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D-2 Staff Report - Bonds CDF 2005-1 Rosedale
SCHEDULED ITEM D-2 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: SERGIO GONZALEZ, CITY MANAGER FROM: TALIKA M. JOHNSON, DIRECTOR OF ADMINISTRATIVE SERVICES DATE: NOVEMBER 18, 2019 SUBJECT: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING THE ISSUANCE OF BONDS OF COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) DESIGNATED 2019 SPECIAL TAX BONDS, APPOINTING FISCAL AGENT, APPROVING FISCAL AGENT AGREEMENT AND PURCHASE CONTRACT AND AUTHORIZING NEGOTIATION OF TERMS OF THE SALE OF SAID BONDS, APPROVING PRELIMINARY OFFICIAL STATEMENT AND AUTHORIZING PREPARATION OF FINAL OFFICIAL STATEMENT AND APPROVING CONTINUING DISCLOSURE CERTIFICATE BACKGROUND: The City of Azusa (the “City”) formed City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the “District”) on June 5, 2006. Additionally, the City Council also adopted Resolution No. 06-C40 which expressed the determination of the City Council of the necessity to issue special tax bonds in the maximum aggregate principal amount of $110,000,000 for the District ($80,000,000 in Improvement Area No. 1 and $30,000,000 in Improvement Area No. 2). Following the formation of the District, on June 5, 2006, an election was held of the landowners who comprised the qualified voters of Improvement Area No. 2 authorizing the District to incur bonded indebtedness in the aggregate principal amount not to exceed $30,000,000 to be secured by the levy of Special Taxes on taxable property within Improvement Area No. 2. On that same date, the landowners within Improvement Area No. 2 approved the rate and method of apportionment of the Special Taxes on land within Improvement Area No. 2. On October 17, 2011, the City Council adopted a resolution of consideration to amend and restate the rate and method of apportionment for Improvement Area No. 2 to implement, among other things, changes to the rates of special tax to be levied on parcels of property in Improvement Area No. 2. On November 21, 2011 the landowners within Improvement Area No. 2 approved the amended and restated rate and method of apportionment of the Special Taxes on land within Improvement Area No. 2. To date, no bonds have been issued for Improvement Area No. 2. APPROVED CITY COUNCIL 11/18/2019 Rosedale IA2 Special Tax Bonds November 18, 2019 Page 2 RECOMMENDATIONS: Staff recommends the City Council take the following actions: 1) Adopt the attached Resolution approving the issuance of bonds for Community Facilities District No. 2005-1 (Rosedale) Improvement Area No. 2; and 2) Authorize the City Manager to execute any necessary financing documents, in a form acceptable to the City Attorney, on behalf of the City. ANALYSIS: The proposed bonds, (“2019 Special Tax Bonds (Improvement Area No. 2)”) are expected to be issued in a par amount of approximately $19,840,000 with a final maturity of 2049. Proceeds from the 2019 Special Tax Bonds (Improvement Area No. 2) will be primarily to fund public school facilities to be completed by the Azusa Unified School District, develop a community park, and reimburse Rosedale Land Partners II, LLC for completed public facilities including neighborhood parks, the Arroyo, the Transit Plaza and other public parkway landscaping. Staff proposes using same members of the financing team for the refinancing of the Rosedale Improvement Area No. 1 bonds in June of this year due to the excellent service provided during that transaction and knowledge of the City, which include: • Urban Futures Inc. (UFI) as the Municipal Advisor • Stifel, Nicolaus & Company, Incorporated as the Underwriter • Best, Best & Krieger as Bond and Disclosure Counsel Approval of the attached resolution will authorize the execution of the following documents: • Joint Community Facilities Agreement – This document is an agreement between the Azusa Unified School District (AUSD) and the District for the funding of school facilities, land, or utilities; and • Fiscal Agent Agreement – This document contains the terms of the 2019 Special Tax Bonds (Improvement Area No. 2), including payment and redemption provisions, definition and pledge of revenues to pay the 2019 Special Tax Bonds (Improvement Area No. 2), remedies upon a default in the payment of the 2019 Special Tax Bonds (Improvement Area No. 2), and final discharge of the 2019 Special Tax Bonds (Improvement Area No. 2) and other related matters; and • Preliminary Official Statement – This is the City’s and the District’s document pursuant to which the 2019 Special Tax Bonds (Improvement Area No. 2) will be offered for purchase by the public. This document must contain all facts material to the 2019 Special Tax Bonds (Improvement Area No. 2), the District and the City (with certain permitted exceptions to be completed in the final Official Statement) and must not omit any such material facts; and • Bond Purchase Agreement – This document contains the obligation of Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) to accept and pay for the 2019 Special Tax Bonds Rosedale IA2 Special Tax Bonds November 18, 2019 Page 3 (Improvement Area No. 2), provided all of the covenants and representations of the City and the District are met and certain other conditions excusing performance by the Underwriter do not exist. The table below highlights a few estimated financing statistics of the 2019 Special Tax Bonds (Improvement Area No. 2) and is based on current market conditions. Summary of Financing Statistics* Par Amount $19,840,000 Average Coupon 5.0% Total Interest Cost 4.3% Average Annual Debt Service (over 30-Years) $1,379,545 Average Annual Debt Service Per Parcel FY 2020-21* $3,171 As required under Section 5852.1 of the California Government Code (the “Code”), below are the good faith estimates as provided by the Urban Futures, Inc. (the “Municipal Advisor”) and Underwriter: 1) The true interest cost of the bonds is estimated at 4.14%, calculated as provided in Section 5852.1(a)(1)(A) of the Code. 2) The finance charge of the 2019 Bonds, including underwriter’s discount and all other fees and charges paid to third parties, is estimated at $862,873. 3) Proceeds of the 2019 Bonds received by the District for the sale of the 2019 Bonds, including the estimated principal amount of the proposed 2019 Bonds of $19,840,000 plus the net premium of $2,713,739.50, less finance charges, is equal to $21,690,866.50, which will be available to finance the project. 4) The total payment amount calculated as provided in Section 5852.1(a)(1)(D) of the Code is estimated at $40,987,822. The foregoing are estimates and the final costs will depend on market conditions and can be expected to vary from the estimated amounts set forth above. FISCAL IMPACT: The 2019 Special Tax Bonds (Improvement Area No. 2) are paid from special taxes levied in Improvement Area No. 2 of the District. There is no fiscal impact to the City’s General Fund. The City will, however, be required to provide administration for the District, which will be funded as part of the annual special tax levy. The average annual special tax attributable to debt service for each parcel will be approximately $3,171 over the life of the 2019 Special Tax Bonds (Improvement Area No. 2). Additionally, in order to fund administration, pay-go and other costs of the District, the average per parcel amount will not exceed the Rosedale IA2 Special Tax Bonds November 18, 2019 Page 4 average per parcel assigned tax over the course of the bonds which is $3,709. These figures are preliminary and subject to prevailing market conditions at the time of sale. Prepared by: Reviewed and Approved: Talika M. Johnson Sergio Gonzalez Director of Administrative Services City Manager Attachments: 1. City of Azusa Resolution Authorizing the Issuance of 2019 Special Tax Bonds (Improvement Area No. 2) in a Principal Amount Not to Exceed $25 Million, with Good Faith Estimates as Exhibit A 2. Second Amendment to Funding and Acquisition Agreement 3. Joint Community Facilities Agreement (JCFA) 4. Fiscal Agent Agreement 5. Preliminary Official Statement 6. Bond Purchase Agreement 45635.01434\32352061.4 RESOLUTION NO. 2019-C57 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING THE ISSUANCE OF BONDS OF COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) DESIGNATED 2019 SPECIAL TAX BONDS, APPOINTING FISCAL AGENT, APPROVING FISCAL AGENT AGREEMENT AND PURCHASE CONTRACT AND AUTHORIZING NEGOTIATION OF TERMS OF THE SALE OF SAID BONDS, APPROVING PRELIMINARY OFFICIAL STATEMENT AND AUTHORIZING PREPARATION OF FINAL OFFICIAL STATEMENT AND APPROVING CONTINUING DISCLOSURE CERTIFICATE WHEREAS, the City of Azusa Community Facilities District 2005-1 (Rosedale) (the “District”), along with Improvement Area Nos. 1 and 2 therein, was originally established on June 5, 2006 pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the California Government Code) (the “Act”), by adoption by the City Council (the “City Council”) of City of Azusa (the “City”) of Resolution No. 06-C39; and WHEREAS, under the provisions of the Act, on June 5, 2006, the City Council also adopted Resolution No. 06-C40 which resolution, among other matters, expressed the determination of the City Council of the necessity to issue special tax bonds in the maximum aggregate principal amount of $110,000,000 for the District ($80,000,000 within Improvement Area No. 1 and $30,000,000 within Improvement Area No. 2); and WHEREAS, on June 5, 2006, consolidated special elections were held within the District and there was submitted to the qualified voters of the District, among other propositions, the proposition of whether a bonded indebtedness in an aggregate principal amount not to exceed the amounts stated above should be incurred by and for the District for the purpose of financing certain public facilities for the benefit of the District (the “Facilities”), and more than two-thirds of the votes cast in said consolidated special elections were cast in favor of incurring such bonded indebtedness, and the District was thereby authorized to issue bonds in the amounts set forth above for the purposes set forth in said proposition; and WHEREAS, the City Council has determined (i) that it is necessary that bonds of the District designated “City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2)” be issued in an aggregate principal amount which shall not exceed $25,000,000 (the “Bonds”) to finance the design, construction and acquisition of the Facilities; and WHEREAS, the City and the Azusa Unified School District (the “School District”) previously entered into that certain Joint Community Facilities Agreement dated June 1, 2005 (the “School District JCFA”) which authorized certain improvements to be financed through the use of bond proceeds of the District; and Attachment 1 45635.01434\32352061.4 2 WHEREAS, the School District and Rosedale Land Partners II, LLC (the “Developer”), developer of the property within the District, have agreed to a certain settlement agreement which requires an amendment to the School District JCFA, and such amendment has been presented to the City Council in the form of the Amended and Restated Joint Community Facilities Agreement (the “Amended JCFA”); and WHEREAS, payment of the principal of and interest on the Bonds will be secured by special taxes to be levied on parcels of taxable property within Improvement Area No. 2 of the District (the “Special Taxes”); and WHEREAS, the District, the City and the Developer entered into that certain Funding and Acquisition Agreement dated August 1, 2005 (the “Original Funding Agreement”) to govern the financing of the Facilities through proceeds of bonds of the District and levy of Special Taxes; and WHEREAS, the District, the City and the Developer amended the Original Funding Agreement pursuant to the First Amendment to Funding and Acquisition Agreement dated June 1, 2019, to permanently reduce the levy of special taxes within Improvement Area No. 1 and now desire to permanently reduce the levy of Special Taxes within Improvement Area No. 2 at the time and upon satisfaction of the conditions set forth in the Second Amendment to Funding and Acquisition Agreement dated December 1, 2019 (the “Second Amendment to Funding Agreement”), which has been presented to the City Council; and WHEREAS, pursuant to Section 53345.8 of the California Government Code, the City Council, as the legislative body of the District, may sell bonds of the District only if it determines prior to the award of the sale of such bonds that the value of the real property that would be subject to the special tax to pay debt service on such bonds will be at least three (3) times the principal amount of such bonds to be sold and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or special assessment levied on the property within Improvement Area No. 2 of the District; and WHEREAS, Special Districts Financing & Administration, LLC, the special tax consultant to the City, has determined, based on a review of the Los Angeles County Assessor’s Assessment Roll for fiscal year 2019-20, that the total gross assessed value of taxable property within Improvement Area No. 2 of the District is $167,835,099; and WHEREAS, if the Bonds are issued and sold in an aggregate principal amount that does not exceed $25,000,000, the assessed value of the taxable property in the District will be more than three (3) times such principal amount of the Bonds, and there are no other special tax or assessment bonds of the District; and WHEREAS, there has been presented to the City Council a form of Bond Purchase Agreement (the “Purchase Contract”) whereby Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) has offered to purchase the Bonds from the City, and a form of Preliminary Official Statement relating to the Bonds; and WHEREAS, there has also been presented to the City Council a form of Fiscal Agent Agreement (the “Fiscal Agent Agreement”) with respect to the Bonds to be executed and 45635.01434\32352061.4 3 delivered by the City and Wilmington Trust, National Association, as fiscal agent (the “Fiscal Agent”), whereby the Fiscal Agent will authenticate and deliver the Bonds and perform certain other duties; and WHEREAS, there has also been presented to the City Council a form of Continuing Disclosure Certificate to be executed and delivered by the City, for the benefit of the owners of the Bonds and in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) of the Securities and Exchange Commission, as amended (the “Rule”); and WHEREAS, the City Council has considered the forms of the Fiscal Agent Agreement, the Continuing Disclosure Certificate, the Purchase Contract and the Preliminary Official Statement and has determined that it is in the best interest of the owners of property in and the future residents of the District that the City Council authorize the issuance and sale of the Bonds and the execution and delivery of said agreements and approve and authorize the distribution of the Preliminary Official Statement subject to the conditions hereinafter contained; and WHEREAS, Section 5852.1 of the Government Code of the State of California (“Section 5852.1”) provides that the City Council obtain from an underwriter, financial advisor or private lender and disclose, in a meeting open to the public, prior to authorization of the issuance of the Bonds, good faith estimates of: (a) the true interest cost of the Bonds, (b) the finance charge of the Bonds, meaning the sum of all fees and charges paid to third parties, (c) the amount of proceeds of the Bonds received less the finance charge described above and any reserves or capitalized interest paid or funded with proceeds of the Bonds and (d) the sum total of all debt service payments on the Bonds calculated to the final maturity of the Bonds plus the fees and charges paid to third parties not paid with the proceeds of the Bonds; and WHEREAS, in accordance with Section 5852.1, the City Council has obtained such good faith estimates from Urban Futures, Inc., the City’s municipal advisor (the “Municipal Advisor”), and such estimates are disclosed in Exhibit A attached hereto; and WHEREAS, the City Council wishes at this time to authorize all proceedings relating to the issuance and sale of the Bonds and all other agreements and documents relating thereto. NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED BY THE CITY COUNCIL OF THE CITY OF AZUSA AS FOLLOWS: Section 1. Findings. The City Council finds (a) that the preceding recitals are true and correct, (b) that the sale of the Bonds at negotiated sale, without advertising for bids, will result in a lower overall cost to the District, and (c) that if the Bonds are issued and sold in an aggregate principal amount that does not exceed $25,000,000, the value of the parcels of real property within Improvement Area No. 2 which will be subject to the levy of the Special Taxes to pay the principal of and interest on the Bonds, based on the assessed value of such parcels for fiscal year 2019-20 as determined by Special District Financing & Administration, LLC based on a review of Los Angeles County Assessor’s Roll Assessment, i.e., $167,835,099, will be more than three (3) times the principal amount of such Bonds and all other outstanding bonds that are secured by special taxes that are to be levied on such parcels or special assessments that have been levied on such parcels. 45635.01434\32352061.4 4 Section 2. Authorization of the Issuance of the Bonds. The City Council authorizes the issuance and sale of the Bonds in an aggregate principal amount which shall not exceed $25,000,000. The Mayor, the City Manager and the Director of Administrative Services (each an “Authorized Representative”) are authorized and directed to take all steps and actions which are necessary to accomplish the issuance, sale and delivery of the Bonds pursuant to the authorization given by and the conditions specified in this resolution. The Mayor and the City Clerk of the City are authorized to execute the Bonds for and on behalf of the City and the District by their manual or facsimile signatures. The Bonds shall be dated as of their date of delivery pursuant to the Purchase Contract. Section 3. Approval of Fiscal Agent Agreement. The form of Fiscal Agent Agreement which provides generally for (i) the authentication and delivery by the Fiscal Agent of the Bonds, (ii) the establishment and administration by the Fiscal Agent of certain funds and accounts for the benefit of the City and the owners of the Bonds, (iii) the payment by the Fiscal Agent of the principal of and interest on the Bonds from the Special Tax Revenues (as defined therein), and (iv) the performance of other duties by the Fiscal Agent, is approved in the form provided to the City Council at the meeting at which this resolution is adopted, and the Authorized Representatives are each individually authorized to execute and deliver, on behalf of the City, such Fiscal Agent Agreement with respect to the Bonds. Section 4. Approval of Preliminary Official Statement; Preparation of Final Official Statement. The Preliminary Official Statement is approved, and the City Manager or the Director of Administrative Services (collectively, the “Authorized Officers,” individually an “Authorized Officer”) are each authorized to consent to and assist in the preparation of such modifications thereto as may be specified by Best Best & Krieger LLP, bond counsel to the City (“Bond Counsel”) and the Municipal Advisor. The Authorized Officers are each authorized to determine, with the assistance of Bond Counsel, Disclosure Counsel and the Municipal Advisor when the Preliminary Official Statement is to be deemed final within the meaning of the Rule and to deliver a certificate to that effect to the Underwriter. The Underwriter is authorized to distribute the Preliminary Official Statement as approved hereby, or as modified with the consent of the Authorized Officers to prospective purchasers of the Bonds. The Authorized Officers and the Municipal Advisor are authorized to participate in the preparation of the Final Official Statement, based on the Preliminary Official Statement, and such modifications thereto as may be agreed to by Bond Counsel, Disclosure Counsel, the Municipal Advisor and the Underwriter. The Authorized Officers are each authorized to sign the Final Official Statement on behalf of the City and the District. Section 5. Appointment of Professionals. The City Council hereby authorizes and approves the following professionals to provide services in connection with the issuance of the Bonds: (a) Fiscal Agent. Wilmington Trust, National Association is appointed as Fiscal Agent pursuant to the Fiscal Agent Agreement and to take any and all action provided therein to be taken by the Fiscal Agent; (b) Municipal Advisor. Urban Futures, Inc. is hereby appointed to provide municipal advisory services; 45635.01434\32352061.4 5 (c) Bond and Disclosure Counsel. Best Best & Krieger LLP is hereby appointed as Bond and Disclosure Counsel in connection with the issuance of the Bonds; and (d) Special Tax Consultant. Special District Financing & Administration, LLC is hereby appointed as Special Tax Consultant in connection with the issuance of the Bonds. Section 6. Sale of Bonds; Purchase Contract. The City Council approves and authorizes the issuance and sale of the Bonds by negotiation with the Underwriter pursuant to the Purchase Contract between the City and the Underwriter in the form presented to the City Council at the meeting at which this resolution is adopted, together with any changes therein or additions thereto which are deemed advisable by the Authorized Officers upon consultation with Bond Counsel and the Municipal Advisor. The Authorized Officers are each authorized and directed to execute and deliver the final form of the Purchase Contract on behalf of the City and the District upon the submission of an offer by the Underwriter to purchase the Bonds, which offer is acceptable to the Authorized Officers and is consistent with the requirements of this resolution; provided that the true interest cost on the Bonds shall not exceed five percent (5.00%); the Underwriter’s discount for the purchase of the Bonds shall not be greater than 0.85 percent (0.85%) (exclusive of original issue discount) of the aggregate principal amount of the Bonds; and the last maturity of the Bonds shall be paid and redeemed no later than December 1, 2059. When the Authorized Officers have negotiated the Purchase Contract with the Underwriter within the parameters specified above and when the other terms and conditions of the Purchase Contract are satisfactory to the Authorized Officers and Bond Counsel, the Authorized Officers are authorized to execute and deliver the Purchase Contract to the Underwriter on behalf of the City and the District. Section 7. Accountability Measures. Pursuant to Section 53410 of the California Government Code, the issuance of and sale of the Bonds is subject to the following accountability measures: (a) The proceeds of the Bonds shall be applied only for the specific purposes identified in the propositions regarding the authorization of the District incurring bonded indebtedness which the qualified electors of the District approved in the election held on June 5, 2006; (b) Except as otherwise provided in the Fiscal Agent Agreement, the proceeds of the sale of the Bonds shall be deposited in the funds and accounts established pursuant to the Fiscal Agent Agreement and the proceeds deposited in each such fund or account shall be expended as provided in the Fiscal Agent Agreement with respect to each such fund or account; and (c) The Authorized Officers shall file a report with the City Council at least once in each calendar year, beginning in 2020, which shall contain the information required by Section 53411 of the California Government Code with respect to the expenditure of the proceeds of the sale of the Bonds and the status of the construction and acquisition of the public facilities comprising the Project (as defined in the Fiscal Agent Agreement). 45635.01434\32352061.4 6 Section 8. Findings Regarding the Levy and Rates of Special Taxes. The City Council finds that the City will covenant in the Fiscal Agent Agreement, for the benefit of the owners of the Bonds, that it will not initiate proceedings under the Mello-Roos Community Facilities Act of 1982 to reduce the Maximum Special Tax rates on then existing Developed Property (as defined in the Fiscal Agent Agreement) in the District below the amounts which are necessary to provide Special Tax Revenues in an amount equal to estimated Administrative Expenses for the then current Fiscal Year plus an amount equal to one hundred ten percent (110%) of Maximum Annual Debt Service on the Outstanding Bonds. The City Council further finds and determines that any reduction or limitation of the Special Tax rates below the Maximum Rates would interfere with the timely retirement of the Bonds. Section 9. Approval of Documents. The Continuing Disclosure Certificate, Amended JCFA and Second Amendment to Funding Agreement are approved in the form submitted to the City Council at the meeting at which this resolution is adopted, and the Authorized Officers are authorized to execute and deliver said agreements on behalf of the City. Section 10. Modifications. The approval of the Fiscal Agent Agreement, the Continuing Disclosure Certificate, the Purchase Contract, Amended JCFA and Second Amendment to Funding Agreement given by this resolution shall apply to any modification or amendment of any of said agreements which is agreed upon and approved by Bond Counsel, the Municipal Advisor and the Authorized Officers as being necessary to carry out the provisions thereof and the authorization and direction provided in this resolution. Section 11. Further Action. The Authorized Officers are authorized to take any and all action which is directed by Bond Counsel with respect to the execution and delivery of the Fiscal Agent Agreement, the Continuing Disclosure Certificate, the Purchase Contract, the Amended JCFA and Second Amendment to Funding Agreement and the issuance, sale and delivery of the Bonds, which in the opinion of Bond Counsel is necessary in order for the authorization and direction provided in this resolution to be carried out. Section 12. Conditions of Approval. The approvals, authorization and direction given by this resolution, excepting approval of the Amended JCFA and Second Amendment to Funding Agreement, are conditioned upon the satisfaction of the requirements of Section 6 hereof with respect to the issuance and sale of the Bonds. The officers of the City designated above shall not take any action with respect to the execution and delivery of the Fiscal Agent Agreement, the Continuing Disclosure Certificate and the Purchase Contract or the issuance, sale and delivery of the Bonds unless and until such conditions are satisfied; provided, however, that upon satisfaction of such conditions, this resolution shall be fully effective and shall be carried out by such officers without further approval or action of the City Council. The approvals, authorization and direction provided by this resolution shall continue, subject to the satisfaction of such conditions, until January 31, 2020, and the Bonds may be sold, and the Bonds, the Fiscal Agent Agreement, the Continuing Disclosure Certificate, the Purchase Contract, the Preliminary Official Statement and the Final Official Statement may be dated, entered into, executed and delivered or distributed, as appropriate, on any date selected by the Authorized Representatives and the Municipal Advisor and the Underwriter prior to said date. 45635.01434\32352061.4 7 Section 13. Effective Date. This resolution shall take effect upon adoption and shall remain in effect until January 31, 2020, or if the Bonds are issued prior to said date, until all of the Bonds are paid at or redeemed prior to maturity. PASSED AND ADOPTED by the City Council of the City of Azusa at a regular meeting held on the 18th day of November, 2019. _____________________________ Joseph Romero Rocha Mayor ATTEST: ______________________________ Jeffrey Lawrence Cornejo, Jr. City Clerk 45635.01434\32352061.4 8 STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution No. 2019-C57 was duly adopted by the City Council of Azusa at a regular meeting thereof, held on the 18th day of November, 2019, by the following vote of Council: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: ______________________________ Jeffrey Lawrence Cornejo, Jr. City Clerk 45635.01434\32352061.4 A-1 EXHIBIT A GOOD FAITH ESTIMATES The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the City by the Municipal Advisor in consultation with the Underwriter. Principal Amount. The Municipal Advisor has informed the City that, based on the financing plan and current market conditions, it’s good faith estimate of the aggregate principal amount of the Bonds to be sold is $19,840,000 (the “Estimated Principal Amount”), which excludes approximately $2,713,739.50 of net premium estimated to be generated based on current market conditions. Net premium is generated when, on a net aggregate basis for a single issuance of bonds, the price paid for such bonds is higher than the face value of the bonds. True Interest Cost of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 4.3%. Finance Charge of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $862,873.00. Amount of Proceeds to be Received. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the City, on behalf of the District, for the sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds, is $21,690,866.00. Total Payment Amount. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amount of the Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the District will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the proceeds of the Bonds, calculated to the final maturity of the Bonds, is $40,987,822.00 (excluding any offsets from reserves or capitalized interest). The foregoing estimates constitute good faith estimates only. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such 45635.01434\32352061.4 A-2 good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the Estimated Principal Amount, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the financing plan or finance charges, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City, on behalf of the District, based on the timing of the need for proceeds of the Bonds and other factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City. 45635.01434\32384251.4 SECOND AMENDMENT TO FUNDING AND ACQUISITION AGREEMENT Relating to COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) of CITY OF AZUSA between CITY OF AZUSA and ROSEDALE LAND PARTNERS II, LLC Dated as of December 1, 2019 Attachment 2 1 SECOND AMENDMENT TO FUNDING AND ACQUISITION AGREEMENT COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) OF THE CITY OF AZUSA THIS SECOND AMENDMENT (“Second Amendment”) is entered into as of the 1st day of December, 2019 by and between the CITY OF AZUSA (“City”) for and on behalf of the COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) OF THE CITY OF AZUSA, County of Los Angeles, State of California, a legally constituted governmental entity (the “District”), and ROSEDALE LAND PARTNERS II, LLC a Delaware limited liability company (the “Developer”). RECITALS A. The City Council of the City of Azusa (hereinafter the “City Council”) has established the District and designated Improvement Areas (as defined below) pursuant to the provisions of Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the California Government Code, commonly known as the “Mello-Roos Community Facilities Act of 1982” (the “Act”). The property within the District (the “Property”) has been designated as Improvement Area No. 1 and Improvement Area No. 2 (collectively, the “Improvement Areas” individually, each an “Improvement Area”). B. The District (and each Improvement Area thereof) is authorized to finance certain public facilities and improvements, including utilities, to be owned and maintained by the City, Azusa Unified School District, the Metropolitan Transit Authority, the Los Angeles County Sanitation District No. 22 and the City of Glendora (the “Public Facilities”). 45635.01434\32384251.4 2 C. The District was formed and issued bonds secured by special taxes levied within Improvement Area No. 1 for the purpose of financing the acquisition of land and improvements thereon for public use, and the design, planning, engineering, installation, and construction of certain Public Facilities. D. Azusa Land Partners, LLC (“ALP”) and the City previously entered into a Funding and Acquisition Agreement (the “Original Agreement”) dated as of August 1, 2005, for the purpose of including the Property in the District and establishing a plan for the financing of the acquisition, design and construction of the Public Facilities. E. On July 18, 2011, ALP, the City, and the Developer entered into the Assignment and Assumption Agreement of Funding and Acquisition Agreement, whereby ALP assigned to, and the Developer assumed, all of ALP’s rights and obligations under the Funding Agreement. F. The City, on behalf of the District, and Developer, entered into a First Amendment to Funding and Acquisition Agreement, dated June 1, 2019, for the purpose of amending Section 9 of the Original Agreement with respect to Improvement Area No. 1 (the “First Amendment” and together with the Original Agreement, the “Funding Agreement”). G. The District intends to issue its City of Azusa Community Facilities District 2005-1 (Rosedale) Improvement Area No. 2 Special Tax Bonds (the “Improvement Area No. 2 Bonds”) pursuant to a Fiscal Agent Agreement to be entered into between the City, on behalf of the District, and Wilmington Trust Company, as trustee for the Improvement Area No. 2 Bonds. 45635.01434\32384251.4 3 H. Section 9 of the Funding Agreement requires the City to levy 100% of the assigned special taxes against the developed property within Improvement Area No. 2 to finance the Public Facilities from special tax revenues not needed to pay debt service on the applicable series of bonds, replenish the applicable reserve fund, and pay administrative costs (the “Surplus Taxes”). I. The City continues to hold such Surplus Taxes in a separate fund (the “Facilities Fund”) in lieu of depositing such Special Taxes in the Surplus Tax Fund with respect to Improvement Area No. 2. AGREEMENTS NOW, THEREFORE, in consideration of the preceding recitals and the mutual covenants hereinafter contained, the parties agree as follows: Section 1. Surplus Special Taxes. Developer and City agree that Section 9 of the Funding Agreement shall be amended and restated in its entirety as follows: “Pursuant to the Development Agreement dated May 27, 2004, by and between the City and the Developer (the “Development Agreement”), the City shall levy special taxes against developed property within each Improvement Area at 100% of the assigned special tax rate. In addition, the City shall establish in each Fiscal Agent Agreement governing the Bonds an interest-earning “Surplus Tax Fund” and, in each Fiscal Year, all special tax revenues not needed to pay debt service on the applicable series of Improvement Area No. 2 Bonds, replenish the reserve fund and pay administrative costs shall be deposited in the appropriate Surplus Tax Fund. Amounts in each Surplus Tax Fund shall be used to pay the costs of 45635.01434\32384251.4 4 the construction and acquisition of the Public Facilities to the extent that the proceeds of the Improvement Area No. 2 Bonds are, for any reason, insufficient at the time that a request for payment is made. Developer and City acknowledge that in lieu of holding Surplus Taxes in a Surplus Tax Fund, the City has held such Surplus Taxes in a segregated account (the “Facilities Fund”) For Improvement Area No. 1, beginning fiscal year 2019-20, the City shall levy special taxes against developed property solely in an amount sufficient to pay debt service on the Bonds, or any bonds issued to refinance outstanding Bonds, replenish any applicable reserve fund and pay administrative expenses with respect to Improvement Area No. 1. The City shall not be required to levy special taxes within Improvement Area No. 1 in excess of the amounts stated above. Any amounts that remain on deposit in the Facilities Fund for Improvement Area No. 1 as of the closing date of the City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Refunding Bonds (Improvement Area No. 1) shall be used to finance Public Facilities. Any special taxes collected after such date shall not be deposited in the Facilities Fund. For Improvement Area No. 2, the provisions in this paragraph apply only if the Improvement Area No. 2 Bonds (as defined below) are issued in an amount that produces at least $21 million in proceeds for the project fund: Until the Fiscal Year immediately following the Funding Completion Date (as defined herein), the City shall levy special taxes against developed property within Improvement Area 45635.01434\32384251.4 5 No. 2 at 100% of the assigned special tax rate and use the proceeds not needed to pay debt service on the Improvement Area No. 2 Bonds, replenish the reserve fund and pay administrative costs to finance Public Facilities. In the Fiscal Year immediately following the Funding Completion Date, the City shall levy special taxes against developed property solely in an amount sufficient to pay debt service on the City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the “Improvement Area No. 2 Bonds”), or any bonds issued to refinance outstanding the Improvement Area No. 2 Bonds, replenish any applicable reserve fund and pay administrative expenses with respect to Improvement Area No. 2, and the City shall not be required to levy special taxes within Improvement Area No. 2 in excess of such amounts. Any amounts that remain on deposit in the Facilities Fund for Improvement Area No. 2 as of such Fiscal Year shall be used to finance Public Facilities. Any special taxes collected after such date shall not be deposited in the Facilities Fund. For purposes of this Agreement, the term “Funding Completion Date” shall mean the earlier of: (i) the date that the Developer and the City mutually agree in writing that all Public Facilities have been financed and (ii) June 30, 2023. Section 2. Facilities Fund. Amounts on deposit in the Facilities Fund held by the City for Improvement Area No. 2 shall be used to reimburse the Developer for the acquisition, design and/or construction of the Public Facilities. Section 3. Funding Agreement. The remaining provisions of the Funding Agreement shall remain in full force and effect. 45635.01434\32384251.4 6 Section 4. Severability. If any part of this Second Amendment is held to be illegal or unenforceable by a court of competent jurisdiction, the remainder of this Second Amendment shall be given effect to the fullest extent reasonably possible. Section 5. Counterparts. This Second Amendment shall be executed in counterparts, all of which shall be deemed an original. (Signature page follows) 45635.01434\32384251.4 S-1 IN WITNESS WHEREOF, the parties have caused this Second Amendment to be signed as of the date first above written. CITY OF AZUSA, for and on behalf of COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) of the CITY OF AZUSA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA By: ______________________________________ Sergio Gonzalez, City Manager ROSEDALE LAND PARTNERS II, LLC, a Delaware limited liability company By: CDG Rosedale Investment, LLC, a Delaware limited liability company Its: Administrative Member By: ______________________________________ Name: ____________________________________ Title: ____________________________________ -Signature Page- Second Amendment to Funding and Acquisition Agreement 45635.01434\32382670.4 1 AMENDED AND RESTATED JOINT COMMUNITY FACILITIES AGREEMENT THIS AMENDED AND RESTATED JOINT COMMUNITY FACILITIES AGREEMENT (“Amended and Restated Agreement”), dated as of December 1, 2019, is entered into by and among CITY OF AZUSA, a municipal corporation (the “City”), for and on behalf of COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) OF THE CITY OF AZUSA (the “CFD”), ROSEDALE LAND PARTNERS II, LLC, a Delaware limited liability company (the “Owner”), and AZUSA UNIFIED SCHOOL DISTRICT, a unified school district existing under the laws of the State of California (the “School District”). R E C I T A L S : A.The City Council of the City conducted proceedings to establish the CFD pursuant to the Mello-Roos Community Facilities Act of 1982, Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code (the “Act”) for the purpose of financing the acquisition and/or construction of public facilities necessary to serve new development within Improvement Area No. 1 and Improvement Area No. 2 of the CFD. The CFD has authorized the issuance of bonds (the “Bonds”) for Improvement Area No. 1 and Improvement Area No. 2 to be secured by the levy of special taxes within the respective Improvement Area of the CFD. B.The Owner, as the successor in interest to the "Monrovia Property," as defined in the Mitigation Agreement (defined below) has succeeded to the rights and obligations of Monrovia Nursery Company as to that certain School Facilities Mitigation Agreement dated as of March 2, 2004 (the “Mitigation Agreement”). By this Amended and Restated Agreement, the parties hereto agree that, as set forth in the Settlement Agreement and Mutual General Release entered into by the Owner and the School District (the “Settlement Agreement”), the Mitigation Agreement shall be irrevocably deemed, determined, and agreed to be null and void, and that the Owner's obligations and School District's obligations with respect to school fees (statutory or otherwise) and school mitigation, and with respect to the litigation filed by the School District, LASC case no. BS157058, shall be released and replaced by the obligations contained in this Amended and Restated Agreement and the Settlement Agreement. C.Pursuant to Sections 53316.2, 53316.4 and 53316.6 of the Act, (i) a community facilities district may finance facilities to be owned or operated by an entity other than the agency that created the community facilities district pursuant to a joint community facilities agreement or a joint exercise of powers agreement adopted pursuant to Section 53316.2; and (ii) a party to such an agreement may use the proceeds of any bonds or other indebtedness issued pursuant to the Act to provide facilities which that party is otherwise authorized by law to provide, even though another party to the agreement does not have the power to provide those facilities. D.In connection with the formation of the CFD, the City, the School District, and the Owner’s predecessor in interest entered into the Joint Community Facilities Agreement, dated as of June 1, 2005 (the “JCFA”); Attachment 3 45635.01434\32382670.4 2 E. Owner and School District have requested that the City and the CFD enter into this Amended and Restated Agreement, in order to provide for the disbursement of proceeds of Bonds of Improvement Area No. 2 to School District for School Facilities (as defined below) in satisfaction of the Settlement Agreement. F. The School District expects to fund some, all or a portion of the K-12 school facilities listed on Exhibit A to this Amended and Restated Agreement (the “School Facilities”). G. The purpose of this Amended and Restated Agreement is to set forth the understandings and agreement of the parties with respect to the sale of Bonds for the CFD, the allocation of the proceeds of the sale of such Bonds for School Facilities and the representations of the School District with respect thereto. H. The City, the Owner and the School District have each determined that entering into this Amended and Restated Agreement to enable the CFD to finance School Facilities will be beneficial to the residents of the City and the School District respectively, and, therefore, they desire to enter into this Amended and Restated Agreement pursuant to Government Code Section 53316.2. I. The City has undertaken a financial analysis of the proposed Bond issuance anticipated hereunder for the CFD and has determined that the CFD will be able to issue Bonds in an amount sufficient to satisfy the required deposit into the School Facilities Account (defined herein), fund additional public facilities, and meet the appropriate value-to-line ratios required by the City consistent with sound municipal financing practices. J. The City has commenced the process for the issuance of the Bonds by the CFD and will use its best efforts to issue the Bonds and provide funds for School Facilities in a timely manner. The City expects (but does not guaranty) that it will issue the Bonds before April 30, 2020, barring an unforeseen, unanticipated, significant financial event, which, if such occurs, would prevent the Bonds from being issued consistent with sound municipal financing practices. NOW, THEREFORE, in consideration of the preceding recitals and the mutual covenants hereinafter contained, the parties agree as follows: 1. Restatement. This Amended and Restated Agreement hereby restates and replaces the JCFA in its entirety and restates the rights and obligations of all of the parties thereto. 2. Payment. Promptly following the issuance and sale of Bonds to be issued by the CFD for Improvement Area No. 2 (the “IA No. 2 Bonds”), the proceeds of such IA No. 2 Bonds (“Bond Proceeds”) shall be applied in the following order of priority: (i) pay costs of issuance, including underwriter’s discount and any discount on the IA No. 2 Bonds; (ii) fund the reserve fund; (iii) fund capitalized interest, if any; (iv) pay the first year administrative expenses, if any; (v) deposit the amount of $7,250,000 into a School Facilities Account of the Improvement Fund (regardless of the actual designation thereof) (“School Facilities Account”) established under the Fiscal Agent Agreement; (vi) fund additional authorized improvements other than School Facilities in the priority determined by the City and the Owner. Upon the deposit of IA No. 2 Bond Proceeds in the School Facilities Account, School District may submit written requests to 45635.01434\32382670.4 3 the CFD, in substantially the form attached hereto as Exhibit B, for the payment of the costs of acquisition, construction, reconstruction, modernization, rehabilitation, or improvement of School Facilities (“School Improvements”), having a useful life of five (5) years or greater. Within thirty (30) days of receipt of the written request, the City shall provide written direction to the trustee or fiscal agent for the IA No. 2 Bonds (the “Trustee”) to promptly transfer the amount requested from the School Facilities Account held by the Trustee, to the order of the School District to the extent funds in such School Facilities Account are available. If the full amount requested is not then available in the School Facilities Account, the CFD shall request the Trustee to transfer the then available amount and will transfer additional amounts if and to the extent that such funds become available. The School District acknowledges and agrees that the total amount of $7,250,000, but not more, may be drawn from the School Facilities Account, and that no other funds of the CFD shall be available to fund the School Facilities, including any other funds of the City, the CFD, or the Owner. 3. Use of Funds. (a) The School District shall use all funds received pursuant to Section 2 of this Amended and Restated Agreement to pay for the School Improvements . The School District reasonably expects that (i) School Improvements will proceed with due diligence to the completion thereof; (ii) the School District does not intend to sell or otherwise dispose of the School Facilities prior to the final maturity date of the IA No. 2 Bonds, except such minor parts or portions thereof as may be disposed of due to normal wear, obsolescence or depreciation in the ordinary course of operation; and (iii) the amount of the proceeds of the IA No. 2 Bonds transferred from the School Facilities Account to the School District is reasonably expected to be fully expended to pay the School Improvements within three years from the date of issuance of the IA No. 2 Bonds. (b) The School District will not use or permit more than five percent (5%) the School Facilities financed with the Bonds to be used for any activity that would constitute a “Private Use”. The School District understands (i) that the term “Private Use” means any activity that constitutes a trade or business that is carried on by persons or entities, other than governmental entities; (ii) that the leasing of the School Facilities or access by persons or entities other than a governmental unit to the School Facilities on a basis other than as a member of the general public (“General Public Use”) would constitute a Private Use; and (iii) that the use of the School Facilities in a trade or business would constitute a General Public Use only if the School Facilities are intended to be available and are in fact reasonably available for use on the same basis by natural persons not engaged in a trade or business. The School District represents to the City that the School District’s employer identification number is 95-6006672. (c) As a condition to receiving proceeds of the IA No. 2 Bonds from the School Facilities Account pursuant to Section 2 of this Amended and Restated Agreement, the School District agrees that it shall provide to the City a certificate confirming the representations contained in subsection (a) and (b) of this Section 3 and such other matters as the City may reasonably request upon which the City, on behalf of the CFD, and its bond counsel may rely in connection with the issuance of such IA No. 2 Bonds and their conclusion that interest on such IA No. 2 Bonds is not included in gross income for purposes of federal income taxation. 4. Responsibility to Plan, Design, and Construct. The School District shall have sole responsibility for the planning, design, and construction of any School Facilities whose 45635.01434\32382670.4 4 construction or reconstruction has been financed, in whole or in part, from payments made by the CFD from the School Facilities Account pursuant to this Amended and Restated Agreement. The City shall have sole responsibility for the planning, design, and construction of any other facilities financed in connection with the CFD. 5. Recordkeeping; Inspection of Records. The School District hereby agrees to keep and maintain full and accurate records of all amounts, and investment earnings, if any, paid to the School District pursuant to a written request. The School District agrees to make such records available to the City, the CFD and the Owner during normal business hours upon reasonable prior notice. All such records shall be kept and maintained by the School District as provided by applicable law and their respective policies. The School District agrees that it will cooperate with the CFD and the City in providing documentation, reports or other data reasonably required and requested by the City or the CFD in meeting the reporting requirements of the CFD under California Senate Bill (SB) No. 165, Chapter 535 of the Statutes of 2000. 6. Indemnification. The City, acting for and on behalf of itself and the CFD, shall defend, indemnify and hold harmless the School District, its officers, directors, employees and agents, from and against any and all claims, losses, liabilities, damages, including court costs and reasonable attorneys’ fees by reason of, or resulting from, the actions of the City or CFD with regard to the issuance of the Bonds or proceedings associated therewith, or arising out of the design, construction, maintenance and operation of any facilities, other than the School Facilities financed pursuant to this Amended and Restated Agreement, financed in connection with the CFD. The School District shall defend, indemnify and hold harmless the City and the CFD, their officers, directors, employees and agents, from and against any and all claims, losses, liabilities, damages, including court costs and reasonable attorneys’ fees by reason of, or resulting from, or arising out of the design, construction, maintenance, and operation of any School Facilities, the construction or reconstruction of which has been financed in whole or in part from proceeds of the IA No. 2 Bonds, pursuant to this Amended and Restated Agreement. 7. General Standard of Reasonableness. Any provision of this Amended and Restated Agreement which requires the consent, approval, discretion or acceptance of any party hereto or any of their respective employees, officers or agents shall be deemed to require that such consent, approval or acceptance not be unreasonably withheld or delayed, unless such provision expressly incorporates a different standard. 8. Entire Agreement; Amendment. This Amended and Restated Agreement and the agreements expressly referred to herein contains all of the agreements of the parties hereto with respect to the matters contained herein and no prior or contemporaneous agreement or understandings, oral or written, pertaining to any such matters shall be effective for any purpose. No provision of this Amended and Restated Agreement may be modified, waived, amended or added to except by a writing signed by the party against which the enforcement of such modification, waiver, amendment or addition is or may be sought. 9. Notices. Any notice, payment or instrument required or permitted by this Amended and Restated Agreement to be given or delivered to either party shall be deemed to 45635.01434\32382670.4 5 have been received when personally delivered or seventy-two (72) hours following deposit of the same in any United States Post Office in California, registered or certified, postage prepaid, addressed as follows: City and CFD: City of Azusa 213 East Foothill Boulevard Azusa, CA 91702 Attention: City Manager School District Azusa Unified School District 546 So. Citrus Avenue Azusa, CA 91702 Attention: Superintendent With a copy to: Rosedale Land Partners II, LLC Attn: William Holman 23 Corporate Plaza Drive, Suite 246 Newport Beach, Ca 92660 All notices will be deemed to be effective on the date of mailing. In case any party changes its address at which notice is to be received, written notice of such change of address will be given without delay to the other party. 10. Severability. If any provision of this Amended and Restated Agreement is held to be illegal or unenforceable by a court of competent jurisdiction, that provision will be limited or eliminated to the minimum extent necessary so that this Amended and Restated Agreement will otherwise remain in full force and effect. 11. Successors and Assigns. Each and all provisions hereof shall be binding on and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. 12. Governing Law. This Amended and Restated Agreement and any dispute arising hereunder shall be governed by and interpreted in accordance with the laws of the State of California, irrespective of such state’s choice-of-law principles. 13. Waiver. Failure by a party to insist upon the strict performance of any of the provisions of this Amended and Restated Agreement by any other party, or the failure by a party to exercise its rights upon the default of any other party, shall not constitute a waiver of such party's right to insist and demand strict compliance by any other party with the terms of this Amended and Restated Agreement thereafter. 14. Singular and Plural; Gender. As used herein, the singular of any word includes the plural, and terms in the masculine gender shall include the feminine. 45635.01434\32382670.4 6 15. Counterparts. This Amended and Restated Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which will constitute one and the same instrument. 16. Construction of Agreement. This Amended and Restated Agreement has been reviewed by legal counsel for the City, CFD, Owner and the School District and shall be deemed for all purposes to have been jointly drafted by the City, CFD, Owner and the School District. No presumption or rule that ambiguities shall be construed against the drafting party shall apply to the interpretation or enforcement of this Amended and Restated Agreement. The language in all parts of this Amended and Restated Agreement, in all cases, shall be construed as a whole and in accordance with its fair meaning and not strictly for or against any party and consistent with the provisions hereof, in order to achieve the objectives of the parties hereunder. The captions of the sections and subsections of this Amended and Restated Agreement are for convenience only and shall not be considered or referred to in resolving questions of construction. 17. Further Assurances. Each party to this Amended and Restated Agreement agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Amended and Restated Agreement. 