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ID# 14-535 PFA Adoption of City Resolution No. 2015-028 & PFA Resolution No. 2015-004
Crry tai L4KY LSIf10 CITY OF LAKE ELSINORE JOINT REPORT TO CITY COUNCIL AND PUBLIC FINANCING AUTHORITY TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL HONORABLE CHAIRPERSON AND MEMBERS OF THE PUBLIC FINANCING AUTHORITY FROM: GRANT YATES CITY MANAGER / EXECUTIVE DIRECTOR DATE: APRIL 14, 2015 SUBJECT: 1) RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, ACTING AS THE LEGISLATIVE BODY OF THE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 (WEST LAKE ELSINORE), AUTHORIZING THE ISSUANCE OF ITS SPECIAL TAX REFUNDING BONDS, 2015 SERIES B IN A PRINCIPAL AMOUNT NOT TO EXCEED THIRTEEN MILLION DOLLARS ($13,000,000) AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH 2) RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY, RIVERSIDE COUNTY, CALIFORNIA, AUTHORIZING THE ISSUANCE OF ITS LOCAL AGENCY REVENUE REFUNDING BONDS (COMMUNITY FACILITIES DISTRICT NO. 88 -3), 2015 SERIES B IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED THIRTEEN MILLION DOLLARS ($13,000,000) AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH Recommendations 1) City: Adopt City Resolution No. 2015 -_ authorizing issuance of the bonds and bond documents. 2) PFA Adopt PFA Resolution No. 2015 -_ authorizing issuance of bonds and bond documents. Page 1 Refinancing of the CFD 88 -3 (West Lake Elsinore), 2008 Series A Local Agency Revenue Bonds April 14, 2015 Page 2 Background On January 17, 2008, the Lake Elsinore Public Financing Authority Communities Facilities District No. 88 -3 (West Lake Elsinore) issued the $22,295,000 aggregate principal amount of Local Agency Revenue Bonds (CFD 88 -3 Refunding), 2008 Series A (the "2008A Bonds "). The 2008A Bonds were originally issued with interest rates ranging from 3.50 % -4.30% and are callable on September 1, 2015 at a price of 102 %. Discussion The proposed Lake Elsinore Public Financing Authority, Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3), 2015 Series B (the "20156 Refunding Bonds ") would be in a par amount of about $9.6 million with a final maturity in 2020, which is the same as the final maturity for the 2008A Bonds. The final interest rate structure will be determined when the 2015B Refunding Bonds are priced and sold. The pricing date would be targeted for early May, assuming that interest rates are attractive. The bond closing is expected to occur the in late May and the 2008A Bonds will be redeemed on September 1, 2015. With the proceeds of the 2015B Refunding Bonds, the Authority will purchase from CFD 88 -3 its Special Tax Refunding Bonds, Series 2015 (the "CFD Bonds "). The CFD is a fully built out residential district with 2,055 developed parcels with individual property owners. The assessed value -to -lien ratio is quite high at 19 -to -1, which means that the current FY 2014 -15 assessed values of the properties in the district is 19 times greater than the outstanding 2008A Bond lien. The current underlying S &P credit rating for the 2008A Bonds is 'A -" and the bonds originally qualified for and were insured with Ambac bond insurance. Based on the strong underlying credit quality of this specific CFD, the 2015B Refunding Bonds would very likely qualify for Assured Guaranty bond insurance which would elevate the rating on the 2015B Refunding Bonds from "A-" to "AA-". This would enable the 2015B Refunding Bonds to be sold at very low interest rates, even lower than the attractive rates garnered for the City's recent 2015 CFD refunding bonds which were sold with no underlying rating. Furthermore, the 2015B Refunding Bonds would also qualify for a reserve fund surety policy from Assured Guaranty. By purchasing a reserve fund surety policy, the 2015B Refunding Bonds would not need to fund a separate bond reserve fund as part of the refunding bond issuance. This would enable the City to use the $1.15 million of reserve fund monies (currently being held as part of the 2008A Bonds) to downsize the 2015B Refunding Bonds and thereby level out savings over the next 5 years. In contrast, if the existing 2008A Bonds are not refinanced, the $1.15 million of reserve fund monies would come back to property owners in one lump sum in 2020 (about $560 of savings per parcel). Based on current interest rates, present value savings over the life of the bonds is $283,000 or 2.23% of par value refunded. The interest rate savings combined with the Refinancing of the CFD 88 -3 (West Lake Elsinore), 2008 Series A Local Agency Revenue Bonds April 14, 2015 Page 3 reduction of the bond size (through use of a reserve fund surety) would produce annual cash flows savings of about $283,000 over the next 5 years (2016- 2020). On average, this would result in a $140 per year reduction in annual special taxes per parcel. The savings quoted above are net of all financing costs (including the cost of purchasing bond insurance and a reserve fund surety policy). The table below highlights the total savings based upon current Interest rates. Summary of Savings Results for 20168 Refundin Bonds* �. v�..x� Outstanding Amount $12,685,000 Current Interest Rates (on Outstandin Bonds 4.00 -4.30% Z015B Refundrri`'„ 13oriUs ;4 , z Bond Amount $9,605,000 True Interest Cost 1.43% Net Present Value Savings $ $283,000 Net Present Value Savings %o of Par Value Refunded) 2.23% Average Annual Savings Through 2020 ** $289,000 ** Average Annual Per Parcel Savings Through 2020 $140 Projected savings are based on current interest rates assuming the 20156 Refunding Bonds are sold with "AA - "bond insurance. These rates are subject to change based on market conditions. ** A significant amount of the cash flows savings is achieved by releasing $1.15 million of ni ..1.1 held o fund w. sti...��w I gage of a reserve fund Surety, to dOWnSlze the .°gen ^d., ... uvuugh purchase size of the 2015B Refunding Bonds. Documents to be Approved Approval of the Resolution approving, authorizing and directing execution of certain bond documents, authorizing and directing the sale of the proposed 2015B Refunding Bonds, approving a Preliminary Official Statement, and authorizing and directing certain actions with respect thereto will authorize the execution of the following documents which are not included with the document due to their length, but are available for review in the City Clerk's Office. • Indenture of Trust - This document contains the terms of the 2015B Refunding Bonds, including payment and redemption provisions, definition and pledge of Revenues to pay the 2015B Refunding Bonds, Rights and Duties of the Trustee, remedies upon a default in the payment of the 2015B Refunding Bonds, and final discharge of the 2015B Refunding Bonds and other related matters. • Escrow Agreement - This document contains terms by which the Trustee will hold 2015B Refunding Bond proceeds on the behalf of the owners of the 2008A Bonds to pay and discharge all of the 2008A Bonds on September 1, 2015. • Preliminary Official Statement - This is the Authority's and the City's document pursuant to which the 2015B Refunding Bonds will be offered for purchase by the public. This document must contain all facts material to the 2015B Refunding Refinancing of the CFD 88 -3 (West Lake Elsinore), 2008 Series A Local Agency Revenue Bonds April 14, 2015 Page 4 Bonds and the City (with certain permitted exceptions to be completed in the final Official Statement) and must not omit any such material facts. Bond Purchase Agreement - This document contains the obligation of the underwriter to accept and pay for the 2015B Refunding Bonds, provided that all of the covenants and representations of the Authority and the City are met and certain other conditions excusing performance by the underwriter do not exist. • Third Amendment to Fiscal Agent Agreement - This document contains the terms of the CFD Bonds which will be sold to the Authority. The CFD Bonds will be issued on parity with CFD 88 -3's outstanding 2013 Series B Bonds. • Continuing Disclosure Agreement - Agreement by CFD 88 -3 to provide certain annual reports to investors in order to allow the underwriter to comply with federal securities laws. Fiscal Impact There is no cost to the City of Lake Elsinore, however, the property owners are expected to save about $140 per parcel annually through 2020, illustrated in the table on the prior page. The net present value of savings is $283,000 (2.23% on $12,685,000 on bonds outstanding). The savings quoted above are net of all financing costs (including the cost of purchasing bond insurance and a reserve fund surety policy). The interest rates on the bonds are projected to decrease from about 4.00% to 1.43% after the refinancing is completed. Recommendation Adopt a Resolution of the Board of Directors of the Lake Elsinore Public Financing Authority approving the issuance of the Lake Elsinore Public Financing Authority Local Agency Revenue Refunding Bonds, 2015 Series B, in the aggregate principal amount not -to- exceed $13 million and the execution and delivery of bond financing documents. Prepared by: Jason Simpson Director of Administrative Services Approved by: Grant Yates City Manager / Executive Director Attachments: 1. City Resolution No. 2015 - 2, PFA Resolution No. 2015- _ 3. Indenture of Trust 4. Third Amendment to Fiscal Agent Agreement 5. Escrow Agreement 6. Preliminary Official Statement 7. Bond Purchase Agreement 8. Continuing Disclosure Agreement RESOLUTION NO. 2015 - RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, ACTING AS THE LEGISLATIVE BODY OF THE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 (WEST LAKE ELSINORE), AUTHORIZING THE ISSUANCE OF ITS SPECIAL TAX REFUNDING BONDS 2015 SERIES IN A PRINCIPAL AMOUNT NOT TO EXCEED THIRTEEN MILLION DOLLARS ($13,000,000) AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the City Council of the City of Lake Elsinore (the "City "), located in Riverside County, California (hereinafter sometimes referred to as the "legislative body of the District "), has heretofore undertaken proceedings to form City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) (the "District') pursuant to the terms and provisions of the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the "Act "); and WHEREAS, the District has previously issued its $24,670,000 Special Tax Bonds 2008 Series (the "Prior Bonds ") to refinance certain public improvements; and WHEREAS, the legislative body of the District now desires to refund the Prior Bonds through the issuance of bonds in an aggregate principal amount not to exceed $13,000,000 designated as the "City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) Special Tax Refunding Bonds 2015 Series" (the "2015 Bonds "); and WHEREAS, in order to effect the issuance of the 2015 Bonds, the legislative body of the District desires to enter into a Third Amendment to Fiscal Agent Agreement (the "Third Amendment "), with MUFG Union Bank, N.A., as Fiscal Agent, in substantially the form presented herewith; and WHEREAS, in order to effect the refunding and redemption of the Prior Bonds, the legislative body of the District desires to enter into an Escrow Agreement (the "Escrow Agreement'), with MUFG Union Bank, N.A., as Escrow Bank and the Lake Elsinore Public Financing Authority (the "Authority ") in substantially the form presented herewith; and WHEREAS, the legislative body of the District has determined in accordance with Section 53360.4 of the Code that a negotiated sale of the 2015 Bonds to the Authority in accordance with the terms of the Bond Purchase Agreement to be entered into by and among the Authority, the District and the underwriter of the Authority Bonds (as defined below) (the "Bond Purchase Agreement') approved as to form by this legislative body herein will result in a lower overall cost to the District than a public sale; and City Council Resolution No 2015 -_ Page 2 WHEREAS, the 2015 Bonds are payable from Special Tax Revenues on a parity with the District's outstanding Subordinate Special Tax Bonds, 2013 Series; and WHEREAS, the legislative body of the District hereby determines that it is prudent in the management of its fiscal affairs to issue the 2015 Bonds and that the issuance of the 2015 Bonds will result in significant public benefits of the type described in Government Code Section 6586; and WHEREAS, the Authority will issue its bonds (the "Authority Bonds ") to provide funds for its purchase of the 2015 Bonds; NOW, THEREFORE, the City Council, acting as the legislative body of the District, does hereby resolve, order and determine as follows: Section 1. Each of the above recitals is true and correct. Section 2. The legislative body ofthe District is authorized pursuant to the Act to issue the 2015 Bonds for the benefit ofthe District for purposes set forth herein and to take the necessary steps to refund and redeem the Prior Bonds. Section 3. The issuance of the 2015 Bonds in an aggregate principal amount not to exceed $13,000,000 is hereby authorized with the exact principal amount to be determined by the official signing the Bond Purchase Agreement in accordance with Section 6 below. The legislative body of the District hereby determines that it is prudent in the management of its fiscal affairs to issue the 2015 Bonds. The 2015 Bonds shall mature on the dates and pay interest at the rates set forth in the Bond Purchase Agreement to be executed on behalf of the District in accordance with Section 6 hereof. The 2015 Bonds shall be governed by the terms and conditions of the Fiscal Agent Agreement dated as of January 1, 2008, as amended, and as further amended by the Third Amendment (together, the "Fiscal Agent Agreement ") presented at this meeting. The Third Amendment shall be prepared by Bond Counsel to the District and executed by one or more of the Mayor, the City Manager, the Director of Administrative Services, or their written designees (collectively, the "Authorized Officers ") substantially in the form presented at this meeting, with such additions thereto and changes therein as the officer or officers executing the same deem necessary to cure any ambiguity or defect therein, to insert the offering price(s), interest rate(s), selling compensation, principal amount per maturity, redemption dates and prices and such other related terms and provisions as limited by Section 6 hereof, to conform any provisions therein to the Bond Purchase Agreement and the Official Statement for the Authority Bonds. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Third Amendment by one or more Authorized Officers. Capitalized terms used in this Resolution which are not defined herein have the meanings ascribed to them in the Fiscal Agent Agreement. In satisfaction of the requirements contained in Section 53363.2 of the Act, the legislative body of the District hereby determines that: (1) it is anticipated that the purchase ofthe 2015 Bonds will occur on or about June 3, 2015, (2) the 2015 Bonds shall bear the date, be in the denominations, have the maturity dates (which do not exceed the latest maturity date of the Prior Bonds being refunded), and be payable at the place and be in the form specified in the Fiscal Agent Agreement, City Council Resolution No 2015 - Page 3 (3) the 2015 Bonds will bear interest at the minimum rate of 0.01% per annum, and (4) the designated cost of issuing the 2015 Bonds being used to refund the Prior Bonds, as defined by Section 53363.8 of the Act, shall include all of the costs specified in Section 53363.8(a), (b)(2) and (c). In satisfaction of the requirements contained in Section 53364.2 of the Act, the legislative body of the District hereby determines that any savings achieved through the issuance of the 2015 Bonds shall be used to reduce special taxes of the District, and such reductions shall be made in accordance with the Act. Section 4. The 2015 Bonds shall be executed on behalf of the District by the manual or facsimile signature of the Mayor of the City, and the seal of the District, or a facsimile thereof, shall be impressed or imprinted thereon and attested with the manual or facsimile signature of the City Clerk. MUFG Union Bank, N.A. is hereby appointed to act as Fiscal Agent for the 2015 Bonds. Section 5. The covenants set forth in the Fiscal Agent Agreement and in the Third Amendment to be executed in accordance with Section 3 above are hereby approved, shall be deemed to be covenants of the City Council in its capacity as the legislative body of the District and shall be complied with by the District and its officers. Section 6. The form of the Bond Purchase Agreement presented herewith is hereby approved; and any one of the Authorized Officers is hereby authorized and directed, for and in the name of the District, to execute and the City Clerk, or her written designee, is authorized to attest to the Bond Purchase Agreement substantially in the form approved, with such additions thereto and changes therein as may be approved or required by an Authorized Officer, including changes relating to dates and numbers as are ne'essary to conform the Bond PurehaSe Agl'eemiertt to the dates, amounts and interest rates applicable to the 2015 Bonds as of the sale date. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Bond Purchase Agreement; provided, however, that the Bond Purchase Agreement shall be signed only if the interest rate on the 2015 Bonds is such that the principal and total net interest cost to maturity on the 2015 Bonds is less than the principal and total net interest cost to maturity on the Prior Bonds. Section 7. The form of the Escrow Agreement presented at this meeting is hereby approved; and any one of the Authorized Officers is hereby authorized and directed, for and in the name of the District, to execute and the City Clerk, or her written designee, is authorized to attest to the Escrow Agreement, with such additions thereto and changes therein as may be approved or required by an Authorized Officer, including changes to conform to the final pricing of the escrow investments and to clarify any ambiguities; provided that the form of Escrow Agreement may be modified to conform to federal tax law requirements or to achieve further savings, with the advice and assistance of Bond Counsel, such approval to be conclusively evidenced by the execution of the Escrow Agreement by an Authorized Officer. MUFG Union Bank, N.A. is hereby appointed to act as Escrow Agent under the Escrow Agreement. City Council Resolution No 2015 - Page 4 Section S. In accordance with the requirements of Section 53345.8 of the Act, the legislative body of the District hereby determines that the assessed value of the real property in the District subject to the special tax to pay debt service on the 2015 Bonds is at least three times the principal amount of the 2015 Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District. Section 9. The form of the Preliminary Official Statement for the Authority Bonds presented at this meeting is hereby approved, and the underwriter of the Authority Bonds is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the Authority Bonds in the form hereby approved, together with such additions thereto and changes therein as are determined necessary or desirable by the Authorized Officers, to make such Preliminary Official Statement final as of its date for purposes of Rule 15c2 -12 of the Securities and Exchange Commission, including, but not limited to, such additions and changes as are necessary to make all information set forth therein accurate and not misleading. Any one of the Authorized Officers is hereby authorized to execute a final Official Statement in the form of the Preliminary Official Statement, together with such changes as are determined necessary by the Authorized Officers to make such Official Statement complete and accurate as of its date. The underwriter of the Authority Bonds is further authorized to distribute the final Official Statement for the Authority Bonds and any supplement thereto to the purchasers thereof upon its execution on behalf of the District as described above. Section 10. The Authorized Officers are authorized to provide for all services necessary to effect the issuance of the 2015 Bonds. Such services shall include, but not be limited to, obtaining legal services, fiscal agent services and any other services deemed appropriate as set forth in a certificate of any one of the Authorized Officers. The Authorized Officers are authorized to pay for the cost of such services, together with other Costs of Issuance from 2015 Bond proceeds. Section 11. The Authorized Officers and all other officers of the City are hereby authorized and directed to take any actions and execute and deliver any and all documents as are necessary to accomplish the issuance, sale and delivery of the 2015 Bonds in accordance with the provisions of this Resolution and the fulfillment of the purposes of the 2015 Bonds as described in the Fiscal Agent Agreement. Any document authorized herein to be signed by the City Clerk may be signed by a duly appointed deputy clerk. Section 12. This Resolution shall take effect immediately upon its adoption. City Council Resolution No 2015 - Page 5 PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council of the City of Lake Elsinore, California, this 14`h day of April, 2015. STEVEN MANOS MAYOR ATTEST: VIRGINIA BLOOM CITY CLERK APPROVED AS TO FORM: BARBARA ZEID LEIBOLD CITY ATTORNEY RESOLUTION NO. 2015 - RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY, RIVERSIDE COUNTY, CALIFORNIA, AUTHORIZING THE ISSUANCE OF ITS LOCAL AGENCY REVENUE REFUNDING BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED THIRTEEN MILLION DOLLARS ($13,000,000) AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the Lake Elsinore Public Financing Authority (the "Authority ") is a joint exercise of powers authority duly organized and existing under the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act'), and is authorized pursuant to Article 4 of the Act (the "Bond Law ") to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations to provide financing and refinancing for capital improvements of member entities of the Authority and other local agencies; and WHEREAS, the City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) ( "CFD No. 88 -3 ") previously issued the $24,670,000 City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) Special Tax Bonds, 2008 Series (the "Prior CFD No. 88 -3 Bonds ") to refinance certain public improvements; and WHEREAS, the Authority previously issued the $22,295,000 Lake Elsinore Public Financing Authority Local Agency Revenue Bonds (CFD 88 -3 Refunding), 2008 Series A (the "Prior Authority Bonds" and together with the Prior CFD No. 88 -3 Bonds, the "Prior Bonds ") to purchase the Prior CFD No. 88 -3 Bonds; and WHEREAS, as a result of favorable conditions in the municipal bond market, the Authority and CFD No. 88 -3 desire to refund the Prior Bonds; and WHEREAS, the Authority, for the purpose of acquiring special tax refunding bonds of CFD No. 88 -3 (the "District Bonds "), the proceeds of which will be utilized to defease and refund the Prior Bonds, has determined to issue its Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3) Series 2015B (the "Authority Bonds ") pursuant to and secured by the Indenture (as defined below) providing for the issuance of the Authority Bonds, all in the manner provided therein; and WHEREAS, the Authority Bonds will be secured by debt service payments paid with respect to the District Bonds, the payment of which will be secured by special tax liens on taxable property within CFD No. 88 -3; and WHEREAS, for this financing there has been filed with the Secretary of the Board of Directors of the Authority the forms of the following documents to be executed by the Authority Public Finance Authority Resolution No 2015 -_ Page 2 with respect to the issuance of the Authority Bonds, which documents the Board desires to approve for execution as described herein: (1) The Indenture of Trust, (the "Indenture "), by and between the Authority and MUFG Union Bank, N.A., as Trustee; (2) The Bond Purchase Agreement, to be dated the date of sale, by and among Stifel, Nicolaus & Company, Incorporated, as Underwriter (the "Underwriter "), the Authority and CFD No. 88 -3 (the "BOnd Purchase .greem —f' j. (3) The Escrow Agreement (the "Escrow Agreement') by and among the Authority, CFD No. 88 -3 and MUFG Union Bank, N.A., as Escrow Agent; (4) The Preliminary Official Statement for the Authority Bonds (the "Preliminary Official Statement'); and (5) The Continuing Disclosure Certificate executed and delivered by the Authority (the documents described in (1) through (5) above are collectively referred to herein as the "Authority Documents "); WHEREAS, the Authority has determined and hereby finds that the issuance of the Authority Bonds and the acquisition of the District Bonds will result in significant public benefits of the type described in Section 6586 of the Bond Law; and NOW, THEREFORE, the Board of Directors of the Lake Elsinore Public Financing Authority does hereby resolve, determine and order as follows: Se.