Account (Group Two), the Redemption Account (Group Three) and the Redemption Account (Group Four), respectively, which will be held by the 95-2 Fiscal Agent and used to pay the principal of and interest on the Group One Bonds, the Group Two Bonds, the Group Three Bonds and the Group Four Bonds, respectively, as they become due. The installment billed against each parcel of land within Reassessment District No. 95-1, each year represents a pro-ram share of the total principal and interest coming due on all of the Assessment Bonds (95-1) that year. The amount billed against each' parcel of land within Reassessment District No. 95-1 is based on the percentage which the unpaid 95-1 Reassessment against the parcel bears to the total of unpaid 95-1 Reassessments within Reassessment District 95-1, plus an administrative charge of the City. The failure of a property owner to pay an annual 95-1 Reassessment installment will not result in an increase in 95-1 Reassessment installments against other property in the 95-1 Reassessment District. The installment billed against each Group One Designated Parcel each year represems a pro-ram' share of the total principal and interest coming'due on all of the Group One Bonds that year. The amount billed against each Group One Designated Parcel is based on the percentage 16 D oCSLA 1. :397495.2 1-415040 MVH which the unpaid Group One Reassessment against the parcel bears to the total of unpaid Group One Reassessments on GroUp One Designated Parcels, plus an administrative charge of the City. The failure of a property owner to pay an annual Group One Reassessment installment will not result in an increase in Group One Reassessment installments against other property in the Group One Designated Parcels. The installment billed against each Group Two Designated Parcel each year represents a pro-ram share of the total principal and interest coming due on all of the Group Two Bonds that year. The mount billed against each Group Two Designated Parcel is based on the percentage which the unpaid Group Two Reassessment againSt the parcel bears to the total of unpaid Group Two Reassessments on Group Two Designated Parcels, plus an administrative charge of the City. The failure of a proPerty owner to pay an annual Group Two Reassessment installment will not result in an increase in Group Two Reassessment installments against other property in the Group Two Designated Parcels. The installment billed against each Group Three Designated Parcel each year represents a pro-ram share of the total principal and interest coming due on all of the Group Three Bonds that year. The amount billed against each Group Three Designated Parcel is based on the percentage which the unpaid Group Three Reassessment against the parcel bears to the total of unpaid Group Three Reassessments on Group Three Designated' Parcels, plus an administrative charge of the City. The failure of a property owner to pay an annual Group Three Reassessment installment will not result in an increase' in Group Three Reassessment installments against other property in the Group Three Designated Parcels. The installment billed against each Group Four .Designated Parcel each year represents a pro-ram share of the total principal and interest coming due on all of the Group Four Bonds that year. The amount billed against each Group Four Designated Parcel is based on the percentage which the unpaid Group Four Reassessment against the parcel bears to the total of unpaid Group Four Reassessments on Group Four Designated Parcels, plus an administrative charge of the City. The failure of a property owner to pay an .annual Group Four Reassessment installment will not result in an increase in Group Four Reassessment installments .against other prope .rty in the Group Four Designated Parcels. In the event of delinquencies of a certain mount respecting any inStallment of an unpaid Fixed Rate Reassessment, and with respect to all delinquencies in certain circumstances, as prescribed in each Fiscal Agent Agreement, the City has covenanted to institute superior court foreclosure proceedings to enforce paymem of such delinquencies. See "Covenant for Superior Court Foreclosure" herein. 'Debt Service Reserves Pursuant to the 95-1 Fiscal Agent Agreement, a Reserve Fund has been established for the Assessment Bonds (95-1) (the "Reserve Fund (95-1)") in the mount of the Reserve Requirement (as defined in the 95-1 Fiscal Agent Agreement), presently $3,114,000. Pursuant to the 95-1 Fiscal Agent Agreement, transfers will be made from the Reserve Fund (95-1) to the Redemption Fund 17 DOCSLAI.:397495.2 1-415040 MVH (95-1) in the event of a deficiency in the Redemption Fund (95-1). The mount so advanced will be reimbursed to the Reserve Fund (95-1) from the proceeds of redemption or sale of the parcel for which payment or reimbursement of any delinquent 95-1 Reassessment was made from such Reserve Fund. If any 95-1 Reassessment Bond is prepaid befOre final maturity of' the 95-1 Reassessment Bonds, the City is authorized by the 95-1 Fiscal Agent Agreement to reduce the 'amount in Reserve Fund (95-1), and transfer to the Prepayment Account within the Redemption Fund (95-1) an amount in the proportion to which the 95-1 Reassessment prepaid bears to the total original unpaid 95-1 Reassessments. Pursuant to the 95-2 Fiscal Agent Agreement, a Reserve Account (Group One) has been established for the Group One Bonds in the mount of the Reserve Requirement (Group One) (as defined in the Second Supplemental 95-2 Agreement), presently $310,003.75. Transfers will be made pursuant to the 95-2 Fiscal Agent Agreement from the Reserve Account (Group One) to the Redemption AccoUnt .(Group One) in the event of a deficiency in the Redemption Account (Group One). The amount so advanced will be reimbursed to the Reserve Account (Group One) from the proceeds of redemption or sale of the parcel for which payment or reimbursement of any delinquent Group One Reassessment was made from the Reserve Account (Group One). If any Group One Reassessment is prepaid before final maturity of the Group One Bonds, the City is authorized by the 95-2 Fiscal Agent Agreement to reduce the amount in Reserve Account (Group One) and transfer to the Prepayment Account (Group One) within the Redemption Fund (95-2) an amount in the proportion to which the Group One Reassessment prepaid bears to the total original unpaid Group One Reassessments. Pursuant to the 95-2 Fiscal Agent Agreement, a Reserve Account (Group Two) has been established for the Group Two Bonds in the mount of the Reserve Requirement (Group Two) (as defined in the Third Supplemental 95-2 Agreement), presently $382,535. Transfers will be made pursuant to the 95-2 Fiscal Agent Agreement from the Reserve Account (Group Two) to the Redemption Account (Group Two) in the event of a deficiency in the Redemption Account (Group Two). The amount so advanced will be reimbursed to the Reserve Account (Group Two) from the proceeds of redemption or sale of the parcel for which payment or reimbursement of any delinquent Group-Two Reassessment was made from the Reserve Account (Group Two). If any Group Two Reassessment is prepaid before final maturity of the Group Two Bonds, the City is authorized by the 95-2 Fiscal Agent Agreement to reduce the mount in Reserve Account (Group Two) and transfer to the Prepayment Account (Group Two) within the Redemption Fund (95-2) an amount in the proportion to which the Group Two Reassessment prepaid bears to the total original unpaid Group Two Reassessments. Pursuant to the 95-2 Fiscal Agent Agreement, a Reserve Account (Group Three)has been established for the Group Three Bonds in the amount of the Reserve Requirement (Group Three) (as def'med in the Fourth Supplemental 95-2 Agreement),. presently $499,500. Transfers will be made pursuant to the 95-2 Fiscal Agent Agreement from the Reserve AccoUnt (Group Three) to the Redemption Account (Group 'Three) in the event of a' deficiency in the Redemption Account (GroUP Three). The amount so advanced will be reimbursed to the Reserve Account (Group Three) from the proceeds of redemption or'sale of the parcel for which payment or reimbursement of any 18 D O CSLA 1:397495.2 1-415040 MYH. delinquent Group Three Reassessment was made from the Reserve Account (Group Three). If any Group Three ~Reassessment is prepaid before f'mal maturity of the Group Three Bonds, the City is authorized by the 95-2 Fiscal Agent Agreement to reduce the amount in ReserVe Account (Group Three) and transfer to the Prepayment Account (Group Three) within the Redemption Fund (95-2) an mount in the proportion to which the Group Three Reassessment prepaid bears to the total original unpaid Group Three Reassessments. Pursuant to the 95-2 Fiscal Agent Agreement, a Reserve Account (Group Four) has been established for the Group Four Bonds in the mount of the Reserve Requirement (Group Four) (as defined in the Fifth Supplemental 95-2 Agreement), presently $ . Transfers will be made pursuant to the 95-2 Fiscal Agent Agreement from the Reserve Account (Group Four) to the Redemption Account (Group Four) in the event of a deficiency in the Redemption Account (Group Four). The amount so advanced will be reimbursed to the Rese~e Account (Group Four) from the proceeds of redemption or sale of the parcel for which payment or reimbursement of any delinquent Group Four.Reassessment was made from the Reserve Account (Group Four). If any Group Four Reassessment is prepaid before final maturity of the Group Four Bonds, the City is authorized by the 95-2 Fiscal Agent Agreement to reduce the amount in Reserve Account (Group Four) and transfer to the Prepayment Account (Group Four) within the Redemption Fund (95-2) an amount in the proportion to' which the Group Four Reassessment prepaid bears to the total original unpaid Group Four Reassessments. , Upon the conversion of each group of Adjustable. Assessment Bonds (95-2) to Fixed Rate Bonds, and the issuance of any Related Additional Bonds, a reserve account will be established for such Fixed Rate Bonds and Related Additional Bonds, if any. There will be deposited in each such reserve account established for each such group of Fixed Rate Bonds so converted and the Related Additional Bonds, if any, an amount equal to the Reserve Requirement for such group of Fixed Rate Bonds and Related Additional Bonds, if any; provided, however, in lieu of such deposit there may be deposited in such reserve account a Reserve Facility in an amount at least equal to such Reserve Requirement. Additional ,A,,,uthori~,,B0nds In addition to the Prior Authority Bonds and the Series E Bonds, the Authority may, subject to the requirements of the Marks-Roos Bond Pooling Act of 1985 (the "Bond Law"), by Supplemental Indenture establish one or more Series (as defined in the Indenture) of Bonds payable from the Revenues on a parity with the Prior Authority Bonds and Series E Bonds and secured by a lien upon and pledge of Revenues equal to the lien and pledge securing the Prior Authority Bonds and Series E Bonds, and the Authority may issue and the Trustee may authenticate and deliver Bonds of any Series 'so established in such principal amount as shall be determined by the Authority in said Supplemental Indenture, subject to certain conditions set forth in the Indenture, summarized as follows' (1) The Authority shall not be in default under the Indenture. DOCSLAl.:397495.2 1-41504O MVH 19 (2) The Bonds of such additional Series shall be payable as to principal annually on September 2 of each year in which principal falls due. The Bonds Of such additional Series shall be payable as to interest semiannually on March 2 and September 2 of each year excepting the first. year, provided that the first installment of interest may be payable on either March 2 or September 2 and shall be for a period of not longer than twelve months and that the interest shall be payable thereafter semiannually on March 2 and September 2. (3) The Bonds of such additional Series shall be subject to mandatory redemption from Principal Prepayments received with respect to the Assessment Bonds (95-2) being acquired with the proceeds of Such. Bonds, or with respect to the Assessment Bonds (95-2) theretofore acquired with the Proceeds of Outstanding Bonds being refunded with the proceeds of the Bonds of such additional Series, as applicable, on the dates on which and at the redemption prices at which such Assessment Bonds (95-2) may be optionally redeemed or mandatorily redeemed from prepayment of reassessments pursuant to the 95-2 Fiscal Agent Agreement. (4) Unless such Series of Bonds is being issued solely to refund Outstanding Bonds, a portion of the. proceeds of such Series of Bonds shall be applied to acquire Assessment Bonds (95-2) pursuant to a Purchase Agreement. : .(5) Agreement. No default shall have occurred and be continuing under either Fiscal Agent (6) The aggregate principal amount of' Bonds isSued under the Indenture shall not exceed any limitation imposed by law or by any Supplemental Indenture. (7) The Authority shall have filed the following docttrnents with the Trustee: (a) An opinion of Bond Counsel substantially to the effect that (i)-that such Bond Counsel has examined the Supplemental Indenture and found it to be in compliance with the requirements of the Indenture, (ii) that the execution and .delivery of the .additional Series of Bonds has been duly authorized by the Authority, (iii) that said additional Series of Bonds, when duly executed by the Authority and authenticated and delivered by the Trustee, will be valid and binding special obligations of the Authority, payable from Revenues-as provided in the Indenture, and (iv) that the issuance of such additional Series of Bonds and the application of the proceeds thereof in accordance with the Supplemental Indenture pursuant to which said additional Series of Bonds is issued will not adversely affect the exclUsion from gross income of' interest on the Outstanding Bonds; has been met; A certificate of the Authority that the requirement of paragraph (1) above has.been met; (c) A certificate of the Fiscal Agent that the requiremem of paragraph (5) above DOCSLAl:397495.2 ~-41~3040 MVH 20 (d) A written report of an Independent Financial Consultant demonstrating that (i) the Revenues attributable to the Assessment. Bonds (95,2) being acquired with the proceeds of such additional Series of Bonds, or attributable to the Assessment Bonds (95-2) theretofore acquired with the proceeds of Outstanding Bonds being refunded with the proceeds of such additional Series of Bonds, as applicable, will be sufficient in time and mount to pay when due the principal of and interest and premium, if any, on such additional Series of Bonds, 'Oi) upon the issuance of such additional Series of Bonds, the Revenues will be sufficient in time and amount to pay when due the principal of and interest and premium, if any, on all Outstanding Bonds, (iii) Upon the issuance of such additional Series of Bonds, the Revenues in each Bond Year will be at least equal to 120% of the principal of and interest and premium, if any, on all Outstanding Bonds scheduled to be paid in such Bond Year, (iv) upon the issuance of such additional Series 'of Bonds,. the Revenues to be generated from assessments levied on property that is, as of the date Of such issuance, Developed Property in each Bond Year will be at least equal to 100% of the principal of and interest and premium, if any, on all Outstanding Bonds scheduled to be paid in such'year, (v) upon the issuance of such additional Series of Bonds, no more than 15% (or such greater percentage as is consented to in writing by. the Bond Insurer) of the Revenues will be generated from assessments, levied on property owned by the largest assessee (other than Irvine Apartment Communities) of assessments levied to pay the Assessment Bonds, or by any Affiliate thereOf, (vi) upon the issuance of such additional Series of Bonds, no more than 30% (or such greater percentage as is consented to in writing by Financial Security) of the-Revenues will be generated from assessments levied on property owned by the five largest asseSsees (other than Irvine Apartment Communities) of assessmems levied to pay the Assessment Bonds, or by any Affiliate thereof, and (vii) no property, upon which are levied assessments securing the Assessment Bonds (95-2) being acquired with the proceeds of such additional Series of Bonds, is owned by an owner of property (A) upon which are levied assessments securing Assessment Bonds theretofore acquired pursuant to the Indenture, and (B) that is delinquent in the payment of any installment of an assessment described in clause (A); and (e) Said Supplemental Indenture, duly executed. None of the above limitations or restrictions on the issuance of Additional Bonds will be applicable to any Additional Bonds which are to be issued solely for the purpose of reftm~g and retiring all of a Series of Bonds issued under the Indenture and then Outstanding, and nothing in the Indenture limits the issuance of any Additional Bonds if, after the issuance and delivery of such Additional Bonds, none of the Bonds theretofore authorized under the Indenture will be Outstanding or the Authority shall have discharged the entire indebtedness on all Bonds Outstanding in one of the ways authorized by the Indenture. Additiona!....Assessment B0n. ds The 95-2 Fiscal Agent Agreement provides that additional Adjustable Assessment Bonds (95-2) may, and in certain circumstances must, be converted to Fixed Rate Bonds and that Related Additional Bonds may be issued in connection with the conversion of such Fixed Rate Bonds. Such Related Additional Bonds, if any, and Fixed Rate Bonds (together, the "AdditiOnal 95-2 Fixed Rate Bonds") would be secured by 95-2 Reassessments on certain parcels (the "Additional 95-2 21 DOCSLA 1:397495.2 1-415040 lvIVI-I Fixed Rate Parcels") within Reassessment District No. 95-2 (other than the Group One Designated Parcels, the Group Two Designated Parcels, the Group Three Designated Paroles or the Group Four Designated Parcels) designated by the City at the time of such conversion to represent such Additional 95-2 Fixed Rate Bonds. Subject to the provisions of the Indenture, such Additional 95-2 Fixed Rate Bonds could be purchased by the Authority with the proceeds of Additional Bonds to be issued pursuant 'to the Indenture. All Bonds issued under the Indenture, including any such Additional Bonds, 'are secured on a parity basis by all Revenues derived from payments to the Authority on ail AsseSsment Bonds. No additional ASsessment Bonds (95-1) may be issued under the 95-1 Fiscal Agent Agreement and no additional Assessment Bonds (95-2) may be issued upon the security of the unpaid Group One Reassessments for the Group One Designated Parcels, the unpaid Group Two Reassessments for the Group Two Designated Parcels or the unpaid Group Four Reassessments for the Group Four Designated Parcels. See "--Additional Authority Bonds" above and "APPENDIX A -- SUMMARY OF INDEN~~ AND FISCAL AGENT AGREEMENTS." Covenant for Superior Court Foreclosure If a delinquency occurs in the payment of any Fixed Rate Reassessment installment securing any Fixed Rate Assessment Bonds, the Fiscal Agent will have a duty only to transfer into the related Redemption Fund from the Reserve Fund (95-1), Reserve Account (Group One), Reserve Account (Group Two), Reserve Account (Group Three) or Reserve Account (Group Four) (but only to the extent funds are available therein) the amount necessary to pay principal of or interest on such Fixed Rate Assessment Bonds when due. There is no assurance that sufficient funds will be available in the Reserve Fund (95-1), Reserve Account (Group One), Reserve Account (Group Two), Reserve Account (Group Three) or Reserve Account (Group Four), as the case may be, for the Assessment Bonds (95-1), Group One Bonds, Group Two Bonds, Group Three Bonds or Group Four Bonds, as applicable, for this purpose. The City has determined, pursuant to Section 8769 of the California Streets and Highways Code, that it will not obligate itself to advance funds from its treasury to cover any delinquency on the Fixed Rate Reassessments or payments on the Fixed Rate Assessment Bonds. The City has covenanted in the Fiscal Agent Agreement that it will within 150 days of a delinquency in the payment of Fixed Rate Reassessments or any other reassessments levied on any Additional 95-2 Fixed Rate Parcels ("Additional 95-2 Fixed Rate Reassessments"), or interest thereon, or mounts to pay the continuing costs of the Bonds, forthwith undertake and 'diligently prosecute foreclosure proceedings in the manner prescribed in the Act to collect' such delinquent amounts; provided, however, that if the amount collected in Reassessment District No. 95-1, on the Group One Designated Parcels, the Group Two Designated Parcels, the Group Three Designated Parcels or the Group Four Designated Parcels or on any group of Additional 95-2 Fixed Rate Parcels securing any series of Additional 95-2 Fixed Rate Bonds is greater than 92.5% of the installment of the 95'1 Reassessments,. Group One Reassessments, Group Two Reassessments, Group Three Reassessments' or' Group Four Reassessments or such Additional 95-2 Fixed Rate Reassessments, as the case may be, and interest thereon, and mounts to pay such continuing costs, to be collected, the City will not be required to undertake such foreclosure proceedings, unless it is 22 DOCSLAl:397495.2 1-415040 IvlVI-I determined that any single property owner is delinquent in excess of $25,000 in the payment of such mounts in which case it shall diligently institute, prosecute and pursue such foreclosure proceedings against such property owner as set forth therein. Upon the redemption or sale of the real property responsible for such delinquencies, the City shall deposit in the Reserve Fund (95-1), the Reserve Account (Group One)~ Reserve Account (Group Two), Reserve Account (Group Three) or the Reserve AccoUnt. (Group Four) established with respect to the Group One Bonds, Group Two Bonds, Group Three Bonds or Group Four Bonds, respectively, or any other reserve account established with respect to any Additional 95-2 Fixed Rate Bonds, as applicable, from the net proceeds of such redemption or sale, the amount, of any delinquency advanced therefrom pursuant to the applicable Fiscal Agent Agreement; provided, however, that if, and to the extent that any such deposit would cause the amount'on deposit in the Reserve Fund (95-1), Reserve Account (Group One), Reserve Account (Group TWO), Reserve Account (Group Three), Reserve Account (Group Four), or any other reserve aCcount established with respect to any Additional 95-2 Fixed Rate Bonds, as applicable, to exceed the applicable reserve requirement, such excess shall be deposited in the applicable RedemPtion Fund. The balance, if any, of such redemption or Sale proceeds shall be disbursed as set forth in the judgment of foreclosure or as required by law. Even though foreclosure is commenced and diligently prosecuted in accordance' with the City's covenant of foreclosure, neither the City nor the Authority can provide 'any assurance that, in the event such foreclosure progresses to the point of a foreclosure sale, there will be any bidder for the subject parcel 'or parcels. While assessed valuations would indicate that each of the parcels in the Fixed Rate Subject Area has sufficient value to assure meaningful bidding at such foreclosure sale, there is no assurance that such present value will not decline in the future, and neither the City nor the Authority is obligated to be a bidder at such foreclosure sale. In the absence of any outside bidder, the foreclosure sale may not produce money to the City in satisfaction of its foreclosure judgment from which to pay the principal of or the interest on the Assessment Bonds (95-1), Group One Bonds, GroUp Two Bonds, Group Three Bonds, or Group Four Bonds, as applicable. See "SPECIAL RISK FACTORS." Priori, .ty of Lien The unpaid Fixed Rate Reassessments and each installment thereof and any. interest and penalties thereon constitute a lien against each of the respective parcels within the Fixed Rate Subject Area until the same are paid. Such lien is subordinate to all special assessment liens previously imposed, upon the same property, but has priority over all private liens and over all special assessment liens which may thereafter be created against the same property. However, such lien is on a parity with the lien of general prope .rty taxes and any special taxes imposed, whether prior to the date hereof or in the future, against parcels within the Fixed Rate Subject Area pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Mello-Roos Act"), or other applicable legislation. While there are no prior special assessment liens on any of the parcels of land in the Fixed Rate Subject Area, there are' liens for special taxes and the recurring lien for I)OCSLA 1:397495'.2 1-415040 MVH 23 general property taxes. See "THE FIXED RATE SUBJECT AREA - Direct and Overlapping Debt - Table 6" herein. BOND INSURANCE No representation is made by the Authority as to the accuracy or adequacy of the following information or as to the absence of material adverse changes in such information subsequent to the date hereof, or that the information contained and incorporated herein by reference is correct. The following information has been furnished by 'the Bond Insurer for use in this Official Statement. Reference is made to Appendix D for a SPecimen of the Series E Bond Insurance Policy. Series E Bond InsUrance Policy Concurrently with the issuance of the Series E Bonds, Financial Security Assurance Inc., as the Bond Insurer, will issue the Series E Bond InsUrance Policy. The Series E Bond Insurance Policy guarantees the Scheduled payment of principal of and interest on the Series E Bonds when due as set forth in the form of the Series E Bond Insurance Policy included as Appendix D'to this Official Statement. The Series E Bond.'Insurance Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Financial Security Assurance Inc. The Bond Insurer is a NeTM York domiciled insurance company and a wholly owned subsidiary' of Financial Security Assurance Holdings. Ltd. ("Holdings"). Holdings is a New York Stock Exchange listed company whose major shareholders include White Mountains Insurance Group, Inc., XL Capital Ltd., The Tokio Marine and Fire Insurance Co., Ltd. and MediaOne Capital Corporation. The shareholders of Holdings are not liable for the obligations of Financial Security. At , 2001, the Bond Insurer's total policyholders' surplus and contingency reserves were approximately $ and its total unearned premium reserve was approximately $ in accordance with statutory accounting principles. At , 2001, the Bond Insurer's total shareholder's equity was approximately $ and its total net unearned premium reserve Was approximately $ in accordance with generally accepted accounting principles. The financial statements included as exhibits to the annual and quarterly reports filed by Holdings with the Securities and Exchange Commission are hereby incorporated herein by .reference. Also incorporated herein by reference are any such financial statements so filed from the date of this Official Statement until the termination of the offering of the Series E Bonds. Copies of materials incorporated by reference will be 'provided upon request to' Financial Security AssUrance DOCSLA 1.:397495.2 1-41.5040 MVH 24 lnc~, 350 Park Avenue, New York, New York 10022, Attemion: (telephone (212) 826-0100). Communications Department The .Series E Bond Insurance Policy does not protect investors against changes in market value of the Series E Bonds, which market-value may be impaired as 'a result of changes in prevailing interest rates, changes in applicable ratings or other causes. The Bond Insurer makes no representation regarding the Series E Bonds or the advisability of investing in the Series E Bonds. The Bond InsUrer makes no representation regarding the Official Statement, 'nor has it participated in the preparation thereof, except that the Bond Insurer has provided to the Authority the information presented under this caption for incluSion in the. Official Statement. METHOD OF REASSESSMENT The total amount of 95-1 Reassessments, Group One Reassessments, 'Group Two Reassessments, Group Three ReaSsessments and Group Four Reassessments levied in Reassessment District No. 95-1, and on the Group One Reassessment Parcels, the Group Two Designated Parcels, Group Three Reassessment Parcels and the Group Four Designated Parcels is equal to the principal amoUnts of the Assessment Bonds (95-1), Group One Bonds, Group Two Bonds, Group Three Bonds and Group Four .Bonds, respectively. Said mount of each reassessment was calculated for'each of the individual parcels of land within the Fixed Rate Subject Area in proportion to the unpaid existing reassessment on each such parcel. D OCS~ 1. :397495.2 1-415040 MVH 25 THE FIXED RATE SUBJECT AREA General In legal proceedings concluded in 1986,' the City established Assessment. District No. 85-1 ("A.D. 85-1"),' then comprised of 19 assessed parcels covering a total area of approximately 522 acres. A.D. 85-1 is bounded by the Santa Ana Freeway (Interstate 5), Browning Avenue, Irvine Boulevard and Jamboree Road. In legal proceedings concluded in 1988, the City established Assessment District No. 86-2 ("A.D. 86-2" and together with A.D. 85-1, the "Prior Districts"), then comprised of 56 assessed parcels covering a total area of approximately 2,260 acres, 1,440 of which were within the City boundary and the remaining portion of which were located primarily in an unincorporated area of the County (to the northeast of the City), with a small portion of A.D. 86-2 falling within the southeastern border of the City of' Orange. A.D, 86-2 is bounded by Irvine Boulevard, Tustin Ranch Road, Santiago Canyon Road, and Jamboree Road. In August, 1986, the City issued $50,650,000 principal amount of variable rate improvement bonds for A.D. 85-1, and in September, I988, the City. issued $81,400,000 principal mount of variable rate improvement bonds' for A.D. 86-2 (collectively, the "Prior Variable Rate Bonds"). The proceeds of both issues have been used to fund the design .and constmction of public improvements within the Prior Districts, including streets and other traffic access and control facilities, drainage facilities, and utility improvements, The respective Indentures of Trust (collectively, the "Prior Indentures") pursuant to which the Prior Variable Rate Bonds were issued each provided for the conversion of a portion of. the Prior Variable Rate Bonds to fixed rate bonds (collectively, the "Prior Fixed Rate Bonds") upon the occurrence of certain events prescribed by the Prior Indentures (primarily, the transfer of title by The Irvine Company, the owner of substantially all of the assessed property at the time of issuance of the Prior Variable Rate Bonds, to third parties with respect to portions of the assessed property). The Prior Indentures and related legal documents for the Prior Districts also provided for conversion to a fixed rate of the'unpaid assessments on those certain parcels (the "Prior Fixed Rate Parcels'"), the conveyance of which caused the conversion of the subject portion of the Prior Variable Rate Bonds into the Prior Fixed Rate Bonds. Reassessment District 95-1 consists of all Prior Fixed Rate Parcels from the Prior Districts which had an unpaid reassessment. 'The 95-1' Reassessments were levied within Reassessment District No. 95-1 by the City Council under the proceedings taken pursuant to Resolution No: 96-8, adopted by the City Council on January 15, 1996. Reassessment District No. 95-2 consists of all those parcels from the Prior DistriCts which had an unpaid reassessment securing Prior Variable Rate Bonds that had not been so converted to Prior Fixed Rate Bonds. The 95-2 Reassessments were levied on the parcels in Reassessment District No. 95-2 by the City Council under the proceedings take pursuant to Resolution No. 96-10, adopted by the City Council on January 15, 1996. The Group Four Designated Parcels consist only of those-parcels in Reassessment District No. 95-2, the assessments on which are now being converted to fixed assessments. DOCSLA 1:397495.2 1-415040 MVH 26 Status of Public Improvements Designated parcels The public improvements financed with the proceeds of the Prior Bonds are Substantially complete. The only remaining improvements necessary to enable the remaining undeveloped property in the Fixed Rate Subject Area to be developed are in-tract 'improvements to certain specific parcels which will be the responsibility of the developer of such specific parcel or 'parcels. Examples of such in-tract improvements are local streets; curb, gutters and sidewalk; traffic control signage and striping; street lightS; landscaping; .water distribution lines and appurtenances; sanitary sewer laterals, collection lines and appurtenances; and underground gas, electric, telephone and cable television facilities. [With the exception of school .facilities to be developed by the Tustin Unified School District, no additional major infrastructure such as arterial streets, parks, fire stations, or libraries are required or anticipated for the full development .of the remaining undeveloped property in the Fixed Rate Subject Area, although as of June 30, 2001, $ in proceeds of the Prior Bonds (including interest earnings) remain in the constmcti°n fund established with respect to such Prior Bonds. The City expects to eXpend the remaining proceeds of the Prior Bonds over the next Several years to complete an interchange at the junction of Tustin Ranch Road and' Interstate 5 and certain other- minor street improvements. Neither completion of such street improvements nor construction of such school facilities is a condition precedent to issuance of building permits for any of the remaining undeveloped property in the Fixed Rate Subject Area.] ~ocation. ,,and Terrain of.the,,Fixed Rate Sub.iect Area The City is located in central Orange County, about 40 miles southeast of Los Angeles and' 80 miles north of San Diego. The City spans approximately 11.2 Square miles and adjoins the cities of Irvine, Orange and Santa Ana. The combined area of the Reassessment Districts, of which the Fixed Rate Subject Area is a part, is approximately [2,782] acres and is located, along the east side of the City, .extending generally in a southwest-to-northeast band approximately 3/4ths of a mile wide, from the Santa Ana Freeway (Interstate 5) to Santiago Canyon Road, a distance of approximately 6 miles. The terrain is relatively flat, extending gently uphill toward the northeast, and transitioning to gently rolling, hills in the last mile. Land Uses and Development Status The following Table 1 illustrates the land use categories of the parcels in the Fixed Rate Subject Area.' As used in Table 1, the term '!developed" means that at least one structure has been constructed on the parcel, which has been assigned improvement assessed value by the County Assessor. The developed portion of the Fixed Rate Subject Area represents approximately 91.47% of the unpaid Fixed Rate Reassessments. The information in Table 1 reflects the County's 2000- 2001 property ownership records. However, additional development has occurred in the Fixed Rate 27 ( DOCSLAl:397495.2 1-415040 IVM.-I Subject Area since the County's records were last updated. See "Stares of Development" below for a description of such additional development. 28 DOCSLA 1:397495.2 1-415040 IvlVH TABLE 1 CITY OF TUSTIN Fixed Rate Subject Area Parcel Totals For Each Modified Land Use Total Total Reassessment Parcels ValueO) -Amount® Value' to-Lien Percent of Total Reassessment DeveloPed Residential 24 Developed Commercial 5,373 Undeveloped Residential 1 Undeveloped Commercial 109 $ 62,361,436 $ 2,378,364.28 . 1,707,541,518 35,204,357.76 2,2.78,3 07 124,005.74 2,550,t43 3,380,201.77 26.22 5.79% 48.50 85.68 8.37 0.30 0.75 8.23 TOTAL 5,507 $1,774,731,404 $41,086,929.55 43.19 100.00% Source' MuniFinancial, Inc. (1) Based on County of Orange 2001-2002 secured roll. (2) Includes September 2, 2001 principal. Largest Landowners by Reassessment .A~...o...u...nt The following Table 2 illustrates the 11 largest landowners in the Fixed Rate Subject Area, as measured.by total Fixed Rate Reassessment levied on property owned by such landowner. All other parcels in the Fixed Rate Subject Area are single family residences. The information in Table 2 reflects the County's 2001-2002 property ownership records. However, a number of the parcels shown on the following table have been sold to other entities and to individual homeowners, and additional development has occurred in the Fixed Rate Subject Area since the County's records were last updated. See "Stares of Development" below for a description of current development in the Fixed Rate Subject Area. DOCSLA 1.:397495.2 1-415040 MVH 29 TABLE 2 CITY OF TUSTIN Fixed-Rate Subject Area Top 11 Owners by Fixed Rate Reassessment Amount Property Owner Total Total Assessed Remaining/Proposed Parcels Value(~) Reassessment(2) Irvine Community Development Co® 121 Sanderson J Ray-Tustin Ranch Plaza 4 Irvine Apartment Communities® 8 Brookfield Tustin Ranch Inc 21 Sb & W Dev Tus 2 Sanyo Foods Corp Of America 14 Salvation Army 2 Church At Tustin Ranch 1 B'nai Israel 1 Tustin Congregation Of Jehovah's 'Witness 1 Tustin Del Verde Community Assn 1 $6,232,804 $3,709,201.43 6,917,222 1,392,083.17 36,344,573 1,103,543.44 7,870,244 561,941.31 2,615,636 340,000.00 39,123,259 292,364.34 7,512,219' 188,364.29 2,278,307 124,005..74 4,087,485 115,303.87 2,105,615 50,248.61 0 46,241.18 TOTALS 176 $115,087,364 $7,923,297.38 Value- to-Lien 1.68 . 4.97 32.93 14.01 7.69 133.82 39.88 18.37 35.45 41.90 0.00 14.53 Percent of Total Remaining Reassessment 9.03% 3.39 2.69 1.37 0.83 0.71 0.46' 0.30 0.28 0.12 0.11 19.28% Source: MuniFinancial, Inc. (1) Based on County of Orange 2001-2002 secured roll. (2) Includes September 2, 2001 principal. (3) Includes Group Four Designated Parcels. The Group Four Designated Parcels are consisted of Four Designated Parcels have a total assessed value of $ ., a combined value-to-lien ratio of~ represent % of the total remaining reassessment. (4) IrVine Apamnent Communities, L.P. is a related entity to lrvine Community Development Company. . The Group , and D OCSLA 1:397495.2 1-415040 MVH 30 Debt Service Coverage The following Table 3 illustrates the estimated coverage .for debt service on the Series A Bonds, Series B Bonds, SerieS C Bonds, the Series D Bonds and the Series E Bonds from Revenues, consisting of the debt serVice on the Fixed Rate Assessment Bonds. TABLE 3 CITY OF TUSTIN Fixed Rate Subject Area Estimated Debt Service Coverage from Revenues Bond Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total Revenues Series A, B, C and D Bond Debt Service Series E 'Bond Debt Service Total Bond Debt Service Estimated Coverage Total D OCSLA 1:397495.2 1-41. 