18. Beneficiaries. No person or entity shall be deemed to be a third party beneficiary hereof, and nothing in this Amended and Restated Agreement (either express or implied) is intended to confer upon any person or entity, other than the City, CFD, Owner and the School District any rights, remedies, obligations or liabilities under or by reason of this Amended and Restated Agreement. (Signature page follows) 45635.01434\32382670.4 S-1 IN WITNESS WHEREOF, the parties have executed this Amended and Restated Agreement on the day and year first above written. CITY OF AZUSA, for itself and on behalf of COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) OF THE CITY OF AZUSA By: Mayor ATTEST: Clerk AZUSA UNIFIED SCHOOL DISTRICT By: Name: Title: ROSEDALE LAND PARTNERS II, LLC, a Delaware limited liability company By: CDG Rosedale Investment, LLC, a Delaware limited liability company Its: Administrative Member By: Name: Title: -Signature Page- Amended and Restated Joint Community Facilities Agreement 45635.01434\32382670.4 A-1 EXHIBIT “A” LIST OF K-12 SCHOOL FACILITIES 45635.01434\32382670.4 B-1 EXHIBIT “B” FORM OF SCHOOL DISTRICT REQUISITION The undersigned, the [Assistant Superintendent, Facilities] of Azusa Unified School District, certifies for purposes of Section 3.03(B) of the Fiscal Agent Agreement for the above- referenced bonds with regard to the disbursement of funds from the School Facilities Account in the Improvement Fund as follows: (1) The amount(s) required to be disbursed, the purpose for which the disbursement(s) is/are to be made and the person(s) to which the disbursement(s) is/are to be paid are set forth in Exhibit “A” attached hereto, and accompanied with the invoices of the contractors/suppliers/materialmen; (2) The amount(s) required to be disbursed is/are for payment of costs related to the construction and acquisition of the School Facilities as described in the Amended and Restated Joint Community Facilities Agreement, dated ________, 2019, by and among the City of Azusa (for itself and on behalf of Community Facilities District No. 2005-1 (Rosedale) of the City of Azusa), the Azusa Unified School District, and Rosedale Land Partners II, LLC, and in compliance with applicable State law; and (3) No portion of the amount(s) being requested to be disbursed was set forth in any School District Requisition previously filed with the Fiscal Agent requesting disbursement, and the amount(s) being requested is/are an appropriate disbursement from the School Facilities Account. The School District requests that the Fiscal Agent disburse funds from the School Facilities Account in the amount(s) and to the payee(s) specified in Exhibit “A” attached hereto. Dated: __________________ AZUSA UNIFIED SCHOOL DISTRICT By: ______________________________________ 45635.01434\32382670.4 B-2 EXHIBIT “A” Name of Payee Purpose of Disbursement Amount to be Disbursed 45635.01434\32349708.2 _________________________________________________________________________ FISCAL AGENT AGREEMENT by and between THE CITY OF AZUSA and WILMINGTON TRUST, NATIONAL ASSOCIATION as Fiscal Agent Dated as of December 1, 2019 Relating to CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (Rosedale) County of Los Angeles State of California $__________ 2019 Special Tax Bonds (Improvement Area No. 2) _________________________________________________________________________ Attachment 4 TABLE OF CONTENTS Page 45635.01434\32349708.2 -i- ARTICLE I AUTHORITY AND DEFINITIONS Section 1.01. Authority for this Agreement .............................................................................. 2 Section 1.02. Agreement for Benefit of Bondowners ............................................................... 2 Section 1.03. Definitions ........................................................................................................... 2 ARTICLE II THE BONDS Section 2.01. Principal Amount; Designation ......................................................................... 15 Section 2.02. Terms of Bonds ................................................................................................. 15 Section 2.03. Redemption ........................................................................................................ 16 Section 2.04. Form of Bonds ................................................................................................... 19 Section 2.05. Execution of Bonds ........................................................................................... 19 Section 2.06. Transfer of Bonds .............................................................................................. 19 Section 2.07. Exchange of Bonds ............................................................................................ 20 Section 2.08. Bond Register .................................................................................................... 20 Section 2.09. Temporary Bonds .............................................................................................. 20 Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen ..................................................... 20 Section 2.11. Special Obligation ............................................................................................. 21 Section 2.12. Book-Entry ........................................................................................................ 21 Section 2.13. Parity Bonds ...................................................................................................... 22 ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS; BOND PROCEEDS FUND; SPECIAL TAX FUND; ADMINISTRATIVE EXPENSE FUND; COSTS OF ISSUANCE FUND Section 3.01. Issuance and Delivery of Bonds ........................................................................ 23 Section 3.02. Application of Proceeds of Sale of Bonds ......................................................... 23 Section 3.03. Improvement Fund ............................................................................................ 23 Section 3.04. Special Tax Fund ............................................................................................... 25 Section 3.05. Administrative Expense Fund ........................................................................... 27 Section 3.06. Costs of Issuance Fund ...................................................................................... 27 ARTICLE IV SPECIAL TAX REVENUES; BOND FUND; RESERVE FUND Section 4.01. Pledge of Special Tax Revenues ....................................................................... 28 Section 4.02. Bond Fund ......................................................................................................... 28 Section 4.03. Reserve Fund ..................................................................................................... 30 TABLE OF CONTENTS (continued) Page 45635.01434\32349708.2 -ii- ARTICLE V OTHER COVENANTS OF THE CITY Section 5.01. Punctual Payment .............................................................................................. 32 Section 5.02. Special Obligation ............................................................................................. 32 Section 5.03. Extension of Time for Payment ......................................................................... 32 Section 5.04. Against Encumbrances ...................................................................................... 32 Section 5.05. Books and Accounts .......................................................................................... 32 Section 5.06. Protection of Security and Rights of Owners .................................................... 33 Section 5.07. Collection of Special Tax Revenues .................................................................. 33 Section 5.08. Levy of Special Taxes for Administrative Expenses ........................................ 34 Section 5.09. Further Assurances ............................................................................................ 34 Section 5.10. Tax Covenants ................................................................................................... 34 Section 5.11. Covenant to Foreclose ....................................................................................... 35 Section 5.12. Prepayment of Special Taxes ............................................................................ 35 Section 5.13. Calculation of Prepayments ............................................................................... 35 Section 5.14. Continuing Disclosure ....................................................................................... 36 Section 5.15. Accountability Measures ................................................................................... 36 ARTICLE VI INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS; LIABILITY OF THE CITY Section 6.01. Deposit and Investment of Moneys in Funds .................................................... 36 Section 6.02. Rebate Fund; Rebate to the United States ......................................................... 37 Section 6.03. Liability of City ................................................................................................. 37 Section 6.04. Employment of Agents by City ......................................................................... 38 ARTICLE VII THE FISCAL AGENT Section 7.01. Appointment of Fiscal Agent ............................................................................ 38 Section 7.02. Liability of Fiscal Agent .................................................................................... 39 Section 7.03. Information ........................................................................................................ 41 Section 7.04. Notice to Fiscal Agent ....................................................................................... 41 Section 7.05. Compensation, Indemnification ........................................................................ 41 Section 7.06. Books and Accounts .......................................................................................... 42 ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT Section 8.01. Amendments Permitted ..................................................................................... 42 Section 8.02. Owners’ Meetings ............................................................................................. 43 TABLE OF CONTENTS (continued) Page 45635.01434\32349708.2 -iii- Section 8.03. Procedure for Amendment with Written Consent of Owners ........................... 43 Section 8.04. Disqualified Bonds ............................................................................................ 44 Section 8.05. Effect of Supplemental Agreement ................................................................... 44 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments ................. 44 Section 8.07. Amendatory Endorsement of Bonds ................................................................. 45 ARTICLE IX MISCELLANEOUS Section 9.01. Benefits of Agreement Limited to Parties ......................................................... 45 Section 9.02. Successor is Deemed Included in All References to Predecessor ..................... 45 Section 9.03. Discharge of Agreement .................................................................................... 45 Section 9.04. Execution of Documents and Proof of Ownership by Owners ......................... 46 Section 9.05. Waiver of Personal Liability ............................................................................. 46 Section 9.06. Notices to and Demands on City and Fiscal Agent ........................................... 47 Section 9.07. Partial Invalidity ................................................................................................ 47 Section 9.08. Unclaimed Moneys ............................................................................................ 47 Section 9.09. Applicable Law ................................................................................................. 47 Section 9.10. Conflict with Act ............................................................................................... 48 Section 9.11. Conclusive Evidence of Regularity ................................................................... 48 Section 9.12. Payment on Business Day ................................................................................. 48 Section 9.13. Counterparts ...................................................................................................... 48 EXHIBIT A – FORM OF BOND .............................................................................................. A-1 45635.01434\32349708.2 1 FISCAL AGENT AGREEMENT THIS FISCAL AGENT AGREEMENT (the “Agreement”) is made and entered into as of December 1, 2019, by and between the CITY OF AZUSA, a municipal corporation (the “City”), for and on behalf of City of Azusa Community Facilities District No. 2005-1 (Rosedale), County of Los Angeles, State of California (the “District”), and WILMINGTON TRUST, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, as fiscal agent (the “Fiscal Agent”). W I T N E S S E T H: WHEREAS, the City Council of the City (the “City Council”) has established the District pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the California Government Code (the “Act”); and WHEREAS, the District is authorized to incur bonded indebtedness and issue bonds in the aggregate principal amount of $110,000,000 ($80,000,000 for Improvement Area No. 1 and $30,000,000 for Improvement Area No. 2) for the purpose of financing the construction and acquisition of certain public facilities (the “Public Facilities”); and WHEREAS, on ______________, the City Council adopted Resolution No. ____-___ (the “Resolution”) authorizing the issuance and sale of bonds of the Improvement Area No. 2 pursuant to this Agreement, designated “City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the “Bonds”) for the purpose of financing the acquisition and construction of certain public improvements of the City and certain public school facilities of the Azusa Unified School District; and WHEREAS, payment of the principal of and interest on the Bonds will be secured solely by special taxes to be levied on parcels of taxable property in Improvement Area No. 2; and WHEREAS, all things necessary to cause the Bonds, when executed by the City on behalf of the District and authenticated by the Fiscal Agent for the District and issued as in the Act, the Resolution and this Agreement provided, to be legal, valid and binding special obligations of the District in accordance with their terms, and all things necessary to cause the authorization, execution and delivery of this Agreement and the authorization, execution, authentication and delivery of the Bonds, subject to the terms hereof, 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: 45635.01434\32349708.2 2 ARTICLE I AUTHORITY AND DEFINITIONS Section 1.01. Authority for this Agreement. This Agreement is entered into pursuant to the provisions of the Act and the Resolution. Section 1.02. Agreement for Benefit of Bondowners. The provisions, covenants and agreements herein set forth to be performed by or on behalf of the City and/or the District shall be for the equal benefit, protection and security of the Owners of the Outstanding Bonds. All of the Bonds, without regard to the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other thereof, except as expressly provided in or permitted by this Agreement or any Supplemental Agreement. The Fiscal Agent may become the owner of any of the Bonds with the same rights it would have if it were not Fiscal Agent. If Parity Bonds are issued, as provided in Section 2.13 hereof, the provisions of this Section 1.02 shall apply to such Parity Bonds to the same extent and with the same effect as they apply to the Bonds. Section 1.03. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.03 shall, for all purposes of this Agreement, of any Supplemental Agreement, and of any certificate, opinion or other document herein mentioned, have the meanings herein specified. All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement, and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof. “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the California Government Code. “Administrative Expenses” means any or all of the following: the fees and expenses of the Fiscal Agent (including any fees or expenses of its counsel), the expenses of the City in carrying out its duties hereunder (including, but not limited to, the levying and collection of the Special Taxes) including the fees and expenses of its counsel, an allocable share of the salaries of City staff directly related thereto and a proportionate amount of City general administrative overhead related thereto, any amounts paid by the City from its general funds pursuant to Section 6.02 hereof, the fees and expenses of the Municipal Advisor and the Special Tax Consultant, the costs of the District, the City or any designee of either thereof of complying with the arbitrage rebate requirements; the costs to the District, the City or any designee of either thereof of complying with the District, City or obligated persons disclosure requirements associated with applicable federal and state securities laws and of the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the District, or City, or any designee of either thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; and the District’s annual administration fee and third party expenses, and all other costs and expenses of the City or the Fiscal Agent incurred in connection with the discharge of their 45635.01434\32349708.2 3 respective duties hereunder and, in the case of the City, in any way related to the administration of the District with respect to Improvement Area No. 2. “Administrative Expense Fund” means the fund by that name established by Section 3.05(A) hereof. “Agreement” or “Fiscal Agent Agreement” means this Fiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement adopted pursuant to the provisions hereof. “Annual Debt Service” means, for each Bond Year, the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as scheduled, and (ii) the principal amount of the Outstanding Bonds scheduled to be paid. “Auditor” means the Auditor-Controller of the County of Los Angeles. “Authorized Officer” means the City Manager, or the Director of Administrative Services of the City, and their designees, and any other officers or employees of the City authorized by the City Council or by an Authorized Officer to undertake the action referenced in this Agreement as required to be undertaken by an Authorized Officer. “Bond Counsel” means any attorney or firm of attorneys acceptable to the City and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt status of securities issued by public entities. “Bond Fund” means the fund by that name established by Section 4.02(A) hereof. “Bond Year” means the period beginning on the Closing Date and ending on September 1, 2020 and thereafter the period beginning on each September 2 and ending on the following September 1. “Bonds” means, unless otherwise expressly provided, the Community Facilities District No. 2005-1 (Rosedale) of the City of Azusa 2019 Special Tax Bonds (Improvement Area No. 2), authorized by and at any time Outstanding pursuant to the Act and this Agreement. “Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the State of California or in any state in which the Fiscal Agent has its Principal Office are authorized or obligated by law or executive order to be closed. “City” means the City of Azusa. “City Council” means the City Council of the City. “City Facilities” means the public facilities of the City the construction and acquisition of which are to be financed with the proceeds deposited in the City Facilities Account. “City Facilities Account” means the account by that name established in the Improvement Fund by Section 3.03(A) hereof. 45635.01434\32349708.2 4 “Closing Date” means the date upon which there is an exchange of the Bonds for the proceeds representing payment of the purchase price of the Bonds by the Original Purchaser. “Code” means the Internal Revenue Code of 1986, as amended. “Continuing Disclosure Certificate” means the Continuing Disclosure Certificate of the City, dated as of the Closing Date, as originally executed and as it may be amended from time to time in accordance with the terms thereof. “Costs of Issuance” means items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of the Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, including but not limited to the preliminary official statement and official statement regarding the Bonds, closing costs, filing and recording fees, premiums for any reserve fund, surety bond or bond insurance policy, initial fees and charges of the Fiscal Agent including its initial annual administration fee and the fees of its counsel, expenses incurred by the City in connection with the issuance of the Bonds and the change proceedings with respect to Improvement Area No. 2, Bond (underwriter’s) discount, legal fees and charges, including the fees of Bond Counsel and counsel to the Underwriter, Municipal Advisor’s fees, fees of a Special Tax Consultant, fees of a market absorption consultant, charges for authentication, transportation and safekeeping of the Bonds and other costs, charges and fees in connection with the foregoing. “Costs of Issuance Fund” means the fund by that name established by Section 3.06(A) hereof. “Defeasance Securities” means, for purposes of Section 9.03(C) hereof, the following: (i) United States Treasury Certificates, Notes and Bonds (including State and Local Government Series - “SLGs”); (ii) Direct obligations of the United States Treasury which have been stripped by the Treasury itself, CATS, TIGRS and similar securities; (iii) Resolution Funding Corporation (REFCORP) obligations; provided that only the interest component of REFCORP strips which have been stripped by request of the Federal Reserve Bank of New York in book-entry form are acceptable; (iv) Pre-refunded municipal bonds rated “Aaa” by Moody’s and “AAA” by Standard & Poor’s; provided, however, that if the issue is only rated by Standard & Poor’s (i.e., there is no Moody’s rating), then the pre-refunded bonds must have been pre- refunded with cash, direct United States or United States guaranteed obligations, or “AAA” rated pre-refunded municipal bonds; and (v) Obligations issued by the following agencies which are backed by the full faith and credit of the United States of America: 45635.01434\32349708.2 5 (a) U.S. Export-Import Bank Direct obligations or fully guaranteed certificates of beneficial ownership (b) Federal Financing Bank (c) General Services Administration Participation certificates (d) United States Maritime Administration Guaranteed Title XI financing (e) United States Department of Housing and Urban Development Project notes Local Authority Bonds New Communities Debentures - United States government guaranteed debentures United States Public Housing Notes and Bonds - United States government guaranteed public housing notes and bonds. “Developed Property” means all Assessor’s Parcels of taxable property, exclusive of Taxable Association Property and Taxable Public Property (as those terms are defined in the Rates and Method of Apportionment of Special Tax), for which a Final Subdivision was recorded as of March 1 and a building permit for new construction was issued as of March 1 of the Fiscal Year preceding the Fiscal Year for which the Special Taxes are being levied. “District” means Community Facilities District No. 2005-1 (Rosedale) of the City of Azusa, County of Los Angeles, State of California. “DTC” or the “Depository” means The Depository Trust Company, New York, New York and its successors and assigns. “Facilities” means the public facilities which are to be financed with the proceeds of the sale of the bonds of the District as described in Resolution No. 06-C39 adopted by the Board of Directors on June 5, 2006. “Federal Securities” means any of the following which at the time of investment are legal investments under the laws of the State of California for the moneys proposed to be invested therein: (i) Cash; and (ii) Direct general obligations of (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America and CATS and TIGRS), or obligations, the payment of principal of and interest on which is unconditionally guaranteed by the United States of America. 45635.01434\32349708.2 6 “Final Subdivision” means a subdivision of property by recordation of a final subdivision map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code Section 1352 that creates individual lots for which building permits may be issued without further subdivision. “Fiscal Agent” means Wilmington Trust, National Association, the Fiscal Agent appointed by the City, acting as an independent fiscal agent with the duties and powers herein provided, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in Section 7.01 hereof. “Fiscal Year” means the twelve-month period extending from July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive. “Improvement Area No. 2” means Improvement Area No. 2 of the District. “Improvement Fund” means the fund by that name established by Section 3.03(A) hereof. “Independent Financial Consultant” means a firm of certified public accountants, a financial consulting firm, including a Municipal Advisor, a consulting engineering firm or engineer which is not an employee of, or otherwise controlled by, the City. “Information Services” means in accordance with then-current guidelines of the Securities and Exchange Commission, the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Board (at http://emma.msrb.org) or such service or services as the City may designate in a certificate delivered to the Fiscal Agent. “Interest Account” means the account by that name established in the Bond Fund by Section 4.02(A). “Interest Payment Dates” means March 1 and September 1 of each year, commencing March 1, 2020, until the maturity or redemption of all Outstanding Bonds. “Investment Earnings” means all interest earned and any gains and losses on the investment of moneys in any fund or account created by this Agreement, excluding interest earned and gains and losses on the investment of moneys in the Rebate Fund. “Late Payment Rate” means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank, N.A., at its principal office in The City of New York, New York, as its prime or base lending rate (“Prime Rate”) (any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank, N.A.) plus 3%, and (ii) the then applicable highest rate of interest on the Insured Obligations and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. In the event JPMorgan Chase Bank, N.A., ceases to announce its Prime Rate, the Prime Rate shall be the prime or base lending rate of such other bank, banking association or trust company as BAM, in its sole and absolute discretion, shall designate. Interest 45635.01434\32349708.2 7 at the Late Payment Rate on any amount owing to BAM shall be computed on the basis of the actual number of days elapsed in a year of 360 days. “Maximum Annual Debt Service” means the largest Annual Debt Service for any Bond Year after the calculation is made through the final maturity date of any Outstanding Bonds. “Moody’s” shall mean Moody’s Investors Service, a national rating service with offices in New York, New York. “Municipal Advisor” means an independent financial consulting firm appointed by the City to advise the City as to financial matters relating to the Bonds. “Officer’s Certificate” means a written certificate of the City signed by an Authorized Officer of the City. “Ordinance” means any ordinance of the City or resolution of the City Council levying the Special Taxes. “Original Purchaser” means the first purchaser of the Bonds from the City. “Outstanding,” when used as of any particular time with reference to the Bonds, means (subject to the provisions of Section 8.04 hereof) all Bonds except: (i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds called for redemption which, for the reasons specified in Section 2.03 (G) hereof, are no longer entitled to any benefit under this Agreement other than the right to receive payment of the redemption price therefor; (iii) Bonds paid or deemed to have been paid within the meaning of Section 9.03 hereof; and (iv) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the City and authenticated by the Fiscal Agent pursuant to this Agreement or any Supplemental Agreement. “Owner” means any person who shall be the registered owner of any Outstanding Bond. “Parity Bonds” means bonds issued by the District, in addition to the Bonds, that are secured by a lien on the Special Tax Revenues and funds pledged for the payment of the Bonds hereunder on a parity with the Outstanding Bonds pursuant to Section 2.13 hereof. “Permitted Investments” means: (i) Federal Securities; (ii) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are 45635.01434\32349708.2 8 backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): (a) U.S. Export-Import Bank Direct obligations or fully guaranteed certificates of beneficial ownership (b) Federal Financing Bank (c) Federal Housing Administration Debentures (d) General Services Administration Participation certificates (e) Government National Mortgage Association (GNMA) GNMA - guaranteed mortgage-backed bonds GNMA - guaranteed pass-through obligations (f) U.S. Maritime Administration Guaranteed Title XI financing (g) U.S. Department of Housing and Urban Development Project Notes Local Authority Bonds New Communities Debentures - United States government guaranteed debentures U.S. Public Housing Notes and Bonds - United States government guaranteed public housing notes and bonds; (iii) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit United States government agencies (stripped securities are only permitted if they have been stripped by the agency itself): (a) Federal Home Loan Bank System Senior debt obligations (b) Federal Home Loan Mortgage Corporation Participation Certificates Senior debt obligations (c) Federal National Mortgage Association Mortgage-backed securities and senior debt obligations (d) Student Loan Marketing Association Senior debt obligations 45635.01434\32349708.2 9 (e) Resolution Funding Corporation (REFCORP) obligations (f) Farm Credit System Consolidated systemwide bonds and notes; (iv) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by Standard & Poor’s of “AAAm-G,” “AAA-m” or “AA-m” and, if rated by Moody’s, rated “Aaa,” “Aa1” or “Aa2” by Moody’s, including funds for which the Fiscal Agent, its parent holding company, if any, or any affiliates or subsidiaries of the Fiscal Agent or such holding company receive and retain a fee for services provided to the fund whether as a custodian, transfer agent, investment advisor or otherwise; (v) Certificates of deposit secured at all times by collateral described in clauses (i) and/or (ii) above. Such certificates must be issued by commercial banks, including the Fiscal Agent and its affiliates, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the Fiscal Agent on behalf of the Owners of the Bonds must have a perfected first security interest in the collateral; (vi) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF including those that may be issued or provided by the Fiscal Agent and its affiliates; (vii) Investment agreements with domestic or foreign banks, insurance companies or corporations the long-term debt or claims paying ability of which or, in the case of a guaranteed corporation, the long-term debt of the guarantor, or, in the case of a monoline financial guaranty insurance company, the claims paying ability or financial strength, of the guarantor is rated in at least the double A category by Standard & Poor’s and 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 Annual Debt Service on the Bonds (if the funds invested pursuant to the investment agreement are from the Reserve Fund); (b) the investment agreement shall provide that the invested funds are available for withdrawal without penalty or premium at any time upon not more than seven (7) days’ prior notice (The City and the Fiscal Agent shall 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 payable.); (c) the investment agreement shall provide that it is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof; (d) the City and the Fiscal Agent receive the opinion of domestic counsel (which opinion shall be addressed to the City and the Fiscal Agent) that 45635.01434\32349708.2 10 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 City and the Fiscal Agent; (e) the investment agreement shall provide that if during its term: (1) the provider’s (or its guarantor’s) rating by either Standard & Poor’s or Moody’s falls below “AA-” or “Aa3”, respectively, the provider shall, at its option, within ten (10) days of receipt of publication of such downgrade, either (i) collateralize the investment agreement by delivering or transferring in accordance with the 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 one hundred four percent (104%) of securities identified in clauses (i) and (ii) of this definition; or (ii) assign the investment agreement and all of its obligations thereunder to a financial institution mutually acceptable to the provider, the City and the Fiscal Agent which is rated either in the first or second highest category by Standard & Poor’s and Moody’s; and (2) the provider’s (or its guarantor’s) rating by either Standard & Poor’s or Moody’s is withdrawn or suspended or falls below “A-” or “A3”, respectively, the provider must, at the direction of the City or the Fiscal Agent, within ten (10) days of receipt of such direction, repay the principal of and accrued but unpaid interest on the invested funds, in either case with no penalty or premium to the City or the Fiscal Agent; and (f) the investment agreement shall provide 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 shall mean the Holder of the Collateral is in possession of such collateral); and (g) the investment agreement shall provide that if during its term: (1) the provider shall default in its payment obligations, the provider’s obligations under the investment agreement shall, at the direction of the City or the Fiscal Agent, be accelerated and amounts invested and accrued but unpaid interest thereon shall be paid to the City or the Fiscal Agent, as appropriate; and (2) the provider shall 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 45635.01434\32349708.2 11 accelerated and amounts invested and accrued but unpaid interest thereon shall be paid to the City or the Fiscal Agent, as appropriate; (viii) Commercial paper rated, at the time of purchase, “Prime - 1” by Moody’s and “A-1” or better by Standard & Poor’s; (ix) Bonds or notes issued by any state or municipality which are rated by Moody’s and Standard & Poor’s in one of the two highest rating categories assigned by them; (x) Federal funds or bankers acceptances with a maximum term of one year of any bank, including the Fiscal Agent and its affiliates, which has an unsecured, uninsured and unguaranteed obligation rating of “Prime - 1” or “A3” or better by Moody’s and “A- 1” or better by Standard & Poor’s; (xi) Repurchase agreements which satisfy the following criteria: (a) Repurchase agreements must be between the City or the Fiscal Agent and an entity which is: (1) A primary dealer on the Federal Reserve reporting dealer list which is rated “A” or better by Standard & Poor’s and Moody’s, or (2) A bank rated “A” or above by Standard & Poor’s and Moody’s; or (3) A corporation the long-term debt or claims paying ability of which, or in the case of a guaranteed corporation, the long-term debt of the guarantor, or, in the case of a monoline financial guaranty insurance company, the claims paying ability or financial strength of the guarantor, is rated in at least the double A category by Standard & Poor’s and Moody’s. (b) The written agreement must include the following: (1) Securities which are acceptable for transfer are: (A) direct obligations of the United States government, or (B) obligations of federal agencies backed by the full faith and credit of the United States of America (or the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC)), (2) The collateral must be delivered to the City or the Fiscal Agent (if the Fiscal Agent is not supplying the collateral) or a third party acting as agent for the Fiscal Agent (if the Fiscal Agent is supplying the 45635.01434\32349708.2 12 collateral) before or simultaneous with payment (perfection by possession of certificated securities), (3) (A) The securities must be valued weekly, marked-to- market at current market price plus accrued interest, and (B) The value of the collateral must be at least equal to one hundred four percent (104%) of the amount of money transferred by the Fiscal Agent to the dealer, bank or corporation under the agreement plus accrued interest. If the value of the securities held as collateral is reduced below one hundred four percent (104%) of the value of the amount of money transferred by the Fiscal Agent, then additional acceptable securities and/or cash must be provided as collateral to bring the value of the collateral to one hundred four percent (104%); provided, however, that if the securities used as collateral are those of FNMA or FHLMC, then the value of the collateral must equal to one hundred five percent (105%) of the amount of money transferred by the Fiscal Agent; (xii) Forward delivery agreements (FDA) or forward purchase and sale agreements (FPSA) having as the underlying investment property investments of the type which are identified in clauses (i), (ii), (iii) or (viii) of this Section; and (xiii) the Local Agency Investment Fund in the State Treasury of the State of California as permitted by the State Treasurer pursuant to Section 16429.1 of the California Government Code. “Person” means natural persons, firms, corporations, limited liability companies, partnerships, associations, trusts and other entities. “Principal Account” means the account by that name established in the Bond Fund by Section 4.02(A). “Principal Office” means the principal corporate trust office of the Fiscal Agent in Los Angeles, California or such other addresses as may be specified in writing by the Fiscal Agent; provided, however, that for purposes of the transfer, registration, exchange, payment and surrender of Bonds “Principal Office” means the office or agency of the Fiscal Agent at which, at any time, its corporate trust agency business shall be conducted or such other office or address as may be specified in writing by the Fiscal Agent. “Proceeds,” when used with reference to the Bonds, means the aggregate principal amount of the Bonds, plus accrued interest and premium, if any, less original issue discount if any. “Qualified Reserve Account Credit Instrument” means (i) the Reserve Policy or (ii) an irrevocable standby or direct-pay letter of credit or Reserve Policy issued by a commercial bank or insurance company and deposited with the Fiscal Agent pursuant to Section 4.03, provided that all of the following requirements are met by the City at the time of delivery thereof to the Fiscal Agent: (a) the long-term credit rating of such bank or insurance company is “A” (without 45635.01434\32349708.2 13 regard to modifier) or higher; (b) such letter of credit or Reserve Policy has a term of at least twelve (12) months; (c) such letter of credit or Reserve Policy has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to Section 4.03; (d) the Fiscal Agent is authorized pursuant to the terms of such letter of credit or Reserve Policy to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Interest Account and the Principal Account; and (e) prior written notice is given pursuant to this Fiscal Agent Agreement before the effective date of any such Qualified Reserve Account Credit Instrument. “Rates and Method of Apportionment of Special Tax” means the Rates and Method of Apportionment of Special Tax for Improvement Area for the District in the form attached as Exhibit “A” to Resolution No. 06-C39 adopted by the City Council on June 5, 2006 as amended by Resolution No. 11-080 adopted by the City Council on November 21, 2011. “Rebate Certificate” means the certificate delivered by the City upon the delivery of the Bonds relating to Section 148 of the Code, or any functionally similar replacement certificate. “Rebate Fund” means the fund by that name established by Section 6.02 hereof. “Record Date” means the fifteenth (15th) day of the month next preceding the applicable Interest Payment Date whether or not such day is a Business Day. “Regulations” means the temporary and permanent regulations of the United States Department of the Treasury promulgated under the Code. “Representation Letter” means the representation letter which the City has delivered to The Depository Trust Company (“DTC”) with respect to the utilization of the book-entry system maintained by DTC for the issuance and registration of bonds. “Reserve Fund” means the fund by that name established by Section 4.03(A) hereof. “Reserve Policy” means a municipal bond debt service reserve insurance policy issued by the municipal bond insurance company in an amount equal to the Reserve Requirement, which is deposited into the Reserve Fund relating to the Bonds. “Reserve Requirement” means, on the date of any calculation, as determined by the City and provided in writing to the Fiscal Agent, the lesser of (i) ten percent (10%) of the proceeds of the sale of the Bonds, (ii) Maximum Annual Debt Service on the Bonds, or (iii) 125 percent of average Annual Debt Service on the Bonds; provided, however, such amount shall not exceed the Reserve Requirement calculated on the Closing Date and that the City may meet all or a portion of the Reserve Requirement by depositing a Qualified Reserve Account Credit Instrument meeting the requirements of Section 4.03 hereof. “Resolution” means Resolution No. ____-____, adopted by the City Council on __________, 2019. “Resolution of Formation” means Resolution No. 06-C39 dated June 5, 2006 together with Resolution No. 11-C890 certain amendments to the Rate and Method of Apportionment. 45635.01434\32349708.2 14 School District” means Azusa Unified School District. “School District Certificate” means a certificate signed by the Superintendent or an Assistant Superintendent of the School District requesting the disbursement of funds from the School District Facilities Account pursuant to Section 3.03(B)(3) hereof as approved by an Authorized Officer. “School District Facilities” means the public school facilities of the School District, the construction and acquisition of which are to be financed with the Proceeds deposited in the School District Facilities Account as specified in the School District Joint Community Facilities Agreement. “School District Facilities Account” means the account by that name established in the Improvement Fund by Section 3.03(A) hereof. “School District Joint Community Facilities Agreement” means the Joint Community Facilities Agreement, dated as of June 1, 2008, by and between the City and the School District, as amended by the First Amendment to the Joint Community Facilities Agreement by and between the City and the School District, dated as of December 1, 2019. “Securities Depositories” means The Depository Trust Company, 55 Water Street, 50th Floor, New York, New York, 10041-0099, Call Notification Department, Fax (212) 855-7232, and, in accordance with then current guidelines of the Securities and Exchange Commission, such other securities depositories as the City may designate in an Officer’s Certificate delivered to the Fiscal Agent. “Security Documents” shall mean the resolution, fiscal agent agreement, bond, and/or any additional or supplemental document executed in connection with the Bonds. “Special Taxes” or “Special Tax” means the special taxes levied by the City Council on parcels of taxable property within Improvement Area No. 2 pursuant to the Act and the Rates and Method of Apportionment of Special Tax. “Special Tax Consultant” means an engineer or financial consultant or other such person or firm with expertise in the apportionment and levy of special taxes in community facilities districts which is employed by the City to assist the City in levying the Special Taxes. “Special Tax Fund” means the fund by that name established by Section 3.04(A) hereof. “Special Tax Prepayments” means amounts received by the City as prepayments of all or a portion of the Special Tax obligation of a parcel of property in Improvement Area No. 2. “Special Tax Prepayments Account” means the account by that name established by the Fiscal Agent in the Bond Fund pursuant to Section 4.02(A) hereof. “Special Tax Revenues” means the proceeds of the Special Taxes received by the City, including any scheduled payments, interest and penalties thereon and proceeds of the redemption 45635.01434\32349708.2 15 or sale of property sold as a result of foreclosure of the lien of the Special Taxes in the amount of said lien and interest and penalties thereon. “Standard & Poor’s” shall mean S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, a national rating service with offices in New York, New York. “Supplemental Agreement” means an agreement between the City and the Fiscal Agent that amends and supplements this Agreement as authorized hereby. ARTICLE II THE BONDS Section 2.01. Principal Amount; Designation. The Bonds in the aggregate principal amount of $__________ are hereby authorized to be issued by the City for the District under and subject to the terms of the Resolution, this Agreement, the Act and other applicable laws of the State of California. The Bonds shall be designated “Community Facilities District No. 2005-1 (Rosedale) of the City of Azusa 2019 Special Tax Bonds (Improvement Area No. 2).” The Bonds shall be issued in the form attached hereto as Exhibit A. Section 2.02. Terms of Bonds. (A) The Bonds. The Bonds shall be issued as fully registered bonds, without coupons, in the denominations of $5,000 or any integral multiple thereof. The Bonds shall be lettered and numbered in a customary manner as determined by the Fiscal Agent. The Bonds shall be dated as of December 1, 2019. (B) Maturities. The Bonds shall mature and become payable on September 1 of each year, as follows: Maturity Dates (September 1) Principal Amounts Interest Rates (C) Interest. The Bonds shall bear interest at the rates set forth in subsection (B) above payable on the Interest Payment Dates in each year. Interest shall be calculated on the basis of a 360-day year composed of twelve 30-day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from __________, 2019; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has 45635.01434\32349708.2 16 previously been paid or made available for payment thereon or from __________, 2019, if no interest has previously been paid or made available for payment thereon. (D) Method of Payment. Interest on the Bonds is payable by check of the Fiscal Agent mailed by first class mail, postage prepaid, on each Interest Payment Date, to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date. The principal of the Bonds and any premium on the Bonds are payable in lawful money of the United States of America by check of the Fiscal Agent upon surrender of such Bonds at the Principal Office of the Fiscal Agent; provided, however, that at the written request of the Owner of at least $1,000,000 in aggregate principal amount of Outstanding Bonds filed with the Fiscal Agent prior to any Record Date, interest on such Bonds shall be paid to such Owner on each succeeding Interest Payment Date by wire transfer of immediately available funds to an account in the United States of America designated in such written request. (E) CUSIP Identification Numbers. “CUSIP” identification numbers shall be imprinted on the Bonds, but such numbers shall not constitute a part of the contract evidenced by the Bonds. In addition, failure on the part of the City or the Fiscal Agent to use such CUSIP numbers in any notice to the Owners shall not constitute an event of default or any violation of the City’s contract with the Owners and shall not impair the effectiveness of any such notice. Section 2.03. Redemption. (A) Optional Redemption. The Bonds are subject to redemption prior to their stated maturity dates at the option of the City on September 1, 20__ or any date thereafter, from such maturities as selected by the City (and by lot within any one maturity), in integral multiples of $5,000, at the option of the City from moneys derived by the City from any source, at par together with accrued interest to the date of redemption. (B) Mandatory Redemption From Special Tax Prepayments. The Bonds are subject to mandatory redemption prior to their stated maturity dates on any Interest Payment Date, as selected among maturities by the City (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the City from Special Tax Prepayments, at redemption prices (expressed as percentages of the principal amounts of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows: Redemption Dates Redemption Price Any Interest Payment Date through March 1, 20__ 103% September 1, 20__ and March 1, 20__ 102 September 1, 20__ and March 1, 20__ 101 September 1, 20__ and any Interest Payment Date thereafter 100 The amounts in the foregoing schedules shall be reduced by the City as nearly as possible on a pro rata basis in multiples of $5,000 among redemption dates as a result of any prior or partial redemption of the Bonds pursuant to subsection (A) or subsection (B) above. The City shall, as may be appropriate, provide to the Fiscal Agent a revised mandatory sinking fund schedule for the Bonds. 45635.01434\32349708.2 17 (C) Mandatory Sinking Fund Redemption. The outstanding Bonds maturing on September 1, 20___ and September 1, 20__ are subject to mandatory sinking fund redemption, in part, on September 1, 20___ and September 1, 20__, respectively, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date of redemption, without premium, and from sinking payments as follows: Bond Maturing on September 1, 20___ Redemption Date (September 1) Sinking Payment (maturity) Bond Maturing on September 1, 20___ Redemption Date (September 1) Sinking Payment (maturity) The amounts in the foregoing schedules shall be reduced by the City pro rata among redemption dates, in order to maintain substantially level Debt Service, as a result of any prior or partial redemption of the Bonds pursuant to subsection (A) or subsection (B) above. (D) Purchase of Bonds. In lieu of payment at maturity or redemption under this Section 2.03, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding Bonds, upon the filing with the Fiscal Agent of an Officer’s Certificate requesting such purchase, at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer’s Certificate may provide, but in no event may Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase. In such event, the City shall, as may be appropriate, provide to the Fiscal Agent a revised maturity schedule or a revised mandatory sinking fund schedule for the Bonds, or both. (E) Notice to Fiscal Agent. An Authorized Officer shall give the Fiscal Agent written notice of the City’s intention to redeem Bonds not less than forty-five (45) days prior to the applicable redemption date specifying the principal amounts and maturities of the Bonds to be redeemed. The provisions of this subsection (F) shall not apply to the redemption of the Bonds pursuant to Section 2.03(D) hereof. (F) Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed for redemption, or electronically submitted to the Securities Depositories and to one or more Information Services selected by an Authorized 45635.01434\32349708.2 18 Officer, and to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books maintained by the Fiscal Agent at its Principal Office; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of such Bonds. Such notice shall state the date of such notice, the date of issue of the Bonds, the place or places of redemption, the redemption date, the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, shall designate the CUSIP numbers and Bond numbers of the Bonds to be redeemed, by giving the individual CUSIP number and Bond number of each Bond to be redeemed, or shall state that all Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities have been called for redemption, shall state as to any Bond called for redemption in part the portion of the principal of the Bond to be redeemed, shall require that such Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said redemption price, and shall state that further interest on such Bonds will not accrue from and after the redemption date. The cost of the mailing and publication of any such redemption notice shall be paid by the District. Any notice of redemption of the Bonds delivered in accordance with this Section 2.03 may be conditional and if any condition stated in the notice of redemption shall not have been satisfied on or prior to the redemption date, said notice shall be of no force and effect and the District shall not be required to redeem such Bonds and the redemption shall not be made and the Fiscal Agent shall within a reasonable time thereafter give notice, to the persons and in the manner in which the notice of redemption was given, that such condition or conditions were not met and that the redemption was cancelled. Upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. If less than all the Bonds Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or a multiple thereof, and, in selecting portions of such Bonds for redemption, the Fiscal Agent shall treat each such Bond as representing the number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. Whenever provision is made in this Agreement for the redemption of less than all of the Bonds of a maturity or any given portion thereof, the Fiscal Agent shall select the Bonds of such maturity to be redeemed, from all Bonds of such maturity or such given portion thereof not previously called for redemption, by lot within a maturity in any manner which the Fiscal Agent in its sole discretion shall deem appropriate. Upon surrender of Bonds redeemed in part only, the City shall execute and the Fiscal Agent shall authenticate and deliver to the Owner, at the expense of the District, a new Bond or 45635.01434\32349708.2 19 Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds. (G) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the redemption prices of the Bonds called for redemption shall have been deposited in the Bond Fund, such Bonds shall cease to be entitled to any benefit under this Agreement other than the right to receive payment of the redemption price, and interest shall cease to accrue on the Bonds to be redeemed on the redemption date specified in the notice of redemption. All Bonds redeemed and purchased by the Fiscal Agent pursuant to this Section 2.03 shall be canceled by the Fiscal Agent. Section 2.04. Form of Bonds. The Bonds, including the Fiscal Agent’s certificate of authentication and the assignment to appear thereon, shall be substantially in the form set forth in Exhibit A attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions as permitted or required by this Agreement. Section 2.05. Execution of Bonds. The Bonds shall be executed on behalf of the District by the facsimile signatures of the Mayor and City Clerk of the City, who are in office on the date of this Agreement or at any time thereafter. If any officer whose signature appears on any Bond ceases to be such officer before delivery of the Bond to the Owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Bond to the Owner. Any Bond may be signed and attested on behalf of the District by such persons as at the actual date of the execution of such Bond shall be the proper officers of the City although at the nominal date of such Bond any such person shall not have been such officer of the City. Only such Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A hereto, manually executed and dated by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of authentication of the Fiscal Agent shall be conclusive evidence that such Bonds have been duly authenticated, registered and delivered hereunder, and are entitled to the benefits of this Agreement. Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept pursuant to the provisions of Section 2.08 hereof, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Office of the Fiscal Agent, accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Fiscal Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer shall be paid by the District. The Fiscal Agent shall collect from the Owner requesting transfer of a Bond any tax or other governmental charge required to be paid with respect to such transfer. 45635.01434\32349708.2 20 Whenever any Bond or Bonds shall be surrendered for transfer, the City shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds of like aggregate principal amount. No transfers of Bonds shall be required to be made (i) during the fifteen (15) days preceding the date established by the Fiscal Agent for selection of Bonds for redemption, or (ii) with respect to Bonds which have been selected for redemption. Section 2.07. Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Fiscal Agent only for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity and interest rate. The cost for any services rendered or any expense incurred by the Fiscal Agent in connection with any such exchange shall be paid by the District. The Fiscal Agent shall collect from the Owner requesting exchange of a Bond any tax or other governmental charge required to be paid with respect to such exchange. No exchanges of Bonds shall be required to be made (i) during the fifteen (15) days preceding the date established by the Fiscal Agent for selection of Bonds for redemption, or (ii) with respect to Bonds which have been selected for redemption. Section 2.08. Bond Register. The Fiscal Agent shall keep, or cause to be kept, at its Principal Office sufficient books for the registration and transfer of the Bonds which books shall show the series, number, CUSIP identification number, date of issuance, amount, rate of interest and Owner of each Bond and shall at all times be open to inspection by the City during regular business hours upon reasonable notice; and, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, the ownership of the Bonds as hereinbefore provided. Section 2.09. Temporary Bonds. The Bonds may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the City, and may contain such reference to any of the provisions of this Agreement as may be appropriate. Every temporary Bond shall be executed by the City upon the same conditions and in substantially the same manner as the definitive Bonds. If the City issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds shall be surrendered, for cancellation, in exchange for the definitive Bonds at the Principal Office of the Fiscal Agent or at such other location as the Fiscal Agent shall designate, and the Fiscal Agent shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Agreement as definitive Bonds authenticated and delivered hereunder. Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the City, at the expense of the Owner of said Bond, shall execute, and the Fiscal Agent shall authenticate and deliver, a replacement Bond of like tenor and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be canceled and destroyed by the Fiscal Agent. If any Bond shall be lost, destroyed or stolen, 45635.01434\32349708.2 21 evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence be satisfactory to it and indemnity satisfactory to it shall be given, the City, at the expense of the Owner, shall execute, and the Fiscal Agent shall authenticate and deliver, a replacement Bond of like tenor and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen. The City or Fiscal Agent may require payment of a sum not exceeding the actual cost of preparing each replacement Bond delivered under this Section 2.10 and of the expenses which may be incurred by the City and the Fiscal Agent for the preparation, execution, authentication and delivery thereof. Any Bond delivered under the provisions of this Section 2.10 in replacement of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation of the District whether or not the Bond so alleged to be lost, destroyed or stolen is at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Agreement with all other Bonds issued pursuant to this Agreement. Section 2.11. Special Obligation. All obligations of the City and the District under this Agreement and the Bonds shall be special obligations of the City and the District, payable solely from the Special Tax Revenues and the funds pledged therefor pursuant to this Agreement, including any amount on deposit in the Special Tax Prepayments Account. Neither the faith and credit nor the taxing power of the City, the District (except to the limited extent set forth herein) or the State of California or any political subdivision thereof is pledged to the payment of the Bonds. Section 2.12. Book-Entry. The Bonds shall be initially issued in the form of a single, fully registered Bond for each maturity (which may be typewritten). Upon initial issuance, the ownership of such Bonds shall be registered in the name of the Nominee identified below as nominee of The Depository Trust Company, New York, New York and its successors and assigns (the “Depository” or “DTC”). Except as hereinafter provided, all of the Outstanding Bonds shall be registered in the name of the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to this Section 2.12 (the “Nominee”). With respect to the Bonds registered in the name of the Nominee, neither the City nor the Fiscal Agent shall have any responsibility or obligation to any broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds as securities depository (the “Participant”) or to any person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, neither the City nor the Fiscal Agent shall have any responsibility, liability or obligation whatsoever with respect to (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other person, other than an Owner of a Bond as shown in the registration books maintained by the Fiscal Agent pursuant to Section 2.08 hereof (the “Registration Books”), of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event the City redeems the Bonds in part, or (iv) the payment to any Participant or any other person, other than an Owner of a Bond as shown in the Registration Books, of any amount with respect to principal of or interest on the Bonds. The City and the Fiscal Agent may treat and consider conclusively the person in whose name each Bond is registered as the holder and absolute Owner of such Bond for the purpose of payment of principal and interest with respect to such Bond, for the purpose of 45635.01434\32349708.2 22 giving notices of redemption, if applicable, and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The City shall pay all principal of and interest on the Bonds only to or upon the order of the respective Owner of a Bond, as shown in the Registration Books, or his or her attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City’s obligations with respect to payment of principal of and interest on the Bonds to the extent of the sum or sums so paid. No person other than an Owner of a Bond, as shown in the Registration Books, shall receive a Bond evidencing the obligation of the City to make payments of principal and interest pursuant to this Agreement. Upon delivery by the Depository to the Owners of the Bond and the City of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Agreement shall refer to such nominee of the Depository. In the event (i) the Depository determines not to continue to act as securities depository for the Bonds, or (ii) the Depository shall no longer so act and gives notice to the City of such determination, then the City will discontinue the book-entry system with the Depository. If the City determines to replace the Depository with another qualified Securities Depository, the City shall prepare or direct the preparation of a new, single, separate, fully registered Bond, per maturity, registered in the name of such successor or substitute qualified Securities Depository or its nominee. If the City fails to identify another qualified Securities Depository to replace the Depository, then the Bonds shall no longer be restricted to being registered in the Registration Books in the name of the Nominee, but shall be registered in whatever name or names Owners of the Bonds transferring or exchanging Bonds shall designate, in accordance with the provisions of Sections 2.06 and 2.07 hereof, and the City shall prepare and deliver Bonds to the Fiscal Agent for authentication and delivery to the Owners thereof for such purpose. In the event of a reduction in aggregate principal amount of Bonds Outstanding or an advance refunding of part of the Bonds Outstanding, the Depository, in its discretion, (a) may request the City to prepare and issue a new Bond or (b) may make an appropriate notation on a Bond indicating the date and amounts of such reduction in principal, but in such event the Registration Books maintained by the Fiscal shall be conclusive as to what amounts are Outstanding with respect to the Bond, except in the case of final maturity, in which case the Bond must be presented to the Fiscal Agent prior to payment. Notwithstanding any other provision of this Agreement to the contrary, so long as any Bond is registered in the name of the Nominee, all payments of principal and interest with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository and acceptable to the City. The initial Nominee shall be Cede & Co., as Nominee of DTC. Section 2.13. Parity Bonds. The District and the City covenant that except as provided below they will not issue any other obligations payable, as to principal or interest, from the Special Tax Revenues which have, or purport to have, any lien upon the Special Tax Revenues superior to or on a parity with the lien of the Bonds. Nothing in this Agreement shall, however, 45635.01434\32349708.2 23 preclude, subject to the limitations contained hereunder, the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California, which refunding bonds may be payable from and have a lien upon the Special Tax Revenues on a parity with the Bonds to be outstanding following the issuance of such refunding bonds so long as there is a debt service savings pursuant to the Act. ARTICLE III ISSUANCE OF BONDS; APPLICATION OF PROCEEDS; BOND PROCEEDS FUND; SPECIAL TAX FUND; ADMINISTRATIVE EXPENSE FUND; COSTS OF ISSUANCE FUND Section 3.01. Issuance and Delivery of Bonds. At any time after the execution of this Agreement, the City may issue the Bonds for the District in the aggregate principal amounts set forth in Section 2.01 hereof and deliver the Bonds to the Original Purchaser. The Authorized Officers of the City are hereby authorized and directed to deliver any and all documents and instruments necessary to cause the issuance of the Bonds in accordance with the provisions of the Act, the Resolution and this Agreement, to authorize the payment of Costs of Issuance by the Fiscal Agent from the proceeds of the Bonds, and to do and cause to be done any and all acts and things necessary or convenient for delivery of the Bonds to the Original Purchaser. Section 3.02. Application of Proceeds of Sale of Bonds. The Proceeds of the sale of the Bonds to the Original Purchaser shall be paid to the Fiscal Agent, who shall forthwith set aside, pay over and deposit such Proceeds on the Closing Date as follows: (A) Deposit in the Reserve Fund the amount of $_________, the Reserve Requirement as of the Closing Date; or (B) Deposit in the Costs of Issuance Fund the amount of $__________; and (C) Deposit in the City Facilities Account of the Improvement Fund the amount of $__________ and (D) Deposit in the School District Facilities Account of the Improvement Fund the amount of $____________. Section 3.03. Improvement Fund. (A) Establishment of Improvement Fund. There is hereby established, as a separate fund to be held by the Fiscal Agent, the “Community Facilities District No. 2005-1 IA No. 2 2019 Special Tax Bonds Improvement Fund.” There are hereby established as separate accounts in the Improvement Fund, to be held by the Fiscal Agent, the “City Facilities Account” and the “School District Facilities Account” to the credit of which deposits shall be made as required by paragraphs (C) and (D) of Section 3.02 hereof. Moneys in the Improvement Fund, and all accounts therein, shall be held by the Fiscal Agent for the benefit of the City and the School 45635.01434\32349708.2 24 District, as provided below, and shall be disbursed, except as otherwise provided in subsection (D) of this Section 3.03, for the payment or reimbursement of the costs of the design, acquisition and construction of the Facilities as provided below. (B) Procedure for Disbursement. (1) City Facilities Account. Disbursements from the City Facilities Account shall be made by the Fiscal Agent upon receipt of a City Certificate which shall: (a) be identified as a payment requisition and be sequentially numbered, i.e., “Requisition No. __,” (except that no numbering shall be required if the City Certificate is a requisition for the full amount on deposit in the City Facilities Account); (b) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made and the person to which the disbursement is to be paid; (c) certify that the amount required to be disbursed is for payment of costs related to the construction and acquisition of the City Facilities as described in the City Joint Community Facilities Agreement; and (d) certify that no portion of the amount then being requested to be disbursed was set forth in any City Certificate previously filed with the Fiscal Agent requesting disbursement, and that the amount being requested is an appropriate disbursement from the City Facilities Account. (2) School District Facilities Account. Disbursements from the School District Facilities Account shall be made by the Fiscal Agent upon receipt of a School District Certificate and shall: (a) be identified as a payment requisition and be sequentially numbered, i.e., “Requisition No. __,” (except that no numbering shall be required if the School District Certificate is a requisition for the full amount on deposit in the School District Facilities Account); (b) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made and the person to which the disbursement is to be paid; (c) certify that the amount required to be disbursed is for payment of costs related to the construction and acquisition of the School District Facilities as described in the School District Joint Community Facilities Agreement; and (d) certify that no portion of the amount then being requested to be disbursed was set forth in any School District Certificate previously filed with the Fiscal Agent requesting disbursement, and that the amount being requested is an appropriate disbursement from the School District Facilities Account; and 45635.01434\32349708.2 25 (e) be approved in writing by an Authorized Officer of the City. If any amount on deposit in the School District Facilities Account will not be disbursed for payment of the costs of the construction and acquisition of the School District Facilities, the Fiscal Agent shall, upon receipt of written direction from the City (upon which the Fiscal Agent may conclusively rely) transfer such amount to the City Facilities Account. (C) Investment. Moneys in the Improvement Fund, and each account therein, shall be invested and deposited in accordance with Section 6.01 hereof. Investment Earnings from amounts on deposit in the Services District Facilities Account shall be retained by the Fiscal Agent in such account to be used for the purposes of such account. Investment Earnings from amounts on deposit in the City Facilities Account shall be retained by the Fiscal Agent in such account to be used for the purposes of such account. Investment Earnings from amounts on deposit in the School District Facilities Account shall be retained by the Fiscal Agent in such account to be used for the purposes of such account. (D) Closing of Fund. Upon the filing of an Officer’s Certificate stating that the portions of the Facilities which are to be financed with the moneys on deposit in the City Facilities Account and the School District Facilities Account have been completed and that all costs of such portions of the Facilities have been paid or are not required to be paid from the Improvement Fund and all accounts therein, and further stating that moneys on deposit in the Improvement Fund, and all accounts therein, are not needed to complete such portions of the Facilities or reimburse the cost thereof, the Fiscal Agent shall transfer the amount, if any, remaining in the Improvement Fund and all accounts therein to the Principal Account of the Bond Fund to be used to pay the principal of the Bonds, and the Fiscal Agent shall close the Improvement Fund and the accounts therein. (E) Reliance on Certificates. Upon receipt of an Officer’s Certificate or a School District Certificate delivered pursuant to this Section 3.03, the Fiscal Agent is authorized to act thereon without further inquiry and shall not be responsible for the accuracy of the statements made in such Officer’s Certificate or School District Certificate or the application of the funds disbursed pursuant thereto, and shall be absolutely protected and incur no liability in relying on such Officer’s Certificate or School District Certificate. Section 3.04. Special Tax Fund. (A) Establishment of Special Tax Fund. There is hereby established, as a separate fund to be held by the Fiscal Agent, the “Community Facilities District No. 2005-1 IA No. 2 of the City of Azusa 2019 Special Tax Bonds Special Tax Fund” to the credit of which the City shall deposit, as hereinafter provided, not later than thirty (30) Business Days after receipt, all Special Tax Revenues received by the City. Moneys in the Special Tax Fund, and all accounts therein, shall be held by the Fiscal Agent for the benefit of the City and the Owners of the Bonds, shall be disbursed as provided below and, pending disbursement, shall be subject to a lien in favor of the Owners of the Bonds. Notwithstanding the foregoing, any amounts received by the City which constitute Special Tax Prepayments shall be transferred by the City not later than thirty (30) Business Days 45635.01434\32349708.2 26 after receipt to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Prepayments Account established pursuant to Section 4.02(A) hereof. (B) Disbursements. As soon as practicable after the receipt from the City of any Special Tax Revenues, but no later than ten (10) Business Days after such receipt, the Fiscal Agent shall withdraw from the Special Tax Fund and deposit in the Administrative Expense Fund, an amount which is estimated by the City, in a written communication (which direction may be provided by email) from an Authorized Officer delivered to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely) to be sufficient, together with the amount then on deposit in the Administrative Expense Fund, to pay the Administrative Expenses during the current Fiscal Year; provided that the amount deposited in the Administrative Expense Fund prior to the deposits to the Interest Account and the Principal Account of the Bond Fund, as provided below, shall not exceed [$125,000] for any Fiscal Year, as determined by the City. From the amount then remaining on deposit in the Special Tax Fund, on or before each Interest Payment Date, the Fiscal Agent shall deposit in the Interest Account and the Principal Account of the Bond Fund the amounts required for payment of interest on and principal of the Bonds as provided in Section 4.02(B)(1) and (2) hereof. Thereafter, the Fiscal Agent shall, as soon as the amount on deposit in the Special Tax Fund is sufficient, deposit in the Reserve Fund the amount, if any, which the City shall direct in a written communication (which direction may be provided by email) from an Authorized Officer delivered to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely), to be withdrawn from the Special Tax Fund and deposited in the Reserve Fund to make the amount on deposit therein equal to the Reserve Requirement. No transfer shall be made without specific written communication (which direction may be provided by email) from the City. On September 2 of each year, beginning on September 2, 2020 after all the deposits required by Section 4.02 have been made, the amount, if any, on deposit in the Special Tax Fund, together with the amount then on deposit in the Principal Account, as determined by the City, shall not exceed the greater of (i) one year’s earnings on such amounts, or (ii) one-twelfth (1/12th) of Annual Debt Service for the then current Bond Year. If on September 2 of any year the amount on deposit in the Special Tax Fund, together with the amount then on deposit in the Principal Account, exceeds the maximum amount allowable pursuant to the preceding sentence, as determined by the City and communicated in writing (which direction may be provided by email) by an Authorized Officer to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely), moneys shall be transferred from the Special Tax Fund to and deposited in the Reserve Fund to the extent that the amount on deposit therein is less than the Reserve Requirement. Any such excess remaining in the Special Tax Fund after any such amount is transferred from the Special Tax Fund to the Reserve Fund, shall be transferred from the Special Tax Fund to and deposited in the Administrative Expense Fund. Any such excess amount may be transferred to the City to finance public improvements authorized pursuant to the Resolution of Formation. (C) Investment. Moneys in the Special Tax Fund shall be invested and deposited in accordance with Section 6.01 hereof. Investment Earnings shall be retained in the Special Tax Fund to be used for the purposes of such fund. 45635.01434\32349708.2 27 Section 3.05. Administrative Expense Fund. (A) Establishment of Administrative Expense Fund. There is hereby established, as a separate account to be held by the Fiscal Agent, the “Community Facilities District No. 2005-1 of the City of Azusa IA No. 2 2019 Special Tax Bonds Administrative Expense Fund” to the credit of which deposits shall be made as required by Section 3.04(B) hereof. Moneys in the Administrative Expense Fund shall be held in trust by the Fiscal Agent for the benefit of the City, and shall be disbursed as provided below. (B) Disbursement. Amounts in the Administrative Expense Fund shall be withdrawn by the Fiscal Agent and paid to the City or its order upon receipt by the Fiscal Agent of an Officer’s Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense and the nature of such Administrative Expense. (C) Investment. Subject to the provisions of subsection (B) above, moneys in the Administrative Expense Fund shall be invested and deposited in accordance with Section 6.01 hereof. Investment Earnings shall be retained by the Fiscal Agent in the Administrative Expense Fund to be used for the purposes of such fund. Section 3.06. Costs of Issuance Fund. (A) Establishment of Costs of Issuance Fund. There is hereby established, as a separate account to be held by the Fiscal Agent, the “Community Facilities District No. 2005-1 IA No. 2 of the City of Azusa 2019 Special Tax Bonds Costs of Issuance Fund” to the credit of which a deposit shall be made as required by p aragraph (C) of Section 3.02 hereof. Moneys in the Costs of Issuance Fund shall be held in trust by the Fiscal Agent and shall be disbursed as provided in subsection (B) of this Section for the payment or reimbursement of Costs of Issuance. (B) Disbursement. Amounts in the Costs of Issuance Fund shall be disbursed to pay Costs of Issuance, as set forth in a requisition containing respective amounts to be paid to the designated payees, signed by an Authorized Officer and delivered to the Fiscal Agent concurrently with the delivery of the Bonds. The Fiscal Agent shall pay all Costs of Issuance upon receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee in such requisition, or upon receipt of an Officer’s Certificate requesting payment of a Cost of Issuance not listed on the initial requisition delivered to the Fiscal Agent on the Closing Date. Each such invoice or Officer’s Certificate shall be sufficient evidence to the Fiscal Agent of the facts stated therein and the Fiscal Agent shall have no duty to confirm the accuracy of such facts. The Fiscal Agent shall maintain the Costs of Issuance Fund for a period of ninety (90) days from the Closing Date and shall then transfer and deposit any moneys remaining therein, including any Investment Earnings thereon, in the Interest Account of the Bond Fund. (C) Investment. Moneys in the Costs of Issuance Fund shall be invested and deposited in accordance with Section 6.01 hereof. Investment Earnings shall be retained by the Fiscal Agent in the Costs of Issuance Fund to be used for the purposes of such fund. 45635.01434\32349708.2 28 ARTICLE IV SPECIAL TAX REVENUES; BOND FUND; RESERVE FUND Section 4.01. Pledge of Special Tax Revenues. The Bonds and any Parity Bonds shall be secured by a pledge of and lien upon (which shall be effected in the manner and to the extent herein provided) all of the Special Tax Revenues (except the initial amount, not to exceed [$125,000], that will be deposited in the Administrative Expense Fund for each Fiscal Year pursuant to Section 3.04(B) hereof), all moneys on deposit in the Special Tax Fund, all moneys on deposit in the Bond Fund, and all moneys on deposit in the Reserve Fund. The Bonds shall be equally secured by a pledge of and lien upon the Special Tax Revenues and such moneys without priority for number, date of Bond, date of execution or date of delivery; and the payment of the interest on and principal of the Bonds and any premium upon the redemption of any thereof shall be and is secured by a pledge of and lien upon the Special Tax Revenues and such moneys. The Special Tax Revenues and all moneys deposited into such funds and such account are hereby dedicated in their entirety to the payment of the principal of the Bonds, and interest and any premium on, the Bonds, as provided herein and in the Act, until all of the Bonds have been paid and retired or until moneys or Defeasance Securities have been set aside irrevocably for that purpose in accordance with Section 9.03 hereof. Section 4.02. Bond Fund. (A) Deposits. There is hereby established, as a separate account to be held by the Fiscal Agent, the “Community Facilities District No. 2005-1 IA No. 2 of the City of Azusa 2019 Special Tax Bonds Bond Fund” to the credit of which deposits shall be made as required by Section 3.04(B) and Section 4.03(B) hereof and any other provision of this Agreement or the Act. There are hereby established in the Bond Fund, as separate accounts to be held by the Fiscal Agent, the “Interest Account” and the “Principal Account.” There is hereby also established in the Bond Fund, as a separate account to be held by the Fiscal Agent, the “Special Tax Prepayments Account” to the credit of which deposits shall be made as required by Section 3.04(A) hereof. Moneys in the Bond Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds, shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below, and, pending such disbursement, shall be subject to a lien in favor of the Owners of the Bonds. (B) Disbursements. On or before each Interest Payment Date, the Fiscal Agent shall transfer from the Special Tax Fund and deposit into the following respective accounts in the Bond Fund, the following amounts in the following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Special Tax Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority: (1) Interest Account. On or before each Interest Payment Date, the Fiscal Agent shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to equal the amount of interest becoming due and payable on the Bonds on such date. No deposit need be made into the Interest Account on any Interest Payment Date if the amount on deposit therein is at least equal to 45635.01434\32349708.2 29 the interest becoming due and payable on the Bonds on such date. All moneys in the Interest Account shall be used and withdrawn by the Fiscal Agent solely for the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds redeemed prior to maturity). (2) Principal Account. On or before each September 1, the Fiscal Agent shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds becoming due and payable on such date pursuant to Section 2.02 hereof, or the redemption price of the Bonds (consisting of the principal amount thereof and any applicable redemption premium) required to be redeemed on such date pursuant to any of the provisions of Section 2.03 hereof. All moneys in the Principal Account shall be used and withdrawn by the Fiscal Agent solely for the purpose of (i) paying the principal of the Bonds at the maturity thereof, or (ii) paying the principal of and premium (if any) on any Bonds upon the redemption thereof pursuant to subsections (A), (B), and (C) of Section 2.03 hereof. In the event that moneys on deposit in the Special Tax Fund will be insufficient on any Interest Payment Date for the Fiscal Agent to deposit the required amounts in the Interest Account and the Principal Account, as provided above, the Fiscal Agent shall deposit the available funds first to the Interest Account up to the full amount required to cause the aggregate amount on deposit therein to equal the amount of interest becoming due and payable on the Bonds on the Interest Payment Date, and shall then deposit the remaining available funds in the Special Tax Fund to the Principal Account up to the full amount required to cause the aggregate amount on deposit therein to equal the amount, if any, of principal becoming due and payable on the Bonds on the Interest Payment Date. If, after making such deposits to the Interest Account and the Principal Account, and after transferring moneys from the Reserve Fund to such accounts, as provided in Section 4.03(C) hereof, the amount on deposit in the Principal Account is insufficient to pay the full amount of the principal of each of the Bonds that is to be redeemed on the Interest Payment Date, the Fiscal Agent shall make a prorated payment of the principal of each of such Bonds as specified in an Officer’s Certificate provided to the Fiscal Agent. (C) Special Tax Prepayments Account Deposits and Disbursements. Within ten (10) Business Days after receiving a Special Tax Prepayment the City shall deliver the amount thereof to the Fiscal Agent, together with an Officer’s Certificate notifying the Fiscal Agent that the amount being delivered is a Special Tax Prepayment that is to be deposited in the Special Tax Prepayments Account. Upon receiving a Special Tax Prepayment from the City and such an Officer’s Certificate, the Fiscal Agent shall deposit the amount of the Special Tax Prepayment in the Special Tax Prepayments Account. Such an Officer’s Certificate may be combined with the Officer’s Certificate that the City is required to deliver to the Fiscal Agent pursuant to Section 4.03(F) hereof. A portion of the moneys on deposit in the Special Tax Prepayments Account shall be transferred by the Fiscal Agent, upon receipt of an Officer’s Certificate directing such transfer and specifying the amount to be transferred (upon which the Fiscal Agent may conclusively rely), to the Principal Account on the next date for which notice of the redemption of the Bonds can timely be given under Section 2.03(G) hereof and shall be used to redeem the Bonds on the redemption date selected in accordance with Section 2.03(B) hereof. The portion of the moneys on deposit in the Special Tax Prepayment Account representing funded interest on a portion of the Outstanding Bonds shall be transferred by the Fiscal Agent, upon receipt of an 45635.01434\32349708.2 30 Officer’s Certificate directing such transfer and specifying the amount to be transferred (upon which the Fiscal Agent may conclusively rely), to the Interest Account on or before each Interest Payment Date prior to and including the Interest Payment Date on which the redemption of such Bonds will occur. Pending such transfers, the moneys on deposit in the Special Tax Prepayments Account shall be invested in Permitted Investments, in accordance with Section 6.01 hereof, of such type and at such yield as Bond Counsel shall determine is necessary to preserve the exclusion of interest on the Bonds from gross income for purposes of federal income taxation. Investment earnings on the moneys on deposit in the Special Tax Prepayments Account shall be retained in such account. The City shall provide direction in writing to the Trustee which shall include an exhibit of the Bond Counsel’s determination. (D) Investment. Except as provided in subsection (C) above, moneys in the Bond Fund, including all accounts therein, shall be invested and deposited in accordance with Section 6.01 hereof. Investment Earnings shall be retained in the Bond Fund, except to the extent they are required to be deposited by the Fiscal Agent in the Rebate Fund in accordance with Section 6.02 hereof. Amounts in the Bond Fund, including all accounts therein, shall also be withdrawn and deposited in the Rebate Fund as provided in Section 6.02 hereof. Section 4.03. Reserve Fund. (A) Establishment of Fund. There is hereby established, as a separate account to be held by the Fiscal Agent, the “Community Facilities District No. 2005-1 IA No. 2 of the City of Azusa 2019 Special Tax Bonds Reserve Fund” to the credit of which a deposit shall be made as required by paragraph (A) of Section 3.02 hereof, which deposit is equal to the Reserve Requirement or the deposit of a Qualified Reserve Account Credit Instrument in an amount equal to the Reserve Requirements, and to which deposits shall be made as provided in Section 3.04(B). Moneys in the Reserve Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment of the principal of and interest and any premium on the Bonds and shall be subject to a lien in favor of the Owners of the Bonds. (B) Use of Fund. Except as otherwise provided in this Section, all amounts on deposit in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Interest Account and the Principal Account of the Bond Fund in the event of any deficiency at any time in either of such accounts of the amount then required for payment of the principal of and interest and any premium on the Bonds or, in accordance with the provisions of subsection (E) or subsection (F) of this Section 4.03, for the purpose of redeeming Bonds. (C) Transfer Due to Deficiency in Interest and Principal Accounts. Whenever transfer is made from the Reserve Fund to the Interest Account or the Principal Account due to a deficiency in either such account, the Fiscal Agent shall provide written notice thereof to the City. 45635.01434\32349708.2 31 (D) Transfer of Excess of Reserve Requirement. Whenever, on any September 2, the amount in the Reserve Fund, less Investment Earnings resulting from the investment of the funds therein that pursuant to Section 6.02 hereof must be rebated to the United States, as previously directed by the City, exceeds the Reserve Requirement, the Fiscal Agent shall provide written notice to the City of the amount of the excess. Upon receiving written direction (which direction may be provided by email) from an Authorized Officer (upon which the Fiscal Agent may conclusively rely), the Fiscal Agent shall, subject to the requirements of Section 6.02 hereof, transfer an amount from the Reserve Fund that will reduce the amount on deposit therein to an amount equal to the Reserve Requirement to the Interest Account and the Principal Account, in the priority specified in Section 4.02(B) hereof, to be used for the payment of the interest on and principal of the Bonds on the next succeeding Interest Payment Date in accordance with Section 4.02 hereof. (E) Transfer When Balance Exceeds Outstanding Bonds. Whenever the balance in the Reserve Fund, together with the amount on deposit in the Special Tax Fund, is equal to or exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent shall, upon receiving written direction (which direction may be provided by email) from an Authorized Officer (upon which the Fiscal Agent may conclusively rely), transfer the amount in the Reserve Fund to the Interest Account and the Principal Account, in the priority specified in Section 4.02(B) hereof, to be applied, on the next succeeding Interest Payment Date, to the payment and redemption, in accordance with Section 2.03 and Section 4.02 hereof, of all of the Outstanding Bonds. In the event that the amount available to be so transferred from the Reserve Fund to the Interest Account and the Principal Account exceeds the amount required to pay and redeem the Outstanding Bonds, the excess shall be transferred to the City to be used for any lawful purpose of the City. (F) Transfers on Payment of Special Tax Obligations. Whenever the City receives a Special Tax Prepayment, the City shall by an Officer’s Certificate notify the Fiscal Agent thereof and of the amount by which the Reserve Fund is to be reduced and that is transferable from the Reserve Fund to the Principal Account of the Bond Fund, which amount shall be specified in the Officer’s Certificate. Each such Officer’s Certificate shall be accompanied by a report of an Independent Financial Consultant verifying the accuracy of the calculation of the amount to be transferred from the Reserve Fund to the Principal Account (“Verification”). Upon receipt of each such Officer’s Certificate and Verification, upon which the Fiscal Agent may conclusively rely, the Fiscal Agent shall at such time as the amount of such Special Tax Prepayment will be used to redeem Bonds, as provided in Section 4.02(C) hereof, transfer the amount specified in such Officer’s Certificate to the Principal Account and use such amount, together with the amount of such Special Tax Prepayment, to redeem Bonds, as provided in Section 4.02(B)(2) and Section 2.03(B) hereof. Notwithstanding the preceding provisions of this subsection, no amount shall be transferred from the Reserve Fund to the Principal Account if the amount on deposit in the Reserve Fund is, or as a result of such transfer would be, less than the Reserve Requirement. (G) Investment. Moneys on deposit in the Reserve Fund shall be invested in Permitted Investments which do not have maturities extending beyond five (5) years; provided, however, if the Reserve Fund is invested in an investment agreement (as defined in clause (vii) 45635.01434\32349708.2 32 of the definition of Permitted Investments in Section 1.03 hereof) or a repurchase agreement (as defined in clause (xi) of such definition) such agreement may have a maturity longer than five (5) years if the Fiscal Agent is authorized by the provisions of such agreement to draw the full amount thereof, without penalty, if required for the purposes of the Reserve Fund. The City shall cause the Permitted Investments, other than such investment agreements, in which moneys on deposit in the Reserve Fund are invested to be valued at fair market value at least once in each Fiscal Year. Trustee’s pricing service, as reflected on its monthly statements, satisfies fair market value. ARTICLE V OTHER COVENANTS OF THE CITY Section 5.01. Punctual Payment. The City will punctually pay or cause to be paid the principal of and interest and any premium on the Bonds when and as due in strict conformity with the terms of this Agreement and any Supplemental Agreement to the extent that the Special Tax Revenues are available therefor, and it will faithfully observe and perform all of the conditions, covenants and requirements of this Agreement and all Supplemental Agreements and of the Bonds. Section 5.02. Special Obligation. The Bonds are special obligations of the District and are payable solely from and secured solely by the Special Tax Revenues, the amounts in the Bond Fund, the Reserve Fund, the Special Tax Fund and Special Tax Prepayments. Section 5.03. Extension of Time for Payment. In order to prevent any accumulation of claims for interest after maturity, the City shall not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any of the Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by purchasing or funding said claims for interest or in any other manner. In case any such claim for interest shall be extended or funded, whether or not with the consent of the City, such claim for interest so extended or funded shall not be entitled, in case of default hereunder, to the benefits of this Agreement, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest which shall not have been so extended or funded. Section 5.04. Against Encumbrances. The City shall not encumber, pledge or place any charge or lien upon any of the Special Tax Revenues or other amounts pledged to the Bonds, including, but not limited to, moneys on deposit in the Special Tax Prepayments Account, superior to or on a parity with the pledge and lien herein created for the benefit of the Bonds, except as permitted by this Agreement. Section 5.05. Books and Accounts. The City shall keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the City in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Administrative Expense Fund. Such books of record and accounts shall at all times during business hours, upon reasonable notice, be subject to the inspection of the Owners of not less than ten percent (10%) of the aggregate principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing. 45635.01434\32349708.2 33 Section 5.06. Protection of Security and Rights of Owners. The City will preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and defend their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the City, the Bonds shall be incontestable by the City. Section 5.07. Collection of Special Tax Revenues. The City shall comply with all requirements of the Act, including the enactment of necessary Ordinances, so as to assure the timely collection of Special Tax Revenues, including without limitation, the enforcement of the payment or collection of delinquent Special Taxes. On or within five (5) Business Days of May 1 of each year, the Fiscal Agent shall provide the City with a notice stating the amount then on deposit in the Special Tax Fund, the Bond Fund and the Reserve Fund (including all accounts and sub-accounts therein), the monthly statements provided by the Fiscal Agent shall satisfy this notice requirement. The receipt of such notice by the City or the failure of the Fiscal Agent to give such notice shall in no way affect the obligations of the City under the following two paragraphs. The Fiscal Agent shall have no liability if it does not provide such notice to the City. Upon receipt of such notice, the City shall communicate with the Auditor to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current Fiscal Year. The City shall effect the levy of the Special Taxes each Fiscal Year in accordance with the Act by August 10 of each year (or such later date as may be authorized by the Act or any amendment thereof) that the Bonds are Outstanding, such that the computation of the levy is complete before the final date on which the Auditor will accept the transmission of the Special Tax amounts for the parcels within Improvement Area No. 2 for inclusion on the tax roll for the Fiscal Year then beginning. Upon the completion of the computation of the amounts of the levy of the Special Taxes, the City shall prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the tax roll. Notwithstanding the preceding provisions of this paragraph, the City Council may elect, as permitted by the Act, to collect the Special Taxes to be levied for any Fiscal Year directly from the owners of the parcels of taxable property upon which the Special Taxes are levied rather than by transmitting the Special Taxes to the Auditor for collection on the tax roll; provided that, in such event, the City shall otherwise comply with the provisions of this Section 5.07. The City shall fix and levy the amount of Special Taxes within Improvement Area No. 2 required for the payment of the principal of and interest on any Outstanding Bonds becoming due and payable during the ensuing calendar year, including any necessary replenishment or expenditure of the Reserve Fund, and the amount estimated to be sufficient to pay the Administrative Expenses during such calendar year. The Special Taxes so levied shall not exceed the authorized amounts for Improvement Area No. 2 as provided in the Rates and Method of Apportionment of Special Tax. The Special Taxes shall be payable and be collected (except in the event of judicial foreclosure proceedings pursuant to Section 5.11 hereof) in the same manner and at the same time and in the same installments as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and 45635.01434\32349708.2 34 bear the same proportionate penalties and interest after delinquency as do the general taxes on real property. The City will not, in collecting the Special Taxes or in processing any such judicial foreclosure proceedings, exercise any authority which it has pursuant to Sections 53340, 53344.1, 53356.1 and 53356.8 of the California Government Code in any manner which would materially and adversely affect the interests of the Bondowners and, in particular, will not permit the tender of Bonds in full or partial payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds and remaining Outstanding following such tender. Section 5.08. Levy of Special Taxes for Administrative Expenses. The City covenants that, to the extent that it is legally permitted to do so, (a) it will levy the Special Taxes for the payment of the Administrative Expenses which are expected to be incurred in each Fiscal Year, and (b) it will not initiate proceedings under the Act to reduce the Maximum Special Tax rates (the “Maximum Rates”) on then existing Developed Property in Improvement Area No. 2 below the amounts that are necessary to provide Special Tax Revenues in an amount equal to annual Administrative Expenses in the amount of $125,000, plus an amount equal to one hundred ten percent (110%) of Maximum Annual Debt Service on the Outstanding Bonds. The City further covenants that in the event an ordinance is adopted by initiative pursuant to Section 3 of Article XIII C of the California Constitution, which purports to reduce or otherwise alter the Maximum Rates, it will commence and pursue legal action seeking to preserve its ability to comply with its covenant contained in the preceding paragraph. Section 5.09. Further Assurances. The City will adopt, make, execute and deliver any and all such further ordinances, resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Agreement, and for better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Agreement. Section 5.10. Tax Covenants. The City covenants that: (A) It will not take any action or omit to take any action, which action or omission, if reasonably expected on the date of the initial issuance and delivery of the Bonds, would have caused any of the Bonds to be “arbitrage bonds” within the meaning of Section 103(b) and Section 148 of the Code; (B) It will not take any action or omit to take any action, which action or omission, if reasonably expected on the date of initial issuance and delivery of the Bonds, would result in loss of exclusion from gross income for purposes of federal income taxation under Section 103(a) of the Code of interest paid with respect to the Bonds; (C) It will not take any action or omit to take any action, which action or omission, if reasonably expected on the date of initial issuance and delivery of the Bonds, would have caused any of the Bonds to be “private activity bonds” within the meaning of Section 141 of the Code; 45635.01434\32349708.2 35 (D) It will comply with the Rebate Certificate as a source of guidance for achieving compliance with the Code; and (E) In order to maintain the exclusion from gross income for purposes of federal income taxation of interest paid with respect to the Bonds, it will comply with each applicable requirement of Section 103 and Sections 141 through 150 of the Code. The covenants of the City contained in this Section 5.10 shall survive the payment, redemption or defeasance of Bonds pursuant to Section 9.03 hereof. Section 5.11. Covenant to Foreclose. The City hereby covenants with and for the benefit of the Owners of the Bonds (i) that it will order, and cause to be commenced, judicial foreclosure proceedings against properties with delinquent Special Taxes in excess of $10,000 by the October 1 following the close of the Fiscal Year in which such Special Taxes were due, and (ii) that it will commence judicial foreclosure proceedings against all properties with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than ninety-five percent (95%) of the total Special Taxes levied, and diligently pursue to completion such foreclosure proceedings; provided, however, the City shall not be required to order and cause judicial foreclosure proceedings to be commenced against delinquent properties as long as no deficiency in the Reserve Fund exists (or is projected to exist in order to make debt service payments on the Bonds in the current or next Fiscal Year) or the City determines that the cost of pursuing such foreclosure is greater than the outstanding delinquency. Section 5.12. Prepayment of Special Taxes. The City shall cause all applications of owners of property in Improvement Area No. 2 to prepay and satisfy the Special Tax obligation for their property to be reviewed by the Special Tax Consultant and shall not accept any such prepayment unless such consultant certifies in writing that following the acceptance of the proposed prepayment by the City and the redemption of Bonds with such prepayment, (a) the ratio of (i) the maximum amount of the Special Taxes that may be levied on all Developed Property in Improvement Area No. 2 which following such prepayment will be subject to the levy of the Special Taxes to (ii) Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption (e.g., 1.10 to 1.0) plus Administrative Expenses in the amount of [$125,000] will not be less than such ratio as it existed prior to such prepayment, and (b) the maximum amount of the Special Taxes that may be levied on Developed Property at build-out of the property in Improvement Area No. 2, as then approved by the City, will be equal to at least one hundred ten percent (110%) of Maximum Annual Debt Service on such Outstanding Bonds plus Administrative Expenses in the amount of [$125,000]. Section 5.13. Calculation of Prepayments. The City will cause all Special Tax Prepayments to be calculated to include the amount of the premium on the Outstanding Bonds that will be redeemed with the Special Tax Prepayment and negative arbitrage on the investment of the Special Tax Prepayment from the date of receipt until the Interest Payment Date upon which the Special Tax Prepayment and the amount to be transferred from the Reserve Fund to the Principal Account pursuant to Section 4.03(F) hereof will be used to redeem Outstanding Bonds pursuant to Section 2.03(B) hereof. The City will not include in any calculation of the amount of any Special Tax Prepayment for any parcel of taxable property in Improvement Area 45635.01434\32349708.2 36 No. 2 a proportionate amount of the amount then on deposit in the Reserve Fund, if at the time of such calculation the amount on deposit in the Reserve Fund is less than the Reserve Requirement. Section 5.14. Continuing Disclosure. The City hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Section 5.15. Accountability Measures. The City shall comply with the requirements of Section 53410 of the California Government Code with respect to the deposit and expenditure of the Proceeds of the sale of the Bonds and shall cause the appropriate officer of the City to file a report with the City Council no later than January 2, 2020, and annually thereafter, which shall contain the information required by Section 53411 of the California Government Code with respect to the expenditure of the Proceeds. ARTICLE VI INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS; LIABILITY OF THE CITY Section 6.01. Deposit and Investment of Moneys in Funds. Subject in all respects to the provisions of Section 6.02 hereof, moneys in any fund or account created or established by this Agreement and held by the Fiscal Agent shall be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer’s Certificate filed with the Fiscal Agent at least two (2) Business Days in advance of the making of such investments. In the absence of any such Officer’s Certificate, the Fiscal Agent shall hold funds uninvested. The Fiscal Agent shall not have any responsibility for determining the legality of any Permitted Investments. The Fiscal Agent shall have no obligation to pay additional interest or maximize investment income on any funds held by it. Neither the City nor the Owners of the Bonds shall have any claim of any kind against the Fiscal Agent in connection with investments properly made pursuant to this Section 6.01. Obligations purchased as an investment of moneys in any fund or account shall be deemed to be part of such fund or account, subject, however, to the requirements of this Agreement for transfer of Investment Earnings in funds and accounts. The Fiscal Agent shall not incur any liability for losses arising from any investments made pursuant to this Section 6.01. For purposes of determining the amount on deposit in any fund or account held hereunder, all Permitted Investments or investments credited to such fund or account shall be valued at the cost thereof (excluding accrued interest and brokerage commissions, if any). Subject in all respects to the provisions of Section 6.02 hereof, investments in any and all funds and accounts may be commingled in a single fund for purposes of making, holding and disposing of investments, notwithstanding provisions herein for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Fiscal Agent hereunder, provided that the Fiscal Agent shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in this Agreement. 45635.01434\32349708.2 37 The City acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the City or the District the right to receive brokerage confirmations of securities transactions as they occur, the City for itself and the District specifically waives receipt of such confirmations to the extent permitted by law. The Fiscal Agent shall furnish the City periodic cash transaction statements which include detail for all investment transactions made by the Fiscal Agent hereunder. Section 6.02. Rebate Fund; Rebate to the United States. There is hereby created, to be held by the Fiscal Agent, as a separate account distinct from all other funds and accounts held by the Fiscal Agent under this Agreement, the Rebate Fund. The Fiscal Agent shall, in accordance with written directions (which direction may be provided by email) received from an Authorized Officer, deposit into the Rebate Fund moneys transferred by the City to the Fiscal Agent pursuant to the Rebate Certificate or moneys transferred by the Fiscal Agent from the Reserve Fund. The Rebate Fund shall be held either uninvested or invested only in Federal Securities at the written direction of the City. Moneys on deposit in the Rebate Fund shall be applied only to payments made to the United States, to the extent such payments are required by the Rebate Certificate. The Fiscal Agent shall, upon written request and direction of the City, make such payments to the United States. The Fiscal Agent may rely conclusively upon the City’s determinations, calculations and certifications required by this Section. The Fiscal Agent shall have no responsibility to independently make any calculation or determination or to review the City’s calculations hereunder. The Fiscal Agent’s sole responsibilities under this Section 6.02 are to follow the written instructions of the City pertaining hereto. The City shall be responsible for any fees and expenses incurred by the Fiscal Agent pursuant to this Section 6.02. The Fiscal Agent shall, upon written request and direction from the City, transfer to or upon the order of the City any moneys on deposit in the Rebate Fund in excess of the amount, if any, required to be maintained or held therein in accordance with the Rebate Certificate. Section 6.03. Liability of City. The City shall not incur any responsibility in respect of the Bonds or this Agreement other than in connection with the duties or obligations explicitly herein or in the Bonds assigned to or imposed upon it. The City shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The City shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements of the Fiscal Agent herein or of any of the documents executed by the Fiscal Agent in connection with the Bonds. In the absence of bad faith, the City may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the City and conforming to the requirements of this Agreement. The City shall not be liable for any error of judgment made in good faith unless it shall be proved that it was negligent in ascertaining the pertinent facts. No provision of this Agreement shall require the City to expend or risk its own general funds or otherwise incur any financial liability (other than with respect to the Special Tax Revenues) in the performance of any of its obligations hereunder, or in the exercise of and of its 45635.01434\32349708.2 38 rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The City may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The City may consult with counsel, who may be counsel to the City, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. Whenever in the administration of its duties under this Agreement the City shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of willful misconduct on the part of the City, be deemed to be conclusively proved and established by a certificate of the Fiscal Agent, and such certificate shall be full warranty to the City for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the City may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. Section 6.04. Employment of Agents by City. In order to perform its duties and obligations hereunder, the City may employ such persons or entities as it deems necessary or advisable. The City shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities. ARTICLE VII THE FISCAL AGENT Section 7.01. Appointment of Fiscal Agent. Wilmington Trust, National Association is hereby appointed Fiscal Agent, registrar and paying agent for the Bonds. The Fiscal Agent undertakes to perform such duties, and only such duties, as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Fiscal Agent. Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under the following paragraph of this Section 7.01, shall be the successor to the Fiscal Agent without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. 45635.01434\32349708.2 39 The City may, upon a 30-day notice of removal, remove the Fiscal Agent initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but any such successor shall be a bank, national banking association, corporation or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least $50,000,000, and subject to supervision or examination by federal or state authority. If such bank, national banking association, corporation or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section 7.01, combined capital and surplus of such bank, national banking association or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Fiscal Agent may at any time resign by giving written notice to the City and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such resignation, the City shall promptly appoint a successor Fiscal Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent shall become effective upon acceptance of appointment by the successor Fiscal Agent. If no appointment of a successor Fiscal Agent shall be made pursuant to the foregoing provisions of this Section 7.01 within forty-five (45) days after the Fiscal Agent shall have given to the City written notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent, at the expense of the City, or any Owner may apply to any court of competent jurisdiction to appoint a successor Fiscal Agent. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fiscal Agent. Section 7.02. Liability of Fiscal Agent. The recitals of facts, covenants and agreements herein and in the Bonds contained shall be taken as statements, covenants and agreements of the City and the District, and the Fiscal Agent assumes no responsibility for the correctness of the same, nor makes any representations as to the validity or sufficiency of this Agreement or of the Bonds, nor shall the Fiscal Agent incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it. The Fiscal Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Fiscal Agent assumes no responsibility or liability for any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds. In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Fiscal Agent and conforming to the requirements of this Agreement. Except as provided above in this paragraph, the Fiscal Agent shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this Agreement, upon any resolution, order, notice, request, consent or waiver, certificate, statement, affidavit, or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper person or to have been prepared and furnished pursuant to any provision of this Agreement, and the Fiscal Agent shall not be under any duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument. 45635.01434\32349708.2 40 The Fiscal Agent shall not be liable for any error of judgment made in good faith by the Fiscal Agent unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts. No provision of this Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. The Fiscal Agent shall not be responsible for accounting for, or paying to, any party to this Agreement, including, but not limited to the City and the Owners, any returns on or benefit from funds held for payment of unredeemed Bonds or outstanding checks and no calculation of the same shall affect, or result in any offset against, fees due to the Fiscal Agent under this Agreement. The Fiscal Agent shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Owners pursuant to this Agreement unless such Owners shall have offered to the Fiscal Agent reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Fiscal Agent may become the owner of the Bonds with the same rights it would have if it were not the Fiscal Agent. All indemnification and releases from liability granted herein to the Fiscal Agent shall extend to the directors, officers and employees of the Fiscal Agent. The Fiscal Agent shall have the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to this Agreement and delivered using Electronic Means (“Electronic Means” shall mean the following communications methods: e- mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Fiscal Agent, or another method or system specified by the Fiscal Agent as available for use in connection with its services hereunder); provided, however, that the City shall provide to the Fiscal Agent an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the City whenever a person is to be added or deleted from the listing. If the City elects to give the Fiscal Agent Instructions using Electronic Means and the Fiscal Agent in its discretion elects to act upon such Instructions, the Fiscal Agent’s understanding of such Instructions shall be deemed controlling. The City understands and agrees that the Fiscal Agent cannot determine the identity of the actual sender of such Instructions and that the Fiscal Agent shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Fiscal Agent have been sent by such Authorized Officer. The City shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Fiscal Agent and that the City and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the City. The Fiscal Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Fiscal Agent’s 45635.01434\32349708.2 41 reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The City agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Fiscal Agent, including without limitation the risk of the Fiscal Agent acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Fiscal Agent and that there may be more secure methods of transmitting Instructions than the method(s) selected by the City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Fiscal Agent immediately upon learning of any compromise or unauthorized use of the security procedures. Section 7.03. Information. The Fiscal Agent shall provide to the City such information relating to the Bonds and the funds and accounts maintained by the Fiscal Agent hereunder as the City shall reasonably request, including, but not limited to, quarterly statements reporting funds held and transactions by the Fiscal Agent. Section 7.04. Notice to Fiscal Agent. The Fiscal Agent may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or proper parties. The Fiscal Agent may consult with counsel, who may be counsel to the City, with regard to legal questions, and the advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Fiscal Agent hereunder in good faith and in accordance therewith. Whenever in the administration of its duties under this Agreement the Fiscal Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of willful misconduct on the part of the Fiscal Agent, be deemed to be conclusively proved and established by a certificate of the City, and such certificate shall be full warranty to the Fiscal Agent for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. Section 7.05. Compensation, Indemnification. The City shall pay to the Fiscal Agent from time to time reasonable compensation for all services rendered as Fiscal Agent under this Agreement, and also all reasonable expenses, charges, fees and other disbursements, including those of its attorneys, agents and employees, incurred in and about the performance of its powers and duties under this Agreement, and the Fiscal Agent shall have a first priority lien therefor on any funds at any time held by it in the Administrative Expense Fund, and the Fiscal Agent shall pay and reimburse all expenses, charges, fees and other disbursements, including those of its attorneys, agents and employees, incurred in connection therewith from the funds held by it in the Administrative Expense Fund. The City further agrees, to the extent permitted by applicable law, to indemnify and save the Fiscal Agent, its officers, employees, directors and agents, harmless against any liabilities, costs, claims, expenses or charges of any kind whatsoever 45635.01434\32349708.2 42 (including fees and expenses of its attorneys) which it may incur in the exercise and performance of its powers and duties hereunder which are not due to its negligence or willful misconduct. The obligation of the City under this Section 7.05 shall survive resignation or removal of the Fiscal Agent under this Agreement and payment of the Bonds and discharge of this Agreement. Section 7.06. Books and Accounts. The Fiscal Agent shall keep, or cause to be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be made of all transactions made by it to the expenditure of amounts disbursed from the Bond Fund, the Special Tax Fund, the Administrative Expense Fund, the Reserve Fund and the Costs of Issuance Fund. Such books of record and accounts shall, upon reasonable notice, at all times during business hours be subject to the inspection of the City and the Owners of not less than ten percent (10%) of the aggregate principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing. ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT Section 8.01. Amendments Permitted. (A) This Agreement and the rights and obligations of the District and the City and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of the Owners, or with the written consent, without a meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 8.04 hereof. No such modification or amendment shall (i) extend the maturity of any Bond or the time for paying interest thereon, or otherwise alter or impair the obligation of the City on behalf of the District to pay the principal of, and the interest and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation of any pledge of or lien upon the Special Tax Revenues, or the moneys on deposit in the Special Tax Fund, the Bond Fund or the Reserve Fund, superior to or on a parity with the pledge and lien created for the benefit of the Bonds (except as otherwise permitted by the Act, the laws of the State of California or this Agreement), (iii) reduce the percentage of Bonds required for the amendment hereof, or (iv) reduce the principal amount of or redemption premium on any Bond or reduce the interest rate thereon. Any such amendment may not modify any of the rights or obligations of the Fiscal Agent without its written consent. The Fiscal Agent shall be furnished an opinion of counsel that any such Supplemental Agreement entered into by the City and the Fiscal Agent complies with the provisions of this Section 8.01 and the Fiscal Agent may conclusively rely on such opinion. (B) This Agreement and the rights and obligations of the District and the City and the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent of any Owners, only to the extent permitted by law and only for any one or more of the following purposes: 45635.01434\32349708.2 43 (1) to add to the covenants and agreements of the District and the City in this Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or conferred upon the City; (2) to make modifications not adversely affecting any Outstanding series of Bonds of the District in any material respect; (3) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provisions of this Agreement, or in regard to questions arising under this Agreement, as the City and the Fiscal Agent may deem necessary or desirable and not inconsistent with this Agreement, and which shall not adversely affect the rights of the Owners; (4) to make such additions, deletions or modifications as may be necessary or desirable to assure compliance with Section 148 of the Code relating to required rebate of moneys to the United States or otherwise as may be necessary to assure exclusion from gross income for federal income tax purposes of interest on the Bonds or to conform with the Regulations; or (5) to provide for the issuance of Parity Bonds pursuant to Section 2.13 hereof, or to pay and discharge the indebtedness of a portion of the Outstanding Bonds ( a “Partial Discharge”) pursuant to Section 2.13 and Section 9.03 hereof; provided that following the issuance of such Parity Bonds Maximum Annual Debt Service on the Bonds that will remain Outstanding following such Partial Discharge and such Parity Bonds will not be more in any subsequent Bond Year than Maximum Annual Debt Service on the Outstanding Bonds before the issuance of such Parity Bonds. Section 8.02. Owners’ Meetings. The City may at any time call a meeting of the Owners. In such event, the City is authorized to fix the time and place of any such meeting and to provide for the giving of notice thereof and to fix and adopt rules and regulations for the conduct of the meeting. Section 8.03. Procedure for Amendment with Written Consent of Owners. The City and the Fiscal Agent may at any time enter into a Supplemental Agreement amending the provisions of the Bonds or of this Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by Section 8.01(A) hereof, to take effect when and as provided in this Section 8.03. A copy of the Supplemental Agreement, together with a request to Owners for their consent thereto, shall be mailed by first class mail, postage prepaid, by the Fiscal Agent to each Owner of Bonds Outstanding, but failure to mail copies of the Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as in this Section provided. Such a Supplemental Agreement shall not become effective unless there shall be filed with the Fiscal Agent the written consents of the Owners of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in Section 8.04) and a notice shall have been mailed as hereinafter in this Section provided. Each such consent shall be effective only if accompanied by proof of ownership of the 45635.01434\32349708.2 44 Bonds for which such consent is given, which proof shall be such as is permitted by Section 9.04 hereof. Any such consent shall be binding upon the Owner of the Bonds giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Fiscal Agent prior to the date when the notice hereinafter in this Section provided for has been mailed. After the Owners of the required percentage of Bonds shall have filed their consents to the Supplemental Agreement, the City shall mail a notice to the Owners in the manner hereinbefore provided in this Section for the mailing of the Supplemental Agreement, stating in substance that the Supplemental Agreement has been consented to by the Owners of the required percentage of Bonds and will be effective as provided in this Section (but failure to mail copies of said notice shall not affect the validity of the Supplemental Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record, consisting of the documents required by this Section 8.03 to be filed with the Fiscal Agent, shall be proof of the matters therein stated until the contrary is proved. The Supplemental Agreement shall become effective upon the filing with the Fiscal Agent of the proof of mailing of such notice, and the Supplemental Agreement shall be deemed conclusively binding (except as otherwise hereinabove specifically provided in this Article VIII) upon the City, the District and the Owners of all Bonds then Outstanding at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such consent in a legal action or equitable proceeding for such purpose commenced within such sixty (60)-day period. Section 8.04. Disqualified Bonds. Bonds owned or held for the account of the City, excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of any vote, consent or other action or any calculation of Outstanding Bonds provided for in this Article VIII, and shall not be entitled to vote upon, consent to, or participate in any action provided for in this Article VIII. Upon request of the Fiscal Agent, the City shall specify to the Fiscal Agent those Bonds disqualified pursuant to this Section and the Fiscal Agent may conclusively rely on such certificate. Section 8.05. Effect of Supplemental Agreement. From and after the time any Supplemental Agreement becomes effective pursuant to this Article VIII, this Agreement shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Agreement of the City and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such Supplemental Agreement shall be deemed to be part of the terms and conditions of this Agreement for any and all purposes. Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments. The City may determine that Bonds issued and delivered after the effective date of any action taken as provided in this Article VIII shall bear a notation, by endorsement or otherwise, in form approved by the City, as to such action. In that case, upon demand of the Owner of any Bond Outstanding at such effective date and upon presentation of his Bond for that purpose at the Principal Office of the Fiscal Agent or at such other office as the City may select and designate for that purpose, a suitable notation shall be made on such Bond. The City may determine that 45635.01434\32349708.2 45 new Bonds, so modified as in the opinion of the City is necessary to conform to such action, shall be prepared, executed and delivered. In that case, upon demand of the Owner of any Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the Fiscal Agent without cost to any Owner, for like Bonds then Outstanding, upon surrender of such Bonds. Section 8.07. Amendatory Endorsement of Bonds. The provisions of this Article VIII shall not prevent any Owner from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds. ARTICLE IX MISCELLANEOUS Section 9.01. Benefits of Agreement Limited to Parties. Nothing in this Agreement, expressed or implied, is intended to give to any person other than the City, the Fiscal Agent and the Owners, any right, remedy or claim under or by reason of this Agreement. Any covenants, stipulations, promises or agreements in this Agreement contained by and on behalf of the City shall be for the sole and exclusive benefit of the Owners and the Fiscal Agent. Section 9.02. Successor is Deemed Included in All References to Predecessor. Whenever in this Agreement or any Supplemental Agreement either the City or the Fiscal Agent is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Agreement contained by or on behalf of the City or the Fiscal Agent shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 9.03. Discharge of Agreement. If the City shall pay and discharge the indebtedness on all or a portion (a “Partial Discharge”) of the Outstanding Bonds in any one or more of the following ways: (A) by well and truly paying or causing to be paid the principal of and interest and any premium on such Bonds, as and when the same become due and payable; (B) by depositing with the Fiscal Agent, in trust, at or before maturity, an amount of money which, together with the amounts then on deposit in the Bond Fund (including all accounts therein), the Special Tax Fund and the Reserve Fund, or in the event of a Partial Discharge, the appropriate portion of such amounts, as determined by the City, is fully sufficient to pay such Bonds, including all principal, interest and redemption premiums, if any; or (C) by irrevocably depositing with the Fiscal Agent, in trust, cash or non- callable Defeasance Securities in such amount as the City shall determine, as confirmed by an Independent Financial Consultant (which shall be a firm of certified public accountants that specializes in making such determinations), will, together with the interest to accrue thereon and amounts then on deposit in the Bond Fund (including all accounts therein), the Special Tax Fund and the Reserve Fund, or in the event of a Partial Discharge, the appropriate portion of such amounts, as determined by the City and 45635.01434\32349708.2 46 confirmed by such Independent Financial Consultant, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates; and if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as in this Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at the election of the City, and notwithstanding that any such Bonds shall not have been surrendered for payment, the pledge of the Special Tax Revenues and other funds and accounts provided for in this Agreement and all other obligations of the City and the District under this Agreement with respect to such Bonds shall cease and terminate, except the obligation of the City to pay or cause to be paid to the Owners of such Bonds not so surrendered and paid all sums due thereon, the obligation of the City to pay all amounts owing to the Fiscal Agent pursuant to Section 7.05 hereof, and the obligations of the City pursuant to the covenants contained in Section 5.10 hereof; and thereafter Special Tax Revenues shall not be payable to the Fiscal Agent. Notice of such election shall be filed with the Fiscal Agent. The satisfaction and discharge of this Agreement as to all of the Outstanding Bonds shall be without prejudice to the rights of the Fiscal Agent to charge and be reimbursed by the City for the expenses which it shall thereafter incur in connection herewith. Any funds held by the Fiscal Agent to pay and discharge the indebtedness on such Bonds, upon payment of all fees and expenses of the Fiscal Agent, which are not required for such purpose, shall be paid over to the City. Section 9.04. Execution of Documents and Proof of Ownership by Owners. Any request, declaration or other instrument which this Agreement may require or permit to be executed by Owners may be in one or more instruments of similar tenor, and shall be executed by Owners in person or by their attorneys appointed in writing. Except as otherwise herein expressly provided, the fact and date of the execution by any Owner or his attorney of such a request, declaration or other instrument, or of a writing appointing such an attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such a notary public or other officer. Except as otherwise herein expressly provided, the ownership of registered Bonds and the amount, maturity, number and date of holding the same shall be proved by the registration books maintained by the Fiscal Agent pursuant to Section 2.08 hereof. Any request, declaration or other instrument or writing of the Owner of any Bond shall bind all future Owners of such Bond in respect of anything done or suffered to be done by the City or the Fiscal Agent in good faith and in accordance therewith. Section 9.05. Waiver of Personal Liability. No member, officer, agent or employee of the City or the District shall be individually or personally liable for the payment of the principal 45635.01434\32349708.2 47 of, or interest or any premium on, the Bonds; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law. Section 9.06. Notices to and Demands on City and Fiscal Agent. Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the Fiscal Agent to or on the City may be given or served by being deposited postage prepaid (first class, registered or certified) in a post office letter box addressed (until another address is filed by the City with the Fiscal Agent) as follows: City of Azusa 729 N. Azusa Ave. Azusa, CA 91702 Attn: City Manager Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the City to or on the Fiscal Agent may be given or served by being deposited postage prepaid (first class, registered or certified) in a post office letter box addressed (until another address is filed by the Fiscal Agent with the City) as follows: Wilmington Trust, National Association 650 Town Center Drive, Suite 800 Costa Mesa, CA 92626 Attn: Corporate Trust Section 9.07. Partial Invalidity. If any section, paragraph, sentence, clause or phrase of this Agreement shall for any reason be held by a court of competent jurisdiction to be illegal or unenforceable, such holding shall not affect the validity of the remaining portions of this Agreement. The City hereby declares that it would have executed and delivered this Agreement and each and every other section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant thereto irrespective of the fact that any one or more sections, paragraphs, sentences, clauses or phrases of this Agreement may be held illegal, invalid or unenforceable. Section 9.08. Unclaimed Moneys. Anything contained herein to the contrary notwithstanding, any moneys held by the Fiscal Agent in trust for the payment and discharge of the principal of, and the interest and any premium on, the Bonds which remains unclaimed for two (2) years after the date when the payment of such principal, interest and premium have become payable, if such moneys were held by the Fiscal Agent at such date, shall be paid by the Fiscal Agent to the City as its absolute property free from any trust, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Owners of such Bonds shall look only to the City for the payment of the principal of, and interest and any premium on, their Bonds. Section 9.09. Applicable Law. This Agreement shall be governed by and enforced in accordance with the laws of the State of California applicable to contracts made and performed in the State of California. 45635.01434\32349708.2 48 Section 9.10. Conflict with Act. In the event of a conflict between any provision of this Agreement with any provision of the Act as in effect on the Closing Date, the provision of the Act shall prevail over the conflicting provision of this Agreement. Section 9.11. Conclusive Evidence of Regularity. Bonds issued pursuant to this Agreement shall constitute conclusive evidence of the regularity of all proceedings under the Act relative to their issuance and the levy of the Special Taxes. Section 9.12. Payment on Business Day. In any case where the date of the payment of interest or of principal (and premium, if any) of the Bonds or the date fixed for redemption is other than a Business Day, the payment of interest or principal (and premium, if any) need not be made on such date but may be made on the next succeeding day which is a Business Day with the same force and effect as if made on the date required, and no interest shall accrue for the period from and after such date. Section 9.13. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original. (Signature page follows) 45635.01434\32349708.2 S-1 IN WITNESS WHEREOF, the City has caused this Agreement to be executed in its name on behalf of the District and attested, and the Fiscal Agent, in acknowledgment of its acceptance of the trusts created hereunder, has caused this Agreement to be executed in its name, all as of December 1, 2019. CITY OF AZUSA, for and on behalf of COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) of the CITY OF AZUSA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA By: ______________________________________ Sergio Gonzalez City Manager WILMINGTON TRUST, NATIONAL ASSOCIATION, as Fiscal Agent By: ______________________________________ Authorized Officer -Signature Page- Fiscal Agent Agreement 45635.01434\32349708.2 A-1 EXHIBIT A FORM OF BOND UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE FISCAL AGENT AGREEMENT) TO THE FISCAL AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND AUTHENTICATED AND DELIVERED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. No. $ UNITED STATES OF AMERICA STATE OF CALIFORNIA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) OF THE CITY OF AZUSA 2019 SPECIAL TAX BOND (IMPROVEMENT AREA NO. 2) INTEREST RATE MATURITY DATE DATED DATE CUSIP NO. __________, 2019 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: DOLLARS The City of Azusa (the “City”), for and on behalf of Community Facilities District No. 2005-1 (Rosedale) of the City of Azusa, County of Los Angeles, State of California (the “District”), for value received, hereby promises to pay, from the Special Taxes (as hereinafter defined) to be collected in Improvement Area No. 2 of the District (“Improvement Area No. 2”) or amounts in certain of the funds and accounts held under the Agreement (as hereinafter defined) to the registered owner named above, or registered assigns, on the maturity date specified above, the principal amount specified above, and to pay interest on such principal amount from _____________, 2019, or from the most recent interest payment date to which interest has been paid or duly provided for, semiannually on March 1 and September 1, commencing [March 1, 2020] (“Interest Payment Dates”), at the interest rate specified above, until the principal amount hereof is paid or made available for payment. The principal of this Bond is payable by check to the registered owner hereof in lawful money of the United States of 45635.01434\32349708.2 A-2 America upon presentation and surrender of this Bond at the Principal Office of Wilmington Trust, National Association (the “Fiscal Agent”). Interest on this Bond shall be paid by check of the Fiscal Agent mailed by first class mail, postage prepaid, on each Interest Payment Date to the registered owner hereof as of the close of business on the fifteenth (15th) day of the month preceding the month in which the Interest Payment Date occurs (the “Record Date”) at such registered owner’s address as it appears on the registration books maintained by the Fiscal Agent; except that at the written request of the owner of at least $1,000,000 in aggregate principal amount of outstanding Bonds filed with the Fiscal Agent prior to the Record Date preceding any Interest Payment Date, interest on such Bonds shall be paid to such owner on such Interest Payment Date by wire transfer of immediately available funds to an account in the United States of America designated in such written request. This Bond is one of a duly authorized issue of bonds approved by the qualified electors of the District and Improvement Area No. 2 pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the California Government Code (the “Mello-Roos Act”), for the purpose, among others, of financing the construction and acquisition of certain public facilities within and for Improvement Area No. 2, and is one of the series of Bonds designated “Community Facilities District No. 2005-1 (Rosedale) of the City of Azusa 2019 Special Tax Bonds (Improvement Area No. 2)” (the “Bonds”), in the aggregate principal amount of $__________. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City on __________, 2019 (the “Resolution”), and the Fiscal Agent Agreement, dated as of __________ 1, 2019, between the City and the Fiscal Agent (the “Agreement”) and this reference incorporates the Resolution and the Agreement herein, and by acceptance hereof the owner of this Bond assents to the terms and conditions of the Resolution and the Agreement. The Resolution is adopted under, the Agreement is executed under, this Bond is issued under, and all are to be construed in accordance with, the laws of the State of California. Pursuant to the Mello-Roos Act, the Agreement and the Resolution, the principal of and interest on the Bonds are payable from the annual levy of Special Taxes authorized under the Mello-Roos Act to be collected within Improvement Area No. 2 (the “Special Taxes”) and are secured by a pledge of and first lien upon the revenues derived therefrom and certain funds held by the Fiscal Agent pursuant to the Agreement. Interest on this Bond shall be payable from the Interest Payment Date next preceding the date of its authentication, unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (ii) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it shall bear interest from __________, 2019; provided, however, that if at the time of authentication of this Bond, interest is in default hereon, this Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment hereon, or from __________, 2019 if no interest has previously been paid or made available for payment hereon. 45635.01434\32349708.2 A-3 Any tax for the payment hereof shall be limited to the Special Taxes, except to the extent that provision for payment has been made by the City as may be permitted by law. The Bonds do not constitute obligations of the City for which the City is obligated to levy or pledge, or has levied or pledged, general or special taxation other than as described hereinabove. The City has covenanted for the benefit of the owners of the Bonds that within sixty (60) days after each Interest Payment Date, it will cause to be commenced, and (unless delinquent Special Taxes are paid) diligently prosecute to judgment, an action in the superior court to foreclose the lien of any Special Taxes levied on Assessor’s Parcels of Taxable Property in Improvement Area No. 2 (as those terms are defined in the Rates and Method of Apportionment of Special Tax for Improvement Area No. 2), or any installments thereof, which were not paid by the statutory delinquency date (i.e., December 10 or April 10). The Bonds are subject to redemption prior to their stated maturity dates at the option of the City on September 1, 2028 or any date thereafter, from such maturities as selected by the City (and by lot within any one maturity), in integral multiples of $5,000, at the option of the City from moneys derived by the City from any source, at par, together with accrued interest to the date of redemption. The Bonds are subject to mandatory redemption prior to their stated maturity dates on any Interest Payment Date, as selected among maturities by the City (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the City from Special Tax Prepayments, at redemption prices (expressed as percentages of the principal amounts of the Bonds to be redeemed), together with accrued interest to the date of redemption as follows: Redemption Dates Redemption Price [Any Interest Payment Date through March 1, 2026 103% September 1, 2026 and March 1, 2027 102 September 1, 2027 and March 1, 2028 101 September 1, 2028 and any Interest Payment Date thereafter 100] Notice of redemption with respect to the Bonds to be redeemed shall be given to the registered owners thereof, in the manner and to the extent provided in the Agreement. From and after the date fixed for redemption, if funds available for the payment of the redemption prices of the Bonds selected for redemption shall have been deposited in the Bond Fund, such Bonds shall cease to be entitled to any benefit under the Agreement other than the right to receive payment of the redemption price, and interest shall cease to accrue on the Bonds to be redeemed on the redemption date specified in the notice of redemption. This Bond shall be registered in the name of the owner hereof, as to both principal and interest. Each registration and transfer of registration of this Bond shall be entered by the Fiscal Agent in books kept by it for that purpose and authenticated by the manual signature of an authorized signatory of the Fiscal Agent upon the certificate of authentication endorsed hereon. 45635.01434\32349708.2 A-4 No transfer or exchange hereof shall be valid for any purpose unless made by the registered owner or his duly authorized attorney, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof and interest hereon shall be payable only to the registered owner or to such owner’s order. The Fiscal Agent shall require the registered owner requesting transfer or exchange hereof to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. The Agreement and the rights and obligations of the City and the District thereunder may be modified or amended as set forth therein. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been dated and manually signed on behalf of the Fiscal Agent. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond have existed, happened and been performed in due time, form and manner as required by law. (Balance of this page intentionally left blank) 45635.01434\32349708.2 A-5 IN WITNESS WHEREOF, the City of Azusa, for Community Facilities District No. 2005-1 (Rosedale) thereof, has caused this Bond to be dated as of __________, 2019, and to be signed by the facsimile signature of the Mayor of the City and countersigned by the facsimile signature of the City Clerk. CITY OF AZUSA for and on behalf of COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) OF THE CITY OF AZUSA, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA By: ______________________________________ Mayor of the City of Azusa ATTEST: ______________________________ City Clerk of the City of Azusa 45635.01434\32349708.2 A-6 FORM OF CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within-defined Agreement. Dated: __________, 2019 WILMINGTON TRUST, NATIONAL ASSOCIATION, Fiscal Agent By: Authorized Signatory 45635.01434\32349708.2 A-7 FORM OF ASSIGNMENT For value received the undersigned do(es) hereby sell, assign and transfer unto_________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ (Name, Address and Tax Identification or Social Security Number of Assignee) the within Bond and do(es) hereby irrevocably constitute and appoint ______________________ _________________________________________ attorney, to transfer the same on the books of the Trustee, with full power of substitution in the premises. Dated: _______________________ Signature Guaranteed: Note: Signature guarantee shall be made by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee. 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. This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. PRELIMINARY OFFICIAL STATEMENT DATED ____________, 2019 NEW ISSUE—BOOK-ENTRY ONLY INSURED RATING: S&P “__” See “RATING” herein. In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, subject to certain qualifications described herein, under existing statutes, regulations, rules and court decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See the caption “TAX MATTERS.” $19,840,000 * CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) Dated: Date of Delivery Due: September 1, as shown on the inside front cover page The City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the “Bonds”) are being issued and delivered by the City of Azusa (the “City”), County of Los Angeles, California, for and on behalf of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the “District”) to: (i) finance the acquisition and construction of certain public improvements of the City and certain public improvements of the Azusa Unified School District (the “School District”); (ii) purchase a debt service reserve insurance policy; and (iii) pay costs of issuance of the Bonds, including the premium for a municipal bond insurance policy. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California), and pursuant to a Fiscal Agent Agreement, dated as of December 1, 2019 (the “Fiscal Agent Agreement”), by and between the City, for and on behalf of the District, and Wilmington Trust, National Association, as fiscal agent (the “Fiscal Agent”). The Bonds are special limited obligations of the District and are payable solely from revenues derived from certain annual Special Taxes (as such term is defined in this Official Statement) to be levied on and collected from the owners of the taxable land within Improvement Area No. 2 of the District (“Improvement Area No. 2”) (less certain administrative expenses) and from certain other funds that have been pledged under the Fiscal Agent Agreement, all as further described in this Official Statement. The Special Taxes are to be levied according to the Rate and Method of Apportionment of Special Taxes (the “Rate and Method”), which has been approved by the City Council of the City and the qualified electors within Improvement Area No. 2. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Rate and Method of Apportionment of Special Taxes.” The City Council of the City is the legislative body of the District. The Bonds are issuable in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Individual purchases may be made in principal amounts of integral multiples of $5,000 and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described in this Official Statement. Interest on the Bonds will be payable on [March 1, 2020] and each September 1 and March 1 thereafter. Principal of and interest on the Bonds will be paid by the Fiscal Agent to DTC for subsequent disbursement to DTC Participants, which are obligated to remit such payments to the Beneficial Owners of the Bonds. See the caption “THE BONDS—Description of the Bonds” and Appendix E. Neither the faith and credit nor the taxing power of the City, the School District, the County of Los Angeles, the State of California or any political subdivision of the State of California (except the District to the limited extent set forth in the Fiscal Agent Agreement) is pledged to the payment of the Bonds. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds. The Bonds are special limited tax obligations of the District that are payable solely from Special Taxes and other amounts that are held under the Fiscal Agent Agreement, as more fully described in this Official Statement. The Bonds are subject to optional redemption, mandatory redemption from Special Tax Prepayments and mandatory sinking fund redemption prior to maturity. See the caption “THE BONDS—Redemption.” The City has applied for a municipal bond insurance policy and debt service reserve insurance policy and will decide whether to purchase such policies in connection with the offering of the Bonds. Such information will be released prior to offering the Bonds and will be included in the Official Statement. CERTAIN EVENTS COULD AFFECT THE ABILITY OF THE DISTRICT TO PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS WHEN DUE. AS A RESULT, THE BONDS INVOLVE SIGNIFICANT RISKS AND ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS. SEE THE CAPTION “SPECIAL RISK FACTORS” FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED, IN ADDITION TO THE OTHER MATTERS SET FORTH IN THIS OFFICIAL STATEMENT, IN EVALUATING THE INVESTMENT QUALITY OF THE BONDS. This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors are advised to read the entire Official Statement to obtain information that is essential to an informed investment decision. MATURITY SCHEDULE (See Inside Cover Page) The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Best Best & Krieger LLP, Riverside, California, Bond Counsel, and subject to certain other conditions. Best Best & Krieger LLP, Riverside, California is serving as disclosure counsel to the City and the District with respect to the Bonds. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Irvine, California, for the Underwriter by its counsel Kutak Rock LLP, Los Angeles, California, and for the Fiscal Agent by its counsel. It is anticipated that the Bonds in book-entry form will be available for delivery through the facilities of DTC on or about __________, 2019. Dated: ______________, 2019 *Preliminary, subject to change. Attachment 5 $19,840,000* CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) MATURITY SCHEDULE Base CUSIP † 055032 Maturity Date (September 1) Principal Amount Interest Rate Yield Price CUSIP† $ % % * Preliminary, subject to change. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP by CUSIP Global Services which is managed on behalf of the American Bankers Association by S&P Global Market Intelligence LLC, a division of S&P Global Inc. Copyright© 2019 CUSIP Global Services. All rights reserved. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Global Services database. CUSIP® numbers are provided for convenience of reference only. Neither the District nor the Underwriters take any responsibility for the accuracy of such numbers. CITY OF AZUSA COUNTY OF LOS ANGELES STATE OF CALIFORNIA CITY COUNCIL Joseph Romero Rocha, Mayor Edward J. Alvarez, Mayor Pro Tem Angel A. Carrillo, Council Member Robert Gonzales, Council Member Uriel E. Macias, Council Member CITY OFFICIALS Sergio Gonzalez, City Manager Talika Johnson, Director of Administrative Services Best Best & Krieger LLP, City Attorney Bond and Disclosure Counsel Best Best & Krieger LLP Riverside, California Municipal Advisor Urban Futures, Inc. Tustin, California Fiscal Agent Wilmington Trust, National Association Costa Mesa, California Special Tax Consultant Special District Financing & Administration, LLC Escondido, California Except where otherwise indicated, all information that is set forth in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Fiscal Agent or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those 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 City, the District, the Fiscal Agent or the Underwriter. 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 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or owners of the Bonds. Statements that are contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described in this Official Statement, are intended solely as such and are not to be construed as representations of fact. This Official Statement, including any supplement or amendment, is intended to be deposited with a nationally recognized municipal securities depository. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information that is set forth in this Official Statement has been obtained from 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 by the City, the District, the Fiscal Agent or the Underwriter. The information and expressions of opinion in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale made under this Official Statement shall, under any circumstances, create any implication that there has been no change in the affairs of the City or the District or any other parties described in this Official Statement since the date of this Official Statement. All summaries of the Fiscal Agent Agreement or other documents are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. Reference is made to such documents on file with the City for further information. Although the City maintains an Internet website for various purposes, none of the information on its website is incorporated by reference into this Official Statement. Certain statements that are included or incorporated by reference in this Official Statement constitute “forward -looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used, such as “plan,” “expect,” “estimate,” “project,” “budget” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the captions “SOURCES OF PAYMENT FOR THE BONDS,” and “IMPROVEMENT AREA NO. 2.” THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS THAT ARE CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT ARE DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. Table of Contents i INTRODUCTION .......................................................... 1 The District .............................................................. 1 Property Ownership and Development Status ................................................................ 2 Sources of Payment for the Bonds .......................... 2 Limited Liability ...................................................... 3 No Parity Bonds Except for Refunding ................... 4 Description of the Bonds ......................................... 4 Tax Matters.............................................................. 4 Professionals Involved in the Offering .................... 4 Continuing Disclosure ............................................. 5 Bond Owners’ Risks ................................................ 5 Other Information .................................................... 5 THE FINANCING PLAN .............................................. 6 Estimated Sources and Uses of Funds ..................... 6 THE BONDS .................................................................. 7 Authority for Issuance ............................................. 7 Purpose of the Bonds ............................................... 7 Description of the Bonds ......................................... 8 Redemption ............................................................. 8 Notice of Redemption.............................................. 9 Effect of Redemption ............................................ 10 Transfer and Exchange of Bonds ........................... 10 Debt Service Schedule for the Bonds .................... 11 SOURCES OF PAYMENT FOR THE BONDS .......... 12 Special Taxes ......................................................... 12 Rate and Method of Apportionment of Special Tax ..................................................... 12 Prepayment of Special Taxes ................................ 14 One-Time Special Tax ........................................... 14 Collection and Application of Special Taxes .............................................................. 17 Proceeds of Foreclosure Sales ............................... 18 Reserve Fund ......................................................... 19 No Parity Bonds Except for Refunding ................. 19 Projected Special Tax Levy ................................... 19 IMPROVEMENT AREA NO. 2 .................................. 22 General Description of the District and Improvement Area No. 2 ................................ 22 Direct and Overlapping Debt ................................. 22 Estimated Assessed Value-to-Lien Ratio ............................................................... 23 Assessed Valuation ................................................ 26 Delinquency History .............................................. 26 The Development and Property Ownership ...................................................... 28 BOND INSURANCE AND DEBT SERVICE RESERVE INSURANCE ........................................... 28 SPECIAL RISK FACTORS ......................................... 28 Concentration of Ownership; Levy Limitation on Developed Residential Property ....................................... 28 Limited Obligations ............................................... 29 Insufficiency of Special Taxes .............................. 29 Natural Disasters ................................................... 30 Hazardous Substances ........................................... 31 Shapiro Decision ................................................... 31 Parity Taxes and Special Assessments .................. 32 Disclosures to Future Purchasers ........................... 33 Special Tax Delinquencies .................................... 33 Non-Cash Payments of Special Taxes ................... 33 Payment of the Special Tax is not a Personal Obligation of the Owners ................. 34 Land Values ........................................................... 34 Assessment Appeals and Proposition 8 ................. 34 Value-to-Lien Ratios ............................................. 35 Potential Early Redemption of Bonds from Prepayments .......................................... 36 IRS Audit of Tax-Exempt Bond Issues ................. 36 FDIC/Federal Government Interests in Properties ........................................................ 36 Billing of Special Taxes ........................................ 37 Cybersecurity ......................................................... 38 Bankruptcy and Foreclosure .................................. 38 No Acceleration Provision .................................... 39 Loss of Tax Exemption ......................................... 39 Limitations on Remedies ....................................... 40 Limited Secondary Market .................................... 40 Proposition 218 ...................................................... 40 Ballot Initiatives .................................................... 41 CONTINUING DISCLOSURE .................................... 41 TAX MATTERS .......................................................... 42 LEGAL MATTERS ..................................................... 43 LITIGATION ............................................................... 43 RATING ....................................................................... 43 UNDERWRITING ....................................................... 43 PENDING LEGISLATION.......................................... 44 MUNICIPAL ADVISOR ............................................. 44 ADDITIONAL INFORMATION................................. 45 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES ................... A-1 APPENDIX B SUMMARY OF FISCAL AGENT AGREEMENT ................ B-1 APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE OF THE CITY .............................................. C-1 APPENDIX D FORM OF OPINION OF BOND COUNSEL ......................... D-1 APPENDIX E BOOK-ENTRY ONLY SYSTEM ........................................ E-1 APPENDIX F GENERAL INFORMATION CONCERNING THE CITY OF AZUSA AND THE REGION ................................. F-1 APPENDIX G SPECIMEN MUNICIPAL BOND INSURANCE POLICY ................. G-1 [INSERT VICINITY MAP /AERIAL PHOTO] 1 $18,940,000* CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) INTRODUCTION The purpose of this Official Statement, which includes the front cover page, the inside front cover page, the table of contents and the attached appendices (collectively, the “Official Statement”), is to provide certain information concerning the issuance by the City of Azusa (the “City”), for and on behalf of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the “District”), of the $19,840,000* City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the “Bonds”). The proceeds of the Bonds will be used to: (i) finance the acquisition and construction of certain public improvements of the City and certain public school facilities of the Azusa Unified School District (the “School District”); (ii) fund a reserve fund for the Bonds or purchase a debt service reserve insurance policy; and (iii) pay costs of issuance of the Bonds, including the premiums for a municipal bond insurance policy and a debt service reserve insurance policy. The Bonds are authorized to be issued pursuant to the Act (as such term is defined in this Official Statement) and a Fiscal Agent Agreement, dated as of December 1, 2019 (the “Fiscal Agent Agreement”), by and between the City, acting on behalf of the District, and Wilmington Trust, National Association, as fiscal agent (the “Fiscal Agent”). The Bonds are secured under the Fiscal Agent Agreement by a pledge of and lien upon Special Tax Revenues (as such term is defined in this Official Statement) and all moneys that are deposited in the Special Tax Fund, the Bond Fund and the Reserve Fund. This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information in the entire Official Statement and the documents that are summarized or described in this Official Statement. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms that are used in this Official Statement and not defined have the meanings that are set forth in Appendix B. The District The District was formed on June 5, 2006 pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”). The Act was enacted by the State of California (the “State”) legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency (as such term is defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. The City Council of the City acts as the legislative body of the District. Pursuant to the Act, the City Council adopted the necessary resolutions stating its intent to establish the District, to authorize the levy of special taxes on taxable property within the boundaries of the District, including Improvement Area No. 2, and to incur a bonded indebtedness within the District, including Improvement Area No. 2. Following a noticed public hearing that was conducted pursuant to the provisions of the Act, the City Council adopted resolutions to establish the District and call a special election to submit the levy of the Special Taxes and the incurring of bonded indebtedness to the qualified voters of the District. On June 5, 2006, at an election that was held pursuant to the Act, the landowners who comprised the qualified voters of Improvement Area No. 2 authorized the District to incur bonded indebtedness in the aggregate principal amount not to exceed $30,000,000 for Improvement Area No. 2 to be secured by the levy of Special Taxes on taxable property within Improvement Area No. 2. On that * Preliminary, subject to change. 