^ :on i ^ ^M aL . LFla�.0 oil �.,e above reeitas is true and correct and is adopted by the Board of Directors. Section 2. The Authority Bonds shall be issued in an aggregate principal amount not to exceed $13,000,000 with the exact principal amount to be determined by the official signing the Bond Purchase Agreement in accordance with Section 4 below. The Authority Bonds shall mature on the dates and pay interest at the rates set forth in the Bond Purchase Agreement to be executed on behalf of the Authority in accordance with Section 4 below. The Authority Bonds shall be issued under the terms of the Indenture, the form of which is on file with the Secretary of the Board of Directors. The form of the Indenture presented at this meeting is hereby approved and each of the Chairperson of the Board of Directors, the Executive Director and the Treasurer, or their respective written designees (collectively, the "Authorized Officers "), is hereby authorized to execute the Indenture, in the form hereby approved, with such additions thereto and changes therein as the officer or officers executing the same deem necessary to accomplish the issuance of the Authority Bonds as contemplated by this Resolution. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Indenture by one or more of such Authorized Officers. Section 3. The Authority Bonds shall be executed on behalf of the Authority by the manual or facsimile signature of the Chairman of the Board of Directors, and the seal of the Public Finance Authority Resolution No 2015 - Page 3 Authority, or a facsimile thereof, shall be impressed or imprinted thereon and attested with the manual or facsimile signature of the Secretary of the Board of Directors. NRJFG Union Bank, N.A. is hereby appointed to act as the trustee for the Authority Bonds under the Indenture. If the Executive Director determines at any time while the Authority Bonds are outstanding that another bank should be selected to act as trustee for the Authority Bonds, in order to ensure the efficient administration of the Authority Bonds, then the Executive Director, or his designee, is hereby authorized and directed to select and engage a bank or trust company meeting the requirements set forth in the Indenture to act as the trustee for the Authority Bonds under the terms of the Indenture. Section 4. The form of the Bond Purchase Agreement presented at this meeting is hereby approved; and each of the Authorized Officers is hereby authorized to execute the Bond Purchase Agreement in the form so approved, with such additions thereto and changes therein as are necessary to conform the Bond Purchase Agreement to the dates, amounts and interest rates applicable to the Authority Bonds and the District Bonds as of the sale date or to cure any defect or ambiguity therein. Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Bond Purchase Agreement by one or more of such Authorized Officers; provided, however, that the Bond Purchase Agreement shall be signed only if the Underwriters' discount (exclusive of original issue discount) does not exceed 1.25% of the principal amount of the Authority Bonds and the true interest cost of the Authority Bonds is less than 3.00 %. Each of the Executive Director, the Treasurer and their written designees is authorized to determine the day on which the Authority Bonds are to be priced in order to attempt to produce the lowest borrowing cost for the Authority and may reject any terms presented by the Underwriters to the Authority if determined not to be in the best interest of the Authority. Section 5. The form of the Continuing Disclosure Certificate presented at this meeting is hereby approved; and each of the Authorized Officers is authorized to execute the Continuing Disclosure Certificate in the form hereby approved, with such additions thereto and changes therein as the officers executing the same deem necessary to comply with the requirements of Rule 15c2 -12 of the Securities and Exchange Commission and to cure any ambiguity or defect therein. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Continuing Disclosure Certificate by one or more of such officers. Section 6. The form of the Preliminary Official Statement presented at this meeting is hereby approved, and the Underwriter of the Authority Bonds is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the Authority Bonds in the form hereby approved, together with such additions thereto and changes therein as are determined necessary or desirable by the Authorized Officers, to make such Preliminary Official Statement final as of its date for purposes of Rule 15c2 -12 of the Securities and Exchange Commission, including, but not limited to, such additions and changes as are necessary to make all information set forth therein accurate and not misleading. Each of the Authorized Officers is hereby authorized to execute a final Official Statement in the form of the Preliminary Official Statement, together with such changes as are determined necessary by the Authorized Officers to make such Official Statement complete and accurate as of its date. The Underwriter of the Authority Bonds is further authorized to distribute the final Official Statement for the Authority Bonds and any supplement thereto to the purchasers thereof upon its execution on behalf of the Authority as described above. 9 Public Finance Authority Resolution No 2015 - Page 4 Section 7. The form of the Escrow Agreement relating to the refunding of the Prior Bonds (the "Escrow Agreement "), with MUFG Union Bank, N.A., as Escrow Bank, and the District, in substantially the form presented herewith is hereby approved; and any one of the Authorized Officers is hereby authorized and directed, for and in the name of the Authority, to execute and the Secretary, or her written designee, is authorized to attest to the Escrow Agreement, with such additions thereto and changes therein as may be approved or required by an Authorized Officer, including changes to conform to the final pricing of the escrow investments and to clarify any ambiguities; provided that the form of Escrow Agreement may be modified to conform to federal tax law requirements or to achieve further savings, with the advice and assistance of Bond Counsel, such approval to be conclusively evidenced by the execution of the Escrow Agreement by an Authorized Officer. MUFG Union Bank, N.A. is hereby appointed to act as Escrow Agent under the Escrow Agreement. Section 8. The Authorized Officers are hereby appointed as the authorized officers of the Authority for all purposes required to effect the issuance of the Authority Bonds and are hereby authorized, empowered, and directed, jointly and severally, to do all such acts and things and to execute all such documents as may be necessary to carry out and comply with the foregoing actions. Each of the Executive Director and the Treasurer, or their respective written designees, acting alone, is hereby authorized to negotiate the terms of a commitment (the "Insurance Commitment') for bond insurance for some or all of the Authority Bonds and a commitment for a reserve fund surety bond (the "Surety Commitment') for all or a portion of the Reserve Fund (as defined in the Indenture) from one or more municipal bond insurance companies (an "Insurer ") and, if such officer determines that the acquisition either of a policy or a reserve fund surety bond, or both, from an Insurer will result in net interest rate savings or will result in more annual debt service savings, to pay the premiums for policy a .. A ., ., b ond from the proceeds oil «su e Authority Bonds and to amend the Authority Documents to the extent necessary to conform to the terms of the Insurance Commitment and the Surety Commitment. Each of the Authorized Officers, acting alone, is further authorized to execute a reimbursement agreement required by the Surety Commitment. Section 9. The Authorized Officers are hereby authorized and directed, to do any and all things and to execute and deliver any and all documents which they may deem necessary or advisable in order to consummate the issuance and sale of the Authority Bonds and otherwise to effectuate the purposes of this Resolution. Section 10. This Resolution shall take effect immediately upon its adoption. 1l Public Finance Authority Resolution No 2015 -_ Page 5 PASSED, APPROVED AND ADOPTED at a regular meeting of the Board of Directors of the Lake Elsinore Public Financing Authority this 14" day of April, 2015. ATTEST: VIRGINIA BLOOM SECRETARY APPROVED AS TO FORM: BARBARA ZEID LEIBOLD COUNSEL TO AUTHORITY 5 NATASHA JOI-TNSON CHAIR Siradling Yocca Carlson & Rauth Draft of 410115 INDENTURE OF TRUST by and between LAKE ELSINORE PUBLIC FINANCING AUTHORITY and MUFG UNION BANK, N.A., as Trustee Dated as of 1, 2015 S LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE REFUNDING BONDS (COMMUNITY FACILITIES DISTRICT NO. 88-3),2015 SERIES B TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS; EQUAL SECURITY Section1.01 Definitions ....................................................................................... ..............................2 Section 1.02 Rules of Construction... ............................................ ............ ..... ....................... ........ 9 Section 1.03 Authorization and Purpose of Bonds ............................................. ............................... 9 Section1.04 Equal Security ................................................................................. ..............................9 ARTICLE II ISSUANCE OF THE BONDS Section 2.01 Terms of the Bonds ...................................................................... ............................... 10 Section 2.02 Redemption of Bonds .................................................................. ............................... I I Section 2.03 Form of the Bonds ....................................................................... ............................... 13 Section2.04 Execution of Bonds ...................................................................... ............................... 13 Section 2.05 Transfer of Bonds ........................................................................ ............................... 13 Section 2.06 Exchange of Bonds ...................................................................... ............................... 13 Section 2.07 Registration Books ....................................................................... ............................... 13 Section 2.08 Bonds Mutilated, Lost, Destroyed or Stolen ................................ ............................... 14 Section2.09 CUSIP Numbers ........................................................................... ............................... 14 Section 2.10 Use of Securities Depository ....................................................... ............................... 14 Section 2.11 Temporary Bonds ......................................................................... ............................... 15 ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS Section 3.01 Issuance of Bonds ........................................................................ ............................... 16 Section 3.02 Application of Proceeds of Sale of Bonds and Other Amounts ..... .............................16 Section 3.03 Costs of Issuance Fund ................................................................ ............................... 16 Section 3.04 Bond Purchase Fund ...................................................................... .............................16 Section 3.05 Validity of Bonds ........................................................................... .............................16 ARTICLE IV REVENUES; FLOW OF FUNDS Section 4.01 Pledge of Revenues; Assignment of Rights... ........ - .................................................. 17 Section 4.02 Receipt, Deposit and Applications of Revenues .......................... ............................... 17 Section 4.03 Cash Flow Management Fund ..................................................... ............................... 18 Section 4.04 Redemption Fund ......................................................................... ............................... 19 Section4.05 Reserve Fund ................................................................................. .............................19 Section4.06 Investments .................................................................................... .............................21 Section 4.07 Valuation and Disposition of Investments ..................................... .............................22 Section 4.08 Provisions Relating to Bond Insurance .......................................... .............................22 ARTICLE V COVENANTS OF THE AUTHORITY Section 5.01 Punctual Payment ......................................................................... ............................... 27 Section 5.02 Extension of Payment of Bonds ......................................... ............ ................. ........... 27 Section 5.03 Against Encumbrances ................................................................... .............................27 i TABLE OF CONTENTS (continuer) Page Section 5.04 Power to Issue Bonds and Make Pledge and Assignment ............. .............................28 ............................... 32 Section 5.05 Accounting Records and Financial Statements .............................. .............................28 ............................... 32 Section5.06 No Parity Debt ............................................................................... .............................28 ........... .34 Section 5.07 Tax Covenants Relating to Bonds .................................................. .............................28 ............................... 34 Section5.08 Rebate Fund ................................................................................... .............................29 ............................... 34 Section5.09 District Bonds ................................................................................ .............................31 35 Section 5.10 Further Assurances ....................................................................... ............................... 31 Section5.11 Immunity .................................. ................................ ........... - - 31 Section5.12 No Acceleration ........................................................................... ............................... 32 ARTICLE VI TIIE TRUSTEE Section 6.01 Appointment of Trustee ............................................................... ............................... 32 Section 6.02 Acceptance of Trusts .................................................................... ............................... 32 Section 6.03 Fees, Charges and Expenses of Trustee.. ....................................................... ........... .34 Section 6.04 Notice to Bond Owners of Default .............................................. ............................... 34 Section 6.05 Intervention by Trustee ................................................................ ............................... 34 Section 6.06 Removal of Trustee ...................................................................... ............................... 35 Section 6.07 Resignation by Trustee .................................................................. .............................35 Section 6.08 Appointment of Successor Trustee .............................................. ............................... 35 Section 6.09 Merger or Consolidation .............................................................. ............................... 35 Section 6.10 Concerning any Successor Trustee .............................................. ............................... 35 Section 6.11 Appointment to Co- Trustee ......................................................... ............................... 36 Section 6.12 Indemnification; Limited Liability of Trustee ............................. ............................... 36 ARTICLE VII ar n1FT- ATrnNT ,A NrD AMEND.. ENT OF Ti.i 1NDEN UP�E, Section 7.01 Amendment Hereof ...................................................................... ............................... 37 Section 7.02 Effect of Supplemental Indenture .................................................. .............................38 Section 7.03 Endorsement or Replacement of Bonds After Amendment ........... .............................38 Section 7.04 Amendment by Mutual Consent .................................................... .............................38 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES Section8.01 Events of Default ........................................................................... .............................38 Section 8.02 Remedies Upon Event of Default ................................................ ............................... 39 Section 8.03 Application of Revenues and Other Funds After Default ............ ............................... 39 Section 8.04 Power of Trustee to Control Proceedings .................................... ............................... 40 Section 8.05 Appointment of Receivers ............................................................. .............................40 Section8.06 Non - Waiver .................................................................................... .............................40 Section 8.07 Right to Institute Suit, Action or Proceeding ................................. .............................41 Section 8.08 Termination of Proceedings ............................................ .......... .... .......................... ... 41 ARTICLE IX MISCELLANEOUS Section 9.01 Limited Liability of Authority... ........................................ . . ...... ............................ 41 ii TABLE OF CONTENTS (continued Page Section 9.02 Benefits of Indenture Limited to Parties ........................................ .............................42 Section 9.03 Discharge of Indenture......_ ........................................................... .............................42 Section 9.04 Is Deemed Included in All References to Predecessor .................. .............................43 Section 9.05 Content of Certificates ................................................................. ............................... 43 Section 9.06 Execution of Documents by Bond Owners .................................... .............................43 Section 9.07 Disqualified Bonds ......................................................................... .............................44 Section 9.08 Waiver of Personal Liability .......................................................... .............................44 Section9.09 Partial Invalidity ............................................................................. .............................44 Section 9.10 Destruction of Canceled Bonds ...................................................... .............................44 Section 9.11 Funds and Accounts ....................................................................... .............................44 Section 9.12 Payment on Business Days ............................................................ .............................45 Section9.13 Notices ......................................................................................... ............................... 45 Section9.14 Unclaimed Moneys ........................................................................ .............................46 Section 9.15 Governing Law ............................................................................ ............................... 46 Section 9.16 Execution of Counterparts ............................................................. .............................46 EXHIBITA FORM OF BOND ............................................................. ........................................ A -1 iii INDENTURE OF TRUST THIS INDENTURE OF TRUST (this "Indenture ") is made and entered into as of _ 1, 2015, by and between the LAKE ELSINORE PUBLIC FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of the State of California (the "Authority "), and MUFG UNION BANK, N.A., a national banking association organized and existing under the laws of the United States of America having a corporate trust office in Los Angeles, California, and being qualified to accept and administer the trusts hereby created (the "Trustee "); WITNESSETH: WHEREAS, the Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated July 25, 1989, by and between the City of Lake Elsinore (the "City ") and the Redevelopment Agency of the City of Lake Elsinore (the "Agency "), and under the provisions of Articles I through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act'), and is authorized pursuant to Article 4 of the Act (the `Bond Law ") to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations of, or for the purpose of making loans to, the City, the Agency and any associate member to provide financing for public capital improvements of the City, the Agency and any associate member; and WHEREAS, the Authority desires to provide for the issuance of its Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3), 2015 Series B (the "Bonds "); and WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and to secure the payment of the principal thereof, premium (if any) and interest thereon, the Authority has authorized the execution and delivery of this Indenture: and WHEREAS, the Authority has found and determined, and hereby affirms, that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of this Indenture have been in all respects duly authorized: NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the principal of and the interest and premium (if any) on all Bonds at any time issued and Outstanding under this Indenture, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and repaid, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Authority does hereby covenant and agree with the Trustee, for the benefit of the respective Owners from time to time of the Bonds, as follows: ARTICLE I DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS; EQUAL SECURITY Section 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section 1.01 shall for all purposes of this Indenture of any Supplemental Indenture and of the Bonds and of any certificate, opinion, request or other documents herein mentioned have the meanings herein specified. "Act" means Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of the Government Code of the State, as in existence on the Closing Date or as thereafter amended from time to time. "Agency" means the Redevelopment Agency of the City of Lake Elsinore, a public body corporate and politic organized under the laws of the State, and any successor thereto. "Annual Debt Service" means, for each Bond Year, the sum of (a) the interest payable on the Outstanding Bonds in such Bond Year, and (b) the principal amount of the Outstanding Bonds scheduled to be paid in such Bond Year. "Authority" means the Lake Elsinore Public Financing Authority, a joint powers authority duly organized and existing under the Joint Exercise of Powers Agreement, dated July 25, 1989, by and between the City and the Agency, together with any amendments thereof and supplements thereto and under the laws of the State. "Authority Representative" means the Chairperson, Vice Chairperson, Executive Director or Treasurer of the Authority, or any other authorized representative of the Authority as evidenced by a certificate of the Chairperson or Executive Director. "Board" means the Board of Directors of the Authority. "Bond Counsel" means Stradling Yocca Carlson & Rauth, a Professional Corporation, or any attorney or firm of attorneys appointed by or acceptable to the Authority of nationally- recognized experience in the field of municipal law whose opinions are generally accepted by purchasers of municipal bonds or notes. "Bond Fund" means the fund by that name established and held by the Trustee pursuant to Section 4.02(b) hereof. "Bond Law" means the Marks -Roos Local Bond Pooling Act of 1985, constituting Article 4 of the Act (commencing with Section 6584), as in existence on the Closing Date or as thereafter amended from time to time. "Bond Purchase Fund" means the fund established pursuant to Section 3.04 hereof. "Bond Year" means each twelve -month period beginning on September 2 of each year and ending September 1 of the following year, except that the first Bond Year shall begin on the Closing Date and end on September 1, 2015. "Bonds" means the Lake Elsinore Public Financing Authority Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3), 2015 Series B, authorized by, and at any time Outstanding pursuant to, the Bond Law and this Indenture. "Business Day" means any day other than (i) a Saturday or a Sunday, (ii) a day on which the offices of the City are not open for business, or (iii) a day on which banking institutions in the state in which the Trustee has its principal corporate trust office is authorized or obligated by law or executive order to be closed. "Cash Flow Manage—en- . ,.nd" ,,. u F a v_. ,_. ge; a °ans u,e .t U Uy LIM 11W 1e esta'ohshed by Section 4.03(a) hereof. "Cash Flow Management Fund Requirement" means, as of any calculation date, an amount equal to 15% of the Maximum Annual Debt Service. "Certificate" or "Written Request" of the Authority means a written certificate or written request signed in the name of the Authority by an Authority Representative. Any such certificate or request may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. "City" means the City of Lake Elsinore, a political subdivision organized and existing under the laws of the State. "Closing Date" means the date of delivery of the Bonds to the original purchasers thereof. "Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the Bonds, together with applicable proposed, temporary_ and final regulations promulgated, and applicable official public guidance published, under the Code, "Corporate Trust Office" means the corporate trust office of the Trustee at the address set forth in Section 9.13 and such office as the Trustee may designate in writing to the Authority from time to time. "Costs of Issuance" means all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds, the purchase of the District Bonds, including, but not limited to, all compensation, fees and expenses (including, but not limited, to fees and expenses for legal counsel) of the Authority and the Trustee, compensation to any financial consultants or underwriters, legal fees and expenses, filing and recording costs, rating agency fees, premium for the Insurance Policy and the Reserve Surety Policy, costs of preparation and reproduction of documents and costs of printing. "Costs of Issuance Fund" means the fund established and held by the Trustee pursuant to Section 3.03 hereof. "District" means City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore). "District Bonds" means the City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) Special Tax Refunding Bonds, 2015 Series. "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. "Event of Default" means any of the events described in Section 8.01 hereof. "Excess Investment Earnings" means the amount of excess investment earnings determined to be subject to rebate to the United States of America with respect to the investment of the gross proceeds of the Bonds, determined pursuant to Section 148(f) of the Code. "Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Code) and, otherwise, the term "Fah Market Value" means the acquisition price in a bona fide, arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security - State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) any commingled investment fund in which the City and related parties do not own more than a ten percent (10 %) beneficial interest therein if the return paid by the fund is without regard to the source of the investment. "Federal Securities" means any of the following which are non - callable and which at the time of investment are legal investments under the laws of the State of California for funds held by the Trustee, as shall be certified by the Authority to the Trustee: (1) direct general obligations of the United States of America (including obligations issued or held in book -entry form on the books of the United States Department of the Treasury) and obligations, the payment of principal of and interest on which are directly or indirectly guaranteed by the United States of America, including, without limitation, such of the foregoing which are commonly referred to as "stripped" obligations and coupons; and (2) any of the following obligations of the following agencies of the United States of America: (a) direct obligations of the Export- Impot Bank, (b) certificates of beneficial ownership issued by the Farmers Home Administration, (c) participation certificates issued by the General Services Administration, (d) mortgage- backed bonds or pass - through obligations issued and guaranteed by the Government National Mortgage Association, (e) project notes issued by the United States Department of Housing and Urban Development, and (t) public housing notes and bonds guaranteed by the United States of America; or refunded municipal obligations, the timely payment of principal of and interest on are fully guaranteed by the United States of America. "Fiscal Agent" means MUFG Union Bank, N.A., as fiscal agent under the Fiscal Agent Agreement. "Fiscal Agent Agreement" means the Fiscal Agent Agreement dated as of January 1, 2008, as amended by the First Amendment to Fiscal Agent Agreement dated as of February 1, 2010, the S Second Amendment to Fiscal Agent Agreement dated as of July 1, 2013 and the Third Amendment to Fiscal Agent Agreement dated as of 1, 2015, each by and between the District and MUFG Union Bank, N.A., as said agreement may be amended from time to time in accordance with its terms. "Fiscal Year" means any twelve -month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve -month period selected and designated by the Authority as its official fiscal year period and certified to the Trustee in writing by an Authority Representative. "Indenture" means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture pursuant to the provisions hereof. "Independent Accountant" means any certified public accountant or firm of certified public accountants appointed and paid by the Authority, and who, or each of whom (a) is, in fact, independent and not under domination of the Authority or the City; (b) does not have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not connected with the Authority or the City as an officer or employee of the Authority or the City but who may be regularly retained to make annual or other audits of the books of or reports to the Authority or the City. "Information Services" means Electronic Municipal Market Access system (referred to as "EMMA "), a facility of the Municipal Securities Rulemaking Board, at www.emma.msrb.org; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other services providing information with respect to the redemption of bonds as the Authority may designate in a Written Request of the Authority delivered to the Trustee. "Insurance Policy" means the insurance policy issued by the Insurer guaranteeing the scheduled payment of princinal of and interact nn tha Rnnwlg when due "Insurer" means , or any successor thereto or assignee thereof. "Interest Account" means the account by that name established and held by the Trustee pursuant to Section 4.02(c)(i) hereof. "Interest Payment Date" means March I and September I in each year, beginning [September 1, 2015], and continuing thereafter so long as any Bonds remain Outstanding. "Letter of Representations" means the letter of the Authority and the Trustee delivered to and accepted by DTC (or such other applicable Securities Depository) on or prior to the issuance of the Bonds in book -entry form setting forth the basis on which DTC (or such other applicable Securities Depository) serves as depository for the Bonds issued in book -entry form, as originally executed or as it may be supplemented or revised or replaced by a letter to a substitute Securities Depository. "Maximum Annual Debt Service" means, as of the date of calculation, the maximum amount obtained by totaling, for the current or any future Bond Year, the sum of (a) the principal amount of all such Outstanding Bonds maturing in such Bond Year; and (b) the interest which would be due during such Bond Year on the aggregate principal amount of such Bonds which would be Outstanding in such period if such Bonds are retired as scheduled, but deducting and excluding from such aggregate principal amount the aggregate principal amount of such Bonds no longer Outstanding. " Moody's" means Moody's Investors Service, and its successors and assigns. "Outstanding," when used as of any particular time with reference to Bonds, means all Bonds theretofore executed, issued and delivered by the Authority under this Indenture except: (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds paid or deemed to have been paid within the meaning of Section 9.03; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been executed, issued and delivered pursuant to this Indenture or any Supplemental Indenture. "Owner" or "Bond Owner," when used with respect to any Bond, means the person in whose name the ownership of such Bond shall be registered on the Registration Books. "Permitted Investments" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein (the Trustee entitled to rely on written investment direction of the Authority as a determination that such investment is a legal investment), but only to the extent that the same are acquired at Fair Market Value: (a) Federal Securities; (b) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are 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): (i) direct obligations or fully guaranteed certificates of beneficial ownership of the U.S. Export-Import Bank; (ii) certificates of beneficial ownership of the Farmers Home Administration; (iii) obligations of the Federal Financing Bank; (iv) debentures of the Federal Housing Administration; (v) participation certificates of the General Services Administration; (vi) guaranteed mortgage- backed bonds or guaranteed pass - through obligations of the Government National Mortgage Association; (vii) guaranteed Title XI financings of the U.S. Maritime Administration; and (viii) project notes, local authority bonds, new communities debentures and U.S. public housing notes and bonds of the U.S. Department of Housing and Urban Development; (c) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non -full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): (i) senior debt obligations of the Federal Home Loan Bank System; (ii) participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation; (iii) mortgage- backed securities and senior debt obligations of the Federal National Mortgage Association (excluding stripped mortgage securities which are valued greater than par on the portion of unpaid principal); (iv) senior debt obligations of the Student Loan Marketing Association; (v) obligations (but only the interest component of stripped obligations) of the Resolution Funding Corporation; and (vi) consolidated systemwide bonds and notes of the Farm Credit System; (d) money market funds (including funds of the Trustee or its affiliates) 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 S &P of "AAAm -G," "AAAm," or "AAm," and, if rated by Moody's, rated "Aaa," "Aal" or "Aa2;" (e) certificates of deposit secured at all times by collateral described in (a) or (b) above, which have a maturity of one year or less, which are issued by commercial banks, savings and loan associations or mutual savings banks, and such collateral must be held by a third party, and the Trustee must have a perfected first security interest in such collateral; (f) certificates of deposit, savings accounts, deposit accounts or money market deposits (including *hos of tb a. tri i cull_. deposits b ° Trustee anu its alllliate5) wliiCL are fully insured by the Federal Deposit Insurance Corporation or secured at all times by collateral described in (a) or (b) above; (g) investment agreements, including guaranteed investment contracts, forward purchase agreements and Reserve Fund put agreements, which are general obligations of an entity whose long -term debt obligations, or claims paying ability, respectively, is rated in one of the two highest rating categories by Moody's or S &P or collateralized by Federal Securities; (h) commercial paper rated, at the time of purchase, "Prime -1" by Moody's and "A -I" or better by S &P; (i) bonds or notes issued by any state or municipality which are rated by Moody's and S &P in one of the two highest rating categories assigned by such agencies; 0) federal fiords or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of "Prime -1" or "A3" or better by Moody's and "A -1" or "A" or better by S &P; (k) repurchase agreements which provide for the transfer of securities from a dealer bank or securities firm (seller /borrower) to the Trustee and the transfer of cash from the Trustee to the dealer bank or securities 'firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date, which satisfy the following criteria: (i) repurchase agreements must be between the Trustee and (A) a primary dealer on the Federal Reserve reporting dealer list which falls under the jurisdiction of the Securities Investors Protection Corporation which are rated "A" or better by Moody's and S &P, or (B) a bank rated "A" or better by Moody's and S &P; (ii) the written repurchase agreement contract must include the following: (A) securities acceptable for transfer, which may be direct U.S. government obligations, or federal agency obligations backed by the fill faith and credit of the U.S. government; (B) the term of the repurchase agreement may be up to 30 days; (C) the collateral must be delivered to the Trustee or a third party acting as agent for the Trustee simultaneous with payment (perfection by possession of certificated securities); (D) the Trustee must have a perfected first priority security interest in the collateral; (E) the collateral must be free and clear of third -party liens and, in the case of a broker which falls under the jurisdiction of the Securities Investors Protection Corporation, are not subject to a repurchase agreement or a reverse repurchase agreement; (F) failure to maintain the requisite collateral percentage, after a two -day restoration period, will require the "Trustee to liquidate the collateral; and (G) the securities must be valued weekly, marked -to- market at current market price plus accrued interest and the value of collateral must be equal to 104% of the amount of cash transferred by the Trustee to the dealer bank or securities firm under the repurchase agreement plus accrued interest (unless the securities used as collateral are obligations of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, in which case the collateral must be equal to 105% of the amount of cash transferred by the Trustee to the dealer bank or securities firm under the repurchase agreement plus accrued interest). If the value of securities held as collateral falls below 104% of the value of the cash transferred by the Trustee, then additional cash and /or acceptable securities must be transferred; and (iii) a legal opinion must be delivered to the Trustee to the effect that the repurchase agreement meets guidelines under state law for legal investment of public funds; and (1) the Local Agency Investment Fund of the State of California, created pursuant to Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name. "Principal Account" means the account by that name established and held by the Trustee pursuant to Section 4.02(c)(ii) hereof. "Rebate Account" means the account established and held by the Trustee pursuant to Section 5.05 hereof. "Record Date" means, with respect to any Interest Payment Date, the fifteenth (15th) calendar day of the month preceding such Interest Payment Date. "Redemption Fund" means the fund by such name established and held by the Trustee pursuant to Section 4.04 hereof. "Redemption Revenues" means (a) amounts received from the redemption of the District Bonds from amounts constituting prepayments of Special Taxes, (b) amounts received from the optional redemption of the District Bonds, and (c) amounts received from the special mandatory redemption and mandatory redemption of the District Bonds. "Registration Books" means the records maintained by the Trustee pursuant to Section 2.07 for the registration and transfer of ownership of the Bonds. "Reserve Fund" means the fund by that name established acrd held by the Trustee pursuant to Section 4.05 hereof. "Reserve Requirement" means, as of any calculation date, an amount equal to the least of (i) ten percent (10 %) of the proceeds of the Bonds (within the meaning of section 148 of the Code); (ii) 125% of average Annual Debt Service; or (iii) Maximum Annual Debt Service. Provided, however, the Reserve Requirement on any calculation date shall not be greater than the Reserve Requirement amount on the Closing Date. "Reserve Surety Policy" means the municipal bond debt service reserve insurance policy issued by the Insurer and deposited in the Reserve Fund to satisfy the Reserve Requirement. "Revenue Fund" means the fund by that name established and held by the Trustee pursuant to Section 4.02(a) hereof. 8 "Revenues" means: (a) all amounts received by the Authority from the District as principal of or interest on the District Bonds; (b) all moneys deposited and held from time to time by the Trustee in the funds and accounts established hereunder for the Bonds, other than the Rebate Account and the Redemption Fund; and (c) income and gains with respect to the investment of amounts on deposit in the funds and accounts established hereunder for the Bonds, other than the Rebate Account and the Redemption Fund. "S &P" means Standard & Poor's, a division of The McGraw -Hill Companies, Inc., its successors and assigns. "Securities Depositories" means DTC, 55 Water Street, New York 10041, Attention: Call Notification Department, Fax -(212) 855 -7232 and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and /or such other securities depositories as the Authority may designate in a Certificate of the Authority delivered to the Trustee. "State" means the State of California. "Supplemental Indenture" means any indenture, agreement or other instrument hereafter duty executed by the Authority and the Trustee in accordance with the provisions of Section 7.01 hereof. "Tax Regulations" means temporary and permanent regulations promulgated under or with respect to Section 103 and Sections 141 through 150, inclusive, of the Code. "Trustee" means MUFG Union Bank, N.A., and its successors and assigns, and any other corporation or association which may at any time be substituted in its place as provided in Article VI hereof. Section 1.02 Rules of Construction. All references in this Indenture to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture, and the words "herein," "hereof," "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof. Section 1.03 Authorization and Purpose of Bonds. The Authority has reviewed all proceedings heretofore taken relative to the authorization of the Bonds and has found, as a result of such review, and hereby finds and determines that all things, conditions, and acts required by law to exist, happen and be performed precedent to and in the issuance of the Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and the Authority is now authorized under the Bond Law and each and every requirement of law, to issue the Bonds in the manner and form provided in this Indenture. Accordingly, the Authority hereby authorizes the issuance of the Bonds pursuant to the Bond Law and this Indenture for the purpose of providing funds to pay for the District Bonds. Section 1.04 Equal Security. In consideration of the acceptance of the Bonds by the Owners thereof, this Indenture shall be deemed to be and shall constitute a contract among the Authority, the Trustee and the Owners from time to time of the Bonds; and the covenants and agreements herein set forth to be performed on behalf of the Authority shall be for the equal and proportionate benefit, security and protection of all Owners of Bonds without preference, priority or distinction as to security or otherwise of any of the Bonds over any of the others by reason of the number or date thereof or the time of sale, execution or delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein or herein. ARTICLE II ISSUANCE OF THE BONDS Section 2.01 Terms of the Bonds. The Bonds authorized to be issued by the Authority under and subject to the Bond Law and the terms of this Indenture shall be designated the "Lake Elsinore Public Financing Authority Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3), 2015 Series B" which shall be issued in the original aggregate principal amount of $ The principal of and interest and premium (if any) on the Bonds shall be payable in lawful money of the United States of America. The Bonds shall be issued in fully- registered form without coupons in denominations of $5,000 or any integral multiple thereof, so long as no Bond shall have more than one maturity date. The Bonds shall be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York, and shall be evidenced by one Bond for each of the maturities in the principal amounts set forth below, and DTC is hereby appointed depository for the Bonds, and registered ownership may not thereafter be transferred except as set forth in Section 2.05 hereof. The Bonds shall be dated as of the Closing Date, shall mature in the following amounts and shall bear interest (calculated on the basis of a 360 -day year of twelve 30 -day months) at the following rates: Maturity Date Principal Interest September I Amount Rate 2016 2017 2018 2019 2020 Interest on the Bonds shall be payable on each Interest Payment Date to the person whose name appears on the Registration Books as the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check of tote Trustee mailed by first -class mail, postage prepaid, on each Interest Payment Date to the Owner at the address of such Owner as it appears on the Registration Books as of the preceding Record Date; 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 Trustee 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 continental United States designated in such written request. Any such written request shall remain in effect until rescinded in writing by the Owner. Principal of and premium (if any) on any Bond shall be paid upon presentation and surrender thereof, at maturity or the prior redemption thereof, at the Corporate Trust Office. The principal of and interest and premium (if any) on the Bonds shall be payable in lawful money of the United States of America. 