5040 MVH 31 Delinquency, History. The following-Table 4 illustrates the historical Fixed Rate Reassessment delinquency for parcels included in the Fixed Rate Subject Area. All of the delinquencies indicated are attributable to parcels '.within Reassessment District No. 95-1 and, following the issuance of the Group One Bonds in November 1997, to the Group One Designated Parcels. [Until recently, all of the Group Four Designated Parcels were owned by The Irvine Company. There have been no delinquencies with respect to the payment of assessments or reassessments on the Group Two Designated Parcels, the Group Three or the Group Four Designated Parcels.] TABLE 4 CITY OF TUSTIN Fixed Rate Subject Area Assessment and Reassessment Installment Delinquencies for Fiscal Years 1998-1999 through 2001-2002 Fiscal Year 1998-99 1999-00 2000-01 2001-02 Parcels : Amount Amount Parcels Delinquent(~) Levied Delinquent(~) 4,727 70' 4,054,524.08 35,027.42 5,301 34 4,440,990.72 19,473.14 5,452 159 4,451,404.96 74,592.55 5,507 n/a 4,753,815.94 n/a % of Amount Delinquent 0.86% 0.44 1.68 n/a Source: MuniFinancial, Inc. (1) Amount delinquent as of the end of such fiscal year. ( ~ DOCSLA1:397495.2 1-415040 MVH 32 Estimated Value-to-Lien Ratios Il IIIJl I IIII According to the County's 2001-2002 property ownership records, there were approximately 5,507 seParate parcels in the Fixed Rate SUbject Area,-both developed and undeveloped. These parcels '(including improvements, where developed) had. a total assessed value of $1,744,731,404. Total Fixed Rate Reassessments of $41,086,930 secure the Fixed Rate Assessment Bonds. This provides an overall value-to-lien ratio of approximately 43.19 to 1. The following Table 5 illustrates the breakdown, by category of value-to-lien range, of the total number of parcels and the corresponding total Fixed Rate Reassessment amounts attributable thereto. TABLE 5 CITY OF TUSTIN Fixed Rate Subject Area Totals by Value-to-Lien Value-to-Lien 2000-2001 Fixed Rate No, of Total · ReasSessmem % of Total Parcels Assessed ValueO) Amount(2) Reassessment 30:1 and Above 5,034 $1,667,776,180 32,180,579.62 78.32% 25:1 - 29.99:1 257 63,810,121 2,283,850.02 5.56 20:1 - 24.99:1 34 - 6,029,512 265,246.85 0.65 15:1 - 19.99:1 24 7,444,225 419,738.48 1.02 10:1 - I4.99:1 30 7,159,520 580,767.43 1.41 5'1- 9.99:1 12 5,660,985 831,368.94 2.02 3'1- 4.99:1 2~ 4,438,815 971,674.04 2.36 1:1- 2.99:1 7 510,814 187,313.77 0.46 Less than 0.99:1 107 1,901,232 3,366,390.40 8.19 TOTAL 5,507 $1,774,731,404 $41,086,929.55 100.00% Source: MuniFinancial, Inc. (1) Based on County of Orange 2001-2002 secured roll. (2) Includes September 2, 2001 principal. Neither the value-to-lien calculations nor the total reassessment amounts include parity obligations for CFD No. 88-1 and for general property taxes. Direct and .Overlaooing,Debt Community Facilities ,,D..i.,strict No. 88r! I)OCSLA1.:397495.2 1-415040 MVH 33 The Tustin Unified School District has formed its Community Facilities District No. 88-1 ("CFD No. 88-1") pursuant to the Mello-Roos Act, encompassing a major portion of the land within the Reassessment Districts, to provide financing for school facilities. CFD No. 88-1 initially authorized the issuance of bonded debt (the "Mello-Roos Bonds") in the amount of $103 million and the levy of special taxes against the property in CFD No. 88-1 to pay for debt service on the Mello-Roos Bonds, for certain costs of providing school facilities and sites, and for related incidental expenses. CFD No. 88-1 has since reduced the. initial authorization of Mello-Roos Bonds to $63,000,000, not inclusive of additional amounts incidental to a refunding of such indebtedness. After the issuance of $64,615,000 Mello-Roos Bonds by CFD No. 88,1 on October 23, 1998, there is no remaining authorization against which CFD No. 88-1 may issued additional bonds. The lien securing payment of the special taxes 'to be levied from year to year upon the parcels, within CFD No. 88-1 will be on a parity with the lien securing payment of the Fixed Rate Reassessments. See "SECURITY FOR THE BONDS - Priority of Lien" herein. Property within CFD No. 88-1 for which no building permit has been issued is, for purposes of the special tax formula, determined to be undeveloped property. Residential property within CFD No. 88-1 for which a building permit has been issued is, for purposes of the special tax formula, determined to be developed property. The special tax on deVeloped property within CFD No. 88-1 is a function of the density of the development. Based on current development plans, for fiscal year 2000-2001, the minimum special tax that may be levied on residential units in any particular parcel within the Fixed Rate Subject Area is $ per unit, and the maximum special tax that may be levied on residential units in any particular parcel within the Fixed Rate Subject Area is $ per unit. For fiscal years 1999-2000 and thereafter, the special tax formula for CFD No. 88-1 specifies that, subject to the exceptions stated therein, the special tax will be levied only in an amount necessary to insure payment of debt service on the outstanding Mello-Roos Bonds issued through fiscal year 1999-2000. Commencing in fiscal year 1999-2000, the special tax on residential property may be increased by four percent every year, if required. The final maturity of the currently outstanding Mello-Roos Bonds is September 1, 2024. Because the amount of the special tax levy on a particular parcel in CFD No. 88-1 in any year will vary not only based on the status of the remaining parcels as developed or undeveloped property, but also based on the density of the remaining parcels that are developed property, such parcel's proportionate share of the obligations of CFD No. 88-1 cannot be determined ~with certainty prior to development of all of the property in CFD No. 88-1. Prior to such time, the most meaningful figure for ascertaining the burden that may be imposed on a parcel in any year for CFD No. 88-1 obligations is probably the amount of the maximum special tax that may be levied on such parcel. Irvine Ranch Water District As shown on Table 6, the Irvine Ranch Water District ("IRWD") has created two improvement districts, I.D. No. 105 and I.D. No. 250 (collectively, the "IRWD Improvement Districts"), that overlap the Reassessment Districts. IRWD has sold bonds on behalf of I.D. No. 105 to provide regional and local water supply, storage, transmission and distribution facilities to serve residential and commercial development in such improvement districts. IRWD has sold .34 DOCSLAl:397495.2 1-4i 5040 MVH bonds on behalf of I.D. No. 250 to provide reclaimed water supply and sewage cOllection, treatment and disposal facilities for residential and commercial development within such improvement districts. [In addition to the outstanding bonded debt of approximately $107 million reflected on the following schedule, the two IRWD Improvement Districts have a total of approximately $324.5 million in authorized but unissued bonded debt. The Fixed Rate Subject Area's share of outstanding debt of the two IRWD Improvement Districts is approximately $40 million. The Fixed Rate Subject Area's share of' the authorized but unissued debt of the 'two IRWD Improvement Districts is approximately $121 million.] The IRWD Improvement District's 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, as property is developed and sold within the' Fixed Rate Subject Area, and the assessed valuation of such 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 mount of auth~)rized but unissued bonds for the IRWD Improvement Districts that will ultimately be issued by IRWD, nor can it predict when such debt would be issued or the debt service, payments thereon. Estimated Debt Set forth in Table 6 is the existing authorized indebtedness payable from taxes and assessments that may be levied on property within the Fixed Rate Subject Area. No additional Fixed Rate Assessment Bonds can be issued upon the security of the unpaid FiXed Rate Reassessments for the Fixed Rate Subject Area. However, other public agencies may issue additional indebtedness on property within the Fixed Rate Subject Area at any time. See "SECURITY FOR THE BONDS - Priority of Lien." DOCSLA 1:397495.2 1-415040 MVI-t 35 TABLE 6 CITY OF TUSTIN Fixed Rate Subject Area' Direct and Overlapping Debt 2000-2001 Assessed Valuation: $ DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Orange County Teeter Plan Obligations Metropolitan Water District Irvine Ranch Water District, I.D. No. 105 Irvine'Ranch Water District, I.D. No. 250 City of Tustin Reassessment District No. 95-1 City of Tustin ReassesSment District No. 95-2 Tustin Unified School District Community Facilities District No. 1988-1 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT OVERLAPPING GENERAL FUND OBLIGATION DEBT: : Orange County General Fund Obligations Orange County Pension Obligations Orange County Transit Authority Municipal Water District of Orange County Water Facilities Corporation South Orange County Community College 'District Certificates of Participation City of Tustin Water Corporation Irvine Ranch Water District Certificates of ParticiPation Orange County Water District Certificates of Participation -Orange County Sanitation District No. 14 Certificates of Participation TOTAL GROSS OVERLAPPING GENERAL FUND OBLIGATION DEBT Less: Orange County Transit Authority (80% self-supporting) Municipal Water District of Orange County Water Facilities Corporation City of Tustin Water Corporation Orange County Water District Certificates of Participation TOTAL NET OVERLAPPING GENERAL FUND OBLIGATION DEBT Applicable Debt 12/1/00 GROSS COMBINED TOTAL DEBT NET COMBINED TOTAL DEBT Ratios to 2000-2001 Assessed Valuation Direct Debt ($ ) ..... · .............................................................. % Total Direct and Overlapping Tax and Assessment Debt .................... % Gross Combined Total Debt ................................................................ % Net Combined Total Debt .................................................................... % STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/01: $ Source' California Municipal Statistics, Inc. (1) Excludes Group Four Bonds. . (2) Excludes' tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. D O CSLA 1:397495.2 1-415040 MVH 36 Status of Development Active residential development within th.e Fixed Rate Subject Area, along with a · description of each of the developers actively developing at the present time within the Fixed Rate Subject Area, is set forth below. Other residential developments Within the Fixed Rate Subject Area have been completed, and all homes planned for construction in such developments have been sold to homebuyers. EXCEPT AS OTHERWISE INDICATED, THE OWNERS OF THE PROPERTY WITHIN THE FIXED RATE SUBJECT AREA HAVE PROVIDED THE FOLLOWING INFORMATION REGARDING OWNERSHIP AND-PLANNED DEVELOPMENT OF FIXED RATE SUBJECT AREA. NO ASSURANCE CAN BE GIVEN THAT THE PLANNED DEVELOPMENT WILL OCCUR OR THAT THE PLANNED DEVELOPMENT WILL OCCUR IN A TIMELY MANNER. NO REPRESENTATION IS MADE AS TO THE ACCURACY OR ADEQUACY OF SUCH INFORMATION PROVIDED BY THE PROPERTY OWNERS. Brookfield. Brookfield Homes ("Brookfield") is constructing homes in a development known as "Emerson" within the Fixed Rate Subject 'Area. The construction of 114 single family detached residential units on such land has been approved. As of October 1,2001, 109 unites have been sold to homeowners. Brookfield reports that the Emerson units are currently' planned to range from 3,280 to 4,083 square feet, and to sell at prices from the high $700,000's. Standard Pacific. Standard Pacific Homes ("Standard Pacific") is constructing homes in a development known as "Tustin Ranch Estate" within the Fixed Rate Subject Area. The construction of 97 single family detached residential units on.such land has been approved. As of October 1, 2001, 46 units have been Sold to homeowners. Standard Pacific reports that the Tustin Ranch Estate units range from 3,950 to 6,998 square feet, and sell at prices from the low $1,000,000's. The above description of development is based on information provided to the City by the merchant builders referred to above. -Except to the limited extent indicated above, neither such merchant builders nor any other purchaser or Potential purchaser of any portion of the Fixed Rate Subject~Area has proVided the City or the Authority with any information about its development plan, its financing for such plan, its experience or its abilities, nor have such merchant builders or any other such purchaser or potential purchaser participated in any other way in the' issuance of the Group Four Bonds or the Series E Bonds. Furthermore, neither the City nor the Authority has made, nor will make, any investigation of such merchant builders or any other purchaser or potential purchaser of portions of the property within the Fixed Rate Subject Area. Therefore, no representation is made herein as to the experience, abilities or financial resources of such merchant builders or any other such purchasers or potential purchasers or as to the likelihood that such merchant builders or any other such pUrchasers or potential purchasers will be successful in developing the purchased portions of the Fixed Rate Subject Area. Purchasers of the Series E Bonds should not.assume that such merchant builders or any other persons or entities that purchase portions of the Fixed Rate Subject Area from. The Irvine Company will have the experience, 37 DOCSLAl.:397495.2 1-415040 MVH abilities or financial resources necessary to successfully develop such property beyond the stage of development reached by The Irvine Company. SPECIAL RISK FACTORS The following information should be considered by prospective investors in evaluating the Series E Bonds. However, it does not purport to be an exhaustive listing of the risks and other considerations which may be relevant to an investment in the Series E Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. If any risk factor materializes to a sufficient degree, it alone could delay or preclude ' payment of principal of or interest on the Series E Bonds or both. The Bonds are Limited Obl,,igations of the Authori ,ty Funds for the payment of the principal of and the interest on the Bonds are derived from debt service payments on the Fixed Rate Assessment Bonds which are derived only from annual Fixed Rate Reassessment installments. While a modest coverage factor has been established in structuring the annual debt service on the Fixed Rate Assessment Bonds (see "THE FIXED RATE SUBJECT AREA - Debt Service Coverage - TABLE 3" herein), the amount of annual Fixed Rate Reassessment installments that are collected by the City could be insufficient to pay principal of and interest on the Fixed Rate Assessment Bonds due to non-paYment of such annual Fixed Rate Reassessment installments levied or due to insufficient proceeds received frOm a judicial foreclosure sale of land within the Fixed Rate Subject Area following delinquency. The City's legal obligations with respect to any delinquent Fixed Rate Reassessment installments are limited to (1) payments from the Reserve Fund (95-1), Reserve Account (Group One), Reserve Account (Group Two), Reserve Account (Group Three) or Reserve Account (Group Four) (depending on the location of the delinquent parcel) to the extent of fimds on deposit therein, and (2) the institution of judicial foreclosure proceedings with respect to any parcels for which the Fixed Rate Reassessment installment is delinquent (see "SECURITY FOR THE BONDS- Covenant for Superior Court Foreclosure" herein). The City has determined that it will not obligate itself to advance funds from its treasury to cover any delinquency, on the Fixed Rate Reassessments 6r payments on the Fixed Rate Assessment Bonds. The Series E Bonds cannot be accelerated in the event of any default. The Reassessments are. Not Personal Obligations of.the Pro~e ..~... Owners Under the provisions of the Act, Fixed Rate Reassessment installments will be billed to the owner of each parcel in the Fixed Rate Subject Area against which there is an unpaid Fixed Rate Reassessment, such billing to be made on the regular property tax bills sent to such owners. Such Fixed Rate Reassessment installments are due and payable at the same time and bear the Same late charges and penalties as for non-payment of regular property tax installments. The obligation to pay Fixed Rate Reassessment installments does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to the Fixed Rate Reassessment liens. Enforcement of Fixed Rate Reassessment payment obligations by 38 D OCSLA 1:397495.2. 1-415040 MVH the City is limited-to judicial foreclosure in the Orange County Superior Court pursuant to Sections 8830 et seq. of the California Streets and Highways Code. There is no assurance that any current or subsequent owner of a parcel subject to a Fixed Rate Reassessment lien will be able to 'pay the Fixed Rate Reassessment installments or that such owner will choose to pay such installments even though financially able to do'so. The Assessment Bonds are Limited Obligations of the City The obligation of the City,-as issuer of the Fixed Rate Assessment Bonds, to advance the amount of delinquencies to the Trustee, as the registered holder of the Assessment Bonds, is strictlY limited to funds on deposit in the Reserve Fund (95-1), Reserve Account (Group One), Reserve Account. (Group Two), ReserVe Account (GroUp Three) or Reserve Account (Group Four) established and held by the City pursuant to the respective Fiscal Agent Agreements. Pursuant to Section 8769 of the California Streets and Highways Code, the City has expressly elected not to obligate itself to advance available fimds from the City's treasury to make up deficiencies in the amount of Fixed Rate Reassessment installments collected. Sustained failure by property owners to pay Fixed Rate Reassessment installments when due, combined with depletion of the Reserve Fund (95-1), Reserve Account (Group One), Reserve Account (Group Two), Reserve Account (Group Three) or Reserve Account (Group Four), or all five, and the inability of the City to sell parcels which have become subject to judicial foreclosure proceedings for mounts sufficient to cover the delinquent Fixed Rate Reassessment installments, will most likely result in the inability of the City to make full or punctual payments of interest on or Principal of the Assessment Bonds (95-1), the Group One Bonds, the Group Two Bonds, the Group Three Bonds or the Group Four Bonds, or all four, which could result in a default on the Fixed Rate Bonds. Bankruptcy The payment of Fixed Rate Reassessment installments and the ability .of the City to fOreclose the lien of a delinquent Fixed Rate Reassessment is normally delayed by and may be limited in other ways by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by State law relating to judicial foreclosure. In addition, the prosecution of a judicial foreclosure may be delayeddue to congested local court calendars or procedural delays. The various legal opinions to be delivered concurrently with the delivery of the Series E Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments, including the Series E Bonds, by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Although bankruptcy proceedings would not cause the Reassessments to become extinguished, bankruptcy of a property owner could result in a delay in prosecuting judicial foreclosure proceedings and could, result in delinquent Fixed Rate Reassessment installments not DOCSllA.l:397495.2 1-415040 IVlVH 39 being paid in full. Such a delay would increase the likelihood of a delay or default in payment of the principal of and interest on the Series E Bonds. Payments by F,,DIC [The ability of the City to collect Fixed Rate~ Reassessment installment and interest and penalties specified by state law, and to foreclose the lien of delinquent Fixed Rate Reassessment installment, may be limited in certain respects with regard to properties in which the Federal Deposit Insurance Corporation (the "FDIC") or other similar federal governmental agencies has or obtains an interest. On June 4, 1991, the FDIC issued a Statement of Policy Rggarding~the Payment of State and Local Property Taxes (the "1991 Policy Statement"). The 1991 Policy Statement was revised and superseded by new Policy Statement effective January9, 1997 (the "Policy Statement'"). The Policy Statement proVides that real 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 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 f'mes 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 fin'ther 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 perm/t 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 ~alorem taxes, including special assessments, on property in which it has a fee interest unless the mount 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 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. With respect to property in Califomia owned by the FDIC on January 9, 1997 and that was owned by the RTC on December 31, 1995, or that became the property of the FDIC through foreclosure of a security interest held by the RTC on that date, the FDIC will continue the RTC'.s prior practice of paying special taxes imposed pursuant to the Mello- Roos Act if the taxes were imposed prior to the RTC's acquisition of an interest 'in the property. All other special taxes may be challenged by the FDIC. The FDIC has filed claims against the County in the United States Bankruptcy Court contending, among other things, that special taxes are not ad valorem taxes, and, therefore, special taxes levied after the FDIC is appointed as receiver are not payable by the FDIC, and to the extent previously paid by the FDIC must be refunded. The Bankruptcy Court mled in favor of the FDIC's 40 DOCSLAI:397495.2 1-415040 MVH positions and, on March 22, 1999, the United States Bankruptcy Appellate Panel of the Ninth Circuit 'affirmed the decision of the Banlmtptcy Court. The County has appealed such ruling to the Un/ted States Court of Appeals for the Ninth Circuit and the FDIC has cross-appealed. The Ninth Circuit has not yet issued a ruling on the matter. Based upon the secured tax roll as of January 1, 1999, the FDIC was not listed as the owner of any of the property in the Reassessment District No. 95-1 and Reassessment District No. 95-2. Neither the Authority nor the City is able to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to a parcel in the Fixed Rate Subject Area in which the FDIC has or obtains an interest, although prohibiting the lien on the FDIC-owned property to be foreclosed on at a judicial foreclosure sale would prevent the sale of such a parcel at a foreclosure sale. Owners of the Series E Bonds should assume that the City will be unable to foreclose on any parcel in the Fixed Rate Subject Area owned by the FDIC. Such an outcome would cause a draw On the Reserve Fund (95-1), Reserve Account (Group One), Reserve Account '(Group Two), Reserve Account (Group Three) or Reserve Account (Group Four) and perhaps, ultimately, a default in payment of the Series E Bonds. Neither the Authority nor the City has undertaken to determine whether the FDIC currently has, or is likely to acquire, any interest in any of the parcels in the Fixed Rate Subject Area, and therefore expresses no view' concerning the likelihood that the risks described above will materialize while the Series E Bonds are outstanding.] Existence of Undeveloped Prooerty. _ Approximately 8.53% of the Fixed Rate Reassessments are secured by liens on undeveloped property, and the average ~value-to-lien ratio for such undeveloped property is 1.38:1 (see "THE FIXED RATE SUBJECT AREA - Land Uses and Development Stares - TABLE 1" herein). ~ Such ratio reflects the County's 2001-2002 property ownership records. Additional development has occurred in the Fixed Rate Subject Area since such records were last updated. The undeveloped property consists primarily of subdivided lots which are owned by merchant builders who intend to develop the property for single family residential use (see "THE FIXED RATE SUBJECT AREA- Stares of DevelOpment" herein). There may be subsequent transfers of ownership of the undeveloped property prior to completion of development. Failure of the owners of undeveloped property to pay the Fixed Rate Reassessment installments when due could result in' a default in the payments of principal of and interest on any of the Fixed Rate Assessment Bonds, which could result in the inability of the Authority to make payments of the principal of and interest on the Series E Bonds. Price Realized Upon Foreclosur,e. Section 8832 of the Act prescribes the minimum price (the "Minimum Price") at Which property may be sold. in a judicial foreclosure resulting from delinquencies on assessment installments. The Minimum Price is the amount equal to the delinquent installments of principal and interest of the assessment, together with all interest, penalties, costs, fees,, charges and other amounts more fully detailed in said Section 8832. However, Section 8836 of the Streets and Highways Code provides-that the court may authorize a sale at less than the Minimum Price if the court makes certain determinations, based on the evidence introduced at the required hearing, which 41 DOCSLAl:397495.2 1.-415040 MVH evidence must establish that no ultimate loss will result to the bondholders or that no other remedy is acceptable and at least 75% of the bondholders' consent. The Fixed Rate Reassessment lien upon property sold pursuant to this procedure at a lesser price than the Minimum Price would be reduced by the difference between the Minimum PriCe and the actual sale price. In addition, the court would permit participation by the Authority, as owner of all of the Fixed Rate Assessment Bonds, in its consideration of the petition as necessary to it determination. Reference should be made to Section 8836 for the complete presentation of this provision. .If foreclosure proceedings do not result in full collection of delinquent Fixed Rate Reassessments, it is possible that owners of the Series E Bonds may not receive payment of principal of or interest on the Series E Bonds. ,U...,.n. ce.rtainfies of Future Dev,elooment The motivation of the present or furore owners of the undeveloped property in the Fixed Rate Subject Area may be diminished in the event significant delays are experienced in development efforts. However, fiarther development of property in the Fixed Rate Subject Area may be affected by changes in general economic conditions, fluctuations in the real estate market, changes in the ownership of the 'land, and other factors. In addition, any proposed development.-is subject to existing and future federal, state and' local regulations. Approval may be required from various public agencies' in connection with the design, nature and extent of the required public improvements, or such matters as land use and zoning. Failure to meet any such furore regulations or obtain any such approvals in a timely manner could delay or adversely affect any proposed development of the parcels of land in the Fixed Rate Subject Area. The development of property within the Fixed Rate Subject Area is subject to a number of contingencies which cOuld slow or prevent future development of the undeveloped land. Consequently,' no assurance can be given' that such development will be partially or fully completed, and in assessing the investment quality of the Series E Bonds, prospective purchasers should evaluate the risks of noncompletion, including but not limited to the following. First, undeveloped land is less valuable than such land in a developed condition and provides less valuable security to the Series E Bondowners should it be necessary for the City to foreclose due to the nonpayment of Fixed Rate Reassessment installments which secure the Fixed Rate Assessment Bonds. Second, if the remaining undeveloped land in the Fixed Rate Subject Area is not _ developed, the number of likely purchasers at a foreclosure sale, in the event the City forecloses the lien of delinquent unpaid Fixed Rate Reassessment installments, is likely to be reduced. Third, in addition to potentially reducing the ability and willingness of the landowners to pay Fixed Rate Reassessment installments, a slowdown of the economic development process in _. ( DOCSLA 1:397495.2 '1-415040 MVH 42 the region could adversely affect land values and reduce the proceeds received at a foreclosure sale in the event Fixed Rate Reassessment installments are not paid when due. There can be no assurance that land development operations within the Fixed Rate Subject Area will not be adversely affected by future governmental policies, including, but not limited to, governmental policies to restrict or control development. Any event that significantly impacts the ability to develop land in the Fixed Rate Subject Area may cause the property values of undeveloped property to decrease substantially from the assessed values set forth herein and could affect the willingness and ability of the owners of the undeveloped property'to pay the Fixed Rate Reassessment installments when due. ~ir~ct and Ove.r.l. aooin~ Indebtedness The ability or willingness of an owner of land within the Fixed Rate Subject Area to pay Fixed Rate Reassessment installments could be affected by the imposition of other taxes and assessments imposed, upon the land. In addition, other public agencies whose boundaries .overlap thOse of the Fixed Rate Subject Area could, without the consent of the City or the Authority, and in certain cases without the consent of the owners of the land within the Fixed 'Rate Subject Area, impose additional taxes or assessment liens on the property within the Fixed Rate Subject Area to finance public improvements or services to be located or provided inside of or outside of the Fixed Rate Subject Area. A statement of direct and overlapping indebtedness on land within the Fixed Rate Subject Area is included herein under the heading "THE FIXED RATE SUBJECT AREA - Direct and Overlapping Debt - Table 6." Earthquakes The land area comprising the Fixed Rate Subject Area is subject to unpredictable seismic activity. The occurrence of seismic activity in or around the Fixed Rate SubjeCt Area could result in substantial damage to properties in the Fixed Rate Subject Area, which, in mm, could substantially reduce the value of such properties and could affect the willingness or ability of the property owners to pay their Fixed Rate Reassessment installments when due. Drought Conditions California has experienced drought conditions, although rainfall in recent years has terminated the drought conditions throughout the State. Water service within the Fixed Rate Subject Area is provided by the Irvine Ranch Water District. While 1RWD currently anticipates being able to supply water for existing and new development within its service area for the foreseeable future, there can be no assurance that any renewal of drought conditions will not adversely affect IRWD's ability to do so. Such failure could adversely affect the financial condition of the property owners and could slow or halt development efforts, thereby adversely affecting the willingness or the ability of the owners of undeveloped property to pay their Fixed Rate Reassessment installments when due. DOCS[~1:397495.2 1-415040 MVH 43 Land Values The value of land within the Fixed Rate Subject Area is an important factor in evaluating the investment quality of the Fixed Rate Bonds. In the event that a prOperty owner defaults in the payment of a Fixed Rate Reassessment installment, the City's'only remedy is to judicially foreclose on that property. ProspeCtive purchasers of the Series E Bonds should not assume that the property within the Fixed Rate Subject Area could be sold for the assessed value described herein at a foreclosure sale for delinquent Reassessment installments or for an amount adequate to pay delinquent Reassessment installments. The property values set forth in the various tables herein are the property values determined by the County Assessor for property tax purposes. These assessed value determinations may be subject to an appeal by the property owner. Assessment appeals are annually filed with the County Assessment Appeals Board for a hearing and resolution. At the time of filing, applicants are required to estimate an opinion of value. The resolution of an appeal may result in a reduction to the County Assessor's original taxable value and a tax refund to the applicant/property owner. Any reduction in assessed taxable values of property within the Fixed Rate Subject Area would have an adverse impact on the value-m-lien ratios discussed in the tables herein. The actual market value of the property is subject to future events such as downturn in-the economy, occurrences such as earthquakes, droughts or floods or other events, all of which could adversely impact the value of the land in the Fixed Rate Subject Area which is the security for the Fixed Rate Assessment Bonds, which secure the Series E Bonds. As discussed herein, many factors could adversely affect property values or prevem or delay land development within the Fixed Rate Subject Area. Hazardous Substances IIIII The market value of the property in the Fixed Rate Subject Area is subject to diminution upon the furore release or discovery thereon of a hazardous substance. In general; the owners and operators of a parcel may be required by law to remedy conditions 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 "Superfimd 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) had anything to do with creating or handling, the hazardous substance. The effect therefore, should any of the parcels be affected by a hazardous substance, is to reduce the marketability and value 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 value of the property within the Fixed Rate Subject Area, as set forth in the various tables herein, does not reflect the presence of any hazardous substance or the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the Property. Neither the Authority nor the City has independently verified, and neither is aware, that the owner (or 44 ( DOCSLAl:397495.2 1-415040 M'VH operator) .of any of the parcels within the Fixed Rate Subject Area have such a current liability with. respect to any such parcel. However, it 'is possible that. such liabilities do currently exist and that neither the Authority nor the City is aware of them. Further, it is possible that liabilities may arise in the future with respect m any of the land within the Fixed Rate Subject Area resulting' from the existence, currently, of a substance presently claSsified as hazardous but which has not been released or the release of which is not presently threatened, 'or may arise in the future resulting from the existence, currently, on the parcel of 'a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly adversely affect the value of a parcel and the Willingness or ability of the owner of .any parcel to pay the Fixed Rate Reassessment installments when due. Endangered and ,Threatened Species There is no knoWn presence of any endangered or threatened species of animal or plant life within the Fixed Rate SUbject Area. Future discOvery of any endangered or threatened species could delay or halt fu~er development of the undeveloped property in the .Fixed Rate Subject Area. Cu. mulative...B.urden of Pari ..ty TaXes, .Special Assessments and Dev.,elopment Costs The Fixed Rate Reassessments and the annual installments thereof constitute a lien against the parcels of land on which the Fixed Rate Reassessments have been levied. Such .lien is-on a parity with all.special taxes levied by other agencies and is co-equal to and independent of the lien for general property taxes, regardless of when they are imposed upon the same property. Approximately 8.53% of the Fixed Rate Reassessments are on undeveloped land within the Fixed Rate Subject Area. Such percentage reflects the County'.s 2001-2002 property ownership records. However, additional development has occurred in the Fixed Rate Subject Area since the date such records were last updated. See "THE FIXED RATE SUBJECT AREA- Stares of Development" for a description of such additional development. Although most of the public improvements 'required for the development of this land has been completed, it is possible that additional improvements might be required, the cost of which could increase the public and private debt.for which the undeveloped land within the Fixed Rate Subject Area is security. This increased debt could reduce the ability or willingness of the owners of the undeveloped property to pay the Fixed Rate Reassessment installments when due. Neither the City nor the Authority has contrOl over the ability of other entities to issue indebtedness secured by special taxes or assessments payable from all or a portion of the property~ within the Fixed Rate Subject Area. In' addition, the owners of property within the Fixed Rate Subject Area may, without the consent or knowledge of the City or the Authority, petition other public agencies to issue public indebtedness secured by special taxes or assessments. Any such DOCSLA 1:397495.2 1-415040 MVH 45 special taxes may have a lien on such property on a parity with the lien of the Fixed .Rate Reassessments. Loss of Tax Exemption As discussed under the caption "CONCLUDING INFORMATION - Tax Matters" herein, the interest on the Series. E Bonds could become includable in gross income for federal income tax purposes, retroactive to the date of issuance of the Series E Bonds, as a result of failure of the Authority or the'City to comply with certain provisions of the Internal Revenue Code. Should such an event of taxability occur,.the Series E Bonds are not subject to early redemption and will remain Outstanding to maturity or until redeemed under the optional or mandatory redemption or mandatory sinking fired redemption provisions of the Indenture. California Constitution Article XIIIC and Article XIIID On November 5, 1996, the voters of the State approved Proposition 218, the so-called "Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution, which contain a number of provisions affecting the ability of the City to levy and collect both existing and furore taxes, assessments, fees and charges. Article XIIID requires