55B - RESO - WARNER ASSESSMENT DISTRICT

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SECURITY FOR THE BONDS Assessment Installments The Bonds are secured by the Assessments, together with interest thereon at fixed interest rates, and the Bonds, including principal and interest, are payable, exclusively out of the Redemption Fund. Pursuant to the Fiscal Agent Agreement, the Fiscal Agent will establish, maintain and hold in trust specifically for the Bonds, the Improvement Fund, the Redemption Fund, the Reserve Fund, the Costs of Issuance Fund and the Rebate Fund. The Bonds are secured by the amounts held in such funds and accounts (other than the Rebate Fund). Principal of and interest on the Bonds are payable exclusively out of the Redemption Fund. PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS IS SECURED SOLELY BY THE ASSESSMENTS (INCLUDING PREPAYMENTS THEREOF) ON THE PARCELS, TOGETHER WITH INTEREST THEREON AND ANY PENALTIES RECEIVED WITH RESPECT THERETO, AND ANY OTHER AMOUNTS (INCLUDING PROCEEDS OF THE SALE OF THE BONDS) HELD IN ANY FUND ESTABLISHED PURSUANT TO THE FISCAL AGENT AGREEMENT FOR THE BONDS (OTHER THAN THE REBATE FUND). Under the provisions of the Act, the Assessment Installments will be included annually on the regular County tax bills sent to the owners of the parcels within the Assessment District against which there are unpaid Assessments. Such Assessment Installments are to be paid into the Redemption Fund for the payment of principal of, premium, if any, and interest on the Bonds as they become due. Collection of Assessment Installments will commence with Fiscal Year 201647. Any Assessment may be prepaid at any time, together with any applicable premium to the redemption date, plus interest thereon, as the City may determine with respect to the portion of the prepayment which cannot be applied to the redemption of Bonds on the first available redemption date. THE BONDS ARE NOT GENERAL OBLIGATIONS OF THE CITY, BUT ARE LIMITED OBLIGATIONS, PAYABLE SOLELY FROM THE ASSESSMENTS AND THE OTHER FUNDS PLEDGED THEREFOR UNDER THE FISCAL AGENT AGREEMENT. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF TIIE CITY OR THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE BONDS. NOTWITHSTANDING ANY OTHER PROVISION OF TIIE FISCAL AGENT AGREEMENT, TIIE CITY IS NOT OBLIGATED TO ADVANCE AVAILABLE FUNDS FROM THE CITY TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND ESTABLISHED UNDER TIIE FISCAL AGENT AGREEMENT. Reserve Fund Under the Fiscal Agent Agreement, the Fiscal Agent is required on the Closing Date to deposit in the Reserve Fund from proceeds of sale of the Bonds an amount equal to the "Reserve Requirement," which is defined in the Fiscal Agent Agreement to mean, with respect to the Bonds, as of the date of any calculation, the least of (1) 10% of the issue price of the Bonds, (2) maximum annual debt service on the Bonds and (3) 125% of average annual debt service on the Bonds. Amounts on deposit in the Reserve Fund will be transferred to the Redemption Fund in the event of any deficiency at any time in the Redemption Fund of the amount then required for payment of the principal of, premium, if any, and interest on the Bonds or, in accordance with the terms of the Fiscal Agent Agreement, for the purpose of redeeming Bonds from the Redemption Fund. The moneys in the Reserve Fund may be invested in any Permitted Investment, as said tern is defined in the Fiscal Agent Agreement. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF TIIE FISCAL AGENT AGREEMENT" herein. Whenever, on any September 3, the amount in the Reserve Fund, less Investment Earnings resulting from the investment of the funds therein which pursuant to the Fiscal Agent Agreement must be rebated to the 11 55B -81