2 same date, the landowners within Improvement Area No. 2 approved the rate and method of apportionment of the Special Taxes on land within Improvement Area No. 2 to pay the principal of and interest on the bonds of Improvement Area No. 2. Pursuant to the Act, on October 17, 2011 the City Council adopted a resolution of consideration to amend and restate the rate and method of apportionment for Improvement Area No. 2 to implement, among other things, changes to the rates of special tax to be levied on parcels of property in Improvement Area No. 2. On November 21, 2011 the landowners within Improvement Area No. 2 approved the amended and restated rate and method of apportionment of the Special Taxes on land within Improvement Area No. 2. The Amended and Restated Rate and Method of Apportionment for Improvement Area No. 2 of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the “Rate and Method”) is set forth in Appendix A hereto. The facilities authorized to be financed by the District are referenced herein as the “Facilities.” Special Tax A (as defined in the Rate and Method) is the special tax that will be levied to pay debt service on the Bonds. Special Tax A is referred to in this Official Statement as the “Special Tax” or the “Special Taxes.” At the time of the establishment of the District and Improvement Area No. 2 therein and as part of the change proceedings described above, special taxes were also approved to be levied in Improvement Area No. 2 to fund services (i.e. police protection, fire protection and suppression services, maintenance of park, parkways and open space, and any other services permitted to be financed pursuant to the Act) (the “Services Special Taxes”). The Services Special Taxes are not pledged to repay the Bonds. The District contains the Rosedale master-planned community that encompasses approximately 517 acres of which approximately 187 acres have been developed into residential units. The District is located north of the 210 Freeway at the base of the San Gabriel Mountains. The District is comprised of two improvement areas. Improvement Area No. 1 (“Improvement Area No. 1”) consists of approximately consists of approximately 220 gross acres, contains 792 single family homes and is fully built out. Neither the special taxes levied in Improvement Area No. 1 nor the property in Improvement Area No. 1 is security for the Bonds. Improvement Area No. 2 consists of approximately 35 gross acres, approximately 27 acres of which have been developed into 435 residential dwelling units. All of the residential dwelling units are currently subject to the levy of all or a portion of the Special Tax under the Rate and Method. The balance of the acreage in the District represents tax-exempt parcels, parks, open space and public right-of-way. The Bonds are secured and payable solely from Special Tax Revenues of two zones within Improvement Area No. 2, including foreclosure proceeds obtained within each zone. See the caption “IMPROVEMENT AREA NO. 2—The Development and Property Ownership” for a description of the property within Improvement Area No. 2. Property Ownership and Development Status The District is a master-planned community called “Rosedale,” consisting of residential and recreational uses. All 435 residential dwelling units within Improvement Area No. 2 have been constructed, sold and are owned by individual homeowners as of November 1, 2019. Sources of Payment for the Bonds Special Tax Revenues. As used in this Official Statement, the term “Special Tax” is that tax which has been authorized pursuant to the Act to be levied against certain land within Improvement Area No. 2 pursuant to the Act and in accordance with the Rate and Method. See the caption “SOURCES OF PAYMENT FOR THE BONDS— Special Taxes” and Appendix A. Under the Fiscal Agent Agreement, the City has pledged to repay the Bonds from the Special Tax Revenues (as such term is defined below), except the initial amount, not to exceed $60,000 that will be deposited in the Administrative Expense Fund for each Fiscal Year and increase annually by two percent (2%) each Fiscal Year, and amounts that are on deposit in the Special Tax Fund, the Bond Fund and the Reserve Fund established under the Fiscal Agent Agreement. “Special Tax Revenues” are defined in the Fiscal Agent Agreement to include the proceeds of the Special Taxes received by the City, including any scheduled payments, interest and penalties thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes in the amount of said lien and interest and penalties thereon. The Special Taxes are the primary security for the repayment of the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds that are available to pay the debt service on the Bonds are amounts held by the Fiscal Agent, including amounts held in the Reserve Fund. 3 Foreclosure Covenant. The City has covenanted for the benefit of owners of the Bonds: (i) that it will order, and cause to be commenced, judicial foreclosure proceedings against properties with delinquent Special Taxes in excess of $10,000 by the October 1 following the close of the Fiscal Year in which such Special Taxes were due, and (ii) that it will commence judicial foreclosure proceedings against all properties with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Taxes levied, and diligently pursue to completion such foreclosure proceedings; provided, however, the City is not required to order and cause judicial foreclosure proceedings to be commenced against delinquent properties as long as no deficiency in the Reserve Fund exists (or is projected to exist in order to make debt service payments on the Bonds in the current or next Fiscal Year) or the City determines that the cost of pursuing such foreclosure is greater than the outstanding delinquency. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales.” The maximum amount of the Special Taxes that could be levied on parcels of property in Improvement Area No. 2 is equal to at least 110% of annual debt service on the Bonds plus Administrative Expenses in the amount of $60,000 per year, which will increase annually by two percent (2%). See the caption “SOURCES OF PAYMENT FOR THE BONDS—Projected Special Tax Levy.” Pursuant to the terms of the Fiscal Agent Agreement, the City has covenanted not to issue Parity Bonds (as such term is defined in the Fiscal Agent Agreement) except for the purpose of refunding a portion of the Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS—No Parity Bonds Except for Refunding.” Assessed Values do not Reflect Market Values. There is no assurance that the property within Improvement Area No. 2 can be sold for the assessed values that are set forth in this Official Statement or for a price that is sufficient to pay the principal of and interest on the Bonds in the event of a default in payment of Special Taxes by current or future landowners within Improvement Area No. 2. See the caption “SPECIAL RISK FACTORS—Land Values.” Other taxes and/or special assessments with liens that are equal in priority to the continuing lien of the Special Taxes may also be levied on the property within Improvement Area No. 2. See the caption “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” Special taxes that are levied on property within Improvement Area No. 1 are not pledged to or security for the Bonds. Limited Obligations. EXCEPT FOR THE SPECIAL TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NEITHER GENERAL OR SPECIAL OBLIGATIONS OF THE CITY NOR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM SPECIAL TAXES LEVIED IN IMPROVEMENT AREA NO. 2 AND AMOUNTS HELD UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. Limited Liability Although the unpaid Special Taxes constitute a lien on the real property within Improvement Area No. 2, they do not constitute a personal indebtedness of any landowner within Improvement Area No. 2, or any future property owner in Improvement Area No. 2. There is no assurance that the current owners of property within Improvement Area No. 2, or any future property owners within Improvement Area No. 2 will be financially able to pay the Special Taxes or that it will pay the Special Taxes even though financially able to do so. THE BONDS ARE PAYABLE SOLELY FROM THE PROCEEDS OF THE SPECIAL TAX TO BE LEVIED ANNUALLY ON THE LAND WITHIN IMPROVEMENT AREA NO. 2 AND AMOUNTS IN CERTAIN FUNDS ESTABLISHED UNDER THE FISCAL AGENT AGREEMENT. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN OF THE DISTRICT, TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT) IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS. THE BONDS ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF OR CHARGE, LIEN OR ENCUMBRANCE UPON ANY OF THE PROPERTY OR REVENUES OF THE CITY, AND THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF OR REDEMPTION PREMIUMS, IF ANY, ON THE BONDS IS NOT A GENERAL DEBT, LIABILITY OR OBLIGATION OF THE CITY OR THE DISTRICT. 4 No Parity Bonds Except for Refunding The District and the City have covenanted in the Fiscal Agent Agreement that they will not issue any other obligations that are payable from the Special Tax Revenues which have, or purport to have, any lien upon the Special Tax Revenues that is superior to or on a parity with the lien of the Bonds. Nothing in the Fiscal Agent Agreement, however, precludes the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as or under any other law of the State, which are payable from and have a lien upon the Special Tax Revenues on a parity with the Bonds to be outstanding following the issuance of such refunding bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS—No Parity Bonds Except for Refunding” and Appendix B. However, other entities and districts can issue indebtedness that is secured by special taxes, ad valorem taxes or assessments that are payable from all or a portion of the property within Improvement Area No. 2 which may have a lien on such property that is on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within Improvement Area No. 2 or the willingness of property owners to pay the Special Taxes. See the caption “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” Description of the Bonds The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to actual purchasers of the Bonds (the “Beneficial Owners”) in the denominations of integral multiples of $5,000, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described in this Official Statement. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry only system that is described in this Official Statement is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Fiscal Agent Agreement. See Appendix E. Principal of, premium, if any, and interest on the Bonds is payable by the Fiscal Agent to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. In the event that the book-entry only system is no longer used with respect to the Bonds, the Beneficial Owners will become the registered owners of the Bonds and will be paid principal and interest by the Fiscal Agent, all as described in the Fiscal Agent Agreement. The Bonds are subject to optional redemption, mandatory redemption from Special Tax Prepayments and mandatory sinking fund redemption as described under the caption “THE BONDS—Redemption.” For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see the caption “THE BONDS” and Appendix B. Tax Matters In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, subject to certain qualifications described herein, under existing statutes, regulations, rules and court decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, the interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of computing the federal alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See the caption “TAX MATTERS.” Professionals Involved in the Offering Wilmington Trust, National Association, Costa Mesa, California, will act as Fiscal Agent under the Fiscal Agent Agreement. Stifel, Nicolaus & Company, Incorporated is the Underwriter of the Bonds. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Best Best & Krieger LLP, Riverside, California, Bond Counsel. Best Best & Krieger LLP, Riverside, California is serving as Disclosure Counsel to the City and the District with respect to the Bonds. Urban Futures, Inc., Tustin, California, is acting as Municipal Advisor for the City in connection with the Bonds. Certain legal matters will be passed on for the City and 5 the District by Best Best & Krieger LLP, Irvine, California, City Attorney, and for the Underwriter by its counsel Kutak Rock LLP, Los Angeles, California. Other professional services have been performed by Special District Financing & Administration, LLC, Escondido, California, as Special Tax Consultant (the “Special Tax Consultant”). Continuing Disclosure The City, for and on behalf of the District, has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system, which is available on the Internet at http://www.emma.msrb.org/, certain annual financial information and operating data. Such information is provided pursuant to Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission (the “Rule”). The City has further agreed to provide, in a timely manner, notice of certain events as set forth in the Rule. The covenants of the City have been made in order to assist the Underwriter in complying with the Rule. See the caption “CONTINUING DISCLOSURE” and Appendix C for a description of the specific nature of the reports to be filed by the City, the notices of enumerated events and a summary description of the terms of the continuing disclosure certificate pursuant to which reports are to be made. Bond Owners’ Risks Certain events could affect the timely repayment of the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain factors that should be considered, in addition to the other matters that are set forth in this Official Statement, in evaluating an investment in the Bonds. The Bonds are not rated by any nationally recognized rating agency. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors. Other Information This Official Statement speaks only as of its date, and the information in this Official Statement is subject to change. Brief descriptions of the Bonds and the Fiscal Agent Agreement are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references in this Official Statement to the Fiscal Agent Agreement, the Bonds and the Constitution and laws of the State as well as the proceedings of the City, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Fiscal Agent Agreement. Capitalized terms that used in this Official Statement but not otherwise defined have the meanings that are set forth in the Fiscal Agent Agreement. Copies of the Fiscal Agent Agreement and other documents and information referred to in this Official Statement are available for inspection and (upon request and payment to the City of a charge for copying, mailing and handling) for delivery from the City at 213 East Foothill Blvd, Azusa, California 91702, Attention: Director of Administrative Services. 6 THE FINANCING PLAN The City and Azusa Land Partners, LLC (“ALP”) entered into that certain Funding and Acquisition Agreement dated as of August 1, 2005 (the “Original Agreement”), as amended by a First Amendment to Funding and Acquisition Agreement dated as of June 1, 2019 (the “First Amendment”) by and between the City and Rosedale Land Partners II, LLC (the “Developer”), assignee of ALP, and a Second Amendment to Funding and Acquisition Agreement dated as of December 1, 2019 (the “Second Amendment” and together with the Original Agreement and the First Amendment, the “Funding Agreement”) by and between the City and the Developer for, among other things, the purpose of forming the District and establishing a plan for the financing of the acquisition, design and construction of improvements of the City, the School District and other public entities. The Bonds are being issued to finance: (i) backbone streets and in-tract improvements; (ii) neighborhood parks and a transit plaza; (iii) parkway and median landscaping and (iv) a great park (the “City Facilities”), all of which are authorized to be financed by the District and the Funding Agreement. A portion of the Bond proceeds will be deposited into the City Facilities Account of the Improvement Fund to pay costs or to reimburse costs to the Developer relating to the City Facilities. A portion of the Bond proceeds will be deposited into the School Facilities Account of the Improvement Fund to finance certain school facilities (the “School Facilities”). The disbursement of the proceeds of the Bonds for the School Facilities will be subject to that certain Amended and Restated Joint Community Facilities Agreement dated as of _______, 2019 (the “Amended and Restated Agreement”) by and among the City, for and on behalf of the District, the Developer and the School District. Estimated Sources and Uses of Funds The following table sets forth the expected uses of Bond proceeds: Sources of Funds(1) Principal Amount $ Plus/Less Net Original Issue Premium/Discount TOTAL SOURCES $ Uses of Funds(1) City Facilities Account of Improvement Fund $ School District Facilities Account of Improvement Fund Cost of Issuance Fund(2) Reserve Fund Underwriter’s Discount TOTAL USES $ ____________________________ (1) Rounded to nearest dollar. Totals may not add due to rounding. (2) Costs of Issuance include legal fees, City administrative costs, printing costs, Special Tax Consultant fees, Municipal Advisor fees, Fiscal Agent fees, rating agency fees, bond insurance and reserve fund policy premium and other miscellaneous costs of issuance. 7 THE BONDS Authority for Issuance The Bonds in the aggregate principal amount of $19,840,000* are authorized to be issued by the City for the District under and subject to the terms of the resolution authorizing the issuance of the Bonds, as described below, the Fiscal Agent Agreement, the Act and other applicable laws of the State. Resolutions of Intention. On April 17, 2006, the City Council of the City adopted a resolution stating its intention to establish the District and to authorize the levy of a special tax, and a resolution declaring its intention to incur bonded indebtedness for the District in an amount not to exceed $110,000,000 ($80,000,000 within Improvement Area No. 1 and $30,000,000 within Improvement Area No. 2). Resolutions of Formation. Immediately following a noticed public hearing on June 5, 2006, the City Council of the City adopted a resolution that established the District and authorized the levy of a special tax within the District and a resolution declaring the necessity to incur bonded indebtedness within the District. Resolution Calling Election. The resolutions that were adopted by the City Council of the City on June 5, 2006 also called for an election by the landowners in the District on that date on the questions of the levy of the Special Tax, the incurring of bonded indebtedness in the District, and the establishment of an appropriations limit. Landowner Election and Declaration of Results. On June 5, 2006, an election was held at which the owner of property in Improvement Area No. 1 and Improvement Area No. 2, as the sole landowner and qualified voter within the District, approved ballot propositions authorizing the issuance of up to $80,000,000 of bonds for Improvement Area No. 1, $30,000,000 of bonds for Improvement Area No. 2, the levy of the Special Tax within Improvement Area No. 1 and Improvement Area No. 2 and the establishment of an appropriations limit for Improvement Area No. 1 and Improvement Area No. 2. On June 5, 2006, the City Council adopted a resolution approving the canvass of the votes and declaring the District to be fully formed with the authority to levy the Special Taxes, to incur the bonded indebtedness and to have the established appropriations limit. Change Proceedings. Pursuant to the Act, on October 17, 2011, the City Council adopted a resolution of consideration to amend and restate the rate and method of apportionment for Improvement Area No. 2 to implement, among other things, changes to the rates of special tax to be levied on parcels of property in Improvement Area No. 2. On November 21, 2011, the City Council conducted a public hearing, adopted a resolution of change and held a special election where the landowners within Improvement Area No. 2 approved the Rate and Method. Special Tax Lien and Levy. A Notice of Special Tax Lien for Improvement Area No. 2 was recorded in the real property records of the County of Los Angeles (the “County”) on June 12, 2006, as amended by the Amendment to Notice of Special Tax Lien, recorded in the real property records of the County on December 2, 2011 as a continuing lien against the property in Improvement Area No. 2. Resolution Authorizing Issuance of the Bonds. On November 18, 2019, the City Council adopted a resolution approving issuance of the Bonds in a principal amount not to exceed $25,000,000. Purpose of the Bonds The Bonds are being issued to provide funds to: (i) finance the acquisition and construction of certain public improvements of the City and certain public school facilities of the School District; (ii) fund a reserve fund for the Bonds or purchase a debt service reserve insurance policy; and (iii) pay costs of issuance of the Bonds, including the premiums for a municipal bond insurance policy and a debt service reserve insurance policy. See the caption “THE FINANCING PLAN—Estimated Sources and Uses of Funds.” * Preliminary, subject to change. 8 Description of the Bonds The Bonds will be issued as fully registered bonds in denominations of integral multiples of $5,000 (not exceeding the principal amount maturing at any one time), and will be dated the date of delivery. The Bonds will be issued in book-entry only form and DTC will act as securities depository for the Bonds. So long as the Bonds are held in book-entry only form, the principal of, premium, if any, and interest on the Bonds will be paid directly to DTC for distribution to the Beneficial Owners of the Bonds in accordance with the procedures of DTC. See Appendix E. The Bonds will mature on September 1, in the years and principal amounts, and bear rates of interest, as shown on the inside front cover page of this Official Statement. Interest on the Bonds will be payable semiannually on [March 1, 2020] and each September 1 and March 1 thereafter (each, an “Interest Payment Date”) and will be computed on the basis of a 360-day year comprised of twelve 30-day months. Each Bond will bear interest from the Interest Payment Date next preceding the date of authentication, unless: (a) it is authenticated on an Interest Payment Date, in which event it will bear interest from such Interest Payment Date; (b) it is authenticated prior to an Interest Payment Date and after the close of business on the Record Date preceding such Interest Payment Date, in which event it will bear interest from such Interest Payment Date; or (c) it is authenticated prior to the Record Date preceding the first Interest Payment Date, in which event it will bear interest from its dated date; provided that if at the time of authentication of a Bond interest is then in default, such Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment, or from its dated date, if no interest has previously been paid or made available for payment. Interest on the Bonds is payable by check of the Fiscal Agent mailed by first class mail, postage prepaid, on each Interest Payment Date, to the registered Owner at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date. The principal of the Bonds and any premium on the Bonds are payable in lawful money of the United States of America by check of the Fiscal Agent upon surrender of such Bonds at the Principal Office of the Fiscal Agent; provided, however, that at the written request of the Owner of at least $1,000,000 in aggregate principal amount of Outstanding Bonds filed with the Fiscal Agent prior to any Record Date, interest on such Bonds will be paid to such Owner on each succeeding Interest Payment Date by wire transfer of immediately available funds to an account in the United States of America designated in such written request. Redemption * Optional Redemption. The Bonds are subject to redemption prior to their stated maturity dates at the option of the City on September 1, 20__, or any date thereafter, as selected among maturities by the City (and by lot within any one maturity), in integral multiples of $5,000, at the option of the City from moneys derived by the City from any source, at par, together with accrued interest to the date of redemption. Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to mandatory redemption prior to their stated maturity dates on any Interest Payment Date, as selected among maturities by the City (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the City from Special Tax Prepayments, at redemption prices (expressed as a percentage of the principal amount of the Bonds to be redeemed), together with accrued interest to the date of redemption as follows: Redemption Dates Redemption Price Any Interest Payment Date through March 1, 20__ 103% September 1, 20__ and March 1, 20__ 102 September 1, 20__ and March 1, 20__ 101 September 1, 20__ and any Interest Payment Date thereafter 100 The amount of Outstanding Bonds to be redeemed pursuant to the foregoing schedules will be reduced by the City as nearly as practicable on a pro rata basis in multiples of $5,000 among redemption dates as a result of any prior * Preliminary, subject to change. 9 or partial optional redemption or mandatory redemption from Special Tax Prepayments of the Bonds. The City will, as may be appropriate, provide to the Fiscal Agent a revised mandatory sinking fund schedule for the Bonds. Mandatory Sinking Fund Redemption. The Outstanding Bonds maturing on September 1, 20__ and September 1, 20__ are subject to mandatory sinking fund redemption, in part, on September 1, 20__ and September 1, 20__, respectively, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date of redemption, without premium, and from sinking payments as follows: Term Bonds Maturing on September 1, 20__ Redemption Date (September 1) Sinking Fund Payment 20__ $_____ 20__ (Maturity) _____ Term Bonds Maturing on September 1, 20__ Redemption Date (September 1) Sinking Fund Payment 20__ $_____ 20__ (Maturity) _____ The amount of Outstanding Bonds to be redeemed pursuant to the foregoing schedules will be reduced by the City pro rata among redemption dates, in order to maintain substantially level debt service as a result of any prior or partial optional redemption or mandatory redemption from Special Tax Prepayments of the Bonds. Purchase of Bonds. In lieu of payment at maturity or redemption, moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding Bonds, upon the filing with the Fiscal Agent of an Officer’s Certificate requesting such purchase, at a public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer’s Certificate may provide, but in no event will Bonds be purchased at a price in excess of the principal amount, plus interest accrued to the date of purchase. In such event, the City will, as may be appropriate, provide to the Fiscal Agent a revised maturity schedule or a revised mandatory sinking fund schedule for the Bonds, or both. Notice of Redemption The Fiscal Agent Agreement requires the Fiscal Agent to cause notice of any redemption to be mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories and to one or more Information Services selected by an Authorized Officer, and to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books maintained by the Fiscal Agent at its Principal Office; but such mailing will not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect in such notice, will not affect the validity of the proceedings for the redemption of such Bonds. The Fiscal Agent will also cause notice of any redemption to be mailed, in such manner and within such time, to the Underwriter. Such notice will state the date of such notice, the date of issue of the Bonds, the place or places of redemption, the redemption date, the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption, will designate the CUSIP numbers and Bond numbers of the Bonds to be redeemed, by giving the individual CUSIP number and Bond number of each Bond to be redeemed, or will state that all Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities have been called for redemption, will state as to any Bond called for redemption in part the portion of the principal of the Bond to be redeemed, will require that such Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption as the said redemption price, and will state that further interest on such Bonds will not accrue from and 10 after the redemption date. The cost of the mailing and publication of any such redemption notice will be paid by the District. Any notice of optional redemption of the Bonds delivered in accordance with the Fiscal Agent Agreement may be conditional and if any condition stated in the notice of redemption has not been satisfied on or prior to the redemption date, said notice will be of no force and effect, the District will not be required to redeem such Bonds, the redemption will not be made and the Fiscal Agent will within a reasonable time thereafter give notice, to the persons and in the manner in which the notice of redemption was given, that such condition or conditions were not met and that the redemption was cancelled. Upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of funds issued for such purpose will, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. If less than all of the Outstanding Bonds are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of integral multiples of $5,000, and, in selecting portions of such Bonds for redemption, the Fiscal Agent will treat each such Bond as representing the number of Bonds of $5,000 denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. Whenever provision is made in the Fiscal Agent Agreement for the redemption of less than all of the Bonds of a maturity or any given portion, the Fiscal Agent will select the Bonds of such maturity to be redeemed, from all Bonds of such maturity or such given portion not previously called for redemption, by lot within a maturity, in any manner which the Fiscal Agent in its sole discretion deems appropriate. Upon surrender of Bonds redeemed in part only, the City will execute and the Fiscal Agent will authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds. Effect of Redemption From and after the date fixed for redemption, if funds available for the payment of the redemption prices of the Bonds called for redemption have been deposited in the Bond Fund, such Bonds will cease to be entitled to any benefit under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and interest will cease to accrue on the Bonds to be redeemed on the redemption date specified in the notice of redemption. All Bonds redeemed and purchased by the Fiscal Agent pursuant to the Fiscal Agent Agreement will be canceled by the Fiscal Agent. Transfer and Exchange of Bonds Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept pursuant to the provisions of the Fiscal Agent Agreement, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation at the Principal Office of the Fiscal Agent, accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Fiscal Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such transfer will be paid by the District. The Fiscal Agent will collect from the Owner requesting transfer of a Bond any tax or other governmental charge required to be paid with respect to such transfer. Whenever any Bond or Bonds are surrendered for transfer, the City will execute and the Fiscal Agent will authenticate and deliver a new Bond or Bonds of like aggregate principal amount. No transfers of Bonds will be required to be made: (a) during the fifteen days preceding the date established by the Fiscal Agent for selection of Bonds for redemption; or (b) with respect to Bonds which have been selected for redemption. 11 Bonds may be exchanged at the Principal Office of the Fiscal Agent only for a like aggregate principal amount of Bonds of authorized denominations and of the same maturity and interest rate. The cost for any services rendered or any expense incurred by the Fiscal Agent in connection with any such exchange will be paid by the District. The Fiscal Agent will collect from the Owner requesting exchange of a Bond any tax or other governmental charge required to be paid with respect to such exchange. No exchanges of Bonds will be required to be made: (a) during the fifteen days preceding the date established by the Fiscal Agent for selection of Bonds for redemption; or (b) with respect to Bonds which have been selected for redemption. Debt Service Schedule for the Bonds The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming that there are no optional redemptions or mandatory redemptions from Special Tax Prepayments. See the caption “—Redemption.” Period Ending (September 1) Principal Interest Total Debt Service $ $ $ TOTAL $___________ $ $ 12 SOURCES OF PAYMENT FOR THE BONDS The Special Taxes are the primary security for the payment of the Bonds. Pursuant to the Fiscal Agent Agreement, the City has pledged to repay the Bonds from the Special Tax Revenues and amounts held in the Special Tax Fund, the Bond Fund and the Reserve Fund. “Special Tax Revenues” are defined in the Fiscal Agent Agreement to include the proceeds of the Special Taxes that are received by the City, including any scheduled payments, interest and penalties, the proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes in the amount of said lien, and interest and penalties. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE SCHOOL DISTRICT, THE COUNTY, THE STATE OR ANY POLITICAL SUBDIVISION OF THE STATE (EXCEPT THE DISTRICT TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT) IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE SPECIAL TAXES LEVIED IN IMPROVEMENT AREA NO. 2, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT THAT ARE PAYABLE SOLELY FROM THE SPECIAL TAXES AND OTHER AMOUNTS THAT ARE PLEDGED UNDER THE FISCAL AGENT AGREEMENT AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. Special Taxes The City Council, as the legislative body of the District, has covenanted in the Fiscal Agent Agreement that by August 10 of each year (or such later date as may be authorized by the Act), it will levy Special Taxes up to the maximum rates permitted under the Rate and Method in the amount required for the payment of principal of and interest on any Outstanding Bonds becoming due and payable during the ensuing calendar year, including any necessary replenishment of the Reserve Fund and an amount that is estimated to be sufficient to pay the Administrative Expenses during such calendar year. The Special Taxes levied in any Fiscal Year may not exceed the maximum rates that are authorized pursuant to the Rate and Method. See Appendix A. There is no assurance that the Special Tax proceeds will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS—Insufficiency of Special Taxes.” Rate and Method of Apportionment of Special Tax Terms that are used in this caption but not defined have the meanings that are set forth in the Rate and Method. See Appendix A. Classification of Property. The Rate and Method provides that for each Fiscal Year all Taxable Property in Improvement Area No. 2 is to be assigned to Zone 1 or Zone 2 and classified as either Developed Property, Other Taxable Property or Undeveloped Property. “Assessor’s Parcel” is defined as a parcel shown on an Assessor’s Parcel Map with an assigned Assessor’s Parcel number. “Developed Property” is defined as, for each Fiscal Year, all Taxable Property, exclusive of Taxable Property Owner Association Property or Taxable Public Property, for which a building permit for new construction was issued after January 1, 2006 and as of May 1 of the previous Fiscal Year. “One-Time Special Tax” is defined as a one-time special tax payable by a Builder prior to the issuance of a Certificate of Occupancy for a residential dwelling unit in order to reduce the Maximum Special Tax on such dwelling unit, so that the Total Tax and Assessment Obligation for the Fiscal Year in which a Certificate of Occupancy for such residential dwelling unit is expected to be issued will not exceed two percent (2.0%) of the Value of such residential dwelling unit. 13 “Other Taxable Property” is defined as Taxable Property Owner Association Property and Taxable Public Property. “Property Owner Association Property” is defined as, for each Fiscal Year, any Assessor’s Parcel within the boundaries of Improvement Area No. 2 that was owned by or irrevocably offered for dedication to a property owner association, including any master or sub-association, as of January 1 of the previous Fiscal Year. “Public Property” is defined as, for each Fiscal Year, (i) any property within the boundaries of Improvement Area No. 2 that was owned or irrevocably offered for dedication to the federal government, the State, the City or any other public agency as of January 1 of the previous Fiscal Year; provided however that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified in accordance with its use; or (ii) any property within the boundaries of the District that was encumbered, as of January 1 of the previous Fiscal Year, by an unmanned utility easement making impractical its utilization for other than the purpose set forth in the easement. “Undeveloped Property” is defined as, for each Fiscal Year, all Taxable Property not classified as Developed Property or Other Taxable Property. “Taxable Property Owner Association Property” is defined as all Assessor’s Parcels of Property Owner Association Property that are not exempt from the Special Tax pursuant to the Rate and Method. “Taxable Public Property” is defined as all Assessor’s Parcels of Public Property that are not exempt from the Special Tax pursuant to the Rate and Method. “Undeveloped Property” is defined as, for each Fiscal Year, all Taxable Property not classified as Developed Property or Other Taxable Property. “Zone 1” is defined as the property identified as Zone 1 (Great Park and Transit 1) of Improvement Area No. 2, as identified on the boundary map for the District. “Zone 2 ” is defined as the property identified as Zone 2 (Transit 2) of Improvement Area No. 2, as identified on the boundary map for the District. The Rate and Method exempts up to 20.36 acres of Property Owner Association Property and Public Property in Zone 1 and up to 7.35 acres of Property Owner Association Property and Public Property in Zone 2. Assessor’s Parcels of Developed Property are further classified as: • Residential Property; or • Non-Residential Property. Residential Property in Zone 1 is assigned to a Land Use Class (from classes 1-5) based on the Residential Floor Area. Non-Residential Property in Zone 1 is assigned to Land Use Class 6. Residential Property in Zone 2 is assigned to a Land Use Class (from classes 1-3) based on the Residential Floor Area. Non-Residential Property in Zone 2 is assigned to Land Use Class 4. The Land Use Classes in Zone 1 and Zone 2 are shown in Table 1 herein Method of Apportionment. For each Fiscal Year, the City Council will levy the Special Tax until the amount of Special Taxes equals the Special Tax Requirement for Facilities. The Rate and Method defines the “Special Tax Requirement for Facilities” as that amount required in any Fiscal Year for Improvement Area No. 2 to: (i) pay debt service on all Outstanding Bonds; (ii) pay periodic costs on the Bonds, including, but not limited to, credit enhancement and rebate payments on the Bonds; (iii) pay all or a portion of the Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay directly for acquisition or construction facilities eligible under the Act and authorized to be financed in Improvement Area No. 2 to the extent that inclusion of such amount does not increase the Special Tax levy on Undeveloped Property; and (vi) pay for reasonably anticipated Special Tax delinquencies based on the delinquency rate for Special Taxes levied in 14 the previous Fiscal Year; less (vii) a credit for funds available to reduce the annual Special Tax levy, as determined by the CFD Administrator pursuant to the Fiscal Agent Agreement. The Special Tax will be levied for each Fiscal Year as follows: First: The Special Tax will be levied Proportionately on each Assessor’s Parcel of Developed Property in Zone 1 and Zone 2 at up to 100% of the applicable Maximum Special Tax to satisfy the Special Tax Requirement for Facilities; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax will be levied Proportionately on each Assessor’s Parcel of Undeveloped Property in Zone 1 and Zone 2 at up to 100% of the Maximum Special Tax for Undeveloped Property; Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, then the Special Tax will be levied Proportionally on each Assessors’ Parcel of Other Taxable Property in Zone 1 and Zone 2 at up to 100% of the Maximum Special Tax for Other Taxable Property. Notwithstanding the above, under no circumstances will the Special Tax levied in any Fiscal Year against any Assessor’s Parcel of Residential Property be increased as a consequence of delinquency or default by the owner or owners of any other Assessor’s Parcel(s) within Improvement Area No. 2 by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquencies or defaults. Prepayment of Special Taxes The Rate and Method provides that a property owner may prepay and satisfy the Special Tax obligation of an Assessor’s Parcel of Developed Property or Undeveloped Property for which a building permit has been issued, and only if there are no delinquent Special Taxes with respect to such Assessor’s Parcel at the time of prepayment. In the Fiscal Agent Agreement, the City will covenant that any prepayment that is made with respect to a parcel will be reviewed by the Special Tax Consultant who, as a precondition to the City’s acceptance of such prepayment, must certify that: (a) following the acceptance of the prepayment and the redemption of Bonds with such prepayment, the ratio of: (i) the maximum amount of the Special Taxes that may be levied on all Developed Property in the District which following such prepayment will be subject to the levy of the Special Taxes; to (ii) Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption (e.g., 1.10 to 1.0) plus a proportionate share of Administrative Expenses initially established in the amount of $60,000 will not be less than such ratio as it existed prior to such prepayment; and (b) the maximum amount of the Special Taxes that may be levied on Developed Property at build-out of the property in Improvement Area No. 2, as then approved by the City, will be equal to at least 110% of Maximum Annual Debt Service on such Outstanding Bonds plus Administrative Expenses in the amount of $60,000. In the event that additional prepayments of Special Taxes occur in the future, the net proceeds of such prepayments will be applied to effect a mandatory redemption of the Bonds. See the caption “THE BONDS— Redemption—Mandatory Redemption from Special Tax Prepayments.” One-Time Special Tax The Rate and Method provides that a homebuilder may pay a One-Time Special Tax prior to the issuance of a certificate of occupancy in an amount that is necessary to reduce or “buy down” the Maximum Special Tax to be levied against each dwelling to a level such that the total projected tax obligation, consisting of ad valorem taxes, and other charges, including special assessments and taxes, does not exceed 2% of the sales price of the home. Of the total 435 dwelling units within the Improvement Area No. 2, these “buy-downs” have been tendered by homebuilders for 31 dwelling units. One-Time Special Taxes have resulted in the reduction of the Special Tax obligation for 31 dwelling units within Improvement Area No. 2. Certificates of Occupancy have been provided for all 435 dwelling unit in Improvement Area No. 2, so there will be no further buy-downs through payment of the One-Time Special Tax. 15 Table 1 below describes the Maximum Special Tax for each Land Use Class of Developed Property and “buy-downs” in Improvement Area No. 2 16 TABLE 1 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) MAXIMUM SPECIAL TAXES FOR LAND USE CLASSES OF DEVELOPED PROPERTY Tax Zone Land Use Class Property Use Type Residential Floor Area No. of Taxable D/Us with Buy-down (1) No. of Taxable D/Us without Buy-down Highest Buydown Percentage for Land Use Class (2) FY 2019-20 Minimum Special Tax (3) FY 2019-20 Maximum Special Tax (4) 1 1 Residential Greater than 1,950 Square Feet 5 83 5.68% $3,193.86 $3,386.32 2 Residential 1,751-1,950 Square Feet 16 37 6.18 2,930.38 3,123.28 3 Residential 1,551-1,750 Square Feet 0 42 0.00 2,779.82 2,779.82 4 Residential 1,401-1,550 Square Feet 0 83 0.00 2,501.84 2,501.84 5 Residential Less than 1,401 Square Feet 10 47 7.80 2,103.28 2,281.28 6 Non-Residential Per Taxable Acre (5) 0 0 N/A 0.00 0.00 2 1 Residential Greater than 1,300 Square Feet 0 96 0.00% $2,502.98 $2,502.98 2 Residential 1,201 - 1,300 Square Feet 0 16 0.00 2,376.62 2,376.62 3 Residential Less than 1,201 Square Feet 0 0 0.00 2,166.42 2,166.42 4 Non-Residential Per Taxable Acre (5) 0 0 N/A 0.00 0.00 Taxable Dwelling Units: 31 404 (1) There are no dwelling units that have prepaid 100% of the special tax obligation. (2) Percentage shown represents the highest buy-down percentage payment received within each Land Use Class that was less than 100%. Percentage shown may include a reduction attributable to multiple buy-down payments. (3) Represents the Maximum Special Tax for each Land Use Class reduced by the highest buy-down percentage for Land Use Class. (4) Maximum estimated special tax rate reflects a levy requirement equal to estimated Improvement Area No. 2 administrative expenses, anticipated special tax delinquencies and additional required taxes for reimbursement of development costs as provided for in the Rate and Method and amount shown is applicable to dwelling units for which no buy-down payment has been received. (5) Non-Residential Property is not expected to be subject to the Special Tax. Source: Special Tax Consultant. 17 Collection and Application of Special Taxes The Special Taxes are levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes. The City has made certain covenants in the Fiscal Agent Agreement for the purpose of ensuring that the current maximum Special Tax Rate and Method of collection of the Special Taxes are not altered in a manner that would impair the City’s ability to collect sufficient Special Taxes to pay debt service on the Bonds and Administrative Expenses when due. First, the City has covenanted that: (i) to the extent that it is legally permitted to do so, it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on then existing Developed Property in the District below the amounts that are necessary to provide Special Tax Revenues in an amount equal to the estimated Administrative Expenses for the then current Fiscal Year plus an amount equal to 110% of Maximum Annual Debt Service on the Outstanding Bonds; and (ii) in the event that an ordinance is adopted by initiative which purports to reduce or otherwise alter the maximum Special Tax rates, the City will pursue legal action seeking to preserve its ability to comply with the covenant that is set forth in clause (i). See the caption “SPECIAL RISK FACTORS— Proposition 218.” Second, the City has covenanted: (i) not to exercise its rights under the Act to waive delinquency and redemption penalties related to the Special Taxes or to declare a special tax penalties amnesty program in any manner that would materially and adversely affect the interests of the owners of the Bonds; and (ii) not to permit the tender of Bonds in full or partial payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds remaining Outstanding following such tender. Although the Special Taxes constitute liens on Taxable Property within Improvement Area No. 2, they do not constitute a personal indebtedness of the owners of property within Improvement Area No. 2. Moreover, other liens for taxes and assessments already exist on the property within Improvement Area No. 2 and others could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners in Improvement Area No. 2. See the caption “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so. Under the terms of the Fiscal Agent Agreement, not later than 30 Business Days after receipt, all Special Tax Revenues that are received by the City are to be deposited in the Special Tax Fund. As soon as practicable after the receipt from the City of any Special Tax Revenues, but no later than ten Business Days after such receipt, the Fiscal Agent will withdraw from the Special Tax Fund and deposit in the Administrative Expense Fund an amount that is estimated by the City to be sufficient, together with the amount then on deposit in the Administrative Expense Fund, to pay the Administrative Expenses during the current Fiscal Year; provided, however, that the amount deposited in the Administrative Expense Fund prior to the payment of debt service on the Bonds may not exceed $60,000, escalated by two percent annually after Fiscal Year 2020-21, as determined by the City. From the amount then remaining on deposit in the Special Tax Fund, the Fiscal Agent will, on or before each Interest Payment Date, the Fiscal Agent will deposit in the Interest Account and the Principal Account of the Bond Fund the amounts that required for payment of interest on and principal of the Bonds as provided in the Fiscal Agent Agreement. Thereafter, as soon as the amount on deposit in the Special Tax Fund is sufficient, deposit in the Reserve Fund the amount, if any, which the City directs in a written communication from an Authorized Officer delivered to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely), to be withdrawn from the Special Tax Fund and deposited in the Reserve Fund to make the amount on deposit in the Reserve Fund equal to the Reserve Requirement. If after such deposits are made to the Administrative Expense Fund, the Reserve Fund, the Interest Account and the Principal Account there are funds remaining on deposit in the Special Tax Fund, the City will instruct the Fiscal Agent in a written communication from an Authorized Officer (upon which the Fiscal Agent may conclusively rely) to transfer such amount from the Special Tax Fund to and deposit it in the Reserve Fund to the extent that the amount on deposit therein is less than the Reserve Requirement. Such written communication will 18 specify the amount which is to be transferred from the Special Tax Fund and deposited in the Reserve Fund. No transfer will be made without specific written communication from the City. On September 2 of each year, beginning on September 2, 2020, after all the deposits required pursuant to the Fiscal Agent Agreement have been made, the amount, if any, on deposit in the Special Tax Fund, together with the amount then on deposit in the Principal Account, as determined by the City, may not exceed the greater of: (i) one year’s earnings on such amounts; or (ii) one-twelfth of Annual Debt Service for the then current Bond Year. If on September 2 of any year the amount on deposit in the Special Tax Fund, together with the amount then on deposit in the Principal Account, exceeds the maximum amount allowable pursuant to the preceding sentence, as determined by the City and communicated in writing by an Authorized Officer to the Fiscal Agent (upon which the Fiscal Agent may conclusively rely), moneys will be transferred from the Special Tax Fund to and deposited in the Reserve Fund to the extent that the amount on deposit in the Reserve Fund is less than the Reserve Requirement. Any such excess remaining in the Special Tax Fund after any such amount is transferred from the Special Tax Fund to the Reserve Fund, will be transferred from the Special Tax Fund to and deposited in the Administrative Expense Fund. Any such excess amount may be transferred to the City to Facilities authorized pursuant to the Resolution of Formation. Proceeds of Foreclosure Sales The net proceeds received following a judicial foreclosure sale of land within the District resulting from a landowner’s failure to pay the Special Tax when due are pledged to the payment of principal of and interest on the Bonds. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax or receipt by the City of Special Taxes in an amount which is less than the Special Tax levied, the City Council, as the legislative body of the District, may order that Special Taxes be collected by a superior court action to foreclose the lien of the delinquent Special Tax installment within specified time limits. In such an action, the real property that is subject to the unpaid amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, in the Fiscal Agent Agreement, the City will covenant for the benefit of the Owners of the Bonds that (i) it will order, and cause to be commenced, judicial foreclosure proceedings against properties with delinquent Special Taxes in excess of $10,000 by the October 1 following the close of the Fiscal Year in which such Special Taxes were due, and (ii) it will commence judicial foreclosure proceedings against all properties with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than ninety-five percent (95%) of the total Special Taxes levied, and diligently pursue to completion such foreclosure proceedings; provided, however, the City shall not be required to order and cause judicial foreclosure proceedings to be commenced against delinquent properties as long as no deficiency in the Reserve Fund exists (or is projected to exist in order to make debt service payments on the Bonds in the current or next Fiscal Year) or the City determines that the cost of pursuing such foreclosure is greater than the outstanding delinquency. If foreclosure is necessary and other funds (including amounts in the Reserve Fund) have been exhausted, debt service payments on the Bonds could be delayed until the foreclosure proceedings have ended with the receipt of any foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays that are associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City. See the caption “SPECIAL RISK FACTORS—Bankruptcy and Foreclosure.” Moreover, no assurance can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See the caption “SPECIAL RISK FACTORS—Land Values.” Although the Act authorizes the City to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes. 19 Reserve Fund In order to secure further the payment of principal of and interest on the Bonds, the City is required, upon delivery of the Bonds, to deposit $________ into the Reserve Fund and thereafter to maintain in the Reserve Fund an amount equal to the Reserve Requirement. The Fiscal Agent Agreement defines the Reserve Requirement on the date of any calculation, as determined by the City and provided in writing to the Fiscal Agent, the lesser of: (a) 10% of the proceeds of the sale of the Bonds, (b) Maximum Annual Debt Service on the Bonds, or (c) 125% of average Annual Debt Service on the Bonds; provided, however that such amount shall not exceed the Reserve Requirement calculated on the Closing Date and that the City may meet all or a portion of the Reserve Requirement by depositing a Qualified Reserve Account Credit Instrument meeting the requirements set forth in the Fiscal Agent Agreement. Subject to the limitation of the maximum amounts of the Special Tax that may be levied on taxable property within Improvement Area No. 2, as described in Appendix A, the City has covenanted to levy Special Taxes in an amount that is anticipated to be sufficient, in light of the other intended uses of the Special Tax Revenues, to maintain the balance in the Reserve Fund at the Reserve Requirement. Amounts in the Reserve Fund are to be applied: (i) to pay debt service on the Bonds, to the extent that other moneys are not available; (ii) to redeem the Bonds in whole or in part; and (iii) to pay the principal and interest due in the final year of maturity of the Bonds. See Appendix B. No Parity Bonds Except for Refunding The District and the City have covenanted in the Fiscal Agent Agreement that they will not issue any other obligations that are payable from the Special Tax Revenues which have, or purport to have, any lien upon the Special Tax Revenues that is superior to or on a parity with the lien of the Bonds. Nothing in the Fiscal Agent Agreement, however, precludes the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as or under any other law of the State, which are payable from and have a lien upon the Special Tax Revenues on a parity with the Bonds to be outstanding following the issuance of such refunding bonds. Projected Special Tax Levy Pursuant to the Rate and Method, the Special Taxes are apportioned first up to the Maximum Special Tax proportionately to each Assessor’s Parcel of Developed Property in Zone 1 and Zone 2. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Rate and Method of Apportionment of Special Taxes” and Appendix A. The principal amount of the Bonds has been determined based on the amount of Special Tax Revenues that are estimated to be generated from the levy of Special Taxes on Developed Property pursuant to the Rate and Method. 