that, beginning July 1, 1997, the proceedings for the levy of any assessment by the City under the Act (including, if applicable, any increase in such assessment or any supplemental assessment under the Act) must be conducted in conformity with the provisions of Section 4 of Article XIIID. Because the City completed its proceedings for the levy of assessments in the Fixed Rate Subject Area on January 15, 1996, the provisions of Section 4 of Article XIIID do not apply to the unpaid Fixed Rate Reassessments which secure the Fixed Rate Assessment Bonds. In addition, under Section 10400 of the Act, any challenge (including any constitutional challenge) to the proceedings or the assessment must be brought within 30 days after the date the assessment was levied. Article XI]IC removes limitations on the initiative power in matters of local taxes, assessments, fees and charges. Article XIIIC does not define the term "assessment", and it is unclear whether this term is intended to include assessments levied under the Act. Furthermore, this provision of Article XIIIC is not, by its terms, restricted in its application to assessments which were established or imposed' on or after July 1, 1997. In the case of the unpaid Fixed Rate Reassessments which are pledged as security for payment of the Fixed Rate Assessment Bonds, the Act provides a mandatory, statutory duty of the City and the County Auditor to post installments on account of the unpaid 95-1 Reassessments, Group One Reassessments, Group Two Reassessments, Group Three Reassessments or Group Four Reassessments, as the case may be, to the property tax roll of the County each year while any of the Assessment Bonds (95-I), Group One Bonds, Group Two Bonds, Group Three Bonds or Group Four Bonds, as applicable, are outstanding, in amounts equal to the principal of and interest on the Assessment Bonds (95-1), Group One Bonds, Group Two Bonds, Group Three Bonds or Group Four Bonds, as applicable, coming due in the succeeding calendar year. While the matter is not free from doubt, it is likely that a court would hold.that the initiative power cannot be used to reduce or repeal the unpaid Fixed Rate Reassessments which are 46 'D OCSLA 1. :397495.2 1-415040 M-VH pledged as security for payment of the Fixed Rate Assessment Bonds or to otherwise interfere with. performance of the mandatory, .statutory duty of the City and the County Auditor with respect to the unpaid Fixed Rate Reassessments which are pledged as. security for payment of the Fixed Rate Assessment Bonds. The interpretation and application of the Proposition 218 will ultimately be determ/ned 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. THE AUTHORITY The Authority is a joint powers authority, organized pursuant to a Joint Exercise of Powers Agreement, dated as of May 1, 1995, between the City and the Tustin Community Redevelopment Agency (the "Agreement"). The Agreement was entered into pursuant to Chapter 5 of Division 7 of Title 1 of the California Government Code (Sections 6500 et seq.) (the "Joint Powers Act"). The Authority is a separate entity, constituting a public instrumentality of the State of California and was formed for the public purpose of assisting in financing and refinancing projects pursuant to the Joint Powers Act for the benefit of California local agencies. The Authority is governed by a Board of Directors, which is comprised of five members. The members of the City Council of the City constitute the members of the Board of Directors of the Authority. The Authority is specifically granted all of the powers specified in the Joint Powers Act, including but not limited to the power to issue bonds and to sell such bonds to public or private purchasers at public or by negotiated, sale. THE CITY The City .of Tustin is located in central Orange County, approximately 40 miles southeast of Los Angeles and 80 miles north of San Diego. The City covers approximately 11.2 squ.are miles and adjoins the cities of IrVine, Orange and Santa Ana. CONCLUDING INFORMATION iUnderwriting The Series E Bonds are being purchased through negotiation of UBS PaineWebber Inc. (the "Underwriter"). The Underwriter has agreed to purchase the Series E Bonds for an aggregate purchase price of $ (being the principal amount of the Series E Bonds less an Underwriter's discount of $ and less an original issue discount of $ ). Simultaneously with the purchase of the Series E Bonds by the Underwriter, the Authority has agreed to purchase the Group Four Bonds from the City. The Underwriter's obligation to purchase the Series E Bonds is DOCSI,Al:397495.2 1-415040 MVH 47 contingent upon the Authority's purchase of the Group Four Bonds, the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell the Series E Bonds to certain dealers and others at prices lower than the public offering prices set forth on the inside cover hereof. The offering prices of the Series E Bonds may be changed from time to time by the Underwriter. Legal Opinion The legality of the Series E BondS and certain other legal matters are subject to the apProwal of Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, Bond Counsel. Certain legal matters will be passed upon for the Authority and the City by Woodruff, Spradlin & Smart, a Professional Corporation, Orange, California, as City Attomey. The fees of Bond Counsel are contingent upon issuance of the Series E Bonds. Tax Matters In the opinion of Orrick, Herrington. & Sutcliffe LLP ("Bond Counsel"), based on an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other things, compliance with certain covenants, interest on the Series E Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is exempt from State of California personal income taxes~ Bond Counsel is of the further opinion that the interest on the Series E Bonds is not a specific preference item for purposes of the federal individual or corporate altemative minimttrn taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix B hereto. To the extent the issue price of any maturity of the Series E Bonds is less than the amount to be paid at maturity of such Series E Bonds (excluding amounts stated to be interest and payable at least annually Over the term of such Series E Bonds), the difference constitutes "'original issue discount," the accrual of which, to the extent properly alloCable to each owner thereof, is treated as interest on the Series E Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the Series E Bonds is the first price at which a substantial amount of such maturity of the Series E Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizatiOns acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Series E Bonds accrues daily over the term to maturity of such Series E Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Series E Bonds to determine thxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of sUch Series E Bonds. Owners of the Series E Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Series E Bonds with original issue discount, including the treatment ( DOCSLA 1.:397495.2 1-415040 MVH 48 of purchasers who do not purchase-such Series E Bonds in the original offering to the public at the frrst price at which a substantial amount of such Series E Bonds is sold to the public. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Series E Bonds. The Authority and the City have covenanted to comply with certain restrictions designed to insure that interest on the Series E Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Series E Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Series E Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occunSng) after the date' of issuance of the Series E Bonds may adversely 'affect the value of, or the tax status of interest on, the Series E BOnds. Further, no assurance can be given that pending or furore legislation or amendments to the Code, if enacted into law, or any proposed legislation or amendments to the Code, will not adversely affect the value of, or the tax stares of interest on, the Series E Bonds. Prospective owners of the Series E Bonds are urged to consult their own tax advisors with respect to proposals to restructure the federal income tax. Series E Bonds purchased, whether at original issuance 6r otherwise, for an mount greater than their principal amount payable at maturity (or, in some cases, at their earlier call date) ("Premium Bonds") will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, a purchaser's basis in a Premium Bond and, under Treasury Regulations, the amount of tax exempt interest received, will be reduced by the amount of amortizable bond premium properly allocable to such purchaser. Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. Certain requirements and procedures contained or referred to in the Indenture, the Fiscal Agent Agreement, the Tax Certificate, and other relevant documents may be Changed and certain actions (including, without limitation, defeasance of the Series E Bonds) may be taken or omitted under the circumstances and subject to' the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Series E Bond or the interest thereon if any such change occurs or action is taken or Omitted upon the advice .or approval of bond counsel other than Orrick, Herdngton & Sutcliffe LLP.' Although Bond Counsel is of the opinion that interest on the Series E Bonds is excluded from gross income for federal 'income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Series E Bonds may otherwise affect an owner's federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax stares of the owner or the owner's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. 49 DOCSLAl:397495.2 1-415040 IvlVH Bank Qualified Tax..-Exempt Obligations The Series E Bonds will be designated as "bank qualified tax-exempt obligations" within the meaning of Section 265(b)(3)(B) of the Code such that, in the case of certain financial institutions (within the meaning of-Section-265(b)(3)(B) of the .Code), a deduction for federal income tax purposes is allowed for 80 percent of that portion of such financial institution's interest expenses allocable to interest payable with respect to the Series E Bonds. No Litigation There is no proceeding or litigation now pending to restrain or enjoin the issuance, sale, execution or delivery of the Series E Bonds, or in any way contesting or affecting the validity of the Series E Bonds, the proceedings .of the Authority taken with respect to the issuance or sale thereof, the pledge or application of any moneys or securities provided for the payment of the Series E Bonds, the existence or powers of the Authority or the title of any directors or officers of the Authority to their respective positions. A certificate of the Authority to this effect will be delivered on the date of delivery of the Series E Bonds. Ratings It is expected that Moody's Investors Service and Standard & Poor's Ratings Services will assign ratings of "Aaa'' and "AAA," .respectively, to the Series E Bonds, with the understanding that, upon delivery of the Series E Bonds, a policy insuring the payment when due of principal of and interest on the Series E Bonds will be issued by the Bond Insurer. Such ratings reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same, at the following addresses: [Moody's Investors SerVices, Inc. 99 Church Street, New York, New York 10007; Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10041.] Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its own. There is no assurance such ratings will continue for any given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating agencies, if in the judgment of such rating agencies, circumstances so warrant. Any such downward revision or 'withdrawal of such ratings may have an adverse effect on the market price of the Series E Bonds. Miscellaneous All of'the preceding stmunaries of the Indenture, the Fiscal Agent Agreements, applicable legislation, agreements and other documents are made subject to the provisions of such documents and legislation and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. Bonds. This Official Statement does not constitute a contract with the purchasers of the Series E £ DOCSLAl:397495.2 '1-415040 MVH 50 Any statements made in this Official Statement involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The execution and delivery of this Official Statement have been authorized by the members of the Board of Directors of the Authority and by the members of the citY Council of the City. TUSTIN PUBLIC FINANCING AUTHORITY By: Chairman CITY OF TUSTIN By: Mayor DOCSLA1:397495.2 1-415040 MVH 51 APPENDIX A SUMMARY OF INDENTURE AND FISCAL AGENT AGREEMENTS A-1 1,3OCSLA1:397495.2 1-415040 MVH APPENDIX B PROPOSED FORM OF BOND COUNSEL OPINION Upon delivery of the series E Bonds, Orrick, Herrington & Sutcliffe LLP, Bond Counsel, proposes to render its approving opinion with respect thereto in substantially the following form: DOCSLAl:397495.2 -415040 MVH B-1 APPENDIX C FORM' OF CONTINUING DISCLOSURE AGREEMENT (SERIES E) DOCSLAI:397495.2 1-41504O M~-I C-2 APPENDIX D SERIES E BOND INSURANCE POLICY SPECIMEN DOCS[~.\ 1:397495.2 1-415040 MVH D-I 13. ~¢italized Terms. Terms with initial capital letters not otherwise defined herein shall have the meanings assigned to them in the Indenture. Very truly yours, UBS PAINEWEBBER INC. By: Nalile Title ACCEPTED' TUSTIN pUBLIC FINANCING AUTHORITY By' Authorized Officer -17- DOCSLAl:397455.2 notice given as aforesaid, specify a different address for any sUch notices, requests or other Communications. 6. Parties in Interest. This Purchase Agreement is made' solely for the benefit of the Authority and the Underwriter (including successors or assigns .of the Underwriter) and no other person shall acquire or have any fight hereunder or by virtue hereof. 7. Survival of Representation and Warranties. The representations and warranties of the City and the Authority 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 the Authority and regardless of delivery of and payment for the Bonds. 8. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Authority and shall be valid and enforceable as of' the time of such acceptance. 9. _Applicable Law; Nonassignability. This Purchase Agreement shall be go.verned by the laws of the State of Cali£omia. This Purchase Agreement shall not be assigned by the Authority. 10'. Execution of Counterparts. This Purchase Agreement may be executed in several counterparts, each of' which shall be regarded as an original and all of which shall constitute one and the same. 11. 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 by the Authority and represents the entire agreement of the parties as to the subject matter herein. 12. Partial Unenforceabili_ty. Any proVision of this Purchase Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining prOvisions of this Purchase Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. DOCSLAl:397455.2 -16- thereof) in'such reasonable quantities as requested by the Underwriter; the fees and expenses in connection with obtaining a delinquency report and statement of direct and overlapping bonded debt from Califomia'Municipal Statistics, Inc.; and the fees and disbursements of State Street, Bond Counsel, any accountants, financial advisors or other engineers or experts or consultants the Authority or the City has retained in connection with the Bonds and the Local Obligation and .any out-of-pocket disbursements of the Authority or the City to be paid from the proceeds of the Bonds or the Local Obligations. (b) Whether or not the Bonds are delivered to the Underwriter as set forth herein, the Authority shall be under no obligation to pay, and the Underwriter shall pay the cost of preparation of any "blue sky" or legal investment memoranda and this Purchase Agreement, expenses to qualify the Bonds for sale under any "blue sky" or other state securities laws, the fees, if any, payable to the California Debt Advisory Commission on account of the Bonds, and all other expenses incurred by the Underwriter in connection with its public offering and distribUtion of the Bonds (except those specifically enumerated in paragraph (a) of this section), including the fees and disbursements of its counsel and any advertising expenses. 5. Notices. Any notices, requests, directions, instruments or other communications required or permitted to be given hereunder shall be in writing and Shall be given when delivered, against a receipt, or mailed certified or registered, postage prepaid, to the Authority, the City and the Underwriter at the respective addresses below. If to the Authority: Tustin Public Financing Authority c/o City of Tustin 300 Centennial Way Tustin, California 92680 Attention: Finance Director If to the City' City of Tustin 300 Centennial Way Tustin, California 92680 Attention: Finance Director If to the Underwriter: UBS PaineWebber Inc. 777 South Figueroa Street, 50th Floor Los Angeles, California 9'0017 · Attention: Municipal Finance Department provided, however, that all such notices, requests or other communications may be made by telephone and promptly confirmed by writing. The Authority, City and the Underwriter may, by DOCSLAl:397455.2 -15- administrative rule or regulation of the State. or the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, .or under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument to which State Street is a party or' is Otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of State Street to perform its obligations under the ~State Street Documents; (G) within the scoPe of its obligations under the Indenture, the Trustee agrees to cooperate with the Underwriter and its counsel, at the expense of the Underwriter, in endeavoring to qualify the Bonds for offering and sale under the securities' or blue sky laws of such jurisdictions of the United States as the Underwriter may request; provided, however, that the Trustee will not be required to execute a special or general consent to service 'of process or qualify as a foreign corporation in connection with any such qualification in any jurisdiction in which it is. not now so subject; (x) the no-arbitrage or tax certificate of the Authority. in form and substance acceptable to the Bond Counsel; (xi)~ evidence that the federa1 tax information Form 8038-G with respect to the Bonds has been prepared for filing and mailed; and : (xii) ' 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 Official Statement, of the Authority'.s representations and warranties contained herein and the City's representations and warranties contained in the Representation Letter and the due performance or satisfaction by the City and the Authority at or prior to the Closing Date of all agreements then to be performed and all conditions then to be satisfied by the' City and the Authority in connection with the transactions contemplated hereby and by the Official Statement, the City Documents and the Authority Documents. .If any of the conditions to the obligations of the Underwriter contained in this section or elsewhere in this Purchase Agreement" shall not have been satisfied when and as required herein, all obligations of the Underwriter hereunder may be terminated by the Underwriter at, or at any time prior to, the Closing Date by written notice to the Authority. 4. Expenses. (a) The Underwriter shall be under no obligation to pay, and the Authority shall pay or cause to be paid, whether out of the proceeds of the Bonds or otherwise, all expenses incident to the performance of the Authority's and the City's obligations hereunder, including but not limited to' the cost of printing and delivering the Bonds to the Underwriter and the Local Obligations to the Authority; the cost of preparation, printing (and/or word processing and reproduction), distribution and delivery of the Bond Resolution, the Resolutions, and the 'cost of printing' distribution and delivery of the Preliminary Official Statement and the Official Statement and .all other agreements and documents contemplated hereby (and drafts of any -14- DOCSLAl:397455.2 (B) State Street has duly authorized the execution and delivery of the Indenture, the Fiscal Agent Agreement and the Continuing. Disclosure Agreement (the "State Street Documents"); and (C) the State Street Documents have been duly entered into .and delivered by State Street and assuming due, valid and binding authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligations of State Street, enforceable against State Street in accOrdance with their terms, except ..as the enforceability thereof may be limited by applicable bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors' rights generally, or by general principles of equity; (ix) .a certificate, of State Street, dated the Closing Date, addressed to the Underwriter, in form and substance acceptable to counsel for the Underwriter to the following effect: (A) State Street is a national banking association, and is organized and existing under and by virtue of the laws of the United States of America, and has the full power and authority to accept and perform its duties under the State Street Documents; (B) subject to the provisions of the Indenture, the Trustee will apply the proceeds from the Bonds to the purposes specified in the Indenture; '. (c) the Bonds have been duly authenticated on behalf of Trustee; (D) 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 or, to the best of its knowledge, threatened in any way affecting the existence of State Street' or' seeking to restrain or to enjoin the execution and delivery of the State Street Documents, or the authentication of the Bonds, by state Street, or in any way contesting or affecting the validity or enforceability, as against State Street, of the State Street Documents or any action of State Street contemPlated by any of said documents, or in which an adverse outcome would materially and adversely affect the ability of State Street to perform its obligations Under the 'State Street DocumentS; (E) State Street is not in breach of or in default under any applicable law or administrative role or regulation of the State or the Un/ted States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which State Street is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of State Street to perform its obligations under the State Street Documents; (F) the authentication of the Bonds, and the execution and delivery of the State Street Documents by State Street, and compliance with the provisionS of each, will not conflict with or constitute a breach of or default under any applicable law or DOCSLAI:397455.2 (J) as of the Closing Date, the information contained in the Official Statement (excluding therefrom statistical and financial data and information with respect to The Depository Trust Company, the book entry system and the Insurer (Series E) is tree and correct and such information does not Contain any untrue statement of a material fact required to be stated in the Official Statement or omit to state any fact necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading in any material respect; (vi) the opinion of Orrick, Herrington & Sutcliffe LLP, Disclosure Counsel, dated the Closing Date, addressed to the Underwriter, to the effect.that based upon an examination which such firm has made, which shall be specified, and without having undertaken to independently verify the accuracy Or completeness of the statements contained in the Official Statement, no information came to the attention of the attorneys in such firm rendering legal services in connection with representation of the Authority which caused them to believe that the Official Statement as of its date (except for any financial, statistical and economic data or forecasts, numbers, charts, graphs, estimates, projections, assumptions or expressions of opinion and any information about valuation and any information under the 'captions "THE SERIES E BONDS- Book Entry System" and "' Debt Service' Schedule," "BOND INSURANCE," and APPENDIX D-"SERIES E 'BOND INSURANCE POLICY SPECIMEN," or otherwise about book-entry, DTC or the Bond Insurer included therein, as to which such firm shall not be required to express any opinion or view) contained any untrue statement of a material fact or omitted to state any 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 in any material respect; (vii) a certificate, dated the Closing Date and .signed by a duly authorized official of the City and the Authority, certifying that (A)the representations and warranties of the Authority contained herein and the City contained in the City's Representation Letter are tree and correct in all material respects on and. as of the Closing Date with the same effect as if made on the Closing Date; (B)no event has occurred since the date of the Official Statement affecting the City or the Authority 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 (C) the Authority has complied, with all the agreements and has satisfied all the conditions on 'its part to be · performed or satisfied under this Purchase Agreement at and prior to the Closing Date; (viii) the opinion of counsel to the Tmstee,.the Fiscal Agent and State Street Bank and Trust Company of California, N.A:, as dissemination agent (together, "State Street"), dated the Closing Date, addressed to the Underwriter, in form and substance acceptable to counsel for the Underwriter substantially to the following effect: · (A) State Street is a national banking association organized and existing under and by virtue of the laws Of the United States of America; DOCSLAl:397455.2 -12- accordance with their respective terms,~ subject to bankruptCy, insolvency, 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; (F) to the best of such firm's knowledge, 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 or threatened in any way affecting the existence of the City or the Authority or the titles of the officers of each to their respective offices, or seeking to restrain or .to enjoin the execution and delivery of the Authority Documents or the City Documents, or the issuance, sale or delivery of the Local Obligations or the Bonds or the application of the proceeds thereof, or the collection or application of the reassessments to pay the principal of and interest on the Local Obligations, or in any way contesting or affecting the .' validity or enforceability of the Local Obligations or the Bonds, this Purchase Agreement or any other Authority Document or City Document-or any action of the 'Authority or the City contemplated by any of said documents; (G) neither the Authority nor the City is 'in breach of or in default under any applicable law or administrative rule or regulation of the State of California or the United States of America, or of any department, division, agency or instrumentalitY of either thereof, Or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instmrnent to which the Authority or the City is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Authority or the City to perform their obligations under the Bonds, the Authority DocUments or the City Documents; (H) the adoption.of the Bond Resolution and the City Resolutions, and the execution and delivery of the Bonds, the Local Obligations and the other Authority Documents and City Documents and compliance with the provisions of each, will.not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California or the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administratiVe decree or order, or under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument to which the Authority or the City, as the case may be, is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Authority or the City to perform their obligation under the Bonds or any Authority Documents or City Documents, as the case may be; (I) ali approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the ability of the Authority to perform its obligations under the Bonds or any Authority Document or the performance by the City of its obligations under the Local Obligations or any City Document, have been obtained or made, as the case may be, and are in full force and effect; and DOCSLAl:397455.2 -11- "SECURITY FOR THE BONDS," "CONTINUING DISCLOSURE," "CONCLUDING INFORMATION - Tax Matters" and APPENDIX A- "SUMMARY OF INDENTURE AND FISCAL AGENT AGREEMENTS," and insofar as such statements purport to summarize certain provisions relating to the Bonds, the Local Obligations, the Indenture, the Fiscal Agent Agreement and the Continuing Disclosure Agreement and such firm's opinions regarding certain federal tax aspects are accurate in all material respects; provided that Bond Counsel need not express any opinion with respect to any financial or statistical information contained therein; (C) neither the Bonds nor the Local Obligations are subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture and the Fiscal Agent Agreement are exemPt from qualification pursuant to the Trust Indenture Act of 1939, as amended; and (D) the Bonds were validly issued under the provisions of the JPA Act and the Indenture, and the Local Obligations. representing the unpaid reassessments were validly issued Under the provisions of the Improvement Bond Act of 1915 (Sections 8500 and following, California Streets and Highways Code; hereafter referred to as the "Act") and-the Fiscal Agent Agreement. (v) An opinion, dated as of the Closing Date and addressed to: the Underwriter, of Woodruff, Spradlin & Smart as City Attorney and counsel to the Authority, in form and substance acceptable to the Underwriter and its counsel, to the effect that: (A) the Authority is a joint powers authority, duly organized and validly existing pursuant to the Constitution and the laws of the State of California with full legal right, power and authority to adopt the Bond Resolution, to issue the Bonds and to perform all of its obligations under the Bonds and the other Authority Documents; (B) the City is a general law city, duly organized and validly existing pursuant to the Constitution and the laws of the State of California with full legal fight, power and authority to adopt the City Resolutions, to issue the Local Obligations and to perform all of its obligations under the Local Obligations and the City Documents; (C) the preparation and distribution of the Preliminary Official Statement and the Official Statement and the execution and delivery of the Bonds and the other Authority Documents and the City Documents have been duly approved by the Authority and the City, as the case may be; (D) the Bonds and' the other Authority Documents constitute the legal, valid and binding obligations of the Authority enforceable against the Authority in accordance with their respective terms, subject to bankruptcy, insolvency, 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; (E) the Local Obligations and the City Documents constitute the legal, valid and binding obligations of the City enforceable against the City in DOCSLA1:397455.2 -10- (viii) additional material restrictions not in force as of the date 'hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange which restrictions materially adversely affect the Underwriter's ability to market the Bonds; or (ix) the United States has become engaged in hostilities whiCh have resulted in a declaration of war or a national emergency or there has occurred any other outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise, the effect of such outbreak, calamity or crisis on the. financial markets of the United States, being such as, in the reasonable opinion of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Bonds. (e) On or prior to 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, or shall have waived the receipt of such documents as a condition to the Underwriter's purchase of the Bonds' the Authority; (i) the Official Statement, executed on behalf of the'City and (ii) fully executed copies Of the City Documents, the Authority Documents and the Representation Letter of the City, in the form attached hereto as Exhibit'B (the "Representation .Letter") and certified copies of the Bond Resolution and the City Resolutions; (iii) an approving opinion of Bond Counsel dated the Closing Date and substantially in the form included as APPENDIX 'B to the Official Statement, together with a letter from such counsel, dated the Closing Date and addressed to the Underwriter, to the effect that the foregoing opinion may be relied upon by the Underwriter to the same extent as if such opinion were addressed to it; (iv) a supplemental opinion of Bond Counsel, dated as of the Closing Date and addressed to the Underwriter, in form and substance satisfactory to the Underwriter and its counsel, to the.effect that: (A) the Authority Documents and the City Documents, other than the Indenture which shall be covered in the opinion of Bond Counsel referred to in Section 3(e)(iii), have been duly authorized, executed and delivered'by the City and the Authority and constitute the legal, valid and binding obligations of each, 'are in full force and effect as of the Closing Date, and are enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of creditors rights and by the application of equitable principles if equitable remedies are sought; (B) the statements contained in the Official' Statement on the cover page and under the captions "INTRODUCTION," "'THE SERIES E BONDS," DOCSLA1:397455.2 -9- (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 as would be received by the holders of the Bonds or the Local Obligations; (ii). 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 the Bonds or the Local Obligations, obligations'of the general character of the Bonds or the Local Obligations, including any or all ~underlying arrangements, are not .exempt from registration under.or other requirements of the Securities Act of 1933, as amended, or that the Indenture 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 the Bonds or the Local Obligations or of obligations of the general character of the Bonds or the Local Obligations, 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 as amended and then in effect; (iii) a general suspension of trading in securities on the New York Stock Exchange, or a general banking moratorium declared by Federal, State of New York or State of California officials authorized to do so; . (iv) the withdrawal or downgrading of any rating of any securities of the Authority or the City by a national rating agency; (v) any amendmem 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 Authority or the City, the property, income or securities (or interest thereon) of either, the validity or enforceability of the reassessments or the ability of the .Authority to issue the Bonds or the City to issue the Local Obligations as contemPlated by the Indenture, the Fiscal Agent Agreement and the Official Statement; . (vi) the entry of an order by a court of competent jurisdiction which enjoins or restrains the City from issuing permits, licenses or entitlements within the City,' which order, in the reas°nable opinion of the Underwriter, materially and adversely affects proposed developments within the District in particular or the City in general; (vii) any legislation, ordinance, role or regulation shall be introduced in, or be enacted by any governmental body, department or agency of the State ora decision by any court of competent jurisdiction within the State or any court of the United States shall be rendered which, in the reasonable opinion of the Underwriter, materially adversely affects the market price of the Bonds; DOCSLA1:397455.2 -8- . . (q) The Authority is not in default, nor has the Authority been in default at any time, as to the payment of principal or interest with respect to an obligation issued by the Authority or with respect to an obligation guaranteed by the Authority as guarantor; (r) The Authority will apply the proceeds from the sale of the Bonds as set forth in and for the purposes specified in the Indenture. 