10 Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated on or before the Interest Payment Date and after the close of business on the preceding record date, in which event it shall bear interest from such Interest Payment Date; or (b) it is authenticated on or before August 15, 20t5, in which event it shall bear interest from the Closing Date; or (c) interest with respect to any outstanding Bond is in default, such Bond shall bear interest from the Interest Payment Date to which interest has previously paid in full or made available for payment thereon payable on each Interest Payment Date. Section 2.02 Redemption of Bonds. (a) No Optional Redemption. The Bonds are not subject to redemption prior to maturity. (b) Special Mandatory Redemption From Prepayment of Special Taxes and from Surplus Funds. The Bonds shall also be subject to mandatory redemption prior to maturity on any date on or after September 1, 2015, in whole or in part from such maturities as selected by the Authority and by lot within a maturity, from the redemption of District Bonds from amounts constituting prepayments of Special 'Faxes and from amounts held in the Delinquency Management Fund under the Fiscal Agent Agreement and from amounts in the Cash Flow Management Fund at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed) together with accrued interest thereon to the redemption date. Redemption Dates Redemption Prices (c) Selection of Bonds for Redemption. If less than all of 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 an integral multiple thereof. In selecting portions of such Bonds for redemption, the Trustee shall treat such Bonds as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds to be redeemed in part by $5,000. The Trustee shall promptly notify the Authority in writing of the Bonds, or portions thereof, selected for redemption. (d) Notice of Redemption. The Trustee on behalf and at the expense of the Authority shall mail (by first -class mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, to the Securities Depositories and to one or more Information Services, at least thirty (30) but not more than sixty (60) days prior to the date fixed for redemption. Neither failure to receive any such notice so mailed nor any defect therein shall affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice shall state the date of the notice, the redemption date, and the redemption price and shall designate the CUSIP numbers, the Bond numbers (but only if less than all of the Outstanding Bonds are to be redeemed) and the maturity of the Bonds to be redeemed, and shall require that such Bonds be then surrendered at the Corporate Trust Office for redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date. If at the time of mailing of any notice of optional redemption there shall not have been deposited with the Trustee moneys sufficient to redeem all the Bonds called for redemption, such notice shall state that it is subject to the deposit of the redemption moneys with the Trustee not later than the opening of business on the redemption date and will be of no effect unless such moneys are so deposited. In addition to the foregoing notice, further notice shall be given by the Trustee in said form by first -class mail to any Bond Owner whose Bond has been called for redemption but who has failed to tender his Bond for payment by the date which is sixty days after the redemption date, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption. 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. (e) Partial Redemption of Bonds. In the event only a portion of any Bond is called for redemption, then, upon surrender of such Bond, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same series and maturity date, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed. (t) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of and interest (and premium, if any) on the Bonds so called for redemption shall have been duly provided, such Bonds so called shall cease to be entitled to any benefit under this Indenture other than the right to receive payment of the redemption price, and no interest shall accrue thereon from and after the redemption date specified in such notice. All Bonds redeemed pursuant to this Section 2.02 shall be canceled and destroyed. (g) Purchase in Lieu of Redemption. In lieu of redemption of any Bond, amounts on deposit in the Revenue Fund may also be used and withdrawn by the Trustee at any time, upon the Written Request of the Authority, for the purchase of such Bonds at public or private sale as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as the Authority may in its discretion determine in accordance with all applicable laws and in accordance with the priority afforded the relative Bond under the Indenture. (h) Authority Notice. Notwithstanding any provisions in this Indenture to the contrary, upon any optional redemption or mandatory redemption from Special Taxes in part, the Authority shall deliver a Written Certificate to the Trustee at least sixty (60) days prior to the proposed redemption date or such later date as shall be acceptable to the Trustee so stating that the remaining payments of principal and interest on the District Bonds, together with other Revenues will be sufficient on a timely basis to pay debt service on the Bonds. The Authority shall certify in such Written Certificate that sufficient moneys for purposes of such redemption are or will be on deposit in the Redemption Fund, and is required to deliver such moneys to the Trustee together with other Revenues, if any, then to be delivered to the Trustee, which moneys are required to be identified to the Trustee in the Written Certificate delivered with the Revenues. 12 Section 2.03 Form of the Bonds. The Bonds, the form of Trustee's certificate of authentication, and the form of 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 Indenture. Section 2.04 Execution of Bonds. The Bonds shall be signed in the name and on behalf of the Authority with the manual or facsimile signatures of its Chairperson or Executive Director and attested with the manual or facsimile signature of its Secretary or any assistant duly appointed by the Board, and shall be delivered to the Trustee for authentication by it. In case any officer of the Authority who shaii Have signed any of the Bonds shall cease to be such officer before the Bonds so signed shall have been authenticated or delivered by the Trustee or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though the individual who signed the same had continued to be such officer of the Authority. Also, any Bond may be signed on behalf of the Authority by any individual who on the actual date of the execution of such Bond shall be the proper officer although on the nominal date of such Bond such individual shall not have been such officer. Only such of the Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture. Section 2.05 Transfer of Bonds. Subject to Section 2.10, any Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. Whenever any Board or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and deliver to the transferee a new Bond or Bonds of like maturity and aggregate principal amount of authorized denominations. The Trustee may require payment by the Bond Owner requesting such transfer or exchange of any tax or other governmental charge required to be paid with respect to such transfer or exchange. The Trustee shall not be required to transfer, pursuant to this Section, either (a) all Bonds during the period established by the Trustee for the selection of Bonds for redemption, or (b) any Bonds selected for redemption pursuant to Section 2.02. The cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer shall be paid by the Authority. Section 2.06 Exchange of Bonds. The Bonds of any series may be exchanged at the Corporate Trust Office for a like aggregate principal amount of Bonds of the same series of other authorized denominations and of the same maturity. The Trustee shall not be required to exchange, pursuant to this Section, either (a) all Bonds during the period established by the Trustee for the selection of Bonds for redemption, or (b) any Bonds selected for redemption pursuant to Section 2.02. The cost of printing Bonds and any service rendered or expenses incurred by the Trustee in connection with any exchange shall be paid by the Authority. Section 2.07 Registration Books. The Trustee will keep or cause to be kept at its Corporate Trust Office sufficient records for the registration and transfer of the Bonds which shall at all reasonable times during regular business hours be open to inspection by the Authority with 13 reasonable prior notice; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said records Bonds as hereinbefore provided. Section 2.08 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like series, tenor and authorized denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by it and destroyed. If any Bond hereunder shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and the Authority and, if such evidence be satisfactory to the Trustee and the Authority and indemnity for the Trustee and the Authority satisfactory to the Trustee shall be given, the Authority, at the expense of the Bond Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like series and tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such Bond shall have matured or shall have been called for redemption, instead of issuing a substitute Bond, the Trustee may pay the same without surrender thereof upon receipt of indemnity satisfactory to the Trustee). The Authority may require payment of a fee for preparing and authenticating each new Bond issued under this Section and of expenses which may be incurred by the Authority and the Trustee. Any Bond issued under the provisions of this Section 2.08, in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original contractual obligation on the part of the Authority whether or not the Bond alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Indenture with all other Bonds secured by this Indenture. Section 2.09 CUSIP Numbers. The Trustee and the Authority shall not be liable for any defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the Owners and that neither the Trustee, nor the Authority shall be liable for any inaccuracies in such numbers. Section 2.10 Use of Securities Depository. (a) The Bonds shall be initially registered as provided in Section 2.01. Registered ownership of the Bonds, or any portion thereof, may not thereafter be transferred except: W to any successor of Cede & Co., as nominee of DTC, as its nominee, or to any substitute depository designated pursuant to clause (ii) of this Section (a "substitute depository "); provided, that any successor of Cede & Co., as nominee of DTC or a substitute depository, shall be qualified under any applicable laws to provide the services proposed to be provided by it; (ii) to any substitute depository upon (1) the resignation of DTC or its successor (or any substitute depository or its successor) from its functions as depository, or (2) a determination by the Authority to substitute another depository for DTC (or its successor) because DTC or its successor (or any substitute depository or its successor) is no longer able to carry out its functions as depository; provided, that any such substitute depository shall be qualified under any applicable laws to provide the services proposed to be provided by it; or 14 (iii) to any person as provided below, upon (1) the resignation of DTC or its successor (or substitute depository or its successor) from its functions as depository, or (2) a determination by the Authority to remove DTC or its successor (or any substitute depository or its successor) from its functions as depository. (b) In the case of any transfer pursuant to clause (i) or clause (ii) of subsection (a) hereof, upon receipt of the Outstanding Bonds by the Trustee, together with a Written Request of the Authority to the Trustee, a new Bond for each maturity shall be authenticated and delivered in the aggregate principal amount of the Bonds then Outstanding, registered in the name of such successor or ci "eh m'bstitrae �- e ^^ otwy, or their nominees, aS nc case nay be, al a SpeCi n Slledy.. i i h Written Request of the Authority. (c) In the case of any transfer pursuant to clause (iii) of subsection (a) hereof upon receipt of the Outstanding Bonds by the Trustee, together with a Written Request of the Authority to the Trustee, new Bonds shall be authenticated and delivered in such denominations numbered in the manner determined by the Trustee and registered in the names of such persons as are requested in such a Written Request of the Authority, subject to the limitations of Section 2.01 hereof, provided, the Trustee shall not be required to deliver such new Bonds within a period of less than sixty (60) days from the date of receipt of such a Written Request of the Authority. After any transfer pursuant to this subsection, the Bonds shall be transferred pursuant to Section 2.05. (d) The Authority and the Trustee shall be entitled to treat the person in whose name any Bond is registered as the Owner thereof for all purposes of the Indenture and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the Authority; and the Authority and the Trustee shall have no responsibility for transmitting payments to, communication with, notifying, or otherwise dealing with any beneficial owners of the Bonds, and neither the Authority nor the Trustee will have any responsibility or obligations, legal or otherwise, to the beneficial owners or to any other party, including DTC or its successor (or substitute depository or its successor) except for the Owner of any Bonds. (e) So long as the Outstanding Bonds are registered in the name of Cede & Co. or its registered assigns, the Authority and the Trustee shall cooperate with Cede & Co., as sole registered Owner, or its registered assigns in effecting payment of the principal of and interest on the Bonds by arranging for payment in such manner that funds for such payments are properly identified and are made immediately available on the date they are due. (f) Notwithstanding anything to the contrary contained herein, so long as the Bonds are registered as provided in this Section 2. 10, payment of principal of and interest on the Bonds shall be made in accordance with the Letter of Representations delivered to DTC with respect to the Bonds. Section 2.11 Temporary Bonds. The Bonds may be initially delivered in temporary form exchangeable for definitive Bonds when ready for delivery, which temporary Bonds shall be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Trustee, shall be in fully - registered form and shall contain such reference to any of the provisions hereof as may be appropriate. Every temporary Bond shall be authenticated and delivered by the Trustee upon the same conditions and terms and in substantially the same manner as definitive Bonds. If the Trustee authenticates and delivers temporary Bonds, it will register and authenticate definitive Bonds, and in that case, upon demand of the Owner of any temporary Bonds, such definitive Bonds 15 shall be exchanged by the Trustee at its Corporate Trust Office, without cost to such Owner for temporary Bonds upon surrender of such temporary Bonds, and until so exchanged such temporary Bonds shall be entitled to the same benefit, protection and security hereunder as the definitive Bonds executed and delivered hereunder. All temporary Bonds surrendered pursuant to the provisions of this Section shall be canceled by the "Trustee and shall not be redelivered. ARTICLE III DEPOSIT AND APPLICATION OF PROCEEDS OF BONDS Section 3.01 Issuance of Bonds. Upon the execution and delivery of this Indenture, the Authority shall execute and deliver the Bonds in the aggregate principal amount of Dollars ($ ) to the Trustee for authentication and delivery to the original purchaser thereof upon the Written Request of the Authority. Section 3.02 Application of Proceeds of Sale of Bonds and Other Amounts. Upon the receipt of payment for the Bonds on the Closing Date, the Trustee shall apply the proceeds of sale thereof in the amount of $ (being the principal amount of $ plus /less original issue premium /discount of $ , less an underwriter's discount of $ , and less $ paid by the initial purchaser of the Bonds directly to the Bond Insurer), as follows: (a) $ of the proceeds of the Bonds shall be deposited in the Bond Purchase Fund for the acquisition of the District Bonds in accordance with Section 3.04 hereof. (b) $ of the proceeds of the Bonds shall be retained by the Trustee and deposited in the Costs of Issuance Fund for the payment of Costs of Issuance in accordance with Section 3.03 hereof. [Furthermore, the Trustee shall deposit $ into the Cash Flow Management Fund from other available funds received on the Closing Date.] Section 3.03 Costs of Issuance Fund. There is hereby established a fund to be held by the Trustee known as the "Costs of Issuance Fund" into which shall be deposited a portion of the Bond proceeds as set forth in Section 3.02(b). The moneys in the Costs of Issuance Fund shall be used to pay Costs of Issuance from time to time upon receipt of a Written Request of the Authority. On the date which is one hundred twenty (120) days following the Closing Date or upon the earlier receipt by the Trustee of a Written Request of the Authority stating that all Costs of Issuance have been paid, the Trustee shall transfer all remaining amounts in the Costs of Issuance Fund to the Revenue Fund. The Authority may at any time file a Written Request of the Authority requesting that the Trustee retain a specified amount in the Costs of Issuance Fund and transfer to the Revenue Fund all remaining amounts, and the Trustee shall comply with such requests. Section 3.04 Bond Purchase Fund. The Trustee shall establish and maintain a separate fund to be known as the `Bond Purchase Fund" into which shall be deposited a portion of the proceeds of sale of the Bonds pursuant to Section 3.02(a) hereof. Section 3.05 Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be affected in any way of any proceedings taken by the District with respect to the 16 application of the proceeds of the sale of the District Bonds, and the recital contained in the Bonds that the same are issued pursuant to the Bond Law shall be conclusive evidence of their validity and of the regularity of their issuance. ARTICLE IV REVENUES; FLOW OF FUNDS Section 4.01 Pledge of Revenues; Assignment of Rights. The Bonds shall be secured by .. first a.... .,., and piedgc wr'hiGh 81'iali be effected in the tRailrrer End to the extent heremafter provided) of all of the Revenues and Redemption Revenues and a first pledge of all of the moneys in the Bond Fund, the Revenue Fund, the Redemption Fund and the Cash Flow Management Fund, including all amounts derived from the investment of such moneys. The Bonds shall be equally secured by a pledge, charge and first lien upon the Revenues and Redemption Revenues and such moneys without priority for number, date of Bonds, date of execution or date of delivery; and the payment of the interest on and principal of the Bonds and any premiums upon the redemption of any thereof shall be and are secured by an exclusive pledge, charge and first lien upon the Revenues and Redemption Revenues and such moneys. So long as any of the Bonds are Outstanding, the Revenues and Redemption Revenues and such other money shall not be used for any other purpose except as described hereunder for the payment of the Bonds; except that out of the Revenues and Redemption Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by Section 4.02. The Authority hereby transfers in trust and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues and Redemption Revenues and all of the right, title and interest of the Authority in the District Bonds. The Trustee shall be entitled to and shall receive all of the Revenues and the Redemption Revenues, and any Revenues and Redemption Revenues collected or received by the Autherl j' shall be deemed tG be held, and t0 have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The assignment to the Trustee is solely in its capacity as Trustee under this Indenture and in accepting such assignment and taking any actions with respect to the District Bonds, the Trustee shall be entitled to all the indemnities, protections, immunities and limitations from liability afforded it as Trustee under this Indenture. The Trustee also shall be entitled to and, subject to the provisions hereof, shall take all steps, actions and proceedings reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the District under the District Bonds. Section 4.02 Receipt, Deposit and Applications of Revenues. (a) Deposit of Revenues: Revenue Fetid. All Revenues (excluding Redemption Revenues) shall be promptly deposited by the Trustee upon receipt thereof