20 The table below summarizes Land Use Class and Maximum Special Taxes within Improvement Area No. 2. TABLE 2 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) SUMMARY OF ACTUAL AND MAXIMUM SPECIAL TAXES BY LAND USE CATEGORY Tax Zone Land Use Class Description Residential Floor Area Taxable Dwelling Units for FY 2019-20 Average FY 2019-20 Assigned Special Tax Per Unit (1) Maximum Special Tax Capacity for FY 2019-20 (2) FY 2019-20 Special Tax Levy (3) Percent of Total Levy 1 1 Residential Property > 1,950 SF 88 $3,381.53 $297,575 $297,575 24.94% 1 2 Residential Property 1,751-1,950 SF 53 3,093.62 163,962 163,962 13.74 1 3 Residential Property 1,551-1,750 SF 42 2,779.82 116,752 116,752 9.79 1 4 Residential Property 1,401-1,550 SF 83 2,501.84 207,653 207,653 17.41 1 5 Residential Property < 1,401 SF 57 2,259.64 128,799 128,799 10.80 1 6 Non - Residential Property N/A 2 1 Residential Property > 1,300 SF 96 2,502.98 240,286 240,286 20.14% 2 2 Residential Property 1,201-1,300 16 2,376.62 38,026 38,026 3.18 2 3 Residential Property < 1,201 SF 0 - 0 0 0.00 2 4 Non - Residential Property Non-Res 0 - 0 0 0.00 Total 435 $1,193,053 $1,193,053 100.00% ______________________ (1) Rate shown reflects the applicable average Maximum Special Tax for Fiscal Year 2019-20 based on the special tax buy-downs received as of November 1, 2019. (2) Amount shown reflects the applicable average Maximum Special Tax for Fiscal Year 2019-20 based on the special tax buy-downs received as of November 1, 2019. (3) Total levy for Fiscal Year 2019-20 was $1,193,053.40 and amount shown reflects rounding down to even cents as required by the County of Los Angeles. Source: Special Tax Consultant. 21 The table below shows coverage of estimated debt service coverage from the estimated maximum tax capacity levy on Developed Property. Pursuant to the Act, under no circumstances will the Special Taxes that are levied against any parcel of Residential Property within Improvement Area No. 2 be increased as a consequence of delinquency or default by the owner of any other parcel by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquency or default. TABLE 3 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) ESTIMATED DEBT SERVICE COVERAGE * BASED UPON FISCAL YEAR 2019-20 MAXIMUM SPECIAL TAX Period Ending Sept 1 Estimated Debt Service(1) Estimated Assigned Tax Capacity Less Estimated Administrative Expenses (2) Less Anticipated Delinquencies (3) Estimated Special Taxes Available for Debt Service* Net Debt Service Coverage 2020 $1,010,622 $1,193,053 ($60,000) ($20,000) $1,113,053 110.14% 2021 1,030,950 1,216,914 ($61,200) ($20,400) 1,135,314 110.12 2022 1,048,750 1,241,253 ($62,424) ($20,808) 1,158,021 110.42 2023 1,070,000 1,266,078 ($63,672) ($21,224) 1,181,181 110.39 2024 1,095,000 1,291,399 ($64,946) ($21,649) 1,204,805 110.03 2025 1,113,500 1,317,227 ($66,245) ($22,082) 1,228,901 110.36 2026 1,135,750 1,343,572 ($67,570) ($22,523) 1,253,479 110.37 2027 1,161,500 1,370,443 ($68,921) ($22,974) 1,278,548 110.08 2028 1,185,500 1,397,852 ($70,300) ($23,433) 1,304,119 110.01 2029 1,207,750 1,425,809 ($71,706) ($23,902) 1,330,202 110.14 2030 1,233,250 1,454,325 ($73,140) ($24,380) 1,356,806 110.02 2031 1,256,750 1,483,412 ($74,602) ($24,867) 1,383,942 110.12 2032 1,283,250 1,513,080 ($76,095) ($25,365) 1,411,621 110.00 2033 1,307,500 1,543,342 ($77,616) ($25,872) 1,439,853 110.12 2034 1,334,500 1,574,209 ($79,169) ($26,390) 1,468,650 110.05 2035 1,359,000 1,605,693 ($80,752) ($26,917) 1,498,023 110.23 2036 1,386,000 1,637,807 ($82,367) ($27,456) 1,527,984 110.24 2037 1,415,250 1,670,563 ($84,014) ($28,005) 1,558,543 110.12 2038 1,441,500 1,703,974 ($85,695) ($28,565) 1,589,714 110.28 2039 1,469,750 1,738,054 ($87,409) ($29,136) 1,621,509 110.33 2040 1,499,750 1,772,815 ($89,157) ($29,719) 1,653,939 110.28 2041 1,531,250 1,808,271 ($90,940) ($30,313) 1,687,018 110.17 2042 1,564,000 1,844,436 ($92,759) ($30,920) 1,720,758 110.02 2043 1,592,750 1,881,325 ($94,614) ($31,538) 1,755,173 110.20 2044 1,627,500 1,918,952 ($96,506) ($32,169) 1,790,277 110.00 2045 1,657,750 1,957,331 ($98,436) ($32,812) 1,826,082 110.15 2046 1,688,500 1,996,477 ($100,405) ($33,468) 1,862,604 110.31 2047 1,724,500 2,036,407 ($102,413) ($34,138) 1,899,856 110.17 2048 1,760,250 2,077,135 ($104,461) ($34,820) 1,937,853 110.09 2049 1,795,500 2,118,678 ($106,551) ($35,517) 1,976,610 110.09 Total $40,987,822 $48,399,885 ($2,434,085) ($811,362) $45,154,438 ______________________ (1) Reflects estimated debt service for pending issuance of the Bonds. (2) Assumes $60,000 for Improvement Area No. 2 administrative expenses and escalates 2% annually. (3) Assumes $20,000 for anticipated delinquencies and escalates 2% annually. The Rate and Method provides that the Special Tax Requirement for Facilities to be levied each year include an amount for anticipated delinquencies. However, such amount is only available after payment of debt service and priority administrative expenses. Source: Special Tax Consultant. * Preliminary, subject to change. 22 IMPROVEMENT AREA NO. 2 General Description of the District and Improvement Area No. 2 The District contains the Rosedale master-planned community that encompasses approximately 517 acres of which approximately 187 acres have been developed into residential units. The District is located north of the 210 Freeway at the base of the San Gabriel Mountains. The District is comprised of two improvement areas. Improvement Area No. 2 consists of approximately 35 gross acres, is fully built out and contains 435 residential dwelling units, all of which are currently subject to the levy of all or a portion of the Special Tax under the Rate and Method. The balance of the acreage in the District represents tax-exempt parcels, parks, open space and public right-of-way. The Bonds are secured and payable solely from Special Tax Revenues of both zones within Improvement Area No. 2, including foreclosure proceeds obtained within each zone. See the caption “—the Development and Property Ownership” for a description of the property within Improvement Area No. 2. All 435 residential dwelling units within Improvement Area No. 2 have been constructed, sold and are owned by individual homeowners as of November 1, 2019. Direct and Overlapping Debt The ability of the owners of land within Improvement Area No. 2 to pay the Special Taxes could be affected by the existence of other taxes and assessments imposed upon the property. Certain of these taxes relate to direct and overlapping tax and assessment debt as set forth in the below table (the “Debt Report”). The Debt Report has been derived from data that was assembled and reported to the City by California Municipal Statistics Inc. None of the City, the District or the Underwriter has independently verified the information in the Debt Report and such parties do not guarantee its completeness or accuracy. The Debt Report sets forth those entities that have issued debt and does not include entities which only levy or assess fees, charges, ad valorem taxes or other special taxes that do not secure debt. The Debt Report is included for general information purposes only. 23 TABLE 4 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) DIRECT AND OVERLAPPING DEBT SUMMARY (As of October 1, 2019) 2019-20 Local Secured Assessed Valuation: $185,071,674 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 10/1/19 Metropolitan Water District 0.006% $2,863 Citrus Community College District 0.595 518,061 Azusa Unified School District 2.460 3,313,059 City of Azusa Community Facilities District No. 2005-1 I.A. No. 2 100.000 - (1) TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $3,833,983 OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations 0.011% $271,039 Los Angeles County Superintendent of Schools Certificates of Participation 0.011 592 Los Angeles County Sanitation District No. 22 Authority 0.419 12,358 Azusa Unified School District Certificates of Participation 2.460 121,035 City of Azusa General Fund Obligations 3.553 30,025 TOTAL OVERLAPPING GENERAL FUND DEBT $435,049 COMBINED TOTAL DEBT $4,269,032 (2) Ratios to 2019-20 Local Secured Assessed Valuation: Direct Debt ................................................................ 0.00% Total Overlapping Tax and Assessment Debt ............ 2.07% Combined Total Debt ................................................. 2.31% (1) Excludes issue to be sold. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue bonds and non-bonded capital lease obligations. Source: California Municipal Statistics Inc. Estimated Assessed Value-to-Lien Ratio The value of the land within the District is significant because in the event of a delinquency in the payment of Special Taxes, the District may foreclose only against delinquent parcels. Dividing the assessed value of the property within Improvement Area No. 2 by the sum of the estimated principal amount of the Bonds of $19,840,000* results in an estimated assessed value-to-lien ratio of 9.33* to 1 for property in Improvement Area No. 2. Dividing the assessed value of property in Improvement Area No. 2 by the sum of the principal amount of the Bonds and the $3,833,983 of additional overlapping general obligation bond debt that is allocable to property within the District as set forth under the caption “- Direct and Overlapping Debt” results in an estimated assessed value-to-lien ratio of 7.82* to 1 for property in Improvement Area No. 2. The estimated assessed value-to-lien ratios for individual parcels vary. 24 The table below sets forth sample tax bills for six different land use classes in Improvement Area No. 2. TABLE 5 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) SAMPLE TAX BILLS FOR FISCAL YEAR 2019-20 Tax Zone 1 Tax Zone 2 CFD ImprArea 2 ImprArea 2 ImprArea 2 ImprArea 2 ImprArea 2 ImprArea 2 Dwelling Type SFA SFA SFA SFA SFA SFA Land Use Class LUC 4 LUC 1 LUC 1 LUC 2 LUC 2 LUC 1 Dwelling Unit Sqft 1,519 2,090 2,092 1,816 1,254 1,664 BuydownPct 0.0000% 0.0000% 2.2766% 0.0000% 0.0000% 0.0000% APN 8625-047-086 8625-035-230 8625-035-088 8625-035-162 8625-056-019 8625-056-014 Project Parson's Place Palmetto Sage Gardenia Citrus+ Palm Citrus + Palm Lot 98 46-D 171 254 37 32 Assessed Value $445,706 $555,900 $493,460 $504,073 $440,640 $507,960 Ad Valorem Property Taxes: Basic Levy $4,457.06 $5,559.00 $4,934.60 $5,040.73 $4,406.40 $5,079.60 Metropolitan Water District 15.60 19.45 17.27 17.64 15.42 17.78 Community College 96.83 120.77 107.20 109.51 95.73 110.35 Unified Schools 508.83 634.64 563.35 575.47 503.05 579.91 Total General Property Taxes $5,078.32 $6,333.86 $5,622.42 $5,743.35 $5,020.60 $5,787.64 Assessments, Special Taxes & Parcel Charges: Direct Assessments San Gabriel Valley Mosquito and Vector Control District (1) $13.84 $13.84 $13.84 $13.84 $13.84 $13.84 County Sanitation District No. 22 (2) 127.50 127.50 127.50 127.50 127.50 127.50 Regional Park and Open Space District Measure A (3) 23.10 32.51 32.08 28.14 20.38 25.80 Metropolitan Water District No. 15 Standby (4) 9.26 9.26 9.26 9.26 9.26 9.26 CFD 05-1 Services Improvement Area No. 1 (5) 396.70 396.70 396.70 396.70 374.66 374.66 CFD 05-1 Facilities Improvement Area NO. 1 (6) 2,501.84 3,386.32 3,309.22 3,123.28 2,376.62 2,502.98 Upper San Gabriel Valley Municipal Water District (7) 10.00 10.00 10.00 10.00 10.00 10.00 Trauma and Emergency Services (8) 61.22 86.15 85.01 74.58 54.01 68.39 Flood Control (9) 12.17 26.57 7.42 18.30 123.88 123.88 Safe Clean Water (10) 46.79 43.50 30.32 46.48 0.00 0.00 Fire Department - Azusa (11) 70.10 70.10 70.10 70.10 70.10 70.10 Total Assessments& Pcl Charges $3,272.52 $4,202.45 $4,091.45 $3,918.18 $3,180.25 $3,326.41 Projected Total Property Tax $8,350.84 $10,536.31 $9,713.87 $9,661.53 $8,200.85 $9,114.05 Projected Effective Tax Rate 1.87% 1.90% 1.97% 1.92% 1.86% 1.79% (1) Based on Fiscal Year 2019-20 single-family residential rate of $13.84. (2) Based on Fiscal Year 2019-20 single-family residential rate of $127.50. (3) Measure A assessment is $0.015 per square foot of developed property. (4) Based on Fiscal Year 2019-20 per parcel charge of $9.26. (5) Based on Fiscal Year 2019-20 Maximum Special Tax B of $396.70 per dwelling unit in Tax Zone 1 and $374.66 per dwelling unit in Tax Zone 2. (6) Based on Fiscal Year 2019-20 Maximum Special Tax A. (7) Based on Fiscal Year 2019-20 per acre or per parcel charge of $10.00. (8) Based on Fiscal Year 2019-20 charge of $0.0409 per square foot of structural improvement of the residence. (9) Flood Control Assessment is based on a charge of $28.85 in Flood Control Zone 1 or $5.95 in Flood Control Zone 2, multiplied by the area of parcel times an applicable runoff factor for the land use category, and then divided by 0.0637. (10) Based on Fiscal Year 2019-20 charge of $0.025 per square foot of impermeable surface of property (e.g. roof, porch, concrete). (11) Based on Fiscal Year 2019-20 single-family residential rate of $70.10. Source: Special Tax Consultant. 25 The table below set forth the value-to-lien ratio among all parcels in Improvement Area No. 2. TABLE 6 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) PARCELS VALUE-TO-LIEN RATIO * Value-to- Lien Ratio Estimated Fiscal Year 2019-20 Taxed Parcels (1) Percentage of Parcels Estimated Fiscal Year 2019-20 Special Tax Levy Gross Assessed Value (2 ) Estimated Par Amount of Bonds (3) Outstanding Other Debt (4) Total Outstanding Debt Average Value-to- Lien 0.85 to 5 29 6.97% $ 119,657 $ 7,906,878 (5) $ 1,989,850 $ 163,801 $ 2,153,650 3.67:1 5.01 to 10 372 89.42 1,036,074 168,985,659 17,229,502 3,500,742 20,730,244 8.15:1 Greater than 10 15 3.61 37,322 8,179,137 620,648 169,441 790,088 10.35:1 416 100.00% $1,193,053 $185,071,674 $19,840,000 $3,833,983 $23,673,983 7.82:1 ______________________ (1) All parcels were levied for Fiscal Year 2019-20, with the exception of one commercial parcel that is owned by the City. The County has yet to segregate four of the levied parcels (consisting of 23 dwelling units) which means that for Fiscal Year 2019-20, of the 435 taxed dwelling units, 412 dwelling units were levied taxes on segregated parcels. Additionally, there are 27 Developed parcels (consisting of four unsegregated and 23 segregated parcels) that have yet to be assigned improvement value by the County. (2) Represents the gross assessed value as shown on the unequalized Fiscal Year 2019-20 tax roll of the Los Angeles County Assessor. (3) Estimated par amount of the Bonds has been allocated to the taxed parcels in proportion to their respective Fiscal Year 2019-20 special tax obligation. (4) Includes estimated share of direct and overlapping debt of the Metropolitan Water District, the School District, and Citrus Community College District as of October 1, 2019. All debt is allocated on assessed valuation. (5) Includes two fully constructed and occupied homes with reduced valuations as a result of Senior Citizen’s Replacement Dwelling Benefit property transfers authorized by State Proposition 60 and State Proposition 90. Source: Special Tax Consultant, Los Angeles County Assessor, and California Municipal Statistics, Inc. * Preliminary, subject to change. 26 Assessed Valuation The table below summarizes the assessed valuation of the taxable property in Improvement Area No. 2 as shown on the County Assessor’s roll for Fiscal Years 2015-16 through 2019-20. TABLE 7 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) SUMMARY OF ASSESSED VALUATIONS OF TAXABLE PROPERTY Fiscal Year Land Assessed Value Improvement Assessed Value Total Assessed Value Percentage Change 2015-16 $52,809,887 $66,670,700 $119,480,587 N/A 2016-17 59,427,221 76,749,250 136,176,471 13.97% 2017-18 61,939,276 78,559,978 140,499,254 3.17 2018-19 65,086,605 80,475,746 145,562,351 3.60 2019-20 83,990,018 101,081,656 185,071,674 27.14 ______________________ Source: Special Tax Consultant and Los Angeles County Assessor Delinquency History Under the provisions of the Act, the Special Taxes, from which funds for the payment of principal of, and interest on, the Bonds are derived, will be billed to property owners in Improvement Area No. 2 on their regular property tax bills. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Special Tax installment payments cannot generally be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and Special Tax installment payments in the future. See the caption “SPECIAL RISK FACTORS—Special Tax Delinquencies.” The table below summarizes collections, delinquencies and delinquency rates of Special Taxes levied in Improvement Area No. 2 as of August 5, 2019. 27 TABLE 8 CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) SPECIAL TAX COLLECTIONS, DELINQUENCIES AND DELINQUENCY RATES Delinquencies at Fiscal Year End Delinquencies of 08/05/2019 Fiscal Year Parcels Levied Aggregate Special Tax Fiscal Year Parcels Delinquent Fiscal Year Amount Delinquent Fiscal Year Delinquency Levy Rate Parcels Delinquent as of 8/5/2019 Amount Delinquent as of 8/5/2019 Remaining Delinquency Rate 2013-14 133 $ 378,948.32 4 $4,728.60 1.25% 0 $ 0.00 0.00% 2014-15 196 768,379.00 8 10,508.68 1.37 0 0.00 0.00 2015-16 290 845,078.90 9 16,817.20 1.99 1 3,128.44 0.37 2016-17 323 861,980.00 13 21,252.73 2.47 1 2,357.54 0.27 2017-18 323 879,220.02 2 5,659.50 0.64 2 5,659.50 0.64 2018-19 327 1,035,686.00(1) 3 8,876.40 0.86 3 8,876.40 0.86 ______________________ (1) Delinquencies for Fiscal Year 2018-19 are as of August 5, 2019 reflecting payments posted on the Tax-Collector's website. Source: Los Angeles County Auditor-Controller. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales” for a discussion of the provisions that apply, and procedures that the District is obligated to follow, in the event of delinquency in the payment of Special Tax installments. 28 The Development and Property Ownership All 435 residential dwelling units within Improvement Area No. 2 have been constructed, sold and are occupied by individual homeowners as of August 1, 2019. No property owner in Improvement Area No. 2 is presently responsible for more than 0.68% of the Special Taxes levied within Improvement Area No. 2. The Rate and Method provides that a homebuilder may pay a One-Time Special Tax prior to the issuance of a certificate of occupancy in an amount that is necessary to reduce or “buy down” the Maximum Special Tax to be levied against each dwelling to a level such that the total projected tax obligation, consisting of ad valorem taxes, and other charges, including special assessments and taxes, does not exceed 2% of the sales price of the home. Of the total 435 dwelling units within Improvement Area No. 2, these “buy-downs” have been tendered by homebuilders for 31 dwelling units. Through August 5, 2019, One-Time Special Taxes have resulted in the reduction of the Special Tax obligation for 31 residential units within Improvement Area No. 2. Certificates of Occupancy have been provided for all 435 dwelling units in Improvement Area No. 2, so there will be no further buy-downs through the payment of the One-Time Special Tax. BOND INSURANCE AND DEBT SERVICE RESERVE INSURANCE The City has applied for a municipal bond insurance policy and a debt service reserve insurance policy and will decide whether to purchase any such policies in connection with the offering of the Bonds. Such information will be released prior to offering the Bonds and will be included in the Official Statement. SPECIAL RISK FACTORS The following is a discussion of certain risk factors that should be considered, in addition to other matters that are set forth in this Official Statement, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. The occurrence of one or more of the events that are discussed below could adversely affect the value of the property in Improvement Area No. 2. Moreover, the occurrence of one or more of the events that are discussed below could adversely affect the ability or willingness of property owners in Improvement Area No. 2 to pay their Special Taxes when due. Such a failure to pay Special Taxes could result in the inability of the District to make full and punctual payments on the Bonds. Concentration of Ownership; Levy Limitation on Developed Residential Property No property owner in Improvement Area No. 2 is presently responsible for more than 0.68% of the Special Taxes levied within Improvement Area No. 2. See the caption “IMPROVEMENT AREA NO. 2.” There may be subsequent transfers of ownership of the property within Improvement Area No. 2. Failure of the owners of property to pay the annual Special Taxes when due could result in a default in payments of the principal of and interest on the Bonds, which could result in the inability of the District to make payments of the principal of and interest on the Bonds when due. Such risk may be greater or its consequence more severe when ownership is concentrated and may be expected to decrease as ownership is diversified through development and sales. Pursuant to the Act, under no circumstances will the Special Taxes that are levied against any parcel of Residential Property within Improvement Area No. 2 be increased as a consequence of delinquency or default by the owner of any other parcel by more than 10% above the amount that would have been levied in such Fiscal Year had there never been any such delinquency or default. As a result, it may not be possible to levy Special Taxes at the maximum Special Tax amount. None of the owners of property in Improvement Area No. 2 is obligated in any manner to continue to own, or to develop, any of such property. The Special Taxes are not a personal obligation of the owners of the property on which such Special Taxes are levied, and no assurances can be given that the current property owners within Improvement Area No. 2 will be financially able to pay the Special Taxes levied on such property or that they will choose to pay even if financially able to do so. See the caption “—Payment of the Special Tax is Not a Personal Obligation of the Owners.” Such risk is greater and its consequence more severe when ownership is concentrated and may be expected to decrease when ownership is diversified. 29 Limited Obligations The Bonds are revenue bonds, payable exclusively from Special Taxes and other funds provided in the Fiscal Agent Agreement. The Bonds are not payable from the general funds or other moneys of the City or moneys derived from the District. Except with respect to the Special Taxes from Improvement Area No. 2, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest on the Bonds, and, except as provided in the Fiscal Agent Agreement, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City’s or the District’s property or upon any of the City’s or the District’s income, receipts or revenues, except the Special Taxes and other amounts that are pledged under the Fiscal Agent Agreement. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes.” Insufficiency of Special Taxes Under the Rate and Method, the annual amount of Special Tax to be levied on each parcel of Taxable Property in Improvement Area No. 2 will generally be based on whether such parcel is categorized as Undeveloped Property or as Developed Property and on the land use class to which a parcel of Developed Property is assigned. See Appendix A and the caption “SOURCES OF PAYMENT FOR THE BONDS—Rate and Method of Apportionment of Special Taxes.” The Rate and Method expressly exempts up to 20.36 acres of Property Owner Association Property and Public Property in Zone 1 and up to 7.35 acres of Property Owner Association Property and Public Property in Zone 2. If for any reason property within Improvement Area No. 2 becomes exempt Public Property, including, but not limited to, schools, streets, parks, storm drainage facilities, urban runoff facilities and fire and police stations, subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining taxable properties within Improvement Area No. 2. All special tax modeling has assumed that there will be 27.71 acres of exempt property, and maximum special tax rates have been determined accordingly. If more than the originally anticipated 27.71 acres becomes exempt, this could result in the owners or tenants of such property paying a greater amount of the Special Tax (subject at all times to the Maximum Special Tax) and could have an adverse impact upon the ability and willingness of the owners or tenants of such property to pay the Special Tax when due. Moreover, if a substantial portion of land within Improvement Area No. 2 became exempt from the Special Tax because of public ownership, or otherwise, the maximum Special Tax which could be levied upon the remaining property within Improvement Area No. 2 might not be sufficient to pay principal of and interest on the Bonds when due and a default could occur with respect to the payment of such principal and interest. The Special Taxes will be billed to the properties within Improvement Area No. 2 on the ad valorem property tax bills that are sent to owners of such properties. The Act provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments. Significant delinquencies in the payment of Special Tax installments, or delays in the prosecution of foreclosure proceedings to collect such Special Taxes, could result in depletion of the Reserve Fund and a default in the payment of the Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales” for a discussion of the provisions that apply, and the procedures that the District has covenanted to follow, in the event of delinquencies in the payment of Special Taxes. See the captions “—FDIC/Federal Government Interests in Properties” and “—Bankruptcy and Foreclosure” for a discussion of the policy of the Federal Deposit Insurance Corporation (the “FDIC”) regarding the payment of special taxes and assessments and limitations on the District’s ability to foreclose on the lien of the Special Taxes in certain circumstances. The annual levy of the Special Tax is subject to the maximum tax rates that are authorized. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds, will not be sufficient to pay debt service on the Bonds. Other funds that might be available include moneys and reserve fund surety policies or similar instruments that are deposited in the Reserve Fund, funds that are derived from the payment of penalties on delinquent Special Taxes and funds that are derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent. 30 The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular property and the amount of the levy of the Special Tax against such property. Thus, there will rarely, if ever, be a uniform relationship between the value of such property and the proportionate share of debt service on the Bonds, and certainly not a direct relationship. The Act provides that if any property within Improvement Area No. 2 that is not otherwise exempt from Special Taxes is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Taxes will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that if property that is subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to such property is to be treated as if it were a special assessment and paid from the eminent domain award. The constitutionality and operative effect of these provisions has not been tested in the courts. If for any reason property that is subject to Special Taxes becomes exempt from taxation by reason of ownership by a nontaxable entity such as the federal government or another public agency that asserts immunity from the Special Tax, subject to the limitation of the maximum Special Tax rates, the Special Taxes will be reallocated to the remaining properties within Improvement Area No. 2. This would result in the owners of such properties paying a greater amount of the Special Taxes and could have an adverse effect on the timely payment of the Special Taxes. Because of the problems associated with collecting taxes from public agencies, if a substantial portion of land within Improvement Area No. 2 were to become owned by public agencies, collection of the Special Taxes might become more difficult and could result in collections that might not be sufficient to pay principal of and interest on the Bonds when due, and a default could occur with respect to the payment of such principal and interest. Natural Disasters The District, like all communities in the State, may be subject to unpredictable seismic activity, fires, floods, high winds, drought, landslides or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within Improvement Area No. 2 in the event of an earthquake. There is significant potential for destructive ground-shaking during the occurrence of a major seismic event. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such an event. Improvement Area No. 2 is proximate to the Sierra Madre Fault Zone and two other faults. The local fault systems are active and required 40-foot to 100-foot setbacks for habitable structures away from the fault line which was designed into the Rosedale development. In recent years, wildfires have caused extensive damage throughout the State. Certain of these fires have burned thousands of acres and destroyed hundreds and in some cases thousands of homes. In some instances entire neighborhoods have been destroyed. Several fires which occurred in 2018 damaged or destroyed property in areas that were not previously considered to be at risk for such events. Major wildfires have occurred in portions of the City in 2016, 2014 and 2003. In 2016, the Fish Fire burned away from the City and burned approximately 4,000 acres, should a wind shift have occurred, the City would have been threatened. In 2014, the Colby Fire started in Angeles National Forest and quickly threatened the City and the City of Glendora, in the fire area footprint, 1860 structures were saved, 15 structures were destroyed and 8 structures were damages. In 2003, over 80,000 acres and over 500 homes were destroyed in wildfires in the San Gabriel and San Bernardino Mountains near Improvement Area No. 2. The majority of structures destroyed were in San Bernardino County. In addition, the land within Improvement Area No. 2 is located within a designated flood hazard zone. If a flood were to occur, the flooding would be channeled away from the structures to mitigate the impact of the flooding to the structures within Improvement Area No. 2. In the event of a severe earthquake, fire, flood, high wind event, drought, landslide or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes. On October 21, 2019, the City adopted a Local Hazard Mitigation Plan (LHMP), which covers natural disasters. The City of Azusa prepared the LHMP to help guide hazard mitigation planning and better protect the people and property of the City from the effects of hazardous events. This LHMP demonstrates the Community’s commitment to reducing risks from hazards and serves as a tool to help decision makers direct mitigation activities and resources. This LHMP was also developed so the City can be eligible for certain federal disaster assistance, 31 specifically, the Federal Emergency Management Agency’s (FEMA) Hazard Mitigation Grant Program (HMGP), Pre-Disaster Mitigation (PDM) program, and the Flood Mitigation Assistance (FMA) program. Hazard mitigation is defined by FEMA as “any sustained action taken to reduce or eliminate long-term risk to human life and property from a hazardous event.” The results of a three-year congressionally mandated independent study to assess future savings from mitigation activities provides evidence that mitigation plans are highly cost-effective. On average, each dollar spent on mitigation saves society an average of $6 in avoided future losses in addition to saving lives and preventing injuries (National Institute of Building Science Natural Hazard Mitigation Saves 2017 Interim Report). Hazard mitigation planning is the process through which hazards that threaten communities are identified, likely impacts determined, mitigation goals set, and appropriate mitigation strategies determined, prioritized, and implemented. This LHMP documents the City’s hazard mitigation planning process and identifies relevant hazards, vulnerabilities, and mitigation strategies the City will use to decrease vulnerability and increase resiliency and sustainability in the community. The Azusa LHMP is a single jurisdictional plan that geographically covers the entire area within the City’s jurisdictional boundaries. This plan was prepared pursuant to the requirements of the Disaster Mitigation Act of 2000 (Public Law 106-390) and the implementing regulations set forth by the Interim Final Rule published in the Federal Register on February 26, 2002, (44 CFR §201.6) and finalized on October 31, 2007. (Hereafter, these requirements and regulations will be referred to collectively as the Disaster Mitigation Act (DMA) or DMA 2000.) This planning effort also follows FEMA’s most current Plan Preparation and Review Guidance. The DMA 2000 emphasized the need for mitigation plans and more coordinated mitigation planning and implementation efforts. Pursuant to the DMA, the City established the City of Azusa 1-2 Local Hazard Mitigation Plan of October 2018. This LHMP by the City satisfies the requirements that local hazard mitigation plans must meet in order for a local jurisdiction to be eligible for certain federal disaster assistance and hazard mitigation funding under the Robert T. Stafford Disaster Relief and Emergency Act (Public Law 93- 288). Because the City is subject to many kinds of hazards, access to these programs and funding is vital. Hazardous Substances Neither the City nor the District is aware of the presence of any hazardous substances on the property within Improvement Area No. 2. However, if such substance was later identified, the value of a parcel may be substantially reduced. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but State laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. Further, it is possible that liabilities may arise in the future with respect to any of the parcels in Improvement Area No. 2 resulting from the existence, currently, on the parcel of a substance that is 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 that is not presently classified as hazardous but which may in the future be so classified. Such liabilities may also arise not simply from the existence of a hazardous substance but from the method of handling it. Any of these possibilities could significantly affect the willingness or ability of the owner of any parcel to pay the Special Taxes or the value of a parcel that is realizable upon a delinquency. Shapiro Decision On August 1, 2014, the California Court of Appeal, Fourth Appellate District, Division One (the “Court”), issued its opinion in City of San Diego v. Melvin Shapiro, et al. (D063997) (“Shapiro”). The case involved a 32 Convention Center Facilities District (the “CCFD”) that was established by the City of San Diego. The CCFD was a financing district that was formed pursuant to the City of San Diego’s charter (the “Charter”) and was intended to function much like a community facilities district established under the provisions of the Act. The CCFD was comprised of all of the real property in the entire City of San Diego. However, the special tax to be levied within the CCFD was to be levied only on properties that were improved with a hotel located within the CCFD. At the election to authorize such special tax, the Charter proceeding limited the electorate to owners of hotel properties and lessees of real property that was owned by a governmental entity on which a hotel is located. Thus, the election was limited to owners and lessees of properties on which the special tax would be levied, and not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was based on Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote will be by the landowners of the proposed district whose property would be subject to the special tax. The Court held that the CCFD special tax election did not comply with applicable requirements of Article XIIIA, Section 4, and Article XIIIC, Section 2, of the State Constitution, or with applicable provisions of the City of San Diego’s Charter, because the electors in such an election were not the registered voters residing within the district. In the case of the CCFD, at the time of the election there were several hundred thousand registered voters within the CCFD (viz., all of the registered voters in the City of San Diego). In the case of the District, there were no registered voters within the District at the time of the elections to authorize the special tax levy for the District, and fewer than five landowners. In Shapiro, the Court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the Court’s holding does not apply to the special tax election in the District. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax … shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act or the levy of special taxes authorized pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds or the special tax. Voters approved the Special Taxes and the issuance of bonds for the District in compliance with all applicable requirements of the Act in 2006. Therefore, under the provisions of Sections 53341 and 53359 of the Act, the statute of limitations period to challenge the validity of the Special Taxes for the District has expired. Parity Taxes and Special Assessments Property within Improvement Area No. 2 is subject to taxes and assessments that are imposed by other public agencies with jurisdiction over the land within the District. See the caption “IMPROVEMENT AREA NO. 2—Direct and Overlapping Debt.” The Special Taxes and any related penalties will constitute a lien against the lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on parity with all special taxes and special assessments that are 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. The Special Taxes have priority over all existing and future private liens imposed on the property, except for liens or security interests held by the FDIC. See the captions “—Bankruptcy and Foreclosure” and “—FDIC/Federal Government Interests in Properties.” Neither the City nor the District has control over the ability of other entities and districts to issue indebtedness that is secured by special taxes, ad valorem taxes or assessments that are payable from all or a portion of the property within Improvement Area No. 2. In addition, the landowners within Improvement Area No. 2 may, without the consent or knowledge of the District, petition other public agencies to issue public indebtedness that is secured by special taxes, ad valorem taxes or assessments. Any such special taxes, ad valorem taxes or assessments may have a lien on such property that is on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within Improvement Area No. 2 or the willingness of property owners to pay the Special Tax. 33 Disclosures to Future Purchasers The willingness or ability of an owner of a parcel to pay the Special Tax even if the value of the parcel is sufficient may be affected by whether or not the owner was given due notice of the Special Tax authorization when the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum rate and the risk of such a levy and, at the time of such a levy, has the ability to pay it as well as other expenses and obligations. The City has caused a notice of the Special Tax lien to be recorded in the Office of the County Recorder against each parcel. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within Improvement Area No. 2 or lending of money that is secured by such property. The Act requires the subdivider (or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel or unit that is subject to special taxes under the Act of the existence and maximum amount of such special taxes using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Taxes, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. Special Tax Delinquencies Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, are customarily billed to the properties within Improvement Area No. 2 on the ad valorem property tax bills that are sent to the owners of such properties. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments. Significant delinquencies in the payment of annual Special Tax installments, or delays in the prosecution of foreclosure proceedings to collect such Special Taxes, could result in default in depletion of the Reserve Fund and default in payment of debt service on the Bonds. See the caption “IMPROVEMENT AREA NO. 2—Delinquency History” for historical delinquency information with respect to property in Improvement Area No. 2. The Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (known as the Teeter Plan), as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, is not available for community facilities districts such as the District. The collection of Special Taxes is therefore subject to the risk of delinquency, while the District is also entitled to collect penalties and interest on delinquent Special Taxes. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales” for a discussion of the provisions which apply, and procedures which the City is obligated to follow under the Fiscal Agent Agreement, in the event of delinquencies in the payment of Special Taxes. See the caption “—Bankruptcy and Foreclosure” for a discussion of the policy of the FDIC regarding the payment of special taxes and assessment and limitations on the City’s ability to foreclosure on the lien of the Special Taxes in certain circumstances. In addition, the Act provides that the Special Taxes levied against any parcel of residential property may not be increased by more than 10% as a consequence of delinquency or default by the owner of any other parcel or parcels within Improvement Area No. 2. Non-Cash Payments of Special Taxes Under the Act, the City Council, as the legislative body of the District, may reserve to itself the right and authority to allow the owner of any taxable parcel to tender a Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties. A Bond so tendered is to be accepted at par and credit is to be given for any interest that has accrued to the date of the tender. Thus, if Bonds can be purchased in the secondary market at a discount, it may be to the advantage of an owner of a taxable parcel to pay the Special Taxes that are applicable to 34 such parcel by tendering a Bond. Such a practice would decrease the cash flow that is available to the District to make payments with respect to other Bonds then outstanding; and, unless the practice was limited by the District, the Special Taxes paid in cash could be insufficient to pay the debt service due with respect to such other Bonds. In order to provide some protection against the potential adverse impact on cash flows that might be caused by the tender of Bonds in payment of Special Taxes, the Fiscal Agent Agreement includes a covenant pursuant to which the District will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that to accept such tender will not result in the City having insufficient Special Tax Revenues to pay the principal of and interest on the Bonds remaining Outstanding following such tender. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Collection and Application of Special Taxes.” Payment of the Special Tax is not a Personal Obligation of the Owners The obligation to pay Special Taxes levied within Improvement Area No. 2 does not constitute a personal obligation of the current or subsequent owners of the property in Improvement Area No. 2. Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the County Superior Court. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales.” There is no assurance that any current or subsequent owner of a parcel subject to Special Taxes will be able to pay the Special Taxes, or that an owner will choose to pay such installments even if such owner is financially able to do so. Land Values The value of the property within Improvement Area No. 2 is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the City’s only remedy is to commence foreclosure proceedings in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, natural disasters or military or terrorist activities, stricter land use regulations, delays in development or other events will adversely impact the security underlying the Special Taxes. See the caption “IMPROVEMENT AREA NO. 2—Estimated Assessed Value-to-Lien Ratio.” The assessed values that are set forth in this Official Statement do not represent market values that were arrived at through an appraisal process. Rather, assessed values reflect the sales price of a parcel when the parcel is acquired by its current owner, adjusted annually by an amount that is determined by the County Assessor, generally not to exceed an increase of more than 2% per Fiscal Year, and value increases attributable to new construction. In the last several years such upward adjustment has been less than 2% annually and in certain years, the assessed value for specific parcels within Improvement Area No. 2 may have been revised downward. In recent years, many counties in the State, including the County, have reassessed certain properties that were acquired in recent years at the peak of the real estate market. The City and the District cannot predict whether the County will reduce assessed values within Improvement Area No. 2 in future years. If the County did decide to broadly reassess assessed valuations in the County, it is possible that in future years the assessed values shown in this Official Statement could be adjusted downward. Prospective purchasers of the Bonds should not assume that the land within Improvement Area No. 2 could be sold for the assessed values that are described in this Official Statement at a foreclosure sale for delinquent Special Taxes. No assurance can be given that, should a parcel with delinquent Special Taxes be foreclosed upon and sold for the amount of the delinquency, any bid will be received for such property or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. See the caption “SOURCES OF PAYMENT FOR THE BONDS— Proceeds of Foreclosure Sales.” Assessment Appeals and Proposition 8 Pursuant to State law, a property owner may apply for a reduction of the property tax assessment for such owner’s property by filing a written application, in a form prescribed by the State Board of Equalization, with the 35 appropriate county board of equalization or assessment appeals board. A property owner may also informally request a reduction. A property owner desiring to reduce the assessed value of such owner’s property in any one year must submit an application to the County Assessment Appeals Board (the “Appeals Board”). Applications for any tax year must be submitted by November 30 of such tax year. Following a review of each application by the staff of the County Assessor’s Office, the staff makes a recommendation to the Appeals Board on each application which has not been rejected for incompleteness or untimeliness or withdrawn. The Appeals Board holds a hearing and either reduces or confirms the assessment. The Appeals Board generally is required to determine the outcome of appeals within two years of each appeal’s filing date. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre- reduction level for fiscal years following the year for which the reduction application is filed. However, if the taxpayer establishes through proof of comparable values that the property continues to be overvalued (known as “ongoing hardship”), the County Assessor has the power to grant a reduction not only for the year for which application was originally made, but also for the then current year as well. Appeals for reduction in the “base year” value of an assessment, which generally must be made within three years of the date of change in ownership or completion of new construction that determined the base year, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. Moreover, in the case of any reduction in any one year of assessed value granted for “ongoing hardship” in the then current year, and also in any cases involving stipulated appeals for prior years relating to base year and personal property assessments, property tax revenues attributable to such properties will be reduced in the then current year. In practice, such a reduced assessment may remain in effect beyond the year in which it is granted. Proposition 8, which was approved by State voters in 1978 (California Revenue and Taxation Code Section 51(b)), provides for the assessment of real property at the lesser of its originally determined (base year) full cash value compounded annually by the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decline in market value. Reductions pursuant to Proposition 8 may be initiated by the County Assessor or requested by the property owner, and such reductions apply only to a single tax year. After a roll reduction is granted pursuant to Proposition 8, the property is reviewed on an annual basis to determine its full cash value and the valuation is adjusted accordingly. This may result in further reductions or in value increases. Such increases must be in accordance with the full cash value of the property and may exceed the maximum annual inflationary growth rate allowed on other properties under Article XIIIA of the State Constitution. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. The County Assessor has the ability to use Proposition 8 criteria to apply blanket reductions in valuation to classes of property affected by particular negative economic conditions. There can be no assurance that reductions will not be made in the future. For assessed valuations in Improvement Area No. 2, see the caption “IMPROVEMENT AREA NO. 2— Assessed Valuation.” Value-to-Lien Ratios The estimated value-to-lien ratios that are set forth under the caption “IMPROVEMENT AREA NO. 2— Estimated Assessed Value-to-Lien Ratio” are based on the assessed values of property in Improvement Area No. 2 and the direct and overlapping debt that is currently allocable to such property. No assurance can be given that such value-to-lien ratios will be maintained over time. As discussed in this Official Statement, many factors that are beyond the control of the City and the District could adversely affect the property values within Improvement Area No. 2. Neither the City nor the District has any control over the amount of additional indebtedness that may be issued by other public agencies, the payment of which, through the levy of a tax or an assessment, is on a parity with the Special Taxes. See the captions “—Parity Taxes and Special Assessments” and “IMPROVEMENT AREA NO. 2— Direct and Overlapping Debt.” A decrease in the property values in Improvement Area No. 2 or an increase in the 36 parity liens on property in Improvement Area No. 2, or both, could result in a lowering of the value-to-lien ratios of the property in Improvement Area No. 2. Potential Early Redemption of Bonds from Prepayments Property owners within Improvement Area No. 2 are permitted to prepay their Special Taxes at any time. Such prepayments will result in a redemption of Bonds. See the caption “THE BONDS—Redemption— Mandatory Redemption from Special Tax Prepayments.” IRS Audit of Tax-Exempt Bond Issues The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit (or by an audit of similar bonds or securities). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Internal Revenue Code (or the interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Bonds or their market value. FDIC/Federal Government Interests in Properties General. The ability of the District to collect the Special Taxes and interest and penalties as specified by State law, and to foreclose the lien of delinquent Special Taxes, may be limited in certain respects with regard to properties in which the FDIC, the Federal National Mortgage Association (“FNMA”), the IRS, the Drug Enforcement Administration or other similar federal governmental agencies has or obtains an interest. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government’s interest. This means that, unless the United States Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes (including Special Taxes) and assessments levied on the parcel, the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless the United States Congress has otherwise provided, if the federal government has a mortgage interest in a parcel and the District wishes to foreclose on the parcel to satisfy a lien of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount that is sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. In Rust v. Johnson, 597 F.2d 174 (9th Cir. 1979), the United States Court of Appeal, Ninth Circuit (the “Ninth Circuit”), held that FNMA is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. For a discussion of risks associated with taxable parcels within the District becoming owned by the federal government, federal government entities or federal government-sponsored entities, see the caption “—Insufficiency of Special Taxes.” The District has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in any of the parcels that are subject to the Special Taxes, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. FDIC. In the event that any financial institution that has made a loan which is secured by real property within the District is taken over by the FDIC, and the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the District to collect interest and penalties as specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. On June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Property Taxes (the “1991 Policy Statement”). The 1991 Policy 37 Statement was revised and superseded by new Policy Statement effective January 9, 1997 (the “Policy Statement”). The Policy Statement provides that real property that is 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 that are 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 that the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will neither pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC’s consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s consent. The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed when the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent that such lien purports to secure the payment of any such amounts. Special taxes that are imposed under the Act and a special tax formula that determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC’s federal immunity. The Ninth Circuit issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from special taxes under the Act. With respect to property in the State that was owned by the FDIC on January 9, 1997 and that was owned by the Resolution Trust Company (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 that are imposed pursuant to the 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 City and the District are unable to predict what effect the FDIC’s application of the Policy Statement would have in the event of a delinquency on a parcel within the District in which the FDIC has an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would likely reduce the number of persons who would be willing to purchase a parcel at a foreclosure sale. Owners of the Bonds should assume that the District will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, a default in payment on the Bonds. Billing of Special Taxes A special tax formula can result in a substantially heavier property tax burden being imposed upon properties within a community facilities district than elsewhere in a city or county, and this in turn can lead to problems in the collection of the special tax. In some community facilities districts (although not in the District), taxpayers have refused to pay the special tax and have commenced litigation to challenge the special tax, the community facilities district and bonds issued by the community facilities district. Under provisions of the Act, the Special Taxes are to be billed to the properties within the District that were entered on the Assessment Roll of the County Assessor by January 1 of the previous Fiscal Year. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. These Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills may also indicate an unwillingness or inability to make regular property tax payments and installment payments of Special Taxes in the future. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales” for a discussion of the provisions that apply, and that procedures that the District is obligated to follow, in the event of delinquency in the payment of installments of Special Taxes. 38 Cybersecurity As a recipient and provider of personal, private and sensitive information, the City and its departments face multiple cyber threats including, but not limited to, hacking, viruses, malware and other attacks on computers and other sensitive digital networks and systems. The City has been the target of multiple attempts to breach the City’s digital estate. In October 2018, the City’s police department, which operates on a separate IT system, was hit by malware. The cyberattack was specific to the Police Department IT and did not affect other City operations. Following the incident, law enforcement industry standards were implemented, the entire network was re-engineered and the security package was updated. In response to the incident, the City has heightened its internal control procedures, provided additional employee training and placed more stringent requirements for third-party vendors it works with. No assurances can be given that the City’s security and operational control measures will be successful in guarding against any and each cyber threat and attack. The results of any attack on the City’s computer and information technology systems could impact its operations and damage the City’s digital networks and systems, and the costs of remedying any such damage could be substantial. The City has Cyber Liability insurance coverage with its insurance provider, California Joint Powers Insurance Authority, for up to $1,000,000 per occurrence and a total of $1,000,000 per coverage year, with a $50,000 deductible per occurrence; this coverage was utilized for 2018 cyberattack and helps the City to mitigate its financial exposure to such attacks. Bankruptcy and Foreclosure The various legal opinions to be delivered concurrently with the issuance of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by bankruptcy, reorganization, insolvency or other similar laws that affect the rights of creditors generally. The payment of Special Taxes and the ability of the District to foreclose the lien of a delinquent Special Tax may be limited by bankruptcy, insolvency or other laws that affect creditors’ rights or by the laws of the State relating to judicial foreclosure. Bankruptcy, insolvency and other laws that affect creditors’ rights could adversely impact the interests of owners of the Bonds in at least two ways. First, the payment of property owners’ taxes and the ability of the District to foreclose the lien of delinquent unpaid Special Taxes pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws that affect creditors’ rights (such as the Soldiers’ and Sailors’ Relief Act of 1940 discussed below) or by the laws of the State relating to judicial foreclosure. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales.” In addition, the prosecution of a foreclosure could be delayed for many reasons, including crowded local court calendars or lengthy procedural delays. Second, the United States Bankruptcy Code might prevent moneys that are on deposit in the Special Tax Fund from being applied to pay interest on the Bonds and/or to redeem Bonds if bankruptcy proceedings were brought by or against a landowner in the District and if the court found that any of such landowners had an interest in such moneys within the meaning of Section 541(a)(1) of the United States Bankruptcy Code. Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, the amount and priority of any lien on property that secures the payment of delinquent Special Taxes could be reduced or modified if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien would then be treated as an unsecured claim by the court. Further, bankruptcy of a property owner could result in an unwillingness to pay Special Taxes, a stay or other delay in prosecuting Superior Court foreclosure proceedings. Such a delay would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Bonds and the possibility of delinquent Special Tax installments not being paid in full. 39 On July 30, 1992, the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries (“Glasply”). In that case, the court held that ad valorem property taxes that were levied by Snohomish County, Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. Although the court upheld the priority of unpaid taxes that were imposed before the bankruptcy petition, unpaid taxes that were imposed after the filing of the bankruptcy petition were declared to be “administrative expenses” of the bankruptcy estate, payable after the payment of all secured creditors. As a result, the secured creditor was able to foreclose on the property and retain all of the proceeds of the sale except the amount of the pre-petition taxes. The Bankruptcy Reform Act of 1994 included a provision which excepts from the United States Bankruptcy Code’s automatic stay provisions, “the creation of a statutory lien for an ad valorem property tax imposed by . . . a political subdivision of a state if such tax comes due after the filing of the petition [by a debtor in bankruptcy court].” This amendment effectively makes the Glasply holding inoperative as it relates to ad valorem real property taxes. However, it is possible that the original rationale of the Glasply ruling could still result in the treatment of post- petition special taxes as “administrative expenses,” rather than as tax liens secured by real property, at least during the pendency of bankruptcy proceedings. According to the court’s ruling, as administrative expenses, post-petition taxes would be paid, assuming that the debtor had sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise), it would at that time become subject to current ad valorem taxes. The Act provides that the Special Taxes are secured by a continuing lien which is subject to the same lien priority in the case of delinquency as ad valorem taxes. No case law exists with respect to how a bankruptcy court would treat the lien for Special Taxes levied after the filing of a petition in bankruptcy. Glasply is controlling precedent on bankruptcy courts in the State. If the Glasply precedent was applied to the levy of the Special Taxes, the amount of Special Taxes received from parcels whose owners declare bankruptcy could be reduced. Other laws generally affecting creditors’ rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as: (i) a stay in enforcement of the foreclosure covenant; (ii) a six-month period after termination of military service to redeem property sold to enforce the collection of a tax or assessment; and (iii) a limitation on the interest rate on the delinquent tax or assessment to persons in military service if a court concludes that the ability to pay such taxes or assessments is materially affected by reason of such service. No Acceleration Provision The Bonds and the Fiscal Agent Agreement do not provide for the acceleration of the Bonds in the event of a payment default or other default under the Bonds or the Fiscal Agent Agreement. Similarly, there is no provision in the Act for the acceleration of the Special Taxes in the event of a payment default by an owner of a parcel within the District, or upon any adverse change in the tax status of interest on the Bonds. See Appendix C for a description of remedies that are available to Bond Owners in the event of a default under the Fiscal Agent Agreement. Loss of Tax Exemption As discussed under the caption “TAX MATTERS,” interest on the Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds as a result of a failure of the City to comply with certain provisions of the Internal Revenue Code of 1986, as amended, or certain legislative changes that occur after the issuance of the Bonds. Should such an event of taxability occur, the Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional redemption provisions of the Fiscal Agent Agreement. 40 Limitations on Remedies Remedies that are available to the owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of interest on the Bonds. Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Fiscal Agent Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws that affect the enforcement of creditors’ rights, by equitable principles and by the exercise of judicial discretion. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the owners of the Bonds. Limited Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the City has committed to provide certain statutorily-required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. See the captions “CONTINUING DISCLOSURE.” The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information, or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Proposition 218 An initiative measure, Proposition 218, which is referred to as the “Right to Vote on Taxes Act” (the “Initiative”) was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Articles XIIIC and XIIID to the State Constitution. According to the “Title and Summary” of the Initiative that was prepared by the State Attorney General, the Initiative limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” Provisions of the Initiative have been and will continue to be interpreted by the courts. The Initiative could potentially impact the Special Taxes that are available to the District to pay the principal of and interest on the Bonds as described below. Among other things, Section 3 of Article XIIIC states that “…the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or to terminate the levy of any special tax that is pledged to repay any debt that was incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854, which states that: “Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution.” Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds. 41 It may be possible, however, for voters or the City Council, acting as the legislative body of the District, to reduce the Special Taxes in a manner that does not interfere with the timely repayment of the Bonds, but that does reduce the maximum amount of Special Taxes that may be levied in any year below existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts that are greater than the amount that is necessary for the timely retirement of the Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so, the District has covenanted that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on parcels of Developed Property within the District below the amounts that are necessary to provide Special Tax Revenues in an amount equal to estimated Administrative Expenses for the current Fiscal Year plus an amount equal to 110% of Maximum Annual Debt Service on the Outstanding Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS— Collection and Application of Special Taxes.” In connection with the foregoing covenant, the District has made a legislative finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District also has covenanted that, in the event that an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants. The interpretation and application of the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See the caption “—Limitations on Remedies.” Ballot Initiatives The Initiative was adopted pursuant to a measure that qualified for the ballot pursuant to the State’s Constitutional initiative process, and the State Legislature has in the past enacted legislation that has altered the spending limitation or established minimum funding provisions for particular activities. On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiative. From time to time, other initiative measures could be adopted by State voters or legislation enacted by the State Legislature. The adoption of any such initiative or enactment of legislation might place limitations on the ability of the State, the County or local districts to increase revenues or appropriations or on the ability of a property owner to develop or redevelop property within the District. CONTINUING DISCLOSURE Pursuant to a Continuing Disclosure Certificate, dated as of _______ 1, 2019 (the “Disclosure Certificate”), the City, for and on behalf of the District, has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system certain annual financial information and operating data concerning the District (the “Annual Report”). The Annual Report is to be filed not later than nine (9) months after the end of the City’s fiscal year (currently March 31 based on the City’s fiscal year end of June 30), beginning March 31, 2020, and is to include audited financial statements of the City. The requirement that the City file its audited financial statements as a part of the Annual Report has been included in the Disclosure Certificate solely to satisfy the provisions of the Rule. The inclusion of such information does not mean that the Bonds are secured by any resources or property of the City other than as described in this Official Statement. See the caption “SOURCES OF PAYMENT FOR THE BONDS” and “SPECIAL RISK FACTORS—Limited Obligations.” The proposed form of the Disclosure Certificate is set forth in Appendix C. The City and its related entities have previously entered into continuing disclosure undertakings under the Rule in connection with the issuance of municipal obligations. A review of compliance with continuing disclosure undertakings for filings required by the City within the last five years indicates that the City may not have fully complied with its prior continuing disclosure undertakings under the Rule. Identification of the below described events does not constitute a representation by the City that the late filings were material. In the past five years, the 42 City did not timely file annual reports for its prior continuing disclosure undertakings, such filings were made between 1 and 406 days late. Further, the City is aware that not all of the required information was included in certain years with respect to the continuing disclosure undertaking entered into in connection with the issuance of its 2003 Lease Revenue Refunding Certificates of Participation. The City has made supplemental filings and believes that it is currently in compliance with its continuing disclosure undertakings. [UPDATE/CONFIRM] In order to promote compliance by the City and its related entities with their respective continuing disclosure undertakings, the City has retained Urban Futures, Inc. and Special District Financing & Administration, LLC. TAX MATTERS In the opinion of 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 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 interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum tax. 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 Bonds. The City, for and on behalf of the District, has covenanted to comply with certain restrictions designed to insure that interest on the Bonds will not be included in federal gross income. Failure to comply with these covenants may result in interest on the Bonds being included in federal gross income, possibly from the date of original issuance of the 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 occurring) after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Owners from realizing the full current benefit of the tax status of such interest. As one example, legislative proposals are announced from time to time which generally would limit the exclusion from gross income of interest on obligations like the Bonds to some extent for taxpayers who are individuals and whose income is subject to higher marginal income tax rates. Other proposals have been made that could significantly reduce the benefit of, or otherwise affect, the exclusion from gross income of interest on obligations like the Bonds. The introduction or enactment of any such legislative proposals, clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. Certain requirements and procedures contained or referred to in the Fiscal Agent Agreement, the Tax Certificate, and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the 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 the exclusion from gross income of interest on any Bond if any such change occurs or action is taken or omitted upon the advice or approval of counsel other than Best Best & Krieger LLP. The IRS has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of other similar bonds). Although Bond Counsel is of the opinion that interest on the 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 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 status of the 43 Bondowner or the Owner’s other items of income or deduction, and Bond Counsel expresses no opinion regarding any such other tax consequences. A copy of the proposed form of opinion of Bond Counsel is set forth in Appendix D. LEGAL MATTERS The legal opinion of Best Best & Krieger LLP, Riverside, California, approving the validity of the Bonds, in substantially the form set forth in Appendix D, will be made available to purchasers at the time of original delivery. A copy of the legal opinion for the Bonds will be provided with each definitive bond. Best Best & Krieger LLP, Riverside, California is serving as Disclosure Counsel to the City and the District with respect to the Bonds. Certain legal matters will be passed on for the City and the District by Best Best & Krieger LLP, Irvine, California, as City Attorney, for the Underwriter by its counsel Kutak Rock LLP, Los Angeles, California, and for the Fiscal Agent by its counsel. LITIGATION No litigation is pending or threatened concerning the validity of the Bonds or the pledge of Special Taxes to repay the Bonds, and a certificate of the City to that effect will be furnished to the Underwriter at the time of the original delivery of the Bonds. The City is not aware of any litigation, pending or threatened, that questions the existence of the District or the City or contests the authority of the City to levy and collect the Special Taxes or to issue the Bonds. In 2015, the School District filed a lawsuit against developers within the District, the City and numerous other parties. The School District claimed that the master developer within the District was in violation of a 2004 agreement and sought to compel the City to cease issuing building permits for property within the District based on various theories and causes of action. The trial court denied the School District’s request for a writ of mandate and found for the City, and against the School District, on all the causes of action directed against the City. The School District appealed that decision. The Court of Appeal upheld the trial court’s ruling and judgment, affirming that the City had no liability to the School District. Subsequently, the School District dismissed from its action, with prejudice, all other defendants except the Developer. Thus, the Developer was the only party who remained in the action. [UPDATE WITH DETAILS REGARDING SETTLEMENT AGREEMENT TO COME] RATING S&P Global Ratings, a Standard & Poor’s Financial Services LLC business (“S&P”) has assigned a rating of “___” to the Bonds based on the issuance of the municipal bond insurance policy. Such rating reflects only the views of S&P, and any desired explanation of the significant of such rating may be obtained from S&P. Generally, a rating agency bases its rating on the information and materials that are furnished to it and on investigations, studies and assumptions of its own. Such rating is not a recommendation to buy, sell or hold the Bonds. There is no assurance that such rating will remain in effect for any given period of time or such rating will not be revised, either downward or upward, or withdrawn entirely by S&P if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal could have an adverse effect on the market price of the Bonds. UNDERWRITING The Underwriter has agreed to purchase the Bonds at a price of $_______ (being $___________.00 aggregate principal amount of the Bonds, less Underwriter’s discount of $_____ and plus/less a net original issue premium/discount of $_____). The purchase agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in such purchase agreement, the approval of certain legal matters by counsel and certain other conditions. 44 The initial offering prices stated on the inside front cover page of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agent and others at prices lower than said public offering prices. PENDING LEGISLATION The City is not aware of any significant pending legislation that would have material adverse consequences on the Bonds or the ability to pay the principal of and interest on the Bonds when due. MUNICIPAL ADVISOR The District has retained Urban Futures, Inc., Tustin, California, as municipal advisor (the “Municipal Advisor”) in connection with the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information that is contained in this Official Statement. The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. (Balance of this page intentionally left blank) 45 ADDITIONAL INFORMATION The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Summaries and explanations of the Bonds and related documents in this Official Statement do not purport to be complete, and reference is made to such documents for full and complete statements and their provisions. This Official Statement is submitted only in connection with the sale of the Bonds for the District. This Official Statement does not constitute a contract with the purchasers of the Bonds. The execution and delivery of this Official Statement by the City Manager of the City have been duly authorized by the City Council of the City, acting in its capacity as the legislative body of the District. CITY OF AZUSA for and on behalf of CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) By: City Manager A-1 APPENDIX A AMENDED AND RESTATED RATE AND METHOD OF APPORTIONMENT FOR IMPROVEMENT AREA NO. 2 OF CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) B-1 APPENDIX B SUMMARY OF FISCAL AGENT AGREEMENT The following is a summary of certain provisions of the Fiscal Agent Agreement which are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the respective agreements for a full and complete statement of the provisions thereof. C-1 APPENDIX C FORM OF CONTINUING DISCLOSURE CERTIFICATE OF THE CITY Upon issuance of the Bonds, the City proposes to enter into a Continuing Disclosure Certificate in substantially the following form: This Continuing Disclosure Certificate, dated as of _______ 1, 2019 (the “Disclosure Certificate”), is executed and delivered by the City of Azusa (the “Issuer”), for and on behalf of City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the “District”), in connection with the issuance and delivery by the Issuer of its $___________ City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the “Bonds”). The Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of _______ 1, 2019 (the “Fiscal Agent Agreement”), by and between the Issuer and Wilmington Trust, National Association, as fiscal agent (the “Fiscal Agent”). The Issuer covenants as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. SECTION 2. Definitions. In addition to the definitions set forth in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: “Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Annual Report Date” shall mean the date that is nine (9) months after the end of the Issuer’s fiscal year (currently March 31 based on the Issuer’s fiscal year end of June 30). “Beneficial Owner” shall mean any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income purposes. “Disclosure Representative” shall mean the City Manager or the Director of Finance of the Issuer, or their designee, or such other officer or employee as the Issuer shall designate in writing from time to time. “Dissemination Agent” shall mean, initially, the Issuer, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Issuer and which has filed with the then current Dissemination Agent a written acceptance of such designation. “Financial Obligation” shall mean (a) a debt obligation; (b) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) guarantee of (a) or (b). The term “Financial Obligation” does not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. “Fiscal Year” shall mean the period from July 1 to June 30, or any other period selected by the Issuer as its fiscal year. “Improvement Area No. 2” shall mean Improvement Area No. 2 of City of Azusa Community Facilities District No. 2005-1 (Rosedale). “Listed Events” shall mean any of the events listed in Section 5(a) and (b) of this Disclosure Certificate. C-2 “MSRB” shall mean the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future “Official Statement” shall mean the Official Statement dated ________, 2019 relating to the Bonds. “Participating Underwriter” shall mean the original Underwriter’ of the Bonds that are required to comply with the Rule in connection with offering of the Bonds. “Rule” shall mean 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. “State” shall mean the State of California. SECTION 3. Provision of Annual Reports. (a) The Issuer shall, not later than the Annual Report Date, commencing with the report due on March 31, 2020, provide to the MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. 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 4 of this Disclosure Certificate; provided that the audited financial statements of the Issuer may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report; and provided further that the first Annual Report shall consist solely of the Official Statement. An Annual Report shall be provided at least annually notwithstanding any Fiscal Year longer than 12 calendar months. The Issuer’s Fiscal Year is currently effective from July 1 to the immediately succeeding June 30 of the following year. The Issuer will promptly notify the MSRB and the Fiscal Agent of a change in its Fiscal Year. (b) Not later than fifteen (15) business days prior to each Annual Report Date, the Issuer shall provide the Annual Report to the Dissemination Agent (if other than the Issuer). If the Issuer is unable to provide to the MSRB an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the MSRB in a timely manner in the manner prescribed by the MSRB. (c) The Dissemination Agent shall: (i) determine each year prior to March 1 the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and (b) if the Dissemination Agent is other than the Issuer, certify to the Issuer that the Annual Report has been filed with the MSRB pursuant to this Disclosure Certificate, and stating, to the extent that it can confirm such filing of the Annual Report, the date that it was filed. SECTION 4. Content of Annual Report. The Issuer’s Annual Report shall contain or include by reference: (a) The audited financial statements of the Issuer for the most recent Fiscal Year of the Issuer then ended. If the Issuer prepares audited financial statements and if the audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the Issuer in a format similar to the financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements of the Issuer shall be audited by such auditor as shall then be required or permitted by State law or the Fiscal Agent Agreement. Audited financial statements, if prepared by the Issuer, shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, that the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the Issuer shall modify the basis upon which its financial statements are prepared, the Issuer shall provide the information referenced in Section 8(d) below. C-3 (b) Financial and Operating Data. The Annual Report shall contain or incorporate by reference the following information: (i) the principal amount of Bonds outstanding as of the September 2 preceding the filing of the Annual Report; (ii) the balance in each fund under the Fiscal Agent Agreement as of the September 2 preceding the filing of the Annual Report; (iii) any changes to the Rate and Method of Apportionment of the Special Taxes approved or submitted to the qualified electors for approval prior to the filing of the Annual Report and a summary of the facts related to the collection of any Backup Special Tax and a description of any parcels for which the Special Taxes have been prepaid, including the amount prepaid, since the date of the last Annual Report; (iv) in the event assessed valuations have decreased since the Official Statement, an update substantially in the form of the direct and overlapping debt table in the Official Statement; (v) in the event assessed valuations have decreased since the Official Statement, the total assessed value of all parcels within Improvement Area No. 2 on which the Special taxes are levied, as shown on the assessment roll of the Los Angeles County Assessor last equalized prior to the September 2 preceding the filing of the Annual Report, and a statement of assessed value-to-lien ratios therefor, either by individual parcel or by categories; (vi) any event known to the Issuer which reduces the taxable parcels within the District; (vii) a table, substantially in the form of Table 8 in the Official Statement, setting forth for the five most recent Fiscal Years in which Special Taxes were levied, the amount of Special Taxes levied in each Fiscal Year and the percentage delinquent as of June 30 of such Fiscal Year and as of the date of the Annual Report, and a description of the status of any foreclosure actions being pursued by the Issuer with respect to delinquent Special Taxes; and (viii) any information not already included under (i) through (vi) above that the Issuer is required to file in its annual report to the California Debt and Investment Advisory Commission pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended. (c) Any or all of the items listed in subsections (a) or (b) above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, in a timely manner not more than ten (10) Business Days after the event: (i) Principal and interest payment delinquencies. (ii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iii) Unscheduled draws on credit enhancements reflecting financial difficulties. (iv) Substitution of credit or liquidity providers, or their failure to perform. (v) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability or Notices of Proposed Issue (IRS Form 5701 TEB). C-4 (vi) Tender offers. (vii) Defeasances. (viii) Rating changes. (ix) Bankruptcy, insolvency, receivership or similar proceedings. (x) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the District, any of which reflect financial difficulties. Note: For the purposes of the event identified in subparagraph (ix), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a timely manner not more than ten (10) business days after occurrence: (i) Unless described in Section 5(a)(v), other notices or determinations by the Internal Revenue Service with respect to the tax status of the securities or other events affecting the tax status of the securities. (ii) Modifications to the rights of security holders. (iii) Bond calls. (iv) Release, substitution or sale of property securing repayment of the securities. (v) Non-payment related defaults. (vi) The consummation of a merger, consolidation or acquisition involving the obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms. (vii) Appointment of a successor or additional trustee or paying agent or the change of the name of a trustee or paying agent. (viii) Incurrence of a Financial Obligation of the District or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the District, any of which affect security holders. (c) If the Issuer determines that knowledge of the occurrence of a Listed Event under subsection (b) would be material under applicable federal securities laws, and if the Dissemination Agent is other than the Issuer, the Issuer shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB in a timely manner not more than ten (10) business days after the event. Notwithstanding the foregoing, notice of Listed Event described in subsection (b)(iii) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Owners of affected Bonds pursuant to the Fiscal Agent Agreement. C-5 (d) If the Issuer determines that a Listed Event under subsection (b) would not be material under applicable federal securities laws and if the Dissemination Agent is other than the Issuer, the Issuer shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence. (e) The Issuer hereby agrees that the undertaking set forth in this Disclosure Certificate is the responsibility of the Issuer and, if the Dissemination Agent is other than the Issuer, the Dissemination Agent shall not be responsible for determining whether the Issuer’s instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. The obligation of the Issuer under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the form or content of any notice or report prepared by the Issuer pursuant to this Disclosure Certificate. The Dissemination Agent may resign by providing 30 days’ written notice to the Issuer and the Fiscal Agent. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the Issuer and shall have no duty to review any information provided to it by the Issuer. The Dissemination Agent shall have no duty to prepare any information report, nor shall the Dissemination Agent be responsible for filing any report not provided to it by the Issuer in a timely manner and in a form suitable for filing. SECTION 8. Amendment. (a) This Disclosure Certificate may be amended, without the consent of the Owners, if all of the following conditions are satisfied: (i) such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law (including rules or regulations) or in interpretations thereof, or a change in the identity, nature or status of the Issuer or the type of business conducted thereby; (ii) this Disclosure Certificate as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (iii) the Issuer shall have obtained an opinion of a nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the same effect as set forth in clause (ii) above and to the effect that the amendment does not materially impair the interests of the Owners or Beneficial Owners. (b) This Disclosure Certificate may be amended upon obtaining consent of Owners in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of the Owners of the Bonds, provided that the conditions set forth in Section 8(a)(i), (ii) and (iii) have been satisfied. (c) To the extent any amendment to this Disclosure Certificate results in a change in the type of financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change. (d) If an amendment is made to the basis on which financial statements are prepared, the Annual Report 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 accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, 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 information. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice C-6 of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer 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 Certificate, the Issuer shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice if occurrence of a Listed Event. The Issuer acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and the Rule, may apply to the Issuer, and that under some circumstances compliance with this Disclosure Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the Issuer under such laws. SECTION 10. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate, any Owner 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 Issuer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer or the Fiscal Agent to comply with this Disclosure Certificate shall be an action to compel performance. No Owner or Beneficial Owner may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the Issuer satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the Issuer shall have refused to comply therewith within a reasonable time. SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Fiscal Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Issuer agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the Issuer for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. In performing its duties hereunder, the Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the Issuer, the Owners, or any other party. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 13. Notices. Notices should be sent in writing to the following addresses. The following information may be conclusively relied upon until changed in writing. Disclosure Representative: Director of Administrative Services City of Azusa 213 E. Foothill Blvd. Azusa, California 91702 Fiscal Agent: Wilmington Trust, National Association 650 Town Center Drive, Suite 600 Costa Mesa, California 92626 C-7 Participating Underwriter: Stifel, Nicolaus & Company, Incorporated One Montgomery Street, 35th Floor San Francisco, California 94104 CITY OF AZUSA, for and on behalf of CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE), COUNTY OF LOS ANGELES, STATE OF CALIFORNIA By: Director of Administrative Services D-1 APPENDIX D FORM OF OPINION OF BOND COUNSEL [TO COME] E-1 APPENDIX E BOOK-ENTRY ONLY SYSTEM The information in this Appendix concerning DTC and DTC’s book-entry only system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The 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 bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each 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. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. E-2 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the 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 upon DTC’s receipt of funds and corresponding detail information from the District or the Fiscal Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Fiscal Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Fiscal Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Fiscal Agent, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Fiscal Agent. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Fiscal Agent’s DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, bonds will be printed and delivered to DTC. THE FISCAL AGENT, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. F-4 APPENDIX F GENERAL INFORMATION CONCERNING THE CITY OF AZUSA AND THE REGION The following information is presented as general background data. The Bonds are payable solely from the Special Taxes as described in the Official Statement. The taxing power of the City of Azusa, the County of Los Angeles, the State of California or any political subdivision thereof is not pledged to the payment of the Bonds. General The City of Azusa (the “City”) was incorporated as a general law city in 1898, and is administered by a Council-Manager form of government. The four City Council members are elected at-large for four-year terms. Elections are staggered at two-year intervals. The office of mayor is elected at-large for a two-year term. The election coincides with those of the Council members. The City Council appoints the City Manager to manage the City’s staff and implement the policies established by the Council. The City is full-service except for its Fire Department which is contracted with Los Angeles County Fire Department. The City owns and operates an electric public utility for its citizens providing electric services to customers within the City limits. The City also owns and operates a water system whose service territory includes the City and adjoining portions of neighboring cities and unincorporated areas of the County of Los Angeles. The City is strategically located off the 210 Freeway within a 30 minute drive to Pasadena, Orange County, Inland Empire, and the Ontario International Airport. In addition to its convenient freeway access, Azusa offers several major traffic corridors, including the renowned U.S. Route 66 (Foothill Boulevard) which runs east to west through the community. The California State Route 39 runs north to the newly designated San Gabriel Mountains National Monument and south to the beach. The City covers approximately 10 square miles and boasts a diverse population of nearly 50,000. The estimated median household income is over $57,000. The City is proud of its mix of small businesses, support services, manufacturers, and large institutional employers such as Azusa Pacific University. The City is home to two Metro Gold Line Light Rail Stations as part of the Foothill Gold Line from Pasadena to Azusa. The stations are located in the heart of downtown, Azusa Downtown Station, and adjacent to Azusa Pacific University and Citrus College, APU/Citrus College Station. Population The following table offers population figures for the City, the County and the State of California (the “State”) as of January 1, 2015 through January 1, 2019. CITY OF AZUSA , COUNTY OF LOS ANGELES-LONG BEACH-GLENDALE METROPOLITAN AREA AND STATE OF CALIFORNIA POPULATION 1/1/2015 1/1/2016 1/1/2017 1/1/2018 1/1/2019 City of Azusa 49,398 49,691 49,992 50,237 51,313 County of Los Angeles 10,155,753 10,185,851 10,226,920 10,254,658 10,253,716 State of California 38,952,462 39,214,803 39,504,609 39,740,508 39,927,315 ______________________ Source: State of California, Department of Finance, E-4 Population Estimates for Cities, Counties, and the State, 2011-2019, with 2010 Benchmark. F-5 Construction Activity The following table shows building permit valuations and new housing units in the City for calendar years 2014 through 2018. CITY OF AZUSA NEW HOUSING UNITS AND BUILDING PERMIT VALUATIONS 2014 THROUGH 2018 2014 2015 2016 2017 2018 Valuation $101,964,571 $50,241,607 $48,114,099 $53,977,842 $44,422,626 Total New Housing Units 298 112 110 158 189 ______________________ Source: City of Azusa. Employment The following table lists the largest employers located in the County. COUNTY OF LOS ANGELES PRINCIPAL EMPLOYERS 2018 (except as noted) Los Angeles 107,400 (1) Los Angeles Unified School District 104,300 (2) University of California, Los Angeles 65,600 (2) City of Los Angeles (including DWP) 61,900 (2) Federal Government (non-Defense Dept.)* 43,600 (1) Kaiser Permanente 37,400 (3) State of California (non-education) 29,800 (3) University of Southern California 21,000 (3) Northrop Grumman Corp. 16,600 (3) Providence Health & Services 15,900 (3) ______________________ * Includes U.S. Postal Service (1) California Employment Development Department, 2018 (see “Note” below). (2) Government Compensation in California, 2017 (see “Note” below). (3) Los Angeles Business Journal Employer Survey/Estimates, 2018. Note: Employment numbers from “Government Compensation in California” (source #2) may differ from employment numbers directly reported by the employer. Numbers from this source reflect every individual receiving a paycheck for any amount during any part of the year. Source: “Largest Employers in Los Angeles County” from Los Angeles Almanac. F-6 The following table lists the ten largest employers located in the City. CITY OF AZUSA LARGEST TEN EMPLOYERS AS OF JUNE 30, 2018 2017-2018 Employer Number of Employees Rank Percentage of Total City Employment Azusa Pacific University 2,632 1 10.40% Azusa Unified School District* 1,752 2 6.92 Northrop Grumman 901 3 3.56 City of Azusa 357 4 1.41 Costco Wholesale Corporation 312 5 1.23 S&S Foods LLC 300 6 1.19 Hanson Distribution Company 220 7 0.87 Buena Vista Food Products 178 8 0.70 OJ Insulation 165 9 0.65 Target Store 155 10 0.61 Total Number of Employees of Largest Ten Employers 6,972 27.54% Total Number of Employees in City 25,300(1) ______________________ (1) Total City labor force provided by Employment Development Department Labor Force Data. Source: Comprehensive Annual Financial Report of the City of Azusa, California for the Fiscal Year ended June 30, 2018. F-7 Employment and Industry Employment data by industry is not separately reported on an annual basis for the City, but is compiled for the County. The following table represents the Annual Average Labor Force and Industry Employment for the County of Los Angeles Metropolitan Statistical Area for calendar years 2015 through 2018 and preliminary information through August 2019. COUNTY OF LOS ANGELES-LONG BEACH-GLENDALE METROPOLITAN AREA INDUSTRY EMPLOYMENT & LABOR FORCE - BY ANNUAL AVERAGE 2015 2016 2017 2018 2019* Civilian Labor Force 4,989,800 5,041,400 5,096,500 5,136,300 5,101,800 Civilian Employment 4,659,700 4,776,700 4,853,800 4,896,500 4,861,400 Civilian Unemployment 330,100 264,800 242,700 239,800 240,400 Civilian Unemployment Rate 6.6% 5.3% 4.8% 4.7% 4.7% Total Farm 5,000 5,300 5,700 4,800 5,400 Total Nonfarm 4,285,800 4,394,600 4,448,300 4,510,100 4,544,000 Total Private 3,717,300 3,817,900 3,862,200 3,920,500 3,982,000 Goods Producing 497,300 497,100 490,300 491,600 504,600 Mining, Logging and Construction 129,000 136,300 140,400 147,900 160,000 Mining and Logging 2,900 2,400 2,000 1,900 2,000 Construction 126,100 133,900 138,400 146,000 158,000 Manufacturing 368,200 360,800 349,900 343,700 344,600 Service Providing 3,788,500 3,897,400 3,958,000 4,018,500 4,039,400 Trade, Transportation & Utilities 822,200 835,600 845,700 850,900 847,600 Wholesale Trade 222,400 222,100 221,500 222,800 221,700 Retail Trade 422,200 424,600 426,100 425,300 416,900 Transportation, Warehousing & Utilities 177,600 188,900 198,200 202,800 209,000 Utilities 12,100 11,900 11,500 11,600 11,700 Information 207,600 229,400 214,900 217,400 214,400 Financial Activities 215,600 219,800 221,600 223,000 223,900 Professional & Business Services 591,000 600,100 608,800 620,000 637,700 Educational & Health Services 745,900 772,700 800,600 823,600 840,500 Leisure & Hospitality 486,600 510,000 524,600 534,300 549,800 Other Services 151,000 153,300 155,700 159,700 163,500 Government 568,500 576,700 586,100 589,600 562,000 Total, All Industries 4,290,700 4,399,900 4,454,000 4,514,900 4,549,400 ______________________ Note: Does not include proprietors, self-employed, unpaid volunteers or family workers, domestic workers in households and persons involved in labor-management trade disputes. Employment reported by place of work. Items may not add to total due to independent rounding. The “Total, All Industries” data is not directly comparable to the employment data found in this Appendix F. * Preliminary through August 2019 Source: State of California Employment Development Department. F-8 The following table summarizes the labor force, employment and unemployment figures over the past five years for the City, the County, the State and the nation as a whole. CITY OF AZUSA , COUNTY OF LOS ANGELES, STATE OF CALIFORNIA AND UNITED STATES AVERAGE ANNUAL CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT Year and Area Labor Force Employment(1) Unemployment(2) Unemployment Rate (%) 2014 City of Azusa 23,600 22,200 1,500 6.2% Los Angeles County 4,992,600 4,580,300 412,300 8.3% California 18,827,900 17,418,000 1,409,900 7.5 United States 155,922,000 146,305,000 9,617,000 6.2 2015 City of Azusa 24,000 22,800 1,200 5.0% Los Angeles County 4,989,800 4,659,700 330,100 6.6 California 18,981,800 17,798,600 1,183,200 6.2 United States 157,130,000 148,834,000 8,296,000 5.3 2016 City of Azusa 24,799 23,500 1,300 3.9% (3) Los Angeles County 5,041,400 4,776,700 264,800 5.3 California 18,981,800 17,798,600 1,183,200 6.2 United States 159,187,000 151,436,000 7,751,000 4.9 2017 City of Azusa 25,100 23,900 1,200 4.3% (3) Los Angeles County 5,096,500 4,853,800 242,700 4.8 California 18,981,800 17,798,600 1,183,200 6.2 United States 160,320,000 153,337,000 6,982,000 4.4 2018 City of Azusa 25,200 24,100 1,100 4.5%(3) Los Angeles County 5,136,300 4,896,500 239,800 4.7 California 18,981,800 17,798,600 1,183,200 6.2 United States 162,075,000 155,761,000 6,314,000 3.9 2019 (5) City of Azusa 25,000 23,900 1,100 4.5% Los Angeles County 5,101,800 4,861,400 240,400 4.7 California 19,424,900 18,617,500 807,400 4.2 United States 164,039,000 158,269,000 5,769,000 3.5 ______________________ (1) Data may not add due to rounding. The unemployment rate is calculated using unrounded data. (2) Labor force data for all geographic areas for 1990 to 2018 now reflect the March 2018 annual revision (or benchmark) and Census 2014 population controls at the state level. (3) Data from Table 21 in City’s Comprehensive Annual Financial Report for Fiscal Year ending June 30, 2018. (4) As of December 2018. (5) August 2019 (Preliminary) Source: California Employment Development Department and U.S. Department of Labor, Bureau of Labor Statistics, April 19, 2019, March 2018 Benchmark; Comprehensive Annual Financial Report of the City of Azusa, California for the Fiscal Year ended June 30, 2018. F-9 Retail Sales The table below presents the City’s retail permits and transactions for calendar years 2011 through 2016. CITY OF AZUSA TAXABLE TRANSACTIONS (IN THOUSANDS) Year Retail Permits Retail Stores Taxable Transactions Total Permits Total Taxable Transactions 2011 567 $331,797 941 $416,943 2012 580 358,371 950 444,314 2013 553 369,992 911 462,152 2014 567 376,369 916 477,260 2015 602 338,455 1,011 447,264 2016 N/A 340,457 N/A 437,554 2017 N/A 360,220 N/A 453,643 ______________________ Source: “Taxable Sales in California (Sales & Use Tax),” California State Board of Equalization. 4815-4518-6473.2 $[___________] CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) BOND PURCHASE AGREEMENT [__________], 2019 City Manager City of Azusa 213 East Foothill Boulevard Azusa, California 91702 Honorable Members of the Governing Board: The undersigned, Stifel, Nicolaus & Company, Incorporated, as underwriter (the “Underwriter”), offers to enter into this bond purchase agreement (the “Purchase Agreement”) with the City of Azusa (the “City”), acting for itself and on behalf of Community Facilities District No. 2005-1 (Rosedale) (the “District”), which will be binding upon the City and the Underwriter upon the acceptance hereof by the City. This offer is made subject to its acceptance by the City by execution of this Purchase Agreement and its delivery to the Underwriter on or before 11:59 p.m., California time, on the date hereof and, if not so accepted, will be subject to withdrawal by the Underwriter upon written notice delivered to the City at any time prior to the acceptance hereof by the City. All capitalized terms not otherwise defined herein shall have the meanings given to such terms in the Fiscal Agent Agreement, dated as of [_______] 1, 2019 (“Fiscal Agent Agreement”), by and between the City and Wilmington Trust, National Association (the “Fiscal Agent”). The City, for itself and acting on behalf of the District, acknowledges and agrees that (i) the purchase and sale of the Bonds (as defined below) pursuant to this Purchase Agreement is an arm’s-length commercial transaction between the City, acting for itself and on behalf of the District, and the Underwriter, (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as principal and not as the agent or fiduciary of the City or the District, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the City or the District with respect to (a) the offering of the Bonds or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the City or the District on other matters) or (b) any other obligations to the City or the District with respect to the offering contemplated hereby, except the obligations expressly set forth in this Purchase Agreement or otherwise imposed by law and (iv) the City has consulted their own legal, financial and other advisors to the extent each has deemed appropriate in connection with this transaction. The City, for itself and acting on behalf of the District, acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required underwriter disclosure under Rule G-17 of the Municipal Securities Rulemaking Board (the “MSRB”). The City, for itself and acting on behalf of the District, acknowledges that it has engaged Urban Futures, Incorporated, as its municipal advisor (as defined in Securities and Exchange Commission Rule 15Ba1 (“Rule 15Bal”), and will rely on the advice of Urban Futures, Incorporated. Attachment 6 2 4815-4518-6473.2 1. Purchase and Sale. Upon the terms and conditions and upon the basis of representations, warranties and agreements hereinafter set forth, the Underwriter hereby agrees to purchase from the City for offering to the public, and the City hereby agrees to sell to the Underwriter for such purpose, all (but not less than all) of the City of Azusa Community Facilities District No. 2005-1 (Rosedale) 2019 Special Tax Bonds (Improvement Area No. 2) (the “Bonds”). The purchase price for the Bonds shall be $[_______] (being the principal amount of the Bonds, less an Underwriter’s discount in the amount of $[________], and [plus/minus] [net] original issue [premium/discount] of $[______]). [As an accommodation to the City, the Underwriter shall wire directly to the Insurer $[_______] representing the premiums with respect to the Municipal Bond Insurance Policy and the Reserve Fund Surety Policy.] The Bonds shall be dated the Closing Date (as defined herein) and shall have the maturities and bear interest (payable semi-annually on March 1 and September 1 in each year, commencing [March 1, 2020]) at the rates per annum and maturing on the dates and in the amounts, and with mandatory sinking fund payments, as set forth in Appendix A hereto. The purchase price for the Bonds shall be the amount specified as such in Appendix A hereto. Payment for and delivery of the Bonds, and the other actions contemplated hereby, shall take place on the “Closing Date,” which is [_________]. 2019 (or such other date as may be agreed to between the City and the Underwriter). The Bonds shall be issued in book-entry form pursuant to the book-entry system of The Depository Trust Company (“DTC”) and shall be delivered through the facilities of DTC on the Closing Date. 2. Authorization Instruments and Law. The Bonds shall be substantially in the form described in and shall be issued and secured under the provisions of the Fiscal Agent Agreement. The Bonds and interest thereon shall be secured by a pledge of certain proceeds of, and payable from, the special tax levied and collected on taxable property within Improvement Area No. 2 (the “Improvement Area”) of the District (the “Special Taxes”) by the District in accordance with the Rate and Method of Apportionment of Special Tax as set forth in Resolution No. 06-C39, adopted by the Governing Board on June 5, 2006 (the “Resolution of Formation”). The Bonds shall be subject to redemption as provided in the Fiscal Agent Agreement and as set forth in Appendix A hereto. The District was formed pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, constituting Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the “Act”). The Bonds shall be as described in the Fiscal Agent Agreement and the Official Statement relating to the Bonds (which, together with the cover page and all appendices, exhibits, maps, reports and statements included therein or attached thereto and such amendments or supplements thereto which shall be approved by the Underwriter and the City, is hereinafter called the “Official Statement”). The proceeds of the Bonds shall be used by the City as described in the Official Statement to: (i) finance the acquisition and construction of certain improvements of the City and certain public school facilities of the Azusa Unified School District (he “School District”), (ii) fund a reserve fund for the Bonds or purchase a debt service reserve insurance policy, and (iii) pay costs of issuance of the Bonds[, including the premiums for the municipal bond insurance policy and eh debt service reserve insurance policy]. 3. Establishment of Issue Price. (a) The Underwriter agrees to assist the City in establishing the issue price of the Bonds and shall execute and deliver to the City at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Appendix D, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the City and Bond Counsel, to 3 4815-4518-6473.2 accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. (b) [Except as otherwise set forth in Appendix A attached hereto,] the City will treat the first price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity. At or promptly after the execution of this Bond Purchase Agreement, the Underwriter shall report to the City the price or prices at which the Underwriter has sold to the public each maturity of Bonds. [If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the City the prices at which Bonds of that maturity have been sold by the Underwriter to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until either (i) all Bonds of that maturity have been sold or (ii) the 10% test has been satisfied as to the Bonds of that maturity, provided that, the Underwriter’s reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter, the City or bond counsel.] For purposes of this Section, if Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Bonds. (c) The Underwriter has offered the Bonds to the public on or before the date of this Bond Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Appendix A attached hereto, except as otherwise set forth therein. (d) The Underwriter confirms that: (1) any agreement among underwriters, any selling group agreement and each third-party distribution agreement (to which the Underwriter is a party) relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each Underwriter, each dealer who is a member of the selling group and each broker-dealer that is a party to such third-party distribution agreement, as applicable: (A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter, and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter and as set forth in the related pricing wires, and (B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), (C) to acknowledge that, unless otherwise advised by the Underwriter, dealer or broker-dealer, the Underwriter shall assume that each order submitted by the Underwriter, dealer or broker-dealer is a sale to the public. (2) any agreement among underwriters or selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each Underwriter or dealer that is a party to a third- party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) 4 4815-4518-6473.2 report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or dealer, and (B) comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires. (e) The City acknowledges that, in making the representations set forth in this section, the Underwriter will rely on (i) the agreement of each Underwriter to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in an agreement among underwriters and the related pricing wires, (ii) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the- offering-price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (iii) in the event that an Underwriter or dealer who is a member of the selling group is a party to a third-party distribution agreement that was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the third-party distribution agreement and the related pricing wires. The City further acknowledges that each Underwriter shall be solely liable for its failure to comply with its agreement regarding the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, and that no Underwriter shall be liable for the failure of any other Underwriter, or of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a third-party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds. (f) The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section. Further, for purposes of this section (1) “public” means any person other than an underwriter or a related party; (2) “underwriter” means (A) any person that agrees pursuant to a written contract with the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the public); (3) a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if 5 4815-4518-6473.2 both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and (4) “sale date” means the date of execution of this Purchase Agreement by all parties. 