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 Authority 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 Authority and other persons and entities made in any certificates or other documents fimaished pursuant to the provisions hereof, to the Performance by the Authority 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 Authority Documents, the City Documents, the Bond ResolUtion and the City Resolutions and any other applicable agreements 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 the Local Obligations and with the transactions contemplated thereby, all such actions as, in the opinion of Bond Counsel, shall be necessary and appropriate; (b) At the Closing Date, the Official Statement shall be in form and substance satisfactory to the Underwriter, the Authority and the City; (c) At the time of the Closing Date, the reassessments for the Local Obligations shall have been approved and Confirmed by the City and recorded in the office of the Orange County Recorder; (d) Between the date hereof and the Closing Date, the market price or marketability of the Bonds at the initial offering prices shall not have been materially adversely affected, in the judgment of the Underwriter (evidenced by a written notice to the'Authority terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following: (i) 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 has 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 DOCSLA1:397455.2 -7- circumstances existing at the time it is delivered to an initial purchaser of the Bonds, the Authority will forthwith prepare and furnish to the Underwriter a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to counsel.for the underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to an initial purchaser of the Bonds, not misleading. The costs of preparing any necessary amendment or supplement to the Official Statement shall be borne by the Authority or the City. For the purposes of this section the Authority will furnish such information with respect to itself as the Underwriter may from time to time request; (1) The Indenture will create a valid pledge of, lien upon, and security interest in the Local Obligations and the interest thereon and the moneys in all funds and accounts established therein, subject in ail cases to the provisions permitting.the application thereof for the purposes and on the terms and conditions set forth therein; (m) 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, or to the knowledge' of the Authority threatened in any way, affecting the existence of the Authority or the titles of its officers to their respective offices or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds, the apPlication of the proceeds thereof, or the purchase of the Local Obligations pledged or to be pledged to pay the principal of and interest in the Bonds, or in any way contesting or affecting the validity or enforceability of the Bond Resolution, the Bonds or the other Authority Documents, or any action of the Authority contemplated by any of said documents, or in any way contesting the cOmpleteness oi' accuracy of the Preliminary Official Statement or the Official Statement or the powers of the Authority or its authority with respect to the Bond Resolution, the Bonds or the other Authority Documents, or any action of the Authority contemplated by any of said documents, or which would adversely affect the exemption of interest paid on the Bonds from federal income taxation or California personal income taxation, nor to the knowledge of the Authority is there any basis therefor; (n) The Authority 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 Authority shall not be required to register as a dealer or a broker of securities or consent to the jurisdiction of any State of the United States, other than the State of California; (o) Any certificate signed by any authorized official of the Authority authorized to do so shall be deemed a representation and warranty by the Authority to the Underwriter as to the statements made therein; (p) During the period from the date hereof until the Closing Date, the Authority. agrees to furnish the Underwriter with copies of any documents it files with any regulatory authority which are requested by the Underwriter; -6- DOCSIA-l:397455.2 administrative role or regulation of'the State of California or the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Authority is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Authority to perform its obligations under the Bonds or the other Authority Documents; (g) Except as may be required under the blue sky laws of any state, all approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute conditions precedent to, or the absence of whiCh would materially adversely affect, the ability of the Authority to perform its obligations the Bonds, under any of the other Authority Documents or any other applicable agreements, have been obtained and are in full force and effect; (h) The Bonds, the Indenture and the Bond Resolution conform as to form and tenor to the desCriptions thereof contained in the Preliminary Official Statement, and which will be contained in the Official Statement as of the Closing Date, and when delivered to. and paid for by the Underwriter on the Closing Date as provided herein, the Bonds will be validly issued and outstanding; ~ (i) The Preliminary Official Statement provided to the Underwriter. has been deemed final by the Authority, as required by Rule 15c2-12. As of the date thereof, the Preliminary Official Statement (other than information as to which the Authority shall not be required to express any view) did not contain any untrue statement of a material fact or omit 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; the Official Statement (other than information with respect to The Depository Trust Company, the book-entry system and the Insurer (Series E), as to which the Authority shall not be required to express any view) does not, as of the Closing Date, and will 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 the light of the circumstances under which they were made, not misleading; (j) Until the date which is 25 days after the End Date, if any event shall occur of which the Authority is aware, as a result of which it may be necessary to supplement the Official Statement in order to make the statements contained in the Official Statement, in light of the circumstances existing at such time, not misleading, the Authority 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, as required by subparagraph (i) of this Paragraph 2; (k) After the Closing and until the date which is 25 days after the End Date (i) the Authority will not adopt any amendment of or supplement to the Official Statement to which the Underwriter shall object in writing or which shall be disapproved by counsel for the Underwriter, and (ii) if any event relating to or affecting the Authority shall occur as a result of which it is necessary, in the opinion of counsel for the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in'the' light of the -5- DOCSI~M :397455.2 set forth in Section 1 (a) hereof by'wire transfer of immediately available fUnds. The date of this payment and delivery, together with the delivery of the aforementioned documents, is herein' called the "Closing Date." 2. .Representations, Warranties and Agreements of the Authority. Authority hereby represents and warrants to' and agrees with the Underwriter that: The (a) The Authority is a joint powers .authority, duly organized and existing under the laws of the State, including the Joint Exercise of Powers Act (Section 6500 et .seq. of the California Government Code) (the "J-PA Act"); (b) The Authority has, and at the Closing Date will have, full legal right, power and authority (i) to execute, deliver and perform its obligations under the Authority Documents, (ii) to adopt the Bond Resolution, (iii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (iv) to Carry out, give effect to and consUmmate the transactions contemplated by the Authority Documents, the Bond Resolution and the Official Statement; (c) The Authority is, and at the Closing Date will be, in compliance, in all respects, with the AuthOrity Documents; (d) The Authority has duly. and validly adopted the Bond Resolution and approved the execution and delivery of the Bonds and the' Authority Documents, and the performance by the Authority of its obligations contained therein, and the taking of any and ali action as may be necessary to carry 'out, give effect to and consummate the transactions contemplated by each of said documents. The Bonds and the other Authority Documents have been, or on or before the Closing Date will be,' duly executed and delivered by the Authority, and, on the Closing Date, the Bonds, when authenticated and .delivered to the Underwriter in accordance With the Indenture, and the Authority Documents will constitute legally valid and binding obligations, enforceable against the Authority in accordance with their respective terms,. except as such. enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws or equitable principles relating to or limiting creditors' rights generally; (e) The Authority is not, and at the Closing Date will not be, in breach of or in default under any applicable law or administrative rule or regulation of the State of California (the "State") or the United States of America, .or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolUtion, indenture, 'contract, agreement or other instrument to which the Authority is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect .the ability of the Authority to perform its obligations under the Bonds or the Authority Documents; (f) The adoption of the Bond Resolution and the execution and delivery of the Bonds and the Authority Documents and compliance with the provisions of each, did not and will not conflict with or constitute a breach of or default under any applicable law or -4- DOCSLAl:397455.2 · ~ .The proceeds of the Bonds shall be applied to acquire the Local Obligations. The proceeds of the Local .Obligations shall be applied (i) to establish the Reserve Account (as defined and described in .the Fiscal Agent Agreement), (ii)~pay the costs of issuance of the Local Obligations and (iii) to purchase and cancel $1,946,088.64 principal amount of the City's Limited Obligation Improvement Bonds, Reassessment District. No. 95-2 (Tustin Ranch), Series A (the "Prior Bonds") pursuant to the Indenture. (c) The Underwriter agrees to offer all the BondS to the Public initially at the prices (or yields) set forth in Exhibit A hereto and on the cover page of the Official Statement of the Authority pertaining to the Bonds, dated (the Official Statement, derived from the Preliminary Official Statement, together with ail appendices thereto, and with such supplements thereto as are consented to in writing by the Authority and the Underwriter, is herein called the "Official Statement"). Subsequent to the initial public offering of the Bonds, the Underwriter reserves the right to change the public offering prices (or yields) as it deems' necessary in connection with the marketing of the Bonds. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. (d) The Authority shall deliver to the underwriter six (6) copies of the Official Statement manually executed on behalf of the Authority by the Chairman. The. Authority shall also deliver a sufficient number of copies of the Official Statement to enable the Underwriter to distribute a single copy of each Official Statement to any potential customer of the Underwriter requesting an Official Statemem during the time period beginning when-the Official Statement becomes available and ending on the End Date (defined below). The Authority shall deliver these copies to the Underwriter within seven (7) business days after the execution of this Purchase Agreement. The Underwriter covenants to file the Official Statement with a nationally recognized municipal securities information repository ("NRMSIR") on a timely basis. The term "End Date" means the later of sUch time as (i)'the Authority delivers the Bonds to the Underwriter or (ii) the Underwriter does not retain an unsold balance of the Bonds for sale to the Public. Unless the Underwriter gives .notice to the contrary, the End Date shall be deemed the CloSing Date. An authorized officer of the Authority and of the City have certified to the Underwriter on behalf of the Authority and the City that such Preliminary Official Statement was deemed to be final as of its date for purposes of Rule 15c2-12, with the exception of certain final pricing and related information referred to in Rule 15c2-12. The Underwriter has distributed a single copy of each Preliminary Official Statement to potential customers on request. (e) At 9:00 A.M., California time, on November 7, 2001', or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the Authority and the Underwriter. (the "Closing Date"), the Authority will deliver (i) the Bonds to The Depository Trust Company ("DTC") in New York, New York, and (ii) the closing documents hereinafter mentioned at the Los Angeles offices of Orrick, Herrington & Sutcliffe LLP ("Bond Counsel"), or such other place to be mutually agreed upon by the Authority and the Underwriter. Subject to the provisions of this Purchase Agreement, the Underwriter will accept such delivery from the Authority. The Underwriter will pay the purchase price of the Bonds as D OCSLA 1:397455.2 -3- fOrm. The Original Indenture, as amended and supplemented by the First Supplememal Indenture, the Second Supplemental Indenture, the Third Supplemental Indemure, and the Fourth Supplemental Indenture shall be referred to herein as the "Indenture." (b) The Bonds shall be issued and secured under the provisions of the Indenture,. and shall be as described in the Indenture. Pursuant to a Resolution of the Authority adopted on October 15, 2001 (the "Bond Resolution"), the Authority has authorized (i) the issuance of the Bonds, (ii) the execution and delivery of the Fourth Supplemental Indemure, this Purchase Agreement, a Purchase Agreement by and between the City and the Authority (the "Local Obligation Purchase Agreement," and together with the Bonds, the Fourth Supplemental Indenture and this Purchase Agreement, the "Authority Documents") and the. Official Statement (as defined below) and (iii) the use of the Preliminary Official Statement of the City and the Authority dated .., 2001, relating to the Bonds together with all appendices thereto (the "Preliminary Official Statement") and the Official Statement in connection with the offering and sale of the Bonds. The Local Obligation Bonds shall be issued and secured under the provisions of, and as described in, the Fiscal Agent Agreement, dated as of February 1, 1996 (the "Original Fiscal Agent Agreement"), as amended and supplemented by a First Supplemental Fiscal Agent Agreement, - dated as of SePtember 1, 1996 (the "First Supplemental Fiscal Agent Agreement"), a Second Supplemental Fiscal Agent Agreement, dated as of November 1, 1997 (the "Second Supplemental Fiscal Agent Agreement"), a Third Supplemental Fiscal .Agent Agreement, dated as of November 1, 1998 (the "Third Supplemental Fiscal Agent Agreement"), a Fourth · Supplemental Fiscal Agent Agreement, dated as of November 1, 1999 (the "Fourth Supplemental Fiscal Agent Agreement") and a Fifth Supplemental Fiscal Agent Agreement (the "Fifth Supplemental Fiscal Agent Agreement"), each by and between the City and State Street Bank and Trust of California, N.A., as fiscal agent (the "Fiscal Agent"). The Original Fiscal .Agent Agreement, as amended and supplemented by the First Supplemental Fiscal Agent Agreement, the Second Supplemental Fiscal Agent Agreemem, the Third Supplemental Fiscal Agent Agreement, the Fourth Supplemental Fiscal Agent Agreement and the Fifth Supplemental Fiscal Agent Agreement, are hereinafter-referred to as the Fiscal Agent Agreement. Pursuant to a Resolution of the City adopted on October 15, 2001 (the "City Bond Resolution"), the citY has authorized (i) the issuance of the Local Obligations, and (ii) the execution and delivery of.the Fifth Supplemental Fiscal Agent Agreement, the Local Obligation Purchase Agreement and a Continuing Disclosure Agreement by and between the City and the Fiscal Agent (the "Continuing Disclosure Agreement"). The Fiscal Agent Agreement, the Local Obligation Purchase Agreement and the Continuing Disclosure Agreement are hereinafter referred to as the "City Documents." The Local Obligations will be 'secured by reassessments levied on the property within the District. In connection with the establishment of the District and the reassessments imposed in connection therewith, the City adopted a resolution of intention to form the District and a resolution approving an engineer's report and confirming the reassessments (the "Procedural Resolutions"). The City Bond Resolution and the Procedural Resolutions are herein collectively referred to as the City Resolutions. DOCSLA1:397455.2 -2- TUSTIN PUBLIC FINANCING AUTHORITY REVENUE BONDS (TUSTIN RANCH) SERIES E BOND PURCHASE AGREEMENT ,2001 Tustin Public Financing Authority c/o City of Tustin 300 Centennial.Way Tustin, California 92680 Ladies and Gentlemen: UBS 'PaineWebber Inc. (the "Underwriter")~offers to enter into this Bond Purchase Contract (this "Purchase Agreement") with the Tustin Public Financing Authority (the "Authority") with regard to the purchase and sale of the Bonds described herein, which will be binding upon the Authority and the Underwriter upon the Authority's acceptance hereof. All capitalized terms not otherwise defined herein shall have the meanings prescribed in the Indenture' (defined below). o Purchase, Sale and Delivery_ of the Bonds. (a) Upon. the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, including the simultaneous purchase of certain limited Obligation bonds (the "Local Obligations") of Reassessment District No. 95-2 (the "District") of the City of Tustin (the "City"), the Underwriter hereby agrees to purchase from the Authority and the Authority agrees to sell to the Underwriter all (but not less than all) of the Authority's $ aggregate principal amount of Revenue Bonds (Tustin Ranch), Series E (the "Bonds"), at the aggregate purchase price of $ (being the 'principal amount of the Bonds less an Underwriter's discount of $ and less original issue discount of $ ). The Bonds will have the maturities and shall bear interest as set forth in Exhibit A hereto. The Bonds will be subject to redemption and such other terms as set forth in the Indenture of Trust, dated as of February 1, 1996 (the "Original Indenture"), as amended and supplemented by the First Supplemental Indenture of Trust, dated as of November 1, 1997 (the "First Supplemental Indenture"), the Second Supplemental Indenture of Trust, dated as of November 1, 1998 (the "Second Supplemental Indenture"), the Third Supplemental Indenture of Trust, dated as of November 1, 1999 (the "Third SupPlemental Indenture"), and the Fourth Supplemental Indenture of Trust, dated as of. ., 2001 (the "Fourth Supplemental Indenture"), each by and between the Authority and State Street Bank' and Trust Company of California, N.A., as trustee (the "Trustee"), and shall be issued in book-entry only DoCSLAl:397455.2 Exhibit A Maturity Schedule for the Bonds Maturity (September 2) $ Serial Bonds Principal Amount Interest Rate Yield 2000 2001 2002 2003 2004 2005 2006. 2007 2008 2009 $ $ oA Term Bond due September 2, 20 Yield' % DOCSLAl:397455.2 A-1 EXHIBIT B FORM OF REPRESENTATION LETTER The City of Tustin (the "City") hereby certifies in connection with the Bond Purchase Agreement (the "Purchase Agreement"), dated , 2001, between UBS PaineWebber Inc. and the Tustin Public Financing Authority, as follows (capitalized terms not otherwise defined herein shall have the meaning set forth in the Purchase Agreement)- ' The City hereby represents and warrants to and agrees with the Underwriter that: (a) The City is a California general law city, duly organized and validly existing pursuant to the Constitution and laws of the State of California; (b) The City has, and at the Closing Date will have, full legal right, power and authority (i) to execute, deliver and perform its obligations under the City Documents, (ii) to adopt the City Resolutions, (iii)to issue, sell and deliver the Local Obligations to the Authority as provided in the Local Obligation Purchase Agreement, and (iv)to carry out, give effect to and consummate the transactions contemplated by the City Documents, the City Resolutions and the Official Statement; (c) The City is, and at the Closing Date will be, in compliance, in all respects, with the City Documents; (d) The City Council has duly and validly adopted the City Resolutions and approved the execution and delivery of the Local Obligations and the City Documents, and the performance by the City of its obligations contained therein, and the taking of any and all action as may be necessary to carry out, give effect to and conSummate the transactions contemplated by each of said documents. The City Documents and the Local Obligations have been, or on or before the Closing Date will be, duly executed and delivered by the City, and, on the Closing Date, the Local Obligations, the City Documents will constitute legally valid and binding obligations, enforceable against the City in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws or equitable principles relating to or limiting creditors' rights generally; (e) The City is not, and at the Closing Date will not be, in breach of or in default under any applicable law or administrative role or regulation of the State of California (the "State") or the. United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the City to perform its obligations under the Local Obligations or the other City Documents; DOCSLA1:397455.2 B-I (f) The adoption of the City Resolutions and the execution and delivery of the Local Obligations and the City Documents or any other applicable agreements and the other instruments contemplated by 'any of such documents to which the City is a party, and compliance with the provisions thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative role or regulation of the State of California or the United States of America, or of any department, division, agenCy or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or' is otherwise subject or bound, a consequence of which could be to materially and adversely .affect the ability of the' City to perform its obligations under the Bonds or the City Documents; (g) Except as may be required under the blue sky laws of any state, all approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute conditions precedent to, or the absence of which would materially adverselY affect, the ability of the City to perform its obligations under any of the City Documents, or under the Local Obligations, or any other applicable agreements, have been obtained and are in full force and effect; (h)' The Local Obligations, the Fiscal Agent Agreement, the Continuing Disclosure Agreement and the Procedural Resolutions conform as to form and tenor to the descriptions thereof contained in the Preliminary Official Statement, and which will be contained in the Official Statement~ as of the Closing Date, and when delivered to and paid for by the Authority on the Closing Date as provided herein, the Local Obligations will be validly issued and outstanding; (i) The reassessments constituting the security for the Local Obligations have been duly and lawfi~lly levied under and pursuant to the Municipal Improvement Act of 1913 (Sections 10000 and following, California Streets and Highways Code), the Improvement Bond Act of 1915 (Division 10 of the California Streets and Highways Code), as' amended, and such reassessments constitute valid and legally binding liens on the properties on which they have been levied; (j) There are no outstanding reassessment liens levied by the City against any of the properties within the District which are senior to the assessment liens referred. to in paragraph (i) hereof, and the City has no present intention of conducting ft~her proceedings leading to the levying of additional assessments against any of the properties within the District; (k) The Preliminary Official Statement provided to the Underwriter has been deemed final by the City, as required by Rule 15c2-12. As of the date thereof, the Preliminary Official Statement (other than information (other than information with respect to The Depository Trust Company, the book-entry system and the Insurer (Series E), as to which the City shall not be required to express any view) did not contain any untrue statement of a.material fact or omit 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; the Official B-2 DOCSLAl:397455.2 Statement (other than information (other than information with respect to The Depository Trust Company, the book-entry system and the Insurer (Series E), as to which the City shall not be required to express any view) does not and, as of the Closing Date, will 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 the light of the circumstances under which they were made, not misleading; (1) Until the date which is 25 days after the End Date, 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 contained 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 finmishing any information available to it fOr any supplement to the Official Statement necessary, as required by subparagraph (m) below; (m) After the Closing and until the date which is 25 days after the End Date (i)the City will not adopt any amendment of or supplement to the Official Statement to which the Underwriter shall Object in writing or which shall be disapproved by counsel for the Underwriter, and (ii) if any event relating to or affecting the City shall occur as a result of which it is necessary, in the opinion of counsel for the Underwriter, to amend .or supplement the-Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to an initial purchaser of the Bonds, the City will forthwith prepare' and furnish to the Underwriter a reasonable number of copies of an amendment of or sUpplement to the Official Statement (in form and substance satisfactory to counsel for the Underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to an initial purchaser of the Bonds, not misleading. The costs of preparing any necessary amendment or supplement to the Official Statement shall be borne by the City. For the purposes of this section the City will furnish such information with respect to itself as the Underwriter may from time to time request; (n) The Fiscal Agent Agreement will Create a valid pledge of and lien upon the unpaid assessments in the Subject Area of the District and the interest thereon and the moneys in all funds and accounts established therein, subject in all cases to the provisions permitting the application thereof for the purposes and on the terms and conditions set forth therein; (o) 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, or to the knowledge of the City threatened in any way, affecting the existence of the City or the titles of its officers to their respective offices or seeking to restrain or to enjoin the issuance, sale or delivery of the Local Obligations, the application of the proceeds thereof, or the collection or application of reassessments pledged or to be pledged to pay the principal of and interest on the Local Obligations, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the City Resolutions, the Local Obligations or the CitY Documents, or any DOCSLA1:397455.2 B-3 action of the City contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement or the powers of the City or its authority with respect to the City Resolutions, the Local Obligations or the City Documents, or any action of the City contemplated by any of said documents, or which would adversely affect the exemption of interest paid on the Local Obligations from federal income taxation or California personal income taxation, nor to the knowledge of the City is there any basis therefor; (p) The City will fimfish 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 consent to the jurisdiction of any state of the United States, other than the State of California; (q) Any certificate signed by any authorized official of the City authorized to do so shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein; ~ (r) During the period from the date hereof until the Closing Date, the City agrees to ftmfish the Underwriter with copies of any documents it files with any regulatory authority which are requested by the Underwriter; (s) The City is not in' default, nor has the City' been in default at any time, as to the payment of principal or interest with respect to an 'obligation issued by the City or with respect to an obligation guaranteed by the City as guarantor; (t) The City has not been notified of any listing or. proposed listing by the Internal Revenue Service to the effect that the City is a bond issuer whose arbitrage certificates may not be relied upon; (u) The City will apply the proceeds from the sale of the Local Obligations as set forth in and for the purposes specified in the City Resolutions and the Fiscal Agent Agreement; DOCSLAl:39745 5.2 B-4 (v) The City will undertake, pursuant to the Fiscal Agent Agreement and the Continuing Disclosure Agreement, to provide certain .annual financial information and information about the property in the District, together with notices of the occurrence of certain events, if material. A copy of the Continuing Disclosure Agreement is set forth in Appendix C of the Preliminary Official Statement and will also be set forth in the Official Statement, and the specific nature of the information to be Contained 'in the Annual Report (as defined in the Continuing Disclosure Agreement) or the notices of material events is set forth in the Continuing Disclosure Agreement. Very truly yours, CITY OF TIISTIN By: Ronald A. NaUlt Finance Director DOCSLA1:397455.2 B-5 BOND PURCHASE AGREEMENT by and between the CITY OF TUSTIN and the TUSTIN PUBLIC FINANCING AUTHORITY Dated as of,,, ,2001 DOCSLA1:397428.2 BOND PURCHASE AGREEMENT THIS BOND PURCHASE AGREEMENT (this "Bond Purchase Agreement") is entered into as of ,2001, by and between the Tustin Public Financing Authority (the '.'Authority") and the City of Tustin (the "City"). WITNESSETH: WHEREAS, the Authority is a joint exercise of powers authority duly organized and existing, under the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Act"), and is authorized pursuant to Article 4 of the Act to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations to provide financing or refinancing for public capital improvements of local agencies within the State of Califomia (the "State"); WHEREAS, the City is issUing $ aggregate principal amount of its Limited Obligation Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch), Fixed Rate Bonds, Group Four (the "Group Four Bonds"), pursuant to a Fiscal Agent Agreement, dated as of February 1, 1996, by and between the City and State Street Bank and Trust Company of California, N.A., as fiscal agent (the "Fiscal Agent"), as amended and supplemented by a First Supplemental Fiscal Agent Agreement, dated as of September 1, 1996, by and between the City and the Fiscal Agent, a Second Supplemental Fiscal Agent Agreement, dated as of November 1, 1997, by and between the City and the Fiscal Agent, a Third Supplemental Fiscal Agent Agreement, dated as of November 1, 1998, by and between the City and the Fiscal Agent, a Fourth Supplemental Fiscal Agent Agreement, dated as of November 1, 1999 (the "Fourth Supplemental Agreement"), by and between the City and the Fiscal Agent, and a Fifth Supplemental Fiscal Agent Agreement, dated as of 1, 2001, by and between the City and the Fiscal Agent (as so amended and supplemented, the "Fiscal Agent Agreement"); WHEREAS, the Authority desires to assist the City with the Group Four Bonds financing by purchasing the Group Four Bonds from the City; WHEREAS, in order to provide the funds necessary to purchase the Group Four Bonds from the City, the Authority has authorized the issuance of the Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series E (the "Series E Bonds"), in the aggregate principal amount of $ , pursuant to an Indenture of Trust, dated as of February 1, 1996, by and between the Authority and State. Street Bank 'and Trust Company of Cali£omia, N.A., as trustee (the "Trustee"), as amended and supplemented by a First Supplemental Indenture of Trust, dated as of November 1, 1997, by and between the Authority and the Trustee, a Second Supplemental Indenture of Trust, dated as of November 1, 1998, by and between the Authority and the Trustee, a Third Supplemental Indenture of Trust, dated as of' November 1, 1999, by and between the Authority and the Trustee, and a Fourth Supplemental Indenture of Trust, dated as of 1, 2001, by and between the Authority and the Trustee, (as so amended and supplemented, the "Indenture"); DOCSLAl:397428.2 WHEREAS, the Authority and the City have found and determined that the sale of the Group Four Bonds to the Authority will result in substantial public benefits to the City, namely, the interest savings with respect to the Group Four Bonds to be achieved by reason of the credit rating to be assigned to the Series' E Bonds; and WHEREAS, the Series E Bonds are being purchased from the Authority pursuant to a Bond Purchase Agreement, dated ,2001 (the "Authority Purchase Agreement"), by and between the Authority and UBS PaineWebber Inc. (the "Underwriter"); WHEREAS, the Authority and the City desire to enter into this Agreement providing for the sale of the Group Four Bonds by the City to the Authority and containing the other agreements herein set forth; NOW, THEREFORE, in consideration of the mutual agreements herein contained, the Authority and the City agree as follows- Section 1. DefinitiOns. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Fiscal Agent Agreement. Section 2. Purchase and Sale of Group Four Bon,ds. (a) Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter, set forth, the City hereby agrees to sell to the Authority, and the Authority hereby agrees to purchase from the City, all (but not less than all) of the $ aggregate principal amount of the Group Four Bonds. The Group Four Bonds shall mature on September 2, 2013 and shall bear interest at the nominal rate of' °A per annum. (b) The Group Four Bonds and interest thereon shall be payable from annual assessments levied on the Designated Parcels (Group Four) and collected in accordance with the Fiscal Agent Agreement and the proceedings relating thereto. The Group Four Bonds shall be substantially in the form described in, shall be executed, delivered and secured under and pursuant to, and shall be payable and subject to redemption as provided in, the Fiscal Agent Agreement. The proceeds' of the Group Four Bonds, together with other available funds, will be used by the City to (i) pay the Purchase Price of the Series A Bonds being converted to Fixed Rate Bonds on the Conversion Date (Group Four), (ii) pay costs of issuance relating to the Group Four Bonds and the Series E Bonds, including the premium for the municipal bond insurance policy securing the Series E Bonds, and (iii) fund the Reserve Account (Group Four) established under the Fiscal Agent Agreement. The Fiscal Agent Agreement and this Bond Purchase Agreement are colleCtively referred to as the "Legal Documents". (c) The-City hereby ratifies, confirms and approves the Preliminary Official Statement of the Authority, dated , 2001, relating to the Series E Bonds, which contains certain information about the City,.the City's Reassessment District No. 95-1 (Tustin Ranch), the City's Reassessment District No. 95-2 (Tustin Ranch), the Fiscal Agent Agreement and the Group Four Bonds (which, together with the cover page and ail appendices thereto, is referred to herein as the "Preliminary Official Statement"), which Preliminary Official Statement the City deemed f'mal and so certified as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended ("Rule 15c2-12"), except for DOCSLAl:397428.2 -2- information permitted to be omitted therefrom by Rule 15c2-12. The City hereby agrees to assist the Authority in the preparation of a final official statement (the "Official Statement"), consisting of the Preliminary' Official Statement, with such changes as may be made thereto with the approval of the Authority, the City and the Underwriter, so that the Authority may deliver or cause to be delivered to .the Underwriter, no later than the earlier of the day prior to the Closing Date (as hereinafter defined) or seven business days after the date the Underwriter agrees to. purchase the Series E Bonds, copies of the Official Statement in such reasonable quantity as the Underwriter shall request. The City hereby approves of the use and distribution by the Underwriter of the Official Statement in connection with the offer and sale of the Series E Bonds.. (d) The aggregate purchase price for the Group Four Bonds shall be $ (being the principal amount of the Group Four Bonds, less a purchaser's discount of $ and less original issue discount of $ ), which shall be payable solely from proceeds of sale of the Series E Bonds. (e) At 9:00 a.m., California time, on ,2001, or at such other time or on such other date as the Authority, the City and the Underwriter may mutually agree upon (the "Closing Date"), at the offices of Orrick, Herrington & Sutcliffe LLP, in Los Angeles, California, the City shall deliver or cause to be delivered to the Authority, the Group Four Bonds in the form of a single fully registered certificate (which may be tYPewritten), registered in the name of the Trustee, as assignee of the Authority, duly executed and authenticated, and the other documents mentioned herein. The Authority shall accept suCh delivery and pay the purchase price of the Group Four Bonds as provided in subparagraPh (d) above in immediately available funds (such delivery and payment being herein referred to as the "Closing"). Section 3. Reoresentations and Warranties of the Ci .ty. The City hereby makes to the Authority the representations and warranties made by the City to the Underwriter in .the City's Representation Letter, dated as of ,2001 (the "Representation Letter"), the form of which is attached to the Authority Purchase Agreement, to the same extent as if such representations and warranties were set forth in full herein. Section 4. Conditions to the Obligations of the Authori.ty. The Authority has entered into this Bond Purchase Agreement in reliance upon the representations, warranties and agreements of the City contained herein and to be contained in the documents and instruments to be delivered on the Closing Date, and upon the performance by the City of its obligations hereunder, both as of the date hereof and as of the Closing Date. Accordingly, the Authority's obligations under this Agreement to purchase, to accept delivery of and to pay for the Group Four Bonds shall be subject to the performance by the City of its obligations to be perfOrmed hereunder and under such documents and instruments at or prior to the Closing Date, and shall also be subject to the following conditions: (a) The representations and warranties of the City contained herein shall be tree, complete and correct on the date hereof and on and as of the Closing Date, as if made on the Closing Date; DOCSLAl:397428.2 -3- (b) On the Closing Date, the Legal Documents shall be in full force and 'effect and shall not have been amended, modified or supplemented, and the Official Statement shall not have been amended, modified or supplemented, except in either case as may have been agreed to by both the Authority and the Underwriter; (c) As of the Closing Date, all official action of.the City relating to the Group Four Bonds shall be in full force and effect, and there shall have been taken all such actions as, in the opinion of Orrick, Herrington & Sutcliffe LLP, bond counsel ("Bond Counsel"), shall, be necessary or appropriate in connection therewith, with the issuance of the Series E Bonds and the Group Four Bonds, and with the transactions contemplated by the Legal Documents, all as described in the Official Statement; (d) Between the date hereof and the Closing Date, the market price or marketability, at the initial offering price or prices set forth in the Official Statement, of the Series E Bonds shall not have been materially adversely affected, in the reasonable judgment of the Underwriter, by reason of any of the following' (i) an amendment to the Constitution of the United 'States or the constitution of the State shall have been passed or legislation enacted (or resolution passed) by or introduced or pending legislation amended in the Congress or recommended for passage by the President of the United 'States, the Speaker of the House of Representatives, the President Pr° Tempore of the Senate, the Chairman or ranking minority member of the Committee of Ways and Means of the House of Representatives or the Chairman or ranking minority member of the Committee on Finance of the Senate, or a decision rendered by a court established under Article III of the Constitution of the United States or by the Tax Court of the United States, or an order, ruling, regulation (final, temporary or proposed) or press release issued or made (A) by or On behalf of the Treasury Department of the United States or the Internal Revenue Service, with