in a special fetid designated as the "Revenue Fund" which the Trustee shall establish, maintain and hold in trust hereunder. (b) Deposit of Revenues: Bond Fund: The Trustee shall establish, maintain and hold in trust a fund, entitled "Bond Fund." Within such fund, the Trustee shall establish, maintain and hold in trust separate special accounts entitled "Interest Account" and "Principal Account." On 17 or before each hiterest Payment Date, the Trustee shall transfer from the Revenue Fund for deposit into the Bond Fund the following amounts, in the priority set forth in Subsection (c) below. (c) Application of Revenues; Bond Fund. On or before each Interest Payment Date, the Trustee shall transfer from the Revenue Fund and deposit into the Bond Fund and the following respective special accounts therein and into the Reserve Fund, the following amounts in the following order of priority, the requirements of each such special account or fund (including the making up of any deficiencies in any such account or fund resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account or fiord subsequent in priority: (i) Interest Account. On or before each Interest Payment Date, the Trustee 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 such Interest Payment Date on all Outstanding Bonds. No deposit need be made into the Interest Account if the amount contained therein is at least equal to the interest becoming due and payable upon all Outstanding ,Bonds on such Interest Payment Date. All moneys in the Interest Account shall be used and withdrawn by the Trustee 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). (ii) Principal Account. On or before each date on which the principal of the Bonds shall be payable, the Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the aggregate amount of principal (including sinking fund payments) coming due and payable on such date on the Bonds pursuant to Section 2.01. All moneys in the Principal Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds (including sinking fund payments). (iii) Reserve Fund. All amounts on deposit in the Revenue Fund on or before each Interest Payment Date, to the extent not required to pay any interest on or principal of any Outstanding Bonds then having come due and payable, shall be transferred to the replenishment of the Reserve Fund in an amount sufficient to maintain the Reserve Requirement therein. The amounts in the Reserve Fund shall be applied in accordance with Section 4.05 hereof. No such transfer shall be made with respect to the Reserve Fund, so long as the Reserve Fund is fully funded by the deposit of the Reserve Surety Policy therein. (iv) Surplus. All remaining amounts on or as soon as practicable after September 2 (or the next Business Day to the extent September 2 is not a Business Day) of each year, commencing September 2, 2015, on deposit in the Revenue Fund shall be transferred to the Cash Flow Management Fund. Section 4.03 Cash Flow Management Fund. (a) Establishment of Cash Flow Management Fund. There is hereby established as a separate fund to be held by the Trustee, the "Cash Flow Management Fund," to the credit of which a deposit shall be made as required by Section 3.02 and 4.02 hereof. The Cash Flow Management Fund may also be funded at the election of the Authority from any available surplus revenues with respect to other series of local agency revenue bonds issued by the Authority to the extent such surplus revenues are loaned to replenish the Cash Flow Management Fund to the Cash 18 Flow Management Fund Requirement. Amounts, if any, deposited into the Cash Flow Management Find shall be applied for the following purposes in the following order of priority: G) The Trustee shall, prior to any draw on the Reserve Fund, pay debt service on the Bonds to the extent Revenues are insufficient for such purpose. (ii) Upon the written direction of the Authority, the Trustee shall transfer any amounts in the Cash Flow Management Fund to the trustee of any other series of local agency revenue bonds issued by the Authority to the extent any surplus revenues from such other series of local agency ri. v'CnuC bonds wore loaned 'to repieiiisli iiie l Usll Flow I milagemCnl rmul. (iii) Upon the written direction of the Authority, the Trustee shall transfer any amounts in the Cash Flow Management Fund to the trustee of any other series of local agency revenue bonds issued by the Authority in an amount estimated by the Authority to be necessary to prevent a shortfall in the amount required to pay debt service on such other series of local agency revenue bonds or to the fiscal agent of any local agency bonds issued by the City an amount estimated by the Authority necessary to prevent a shortfall in the amount required to pay debt service on such local agency bonds, which all such transfers shall be treated as loaned amounts. (iv) Upon the written direction of the Authority, the Trustee shall transfer such amount as may be directed by the Authority for deposit in the Redemption Fund. (v) On or as soon as practicable after September 2 of each year, commencing September 2, 2015, upon the written direction of the Authority, the Trustee shall transfer all remaining amounts in the Cash Flow Management Fund in excess of the Cash Flow Management Fund Requirement to the Fiscal Agent for the District Bonds for deposit in the Delinquency Management Fund held under the Fiscal Agent Agreement. Section 4.04 Redemption Fund. There is hereby established as a separate fund to be held by the Trustee, the "Redemption Fund," to the credit of which the Authority shall deposit, immediately upon receipt, all Redemption Revenues. Moneys in the Redemption Fund shall be held in trust by the Trustee for the benefit of the Authority and the Owners of the Bonds, and shall be used and withdrawn by the Trustee to redeem Bonds pursuant to Sections 2.02(a), 2.02(c) and 2.02(c) hereof on the applicable date thereof. Section 4.05 Reserve Fund. The Trustee shall establish and hold in trust the Reserve Fund. The Authority shall cause the Reserve Surety Policy to be deposited in the Reserve Fund and the Trustee shall draw upon the Reserve Surety Policy in accordance with this Section 4.05. As long as the Reserve Surety Policy shall be in full force and effect, and the Insurer has not defaulted on any obligation under the Insurance Policy or the Reserve Surety Policy, the Authority and Trustee agree to comply with the following provisions: (a) In the event and to the extent that moneys on deposit in the Revenue Fund, plus all amounts on deposit in and credited to the Reserve Fund in excess of the amount of the Reserve Surety Policy, are insufficient to pay the amount of principal and interest coining due, then upon the later of: (i) one (1) Business Day after receipt by the Insurer of a Notice of Nonpayment (as such terms are defined in the Reserve Surety Policy), duly executed by the Trustee certifying that payment due under this Indenture has not been made to the Trustee; or (ii) the Interest Payment Date, 19 the Insurer will make a deposit of funds in an account with the Trustee or its successor sufficient for the payment to the Trustee of amounts which are then due to the Trustee under this Indenture up to but not in excess of the Policy Limit, as defined in the Reserve Surety Policy; provided, however, that in the event that the amount on deposit in, or credited to, the Reserve Fund, in addition to the amount available under the Reserve Surety Policy, includes amounts available under a letter of credit, insurance policy, reserve surety policy or other such funding instrument (the "Additional Funding Instrument "), draws on the Reserve Surety Policy and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency. (b) The Authority shall repay any draws under the Reserve Surety Policy and pay all related reasonable expenses incurred by the Insurer. Interest shall accrue and be payable on such draws and expenses from the date of payment by the Insurer at the Late Payment Rate. "Late Payment Rate" means the lesser of: (i) the greater of (A) the per annum rate of interest, publicly announced from time to time by JP Morgan Chase Bank at its principal office in the City of 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 JP Morgan Chase Bank) plus 3 %; and (B) the then applicable highest rate of interest on the Bonds; and (ii) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. In the event that JP Morgan Chase Bank ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the Insurer shall specify. (c) Repayment of draws and payment of expenses and accrued interest thereon at the Late Payment Rate (collectively, "Policy Costs ") shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1/12 of the aggregate of Policy Costs related to such draw. (d) Amounts in respect of Policy Costs paid to the Insurer shall be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to the Insurer on account of principal due, the coverage under the Reserve Surety Policy will be increased by a like amount, subject to the terms of the Reserve Surety Policy. (e) All cash and investments in the Reserve Fund shall be transferred to the Bond Fund for payment of the principal of and interest on the Bonds before any drawing may be made on the Reserve Surety Policy or any other credit facility credited to the Reserve Fund in lieu of cash ( "Credit Facility "). Payment of any Policy Costs shall be made prior to replenishment of any such cash amounts. Draws on all Credit Facilities (including the Reserve Surety Policy) on which there is available coverage shall be made on a pro -rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Reserve Fund. Payment of Policy Costs and reimbursement of amounts with respect to other Credit Facilities shall be made on a pro -rata basis prior to replenishment of any cash drawn from the Reserve Fund. For the avoidance of doubt, "available coverage" means the coverage then available for disbursement pursuant to the terms of the applicable alternative credit instrument without regard to the legal or financial ability or willingness of the provider of such instrument to honor a claim or draw thereon or the failure of such provider to honor any such claim or draw. (f) If the Authority shall fail to pay any Policy Costs in accordance with the requirements of Section 4.05(b) hereof, the Insurer shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under this Indenture other than: 20 (i) acceleration of the maturity of the payments of principal of and interest on the Bonds; or (ii) remedies which would adversely affect Owners of the Bonds. (g) The Trustee shall ascertain the necessity for a claim upon the Reserve Surety Policy in accordance with the provisions of Section 4.05(b) hereof and provide notice to the Insurer in accordance with the terms of the Reserve Surety Policy at least five (5) Business Days prior to an Interest Payment Date. Where deposits are required to be made by the Authority with the Trustee to the Bond Fund for the payment of principal of and interest on the Bonds more often than semi- annually, the Trustee shall be instructed to give notice to the Insurer of any failure of the Authority to make timely payment in full of such deposits within two Business Days of the date due. So long as the Reserve Surety Policy is in full force and effect and the Insurer has not defaulted on any obligation under the Insurance Policy or the Reserve Surety Policy, future deposits of a surety in the Reserve Fund shall require the prior written consent of the Insurer. Section 4.06 Investments. All moneys in any of the funds or accounts established with the Trustee pursuant to this Indenture shall be invested by the Trustee solely in Permitted Investments pursuant to the Written Request of the Authority given to the Trustee at least two (2) Business Days in advance of the making of such investments, which by their terms mature prior to the date on which such moneys are required to be paid out hereunder. Each such written direction shall contain the representation of the Authority that the investments identified therein constitute Permitted Investments hereunder upon which the Trustee may conclusively rely. In the absence of any such direction from the Authority, the Trustee shall invest any such moneys in clause (d) of the definition of Permitted Investments. Obligations purchased as an investment of moneys in any funds shall be deemed to be part of such fund or account. All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder shall be deposited in the fund or account from which such investment was made. For purposes of acquiring any investments hereunder, the Trustee may commingle funds held by it hereunder upon the Written Request of the Authority. The Trustee or its affiliate may (but shall not be obligated to) act as principal or agent in the acquisition or disposition of any investment and shall be entitled to its customary fees therefor. The Trustee is required to sell or present for redemption, any Permitted Investment it purchases whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund to which such permitted investment is created. The Trustee shall incur no liability for losses arising from any investments made pursuant to this Section. The Trustee shall furnish the Authority periodic cash transaction statements which include detail for all investment transactions effected by the Trustee or brokers selected by the Authority. Upon the Authority's election, such statements will be delivered via the Trustee's online service and upon electing such service, paper statements will be provided only upon request. The Authority waives the right to receive brokerage confirmations of security transactions effected by the Trustee as they occur, to the extent permitted by law. The Authority further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker. Copies of such cash statements may be mailed to any owner of at least 50% aggregate principal amount of Bonds Outstanding, upon the Owner's written request at a cost not to exceed the Trustee's actual cost's of duplication and mailing. 21 The Trustee may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by this Section. The Trustee may act as purchaser or agent in the making or disposing of any investment. Such investments, if registered, shall be registered in the name of the Trustee for the benefit of the Owners and held by the Trustee. The Trustee or any of its affiliates may act as sponsor, advisor or manager or provide administrative services in connection with any Permitted Investments. Section 4.07 Valuation and Disposition of Investments. Except as otherwise provided in the next sentence, all investments of amounts deposited in any fund, or account created by or pursuant to this Indenture, or otherwise containing gross proceeds of the Bonds (within the meaning of section 148 of the Code) shall be acquired, disposed of, and valued (as of the date that valuation is required by this Indenture or the Code) at Fair Market Value. Investments in funds or accounts (or portions thereof) that are subject to a yield restriction under the applicable provisions of the Code shall be valued at their present value (within the meaning of section 148 of the Code). Section 4.08 Provisions Relating to Bond Insurance. As long as the Insurance Policy is in full force and effect, the Authority and the Trustee agree to comply with the following provisions, notwithstanding anything in this Hrdenture to the contrary. (a) The prior written consent of the Insurer shall be a condition precedent to the deposit of any credit instrument provided in lieu of a cash deposit into the Reserve Fund. Amounts on deposit in the Reserve Fund shall be applied solely to the payment of debt service due on Outstanding Bonds, and the Trustee shall draw on the Reserve Fund to pay debt service and exhaust amounts on deposit or otherwise available therein prior to making any claim on the Insurance Policy. (b) The Insurer shall be deemed to be the sole holder of the Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the Owners of the Bonds are entitled to take pursuant to the section or article of the Indenture pertaining to (i) defaults and remedies and (ii) the duties and obligations of the Trustee. Mandamus is available as a remedy to the Insurer in such capacity. (c) No grace period for a covenant default shall exceed 30 days or be extended for more than 60 days, without the prior written consent of the Insurer. No grace period shall be permitted for payment defaults. (d) The Insurer is hereby deemed a third party beneficiary to the Indenture. (c) Upon the occurrence of an extraordinary optional, special or extraordinary mandatory redemption in part, the selection of Bonds to be redeemed shall be subject to the approval of the Insurer. The exercise of any provision of the Indenture which permits the purchase of Bonds in lieu of redemption shall require the prior written approval of the Insurer if any Bond so purchased is not cancelled upon purchase. (f) Any amendment, supplement, modification to, or waiver of, the Indenture [or the Fiscal Agent Agreement] (collectively, "Transaction Documents "), that requires the consent of Owners of the Bonds or adversely affects the rights and interests of the Insurer shall be subject to the prior written consent of the Insurer. 22 (g) The rights granted to the Insurer under the Indenture or any other Transaction Document to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Insurance Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the Owners of the Bonds and such action does not evidence any position of the Insurer, affirmative or negative, as to whether the consent of the Owners of the Bonds or any other person is required in addition to the consent of the Insurer. (h) Only (1) cash, (2) non callable direct obligations of the United States of ur evidences or ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) subject to the prior written consent of the Insurer, pre - refunded municipal obligations rated "AAA" and "Aaa" by S &P and Moody's, respectively, or (5) subject to the prior written consent of the Insurer, securities eligible for "AAA" defeasance under then existing criteria of S &P or any combination thereof, shall be used to effect defeasance of the Bonds unless the Insurer otherwise approves. To accomplish defeasance of the Bonds, the Authority shall cause to be delivered (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the Insurer ( "Accountant ") verifying the sufficiency of the escrow established to pay the Bonds in full on the maturity or redemption date ( "Verification "), (ii) an Escrow Deposit Agreement (which shall be acceptable in form and substance to the Insurer), (iii) an opinion of nationally recognized bond counsel to the effect that the Bonds are no longer "Outstanding" under the Indenture and (iv) a certificate of discharge of the Trustee with respect to the Bonds; each Verification and defeasance opinion shall be acceptable in form and substance to the Insurer, and addressed, to the Authority, Trustee and Insurer. The Insurer shall be provided with final drafts of the above referenced documentation not less than five Business Days prior to the funding of the escrow. Bonds shall be deemed "Outstanding" under the Indenture unless and until they are in fact paid and retired or the above criteria are met. (i) Amounts paid by the Insurer under the Insurance Policy shall not be deemed paid for purposes of the Indenture and the Bonds relating to such payments shall remain Outstanding and continue to be due and owing until paid by the Authority in accordance with the Indenture. The Indenture shall not be discharged unless all amounts due or to become due to the Insurer have been paid in full or duly provided for. 0) Each of the Authority and the Trustee, to the extent directed by the Authority, at the expense of the Authority, covenants and agrees to take such action (including, as applicable, filing of UCC financing statements and continuations thereof) as is necessary from time to time to preserve the priority of the pledge of the Revenues and Redemption Revenues under applicable law. (k) Claims Upon the Insurance Policy and Payments by and to the Insurer. If, on the third Business Day prior to the related scheduled interest payment date or principal payment date ( "Payment Date ") there is not on deposit with the Trustee or the Fiscal Agent, 23 after making all transfers and deposits required under the Indenture, moneys sufficient to pay the principal of and interest on the Bonds due on such Payment Date, the Trustee shall give notice to the Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent ") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Bonds due on such Payment Date, the Trustee shall make a claim under the Insurance Policy and give notice to the Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Bonds and the amount required to pay principal of the Bonds, confirmed in writing to the Insurer and the hnsurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the Insurance Policy. The Trustee shall designate any portion of payment of principal on Bonds paid by the Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Bonds registered to the then current Owners of the Bonds, whether DTC or its nominee or otherwise, and shall issue a replacement Bond to the Insurer, registered in the name of , in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Trustee's failure to so designate any payment or issue any replacement Bond shall have no effect on the amount of principal or interest payable by the Authority on any Bond or the subrogation rights of the Insurer. The Trustee shall keep a complete and accurate record of all funds deposited by the Insurer into the Policy Payments Account (defined below) and the allocation of such funds to payment of interest on and principal of any Bond. The Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Trustee. Upon payment of a claim under the Insurance Policy, the Trustee shall establish a separate special purpose trust account for the benefit of Owners of the Bonds referred to herein as the "Policy Payments Account" and over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall receive any amount paid under the Insurance Policy in trust on behalf of Owners of the Bonds and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Trustee to Owners of the Bonds in the same manner as principal and interest payments are to be made with respect to the Bonds under the sections hereof regarding payment of Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything herein to the contrary, the Authority agrees to pay to the Insurer (i) a sum equal to the total of all amounts paid by the Insurer under the Insurance Policy (the "Insurer Advances "); and (ii) interest on such Insurer Advances from the date paid by the Insurer until payment thereof in full, payable to the Insurer at the Late Payment Rate per annum (collectively, the "Insurer Reimbursement Amounts "). "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 at its principal office in The City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3 %, and (ii) the then applicable highest rate of interest on the Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. The Authority hereby covenants and agrees that the Insurer Reimbursement Amounts 24 are secured by a lien on and