4. Delivery of Official Statement. As soon as practicable and no later than seven (7) business days after its acceptance hereof but in no event less than three days prior to the Closing, and in sufficient time to accompany any confirmation that requests payment from a purchaser, the City shall deliver to the Underwriter such reasonable number of copies of the Official Statement as the undersigned may request in order to comply with Rule 15c2-12 of the Securities and Exchange Commission (the “Rule”), applicable MSRB’s rules and other regulatory requirements relating to the issuance and sale of the Bonds. The City authorizes the Underwriter to file, and the Underwriter agrees to file or cause to be filed, the Official Statement with the MSRB or its designee (including the MSRB’s Electronic Municipal Market Access system) or other repositories approved from time to time by the Securities and Exchange Commission (either in addition to or in lieu of the filings referred to above). The City hereby authorizes the use of the Official Statement in connection with the public offering and sale of the Bonds. The City also consents to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement, dated [_________]. 2019, relating to the Bonds (which, together with the cover page and all appendices, exhibits, maps, reports and statements included therein and attached thereto, is herein called the “Preliminary Official Statement”) in connection with the public offering of the Bonds. The City hereby ratifies the use by the Underwriter of the Preliminary Official Statement, the Fiscal Agent Agreement, the Continuing Disclosure Certificate (defined below), and other documents or contracts to which the City or the District is a party, including this Purchase Agreement, and all information contained therein, and all other documents, certificates, and written statements furnished by the City to the Underwriter in connection with the transactions contemplated by this Purchase Agreement, or in connection with the offer and sale of the Bonds. The City represents that the Preliminary Official Statement, at the time of its distribution by the Underwriter, was and is the “deemed-final” Official Statement within the meaning of the Rule, except for the omission of no more than the following information: the offering price(s), interest rate(s), selling compensation, aggregate principal amounts, principal amount per maturity and delivery date of the Bonds. It is an express condition of the offer of the Underwriter made hereby that the City deliver the Official Statement, in a form deemed by it to be final, within seven business days of the date hereof but in no event less than three days prior to the Closing; and the delivery of an Official Statement executed by representatives of the City shall conclusively establish that the City deems the document so delivered to be final. A failure of the City to comply with the requirements of the preceding sentence shall entitle the Underwriter to rescind its offer hereunder. The Underwriter agrees that prior to the time the final Official Statement relating to the Bonds is available, the Underwriter will send to any potential purchaser of the Bonds, upon the request of such potential purchaser, a copy of the most recent Preliminary Official Statement. The Preliminary Official Statement and/or the Official Statement may be delivered in printed and/or electronic form to the extent permitted by applicable rules of the MSRB and as may be agreed to by the City and the Underwriter. The City confirms that it does not object to distribution of the Preliminary Official Statement or the Official Statement in electronic form. A 6 4815-4518-6473.2 copy of the most recent Preliminary Official Statement sent to a potential purchaser shall be sent by first-class mail or electronically (or other equally prompt means) not later than the first business day following the day upon which each such request is received. To assist the Underwriter in complying with the Rule, the City will undertake, pursuant to the Fiscal Agent Agreement and pursuant to that certain Continuing Disclosure Certificate, in the form attached to the Official Statement as an appendix (the “Continuing Disclosure Certificate”), executed by the City, for an on behalf of the District, to provide annual reports and notices of certain events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement. 5. City Representations, Warranties and Covenants. The City, acting for itself and on behalf of the District, represents, warrants and covenants to the Underwriter that: (a) Due Organization, Existence and Authority of City. The City is duly organized and existing under the Constitution and laws of the State of California (the “State”), and has, and at the Closing Date will have, full legal right, power and authority, for and on behalf of the District, (i) to enter into this Purchase Agreement, (ii) to enter into the Fiscal Agent Agreement, (iii) to execute the Continuing Disclosure Certificate, (iv) to enter into the Second Amendment to Funding and Acquisition Agreement, dated as of [_______] 1, 2019, by and between the City and Rosedale Land Partners II, LLC (the “Second Amendment to Funding and Acquisition Agreement”), (v) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (vii) to carry out and consummate the transactions on its part contemplated by this Purchase Agreement, Ordinance No. [_____], authorizing the levying of Special Taxes within the Improvement Area, adopted by the City, as the legislative body of the District (the “Ordinance”), the Fiscal Agent Agreement and the Official Statement. The Fiscal Agent Agreement, the Continuing Disclosure Certificate, this Purchase Agreement and the Second Amendment to Funding and Acquisition Agreement are collectively referred to herein as the “City Documents.” The City, as the legislative body of the District, has duly and validly called, held and conducted an election within the Improvement Area to approve the levy of the Special Taxes and the issuance of bonds, including the Bonds. (b) Due Authorization and Approval of City. By all necessary official action of the City, acting for itself and as the legislative body of the District, the City has duly authorized and approved the adoption or execution and delivery by the City of, and the performance by the City of the obligations on its part contained in, the City Documents, and has approved the use by the Underwriter of the Preliminary Official Statement and the execution and delivery of the Official Statement and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the parties thereto, the Bonds and the City Documents will constitute the legally valid and binding obligations of the City for and on behalf of the District, enforceable against the City in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors' rights generally. The City has complied, and will at the Closing (as hereinafter defined) be in compliance in all respects, with the obligations on its part to be performed on or prior to the Closing Date under the City Documents. The City has duly authorized the issuance and sale of the Bonds pursuant to a resolution adopted by the City Council of the City on [_________]. 2019 (the “Bond Resolution”). (c) Preliminary Official Statement and Official Statement Accurate. The information with respect to the City, the District and Improvement Area No. 2 contained in the Preliminary Official Statement and the Official Statement was as of the date of the Preliminary Official Statement and is, and at all times subsequent to the date of the Official Statement up to 7 4815-4518-6473.2 and including the Closing Date will be, true and correct in all material respects, and such information does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) Proceedings Affecting Use of Official Statement. The City will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. (e) Agreement to Amend or Supplement Official Statement. During the period ending on the 25th day after the End of the Underwriting Period (as defined below), the City (i) shall not adopt any amendment of or supplement to the Official Statement to which, after having been furnished with a copy, the Underwriter objects in writing or which is disapproved by the Underwriter (the Underwriter’s approval of such amendment or supplement may not be unreasonably withheld) and (ii) shall notify the Underwriter promptly if any event shall occur, or information comes to the attention of the City that is reasonably likely to cause the Official Statement (whether or not previously supplemented or amended) to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. If, in the opinion of the Underwriter, such event requires the preparation and distribution of a supplement or amendment to the Official Statement, the City shall immediately prepare and furnish the Underwriter (at the expense of the City) a reasonable number of copies of an amendment or supplement to the Official Statement (in form and substance satisfactory to the Underwriter) which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time such supplemental Official Statement is delivered to a purchaser, not misleading. If any such amendment or supplement of the Official Statement shall occur after the Closing Date, the City also shall furnish, or cause to be furnished, such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy of any such amendment or supplement to the Official Statement. For purposes hereof, the phrase “End of the Underwriting Period” shall occur on the later of (a) the Closing Date or (b) when the Underwriter no longer retain an unsold balance of the Bonds; unless otherwise advised in writing by the Underwriter on or prior to the Closing Date, or otherwise agreed to by the City and the Underwriter, the City may assume that the End of the Underwriting Period is the Closing Date. (f) No Material Breach or Default. As of the time of acceptance hereof and as of the Closing Date, except as otherwise disclosed in the Official Statement, the City is not or will not be in breach of or in default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States of America, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument which breach, default or event could have a material adverse effect on the City’s ability to perform its obligations under the Bonds or the City Documents; and, as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the Bonds and the City Documents and compliance by the City with the obligations on its part to be performed in each of such agreements or instruments does not and will not conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the 8 4815-4518-6473.2 United States of America, or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the City (or any of its officers in their respective capacities as such) or the City is subject, or by which it or any of its properties is bound, the result of which would be to materially adversely affect the City’s ability to perform its obligations under the Bonds or the City Documents, nor will any such authorization, execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties or under the terms of any such law, regulation or instrument, except as may be provided by the City Documents, the result of which would be to materially adversely affect the City’s ability to perform its obligations under the Bonds or the City Documents. (h) No Litigation. At the time of acceptance hereof there is, and as of the Closing Date there will be, other than as disclosed in the Official Statement, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body (collectively and individually, an “Action”) pending with respect to which the City or the District has been served with process or to the best knowledge of the authorized officers of the City threatened, in which any such Action (i) in any way questions the existence of the City or the titles of the officers of the City to their respective offices, (ii) in any way questions the formation or existence of the District or the status of the City as the legislative body of the District, (iii) affects, contests or seeks to prohibit, restrain or enjoin the issuance or delivery of any of the Bonds, or the payment or collection of any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contests or affects the validity of the City Documents or the consummation of the transactions on the part of the City contemplated thereby, or contests the exclusion of the interest on the Bonds from federal or the interest on the Bonds from State income taxation or contests the powers of the City or its authority to levy and collect the Special Taxes in the Improvement Area, (iv) may result in any material adverse change in an amount which will affect payment of the debt service on the Bonds or (v) contests the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or asserts that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances upon which they were made, not misleading; and as of the time of acceptance hereof and as of the Closing Date, to the knowledge of the officer of the City, for itself and on behalf of the District, executing this Purchase Agreement, there is no basis for any action, suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (v) of this sentence. (i) Further Cooperation; “Blue Sky”. The City will furnish such information, execute such instruments and take such other action at the sole expense of, and in cooperation with, the Underwriter as the Underwriter may reasonably request at the sole cost and expense of the Underwriter in order to (i) 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 of America as the Underwriter may designate and (ii) determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as is required for the distribution of the Bonds; provided, however, that the City 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. (j) Bonds Issued Pursuant to Fiscal Agent Agreement. The Bonds, the Fiscal Agent Agreement, the Resolution and the City Documents conform as to form and tenor to the descriptions thereof contained in the Official Statement. The City represents that the Bonds, 9 4815-4518-6473.2 when issued, executed and delivered in accordance with the Fiscal Agent Agreement and sold to the Underwriter as provided herein, will be validly issued and outstanding obligations of the City, entitled to the benefits of the Fiscal Agent Agreement and the security of the pledge of the proceeds of the levy of the Special Taxes received by the District. The Fiscal Agent Agreement creates a valid pledge of the moneys in certain funds and accounts established pursuant to the Fiscal Agent Agreement, including the investments thereof subject in all cases to the provisions of the Fiscal Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein. (k) Special Taxes. The Special Taxes of the Improvement Area constituting the security for the Bonds have been duly and lawfully authorized and may be levied under the Act and the Constitution and the applicable laws of the State, and pursuant to the Act such Special Taxes, when levied, will constitute a valid and legally binding lien on the properties upon which they have been levied. (1) Consents and Approvals. All authorizations, approvals, licenses, permits, consents, elections, and orders of or filings with any governmental authority, legislative body, board, agency or commission having jurisdiction in the matters which are required by the Closing Date for the due authorization of, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by the City of, its obligations in connection with the City Documents have been duly obtained or made and are in full force and effect, except the filing of Form 8038-G with the Internal Revenue Service; however, such form shall be filed by the City in a timely manner so as to ensure the tax-exempt status of the Bonds. (m) No Other Bonds. Between the date of this Purchase Agreement and the Closing Date, the City will not offer or issue any bonds, notes or other obligations of the City for borrowed money not previously disclosed to the Underwriter. (n) No Transfer Taxes. The issuance and sale of the Bonds is not subject to any transfer or other documentary stamp taxes of the State or any political subdivision thereof. (o) Compliance with Internal Revenue Code. The City has covenanted to comply with the Internal Revenue Code of 1986, as amended (the “Code”), with respect to the Bonds; and the City shall not knowingly take or omit to take any action that, under existing law, may adversely affect the exclusion from gross income for federal income tax purposes, of the interest on the Bonds or the exemption from any applicable State tax of the interest on the Bonds. (p) Certificates. Any certificate signed by any authorized officer of the City and delivered to the Underwriter in connection with the issuance and sale of the Bonds shall be deemed to be a representation and covenant by the City to the Underwriter as to the statements made therein. (q) Bond Proceeds. The City, for and on behalf of the District, will apply the proceeds of the Bonds in accordance with the terms of the Fiscal Agent Agreement and as described in the Official Statement. (r) Public Debt. Except as disclosed in the Official Statement, to the knowledge of the officer of the City executing this Purchase Agreement and without investigation of any kind, no other public debt secured by an ad valorem tax, a special tax or a benefit assessment levied by the City or the District on the land in the Improvement Area is in the process of being authorized by the City or the District and no assessment districts or other districts have been or are in the process of being formed by the City which include any portion of the land within the Improvement Area. All outstanding debt secured by special taxes, benefit 10 4815-4518-6473.2 assessment or ad valorem levies for general obligation bonds of the City and all authorized but unissued debt secured by special taxes, benefit assessment or ad valorem levies for general obligation bonds of the City, or the City on behalf of the District, which is applicable to the property within the Improvement Area is accurately described in the Official Statement. (s) Disclosure Compliance. Except as disclosed in the Official Statement, based on a review of its prior undertakings and except as described in the Official Statement, the City has not failed to comply in any material respect with any continuing disclosure undertaking previously entered into pursuant to the provisions of the Rule for each of the past five (5) years. 6. The Closing. At 9:00 a.m., Pacific time, on the Closing Date, or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the City and the Underwriter, (i) the City will deliver the Bonds to the Underwriter through the facilities of DTC utilizing DTC’s FAST delivery system, in definitive form, bearing CUSIP® numbers, and duly executed by the City and authenticated by the Fiscal Agent as provided in the Fiscal Agent Agreement, and (ii) the City will deliver the closing documents hereinafter mentioned at the offices of Best Best & Krieger LLP, Riverside, California (“Bond Counsel”) or another place to be mutually agreed upon by the City and the Underwriter. The Underwriter will accept delivery and pay the purchase price of the Bonds as set forth in Section 1 hereof in federal funds payable to the order of the City or its designee. These payments and deliveries, together with the delivery of the aforementioned documents, are herein called the “Closing.” The form of the Bonds will be made available to the Underwriter for inspection not less than four (4) days prior to the Closing. 7. Closing Conditions. The Underwriter has entered into this Purchase Agreement in reliance upon the representations and covenants herein and the performance by the City of its obligations hereunder, both as of the date hereof and as of the Closing, delivered as of the Closing Date, and contained in the certificates delivered as of the Closing Date and in reliance upon the representations and covenants set forth in the various documents and certificates referenced in Section 8 hereof. The Underwriter’s obligations under this Purchase Agreement are and shall be subject to the following additional conditions: (a) Bring-Down Representations. The representations and covenants of the City contained herein shall be true and correct at the date hereof and at the time of the Closing, as if made on the Closing Date. (b) Executed Agreements and Performance Thereunder. At the time of the Closing (i) the City Documents shall be in full force and effect, and shall not have been amended, modified or supplemented except with the written consent of the Underwriter, (ii) there shall be in full force and effect such resolutions as, in the opinion of Bond Counsel, shall be necessary on or prior to the Closing Date in connection with the transactions on the part of the City contemplated by this Purchase Agreement, the Official Statement and the City Documents, (iii) the City shall perform or have performed its obligations required or specified in the City Documents to be performed at or prior to Closing, and (iv) the Official Statement shall not have been supplemented or amended except as otherwise may have been agreed to in writing by the Underwriter. (c) No Default. At the time of the Closing, no default shall have occurred or be existing under this Purchase Agreement, the Procedural Resolutions (as defined below) or the City Documents; and the City shall not be in default in the payment of principal or interest on any of its bonded indebtedness which default shall adversely impact the ability of the City to make payment on the Bonds. 11 4815-4518-6473.2 (d) Closing Documents. At or prior to the Closing, the Underwriter shall have received each of the documents (which may be in an electronic form) required under Section 8 below. (e) Termination Events. The Underwriter (by a written notice to the City terminating the obligation of the Underwriter to accept delivery of and make any payment for the Bonds) shall have the right to terminate this Purchase Agreement, without liability therefor, by written notification to the City if at any time prior to the Closing: (i) any event or circumstance shall occur which causes any statement contained in the Official Statement to be materially misleading or results in a failure of the Official Statement to state a material fact necessary to make the statements in the Official Statement, in the light of the circumstances under which they were made, not misleading and, in either such event, the City refuse to permit the Official Statement to be supplemented to supply such statement or information, or the effect of the Official Statement as so supplemented is to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds; or (ii) the marketability of the Bonds or the market price thereof, or the ability of the Underwriter to enforce contracts for the sale of the Bonds, in the reasonable opinion of the Underwriter, has been materially adversely affected by an amendment to the Constitution of the United States of America or by any legislation in or by the Congress of the United States of America or by the State, or the amendment of legislation pending as of the date of this Purchase Agreement in the Congress of the United States of America, or the recommendation to Congress or endorsement for passage (by press release, other form of notice or otherwise) of legislation by the President of the United States of America, any member of the President’s Cabinet, the Treasury Department of the United States of America, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or the proposal for consideration of legislation by either such Committee, or the presentment of legislation for consideration as an option by either such Committee, or by the staff of the Joint Committee on Taxation of the Congress of the United States of America, or the favorable reporting for passage of legislation to either House of the Congress of the United States of America by a Committee of such House to which such legislation has been referred for consideration, or any decision of any federal or State court or any ruling or regulation (final, temporary or proposed) or official statement on behalf of the United States Treasury Department, the Internal Revenue Service or other federal or State authority materially adversely affecting the federal or State tax status of the City, the interest on bonds or notes or obligations of the general character of the Bonds or the market price of the Bonds; or (iii) legislation shall be enacted by the Congress of the United States of America, or shall have been favorably reported out of committee or be pending in committee, or shall have been recommended to the Congress for passage by the President of the United States of America or a member of the President’s Cabinet, or a decision by a court of the United States of America shall be rendered, or a stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission or any other governmental agency having jurisdiction of the 12 4815-4518-6473.2 subject matter shall be issued or made to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the issuance, offering or sale of the Bonds, including all underlying obligations, as contemplated hereby or by the Official Statement, is in violation or would be in violation of, or that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration under, any provision of the federal securities laws, including the Securities Act of 1933, as amended, and as then in effect, or that the Fiscal Agent Agreement must be qualified under the Trust Indenture Act of 1939, as amended and as then in effect; or (iv) additional material restrictions not in force as of the date hereof, including minimum or maximum prices for trading, having been fixed and in force, or maximum ranges for prices for securities having been required and in force 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 (v) a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or (vi) any new restriction on transactions in securities materially affecting the market for securities (including the imposition of any limitation or interest rates) or the extension of credit by, or a charge to the net capital requirements of credit by, or a charge to net capital requirements of, Underwriter shall have been established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States of America or by Executive Order; or (vii) a general suspension of trading in securities on the New York Stock Exchange or other major exchange or a general banking moratorium shall have been established by federal, State of New York or State authorities; or (viii) the United States of America 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 of America, being such as, in the reasonable opinion of the Underwriter, would affect materially and adversely the ability of the Underwriter to market the Bonds; or (ix) except as disclosed in or contemplated by the Official Statement, any material adverse change in the affairs of the City or the District shall have occurred; or (x) a decision by a court of the United States of America shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds, including the underlying obligations as contemplated by this Purchase Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Bonds, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Exchange Act and the Trust Indenture Act; or 13 4815-4518-6473.2 (xi) the commencement of any action, suit, proceeding, inquiry or investigation, at law or in equity, as set forth in Section 5(h) hereof. 9. Closing Documents. At or prior to the Closing, the Underwriter shall have received each of the following documents, in each case satisfactory in form and substance to the Underwriter: (a) Bond Opinion. The approving opinions of Bond Counsel, dated the Closing Date and substantially in the forms included as an appendix 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 opinions addressed to the City may be relied upon by the Underwriter to the same extent as if such opinions were addressed to them. (b) Supplemental Opinion. A supplemental opinion of Bond Counsel addressed to the Underwriter, in form and substance acceptable to the Underwriter, and dated the Closing Date to the following effect: (i) This Purchase Agreement has been duly authorized, executed and delivered by the City, acting for itself and as the legislative body of the District, and constitutes the legal, valid and binding obligation of the City and the District, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, moratorium or other laws affecting enforcement of creditors' rights, or by the application of equitable principles if equitable remedies are sought; (ii) The District and the Improvement Area are duly established and validly existing under the laws of the State of California, including the Act; (iii) The Bonds conform as to form and tenor to the description thereof contained under the captions “INTRODUCTION,” “THE BONDS,” “SECURITY FOR THE BONDS” “TAX MATTERS” and “LITIGATION,” “SUMMARY OF FISCAL AGENT AGREEMENT” in Appendix B of the Official Statement and “FORM OF OPINION OF BOND COUNSEL” in Appendix D of the Official are accurate insofar as such statements purport to summarize certain provisions of the Act, the Bonds, the Fiscal Agent Agreement or applicable provisions of the United States Internal Revenue Code; and (iv) The Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Fiscal Agent Agreement is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended. (c) City Attorney Opinion. An opinion, dated the Closing Date and addressed to the Underwriter and the City of the City Attorney of the City, addressing the matters set forth in Appendix B hereto. (d) Closing Certificate of the City. A certificate of the City substantially in the form of Appendix C hereto. (e) Fiscal Agent’s Certificate. A Certificate of the Fiscal Agent, dated the Closing Date, to the effect that: (i) the Fiscal Agent is authorized to carry out corporate trust powers, and have full power and authority to perform its duties under the Fiscal Agent Agreement; (ii) the Fiscal Agent is duly authorized to execute and deliver the Fiscal Agent Agreement, to accept the obligations created by the Fiscal Agent Agreement and to authenticate the Bonds pursuant to the terms of the Fiscal Agent Agreement; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over 14 4815-4518-6473.2 the Fiscal Agent that has not been obtained is or will be required for the authentication of the Bonds or the consummation by the Fiscal Agent of the other transactions contemplated to be performed by the Fiscal Agent in connection with the authentication of the Bonds and the acceptance and performance of the obligations created by the Fiscal Agent Agreement; and (iv) to the best of its knowledge, compliance with the terms of the Fiscal Agent Agreement will not conflict with, or result in a violation or breach of, or constitute a default under, any material agreement or material instrument to which the Fiscal Agent is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Fiscal Agent or any of its activities or properties. (0 Fiscal Agent’s Incumbency Certificate. A certified copy of a certificate of an officer of the Fiscal Agent, certifying as to the incumbency, signature and signing authority of the officers who have executed and delivered the Fiscal Agent Agreement and have agreed to accept the duties of Fiscal Agent under the Fiscal Agent Agreement. (p) Fiscal Agent’s Counsel Opinion. An opinion, dated the date of the Closing addressed to the City and the Underwriter, of Fiscal Agent’s Counsel, to the effect that (i) the Fiscal Agent is a national banking association duly organized and validly existing under the laws of the jurisdiction of its organization and has the corporate power to execute and deliver the Fiscal Agent Agreement, and any other documentation relating to the Fiscal Agent Agreement, (ii) the execution and delivery by the Fiscal Agent of the Fiscal Agent Agreement and any other documentation relating to the Fiscal Agent Agreement, and its performance of its obligations under the Fiscal Agent Agreement, have been and are as of the date hereof duly authorized by all necessary corporate action, (iii) no approval, authorization or other action by, or filing with, any governmental body or regulatory authority (which has not been obtained) is required in connection with the due execution, delivery and performance by the Fiscal Agent of the Fiscal Agent Agreement and (iv) the Fiscal Agent Agreement has been duly executed and delivered and constitutes the valid and legally binding obligation of the Fiscal Agent enforceable against it in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought as a proceeding in equity or at law). (g) Disclosure Counsel’s Opinion Letter. A letter, dated the Closing Date, addressed to the City and the Underwriter, of Best Best & Krieger LLP, Riverside, California, disclosure counsel (“Disclosure Counsel”), to the effect that no facts came to the attention of such counsel in connection with preparation of the Official Statement which caused such counsel to believe that the Preliminary Official Statement (except for the completion of pricing information and any other matters or terms of the Bonds relating thereto) as of its date or as of the date of this Purchase Agreement, or the Official Statement as of its date or as of the Closing Date (except that no opinion is expressed as to any financial, statistical, economic, engineering or demographic data or forecasts, numbers, charts, tables, graphs, maps, estimates, projections, assumptions or expressions of opinion, any information about feasibility, valuation, appraisals, market absorption, real estate, ownership, archaeological or environmental matters, the Appendices thereto or any information about debt service requirements, book-entry, The Depository Trust Company, the or tax exemption included or referred to therein, which we expressly exclude from the scope of this paragraph and as to which we express no opinion or view) contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) Reserved. 15 4815-4518-6473.2 (i) Reserved. (k) Special Tax Consultant Certificate. A certificate of the City’s Special Tax Consultant, dated the Closing Date and addressed to the Underwriter and the City substantially to the effect that (a) the Special Taxes, if levied in accordance with the Rate and Method and collected will annually yield sufficient revenue to make timely payments of the annual debt service on the Bonds, and annual Administrative Expenses related to the levy and collection of the Special Taxes and the expenses of the Fiscal Agent for the Bonds (no representation is made as to the actual amounts that will be collected in future years), (b) the Special Tax, if collected in the maximum amounts permitted pursuant to the Rate and Method on the Closing Date, would generate at least 110% of the maximum debt service payable with respect to the Bonds payable from such Special Taxes, plus estimated Administrative Expenses of $125,000, (c) all information supplied by the Special Tax Consultant for use in the Official Statement is true and correct, as of the date of the Official Statement and as of the date hereof and (d) as of the dates of the Preliminary Official Statement and the Official Statement and as of the Closing Date, the information contained in those portions of the Official Statement entitled “SOURCES OF PAYMENT FOR THE BONDS” and “IMPROVEMENT AREA NO. 2” and the other data provided by the Special Tax Consultant and included in the Official Statement, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. (1) Continuing Disclosure Certificate. The Continuing Disclosure Certificate of the City properly executed by the City in form and content satisfactory to the Underwriter. (m) Official Statement. The Official Statement and the supplement(s) or amendment(s), if any thereto, executed on behalf of the City by a duly authorized officer of the City. (n) Resolutions and Ordinance. A copy, certified by the Clerk or Secretary of the City, of each resolution and annexation resolution (the “Procedural Resolutions”) and Ordinance of the City relating to the City Documents, the formation of the District and issuance of the Bonds. (o) Fiscal Agent Agreement. An executed copy of the Fiscal Agent Agreement. (p) Reserved. (q) Purchase Agreement. An executed copy of this Purchase Agreement. (u) Form 8038-G. Evidence that the federal tax information Form 8038-G has been prepared by Bond Counsel for filing. (v) Nonarbitrage Certificate. A nonarbitrage (tax) certificate prepared by Bond Counsel. (w) Ratings. Evidence as of the Closing satisfactory to the Underwriter that the Bonds have received the ratings set forth in the Official Statement and that such ratings have not been reduced or withdrawn (x) Underwriter Counsel Opinion. An opinion of Kutak Rock LLP, counsel to the Underwriter, dated the date of the Closing, addressed to the Underwriter in form and substance acceptable to the Underwriter. (aa) CDIAC Statements. A copy of the filings with the California Debt and Investment Advisory Commission pursuant to the Government Code. 16 4815-4518-6473.2 (bb) Letter of Representations. A copy of the Blanket Letter of Representations to DTC covering the Bonds signed by the City. (cc) [Municipal Bond Insurance Policy. A copy of the Municipal Bond Insurance Policy issued by the Insurer.] (dd) [Reserve Fund Surety Policy. A copy of the Reserve Fund Surety Policy issued by the Insurer.] (ee) [Certificate of Insurer. A certificate(s) of the Insurer in form and substance satisfactory to Bond Counsel and the Underwriter, including a certificate of the appropriate agent of the Insurer evidencing Insurer’s determination that the information contained in the Official Statement regarding the Insurer, the Municipal Bond Insurance Policy, and the Reserve Fund Surety Policy is accurate.] (ff) [Opinion of Counsel to the Insurer. An opinion of counsel to the Insurer, dated as of the date of Closing, addressed to the Underwriter and the City in form and substance acceptable to Bond Counsel and the Underwriter, substantially to the effect that: (a) the Insurer has been duly incorporated and is validly existing and in good standing under the laws of the State of its incorporation; (b) the Municipal Bond Insurance Policy and the Reserve Fund Surety Policy constitute the legal, valid and binding obligations of the Insurer enforceable in accordance with their respective terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, rehabilitation and other similar laws of general applicability relating to or affecting creditors' and/or claimants' rights against insurance companies and to general equity principles; and (c) the information contained in the Official Statement under the caption “BOND INSURANCE” does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.] (gg) Additional Documents. Such additional legal opinions, certificates, instruments and other documents as the Underwriter or its counsel may reasonably deem necessary. If the City shall be unable to satisfy the conditions contained in this Purchase Agreement, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither of the Underwriter nor the City shall be under further obligation hereunder, except as further set forth in Section 9 hereof. 10. Costs and Expenses. (a) The Underwriter shall be under no obligation to pay, and the City shall cause to be paid from any funds available to the City the following expenses incident to the issuance of the Bonds and performance of the City’s obligations hereunder: (i) the costs of the preparation and printing of the Bonds, (ii) the fees and disbursements of Bond Counsel, (iii) the cost of preparation, printing and mailing of the Preliminary Official Statement and the Official Statement and any supplements and amendments thereto, including a reasonable number of copies thereof for distribution by the Underwriter, and (iv) the fees and disbursements of appraisers, market absorption consultants, accountants, advisers and any other experts or consultants retained by the City, including the fees and expenses of the special tax administrator and the financial advisor, (v) the fees and expenses of Disclosure Counsel; (vi) California Debt Investment and Advisory Commission fees; and (vii) the fees and disbursements of the City Attorney. 17 4815-4518-6473.2 (b) The Underwriter shall pay the following expenses: (i) all advertising expenses in connection with the public offering of the Bonds and all other expenses incurred by it in connection with the public offering and distribution of the Bonds, except as noted in Section 9(a) above, including the fees and disbursements of its counsel and fees and disbursements in connection with qualification of the Bonds for sale under the securities or “blue sky” laws of the various jurisdictions and the preparation of a “blue sky” memo. Any meals in connection with or adjacent to meetings, rating agency presentations, pricing activities or other transaction-related activities shall be considered an expense of the transaction and included in the expense component of the Underwriter’s discount. 11. Notice. Any notice or other communication to be given to the City under this Purchase Agreement may be given by delivering the same in writing to such entities at 213 East Foothill Boulevard, Azusa, California 91702, Attention: City Manager. Any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Stifel, Nicolaus & Company, Incorporated, 515 South Figueroa Street, Suite 1800, Los Angeles, California 90071, Attention: John Kim. Notices may be given by personal or courier delivery, registered or certified mail, facsimile transmission or electronic communication, provided that delivery by facsimile transmission or electronic communication must be confirmed by the sender. 12. Entire Agreement. This Purchase Agreement is made solely for the benefit of the City and the Underwriter (including their respective successors and assigns), and no other person shall acquire or have any right hereunder or by virtue hereof. The term “successor” shall not include any owner of any Bonds merely by virtue of such holding. All of the City’s representations, warranties and agreements for itself and as the Legislative Body of the District contained in this Purchase Agreement shall remain operative and in full force and effect regardless of (i) any investigations made by or on behalf of the Underwriter, or (ii) delivery of any payment for the Bonds pursuant to this Purchase Agreement. The agreements contained in this Section and in Section 11 shall survive any termination of this Purchase Agreement. 13. Survival of Representations and Warranties. All representations and warranties of the parties made in, pursuant to or in connection with this Purchase Agreement shall survive the execution and delivery of this Purchase Agreement notwithstanding any investigation by the parties. All statements contained in any certificate, instrument or other writing delivered by a party to this Purchase Agreement or in connection with the transactions contemplated by this Purchase Agreement constitute representations and warranties by such party under this Purchase Agreement. 14. Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be a net original, but all such counterparts shall together constitute but one and the same instrument. 15. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. 16. State of California Law Governs. The validity, interpretation and performance of this Purchase Agreement shall be governed by the laws of the State of California. [EXECUTION PAGE FOLLOWS] S-1 4815-4518-6473.2 17. No Assignment. The rights and obligations created by this Purchase Agreement shall not be subject to assignment by the Underwriter or the City without the prior written consent of the other party hereto. STIFEL, NICOLAUS & COMPANY, INCORPORATED By: Authorized Representative The foregoing is hereby agreed to and accepted as of the date first above written: CITY OF AZUSA, for itself and on behalf of City Of Azusa Community Facilities District No. 2005-1 (Rosedale) By: Sergio Gonzalez, City Manager Time of Execution: ____ p.m. California time [EXECUTION PAGE OF BOND PURCHASE AGREEMENT] A-1 4815-4518-6473.2 APPENDIX A $[___________]] CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) MATURITY SCHEDULE Maturity (September 1) Principal Amount Interest Rate Yield Price 10% Test Satisfied* 10% Test Not Satisfied Subject to Hold-The- Offering-Price Rule * At the time of execution of this Bond Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Bond Purchase Agreement. ** Insured. c Priced to the first optional redemption date of September 1, 20[__] at par. Optional Redemption. The Bonds are subject to redemption prior to their stated maturity dates at the option of the City on September 1, 20[__] or any date thereafter, from such maturities as selected by the City (and by lot within any one maturity), in integral multiples of $5,000, at the option of the City from moneys derived by the City from any source, at par, together with accrued interest to the date of redemption. Mandatory Redemption From Special Tax Prepayments. The Bonds are subject to mandatory redemption prior to their stated maturity dates on any Interest Payment Date, as selected among maturities by the City (and by lot within any one maturity), in integral multiples of $5,000, from moneys derived by the City from Special Tax Prepayments, at redemption prices (expressed as percentages of the principal amounts of the Bonds to be redeemed), together with accrued interest to the date of redemption, as follows: Redemption Dates Redemption Price Any Interest Payment Date through March 1, 20[__] 103% September 1, 20[__] and March 1, 20[__] 102 September 1, 20[__] and March 1, 20[__] 101 September 1, 20[__] and any Interest Payment Date thereafter 100 A-2 4815-4518-6473.2 Mandatory Sinking Fund Redemption. The Outstanding Bonds maturing on September 1, 20__ and September 1, 20__ are subject to mandatory sinking fund redemption, in part, on September 1, 20__ and September 1, 20__, respectively, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date of redemption, without premium, and from sinking payments as follows: Term Bonds Maturing on September 1, 20__ Redemption Date (September 1) Sinking Fund Payment 20__ $_____ 20__ (Maturity) _____ Term Bonds Maturing on September 1, 20__ Redemption Date (September 1) Sinking Fund Payment 20__ $_____ 20__ (Maturity) _____ The amount of Outstanding Bonds to be redeemed pursuant to the foregoing schedules will be reduced by the City pro rata among redemption dates, in order to maintain substantially level debt service as a result of any prior or partial optional redemption or mandatory redemption from Special Tax Prepayments of the Bonds. B-1 4815-4518-6473.2 APPENDIX B MATTERS TO BE COVERED IN OPINION OF DISTRICT COUNSEL 1. The City is duly organized and validly existing as a municipal corporation under and by virtue of the Constitution and the laws of the State, with full legal right, power and authority to adopt the Resolution. 2. The Resolution was duly adopted at the meeting of the City Council, acting as the legislative body of the District, which was called and help pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Resolution and the Procedural Resolutions are in full force and effect and have not been amended or repealed. 3. To our current actual knowledge, except as otherwise disclosed, no suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body is pending with respect to which the City has been served with process or, to our knowledge, threatened, which would materially adversely affect the existence of the City or the titles of the City’s officials to their respective offices, or seek to restrain or enjoin the issuance, sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Fiscal Agent Agreement, or the collection or application of the Special Taxes to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the City Documents or any actions of the City contemplated by an of said documents, or in any action of the City contemplated by any of said documents, or in any way contesting the completeness and accuracy of the Official Statement or the powers of the City or its authority with respect to the Bonds, the City Documents or any action on the part of the City contemplated by any of said documents, wherein an unfavorable decision, ruling or finding could materially adversely affect the validity or enforceability of the Bonds or the City Documents. 4. The execution and delivery of the Bonds and the City Documents, and compliance with the provisions of each, will not conflict with or constitute a breach of or default under any loan agreement, note, ordinance, 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. 5. 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 a condition precedent to, or the absence of which would materially adversely affect ability of the City, to perform its obligations under the Bonds or the City Documents, have been obtained or made, as the case may be, and are in full force and effect. C-1 4815-4518-6473.2 APPENDIX C $[___________] CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) CLOSING CERTIFICATE OF CITY OF AZUSA I, the undersigned, hereby certify that I am the City Manager of the City of Azusa (the “City”), the City Council of which is the legislative body for City of Azusa Community Facilities District No. 2005-1 (Rosedale) (the “District”), a community facilities district duly organized and existing under the laws of the State of California (the “State”) and that as such, I am authorized to execute this Certificate on behalf of the Issuer in connection with the issuance of the above- referenced Bonds (the “Bonds”). I hereby further certify on behalf of the Issuer that: (A) to my best knowledge, after reasonable inquiry, no litigation is pending with respect to which the City has been served with process or threatened (1) to restrain or enjoin the issuance of any of the Bonds or the collection of Special Tax Revenues pledged under the Fiscal Agent Agreement; (2) in any way contesting or affecting the authority for the issuance of the Bonds or the validity or enforceability of the Bonds or the City Documents; or (3) in any way contesting the existence or powers of the City or the District; (B) the representations and warranties made by the City in the City Documents are true and correct in all material respects on the Closing Date, with the same effect as if made on the Closing Date; and (C) as of the date hereof, the Fiscal Agent Agreement is in full force and effect in accordance with its terms and has not been amended, modified or supplemented except in such case as may have been agreed to by the Underwriter; (D) The information with respect to the City, the District and Improvement Area No. 2 contained in the Preliminary Official Statement and the Official Statement was as of the date of the Preliminary Official Statement and is, and at all times subsequent to the date of the Official Statement up to and including the Closing Date will be, true and correct in all material respects, and such information does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (E) the City has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the City Documents prior to issuance of the Bonds; Capitalized terms not defined herein shall have the same meaning set forth in the Bond Purchase Agreement dated [__________], 2019, between the City and Stifel, Nicolaus & Company, Incorporated, as Underwriter. C-2 4815-4518-6473.2 IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date hereinbelow set forth. Dated: [_________]. 2019 CITY OF AZUSA, for itself and on behalf of the City of Azusa Community Facilities District No. 2005-1 (Rosedale) By: City Manager D-1 4815-4518-6473.2 APPENDIX D $[___________] CITY OF AZUSA COMMUNITY FACILITIES DISTRICT NO. 2005-1 (ROSEDALE) 2019 SPECIAL TAX BONDS (IMPROVEMENT AREA NO. 2) FORM OF ISSUE PRICE CERTIFICATE The undersigned, Stifel, Nicolaus & Company, Incorporated (“Underwriter”) hereby certifies as set forth below with respect to the sale and issuance of the above-captioned obligations (the “Bonds”). 1. Sale of the General Rule Maturities. As of the date of this certificate, for each Maturity of the General Rule Maturities, the first price at which at least 10% of such Maturity was sold to the Public is the respective price listed in Schedule A. 2. Initial Offering Price of the Hold-the-Offering-Price Maturities. (a) Underwriter offered the Hold-the-Offering-Price Maturities to the Public for purchase at the respective initial offering prices listed in Schedule A (the “Initial Offering Prices”) on or before the Sale Date. A copy of the pricing wire or equivalent communication for the Bonds is attached to this certificate as Schedule B. (b) As set forth in the Bond Purchase Agreement, Underwriter has agreed in writing that, (i) for each Maturity of the Hold-the-Offering-Price Maturities, it would neither offer nor sell any of the Bonds of such Maturity to any person at a price that is higher than the Initial Offering Price for such Maturity during the Holding Period for such Maturity (the “hold-the- offering-price rule”), and (ii) any selling group agreement shall contain the agreement of each dealer who is a member of the selling group, and any retail distribution agreement shall contain the agreement of each broker-dealer who is a party to the retail distribution agreement, to comply with the hold-the-offering-price rule. Pursuant to such agreement, no Underwriter (as defined below) has offered or sold any Maturity of the Hold-the-Offering-Price Maturities at a price that is higher than the respective Initial Offering Price for that Maturity of the Bonds during the Holding Period. 3. Defined Terms. (a) General Rule Maturities means those Maturities of the Bonds listed in Schedule A hereto as the “General Rule Maturities.” (b) Hold-the-Offering-Price Maturities means those Maturities of the Bonds listed in Schedule A hereto as the “Hold-the-Offering-Price Maturities.” (c) Holding Period means, with respect to a Hold-the-Offering-Price Maturity, the period starting on the Sale Date and ending on the earlier of (i) the close of the fifth business day after the Sale Date, or (ii) the date on which Underwriter has sold at least 10% of such Hold-the-Offering-Price Maturity to the Public at prices that are no higher than the Initial Offering Price for such Hold-the-Offering-Price Maturity. (d) Issuer means the City of Azusa. D-2 4815-4518-6473.2 (e) Maturity means Bonds with the same credit and payment terms. Bonds with different maturity dates, or Bonds with the same maturity date but different stated interest rates, are treated as separate maturities. (f) Public means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly. (g) Sale Date means the first day on which there is a binding contract in writing for the sale of a Maturity of the Bonds. The Sale Date of the Bonds is [__________], 2019. (h) Underwriter means (i) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Bonds to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the Public). The representations set forth in this certificate are limited to factual matters only. Nothing in this certificate represents Underwriter’s interpretation of any laws, including specifically Sections 103 and 148 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. The undersigned understands that the foregoing information will be relied upon by the Issuer with respect to certain of the representations set forth in the Certificate of Arbitrage and with respect to compliance with the federal income tax rules affecting the Bonds, and by Best Best & Krieger LLP, in connection with rendering its opinion that the interest on the Bonds is excluded from gross income for federal income tax purposes, the preparation of the Internal Revenue Service Form 8038-G, and other federal income tax advice that it may give to the Issuer from time to time relating to the Bonds. STIFEL, NICOLAUS & COMPANY, INCORPORATED By: ____________________________ [Name, Title] By: ____________________________ [Name, Title] Dated: [_________]. 2019 D-3 4815-4518-6473.2 SCHEDULE A SALE PRICES OF THE GENERAL RULE MATURITIES AND INITIAL OFFERING PRICES OF THE HOLD-THE-OFFERING-PRICE MATURITIES [BOND PRICING TO BE ATTACHED] D-4 4815-4518-6473.2 SCHEDULE B PRICING WIRE OR EQUIVALENT COMMUNICATION (To be Attached)