the purpose or effect; directly or indirectly, of imposing federal income taxation upon such interest as would be received by the owners of the Series E Bonds, (B) by or on behalf of the State or the California Franchise Tax Board, with the purpose or effect, directly or indirectly, of imposing California personal income taxation upon such interest as would be received by the owners of the Series E Bonds, or (C) by or on behalf of the Treasury Department of the United States or the Internal Revenue Service or by or on behalf of the State or the California Franchise Tax Board, with the purpose or effect, directly or indirectly, of changing the federal or State income tax rates, respectively; (ii) the declaration of war or engagement in major military hostilities by the United States or the occurrences of any other national emergency or ~alamity relating to the effective operation of the government of the United States; (iii) the declaration of a general banking moratorium by federal, New York or California authorities, or the general suspension of trading on any national securities exchange; (iv) the impOsition by the New York Stock Exchange or other national securities exchange or any governmental authority, of any material restrictions not now in DOCSLAl:397428.2 -4- force with respect to the Series E Bonds or obligations of the general character of the Series E Bonds, or the material increase of any such restrictions now in force; (v) an amendment to the Constitution of the United States or the constitution of the State shall have been passed or legislation enacted (or resolution passed) by or introduced or pending legislation amended in the Congress or recommended for passage by the President of the United States, or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed) or press release 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 Series E Bonds, or the Series E Bonds, including any or all underlying arrangements, are not exempt from registration under the Securities Act of 1933, as amended, or that the Fiscal Agent Agreement or the Indenture is not exempt from qualification under the Trust Indenture Act of 1939, as amended, or that the execution, offering or sale of obligations of the general character of the Series E Bonds, or of the Series E Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement, otherwise is or would be in violation of the federal securities laws as amended and then in effect; (vi) the withdrawal or downgrading of any rating of the Series E Bonds by a national rating agency; (vii) 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 Official Statement, or has the effect that the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein; in the light of the circumstances under which they were made, not misleading; (e) On the Closing Date, the Series E Bonds shall have been issued and delivered to the Underwriter and all of the conditions to closing contained in the Authority Purchase Agreement shall have either been satisfied or waived; and (f) At or prior to the Closing Date, the Authority and the Underwriter shall have received the following .documents, in each case satisfactory in form and substance to the Authority and the UnderWriter' (i) Two copies of the Fourth Supplemental Agreement, duly executed and delivered by the parties thereto, with only such amendments, modifications or supplements as may have been agreed to in writing by the Authority and the Underwriter; (ii) The approving opinion, dated the Closing Date and addressed to the City, of Bond Counsel approving, without qualification, the validity of the Group Four Bonds, and a letter of such counsel, dated the Closing Date and addressed to the Authority and the Underwriter to the effect that such opinion may be relied upon by the Authority and the Underwriter to the same extent as if such opinion were addressed to them; (iii) A copy of the Fiscal Agent.Agreement, certified by the City Clerk; -5- DOCSLA1:397428.2 (iv) The opinion of the City Attorney, dated the Closing Date and addressed to the Authority and the Underwriter, to the effect set forth in Section 3(e)(v) of the Authority Purchase Agreement; (v) The opinion, dated the Closing Date and addressed to the City, the Underwriter and the Authority, of counsel to the Fiscal Agent, to the effect set forth in Section 3(e)(viii) of the Authority Purchase Agreement; (vi) A certificate, .dated the Closing Date, signed by a duly authorized official of the City, in form and substance satisfactory to the Authority and the Underwriter, to the effect that the representations and warranties of the City contained in this Bond Purchase Agreement 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; (vii) A certificate, dated the date of Closing, signed by .a duly authorized official ~of the Fiscal Agent, satisfactory in form and substance to the Authority and the Underwriter, to the effect set forth in Section 3(e)(ix) of the Authority Purchase Agreement; (viii) Two certified copies of the general resolution of the Fiscal Agent authorizing the execution and delivery of the Fiscal Agent Agreement by the Fiscal Agent; and (ix) Such additional legal opinions, certificates, proceedings, instruments or evidences thereof and other documents as the Authority, the Underwriter or Bond Counsel may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the representations of the City herein and of the statements and information contained in the Official Statement, and the due performance or satisfaction by the Fiscal Agent and the City at or prior to the Closing of all. agreements then to be performed and all conditions then to be satisfied by any of them in connection with the transactions contemplated hereby and by the Legal Documents. All of the opinions, letters, certificates, instnm~ents and other documents mentioned above or elsewhere in this Bond Purchase Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to the Authority, but the approval of the Authority shall not be unreasonably withheld. Receipt of, and payment for, the Group Four Bonds shall constitute evidence of the satisfactory nature of such as to the Authority. The performance of any and all obligations of the City hereunder and the performance of any and all conditions contained herein for the benefit of the Authority may be waived by the Authority in its sole' discretion. If the City shall be unable to satisfy the conditions to the obligations of the Authority to purchase, accept delivery of and pay for the Group Four Bonds contained in this Bond Purchase Agreement, or if the obligations of the Authority to purchase, accept delivery of and pay for the Group Four Bonds shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate, and neither the Authority nor the DOCSLAl:397428.2 -6- City shall be under further obl. igation hereunder, except that the respective obligations of the City and the Authority set forth in Section 5 hereof shall continue in full force and effect. Section 5. Exoenses. The Authority shall be under no obligation to pay, and the City shall pay (a) the cost of the preparation of the Group Four Bonds and the Series E Bonds, (b) the fees and disbursements of Bond Counsel, (c) the fees and disbursements of accountants, advisers and of any other experts or consultants retained by the City, and (d) any other expenses incident to the issuance of the Group Four Bonds and the Series E Bonds or the performance of' the City's obligations hereunder. Section 6. Benefits~ Survival. This Bond Purchase Agreement is made solely for the benefit of the City, the Authority and the Underwriter, and no other person shall acquire or have any right hereunder or by virtue hereof. All of the City's representations, warranties and agreements contained, in this Bond Purchase Agreement shall remain operative and in full force and effect regardless of (a) any investigations made by or on behalf of the Authority, or (b) delivery of and payment for the Group Four Bonds pursuant to this Agreement. The agreemems contained in this Section shall survive any termination of this Bond Purchase Agreement. Section 7. Counterparts. This Bond Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 8. Governinff Law. The validitY, interpretation and performance of this Bond Purchase Agreement shall be governed by the laws of the State. DOCSI~kl:397428.2 -7- IN WITNESS WHEREOF, the Authority and the City have each caused this Bond Purchase Agreement to be executed by their duly authorized officers all as of the date first above written. TUSTIN PUBLIC FINANCING AUTHORITY By: Executive Director CITY OF TUSTIN By: Ronald A. Nault Finance Director -8- DOCSLAl:397428.2 TABLE OF CONTENTS Page Section 1. Section 2. Section 3. Section 4. Section 5. Section 6. Section 7. Section 8. Definitions ...... - ........................................................................................... 2 Purchase and Sale of Group Four Bonds .... - ............................................ 2 Representations and Warranties of the City ............................................... 3 Conditions to the Obligations of the Authority .......................................... 3 Expenses .................................................. . ................................. 6 Benefits; Survival ....................................................................................... 7 Counterparts ............................................................................................... 7 Governing Law .......' .................................................................................. 7 DOCSL. A 1:397428.2 -i- An extra section break has been inserted above this paragraph. D© not delete this section break if you Plan to add text after the Table of Contents/Authorities. Deleting this break will cause Table of Contents/Authorities headers and footers to appear on any pages following the Table of Contents/Authorities. DOCSLAl:397428.2 CONTINUING DISCLOSURE AGREEMENT (SE~ES E) by and between CITY OF TUSTIN and STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee Dated as of,, ,2001 TUSTIN PUBLIC FINANCING AUTHORITY REVENUE BONDS (TUSTIN RANCH) SERIES E DOCSLAl:397423.2 CONTINUING DISCLOSURE AGREEMENT (SERIES E) THIS CONTINUING DISCLOSURE AGREEMENT (SERIES E) (this "Disclosure Agreement") is made and entered into as of , 2001, by and between STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., a national banking associatiOn organized and existing under the laws of the United States, as trustee (the "Trustee"), and the CITY OF TUSTIN, a general law city and municipal corporation organized and existing under and by virtue of the laws of the State of California (the "City"). WITNESSETH. WHEREAS, pursuant to the Indenture of Trust, dated as of February 1, 1996, as by and between the Tustin Public Financing Authority (the "Authority") and the Trustee, as amended and supplemented by the First Supplemental Indenture of Trust, dated as of November 1, 1997, by and between the Authority and the Trustee, the Second Supplemental Indenture of Trust, dated as of November 1, 1998, by and between the Authority and the Trustee, the Third Supplemental Indenture of Trust (the "Third Supplemental Indenture"), dated as of November 1, 1999, by and between the Authority and the Trustee and the Fourth Supplemental Indenture of Trust, dated as of , 1, 2001, by and between the Authority and the Trustee (as so amended and supplemented, the "Indenture"), the Authority issued its Revenue Bonds (Tustin Ranch), Series E (the "Series E Bonds"), in the aggregate principal mount of $2,245,000; WHEREAS, this Disclosure Agreement is being executed and delivered by the City and the Trustee for the benefit of the holders and beneficial owners of the Series E Bonds and in order to assist the underwriter of the Series E Bonds in complying with Securities and Exchange Commission Rule 15c2-12(b)(5); NOW, THEREFORE, for and in consideration of the mutual premises and covenants herein contained, the parties hereto agree as follows' Section 1. Definitions. Capitalized undefined terms used herein Shall have the meanings ascribed thereto in the Indenture. In addition, the. following capitalized terms shall have the following meanings' "Act" means, collectively, the Improvement Bond Act of 1915, as amended, being Division 10 of the California Streets and Highways Code, and the Refimding Act of 1984 for 1915 Improvement Act Bonds, as amended being Division 11.5 of' the California Streets and Highways Code. "Annual Report" means any Annual Report provided by the City pursuant to, and as described in, Sections 2 and 3 of this Disclosure Agreement. "Annual Report Date" means the date in each year that is eight months after the end of the City's fiscal year, which date, as of the date of this Disclosure Agreement, is March 1. D O CSLA1:397423.2 "Assessment Bonds" means the Assessment Bonds (95-1) and any Assessment Bonds (95-2) acquired pursuant to Section 3.04 of the Indenture. "Assessment Bonds (95-1)" means the City of Tustin Limited Obligation Improvement Bonds, Reassessment District No. 95-1 (Tustin Ranch), which are issued under and pursuant to the Fiscal Agent Agreement (95-1), "Assessment Bonds (95-2)" means the City of Tustin Limited Obligation Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch), which are 'issued under and pursuant to the Fiscal. Agent Agreement (95-2) and which bear interest at a fixed rate. "Authority Bonds" means the Tustin Public Financing Authority Revenue Bonds (Tustin Ranch) issued under the Indenture, and includes the Series A Bonds, the Series B Bonds, the Series C Bonds; the Series D Bonds, the Series E Bonds and any additional bonds issued thereunder in accordance with the terms thereof and ranking on a parity with the Series A Bonds, the Series B Bonds, the Series C Bonds, the Series D Bonds and the Series E Bonds. "Disclosure Representative" means the Finance Director of the City or his or her designee, or such other officer or employee as the City shall designate in writing:to the Trustee from time to time. "Dissemination Agent" means the Trustee, 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 Trustee a written acceptance of such designation. "Fiscal Agent Agreement (95-1)" means the Fiscal Agent Agreement, dated as of February 1, 1996, by and between the City and State Street Bank and Trust Company of California, N.A., as Fiscal Agent, as originally executed or as the same may from time to time be amended or supplemented in accordance with the terms thereof, under and pursuant to which-the Assessment Bonds (95-1) are issued. "Fiscal Agent Agreement (9.5-2)" means the Fiscal Agent Agreement, dated as of February 1, 1996, by and between the City and State Street Bank and 'Trust Company of California, N.A., as Fiscal Agent, as originally executed or as the same may from time to time be amended or supplemented in accordance with the terms thereof, under 'and pursuant to which the Assessment Bonds (95-2) are issued. "Group of Assessment Bonds (95-2)" means a group of Assessmem Bonds (95-2), registered in the name of' the Trustee, that have been designated, pursuant to Section 7.01(e) of the Fiscal Agent Agreement (95-2), to represent specified parcels of real property within the Reassessment District (95-2). Indenture means the Indenture of' Trust, dated as of February 1, 1996, by and between the Authority and the Trustee, as originally executed or as it may from time to time be amended or supplemented by any Supplemental Indenture. D OCSLA 1:397423.2 2 ' "Listed Events" means any of the events listed in Section 4(a) hereof. "National Repository" means any Nationally Information Repository for purposes of the Rule. Recognized Municipal Securities "Official Statement" means the Official Statement, dated the Series E Bonds. 2001, relating to "Participating Underwriter" means any of the. original underwriters of the Series E Bonds required to comply with the Rule in connection with .offering of the Series E Bonds. "Repository" means each National Repository and each State Repository. "Reassessment District (95-1)" means the area designated "Reassessment District No. 95-1 (Tustin Ranch)", formed by the City under the Act. "Reassessment District (95-2)" means the area designated "Reassessment District No. 95-2 (Tustin Ranch)", formed by the City under the Act. "Reassessments (95-1)" means the reassessments levied within Reassessment District (95-1) by the City under the proceedings taken pursuant to the Act. "Reassessments (95-2)" means the reassessments levied within Reassessment District (95-2) by the City under the proceedings taken pursuant to the Act. (95-2). "Reassessments" means, collectively, the Reassessments (95-1) and the Reassessments "Reserve Requirement (95-1)" has the meaning ascribed to Reserve Requirement in the Fiscal Agent Agreement (95-1). "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. "Series A Bonds" means the Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series A, issued under the Indenture. "Series B Bonds" means the Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series B, issued under the Indenture. "Series C Bonds" means the Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series C, issued under the Indenture. DOCSLAl:397423.2 3 "Series D Bonds" means the Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), ' Series D, issued under the Indenture. "Series E Bonds" means the Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), series E, issued under the Indenture. "State Repository" means any public Or private repository or emity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange CommiSsion. As of the date of this Disclosure Agreement, there is no State Repository.. "Subject Area" means all of Reassessment District (95-1) and those portions of Reassessment District (95.-2) upon which are levied Reassessments (95-2). that secure Assessment Bonds (95-2) that are registered in the name of the Trustee. "-Trustee" means State Street Bank and Trust Company of California, N.A., a national banking association organized and existing under the laws of the United States of America, as Trustee under the Indenture, or any'successor thereto as Trustee thereunder as provided therein. Section 2. Provision of Annual Reports,. (a) The City shall, or shall cause the Dissemination Agent to, provide to each Repository an Annual Report which is consistent with the requirements of Section 3 hereof, not later than the Annual Report Date in each year, commencing with the Annual Report .for the 2001-2002 fiscal year. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3 hereof; provided, however, 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 not available by that date. 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 4(f) hereof. (b) Not later than 15 business days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the City shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent). If by such date, the Trustee has not received a copy of the Annual Report, the Trustee shall contact the City and the Dissemination Agent to determine if the City is in compliance with the first sentence of this subsection (b). (c) If the Trustee is 'unable to verify that an Annual Report has been provided to Repositories by the date required in subsection (a), the Trustee shall send a notice to the Municipal Securities Rulemaking Board and the appropriate State Repository, if any, in 'substantially the 'form attached as Exhibit A. (d) The Dissemination Agent shall' DOCSLAl:397423.2 4 (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (ii) file a report with the City and (if the Dissemination Agent is not the Trustee) the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the dat, e it was provided and listing all the' Repositories to which it was provided. Section. 3, Content of Annual .Reports, incorporate by reference the following: The City's Annual Report shall contain or (a) The City's audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities - from time to time by the Governmental Accounting Standards Board. If the-City's audited financial statements are not available by the time the Annual RepOrt is required to be filed pursuant to Section 2(a), the Annual Report shall contain unaudited financial statements in a format similar to that.used for the City's audited fmancial statements, and the audited financial statements shall be 'filed in the same manner as the Annual Report when they become available. (b) The following information: (i) The principal amount of Series E Bonds Outstanding .as of the September 30 next preceding the Annual Report Date. (ii) The principal amount of Authority Bonds Outstanding as of the September 30 next preceding the Annual Report Date. (iii) The principal mount of Assessment Bonds outstanding as of the September 30 next preceding the Annual Report Date. (iv) The balance' in the Improvement Fund established under the Fiscal Agent Agreement (95-1) as of the September 30 next preceding the Annual Report Date, and a statement as to whether or not such amount will be sufficient to pay the costs of the improvements intended to be 'paid therefrom. (v) The balance in the Reserve Fund established under the Fiscal Agent Agreement (95-1), and a statement of the Reserve Requirement (95-1) as of the September 30 next preceding the Annual Report Date. (vi) The balance in each Reserve Account established for a Group of Assessment Bonds (95-2) under the Fiscal Agent Agreement (95-2), and a statement of the reserve requirement applicable to each such Reserve Account as of the September 30 next preceding the Annual Report Date. DOCSLAI:397423.2 5 (vii) The total assessed value of all parcels within the Subject Area on which the Reassessments are levied, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September 30 next preceding the Annual Report Date, and a statement of assessed value-to-lien ratios therefor, either by individual parcel or by categories (e.g. "below 3' 1", "3'1 to 4'1" etc.). (viii) The Reassessment delinquency rate for the Subject Area, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September 30 next preceding the Annual Report Date, the number of parcels within the Subject Area delinquent in payment of Reassessments, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September 30 next preceding the Annual Report Date, the amount of each delinquency, the 'length of time delinquent and the date on which foreclosure was commenced, or similar information pertaining to delinquencies deemed appropriate by the City; provided, however, that parcels with delinquencies of $2,000 or less may be grouped together and such information may be provided by category. (ix) The status of Reassessment foreclosure proceedings and a summary of the results of any foreclosure sales as of the September 30 next preceding the Annual Report Date. (x) The identity of any property owner representing more than 5% of the Reassessment levy delinquent in payment of Reassessments levied within the Subject Area, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September-30 next preceding the Annual Report Date. (xi) A land ownership summary listing property owners responsible for more than 5% of the Reassessment levy .within the Subject Area, as shown on the assessment roll of the Orange County Assessor last equalized prior to the September 30 next preceding the Annual Report Date. (xii) The number of building permits issued by the City for new construction within the Subject Area during the one year period ending on the September 30 next preceding the Annual Report Date. In addition to any of the information expressly required to be provided under paragraphs (a) and (b) of this Section, 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. 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 have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be DOCSLAl:397423.2 6 available from the Municipal Securities Rulemaking Board. such other document so included by reference. The City shall clearly identify each Section 4.' Revortinff of Significant ...Ev. ents. (a) Pursuant to the provisions of this Section, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Series E Bonds, if material' (i) Principal and interest payment delinquencies. (ii) Non-payment related defaults. (iii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iv) Unscheduled draws-on credit enhancements reflecting financial difficulties. (v) Substitution of credit or liquidity providers, or their failure to perform. (vi) Adverse tax opinionS or events affecting the tax-exempt status of the security. (vii) Modifications to rights of security holders. (viii) Comingent or unscheduled bond calls. (ix) Defeasances. (x) Release, substitution, or sale of property securing securities. repayment of the (xi) -Rating changes. (b) The Trustee shall, within one business day of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform ~such person of the event, and request that the City.promptly notify the Trustee in writing whether or not to report the event pursuant to subsection (f). (c) Whenever the City obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the City shall as soon as possible determine if such event would be material under applicable Federal securities law. DOCSLA1:397 423.2 7 (d) If the City determines that knowledge of the occurrence of a Listed Event would be' material under applicable Federal securities law, the City shall promptly notify the Trustee in writing. Such notice shall instruct the Trustee to report the occurrence pursuant to subsection (f). (e) If in response to a request under subsection (b), the City determines that the Listed Event would not be material under applicable Federal securities law, the'City shall so notify the Trustee in writing and instruct the Trustee not to report the occurrence pursuant to subsection (f). (f) If the Trustee has been instructed by the. City to report the occurrence of a Listed Event, the Trustee shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice' (if any) of the. underlying event is given to holders of affected Bonds pursuant to the Indenture. Section 5. Termination of Reporting O.bli~atio.n. The City's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Series E Bonds. If such termination occurs prior to the final maturity of the Series E-Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 4(f) hereof. Section 6. Dissemination Agent. State Street Bank and Trust Company of' California, N.A., is hereby appointed as the initial Dissemination Agent. The City may, from time to time, appoint or engage a successor Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent. Section 7. Amendment; W..a.iver. Notwithstanding any other provision of this Disclosure Agreement, the City and the Trustee may amend this Disclosure Agreement (and the Trustee shall agree to any amendment so requested by the City), and any provision of this Disclosure Agreement may be waived, provided that the following conditiOns are satisfied' (a) if the amendment or waiver relates to Sections 2(a), 3 or 4(a) hereof it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or stares of an obligated person with respect to the Series E Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Series E Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and DOCSLAl:397423.2 8 (c) the proposed amendment or waiver (i) is approved by holders of the Series E Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of' the Trustee or nationally recognized bond counsel, materially impair the interests of holders of the Series E Bonds. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the 'change is made shall present a comparison between the financial statements or information prepared on the basis of the new accouming principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial statements or information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under Section 4(f) hereof. Section 8....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 9. Default. In the event of a failure of the City or the Trustee to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the written direction of any Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Bonds, shall), or any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City or Trustee, as the 'case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the City or the Trustee to comply with this Disclosure Agreement shall be an action to compel performance. DOCSLA1:397423.2 9 Section 10. Duties~ Immunities and Liabilities of T,rustee and Dissemination Agent. Article VIII of the Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Indenture and the Dissemination Agent shall be entit!ed to the protections therein as if it were the Trustee. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Agreement and shall not be responsible for the content of any of the reports or financial statements delivered by thc City pursuant to this Disclosure Agreement. Section 11. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Trustee, the Dissemination Agent, the Participating Underwriters and holders and beneficial owners from time to time of the Series E Bonds, and shall create no rights in any other person or entity. Section 12. ,Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and ail of which shall constitute but one and the same instrument. DOCSLA1:397423.2 1 0 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. CITY OF TUSTIN By: Ronald A. Nault Finance Director STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee By: Authorized Officer DOCSLAl:397423.2 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Tustin Public Financing Authority Name of Bond Issue: Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series E Date of Issuance' ,2001 NOTICE'IS HEREBY GIVEN that the City of Tustin (the "City") has not proVided an Annual Report with respect to the above-named Bonds as required .by the Continuing Disclosure Agreement (Series E), dated as of ,2001, by and between the City and State Street Bank and Trust Company of California, N.A., as Trustee. [The City anticipates that the Annual Report will be filed by .] Dated: STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee, on behalf of the City of Tustin cc' City of Tustin DOCSLA 1:397423.2 A-1 FOURTH SUPPLEMENTAL INDENTURE OF TRUST by and between the TUSTIN PUBLIC FINANCING AUTHORITY and STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee Dated as of 1, 2001 RELATING TO TUSTIN PUBLIC FINANCING AUTHORITY REVENUE BONDS (TUSTIN RANCH), SERIES E DOC$I.~1:397435.2 1-415040 FOURTH SUPPLEMENTAL INDENTURE OF TRUST THIS FOURTH SUPPLEMENTAL INDENTURE OF TRUST (this "Fourth Supplemental Indenture") dated as. of 1, 2001, is by and between the TUSTIN PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under and by virtue of the laws Of the State of California (the "Authority"), and STATE STREET BANK AND TRUST' COMPANY OF CALIFORNIA, N.A., a national-banking association organized and existing under and by virtue of the laws of the United States of America, as trustee (the "Trustee"). WI TNE S S E TH: WHEREAS, the Authority is a joint exercise of powers authority duly organ/zed and existing under the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act"), and is authorized pursuant to Article 4 of the Act (the "Bond Law") to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations to provide financing or refinancing for public capital improvements of local agencies within the State of California; WHEREAS, pursuant to the Indenture of Trust, dated as of February 1, 1996 (the "Original Indenture"), by and between the Authority and the Trustee, the Authority issued its Revenue Bonds (Tustin Ranch), Series A (the "Series A Bonds") in the aggregate principal amount of $35,705,000; WHEREAS, the proceeds of the Series A Bonds were used to purchase $35,705,000 aggregate principal amount of City of Tustin Limited Obligation Improvement Bonds, Reassessment District No. 95-1 (Tustin Ranch); WHEREAS, the Original Indenture provides that, in order to provide the funds required to acquire certain other fixed rate assessment bonds of the City of Tustin (the "City"), in addition to the Series A Bonds, the Authority may, subject to the requirements of the Bond Law, by' Supplemental Indenture establish one or more Series of Bonds payable from Revenues on a parity with the Series A Bonds and secured by a lien upon and pledge of Revenues equal to the lien and pledge securing the Series A Bonds, and that the Authority may issue and the Trustee may authenticate and deliver Bonds of any Series so established, in such principal amount as shall be determined by the Authority in said Supplemental Indenture, but only upon compliance by the Authority with the provisions of the Original Indenture; WHEREAS, the Original Indenture was amended and supplemented pursuant to the First Supplemental Indenture of Trust, dated as of November 1, 1997, by and between the Authority and the Trustee, the Second Supplemental Indenture of Trust, dated as of November 1, 1998, by and between the Authority and the Trustee and. the Third Supplemental Indenture of Trust, dated as of November 1, 1'999, by and between the Authority and the Trustee (as so amended and supplemented, the "Third Amended Indenture") (capitalized undefined terms shall have the meanings ascribed thereto in the Third Amended Indenture); DOCSI,Al:397435.2 1-415040 MVtt 2 WHEREAS, in order to refinance certain public capital improvemems, the City of Tustin (the "City") is issuing not to exceed $2,245,000 of its Limited Obligation Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch), Fixed Rate Bonds, Group Four (the "Group Four Bonds"); WHEREAS, the Authority desires to assist the City with the Group Four Bonds refinancing by purchasing the Group Four Bonds from the City; WHEREAS, the Authority has determined at this time to issue its Revenue Bonds (Tustin Ranch), Series E (the "Series E Bonds"), in the aggregate principal amount of $2,245,000 for the purpose of providing the funds required to acquire the Group Four Bonds; WHEREAS, in order to provide for the authentication and delivery of the Series E Bonds, to establish and declare the terms and conditions upon which the Series E Bonds are to be issued and to secure the payment of the principal thereof and interest thereon, the Authority has authorized the execution and delivery of this Fourth Supplemental Indenture; and WHEREAS, the Authority has determined that all acts and proceedings required by law necessary to make the Series E Bonds, when executed by the Authority, authenticated and delivered by the Trustee, and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute this Fourth Supplemental Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this Fourth Supplemental Indenture have been in' all respects duly authorized; 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 that the Third Amended 'Indenture is hereby amended by adding thereto an additional Article as follows' DOCSLA1:397435.2 1-415040 M~,rt-t ARTICLE XVI SERIES E BONDS Section 16.01. Definifi.0gS_.. Unless the context otherwise requires, the terms defined in this Section, for all purposes of this Indenture and of any indenture supplemental hereto and of. any certificate, opinion or other document herein mentioned, have the meanings herein specified, to be equally applicable to both the singular and plural forms of any of the terms herein defined. "Book-Entry Bonds (Series E)" means the Series E Bonds registered in the name of the nominee of DTC (Series E), or any successor securities depository for the Series E Bonds, as the registered owner thereof pursuant to the terms and provisions of Section 16.05. "Cede & Co. (Series E)" means Cede & Co., the nominee of DTC (Series E), and any · successor nominee of DTC (Series E) with respect to the Series E Bonds. "Closing Date (Series E)" means the date on which the Series E Bonds are delivered to the Original Purchaser (Series E), being November 7, 2001. "Code (Series E)" means the Internal Revenue Code of 1986. "Continuing Disclosure Agreement (Series E)" means the Continuing Disclosure Agreement, dated as of ,2001, by and between the City and the Trustee, as originally executed or as the same may from time to time be amended in accordance with the terms thereof. "DTC (Series E)" means The' Depository Trust Company, a limited-purpose trust company organized under the laws of the State of New York, and its successors as' securities depository for the Series E Bonds, including any such successor appointed pursuant to Section 16.05. "Fourth Supplemental Indenture" means the Fourth Supplemental Indenture of Trust, dated as of 1, 2001, by and between the Authority and the Trustee. "Group Four Bonds" means the City of Tustin Limited Obligation Improvement. Bonds, Reassessment District No. 95-2 (Tustin Ranch), Fixed Rate Bonds, Group Four, which are issued under and pursuant to the Fiscal Agent Agreement (95-2) and which bear interest at a fixed rate. "Insurance Policy (Series E)" means the Municipal Bond Insurance Policy, and any Endorsement thereto, issued by the Insurer (Series E) guaranteeing the scheduled payment of the principal of and interest on the Series E Bonds. "Insurer (Series E)" means Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto. "Insurer's Fiscal Agent (Series E)" means a fiscal agem appointed by the Insurer (Series E) for purposes of, and in accordance with the terms contained in, the Insurance Policy (Series E). DOCSLA 1:397 435.2 1-415040 MVI:-I "Original Purchaser (Series purchaser of the Series E Bonds. E)" means UBS PaineWebber Inc., as the original "Participant (Series E)" means any entity which is recognized as a participant by DTC (Series E).in the book-entry system of maintaining records with respect to Book-Entry Bonds (Series E). "Participating Underwriter (Series E)" has the meaning ascribed thereto in the Continuing Disclosure Agreement (Series E). "Purchase Agreement (Group Four)" means the Bond Purchase Agreement, dated ,2001, by and between the City and the Authority, relating to the acquisition by the Authority of the Group Four Bonds. "Rebate Requirement (Series E)" has the meaning ascribed to Rebate Requirement in the Tax Certificate (Series E). "Series E Bonds" means the Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series E, issued hereunder. "Tax Certificate (Series E)" means the Tax Certificate executed by the Authority and the City at the time of issuance of the Series E Bonds relating to the requirements of Section 158 of the Code (Series E), as originally executed and as it may from time to time be amended in accordance with the provisions thereof. Section 16.02...Auth0r~ation and Issuance of Series E BonOs. The Series E Bonds shall be designated as the "Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series E", and shall