pledge of the Revenues and the Redemption Revenues and payable from such Revenues on a parity with debt service due on Outstanding Bonds. The Authority shall collect such Insurer Reimbursement Amounts from the District. Fluids held in the Policy Payments Account shall not be invested by the Trustee and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following a Bond payment date shall promptly be remitted to the Insurer. (l) The insurer Sh$h, to tnc eXterd it irra'- -- any payment of principal of or interest on the Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terns of the Insurance Policy. Each obligation of the Authority to the Insurer under the Transaction Documents shall survive discharge or termination of such Transaction Documents. (m) The Authority shall pay or reimburse the Insurer any and all charges, fees, costs and expenses that the Insurer may reasonably pay or incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in any Transaction Document; (ii) the pursuit of any remedies under the Indenture or any other Transaction Document or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Indenture or any other Transaction Document whether or not executed or completed, or (iv) any litigation or other dispute in connection with the Indenture or any other Transaction Document or the transactions contemplated thereby, other than costs resulting from the failure of the Insurer to honor its obligations under the Insurance Policy. The Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Indenture or any other Transaction Document. The Authority shall collect amounts described in this paragraph from the District. (n) After payment of reasonable expenses of the Trustee, the application of funds realized upon default shall be applied to the payment of expenses of the Authority or rebate only after the payment of past due and current debt service on the Bonds and amounts required to restore the Reserve Fund to the Reserve Requirement. (o) The Insurer shall be entitled to pay principal or interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Authority (as such terms are defined in the Insurance Policy) and any amounts due on the Bonds as a result of acceleration of the maturity thereof in accordance with the Indenture, whether or not the Insurer has received a notice of Nonpayment (as such terms are defined in the Insurance Policy) or a claim upon the Insurance Policy. (p) The notice address of the Insurer is: In each case in which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of the General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED." 25 (q) The Insurer shall be provided with the following information by the District, the Authority or the Trustee, as the case may be: W Annual audited financial statements within 180 days after the end of the District's fiscal year (together with a certification of the District that it is not aware of any default or Event of Default under the Fiscal Agent Agreement or the District Bonds), and the District's annual budget within 30 days after the approval thereof together with such other information, data or reports as the Insurer shall reasonably request from time to time; (ii) Notice of any draw upon the Reserve Fund within two Business Days after knowledge thereof other than (i) withdrawals of amounts in excess of the Reserve Requirement and (ii) withdrawals in connection with a refunding of Bonds; (iii) Notice of any default known to the Trustee or Authority within five Business Days after knowledge thereof; (iv) Prior notice of the advance refunding or redemption of any of the Bonds, including the principal amount, maturities and CUSIP numbers thereof; (v) Notice of the resignation or removal of the Trustee and Bond Registrar and the appointment of, and acceptance of duties by, any successor thereto; (vi) Notice of the commencement of any proceeding by or against the Authority or the District under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding "); (vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of or interest on, the Bonds; (viii) A full original transcript of all proceedings relating to the execution of any amendment, supplement, or waiver to the Transaction Documents; (ix) All reports, notices and correspondence to be delivered to Bondholders under the terms of the Transaction Documents; and (x) To the extent that the Authority or the District has entered into a continuing disclosure agreement, covenant or undertaking with respect to the Bonds, all information furnished pursuant to such agreements shall also be provided to the Insurer, simultaneously with the furnishing of such information. (r) The Insurer shall have the right to receive such additional information as it may reasonably request. (s) The Authority and the District will permit the Insurer to discuss the affairs, finances and accounts of the Authority or the District or any information the Insurer may reasonably request regarding the security for the Bonds with appropriate officers of the Authority or the District and will use commercially reasonable efforts to enable the Insurer to have access to the facilities, books and records of the Authority on any business day upon reasonable prior notice. 26 W The Authority shall notify the Insurer of any failure of the Authority to provide notices, certificates and other information under the Transaction Documents. (u) to determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under the Indenture or any of the Fiscal Agent Agreement would adversely affect the security for the Bonds or the rights of the Bondholders, the Trustee and the Authority shall consider the effect of any such amendment, consent, waiver, action or inaction as if there were no Insurance Policy. k V) ivo conuact shall I entered into or any action taken by which me rights of the Insurer or security for or sources of payment of the Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the Insurer. (w) So long as any Bonds remain outstanding or any amounts are owed to the Insurer by the Authority, the Authority shall not enter into any swap or any other interest rate exchange agreement, cap, collar, floor, ceiling, or other agreement or instrument involving reciprocal payment obligations between the Authority and a counterparty based on interest rates applied to a notional amount of principal entered into by or on behalf of the Authority and payable from or secured in whole or in part by the Revenues, without the prior written consent of the Insurer. So long as any Bonds remain outstanding or any amounts are owed to the Insurer by the Authority, without the prior written consent of the Insurer, the Authority shall not issue or incur indebtedness payable from or secured in whole or in part by the Revenues that permits or requires the holder to tender such indebtedness for,purchase prior to the stated maturity thereof without the prior written consent of the Insurer. ARTICLE V COVENANTS OF THE AUTHORITY Section 5.01 Punctual Payment. The Authority shall punctually pay or cause to be paid the principal, interest and premium (if any) to become due in respect of all the Bonds, in strict conformity with the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof, but only out of Revenues, Redemption Revenues and other assets pledged for such payment as provided in this Indenture. Section 5.02 Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this Section shall be deemed to limit the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of the Bonds. Section 5.03 Against Encumbrances. The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues, the Redemption 27 Revenues and other assets pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by this Indenture. Section 5.04 Power to Issue Bonds and Make Pledge and Assignment. The Authority is duly authorized pursuant to law to issue the Bonds and to enter into this Indenture and to pledge and assign the Revenues, the Redemption Revenues, the District Bonds and other, assets purported to be pledged and assigned, respectively, under this Indenture in the manner and to the extent provided in this Indenture. The Bonds and the provisions of this Indenture are and will be the legal, valid and binding special obligations of the Authority in accordance with their terms and priority of payment, and the Authority and the Trustee, subject to the provisions of this Indenture, shall at all times, to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the Bond Owners under this Indenture against all claims and demands of all persons whomsoever. Section 5.05 Accounting Records and Financial Statements. The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with industry standards, in which complete and accurate entries shall be made of all transactions made by the Trustee relating to the proceeds of Bonds, the Revenues, the Redemption Revenues and all funds and accounts established by the Trustee pursuant to this Indenture. Such books of record and account shall be available for inspection by the Authority, during regular business hours with reasonable prior notice. Section 5.06 No Parity Debt. Except for the Bonds, or bonds issued for the purpose of refunding the Bonds, the Authority covenants that no additional bonds, notes or other indebtedness shall be issued or incurred which are payable out of the Revenues or the Redemption Revenues in whole or in part. Section 5.07 Tax Covenants Relating to Bonds. Notwithstanding any other provision of this Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds will not be adversely affected for federal income tax purposes, the Authority covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (a) Private Activity. The Authority will not take or omit to take any action or make any use of the proceeds of the Bonds or of any other moneys or property which would cause the Bonds to be "private activity bonds" within the meaning of Section 141 of the Code. (b) Arbitrage. The Authority will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take or omit to take any action which would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code. (c) Federal Guarantee. The Authority will make no use of the proceeds of the Bonds or take or omit to take any action that would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code. (d) Information Reporting. The Authority will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code. Lii (e) Miscellaneous. The Authority will take no action inconsistent with its expectations stated in any Tax Certificate executed with respect to the Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. This Section and the covenants set forth herein shall not be applicable to, and nothing contained herein shall be deemed to prevent the Authority from issuing Bonds the interest on which has been determined by the Board to be subject to federal income taxation Section 5.08 Rebate Fund. (a) Establishment. The Trustee shall establish a Rebate Fund and shall maintain therein separate accounts (solely from amounts deposited by the Authority) designated the "Rebate Account' and the "Alternative Penalty Account." Absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax proposes of interest on the Bonds will not be adversely affected, the Authority shall cause to be deposited in each such account of the Rebate Fund such amounts as are required to be deposited therein pursuant to this Section and the Tax Certificate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust for payment to the United States Treasury. All amounts on deposit in the Rebate Fund shall be governed by this Section 5.08 and the Tax Certificate, unless and to the extent that the Authority delivers to the Trustee an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the Bonds will not be adversely affected if such requirements are not satisfied. Notwithstanding any other provision of this Indenture, the Trustee shall be deemed conclusively to have complied with this Section 5.08 and the Tax Certificate if it follows the directions set forth in any Written Request of the Authority or Certificate of the Authority and shall be fully protected in so doing. The Trustee shall have no independent responsibility to, or liability resulting from its failure to, enforce compliance by the Authority with the terms of this Section 5.08 or the Tax Certificate. (b) Rebate Account. The following requirements shall be satisfied with respect to the Rebate Account: (i) Annual Computation. Within 55 days of the end of each Bond Year, the Authority shall calculate or cause to be calculated the amount of rebatable arbitrage, in accordance with Section 148(f)(2) of the Code and Section 1.148 -3 of the Rebate Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage, described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and (C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the "P /2% Penalty ") has been made), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148 -1(b) of the Rebate Regulations (the "Rebatable Arbitrage "). The Authority shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section 5.08. (ii) Annual Transfer. Within 55 days of the end of each applicable Bond Year, upon receipt of the Request of the Authority, an amount shall be deposited to the applicable Rebate Account by the Trustee from any Revenues specified by the Authority in the aforesaid Request, if and to the extent required so that the balance in the Rebate Account shall equal the amount of Rebatable Arbitrage so calculated in accordance with (i) of this Subsection (b). In the event that immediately following the transfer required by the previous sentence, the amount then on deposit to the credit of a Rebate Account exceeds the amount required to be on deposit therein, upon 29 receipt of a Request of the Authority, the Trustee shall withdraw the excess from the applicable Rebate Account and then credit the excess to the Revenue Fund. (iii) Payment to the Treasury. The Trustee shall pay, as directed by Request of the Authority, to the United States Treasury, out of amounts in the Rebate Account, (iv) Not later than 60 days after the end of (A) the fifth Bond Year, and (B) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage as set forth in a Certificate of the Authority delivered to the Trustee calculated as of the end of such Bond Year; and (v) Not later than 60 days after the payment of all the Bonds, an amount equal to 100% of the Rebatable Arbitrage as set forth in a Certificate of the Authority delivered to the Trustee calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, as set forth in a Certificate of the Authority delivered to the Trustee computed in accordance with Section 148(f) of the Code. In the event that, prior to the time of any payment required to be made from a Rebate Account, the amount in such Rebate Account is not sufficient to make such payment when such payment is due, the Authority shall calculate or cause to be calculated the amount of such deficiency and deposit with the Trustee an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this Subsection (b) shall be made to the Internal Revenue Service Center, Ogden, Utah 84207 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038 T (which form shall be completed and provided by the Authority to the Trustee), or shall be made in such other manner as provided under the Code, in each case as specified in a Request of the Authority delivered to the Trustee. (c) Alternative Penalty Account. (i) Six Month Computation. If the 1 V2% Penalty has been elected, within 85 days of each particular Six Month Period, the Authority shall determine or cause to be determined whether the PY2% Penalty is payable (and the amount of such penalty) as of the close of the applicable Six Month Period. The Authority shalt obtain expert advice in making such determinations. (ii) Six Month Transfer. Within 85 days of the close of each Six Month Period, upon receipt of the Request of the Authority, the Trustee shalt deposit in the Alternative Penalty Account from any source of funds (specified by the Authority in the aforesaid Request), if and to the extent required, so that the balance in the Alternative Penalty Account equals the amount of 1%% Penalty (as specified in such Request) due and payable to the United States Treasury determined by the Authority as provided in subsection (c)(i) above. In the event that immediately following the transfer provided in the previous sentence, the amount then on deposit to the credit of an Alternative Penalty Account exceeds the amount required to be on deposit therein to make the payments required by subsection (c)(iii) below, the Trustee, pursuant to a Certificate of the Authority, may withdraw the excess from the Alternative Penalty Account and credit the excess to the Revenue Fund. 30 (iii) Payment to the Treasury. The Trustee shall pay, as directed by Request of the Authority, to the United States Treasury, out of amounts in the Alternative Penalty Account, not later than 90 days after the close of each Six Month Period the 1 %z% Penalty (as specified by the Authority in the aforesaid Request), if applicable and payable, computed by the Authority in accordance with Section 148(f)(4) of the Code. In the event that, prior to the time of any payment required to be made from the Alternative Penalty Account, the amount in such account is not sufficient to make such payment when such payment is due, the Authority shall calculate the amount of such deficiency and deposit with the Trustee an amount received from any legally available source of funds equal to such deficiency for transfer into the Alternative Penalty Account prior to the time such payment is due. Each payment required to be made pursuant to this Subsection (c)(iii) shall be made to the Internal Revenue Service, Ogden, Utah 84207 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038 -T (which form shall be completed and provided by the Authority to the Trustee) or shall be made in such other manner as provided under the Code. (d) Disposition of Unexpended Funds. Any funds remaining in the accounts of the Rebate Fund after redemption and payment and the payments of all amounts described in Subsection (b)(iii) or ( c)(iii) (whichever is applicable) or provision made therefor satisfactory to the Trustee, including accrued interest and payment of all applicable fees to the Trustee, may be withdrawn by the Trustee and remitted to the Authority and utilized in any manner by the Authority. (e) Survival of Defeasance. Notwithstanding anything in this Section to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance of the Bonds. (i) Trustee. The Trustee shall have no responsibility to monitor or calculate any amounts payable in the U.S. Treasury pursuant to this Section and shall be deemed conclusively to have complied with its obligations hereunder if it follows the written instructions of the Authority given pursuant to this Section. Section 5.09 District Bonds. The Trustee, as assignee of the Authority's rights pursuant to Section 4.01, shall (subject to the provisions of this Indenture) promptly collect all amounts due as principal and interest on District Bonds from the District and, subject to the provisions hereof, shall enforce, and take all steps, actions and proceedings reasonably necessary for the enforcement of all of the rights of the Authority thereunder and for the enforcement of all of the obligations of the District thereunder. Section 5.10 Further Assurances. The Authority shall cause to be collected and paid to the Trustee all Revenues as such Revenues become due and payable. The Authority will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in this Indenture. Section 5.11 Immunity. The Authority is not entitled to any immunity, sovereign or otherwise, from any legal proceedings to enforce or collect upon this Indenture or the Bonds. To the extent that the Authority has or hereafter may acquire any right to immunity, the Authority hereby waives such rights for itself in respect of its obligations arising under this Indenture and the Bonds. 31 Section 5.12 No Acceleration. The principal of the Bonds shall not be subject to acceleration hereunder. Nothing in this Section shall in any way prohibit the prepayment or redemption of Bonds or the defeasance of the Bonds and discharge of this Indenture. ARTICLE VI THE TRUSTEE Section 6.01 Appointment of Trustee. MUFG Union Bank, N.A., in Los Angeles, California, is hereby appointed Trustee by the Authority for the purpose of receiving all moneys required to be deposited with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. The Authority agrees that it will maintain a Trustee having a corporate trust office in the State, with a combined capital and surplus of at least Seventy -Five Million Dollars ($75,000,000), and subject to supervision or examination by federal or State authority, so long as any Bonds are Outstanding. If such bank 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 propose of this Section 6.01 the combined capital and surplus of such bank 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 Trustee is hereby authorized to pay the principal of and interest and redemption premium (if any) on the Bonds when duly presented for payment at maturity, or on redemption or purchase prior to maturity, and to cancel all Bonds upon payment thereof. The Trustee shall keep accurate records of all funds administered by it and of all Bonds paid and discharged. Section 6.02 Acceptance of Trusts. The Trustee hereby accepts the trusts imposed upon it by this Indenture, and agrees to perform said trusts, but only upon and subject to the following express terms and conditions: (a) The Trustee, prior to the occurrence of an Event of Default and after curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default hereunder has occurred (which has not been cured or waived), the "trustee may exercise such of the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill and diligence in their exercise, as a prudent person would use in the conduct of its own affairs. (b) The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder by or through attorneys, agents, or receivers, and shall be entitled to advice of counsel concerning all matters of trust and its duty hereunder. The Trustee may conclusively rely on an opinion of counsel as full and complete protection for any action taken or suffered by it hereunder. (c) The Trustee shall not be responsible for any recital herein or in the Bonds, or for any of the supplements hereto or thereto or instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby and the Trustee shall not be bound to ascertain or inquire as to the observance or performance of any covenants, conditions or agreements on the part of the Authority hereunder. 