be secured and payable from the Revenues and other assets pledged hereunder, as' provided herein. The aggregate principal amount of Series E Bonds that may be issued and Outstanding under this Indenture shall not exceed $2,245,000, except as may be otherwise provided in Section 2.08. On the Closing Date (Series E), the Authority shall execute and the Trustee shall authenticate the Series E Bonds and deliver the Series E Bonds to the Original Purchaser (Series E) in the aggregate principal amount of $ . Section 16.03. Terms of Series E Bonds. (a) The Series E Bonds shall be issued in fully registered form without coupons-in denominations of $5,000 or any integral multiple thereof, so long as no Series E Bond shall have more than one maturity date. The Series E Bonds shall be dated ,2001, shall mature on September 2 in each of the years and in the amounts, and shall bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) at the rates, as follows' DOCSLAl:397435.2 1-415041) MVH Maturity (September 2) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2013 Principal Interest Amount Rate $ % (b) The Interest Payment Dates for the Series E Bonds shall commence on March 2, 2002. Interest on the Series E Bonds shall be payable from the Interest Payment Date. next preceding the date of authentication 'thereof unless (i) a Series E Bond is authenticated on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event it shall bear interest from such Interest Payment Date, (ii) a Series E Bond is authenticated on or before the first Record Date therefor, in which event interest thereon shall be payable from __, or (iii) interest on any Series E Bond is in default as of the date of' authentication thereof, in which event interest thereon shall be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest shall be paid on each Interest Payment Date to the Persons in whose names the ownership of the Series E Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest on any' Series E Bond which is not punctually paid or duly provided for on any Interest Payment Date shall be payable to the Person in whose name the ownership of such Series E Bond is registered on the Registration Books at the close of business on a special Record Date to be established by the Trustee for the payment of such defaulted interest to be fixed by the Trustee, notice of'which shall be given'to such Owner not less than ten days prior to such special Record Date. Interest shall be paid by check of the Trustee mailed by first class mail, postage prepaid, on each Interest Payment Date to the Series E Bond Owners at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. (c) The principal of and premium, if any, on the Series E Bonds shall be payable in lawfial money of the United States of America upon presentation and surrender thereof at the Office of the Trustee. Payment of principal of and premium, if any, on any Series E Bond shall be made only upon presentation and surrender of such Series E Bond at the Office of the Trustee. (d) The Series E Bonds shall' be initially issued registered in the name of "Cede & Co.," as nominee of the Depository Trust Company, New York, New York, and shall be evidenced by one Series E Bond maturing on each maturity date, to be in denomination corresponding to the total principal designated to mature on such date. Registered ownership of DOCSLAI:397435.2 1-415041') M~,~t the Series E Bonds, or any portion thereof, may not thereafter be transferred except as set forth in Section 16.05. (e) The Series E Bonds shall be subject to redemption as provided in Section 16.08. Section 16.04. Form of Series E Bonds. The Series E Bonds shall be in substantially the form set forth in Exhibit E hereto, with appropriate or necessary insertions, omissions and variations as permitted or required hereby. Only such of the Bonds as shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit E hereto, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and'such certificate of or on behalf of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Indenture. Section 16.05. Book-Entry. Series E Bonds. (a) Except as provided in subparagraph (c) of this Section, the registered Owner of all of the Series E Bonds shall be DTc (Series E) and the Seri'es E Bonds shall be registered in the name of Cede & Co. (Series E), as nominee for DTC (Series E). Notwithstanding anything to the contrary contained in this Indenture, payment of interest with respect to any Series E Bond registered as of each Record Date in the name of Cede & Co. (Series E) shall be made by wire transfer of same-day funds to the account of Cede & Co. (Series E) on the payment date for the Series E Bonds at the ad&ess indicated on the record date or special record date for Cede & Co. (Series E) in the Registration Books or as otherwise provided in the Representation Letter. (b) The Series E Bonds shall be initially issued in the form of separate single fully registered Series E Bonds in the amount of each separate stated maturity of the Series E Bonds. Upon initial issuance, the ownership of such Series E Bonds shall be registered in the Registration Books in the name of Cede & Co. (Series E), as nominee of DTC (Series E). The Trustee and the Authority may treat DTC (Series E) (or its nominee) as to the sole and exclusive Owner of the Series E Bonds registered in its name for the purpose~ of' payment of the principal, Redemption Price or interest with respect to the Series E Bonds, selecting the Series .E Bonds or portions thereof to be redeemed, giving any notice permitted or required to be given to Owners of Series E Bonds under this Indenture, registering the transfer of Series E Bonds, obtaining any consent or other action to be taken by Owners of Series E Bonds and for all other purposes whatsoever, and neither the Trustee nor the Authority shall be affected' by any nOtice to the contrary. Neither the Trustee nor the Authority shall have any responsibility or obligation to any Participant (Series E), any person claiming a beneficial ownership interest in the Series E Bonds under or through DTC (Series E) or any Participant (Series E), or any other person which is not shown on the Registration Books as being an Owner, with respect to the accuracy of any records maintained by DTC (Series E) or any Participant (Series E); the payment by DTC (Series E) or any Participant (Series E) of any amount in respect of the principal, Redemption Price or interest with respect to the Series E Bonds; any notice which is permitted or required to be given to Owners of Series E Bonds under this Indenture; the ~election by DTC (Series E) or any Participant (Series E) of any person to receive payment in the event of a partial redemption of the Series E Bonds; or any consent given or other action taken by DTC (Series E) as Owner of Series E Bonds. The Trustee shall pay all principal, premium, if any, and interest with respect to the DOCSI,A1:397435.2 1-415040 Series E Bonds, only to DTC (Series E), and all such payments shall be valid and effective to fully satisfy and discharge the Authority~s obligations with respect to the principal, premium, if any, and interest with respect to the Series E Bonds to the extent of the sum or sums so paid. Except Under the conditions of (c) below, no person other than DTC (Series E) shall receive an executed Series E Bond for each separate stated maturity. Upon delivery by DTC (Series E) to the Trustee of written notice to the effect that DTC (Series E) has determined to substitute a new nominee in place of Cede & Co. (Series E), and subject to the provisions herein with respect to record dates, the term "Cede & Co. (Series E)" in this Indenture shall refer to such new nominee of DTC-(Series E). (c) In the event (i)DTC (Series E), including any successor as securities depository for the Series E Bonds, determines not to continue to act as securities depository for the Series E Bonds, or (ii)the Authority determines that the incumbent securities depository shall no longer so act, and delivers a written certificate to the Trustee to that effect, then the Authority will discontinue th© book-entry system with the incumbent securities depository for the Series E Bonds. If the Authority determines to replace the incumbent securities depository for the Series E Bonds with another qualified securities depository, the Authority shall prepare or direct the preparation of a new single, separate fully registered Series E Bond for the aggregate Outstanding principal mount of Series E Bonds of each maturity, registered in the name of such successor or substitute qualified securities depository, or its nominee, or make such other arrangement acceptable to the Authority, the Trustee and the successor securities depository for the Series E Bonds as are not inconsistent with the terms of this Indenture. If the Authority fails to identify another qualified successor.securities depository of the Series E Bonds to replace the incumbent. securities depository, then the Series E Bonds shall no longer be restricted to being registered in the Registration Books in the name of the incumbent securities depository or its nominee, but shall be registered in whatever name or names the incumbent securities depository for the Series E Bonds, or its nominee, shall designate. In such event the Trustee shall authenticate and deliver a sufficient quantity of Series E Bonds as to cm'w out the transfers and exchanges provided in Sections 2.05, 2.07 and 2.08. All such Series E Bonds shall be in fully registered form in denominations authorized by this Indenture. (d) Notwithstanding any other provision of this Indenture to the contrary, so long as any Series E Bond is registered in the name of DTC (Series E), or its nominee, all payments with respect to the principal, premium, if any, and interest with respect to such Series E Bond and all notices with respect to such Series E Bond shall be made and given, respectively, as provided in the Representation Letter. (e) In connection with any notice or other communication to be provided to Owners of Book-Entry Bonds (Series E) pursuant to this Indenture by the Authority or the Trustee with respect to any consent or other action to be taken by Owners, the Authority or the Trustee, as the case may be, shall establish a record date for such consent or other action and give DTC (Series E) notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. DOCSLAl:397435.2 1-415041) IvD, TH Section 16.06. Aoolication of Proceeds of the...Series E B,0,nd~,. On the Closing Date (Series E), the amount of $. , constituting the proceeds of sale of the Series E Bonds, shall be deposited in the Program Fund. Section 16.07. Pro,ram F.u.nd. On the Closing Date (Series E) there shall be dePosited in the Program Fund the amount specified in Section 16.06. On the Closing Date (Series E), the Trustee shall withdraw from the Program Fund the amount of $ and apply such amount to the purchase on such date of the Group Four Bonds, all pursuant to and in accordance with the provisions of the Purchase Agreement (Group Four). In accordance with the Purchase Agreement (Group Four), the ownership of the Group Four Bonds shall be registered to the Trustee upon the acquisition thereof. Section 16.08. Redemption o.f Seri. es E Bonds. (a) Optional Redemption. The Series E Bonds maturing on or after September 2, 20 shall be subject to optional redemption in whole, or in part in authorized denominations, among maturities'on such basis as shall be designated by the Authority in a Written Certificate of the Authority filed with the Trustee, on any Interest Payment Date on .or after' September 2, 20 , at the following respective Redemption PriCes (expressed as percentages of the principal amount of the Series E Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates September 2, 20 and March 2, 20 September 2, 20 and March 2, 20 , September 2, 20 and thereafter Redemption Price % The provisions of this subsection (a) shall not be applicable to circumstances under which the Series E Bonds are subject to mandatory redemption pursUant to the following subsection (b) of this Section. (b) Mandatory Redemption From Principal Prepayments. The Series E Bonds shall be subject to mandatory redemption, in whole, or in part in authorized denominations, on any Interest Payment Date, from and to the extent of any Principal Prepayments with respect to the Group Four Bonds, at the following respective Redemption Prices (expressed as percentages of the principal amount of the Series E Bonds to be redeemed), plus accrued interest thereon to the' date of redemption: Redemption Dates March 2, 20 through March 2, 20 September 2, 20 and March 2, 20 September 2, 20 and March 2, 20 September 2, 20 and thereafter Redemption Price % The principal amount of Series E Bonds to be redeemed pursuant to this subsection (b) from any Principal Prepayments shall be the greatest principal amount of Series E Bonds,. the Redemption Price of which is less than or equal to such Principal' Prepayments, as specified in a Written Request of the Authority delivered to the Trustee. In the event that the-Fiscal Agent (95- DOCSLAl:397435.2 1-415040 NiYH 2) shall mail notice of. the redemption of any' Group Four Bonds which will produce Principal Prepayments, the Trustee shall concurrently mail notice of the redemption of Series E Bonds pursuant to this subsection (b), such redemption to occur on the date fixed for such redemption of the Group Four Bonds. The proceeds of any such redemption of the Group Four Bonds shall be applied by the Trustee to pay the Redemption Price of Series E Bonds pursuant to this subsection (b) on the date of such redemption of the Group Four Bonds. For purposes of the selection of Series E Bonds for redemption pursuant to this subsection (b), the Series E Bonds shall be selected for redemption among maturities by the Authority (evidenced pursuant to-a Written Certificate of the Authority delivered to the Trustee at least 60 days prior to the redemption date or such later date as shall be acceptable to the Trustee) on such basis that the remaining payments of principal of and interest on the Group Four Bonds, together with other available Revenues attributable thereto, will be sufficient on a timely basis to pay debt service on the Series E Bonds, as shall be demonstrated in a.report of an Independent Financial Consultant filed with the Trustee. (c) Mandatory Sinking Fund Redemption. The Series E Bonds maturing on September 2, 20 shall be subject to mandatory- sinking fund redemption, in part, on September 2 each year, commencing September 2, 20 , at a Redemption Price' equal to the principal amount of the series E Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption, .in the aggregate respective principal amounts in the respective years as follows' Sinking Fund Principal Amount Redemption Date to be (September 2) Redeemed If some but not all of the Series E Bonds maturing on September 2, 2013 are redeemed pursuant to Section 16.08(a), the principal amount of Series E Bonds maturing on September 2, 2013 to be redeemed pursuant to Section 16.08(c) on any subsequent. September 2 shall be reduced, by $5,000 or an integral multiple thereof, as designated by the Authority 'in a Written Certificate of the Authority filed with the Trustee; provided, however, that the aggregate amount of such reductions shall not exceed 'the aggregate amount of Series E Bonds maturing on September 2, 2013 redeemed pursuant to Section 16.08(a). If some but not all of the Series E Bonds maturing on 'September 2, 2013 are redeemed pursuant to Section 16.08(b), the principal amount of Series E Bonds maturing on September 2, 2013 to be subsequently redeemed pursuant to Section 16,08(c) shall be reduced by the aggregate principal amount of the Series E Bonds maturing on September 2, 2013 so redeemed pursuant to Section 16.08(b), 'such reduction to be allocated as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as determined by the Authority, notice of which determination shall be given by the Authority to the Trustee at least 45 days prior to such redemption date. DOCSLA 1:3 97 43 5.2 1-415044) MVH 10 Section 16.09. Series E Tax Coven.a. nts. (a) The Authority shall not take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Series E Bonds under Section 103 of the Code (Series E). Without limiting the generality of the foregoing, the Authority shall comply with the requirements of the Tax Certificate (Series E), which is incorporated herein, as if fully set forth herein. This covenant shall survive payment in full or defeasance of the Series E Bonds. (b) In the event that at any time the Authority is of the. opinion that for purposes of this Section it is necessary or helpful to restrict or limit the yield on the investment of any moneys held by the Trustee in any of the funds or accounts established hereunder, the Authority shall so instruct the Trustee in writing, and the Trustee shall take such 'action as may be necessary in accordance with such instructions. (c) Notwithstanding any provisions of this Section, if the Authority shall provide to the Trustee an opinion of Bond Counsel to the effect that any specified action required under this Section is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on the Series E Bonds, the Trustee may conclusively rely on such opinion in complying with the requirements of this Section and of the Tax Certificate (Series E), and the covenants hereunder shall be deemed to be modified to that extent. Section 16.10. Series E Continuing Disclosure. Pursuant to the Continuing Disclosure Agreement (Series E), the City has undertaken all responsibility for compliance with continuing disclosure requirements with respect to the Series E Bonds, and the Authority shall have no liability to the holders of the Series E Bonds or any other person'with respect to such disclosure matters. The Trustee hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement (Series E). Notwithstanding any other provision of this Indenture, failure of the City or the Trustee to comply with the Continuing Disclosure Agreement (Series E) shall not be considered an Event of Default, however, the Trustee may (and, at the written direction of any Participating Underwriter (Series E) or the holders of at least 25% aggregate principal amount of Outstanding' Series E Bonds, shall) or any holder or beneficial owner of the Series E Bond's may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. The Trustee hereby acknowledges that it has duties under Sections 2 and 4 of' the Continu~ing Disclosure Agreement (Series E) and will continue to have such duties even if it no longer acts as the Dissemination Agent thereunder. Section 16.11. Sale of Group Four Bonds; Sale of Proper .ry. The Authority shall not sell any Group Three Bond without the consent of the'Insurer (Seri'es E). The Authority shall not, without the consent of the Insurer (Series E), give its consent, pursuant to Section 8836 of the Act, to the sale at a lesser minimum price or without a minimum price of any property upon which are levied assessments securing the Group Four Bonds. Section 16.12. Insurer (Series,. E) To Be Deemed Owner;. Rights of the Insurer (Series E); Payments by the Insurer (Series E); Notices. (a) Notwithstanding any provision of this Indenture to the contrary, so long as the Insurer (Se-~ies E) is not in default in its payment 11 DOCSLAl:397435.2 1-415040 MVH obligations under the Insurance Policy (Series E), the Insurer (Series E) shall at all times be deemed the sole and exclusive Owner of the Outstanding Series E Bonds for the purposes of ail approvals, consents, waivers, institution of any action, and the direction of all remedies, including but not limited to approval of or consent to any Supplemental Indenture which requires the consent or approval of the Owners of' a majority of the aggregate principal amount of Bonds · then Outstanding pursuant to this Indenture; provided that the Insurer (Series E) shall not be deemed to be the sole and exclusive Owner of the Outstanding Series E Bonds with respect to any Supplemental Indenture which seeks to amend or supplement-this Indenture for the purposes set forth in clause (i) of the first paragraph of Section 9.01 (a), and provided fiarther that the Insurer (Series E) shall not be deemed the sole and exclusive Owner of the Outstanding Series E Bonds with respect to any Supplemental Indenture, and shall not have the right to direct or consent to Authority, Trustee or Owner action as .provided herein, if: (i) the-Insurer (Series E) shall be in payment default under the Insurance Policy (Series E); (ii) any material provision of the Insurance Policy (Series E) shall be held to be invalid by a final, non-appealable order of a court of competent jurisdiction, or the validity or enforceability thereof shall be contested by the Insurer (Series E); or (iii) a proceeding shall have been instituted in a court having jurisdiction in the premises seeking an order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution in respect of the Insurer (Series E) under Article 16 of the Insurance Law of the State of New York or any successor provision thereto 'and such proceeding is not terminated for a period of' 90 consecutive days or such court enters an order granting the relief sought in such proceeding. (b) To the extent that the Insurer (Series E) makes payment of principal of or interest on a Series E Bond, it shall become the Owner of such portion of such Series E Bond and the right to receive payment of' such principal or interest, and shall be fully subrogated to all of the Owner's rights thereunder in accordance with the terms of the Insurance Policy (Series E) to the extent of such payment, including the Owner's rights to payment thereof. (c) In the event that the principal of or interest on a Series E Bond shall be paid by the Insurer (Series E) pursuant to the terms of the Insurance Policy (Series E), (i) such Series E Bond shall continue to be "outstanding" under the Indenture, (ii) the pledge of the amounts on deposit in the funds and accounts established hereunder and of the Revenues and all covenants, agreements and other obligations of the Authority hereunder shall continue to exist, (iii)the Insurer (Series E) shall be fully subrogated to all of the rights of such Owner in accordance with the terms and conditions of subparagraph (b) above and the Insurance Policy (Series E), and (iv) the Indenture shall not be discharged unless and until all amounts due to the Insurer (Series E) have been paid in full. (d) If an Event of Default shall have occurred and be continuing, the Insurer (Series E) may, reg .ardless of whether a claim has been made under the Insurance Policy (Series E), at any time and at its sole option, pay to the Owners of the Series E Bonds all or any portion of the D O CSLA 1:397435.2 1-415040 MVH 12 principal of or interest on such Series E Bonds (at a price equal to 100% of the par amount thereof) prior to the stated maturity dates thereof; provided, however, that such payment by the Insurer (Series E) shall not accelerate the Authority's obligation to pay principal of or interest on. such' Series E Bonds. The Trustee shall accept such payments on behalf of the Owners of the Series E Bonds and the obligations of the Insurer (Series E) under the Insurance Policy (Series E) shall be discharged to the extent of such payments. (e) The Insurer (Series E) shall be notified by the Trustee (i) within one Business' Day of the Tmstee's having knowledge of the occurrence of any Event of Default, and (ii) of any redemption of Series E Bonds (including the principal amount and CUSIP numbers of such Series E Bonds to be' redeemed) at the same time that the Owners of the Series E Bonds to be redeemed are notified. In addition, all notices, reports, certificates and opinions to be delivered to or by the Trustee or to the Owners or available at the request of the Owners pursuant to this Indenture shall also be delivered to the Insurer (Series E). (f) The Trustee Shall also notify the Insurer (Series E) immediately resignation or removal of the Trustee or the appointment of a successor Trustee. upon the Section 16.13. Deoosits to Policy payments Account (Series E)~ Payments Under the Insurance Policy (Series E). (a) So long as the Insurance Policy (Series E) shall be in full force and effect, the Authority and the Trustee hereby agree to comply with the provisions of this Section. (b) If, on the third Business Day prior to an Interest Payment Date, maturity date or redemption date, the Trustee determines that there'will be insufficient funds in the funds and accounts established hereunder available to pay the principal of or imerest on the Series E Bonds on such Interest Payment Date, maturity date or redemption date, the Trustee shall give notice to the Insurer (Series E) and to the Insurer's Fiscal Agent (Series E) (if any) by telephone or telecopy of the amount of such deficiency by 12:00 noon New York City time on such Business Day. if, on .the second Business Day prior to such Interest Payment Date, maturity date or redemption date, there continues to be a deficiency in the amount available to pay the principal of or interest on the Series E Bonds due on such Interest Payment Date, maturity date or redemption date, the Trustee shall make a claim under the Insurance Policy (Series E) and give notice to the Insurer (Series E) and the Insurer's Fiscal Agent (Series E) (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency among the amount required to pay the principal of or interest on the Series E Bonds, confirmed in writing to the Insurer (Series E) and the Insurer's Fiscal Agent (Series E) (if any) by 12:00 noon, New York City time, on such second Business Day. The Trustee shall establish and maintain a separate special purpose trust account for the benefit of Owners of the Series E Bonds known as the Policy Payments Account (Series E) and over which 'the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall deposit any amount paid under the Insurance Policy (Series E) in the Policy Payments Account (Series E) and distribute such. amount only for purposes of making the payments for which a claim was made. Such amounts shall be received by the Trustee in trust for the'Owners of the Series E Bonds. Such amounts shall be disbursed by the Trustee to Owners of the Series E DOCSLAl:397435.2 1-415040 l'vf~I 13 Bonds in the same manner as payments of principal of and interest on the Series E Bonds are to be made under the provisions hereof regarding payment of Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the .check or wire transfer used to pay principal of and interest on the Series E Bonds with other fimds available to make such payments. Funds held in the Policy Payments Account (Series E) shall not be invested by the Trustee and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. (c) Funds received by the Trustee as a result of any claim under the Insurance Policy. (Series E) shall be deposited by the Trustee in the Policy Payments Account (Series E) and used solely for payment to the Owners of Series E Bonds and may not be applied to satisfy any costs,. expenses or liabilities of the Trustee. Any fimds remaining in the Policy Payments Account (Series E) following an Interest Payment Date, maturity date or redemption date, as applicable, shall promptly be remitted to the Insurer (Series E), except for funds held for the payment of Series E Bonds which have matured or been called for redemption but which have not been surrendered for payment. (d) The rights granted under this Indenture and the Fiscal Agent Agreement (95-2) to the Insurer (Series E) to request, consent to or direct any action are fights granted to the Insurer (Series E) in consideration of its issuance of the Insurance Policy (Series. E). Any exercise by the Insurer (Series E) of such rights is merely an exercise of the contractual rights of the InSurer (Series E) and shall not be construed or deemed to be taken for the benefit of or on behalf of the Owners, nor does such action evidence any position of the Insurer (Series E), positive or negative, as to whether Owner consent is required in addition to consent of the Insurer (Series E). (e) The Authority hereby agrees, to the extent permitted by law, to pay or reimburse the Insurer (Series E) any and all charges, fees, costs and expenses which the Insurer (Series E) may reasonably pay or incur, including, but not limited to, fees and expenses of.attorneys, accountants, consultants and auditors and reasonable costs of investigations, in connection with (i) the administration, enforcement, defense or preservation of any rights in respect of any of this Indenture and the Fiscal Agem Agreement (95-2), (ii) the pursuit of any remedies under this Indenture or the Fiscal Agent .Agreement (95-2) or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to this Indenture or the Fiscal Agent Agreement (95-2) whether or not executed or completed, (iv) the violation by the Authority or the City of any law, role or regulation, or any judgment, order or decree applicable to it, or (v) any litigatiOn or other dispute in connection with this Indenture or the Fiscal Agent Agreement (95-2) or the transactions contemplated thereby, other than amounts resulting from the failure of the Insurer to honor its obligations under the Insurance Policy (Series E). The Insurer (Series E) reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Indenture or the Fiscal Agent Agreement (95-2). (f) The Insurer (Series E) shall be entitled to pay 'principal of and interest on the Series E Bonds that shall' become Due for Payment but shall be unpaid by reason of Nonpayment by the Authority (as such terms are defined in the' Insurance Policy (Series E)) thereof in accordance with this Indenture, whether or not the Insurer (Series E) has received a Notice (as defined in the Insurance Policy (Series E)) of Nonpayment or a claim upon the Insurance Policy (Series E). DOCSLAl:397435.2 1-415040 MVH 14 (g) The Trustee shall promptly notify the Insurer (Series E) of either of the following as to which it has actual knowledge: (i) the commencement of any proceeding by or against.the Authority or the City commenced under the United States Bankruptcy Code or any successor statute or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law · (an "Insolvency Proceeding"), and (ii) the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer (a "Preference' Claim") of any payment of principal of or interest on the Series E Bonds. Section 16.14. ,,,Notices to Rating Agencies. The Trustee shall provide Moody's, if the Series E Bonds are then rated by Moody's, and S&P, if the Series E Bonds are then rated by S&P, with written notice of any material amendments to the Indenture or the Fiscal Agent Agreement (95-2) at least ten days prior to the effective date thereof. Section 16.15. References to Insurer and Insurance .Policy. The references to the Insurer contained in the Indenture in Section 1.01 (in the definition of "Moody's" and in the definition of "S&P"), in Section 7.01(c), in Section 7.04(c), in Section 8.01(b), in Section 9.01, in Section I0.01(e), in Section 11.03, in Section 12.03, in Section 12.07, in Section 12.12, in Section 15.11 and in Section '15.12. shall, from and after the effective date of the Fourth Supplemental Indenture, be deemed to be references to the Insurer, the Insurer (Series B), the Insurer (Series C), the Insurer (Series D) and the Insurer (Series E). The reference to the Insurance Policy contained in the Indenture in Section 10.01 (e) shall, from and after the effective date of the Fourth Supplemental Indenture, be deemed to be a reference to the Insurance Policy, the InsuranCe Policy (Series B), the Insurance Policy (Series C), the Insurance Policy (Series D) and the Insurance Policy (Series E). Section 16.16. Effect of Fourth...Supp!ementa..l. Indenture. This Fourth _Supplemental Indenture and all of the terms and provisions herein contained shall form part of the Indenture as fully and with the same effect as if all such terms and provisions had been set forth in the Indenture. The Indenture is hereby ratified and confirmed and shall continue in full force and effect in accordance with the terms and provisions thereof, as heretofore amended and supplemented, and as amended and supplemented hereby. If there shall be any conflict between the terms of this Fourth Supplemental Indenture and the terms of the Indenture (as in effect on the day prior to the effective date of this Fourth Supplemental Indenture), the terms of this Fourth Supplemental Indenture shall prevail. Section 16.17. Execution in, Several Countero..art...S... This Fourth Supplemental Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. Section 16.18. Effe.cfive, Date of Fou.rth ..... Suoo!emental Indentu. re. Supplemental Indenture shall take effect upon the Closing Date (Series E). This Fourth DOCSLAl:397435.2 1-415040 15 IN WITNESS WHEREOF, the Authority has caused this Fourth Supplemental Indenture to be signed in its name by its officer thereunto duly authorized, and the Trustee has caused this Fourth Supplemental Indenture to be signed in its corporate name by its' officer thereunto duly authorized, all as of the day and year first above written. TUSTIN PUBLIC FINANCING AUTHORITY By: Treasurer STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee By: Authorized Officer DOCSI~1:397435.2 1-415040 i~IV[.-t 16 EXHIBIT E FORM OF SERIES E BOND No. TUSTIN PUBLIC FINANCING AUTHORITY REVENUE BOND (TUSTIN RANCH), SERIES E RATE OF INTEREST: MATURITY DATE: ORIGINAL ISSUE DATE: CUSIP: REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: The TUSTIN PUBLIC FINANCING AUTHORITY, a joint powers authority' organized and existing under the laws of the State of California (the "Authority"), .for value received, hereby promises to pay (but only out of'the Revenues and other moneys and securities hereinafter referred to) to the Registered Owner identified above or registered assigns (the "Registered Owner"), on the Maturity Date identified above or on any earlier redemption date, the Principal Amount identified above in lawful money of the Un/ted States of America; and to pay interest thereon at the Rate of Interest identified above in like lawfi~l money from the date hereof, which date shall be the Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this Bond (unless this Bond is authenticated on or before an Interest Payment Date and after the fifteenth calendar day of the month preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or unless this Bond is authenticated on or prior to February 15, 2002, in which event it shall bear interest from the Original Issue Date identified above; provided, howev.er, that if, at the time of authentication of this Bond, interest is in default on this Bond, this Bond .shall bear interest from the Interest Payment Date to which interest hereon has .previously been paid or made available for payment), payable semiannually on March 2 and September 2 in each year, commencing March 2, 2002 DOCSLAl:397435.2 1-415040 MYH E-1 (the "Interest Payment DateS"), until payment of Such Principal Amount in full. The Principal Amount hereof is payable upon surrender hereof upon maturity or earlier redemption at the principal corporate trust office (the ."Trust Office") of State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"), in Los Angeles, Calif'omia. Interest hereon is payable by check of the Trustee mailed by first class mail on each Interest Payment Date to the Registered Owner hereof at the address of the Registered Owner as it appears on the Registration Books of the Trustee as of the close of business on the fifteenth calendar day of the month preceding such Interest Payment Date. This Bond is one ora duly authorized issue of bonds of the Authority designated .the "Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series E" (the "Series E Bonds"), limited in principal mount to $ , secured.by the Indenture of Trust, dated as of February 1, 1996, by and between the Authority and the Trustee, as amended and supplemented by the First Supplemental Indenture of Trust, dated as of November 1, 1997, the Second Supplemental Indenture of Trust, dated as of November 1, 1998, the Third Supplemental Indenture of Trust, dated as of November 1, 1999, by and between the Authority and the Trustee and the Fourth Supplemental IndentUre of Trust, dated as of ,2001, by and between the Authority and the Trustee (as so amended and supplemented, the "Indenture"). The Authority has previously issued its Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series A (the "Series A Bonds"), Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), 'Series B (the "Series B Bonds"), Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series C (the "Series C Bonds"), and Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series D (the "Series D Bonds") with which the Series E Bonds are on parity. The Authority may issue additional bonds on a parity with the Series A Bonds, the Series B Bonds, the Series C Bonds, the. Series D Bonds and the Series E Bonds, in accordance with the terms of, and upon satisfaction of the conditions contained in, the Indenture; the Series A Bonds, 'the Series B Bonds, the Series C Bonds, the Series D Bonds and the Series E Bonds, together with any such additional bonds, are referred to as the "Bonds." Reference is hereby made to the Indenture and all indentures Supplemental thereto for a description of the rights thereunder of the owners of the Bonds, of the nature and extent of the Revenues (as that term is defined in the Indenture), of the rights, duties and immunities of the Trustee and of the rights and obligations of the Authority thereUnder; and all of the terms of the Indenture are hereby incorporated herein and constitute a contract between the Authority and the Registered Owner hereof, and to all of the provisions of which Indenture the Registered Owner hereof, by acceptance hereof, assents and agrees. The Bonds are authorized to be issued pursuant to the provisions of the Marks-Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with Section 6584)~of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Bond Law"). The Bonds are speCial obligations of the Authority and, as and to the extent set forth in the Indenture, are payable solely from and secured by a first lien on and pledge of the Revenues and certain assets held by the Trustee as provided in the Indenture. All of the Bonds are equally secured by a pledge of, and lien upon, all of the Revenues and such assets, and the Revenues and such assets constitute a trust fund for the security and payment of the principal of and interest on the Bonds. The full faith and credit of the Authority is not pledged for the payment of the principal of or interest or redemption premiums, if any, on the Bonds. The Bonds are not secured DOCSI.,A 1:397435.2 1-415040 MVH E-2 by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the Authority or any of its income or receipts, except the Revenues and such assets as provided in the Indenture. . The Bonds have 'been issued to provide a portion of the funds to acquire certain assessment bonds (the "Assessment Bonds") issued by the City of Tustin, a municipal -corporation organized and existing under the laws of the State of California (the !'City"). The Revenues which secure the Bonds and from which the Bonds are payable consist primarily of amounts derived from the Assessment Bonds, as more fully set forth in the Indenture. The Series E Bonds have been issued to provide a portion of the funds to acquire certain Assessment Bonds designated the City of Tustin Limited Obligation Improvement Bonds, Reassessment District No. 9'5-2 (Tustin Ranch), Fixed Rate Bonds, Group Four (the "Group Four Bonds"). The Series E Bonds maturing on or after September 2, 20 , are .subject to optional redemption in whole, or in part on such basis among maturities as shall be designated by the Authority and by lot'within a maturity, on any Interest Payment Date on or after September 2, 2008, at the following respective redemption prices (expressed as percentages of the principal amount of the Series E Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates September 2, 20 and March 2, 20~ September 2, 20 and March 2, 20~ September 2, 20 and thereafter ..Redemption Price % The Series E Bonds shall be subject to mandatory redemption, in whole, or in part on any Interest Payment Date, from and to the extent of any prepayment of reassessments securing the Group Four Bonds, which .prepayment results in a redemption of Group Four Bonds, as more particularly set forth in the Indenture, at the following respective redemption prices (expressed as percentages of the principal amount of the Series E Bonds to be redeemed), plus accrued interest thereon to the date of redemption. Redemption Dates March 2, 20 . through March 2, 20 September 2, 20 and March 2, 20 September 2, 20 and March 2, 20 September 2, 20 and thereafter Redemption Price % The Series E Bonds maturing on September 2, 2013 shall be subject to mandatory sinking - fund redemption, in part, by lot, on September 2 in each year, commencing September 2, 20 , at a redemption price equal to the principal amount of the Series E Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts specified in the Indenture. The Trustee on behalf and at the expense of the Authority shall mail (by first class mail) notice of any redemption to the respective owners of any Series E Bonds designated for E-3 DOCSLAl:397435.2 1-415040 M-Vt-t redemption, at their respective addresses appearing on the Registration Books maintained by the Trustee, at least 30 but not more than 60 days prior to the redemption date; provided, however, that neither failure to receive any such notice so mailed nor any defect therein shall affect the validity of the proceedings for the redemption of such Series E Bonds or the cessation of the accrual of interest thereon. The redemption price of' the Series E Bonds to be redeemed shall be paid only upon presentation and surrender thereof at the Trust Office of the Trustee. From and after the date fixed for redemption of any Bonds, interest on such Bonds will cease to accrue. The Series E 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 Indenture, fully registered Series E Bonds may be exchanged at the Trust Office of the Trustee for a like aggregate principal amount and maturity of fully registered Series E Bonds of other authorized denominations. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Trust Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges Provided in the Indenture, and upon surrender and cancellation of' this Bond. Upon such transfer a new fully 'registered Series E Bond or Series E Bonds, of authorized denomination or denominations, for the same aggregate principal amount and of the same maturity will be issued to the transferee in exchange herefor. The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. The Indenture and the rights and obligations of the Authority and of the owners of the Bonds and of the Trustee may be modified or amended from time to time and at any time in the' manner, to the extent, and upon the terms provided in the Indenture; provided that no such modification or amendment shall (a) extend the maturity of or reduce the interest rate on any Bond or the amount of principal thereof without the express written consent of the owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) permit the creation of any lien on the Revenues and other assets pledged under the Indenture, or deprive the Bonds owners of the lien created under the Indenture on the Revenues and such other assets, without the consent of the owners of all outstanding Bonds. It is hereby certified that all things, conditions and acts required to exist, to have happened and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by the Constitution and statutes 'of the State of California and by the Bond Law and the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Constitution or statutes of the State of California or by the Bond Law. This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose, until the certificate of authentication hereon shall have been manually signed by the Trustee. DOCSLAl:397435.2 1-415041) MVH E-4 Unless this Bond is presented by an authorized representative of The Depository Trust Company to the Trustee for registration, 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. IN WITNESS WHEREOF, the Authority has caused this'Bond to be executed in its name and on its behalf by the facsimile signatures of its Chairman and Secretary all as of the Original Issue Date identified above. TUSTIN PUBLIC FINANCING AUTHOmTY By: Chairman [SEAL] Attest: By: Secretary DOCSLAl:397435.2 1-415040 MVH E-5 STATEMENT OF INSURANCE Financial SeCurity Assurance Inc. ("Financial Security"), New York, New York, has delivered its municipal bond insurance policy with respect to the scheduled payments due of principal of and interest on this Bond to the Trustee, or its successor, as Trustee for the Series E Bonds. Said Policy is on file and available for inspection at the Office of the Trustee and a copy thereof may be obtained from Financial Security or the Trustee. DOCSLAl:397435.2 1-415040 .M~H E-6 [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Series E Bonds described in the within-mentioned Indemure and registered on the Registration Books. Date: STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Trustee By: Authorized Signatory DOCSLA1:397435.2 ~-4~ s04o ~-i E-7 ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto whose address and social security or other tax identifying number is , the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed' Note: Signature(s) must be guaranteed by an eligible guarantor. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. DOCSLAl:397435.2 1-415040 MVH E-8 TABLE OF CONTENTS ARTICLE XVI SERIES E BONDS .............................................................................................. 4 Section 16.01. Definitions ............................................................................................................. 4 Section 16.02. Authorization and Issuance of Series E Bonds ..................................................... 5 Section 16.03. Terms of Series E Bonds ....................................................................................... 5 Section 16.04. Form of Series E Bonds ..., .................................................................................... 7 SectiOn 16.05. Book-Entry Series E Bonds .............. . ................................................................... 7 Section 16.06. Application of Proceeds of thc Series E Bonds ..... · ............................................... 9 Section 16.07. Program Fund ........................................................................................................ 9 Section 16.08. Redemption of Series E Bonds ............................................. ' ............................. 9 Section 16.09. Series E Tax Covenants ...................................................................................... 11 Section 16.10. Series E Continuing Disclosure .......................................................................... 11 Section 16.11. Sale of Group Four Bonds; Sale of Property ...................................................... 11 Section 16.12. Insurer (Series E) To Be Deemed Owner; Rights of the Insurer (Series E); Payments by the Insurer (Series E); Notices .................................................................... 11 Section 16.13. Deposits to Policy Payments Account (Series E); Payments Under the Insurance Policy (Series E) .............................................................................................. 13 Section 16.14. Notices to Rating Agencies ................................................................................. 15 Section 16.15. References to Insurer and Insurance PolicY ........................................................ 15 Section 16.16. Effect of Fourth Supplemental. Indenture .................................................... i ....... 15 Section 16.17. Execution in Several Counterparts ...................................................................... 15 Section 16.18. Effective Date of Fourth Supplemental Indenture .............................................. 15 EXHIBIT E - FORM OF SERIES E BOND ................................................................................ E-1 DOCSLAl':397435.2 -i- 1-415041) M'VH An extra section break has been inserted above this paragraph. Do not delete this section break if you plan to add text after the Table of Contents/Authorities. Deleting this break will cause Table of Contents/Authorities headers and footers to appear on any pages following the Table of Contents/Authorities. D OCSI.~ 1: 397435.2 1-415040 MVtt FIFTH SUPPLEMENTAL FISCAL AGENT AGREEMENT by and between the CITY OF TUSTIN and STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Fiscal Agent Dated as of 1, 2001 RELATING TO CITY OF TUSTIN LIMITED OBLIGATION IMPROVEMENT BONDS REASSESSMENT DISTRICT NO, 95'2 (TUSTIN RANCH) FIXED RATE BONDS, GROUP FOUR DOCSLAl:397489.2 FIFTH SUPPLEMENTAL FISCAL AGENT AGREEMENT THIS FIFTH SUPPLEMENTAL FISCAL AGENT AGREEMENT (this "Fifth Supplemental Agreement") is made and entered into as of 1, 2001 bY and between the CITY OF TUSTIN, a general law city and municipal corporation organized and existing under and by virtue of the laws of the State of California (the "City"), and STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., a national banking association organized and existing under and by virtue of the laws of the United States of America, as fiscal agent (the "Fiscal Agent"). WITNE S SETH' WHEREAS, pursuant to a Fiscal Agent Agreement, dated as of February 1, 1996. (the "Original Agreement"), by and between the City and the Fiscal Agent, the City issued its Limited Obligation Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch), Series A (the "Series A Bonds") in the aggregate principal amount of $41,500,000; WHEREAS, the Original Agreement was amended and supplemented pursuant to a First Supplemental Fiscal Agent Agreement, dated as of September 1, 1996, by and between the City and the Fiscal Agent, a Second Supplemental Fiscal Agent Agreement, dated as of November 1, 1997, by and between the City and the Fiscal Agent, a Third Supplemental Fiscal Agent Agreement, dated as of November 1, 1998, by and between the City and the Fiscal Agent, and a Fourth Supplemental Fiscal Agent Agreement, dated as of November 1, 1999, by and between the City and the Fiscal Agent (as so amended and supplemented, the "Fourth Amended Original Agreement") (all capitalized terms used in these recitals shall have the meanings ascribed thereto in the "Fourth Amended Original Agreement"); WHEREAS, the Series A Bonds were originally issued as Adjustable Rate Bonds; WHEREAS, in accordance, with the provisions of the Fourth Amended Original Agreement, all or a portion of the Series A Bonds may, and in certain circumstances are required to be, converted to Fixed Rate Bonds; WHEREAS, $1,946,0.88.64 aggregate principal amount of Series A Bonds are now being " lad" converted to Fixed Rate Bonds (the "Group FOur Fixed Rate t~o s ); WHEREAS, the Fourth Amended Original Agreement provides that the Fourth Amended Original Agreement and the rights and obligations of the City, the Fiscal Agent and the Owners of Fixed Rate Bonds, but only as such rights and obligations relate solely to such Fixed Rate Bonds, may be modified or amended, as of the Conversion Date for such Fixed Rate Bonds, by a Supplemental Agreement which the City and the Fiscal Agent may emer into without the DOCSLAl:397489.2 consent of any Bond Owners, but only if such Fixed Rate Bonds have been remarketed by the Remarketing Agent with such modified or amended rights and obligations; WHEREAS, the City desires to amend and modify the Fourth Amended Original Agreement with respect to certain of the rights and obligations relating solely to-Group Four Bonds as of Conversion Date for the Group Four Fixed Rate Bonds; WHEREAS, the Fourth Amended Original Agreement provides that, in connection with the conversion of each group of Series A Bonds to Fixed Rate Bonds pursuant to the Fourth Amended Original Agreement, the City may, subject to the requirements of the Act, by Supplemental Agreement establish one or more Series of Bonds, and the City may issue and the Fiscal Agent may authenticate and deliver Bonds of any Series so established, in such principal amount as shall be determined by the City in said Supplemental A-greement, but only upon compliance by the City with the provisions of the Fourth Amended Original Agreement; WHEREAS, in ~connection with the conversion of the Group Four Fixed Rate Bonds, the City desires to establish an additional Series of Bonds (the "Series Four Bonds", together with the Group Four Fixed Rate Bonds, the "Group' Four Bonds") for one or more of the purposes specified in the Fourth Amended Original Agreement; and WHEREAS, the City has determined that all things' necessary to cause the authorization, execution and delivery of this Fifth Supplemental Agreement have in all respects been duly authorized; 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: DOCSLAl:397489.2 2 PART 1 ADDITION OF ARTICLE XVI Part 1.1. Addition of Article XVI. The Fourth Amended Original Agreement is hereby amended by adding thereto an additional Article as follows- ARTICLE XVI GROup FOUR BONDS Section 16.01. Definitions. Unless the context otherwise requires, the terms defined in this Section shall for ali purposes of this Agreement, of any Supplemental Agreement and of any certificate, opinion or other document herein or therein mentioned, have the. meanings herein specified. "Code (Group Four)" means the Internal Revenue Code of 1986. "Continuing Disclosure Agreement (Series E)" means the Continuing Disclosure Agreement (Series E), dated as of 1, 2001, by and between the City and the Authority Trustee, as originally-' executed and as it may be amended from time to time in accordance with the terms thereof. "Conversion Date (Group Four)" means November 7, 2001. "Costs Account (Group Four)" means the account within the Costs of Issuance Fund by that name established and held by the Fiscal Agent pursuant to Section 16.06. "Designated Parcels (Group Four)" means the parcels of real property within Reassessment District designated by the City, pursuant to Section 7.01(e) of the Agreement, to represent the Group Four Bonds, the assessor's parcel numbers for which are set forth in Exhibit 'C hereto. "Fifth .Supplemental Agreement, dated as of Agreement'' means the Fifth Supplemental Fiscal Agent 1,2001, by and between the City and the Fiscal Agent. "Group Four Bonds" means, collectively, the Group Four Fixed Rate Bonds and the Series Four Bonds. "Group Four Costs" means all items of expense directly or indirectly payable by or reimbursable to the City relating to the authorization, issuance, conversion, remarketing, sale and delivery of the Group Four Bonds and the authorization, issuance, sale and delivery of the Series E Bonds, including but not limited to printing expenses, rating agency fees, filing and recording. fees, fees, expenses and charges of the Fiscal Agent and its counsel, fees, expenses and charges of the Authority Trustee and its counsel, fees, charges and disbursements of underwriters, remarketing agents, attorneys, financial advisors, accounting firms, consultants, and other professionals, and fees and charges for preparation, execution and safekeeping of the Group Four DOCSLA 1:397489.2 3 Bonds and the Series E Bonds and any other cost, charge or fee in connection with the issuance of the Group Four Bonds and the Series E Bonds, including the premium for the municipal bond insurance policy securing payment of the Series E Bonds. "Group Four Fixed Rate Bonds" means the $1,946,088.64 aggregate principal amount of Fixed Rate Bonds, the Conversion Date for which is the Conversion Date (Group Four). "Insurance Policy (Series E)" means the Municipal Bond Insurance Policy, and any endorsement thereto, issued by the Insurer (Series E) guaranteeing the scheduled payment of the principal of and interest on the Series E Bonds. "Insurer (Series E)" means Financial Security Assurance Inc., a New York stock insurance company, or. any successor thereto. "Original Purchaser (Group Four)" means the Authority, as the original purchaser of the Group Four Bonds. "Participating Underwriter (Series E)" has the meaning ascribed to Participating Underwriter in the Continuing Disclosure Agreement (Series E). "Permitted Investments (Group Four)" means any of the following to the extent then permitted by the general laws of the State of California: (1) (a) Direct obligations (other than an obligation subject to variation in principal repayment) of the Un/ted States of America ("United States Treasury Obligations"), (b) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by the United States of America, (c) obligations fully and unconditionally guaranteed as to timely payment of principal and interest by any agency or instrumentality of the United States of America when such obligations are backed by the full faith and credit of the United States of America, or (d) evidences of ownership of proportionate interests in future interest and principal payments on obligations described above held by a bank or trust company as cUstodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying government obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated. (2) Federal Housing Administration debentures. (3) The listed obligations of government-sponsored agencies which are not backed by the full faith and credit of the United States of America: Federal Home Loan Mortgage Corporation (FHLMC) Participation certificates (excluding stripped mortgage securities which are purchased at prices exceeding their principal mounts) Senior debt obligations DOCSLAI:397489.2 4 - Farm Credit Banks (formerly Federal Land Banks, Federal' Intermediate Credit Banks and Banks for Cooperatives) Consolidated systemwide bonds and notes - Federal Home Loan Banks (FHL Banks) Consolidated debt obligations - Federal National Mortgage Association (FNMA) Senior debt obligations Mortgage-backed securities (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts) - Student Loan Marketing Association (SLMA) · Senior debt obligations '(excluding securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date) - Financing Corporation (FICO) Debt obligations - Resolution Funding Corporation (REFCORP) Debt obligations (4) Unsecured certificates of deposit, time deposits, deposit accounts and bankers' acceptances '(having maturities of not more than 30 days) of any bank the short-term obligations of which are rated "A-1" or better by S&P. (5) Deposits the aggregate amount of which are fully insured by the Federal Deposit Insurance Corporation (FDIC), in banks which have capital and surplus of at least $5 million. (6) Commercial paper (having original maturities of not more than 270-days) rated "A-1 +" by S&P and "Prime-1" by Moody's. Money market funds rated "AAm" or "AAm-G" by S&P, or better. (8) State Obligations, which means (a) Direct general obligations of any state of the United States of America or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated "A3" by Moody's and "A" by S&P, or better, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated. (b) Direct, general short-term obligations of any state agency or subdivision or agency described in (a) above and rated "A-l+" by S&P and "Prime-l" by Moody's: DOCSLA 1:397489.2 (c) Special Revenue Bonds (as defined in the United States Bankruptcy Code) of any state, state agency or subdivision described in (a) above and rated "AA" or better by S&P and "Aa" or better by Moody's. (9) Pre-refunded municipal obligations rated "AAA" by S&P and "Aaa" by Moody's . meeting the following requirements' (a) the municipal obligations are (i) not subject to redemption prior to maturity or (ii) the trustee for the municipal obligations has been given irrevocable instructions concerning their call and redemption and the issuer of the municipal obligations has covenanted not to redeem such municipal obligations other than as set forth in such instructions; (b) the municipal obligations are secured by cash or United States Treasury Obligations which may be applied only to payment of the principal of, interest and premium on such municipal obligations; .(c) the principal of and 'interest on the United States Treasury Obligations (plus any cash in the escrow) has been verified by the report of independent certified public accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due and to become due on the municipal obligations ("Verification"); (d) the cash or United States Treasury Obligations serving as security for the municipal obligations are held by an escrow agent or trustee in trust for owners of the municipal obligations; (e) no substitution of a United States Treasury Obligation shall be permitted except with another United States Treasury Obligation and upon delivery of a new Verification; and (f) the cash or the United States Treasury Obligations are not available to satisfy any other claims, including those by or against the trustee or escrow agent. (10) Repurchase agreements: A. With (i) any domestic bank, or domestic branch of a foreign bank, the long term debt of which is rated at least "A" by S&P and Moody's; or (ii) any broker- 'dealer with "retail customers" or a related affiliate thereof which broker-dealer has, or the parent company (which guarantees the provider) of which has, long- term debt rated at least "A" by S&P and Moody's, which broker-dealer falls under the jurisdiction of the Securities Investors Protection .Corporation; or (iii) any other entity rated "A" or better by S&P and Moody's and acceptable to the Insurer (Series E) provided that: DOCSLAl:397489.2 a. The market value of the collateral is maintained at levels and upon such conditions as would be, acceptable to S&P and Moody's to maintain an "A" rating in an "A" rated structured financing (with a market value approach); b. The Fiscal Agent or a third party acting solely as agent therefor or for the City (the "Holder of the Collateral") has possession of the collateral or the collateral has been transferred to the Holder of' the Collateral in accordance with applicable state and federal laws (other than by means of entries on the transferor's books); c. The repurchase agreement shall state and an opinion of counsel shall be rendered at the time such collateral is delivered that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); d. All other requirements of S&P in respect of repurchase agreements shall be met; e. The repurchase agreement shall prOvide that if during its term the provider's rating by either Moody's or S&P is withdrawn or suspended or falls below "A-" by S&P or "A3" by Moody's, as appropriate, the provider must, at the direction of the City or the Fiscal Agent (who shall give such direction if so directed by the Insurer (Series E)), within 10 days of receipt of such direction, repurchase all collateral and terminate .the agreement with no-penalty or premium to the City or the Fiscal Agent. Notwithstanding the above, if a repurchase agreement has a term of 270 days or less (with no'evergreen provision), collateral levels need not be as specified in (a) above, so long as such collateral levels are 103% or better and the provider is rated at least "A" by S&P and Moody's, respectively. (11) Investment agreements with a domestic or foreign bank or corporation (other than a life or property casualty insurance Company) the long-term debt of which, or in the case of a monoline financial guaranty insurance company, claims payability, or the guarantor is rated at least "AA" by S&P and "Aa" by Moody's; provided, that, by the terms of the investment agreement: (a) interest payments are to be made to the Fiscal Agent at times and in amounts as necessary to pay debt service (or, if the 'investment agreement is for the construction fund, construCtion draws) on the Bonds; (b) .the invested funds are available for withdrawal without penalty or premium, at any time upon not more'than seven days' prior notice; the City and DOCSLAl:397489.2 the Fiscal Agent hereby agree to give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid; (c) the investment agreement shall state that it is the unconditional and general obligation of', and is not subordinated to any other obligation of, the provider thereof; (d) the City or the Fiscal Agent receives the opinion of' domestic counsel (which opinion shall be addressed to the City and the Insurer (Series E)) that such . investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable) in form and substance acceptable, and addressed to, the Insurer (Series E); (e) the investment agreement shall provide that if during its term (i) the provider's rating by either S&P or Moody's falls below "AA-" or "Aa3", respectively, the provider shall, at its option, within 10 days of receipt of such downgrade either (a) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider's books) to the City, the Fiscal Agent or a third party acting solely as agent therefor ( the "Holder of the Collateral") collateral free and clear of any third-party liens or claims the market value of which collateral is maintained at levels and upon such conditions as woUld be acceptable t° S&P and Moody's to maintain an "A" rating in an "A" rated structured financing (with a market value approach); Or (b) repay the principal of and accrued but unpaid interest on the investment and (ii) the provider's rating by either Moody's or S&P is withdrawn or suspended or falls below "A3" or "A-" respectively, the provider must, at the direction of the City or the Fiscal Agent (who shall give such direction if so directed by the Insurer (Series E)), within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the City or Fiscal Agent; (f) the investment agreement shall state, and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under. the terms of the investment agreement, at the time such collateral is delivered, that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of.the Collateral is in possession); (g) the investment agreement must provide that if during its term (x) the provider shall default in its payment obligations, the provider's obligations under the investment, agreemem shall, at the direction of the City or the Fiscal Agent (who shall give such direction if so directed by the Insurer (Series E)), be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the City or Fiscal Agent, as appropriate, and (y) the 'proVider shall DOCSLA1'397489.2 8 become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. ("event of insolvency"), the provider's obligations shall automatically be accelerated and amoUnts invested and accrued but unpaid interest thereon shall be repaid to the City or Fiscal Agent, as appropriate. "Rebate Fund (Group Four)" means the fund by that name established and held by the Fiscal Agent pursuant to Section 16.11. "Rebate Requirement (Series E)" has the meaning ascribed to Rebate Requirement in the Tax Certificate (Series E). "Reserve Requirement (Group Four)" means, as of the date of any calculation, the least of (a) 10% of the original aggregate principal mount 'of the Series E Bonds, (b) maximum annual debt service.on the Series E Bonds, and (c) 125% of average annual debt service on the Series E Bonds.. "Series E Bonds" means the Tustin Public Financing Authority Revenue Bonds (Tustin Ranch), Series E, issued under the Authority Indenture. "Series Four Bonds" means the City. of Tustin Limited Obligation Improvement Bonds, Reassessment District No, 95-2 (Tustin Ranch), Series Four, issued hereUnder. "Tax Certificate (Series E)" means the Tax Certificate executed by the Authority and the City at the time of issuance of the Series E Bonds relating to the requirements of Section 148 of the Code (Group Four), as originally executed and as it may from time to time be amended in accordance with the provisions thereof. Section 16.02. 'Authorization and Issuance of Series Four Bonds. The Series Four Bonds shall be designated "City of Tustin Limited Obligation Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch), Series Four", and 'shall be secured by and payable .from the Reassessments and other assets pledged hereunder, as provided herein. The aggregate principal amount of Series Four Bonds that may be issued and Outstanding under this Agreement shall not exceed $298,911.36, except as maY be otherwise provided in Section 2.14. On the Conversion Date (Group Four), the City shall execute and the Fiscal Agent shall authenticate the Series Four Bonds and deliver the Series Four Bonds to the Original Purchaser (Group Four) in the aggregate principal amount of $ . Section 16.03. Terms of Group Four Bonds. (a) The Group Four Bonds shall be issued in fully registered form without coupons in Authorized Denominations, so long as no Group' Four Bond Shall have more than one maturity date. The Group Four Bonds shall be dated as of , shall be in the aggregate principal amount of $ , shall mature on September 2, 2013, and shall bear interest (calculated on the basis of a 360-day year comprised of' twelve 30-day months) at the nominal rate of % per annum; provided, however, that the actual rate of interest to be borne by the Group Four Bonds shall be adjusted as of each September 1 to be a rate per annum such that the sum of (i) the product of such rate (expressed as a decimal) times the principal amount of Group Four Bonds Outstanding as of the .close of DOCSLAl:397489.2 9 business on such September 1, plus (ii) the amount to be deposited on the following September 3 in the Redemption Account (Group Four), pursuant to Section 6.02(a), from amounts transferred by the Authority Trustee from the Sm~lus Fund established under the Authority Indenture, is equal to the product of the nominal rate (expressed as a decimal) times the principal amount of Group FourBonds Outstanding as of the close of business on such September 1. (b) The Interest Payment Dates for the Group Four Bonds shall commence on March 2, 2002. Interest on the Group Four Bonds shall be payable from the Interest Payment Date next preceding the date of authentication thereof unless (i) a Group Four Bond is authenticated on or before an Interest Payment Date and after the close of' business on the preceding Record Date, in which event it shall bear interest from such Interest Payment Date, (ii) a Group Four Bond is authenticated on or before the first Record Date therefor, in which event interest thereon shall be payable from ., 2001, or (iii) interest on any Group Four Bond is in default as of the date of authentication thereof, in which event interest thereon shall be payable from the date to which interest has been paid in full or made available for such payment, payable on each Interest Payment Date. Interest shall be paid in lawfial money of the United States on each. Interest Payment Date to the Persons in whose names the ownership of the Group Four Bonds is registered on the Registration Books at the close of business on the immediately preceding Record Date, except as provided below. Interest on any Group FOur Bond which is not punctually paid or duly provided for on any Interest Payment Date shall be payable to the Person in whose name the ownership of such Group Four Bond is registered on the Registration Books at the close of business on a special Record Date to be established by the Paying Agent for the payment of such defaulted interest, notice of which shall be given to such Owner not less than ten days prior to such special Record Date. Interest shall be paid by check of the Paying Agent mailed by first class mail, postage prepaid, on each Interest Payment Date to the Group Four Bond Owners at their respective addresses shown on the Registration Books as of the close of business on the preceding Record Date. (c) The principal of and premium, if any, on the Group Four Bonds shall be payable in lawfial money of the United States of America upon presentation and surrender thereof upon maturity or earlier redemption at the Office of the Paying Agent. Payment of principal of and premium, if any, on any Group Four Bond shall be made only upon presentation and surrender of such Group Four Bond at the Office of the Paying Agent. (d) Notwithstanding the foregoing, so long as the ownership of a Group Four Bond is registered in the name of the Authority Trustee, payment of the principal of, premium, if any, and interest on such Group Four Bond shall be made to the Authority Trustee in immediately available funds on each applicable payment date, in an amount equal to the principal, interest and any premium due on such Group Four Bond on the applicable payment date. 16.07. (e) The Group Four Bonds shall, be subject to redemption as provided in Section Section 16.04. Form of Group Four Bonds. 'The Group Four Bonds shall be in substantially the form set forth in Exhibit H hereto, with appropriate or necessary insertions, omissions and variations as permitted or required hereby. Only such of the Group Four Bonds as DOCSLAl:397489.2 1 0 shall bear thereon a certificate of authemication substantially in the form set forth in Exhibit H hereto, manually executed by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of or on behalf of the Paying Agent shall be conclusive evidence .that the Group Four Bonds so authemicated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of this Agreement. Section 16.05. Aoolication of Amounts. On the Conversion Date (Group Four), the proceeds of the sale of the Group Four Bonds $ shall be paid to the Fiscal Agent and, together with the amount $ required to be transferred pursuant to Section 6.05, shall be transferred or deposited by the Fiscal Agent as follows' (a) The Fiscal Agent shall, from the proceeds of the sale of the Group Four Bonds, transfer the amount of $ to the Paying Agent for deposit in the Remarketing Proceeds Account. (b) The Fiscal Agent shall, from the proceeds of the sale of the Group Four Bonds, and the amount transferred from the Interest Reserve Fund, deposit the amount of $ in the Reserve Account (Group Four) established pursuant to Sections 6.06 and 16.09, constituting the full amount of the Reserve Requirement (Group Four). (c) The Fiscal Agent shall, from the proceeds of the sale of the. Group Four Bonds, deposit the amount of $ in the Costs Account (Group Four)' 'established pursuant to Section 16.06. Section 16.06. Costs Account (Group Four). There is hereby established within the Costs of Issuance Fund a separate account to be known as the "Costs Account (Group Four)", which shall be held by the Fiscal Agent in trust. On the Conversion Date (Group Four), there shall be deposited in the Costs Account (Group Four) the amount specified in Section 16.05(c). The moneys in the Costs Account (Group Four) shall be used and withdrawn by the Fiscal Agent from time to time to pay the Group Four Costs upon submission of a Written Request of the City stating (a) the Person to whom payment is to be made, (b) the amount to be paid, (c) the purpose for which the obligation was incurred, (d) that such payment is a proper charge against the Costs Account (Group Four), and (e) that such amounts have not been the subject of a prior disbursement from the Costs Account (Group Four), in each case together with a statement or invoice for each amount requested thereunder. On [February 1 ], 2002, all amounts remaining in the Costs Account (Group Four) shall be withdrawn therefrom by the Fiscal Agent. and transferred to the Redemption Account (Group Four). Section 16'.07. Redemption of Group F.o. ur Bonds. (a) Optional Redemption. The Group Four Bonds shall be subject to optional redemption, in whole, or in part in Authorized Denominations, on any Interest Payment Date on or after September 2, 20 , at the following respective Redemption Prices (expressed as percentages of the principal amount of' the Group Four Bonds to' be redeemed), plus accrued interest thereon to the date of redemption: DOCSLAI:397489.2 11 Redemption Dates Redemption Price September 2, 20 and March 2, 20 September 2, 20 and March 2, 20 September 2, 20 and thereafter The reference in Section 7.01 (d) to Section 4.02(a) shall be deemed to also refer to this Section 16.07(a). (b) Mandatory Redemption From Reassessment Prepayments. The Group Four Bonds shall be subject to mandatory redemption, in whole, or in part in .Authorized Denominations, on any. Interest Payment Date, from and to the .extent of any prepayment of Reassessments on parcels of real property within the area constituting the Designated Parcels (Group Four), at the following respective Redemption Prices (expressed as percentages of the principal amount of the Group Four Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates Redemption Price March 2, 20 through March 2, 20 September 2, 20 and March 2, 20 September 2, 20 and March 2, 20 __ September 2, 20 and thereafter The City shall notify the Fiscal Agent of Group Four Bonds to be called for redemption upon prepayment of such Reassessments in amounts sufficient therefor, or whenever sufficient surplus funds are available therefor in the Redemption Account (Group Four). (c) Mandatory Sinking Fund Redemption. The Group Four Bonds shall be subject to mandatory sinking fund redemption, in part, on September 2 in each year, commencing September 2, 20 , at a Redemption Price equal to the .principal amount of the Group Four Bonds to be redeemed, without premium, plus accrued interest thereon to the date of redemption, in the aggregate respective principal amounts in the respective years as follows: D OCSLA1:397489.2 12 Sinking Fund Principal Amount Redemption Date to be (SeVtember 2) Redeemed $ If some but not all of the Group Four Bonds are redeemed pursuant to Section 16.07(a), the principal amoUnt of Group Four Bonds to be redeemed pursuant to Section 16.07(c) on any subsequent September 2 shall be reduced, by $5,000 or an integral multiple thereof, as designated by the City in a Written Certificate of the City filed with the Fiscal Agent at least 45 days prior to. such redemption date; provided, however, that the aggregate amount of such reductions shall not exceed the aggregate amount of GrOup Four Bonds redeemed pursuant to Section 16.07(a). If some but not all of the Group Four Bonds are redeemed pursuant to Section 16.07(b), the principal amount of Group Four Bonds to be subsequently redeemed pursuant to Section 16.07(c) shall be' reduced by the aggregate principal amount of the Group Four Bonds so redeemed pursuant to Section 16.07(b), such reduction to be allocated as nearly as practicable on a pro rata basis in amounts of $5,000 or integral multiples thereof, as designated by the City in a Written Certificate of the City filed with the Fiscal Agent at least 45 days prior to such redemption date. Section 16.08. Selecti0n,.,o,,,f Group Four B0.nds for Redemption. Whenever provision is made in this Agreement for the redemption of less than all of the Group Four Bonds, the Fiscal Agent shall select the Group Four Bonds to be redeemed from all Group Four Bonds not previously called for redemption, by lot in any manner which the Fiscal Agent in its sole discretion shall deem appropriate and fair. For purposes of such selection, all Group Four Bonds shall be deemed to be comprised of separate $5,000 denominations and such separate denominations shall be treated as separate Group Four Bonds which may be separately redeemed. Section 16.09..Grout} Four..A.cc0unts. In accordance with Section 6.02, the Fiscal Agent shall establish and maintain within the Redemption Fund a separate account designated the "Redemption Account (Group Four)." In accordance with Section 6.03, the Fiscal Agent shall establish and maintain within the Prepayment Account a separate account designated the "Prepayment Subaccount (Group Four)." In accordance with Section 6.06, the Fiscal Agent shall establish and maintain within the Reserve Fund a separate account designated the "ReServe Account (Group Four)." Section 16.10. Group Four Tax Covenants. (a) The City shall not take any action, or fail to take any action, if such action or failure to take suCh action would adversely affect'the exclusion from gross income of interest on the Series E Bonds under Section 103 of the Code (Group Four). Without limiting the generality of the foregoing, the City shall comply with the DOCSLA 1:397489.2 13 ...... requirements of the Tax Certificate (Series E), which is incorporated herein as if fUlly set forth herein. This covenant shall survive payment in full or defeasance of the Group Four Bonds and the Series E Bonds. (b) In the event that at any time the City is of the opinion that for purposes of this Section it is necessary or helpful to restrict or limit the yield on the investment of any moneys held by the Fiscal Agent in any of the funds or accounts established hereunder, the City shall so instruct the Fiscal Agent in writing, and the Fiscal Agent shall take such action as may be necessary in accordance with such instructions. (c) Notwithstanding any provisions of this Section, if the City shall provide to the Fiscal Agent an opinion of Bond Counsel to the effect that any specified action required under this Section is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on the Series E Bonds, the Fiscal Agent may conclusively rely on such opinion in complying with the requirements of this Section and of the Tax Certificate (Series E), and the covenants hereunder shall be deemed to be modified to that extent. Section 16.11. Rebate Fund (Group Four). (a) The Fiscal Agent shall establish and maintain a special fund designated the "Rebate Fund (Group Four)". There shall be deposited in the Rebate Fund (Group Four) such amounts as are required to be deposited therein pursuant to the Tax Certificate (Series E). Notwithstanding anything to the contrary contained herein, amounts held in the Rebate Fund (Group Four) are not pledged by the City to secure the payment of the principal of, premium, if any, or interest on the Bonds. All money at any time deposited in the Rebate Fund (Group Four) shall be held by the Fiscal Agent in trust, to the extent required to satisfy, the Rebate Requirement (Series E), for payment to the United States of America. Notwithstanding defeasance of the Group Four Bonds pursuant to Article X hereof, the defeasance of the Series E Bonds pursuant to the Authority Indenture or anything to the contrary contained, herein, all amounts required to be deposited into or on deposit in the Rebate Fund (Group Four) shall' be governed exclusively by this Section and by the Tax Certificate (Series E) (which is incorporated herein by reference). The Fiscal Agent shall be 'deemed conclusively to have complied with such provisions if it follows the written directions of the City, and shall have no liability or responsibility to enforce compliance by the City with the' terms of the Tax Certificate (Series E). The Fiscal Agent may conclusively rely upon the City's determinations, calculations and certifications required by the Tax Certificate (Series E). The Fiscal Agent shall have no responsibility to independently make any calculation or determination or to review the City's calculations. (b) Any fimds remaining in the Rebate Fund (Group Four) after payment in full of all of the Group Four Bonds and the Series E Bonds and after payment of any amounts described in this Section, shall be withdrawn by the Fiscal Agent and remitted to the City. Section 16.12. Revorts to California Debt and Investment Advisory, Commission. The City shall, not later than'"OCtobe; 30 o'f each y~r"'"untiI the final maturity of ~he'series E Bonds, supply the information required by Section 6599.1(b) of the California Government Code to the California Debt and Investment Advisory Commission by mail, postage prepaid. DOCSI,AI:397489.2 14 In accordance with Section 6599.1(c) of the California Government Code, the City shall notify the California Debt and Investment Advisory Commission by mail, postage prepaid, within ten days if either (a) the City fails to pay principal of or interest on the Group Four Bonds on any scheduled payment date, or (b) funds representing all or a portion, of the Reserve Requirement (Group Four) are withdrawn from the Reserve Account (Group Four) to pay principal of or interest on the GroUp Four Bonds. Section 16.13 Modification or Amendment of Agreement. Notwithstanding the provisions of Article J~, any Supplementa1 Agreemehi that affects the Group Four Bonds may be entered into only with the written consent of the Insurer (Series E) (so long as the Insurer (Series E) is not in default in its payment obligations under the Insurance Policy (Series E)). Section 16.14. Defeasance of Group Four Bonds. (a) Notwithstanding the provisions of Article XI, the defeasanc~ (~'f the Group Four B;nds "~'shall occur only in accordance with the prows~ons of this Section. (b) If the City shall pay or cause to be paid or there, shall otherwise, be paid (i) to the- Owners of all Outstanding Group Four Bonds the principal thereof and the premium, if any, and interest thereon at the times and in the manner stipulated herein and therein, and (ii) all other amounts due hereunder, then such Owners shall cease to be entitled to the pledge of' and lien on the Reassessments as provided herein, and all agreements and covenants of the City and the Fiscal Agent to such Owners hereunder shall thereupon cease, terminate and become void and shall be discharged and satisfied. (c) Any Outstanding Group Four Bond shall be deemed to have been paid within the meaning and with the effect expressed in this Section when the whole amount of the principal thereof and the premium, if any, and interest thereon shall have been paid or when (i) in case said Group Four Bond or portion thereof has been selected for redemption in accordance with. Section 16.08 prior to its stated maturity date, the City shall have given to the Fiscal Agent irrevocable instructions to give, in accordance with the provisions of Section 4.04, notice of redemption of such Group Four Bond, or portion thereof, (ii)there shall be on dePosit with the Fiscal Agent, moneys, or (A) Permitted Investmems (Group Four) described in clause (1)(a) of the definition thereof, (B) evidences of ownership of proportionate interests in future interest and principal payments on Permitted Investments (Group Four) described in clause (1)(a) of the definition thereof held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying United States Treasury Obligations are not available to any person claiming through the custodian or to whom the custodian may be obligated, or (C) Permitted Investments (Group Four) described in clause (9) of the definition thereof, or any combinations thereof ("Defeasance Securities"), which Defeasance Securities shall not contain provisions permitting the redemption thereof other than at the option of the holder, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which shall be sufficient to pay when due the principal of and premium, if any, and interest on such Group Four Bond and due and to become due on said Group Four Bond or portion thereof on or prior to the redemption date or its stated maturity date, as the case may be, and (iii) in the event said Group DOCSLAI:397489.2 15 Four Bond does not mature and is not to be redeemed within the next succeeding 60 days, the City shall have given the Fiscal Agent irrevocable instructions t° give notice, as soon as practicable in the ~same manner as a notice of redemption given pursuant to Section 4.04, to the Owner of said Group Four Bond, or portion thereof, stating that the deposit of moneys or Defeasance Securities required by clause (ii) of this paragraph has been made with the Fiscal Agent and that said Group Four Bond, or portion thereof, is deemed to have been paid in accordance with this Section and stating such maturity date or redemption date upon which moneys are to be available for the payment of the principal of and premium, if any, and interest on such Group Four Bond, or portion thereof. Neither the moneys nor the Defeasance 'Securities deposited with the Fiscal Agent pursuant to this Section nor principal or interest payments on any such Defeasance Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of and premium, if any, and interest on such Group Four Bond, or portions thereof. If payment of less than all of the Group Four Bonds is to be provided for in the manner and with the effect expressed in this Section, the Fiscal Agent shall select such Group Four Bonds, or portions thereof, in the manner specified in Section '16.08 for selection for redemption of less than all of the Group Four Bonds in the principal amounts designated to the Fiscal Agent by the City. (d) The Fiscal Agent may seek and is entitled to rely upon (i)an opinion of Bond Counsel reasonably satisfactory to the Fiscal Agent to the effect that the conditions precedent to a defeasance pursuant to this Section have been satisfied, and (ii)such other opinions, certifications and computations, as the Fiscal Agent may reasonably request, of accountants or other financial consultants concerning the matters described in paragraph (c) of this Section. (e) Prior to any defeasance becoming effective under this section, (A) all amounts currently due to the Insurer (Series E) under the Insurance Policy (Series E) shall have been paid in full, and (B) the City shall cause to be delivered (i) an executed copy of a report, addressed to the Fiscal Agent, the City and the Insurer (Series E), in form and in substance acceptable to the Fiscal Agent, the City and the Insurer (Series E), of a nationally recognized certified public accountant, or firm of such accountants, verifying that the Defeasance Securities and cash, if any, satisfy the requirements of clause (ii) of paragraph (c), above (a "Verification"), (ii) a copy of the escrow deposit agreement entered into in connection with such defeasance, which escrow deposit agreement shall provide that no substitution of Defeasance Securities shall be permitted except with other Defeasance Securities and upon delivery of a new Verification and no reinvestment of Defeasance Securities shall be permitted except as contemplated by the original Verification or upon delivery of a new Verification, and (iii) a copy of an opinion of Bond Counsel, dated the date of such defeasance and addressed to the Fiscal Agent, the City and the InsUrer (Series E), in form and in substance acceptable to the Fiscal Agent, the City and the Insurer (Series E), to the effect that such Group Four Bonds have been paid within the meaning and with the effect expressed in the Fiscal Agent Agreement, and 'that all agreements and covenants of the City and the Fiscal Agent to the Owners of such Group .Four Bonds under the Fiscal Agent Agreement have ceased, terminated and becOme void and have been discharged and satisfied. In the event a forward purchase agreement will be employed in the refunding, such agreement shall be subject to the approval of the Insurer (Series E) and shall be accompanied by such opinions of counsel as may be required by the Insurer (Series E). The Insurer (Series E) shall be provided with final DOCSI.,A 1:397489.2 16 drafts of the above-referenced documentation not less than five Business Days prior to the funding of the escrow. Section 16.15. Revorting Requirements. (a) The City shall deliver to the Insurer (Series E), upon delivery of the financial statements described in subsection (b), below, a Written Certificate of the City stating that no Event of Default has occurred, or if an Event of Default has occurred, specifying the nature thereof and, if the City has a right to correct such default pursuant to Section 8.01 (c), stating in reasonable detail the.steps, if any, being taken by the City to correct such default. (b) The City shall promptly provide to the Insurer (Series E) (i) audited financial statements for each fiscal year, to be submitted within 120 days of the end of such fiscal year, and (ii) each annual budget of the City, to be submitted within 30 days of the approval thereof. (c) The City shall file or cause to be filed with the Insurer (Se~:ies E) any official statement issued by, or on behalf of, the City in connection with the incurrence by the City of any additional indebtedness within 30 days of the incurrence thereof. (d)' If, on the fifth BusineSs Day prior to an Interest Payment Date, maturity date or redemption date, the Fiscal Agent determines that there will be insufficient funds in the funds and accounts established hereunder available to pay the.principal of or i~terest on the Group Four Bonds on such Interest Payment Date, maturity date or redemption date, the Fiscal Agent shall give notice to the Insurer (Series E) and to the Authority Trustee by telephone or telecopy of the amount of such deficiency by 12 noon New York City time on such Business Day. (e) All notices, repo.rts, certificates and opinions required to be delivered by the City pursuant hereto shall also be delivered to the Insurer (Series E). (f) The City agrees promptly to provide or cause to be provided to the Insurer (Series E) such financial, statistical and other factual information as the Insurer (Series E) shall from time to time reasonably request regarding the City. Section 16.16. Third,,-Party Beneficiary.. Notwithstanding anything to the contrary contained herein, the Insurer (Series E) is a third-party beneficiary of this Agreement. Section 16.17. Gr0u. P Four Bonds Original Issue Discount. Notwithstanding the provisions of Section 2.04 and 5.03, the Group Four Bonds may be purchased by the Original Purchaser (Group Four) on the Conversion Date (Group Four) at such purchase price, which may include original issue discount, as may be agreed to by the City and the Original Purchaser (Group Four). DOCSL. A1:397489.2 17 PART 2 SPECIFIC AMENDMENTS Part 2.1. Amendment to Section 6.08. Section 6.08.of the Fourth Amended Original Agreement is hereby amended by adding thereto a final paragraph, which shall read in full as follows' References in this Section 6.08 to Permitted Investments shall, when such references are applicable to any fund or account established for the Group Four Bonds, be deemed to be references to Permitted Investments (Group Four). Part 2.2. Amendme.n.t of' Section 8...0..1... Paragraph (a) of Section 8.01 of the Fourth Amended Original Agreement is hereby amended to read in full as follows: (a) Failure by the City to observe and perform any of the other covenants, agreements or conditions on its part in thi's Agreement or in the Bonds contained, if such failure shall have continued for a period of 30 days after written notice thereof, specifying such failure and requiting the same to be remedied, shall have been given to the City by the Fiscal Agent or the Owners of not less than 25% in aggregate principal amount of the Bonds at the time Outstanding; provided, however, if in the reasonable opinion of' the City the failure stated in the notice can be corrected, but not within such 30 day period, such failure shall not constitute an Event of · Default (with the consent of the Insurer (Series B) if such failure relates to : the Group One Bonds, with the consent of the Insurer (Series C) if such failure relates to the Group Two Bonds, with the consent of the Insurer (Series D) if such failure relates to the Group Three Bonds, and with the consent of the Insurer (Series E) if such failure relates to the Group Four Bonds), corrective action is instituted by the City within such 30 day period' and the City shall thereafter diligently and in good faith cure such failure in a reasonable period of time. Part 2.3. ,A. mendment of Section 12.03.2 Section 12.03 of the Fourth Amended Original Agreement is hereby amended to read in full as follows: Section 12.03. Limit, ation of Rights to Parties and Bond Owners..Nothing in this Agreement or in the Bonds expressed or implied is intended or shall be construed to give to any Person other than the Fiscal Agent, the City, the Paying Agent, the Bank, the Remarketing Agent, the Insurer (Series B) (with respect to the Group One Bonds), the Insurer (Series C) (with respect to the Group Two Bonds), the Insurer (Series D) (with respect to the Group Three BOnds), the Insurer (Series E) (with respect to the Group Four Bonds) and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of this Agreement DOCSI.,A 1:397489.2 18 or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Fiscal Agent, the City, the Paying Agent, the Bank, the Remarketing Agent, the Insurer (Series B) (with respect to the Group One Bonds), the Insurer (Series C) (with respect to the Group Two Bonds), the Insurer (Series D) (with respect to the Group Three Bonds), the Insurer (Series E) (with respect to the Group Four Bonds) and the Owners of the Bonds. Part 2.4. Amen..d. ment of Section 12.08.. Section 12.08 of the Fourth Amended Original Agreement is hereby amended to update the address of the Fiscal Agent and to include the ad&ess of the Insurer (Series E) as follows: If to Fiscal Agent: State Street Bank and Trust Company of California, N.A. 633 West Fifth Street, 12th Floor Los Angeles, California 90071 Attention: Corporate Trust Department Telephone: (213) 362-7369 Telecopier: (213) 362-7357 If to the Insurer (Series E): Financial Security Assurance Inc. 350 Park Avenue New York, New York 10022-6022 Attention: Managing Director Surveillance - Re: Policy No. Telephone: (212) 826-0100 Telecopier: (212) 339-3529 DOCSLA 1:397489.2 19 PART 3 MISCELLANEOUS Part 3.1. Effect of Fifth Supplemental Agreement. This Fifth Supplememal Agreement and all of the terms and provisions herein contained shall form part of the Fifth Amended Original Agreement as fully and with the same effect as if all such terms and provisions had been set forth in the Fourth Amended Original Agreement. The FOurth Amended Original Agreement is hereby ratified and confirmed and shall continue in full force and effect in accordance with the terms and provisions thereof, as heretofore amended and supplemented, and as amended and supplemented hereby. If there shall be any conflict between the terms of this Fifth Supplemental Agreemem and the terms of the Fourth Amended Original Agreement (as in effect on the day prior to the effective date of this Fifth Supplemental Agreement), the terms of this Fifth Supplemental Agreement shall prevail. Part 3.2. Executi,,.on in Sey,~ral Counteroarts. This Fifth Supplemental Agreement may be executed in any number of counterparts .and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the City and the Fiscal Agent shall preserve undestroyed, shall together constitute but one and the same instrument. Part 3.3. Effective Date of Fifth Supplemental Agreement. This Fifth Supplemental Agreement shall take effect upon the Conversion Date. (Group Four). D OCSI.,A 1:397489.2 2 0 IN WITNESS WHEREOF, the City has caused this Fifth Supplemental Agreement to be signed in its name by its officer thereunto duly authorized, and the Fiscal Agent has caused · this Fifth Supplemental Agreement to be signed in its corporate name by its officer thereunto duly authorized, all as of the day and year first above written. CITY OF TUSTIN By: Ronald A. Nault Finance Director STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., as Fiscal Agent By: Authorized Officer DOCSLAl:397489.2 2 1 EXHIBIT H FORM OF GROUP FOUR BOND No. R-1 CITY OF TUSTIN LIMITED OBLIGATION IMPROVEMENT BONDS REASSESSMENT DISTRICT NO. 95-2 (TUSTIN RANCH) FIXED RATE BOND, GROUP FOUR NOMINAL INTEREST RATE REGISTERED OWNER: PRINCIPAL AMOUNT: MATURITY DATE DATED DATE September 2, 2013 STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., AS TRUSTEE Under .and by virtue of the Refunding Act of 1984 for 1915 Improvement Act Bonds . (Division 11.5 of the California Streets and Highways .Code) (the "Act"), the City of' Tustin, County of Orange, State of California (the "City"), will, out of the redemption fund for the payment of the bonds issued upon the unpaid 'portion of reassessments made for the refunding bonds more fully described in proceedings taken pursuant .to Resolution No. 95-118 adopted by the City Council of the City on November 20, 1995, pay to the Registered Owner identified above or registered assigns (the "Registered Owner"), on the Maturity Date identified above or on any earlier redemption date, the Principal Amount identified above in lawful money of the United States of America; and pay interest thereon at, except as provided below, the nominal Interest Rate identified above in like lawful money from the date hereof payable semiannually on March 2 and September 2 in each year, commencing March 2, 2002 (each such date an "Interest Payment Date"), until payment of such Principal Amount in full. This Group Four Bond shall bear interest from the Interest Payment Date next preceding the date of authentication of this Group Four Bond, unless this Group Four Bond is authenticated on or before an Interest Payment Date and after the fifteenth calendar day of the month preceding such Interest Payment Date (the "Record Date"), in which event it shall bear interest from such Interest Payment Date, or unless this Group Four Bond is authenticated on or prior to , in which event it shall bear interest from the Dated Date identified above; provided, however, that if, at the time of authentication of this Group Four Bond, interest is in default, this Group Four Bond shall bear interest from the Interest Payment Date to which interest hereon has previously been paid or made available for payment. The Principal Amount hereof is payable upon surrender hereof DOCSLAI:397489.2 H-1 upon maturity or earlier redemption at the principal corporate trust office (the "Trust Office") of State Street Bank and Trust Company of California, N.A., as fiscal agent and paying agent (the "Fiscal Agent" and "Paying Agent", respectively), in Los Angeles, California. Interest hereon is payable by Check of the Paying Agent mailed by first class mail, postage prepaid, on each Interest Payment Date to the Registered Owner hereof at the address of the Registered' Owner as it appears on the Registration Books of the Paying Agent as of the close of business on the Record Date. This Group Four Bond shall not be entitled to any benefit under the Act, the Resolutions authorizing the issuance of the bonds, adopted by the City Council of the City on January 15, 1996, September 2, 1997, August 17, 1998, November 1, 1999, and ., 2001 (the "Resolutions of Issuance") or the Fiscal Agent Agreement, dated as of February 1, 1996, by and between the City and the Fiscal Agent, as amended and supplemented by the First Supplemental Fiscal Agent Agreement, dated as of September 1, 1996, by .and between the City and the Fiscal Agent, the SecOnd Supplemental Fiscal Agent Agreement, dated as of November 1, 1997, by and between the City and the Fiscal Agent, the Third Supplemental Fiscal Agent Agreement, dated as of November 1, 1998, by and between the City and the Fiscal Agent, the Fourth Supplemental Fiscal Agent Agreement, dated as of November 1, 1999, by and between the City and the Fiscal Agent, and the Fifth Supplemental Fiscal Agent Agreement, dated as of 1,2001 by and between the City and the Fiscal Agent (as so amended and supplemented, the "Agreement"), executed pursuant to the Resolutions of Issuance, or become valid or obligatory for any purpose, until the certificate of authentication hereon shall have been dated and signed by the Paying Agent. Capitalized undefined terms used in this Group Four Bond shall have the meanings ascribed thereto in the Agreement. Notwithstanding anything to the contrary contained herein, or in the Agreement, the actual rate of interest to be borne by the Group Four Bonds (including this Group Four Bond) shall be adjusted as of each September 1 to a rate per annum such that the sum of (i) the product of such rate (expressed as a decimal) times the principal amount of Group Four Bonds Outstanding as of-the close of business on such September 1, plus (ii) the amount to be deposited, pursuant to the Agreement, on the following September 3, in the Redemption Account (Group Four) established under the Agreement from amounts transferred by the Authority Trustee from the Surplus Fund established under the Authority Indenture, is equal to the product of the nominal rate (express as a decimal) times the principal amount of Group Four Bonds Outstanding as of the close of business on such September 1. This Group Four Bond is one of several annual series of Limited Obligation Improvement Bonds, Reassessment District No. 95-2 (Tustin Ranch), Fixed Rate Bonds, Group Four (the "Group Four Bonds") of like date, tenor and effect, but differing in mounts, maturities and interest rates, issued by said City under the Act and the Agreement for the purpose of providing means for paying for the refunding of the bonds as more particularly described in said proceedings, and is secured by the moneys in the redemption fimd (as may be limited by the Agreement) and by the unpaid portion of the Reassessments made for the payment of said refunding, and, including principal and interest, is payable exclusively out of said fund. Notwithstanding the foregoing, the 'Group Four Bonds shall be payable solely from and secured solely by the Reassessments (including prepayments thereof) on the parcels of real property within the Reassessment District designated by the City, pursuant to the Agreement, to be represented by the Group Four Bonds (the "Designated ParcelS (Group Four)"), together with DOCSI.,A 1:397489.2 H-2 interest and any penalties on such Reassessments, and any other amounts (including proceeds of the sale of the Group Four Bonds) held in any account established under the Agreement for the Group Four Bonds. Reassessments (including prepayments thereof) on parcels of real property within the Reassessment District other than the Designated Parcels (Group Four), together with interest and any penalties on such Reassessments, and any amounts held in any fund or account established under the Agreement other than such accounts established specifically for the Group Four Bonds, secure certain other Bonds issued or to be issued under the Agreement and shall not constitute a source of payment for the Group Four Bonds. Reference is hereby made to the Agreement and all agreements supplemental thereto for a description of the rights thereunder of the owners of the Group Four Bonds, of the nature and extent of the.Reassessments, of the rights, duties and immunities of the Fiscal Agent and the Paying Agent and of the rights and obligations of the City thereunder; and all of the terms of the Agreement are hereby incorporated herein and constitute a contract between the City and the Registered Owner hereof, and to all of the provisions of which Agreement the Registered Owner hereof, by acceptance hereof, assents .and agrees. The Group Four Bonds maturing on or after September 2, 20 , shall be subject to optional redemption, in whole or in part, on any Interest Payment Date on or after. September 2, 20 , at the following respective redemption prices (expressed as percentages of the principal amount of the Group Four Bonds to be redeemed), plus accrued interest thereon to the date of redemption: Redemption Dates Redemption Price September 2, 20 and March 2, 20 September 2, 20 and March 2, 20 September 2, 20 and thereafter The Group Four Bonds shall be subject to mandatory redemption, in whole or in part, on any Interest Payment Date, from and to the extent of any prepayments of principal of' the Reassessments on Designated Parcels (GroUP Four), as more particularly set forth in the Agreement, at the following respective redemption prices (expressed as percentages of the principal mount of the Group Four Bonds to be redeemed), plus accrued interest thereon to the date of redemption. Redemption Dates Redemption Price March 2, 20 through March 2, 20 September 2, 20 and March 2, 20 September 2, 20 and March 2, 20 September 2, 20 and thereafter oA The Group Four Bonds shall be subject to mandatory sinking fund redemption, in part, on September 2 in each year, commencing September 2, 20~ at a redemption price equal to the principal amount of the Group Four Bonds to be redeemed, without premium, plus accrued DOCSIAl:397489.2 H-3 interest thereon to the date of redemption, in the aggregate respective principal amounts specified in the Agreement. The Fiscal Agent on behalf and at the expense of the City shall mail (by first class mail) notice of any redemption to the respective owners of any Group Four Bonds designated for redemption, at their respective addresses appearing on the Registration Books, at least 30 but not more than 60 days prior to the redemption date; provided, however, that neither failure to receive any such notice so mailed nor any defect therein shall affect the validity of the proceedings for the redemption of such Group Four Bonds or the cessation of the accrual of interest thereon. The redemption price of the Group Four Bonds to be redeemed shall be paid only upon presentation and surrender thereof at the Trust Office of the Paying Agent. From and after the date fixed for redemption of any Group Four Bonds, interest on such Group Four Bonds will cease to accrue. The Group Four 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, Group Four Bonds may be exchanged at the Trust Office of the Paying Agent for a like aggregate' principal amount and maturity of fully registered Group Four Bonds of other authorized denominations. This Group Four Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Trust Office of the Paying Agent, but only in the manner, subject to the limitations and upon payment of the charges provided in the Agreement, and upon surrender and cancellation of this Group Four Bond. Upon such transfer a new fully registered Group Four Bond or Group Four Bonds, of authorized denomination or denominations, for the same aggregate principal amount and of the same maturity will be issued to the transferee in exchange herefor. The City, the Fiscal Agent and the Paying Agent may treat the Registered Owner hereof as the absolute owner hereof for all proposes, and the City, the Fiscal Agent and the Paying Agent shall not be affected by any notice to the contrary. The Agreement and the rights and obligations of the City and of the owners of the Bonds and of the Fiscal Agent may be modified or amended from time to time and at any time in the manner, to the extent, and upon the terms provided in the Agreement. The Bonds (including the Group Four Bonds) are Limited Obligation Bonds because, under the Agreement, the City is not obligated to advance funds from the City treasury to cure any deficiency which may occur in the redemption fund for the Bonds; provided, however, the City is not prevented, in its sole discretion, from so advancing funds. DOCSLA1:397489.2 H-4 IN WITNESS WHEREOF, said City has caused this Group Four Bond to be signed in its name and on its behalf by the facsimile signatures of its Treasurer and City Clerk, and has caused its corporate seal to be reproduced in facsimile hereon all as of the Dated Date identified above. CITY OF TUSTIN By: Treasurer (SEAL) Attest: By: City Clerk DOCSLAl:397489.2 H-5 CERTIFICATE OF AUTHENTICATION This is one of the Group Four Bonds described in the within-memioned Agreement and registered on the Registration Books. Date: STATE STREET BANK AND. TRUST COMPANY OF CALIFORNIA, N.A., as Fiscal Agent By: Authorized Signatory DOCSI.,AI:397489.2 H-6 ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto whose address and social security or other tax identifying number is , the within-mentioned Group Four Bond and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the registration books of the Paying Agent with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature(s) must be guaranteed by an eligible guarantor. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Group Four Bond in every particular without alteration or enlargement or any change whatsoever. DOCSLAI:397489.2 H-7 EXHIBIT I DESIGNATED PARCELS (GROUP FOUR) The assessor's parcel numbers of the parcels of real property within the Reassessment District designated by the City, pursuant to Section 7.01(e) of the Agreement, to represent the Group Four Bonds are as follows: ASsessor Parcel Number D OCSLA 1:397489.2 I-1 TABLE OF CONTENTS Page PART 1 ADDITION OF ARTICLE XVI Part I. 1. Addition of Article XVI ................................................................................................. 3 ARTICLE XVI GROUP FOUR BONDS ....................................................................... 3 Section 16.01. Definitions ................................................................................................ 3 Section 16.02. Authorization and Issuance of Series Four Bonds .................................... 9 Section 16.03. Terms of Group Four Bonds ........................................................... · ......... 9 Section 16.04. Form of Group Four Bonds ..................................................................... 11 Section 16.05. Application of Amounts .......................................................................... 11 Section 16.06. Costs Account (Group Four) ................................................................... 11 Section 16.07. Redemption of Group Four Bonds'. ......................................................... 11 Section 16.08. Selection of Group Four Bonds for RedemptiOn .................................... 13 Section 16.09. Group Four Accounts .............................................................................. 13 Section 16.11. Rebate Fund (Group Four) ...................................................................... 14 Section 16.12. Reports to California Debt and Investment Advisory Commission ........ 15 Section 16.13. Modification or Amendment of Agreement ............................................ 15 Section 16.14. Defeasance of Group Four Bonds ........................................................... 15 Section 16.15. Reporting Requirements .................................................... , ..................... 17 Section 16.16. Third-Party Beneficiary ........................................................................... 18 Section 16.17. Group Four Bonds Original Issue Discount ............................................ 18 PART 2 SPECIFIC AMENDMENTS Part 2.1. Amendment to Section 6.08 .......................................................................................... 19 Part 2.2. Amendment of Section 8.01 ......................................................................................... 19 Part 2.3. Amendment of Section 12.03 ........................................................... ' ........ , ................... 19 Part 2.4. Amendment of Section 12.08 .................................................... · ................................. 20 PART 3 MISCELLANEOUS Part-3.1. Effect of Fifth Supplemental Agreement ......................................................... - ............ 21 Part 3.2. Execution in Several Counterparts ............................................................................... 21 DOCSLA 1:397489.2 -i- TABLE OF CONTENTS (continued) Page Part 3.3. Effective Date of Fifth Supplemental Agreement ........................................................ 21 EXHIBIT H - FORM OF GROUP FOUR BONDS .................................................................. H-1 EXHIBIT I - DESIGNATED PARCELS (GROUP FOUR) ....................................................... I-1 D OCSLA1:397489.2 -ii- An extra section break has been inserted above this paragraph. Do not delete this section break if you plan to add text after the Table of Contents/Authorities. Deleting this break will cause Table of Contents/Authorities headers and footers to appear on any pages following the Table of Contents/Authorities. DOCSI2.\ 1:397489.2 E-2