32 (d) The Trustee may become the Owner of Bonds secured hereby with the same rights which it would have if not the Trustee; may acquire and dispose of other bonds or evidences of indebtedness of the Authority with the same rights it would have if it were not the Trustee; and may act as a depository for and permit any of its officers or directors to act as a member of or in any other capacity with respect to, any committee formed to protect the rights of Owners of Bonds, whether or not such committee shall represent the Owners of the majority in aggregate principal amount of the Bonds then Outstanding. (e) The Trustee shall be protected in acting upon any notice, request, consent, certi'iicate, order, affidavit, letter, telegram or other paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken or omitted to be taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Owner of any Bond, shall be conclusive and binding upon all future Owners of the same Bond and upon Bonds issued in exchange therefor or in place thereof. The Trustee shall not be bound to recognize any person as an Owner of any Bond or to take any action at his request unless the ownership of such Bond by such person shall be reflected on the Registration Books. (f) As to the existence or non - existence of any fact or as to the sufficiency or validity of any instrument, paper or proceeding, the Trustee shall be entitled to rely upon a Certificate of the Authority as sufficient evidence of the facts therein contained and prior to the occurrence of an Event of Default hereunder of which the Trustee has been given notice or is deemed to have notice, as provided in Section 6.02(h) hereof shall also be at liberty to accept a Certificate of the Authority to the effect that any particular dealing, transaction or action is necessary or expedient, but may at its discretion secure such further evidence deemed by it to be necessary or advisable, but shall in no case be bound to secure the same. (g) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and it shall not be answerable for other than its negligence or willful misconduct. The immunities and exceptions from liability of the Trustee shall extend to its officers, directors, employees and agents. (h) The Trustee shall not be required to take notice or be deemed to have notice of any Event of Default hereunder except failure by the Authority to file with the Trustee any document required by this Indenture to be so filed subsequent to the issuance of the Bonds, unless the Trustee shall be specifically notified in writing of such default by the Authority or by the Owners of at least twenty -five percent (25 %) in aggregate principal amount of the Bonds then Outstanding and all notices or other instruments required by this Indenture to be delivered to the Trustee must, in order to be effective, be delivered at the Corporate Trust Office, and in the absence of such notice so delivered the Trustee may conclusively assume there is no Event of Default hereunder except as aforesaid_ W At any and all reasonable times the Trustee, and its duly authorized agents, attorneys, experts, accountants and representatives, shall have the right (but not the duty) fully to inspect all books, papers and records of the Authority pertaining to the Bonds, and to make copies of any of such books, papers and records such as may be desired but which is not privileged by statute or by law. 33 0) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises hereof. (k) Notwithstanding anything elsewhere in this Indenture with respect to the execution of any Bonds, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Indenture, the Trustee shall have the right, but shall not be required, to demand any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, as may be deemed desirable for the purpose of establishing the right of the Authority to the execution of any Bonds, the withdrawal of any cash, or the taking of any other action by the Trustee. (1) Before taking the action referred to in Section 8.02, the Trustee may require that a satisfactory indemnity bond be furnished for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or willful default in connection with any such action. (in) All moneys received by the Trustee shall, until used or applied or invested as herein provided, be held in trust for the purposes for which they were received but need not be segregated fi-om other funds except to the extent required by law. (n) The Trustee shall have no responsibility or liability with respect to any information, statements or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds. Section 6.03 Fees, Charges and Expenses of Trustee. The Trustee shall be entitled to payment and reimbursement for reasonable fees for its services rendered hereunder and all advances, counsel fees (including expenses) and other expenses reasonably and necessarily made or incurred by the Trustee in connection with such services. Upon the occurrence of an Event of Default hereunder, but only upon an Event of Default, the Trustee shall have a first lien with right of payment prior to payment of any Bond upon the amounts held hereunder for the foregoing fees, charges and expenses incurred by it respectively. The Trustee's right to payment of its fees and expenses shall survive the discharge and payment or defeasance of the Bonds and termination of the Indenture, and the resignation or removal of the Trustee. Section 6.04 Notice to Bond Owners of Default. If an Event of Default hereunder occurs with respect to any Bonds of which the Trustee has been given or is deemed to have notice, as provided in Section 6.02(h) hereof, then the Trustee shall promptly give written notice thereof by first -class mail to the Owner of each such Bond, unless such Event of Default shall have been cured before the giving of such notice; provided, however, that unless such Event of Default consists of the failure by the Authority to make any payment when due, the Trustee may elect not to give such notice to the Bond Owners if and so long as the Trustee in good faith determines that such Event of Default does not materially adversely affect the interests of the Bond Owners or that it is otherwise not in the best interests of the Bond Owners to give such notice. Section 6.05 Intervention by Trustee. In any judicial proceeding to which the Authority is a party which, in the opinion of the Trustee and its counsel, has a substantial bearing on the interests of Owners of any of the Bonds arising under this Indenture, the Trustee may intervene on behalf of such Bond Owners, and subject to Section 6.02(1) hereof, shall do so if requested in writing 34 by the Owners of at least twenty -five percent (25 %) aggregate principal amount of such Bonds then Outstanding. Section 6.06 Removal of Trustee. The Owners of a majority in aggregate principal amount of the Outstanding Bonds may at any time, or the Authority may (and the Authority, at the request of the District shall), so long as no Event of Default shall have occurred and then be continuing, remove the Trustee initially appointed, and any successor thereto, by an instrument or concurrent instruments in writing delivered to the Trustee at least thirty (30) days prior to the effective date of such removal, whereupon the Authority or such Owners, as the case may be, shall appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company meeting the requirements set forth in Section 6.01. Section 6.07 Resignation by Trustee. The Trustee and any successor Trustee may at any time give thirty (30) clays' written notice of its intention to resign as Trustee hereunder, such notice to be given to the Authority and the District by registered or certified mail. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee. Section 6.08 Appointment of Successor Trustee. In the event of the removal or resignation of the Trustee pursuant to Sections 6.06 or 6.07, respectively, with the prior written consent of the District, the Authority shall promptly appoint a successor Trustee. In the event the Authority shall for any reason whatsoever fail to appoint a successor Trustee within ninety (90) days following the delivery to the Trustee of the instrument described in Section 6.06 or within ninety (90) days following the receipt of notice by the Authority pursuant to Section 6.07, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee meeting the requirements of Section 6.01 hereof. Any such successor Trustee appointed by such court shall become the successor Trustee hereunder notwithstanding any action by the Authority purporting to appoint a successor Trustee following the expiration of such 90 -day period. Any resignation or removal of the Trustee pursuant to Section 6.06 or Section 6.07 and appointment of a successor Trustee shall become effective upon written acceptance of appointment by the successor Trustee. Upon such acceptance, the Authority shall cause notice thereof to be given by first -class mail, postage prepaid, to the Bond Owners at their respective addresses set forth on the Registration Books. Section 6.09 Merger or Consolidation. Any company into which the Trustee 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 Trustee may sell or transfer all or substantially all of its corporate trust business, provided that such company shall meet the requirements set forth in Section 6.01, shall be the successor to the Trustee and vested with all of the title to the trust estate and all of the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. Section 6.10 Concerning any Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the Authority an instrument in writing accepting such appointment hereunder and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessors; but such predecessor shall, nevertheless, on the request of the Authority, or of the Trustee's successor, execute and deliver an instrument 35 transferring to such successor all the estates, properties, rights, powers and trusts of such predecessor hereunder; and every predecessor Trustee shall deliver all securities and moneys held by it as the Trustee hereunder to its successor. Should any instrument in writing from the Authority be required by any successor Trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested in the predecessor Trustee, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Authority. Section 6.11 Appointment to Co- Trustee. It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction (including particularly the law of the State) denying or restricting the right of banking corporations or associations to transact business as Trustee in such jurisdiction. It is recognized that in the case of litigation under this Indenture, and in particular in case of the enforcement of the rights of the Trustee on default, or in the case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as herein granted, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an additional individual or institution as a separate or co- trustee. The following provisions of this Section 6.11 are adopted to these ends. In the event that the Trustee appoints an additional individual or institution as a separate or co- trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vested in such separate or co- trustee but only to the extent necessary to enable such separate or co- trustee to exercise such powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof by such separate or co- trustee shall run to and be enforceable by either of them. Should any instrument in writing from the Authority be required by the separate trustee or co- trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to it such properties, rights, powers, busts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Authority. In case any separate trustee or co- trustee, or a successor to either, shall become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co- trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate trustee or co- trustee. Section 6.12 Indemnification; Limited Liability of Trustee. The Authority further covenants and agrees to indemnify and save the Trustee and its officers, directors, agents and employees, harmless against any loss, costs, claims, expense and liabilities which it may incur arising out of or in the exercise and performance of its powers and duties hereunder, including the costs and expenses of defending against any claim of liability, but excluding any and all losses, costs, claims, expenses and liabilities which are due to the negligence or willful misconduct of the Trustee, its officers, directors, agents or employees. No provision in this Indenture shall require the Trustee to risk or expend its own funds or otherwise incur any financial liability hereunder if it is not assured to its satisfaction that repayment of such funds or adequate indemnity against such liability or risk is not assured to it. The Trustee shall not be liable for any action taken or omitted to be taken by it in accordance with the direction of the Owners of a majority in aggregate principal amount of Bonds Outstanding relating to the time, method and place of conducting any proceeding or remedy available to the Trustee under this Indenture. The obligations of the Authority under this paragraph shall 36 survive the resignation or removal of the Trustee under this Indenture or any defeasance of the Bonds. ARTICLE VII MODIFICATION AND AMENDMENT OF THE INDENTURE Section 7.01 Amendment Hereof. (a) This indenture and the rights and obligations of the Authority and of the Owners of the Bonds may be modified or amended at any time by a Supplemental Indenture which shall become binding upon execution by the Authority and the Trustee and upon prior written consent of the District, without consent of any Bond Owners, to the extent permitted by law but only for any one or more of the following purposes: (i) to add to the covenants and agreements of the Authority contained in this Indenture, other covenants and agreements hereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority; (ii) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in this Indenture, or in any other respect whatsoever, as the Authority may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Bond Owners in the opinion of Bond Counsel; (iii) to modify, amend or supplement the Indenture in such manner as to permit the qualification of this Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; or (iv) to make such additions, deletions or modifications as may be necessary or desirable to assure exemption from federal income taxation of interest on the Bonds. (b) Except as set forth in the preceding paragraph of this Section 7.01, this Indenture and the rights and obligations of the Authority and of the Owners of the Bonds may only be modified or amended at any time by a Supplemental Indenture which shall become binding when the written consents of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding are filed with the Trustee. No such modification or amendment shall (a) extend the maturity of or reduce the interest rate on any Bond or otherwise alter or impair the obligation of the Authority to pay the principal, interest or premiums (if any) at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner of such Bond, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification, or (c) without its written consent thereto, modify any of the rights or obligations of the Trustee. (c) The Trustee shall be provided an opinion of Bond Counsel that any such Supplemental Indenture entered into by the Authority and the Trustee complies with the provisions of this Article VII and the Trustee may conclusively rely upon such opinion. 37 Section 7.02 Effect of Supplemental Indenture. From and after the time any Supplemental Indenture becomes effective pursuant to this Article VII, this Indenture shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations of the parties hereto or thereto and all Owners of Outstanding Bonds, as the case may be, shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 7.03 Endorsement or Replacement of Bonds After Amendment. After the effective date of any action taken as liereinabove provided, the Authority may determine that the Bonds shall bear a notation, by endorsement in form approved by the Authority, as to such action, and in that case upon demand of the Owner of any Bond Outstanding at such effective date and presentation of his Bond for that purpose at the Corporate Trust Office, a suitable notation as to such action shall be made on such Bond. If the Authority shall so determine, new Bonds so modified as, in the opinion of the Authority, shall be necessary to conform to such Bond Owners' action shall be prepared and executed, and in that case upon demand of the Owner of any Bond Outstanding at such effective date such new Bonds shall be exchanged at the Corporate Trust Office, without cost to each Bond Owner, for Bonds then Outstanding, upon surrender of such Outstanding Bonds. Section 7.04 Amendment by Mutual Consent. The provisions of this Article VII shall not prevent any Bond Owner from accepting any amendment as to the particular Bond held by him, provided that due notation thereof is made on such Bond. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES Section 8.01 Events of Default. The following events shall be Events of Default hereunder: (a) Default in the due and punctual payment of the principal of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption or otherwise. (b) Default in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable. (c) Failure by the Authority to observe and perform any of the covenants, agreements or conditions on its part in this Indenture or in the Bonds contained, other than as referred to in the preceding clauses (a) and (b), for a period of thirty (30) days after written notice, specifying such failure and requesting that it be remedied has been given to the Authority by the Trustee, or to the Authority and the Trustee by the Owners of the Bonds of not less than twenty -five percent (25 %) in the aggregate principal amount of the Bonds at that time Outstanding, provided, however, that if in the reasonable opinion of the Authority, provided to the Trustee in writing, the failure stated in such notice can be corrected, but not within such thirty (30) day period, such failure shall not constitute an Event of Default if corrective action is instituted by the Authority, within such thirty (30) day period and diligently pursued until such failure is corrected. IN (d) The filing by the Authority of a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction shall approve a petition, filed with or without the consent of the Authority, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property. Section 8.02 Remedies Upon Event of Default. Upon the occurrence and during the _1 E t _r De _tom continuance �. air Event �i Lciauiy the Trustee may, pursue any available remedy at law or in equity to enforce the payment of the principal of and interest and premium (if any) on the Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture. If an Event of Default shall have occurred and be continuing, the Trustee may, if requested so to do by the Owners of a majority in aggregate principal amount of Outstanding Bonds, and indemnified as provided in Section 6.02(1), the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article VIII, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Bond Owners. No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to the Bond Owners) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Bond Owners hereunder or now or hereafter existing at law or in equity. No delay or omission to exercise any rights or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or acquiescence therein; such right or power may be exercised from time to time as often as may be deemed expedient. Section 8.03 Application of Revenues and Other Funds After Default. All amounts received by the Trustee pursuant to any right given or action taken by the Trustee under the provisions of this Indenture shall be applied by the Trustee in the following order upon presentation of the several Bonds, and the stamping thereon of the amount of the payment if only partially paid, or upon the surrender thereof if fully paid. First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default and in carrying out the provisions of this Article VIII, including reasonable compensation to its agents, attorneys and counsel and any outstanding fees and expenses of the Trustee; and Second, to the payment of the whole amount of interest on and principal of the Bonds then due and unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the net effective rate of interest then borne by the Outstanding Bonds; provided, however, that in the event such amounts shall be insufficient to pay in full the full amount of such interest and principal, then such amounts shall be applied in the following order of priority: (a) first, to the payment of all installments of interest on the Bonds then due and unpaid, 39 (b) second, to the payment of all installments of principal of the Bonds then due and unpaid, (c) third, to the payment of the redemption price (including principal and interest accrued to the redemption date, but excluding any premium) of the Bonds to be redeemed pursuant to this Indenture, (d) fourth, to the payment of interest on overdue installments of principal and interest on the Bonds, and (e) fifth, to the payment of any amounts due and owing the Insurer. Section 8.04 Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties hereunder, whether upon its own discretion or upon the request of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds, opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation. Any suit, action or proceeding which any Owner of Bonds shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney -in -fact of the respective Owners of the Bonds for the purpose of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney -in- fact. Section 8.05 Appointment of Receivers. Upon the occurrence of an Event of Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the Bond Owners under this Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Revenues and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment shall confer. Section 8.06 Non - Waiver. Nothing in this Article VIII or in any other provision of this Indenture, or in the Bonds, shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners of the Bonds at the respective dates of maturity, as herein provided, out of the Revenues and other moneys herein pledged for such payment. A waiver of any default or breach or duty or contract by the Trustee or any Bond Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies OD any such subsequent default or breach. No delay or omission of the Trustee or any Owner of any 40 of the Bonds to exercise any right or power accruing upon any default or breach shall impair any such right or power or shall be construed to be a waiver of any such default or breach or an acquiescence therein; and every power and remedy conferred upon the Trustee or Bond Owners by the Bond Law or by this Article VIII may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Bond Owners, as the case may be. Section 8.07 Right to Institute Snit, Action or Proceeding. No Owner of any Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Indenture, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers herembefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee; and (c) no direction inconsistent with such written request has been given to the Trustee during such sixty (60) day period by the Owners of majority in aggregate principal amount of the Bonds then Outstanding. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy hereunder; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to enforce any right under this Indenture, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Bonds. The right of any Owner of any Bond to receive payment of the principal of and interest and premium (if any) on such Bond as herein provided or to institute suit for the enforcement of any such payment shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of this Section 8.07 or any other provision of this Indenture. Section 8.08 Termination of Proceedings. In case the Trustee shall have proceeded to enforce' any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case, the Authority, the Trustee and the Bond Owners shall be restored to their former positions and rights hereunder, respectively, with regard to the property subject to this Indenture, and all rights, remedies and powers of the Trustee shall continue as if no such proceedings had been taken. ARTICLE IX MISCELLANEOUS Section 9.01 Limited Liability of Authority. Notwithstanding anything contained in this Indenture, the Authority shall not be required to advance any moneys derived from any source of income other than the Revenues and the Redemption Revenues for the payment of the principal of or 41 interest on the Bonds, or any premiums upon the redemption thereof, or for the performance of any covenants herein contained (except to the extent any such covenants are expressly payable hereunder from the Revenues). The Authority may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose and may be used by the Authority for such purpose without incurring indebtedness. The Bonds shall be revenue bonds, payable exclusively from the Revenues and other funds as in this Indenture provided. The general fund of the Authority is not liable, and the credit of the Authority is not pledged, for the payment of the interest and premium (if any) on or principal of the Bonds. The Owners of the Bonds shall never have the right to compel the forfeiture of any property of the Authority. The principal of and interest on the Bonds, and any premiums upon the redemption of any thereof, shall not be a legal or equitable pledge, charge, lien or encumbrance upon any property of the Authority or upon any of its income, receipts or revenues except the Revenues, the Redemption Revenues and other funds pledged to the payment thereof as in this Indenture provided. Section 9.02 Benefits of Indenture Limited to Parties. Nothing in this Indenture, expressed or implied, is intended to give to any person other than the Authority, the District, the Trustee, the Insurer and the Owners of the Bonds, any right, remedy or claim colder or by reason of this Indenture. Any covenants, stipulations, promises or agreements in this Indenture contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the Trustee, the Insurer. the District and the Owners of the Bonds. Section 9.03 Discharge of Indenture. The Authority may pay and discharge any or all 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 the interest and premium (if any) on, such Bonds as and when the same become due and payable; (b) by irrevocably depositing with the Trustee, in Lust, at or before maturity, money which, altogether with the available amounts then on deposit in the funds and accounts established with the Trustee pursuant to this Indenture, is fully sufficient to pay such Bonds, including all principal, interest and premiums (if any); or (c) by irrevocably depositing with the Trustee or any other fiduciary, in trust, Federal Securities in such amount as an Independent Accountant shall determine will, together with the interest to accrue thereon and available moneys then on deposit in the funds and accounts established with the Trustee pursuant to this Indenture, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates. If the Authority shall have taken any of the actions specified in (a), (b) or (c) above, and if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been mailed pursuant to Section 2.02(e) or provision satisfactory to the Trustee shall have been made, for the mailing of such notice, then, at the election of the Authority, and notwithstanding that any of such Bonds shall not have been surrendered for payment, the pledge of the Revenues and other funds provided for in this Indenture with respect to such Bonds, pledge of Revenues and all other pecuniary obligations of the Authority under this Indenture with respect to all such Bonds, shall cease and terminate, except only the obligation of the Authority to pay or cause to be paid to the Owners of such Bonds not so surrendered and paid all sums due thereon from amounts set aside for 42 such purpose as aforesaid, and all expenses and costs of the Trustee. Any funds held by the Trustee following any payments or discharge of the Outstanding Bonds pursuant to this Section 9.03, which are not required for said purposes, shall be paid over to the Authority. Section 9.04 Is Deemed Included in All References to Predecessor. Whenever in this Indenture or any Supplemental Indenture the Authority is named or referred to, such reference shall be deemed to include the successor to the powers, duties and functions, with respect to the management, administration and control of the affairs of the Authority, that are presently vested in the Authority, and all the covenants, agreements and provisions contained in this Indenture by or on behalf of the Authority shall bind and inure to the benefit of its successors whether so expressed or not. Section 9.05 Content of Certificates. Every certificate with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person or persons making or giving such certificate have read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate are based; (c) a statement that, in the opinion of the signers, they have made or caused to be made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of the signers, such condition or covenant has been complied with. Any such certificate made or given by an officer of the Authority may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate may be based, as aforesaid, are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Any such certificate or opinion or representation made or given by counsel may be based, insofar as it relates to 'factual matters, on information with respect to which is in the possession of the Authority, or upon the certificate or opinion of or representations by an officer or officers of the Authority, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his certificate, opinion or representation may be based, as aforesaid, are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Section 9.06 Execution of Documents by Bond Owners. Any request, consent or other instrument required by this Indenture to be signed and executed by Bond Owners may be in any number of concurrent writings of substantially similar tenor and may be signed or executed by such Bond Owners in person or by their agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and of the Authority if made in the manner provided in this Section 9.06. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument or writing acknowledged to him the execution thereof. 43 The ownership of Bonds shall be proved by the Registration Books. Any request, consent or vote of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of any Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in pursuance of such request, consent or vote. In lieu of obtaining any demand, request, direction, consent or waiver in writing, the Trustee may call and hold a meeting of the Bond Owners upon such notice and in accordance with such rules and obligations as the Trustee considers fair and reasonable for the purpose of obtaining any such action. Section 9.07 Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are owned or held by or for the account of the District or the Authority (but excluding Bonds held in any employees' retirement fund) shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, provided, however, that for the purpose of determining whether the Trustee shall be protected in relying on any such demand, request, direction, consent or waiver, only Bonds which the Trustee knows to be so owned or held shall be disregarded. Section 9.08 Waiver of Personal Liability. No officer, agent or employee of the Authority shall be individually or personally liable for the payment of the interest on or principal of the Bonds; but nothing herein contained shall relieve any such officer, agent or employee from the performance of any official duty provided by law. Section 9.09 Partial Invalidity. If any one or more of the covenants or agreements, or portions thereof, provided in this Indenture on the part of the Authority (or of the Trustee) to be performed should be contrary to law, then such covenant or covenants, such agreement or agreements, or such portions thereof, shall be null and void and shall be deemed separable from the remaining covenants and agreements or portions thereof and shall in no way affect the validity of this Indenture or of the Bonds; but the Bond Owners shall retain all rights and benefits accorded to them under the Bond Law or any other applicable provisions of law. The Authority hereby declares that it would have entered into this Indenture and each and every other section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the issuance of the Bonds pursuant hereto irrespective of the fact that any one or more sections, paragraphs, subdivisions, sentences, clauses or phrases of this Indenture or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. Section 9.10 Destruction of Canceled Bonds. Whenever in this Indenture provision is made for the surrender to the Authority of any Bonds which have been paid or canceled pursuant to the provisions of this Indenture, the Trustee shall destroy such Bonds and deliver a certificate of destruction to the Authority. Section 9.11 Funds and Accounts. Any fund or account required by this Indenture to be established and maintained by the Authority or the Trustee may be established and maintained in the accounting records of the Authority or the Trustee, as the case may be, either as a fund or an account, and may, for the purpose of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account. All such records with respect to all such funds and accounts held by the Authority shall at all times be maintained in accordance with generally accepted accounting principles and all such records with respect to all such funds and accounts held by the Trustee shall be at all times maintained in accordance with industry practices; in each case with due regard for the protection of the security of the Bonds and the rights of every 44 Owner thereof Any fund or account required by this Indenture to be established and maintained by the Authority or the Trustee may be established and maintained in the form of multiple funds, accounts or sub - accounts therein. Section 9.12 Payment on Business Days. Whenever in this Indenture any amount is required to be paid on a day which is not a Business Day, such payment shall be required to be made on the Business Day immediately following such day, provided that interest shall not accrue from and after such day. Section 9.1� iv'oiiee5. Any notice, request, complaint, demand or other communication under this Indenture shall be given by first -class mail or personal delivery to the party entitled thereto at its address set forth below, or by facsimile or other form of electronic communication, at its number set forth below. Notice shall be effective either (a) upon transmission by telecopy or other form of telecommunication, (b) 48 hours after deposit in the United States mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The Authority, the District, or the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the Authority: Lake Elsinore Public Financing Authority 130 South Main Street Lake Elsinore, California 92530 Attention: Executive Director (951) 674 -3124 (951) 674 -2392 - Fax If to the District: City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) c/o City of Lake Elsinore - 130 South Main Street Lake Elsinore, California 92530 Attention: City Manager (951) 674 -3124 (951) 674 -2392 - Fax If to the Trustee: MUFG Union Bank, N.A. 120 South San Pedro Street, 4th Floor Los Angeles, California 90012 Attention: Corporate Trust Department (213) 972 -5675 (213) 972 -5694 —Fax lorraine. mcintire @unionban k. com with a copy toaccountadministration- corporatetrust @unionbank.com If to the Insurer: 45 Section 9.14 Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, subject to the laws of the State, any moneys held by the Trustee in trust for the payment and discharge of any of the Bonds which remain unclaimed for two (2) years after the date when such Bonds or any interest thereon have become due and payable, either at their stated maturity dates or by call for earlier redemption, if such moneys were held by the Trustee at such date, or for two (2) years after the date of deposit of such moneys if deposited with the Trustee after said date when such Bonds become due and payable, shall be repaid by the Trustee to the Authority, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Bond Owners shall look only to the Authority for the payment of such Bonds; provided, however, that before being required to make any such payment to the Authority, the Trustee shall, at the expense of the Authority, cause to be mailed to the Owners of all such Bonds, at their respective addresses appearing on the Registration Books, a notice that said moneys remain unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of mailing of such notice, the balance of such moneys then unclaimed will be returned to the Authority. Section 9.15 Governing Law. This Indenture shall be construed and governed in accordance with the laws of the State of California. Section 9.16 Execution of Counterparts. This Indenture may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and all of which shall together constitute but one and the same instrument. M IN WITNESS WHEREOF, the LAKE ELSINORE PUBLIC FINANCING AUTHORITY has caused this Indenture to be signed in its name and MUFG UNION BANK, N.A., in token of its acceptance of the trust created hereunder, has caused this Indenture to be signed in its corporate name by its officer identified below, all as of the day and year first above written. ATTEST: By: Secretary LAKE ELSINORE PUBLIC FINANCING AUTHORITY By: Executive Director MUFG UNION BANK, N.A., as Trustee By: Authorized Officer 47 EXHIBIT A FORM OF BOND No. R- UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE SECURITIES DEPOSITORY (AS DEFINED IN THE INDENTURE OF TRUST) TO THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE SECURITIES DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE SECURITIES DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCII AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. NEITHER THE PAYMENT OF THE PRINCIPAL OR ANY PART THEREOF NOR ANY INTEREST THEREON CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE CITY OF LAKE ELSINORE OR THE REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE. UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE REFUNDING BONDS (COMMUNITY FACILITIES DISTRICT NO. 88-3),2015 SERIES B RATE OF INTEREST MATURITY DATE DATED DATE CUSIP ,2015 REGISTERED OWNER: Cede & Co. PRINCIPAL AMOUNT: The LAKE ELSINORE PUBLIC FINANCING AUTHORITY, a joint powers authority organized and existing under the laws of the State of California (the "Authority "), for value received, hereby promises to pay (but only out of the Revenues and other moneys and securities hereinafter referred to) to the Registered Owner identified above or registered assigns (the "Registered Owner "), on the Maturity Date identified above, the Principal Amount identified above in lawful money of the United States of America; and to pay interest thereon at the Rate of Interest identified above in like money from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this Bond (unless this Bond is authenticated on or before an Interest Payment Date and after the fifteenth calendar day of the month preceding such Interest Payment Date occurs, in which event it shall bear interest from such Interest Payment Date, or unless this Bond is authenticated on or prior to August 15, 2015, in which event it shall bear interest from the Dated Date identified above; provided, however, that if, at the time of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest Payment Date to which A -I interest hereon has previously been paid or made available for payment), payable semiannually on March 1 and September 1 in each year, commencing September 1, 2015 (each, an "Interest Payment Date "), until payment of such Principal Amount in full. The Principal Amount hereof is payable upon presentation hereof at the corporate trust office (the "Corporate Trust Office ") of MUFG Union Bank, N.A., as trustee (the "Trustee ") or such other place as designated by the Trustee. Interest hereon is payable by check of the Trustee mailed by first class mail on each Interest Payment Date to the Registered Owner hereof at the address of the Registered Owner as it appears on the Registration Books of the Trustee as of the first calendar day of the month in which such Interest Payment Date occurs; 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 Trustee prior to the fifteenth calendar day of the month 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 continental United States designated in such written request. Notwithstanding any other provision herein to the contrary, so long as this Bond shalt be registered in book -entry -only form, the payment of the principal of, and redemption premium, if any, and interest on, this Bond shall be paid in immediately available funds in such manner as determined by the Authority, the Trustee and the Owner. It is hereby certified that all things, conditions and acts required to exist, to have happened and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by the Constitution and statutes of the State of California and by the Act, and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Constitution or statutes of the State of California or by the Act. This Bond shall not be entitled to any benefit under the Indenture, or become valid or obligatory for any purpose, until the certificate of authentication hereon shall have been manually signed by the Trustee. This Bond is one of a duly authorized issue of bonds of the Authority designated the "Lake Elsinore Public Financing Authority Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3), 2015 Series B" (the "Bonds "), limited in principal amount to $ , secured by an Indenture of Trust, dated as of 1, 2015 (the "Indenture "), by and between the Authority and the Trustee. Reference is hereby made to the Indenture and all indentures supplemental thereto for a description of the rights thereunder of the owners of the Bonds, of the nature and extent of the Revenues (as that term is defined in the Indenture), of the rights, duties and immunities of the Trustee and of the rights and obligations of the Authority thereunder; and all of the terms of the Indenture are hereby incorporated herein and constitute a contract between the Authority and the Registered Owner hereof, and to all of the provisions of which Indenture the Registered Owner hereof, by acceptance hereof, assents and agrees. The Bonds are authorized to be issued pursuant to the provisions of the Marks -Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act"). The Bonds are special obligations of the Authority and, as and to the extent set forth in the Indenture, are payable solely from and secured by a first lien and pledge of the Revenues and certain other moneys and securities held by the Trustee as provided in the Indenture. All of the Bonds are equally secured by a first pledge of, and charge and lien upon, all of the Revenues, the Redemption Revenues and such other moneys and securities, and the Revenues, the Redemption Revenues and such other moneys A -2 and securities constitute a trust fund for the security and payment of the principal of and interest and premium (if any) on the Bonds. The full faith and coedit of the Authority is not pledged for the payment of the principal of or interest or redemption premiums (if any) on the Bonds. The Bonds are not secured by a legal or equitable pledge of, or charge, lien or encumbrance upon, any of the property of the Authority or any of its income or receipts, except the Revenues, the Redemption Revenues and such other moneys and securities as provided in the Indenture. The Bonds have been issued to provide funds to be applied by the Authority to purchase of bonds of City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) (the "District Bonds "), as more particularly described in the Indenture. The Bonds are not subject to optional redemption prior to maturity. The Bonds shall be subject to mandatory redemption prior to maturity on any date on or after September 1, 2015, in whole or in part from such maturities as selected by the Authority and by lot within a maturity, from the redemption of District Bonds from amounts constituting prepayments of Special Taxes and from amounts held in the Delinquency Management Fund under each Fiscal Agent Agreement for the District Bonds and from amounts in the Cash Flow Management Fund at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed) together with accrued interest thereon to the redemption date. Redemption Dates Redemption Prices IN WITNESS WHEREOF, the Authority has caused this Bond to be executed in its name and on its behalf by the manual signatures of its Chairperson and Secretary all as of the Dated Date identified above. Secretary LAKE ELSINORE PUBLIC FINANCING AUTHORITY By: A -3 Chairperson TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within - mentioned Indenture and registered on the registration books of the Trustee. Dated: 2015 NTT 11— — _11: 1N BA VI >,1:.A., as Trustee LIN A -a Authorized Signatory ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers onto (Name, Address and Tax Identification or Social Security Number of Assignee) the within Bond and hereby irrevocably constitute(s) and appoint(s) , attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature Guaranteed: Signature Note: Signature(s) must be guaranteed by an eligible guarantor institution. Note: The signature(s) on this assignment must correspond with the name(s) as written on the face of the within- registered Bond in every particular without alteration or enlargement or any change whatsoever. A -5 STATEMENT OF INFORMATION [TO COME FROM INSURER] A -6 Sit adling Yocca Carlson & Rauth Draft of 416115 THIRD AMENDMENT TO FISCAL AGENT AGREEMENT by and between CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 (WEST LAKE ELSINORE) and MUFG UNION BANK, N.A., as Fiscal Agent Dated as of 1, 2015 Relating to CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 (WEST LAKE ELSINORE) SPECIAL TAX REFUNDING BONDS 2015 SERIES (SENIOR BONDS) THIRD AMENDMENT TO FISCAL AGENT AGREEMENT THIS THIRD AMENDMENT TO FISCAL AGENT AGREEMENT dated as of 1, 2015 (the "Third Amendment"), by and between City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) (the "District') and MUFG Union Bank, N.A. (the "Fiscal Agent "), governs the terms of the Special Tax Refunding Bonds 2015 Series (Senior Bonds) which are being issued in accordance with the Fiscal Agent Agreement dated as of January 1, 2008 (the "Original Fiscal Agent Agreement'), as amended by the First Amendment to Fiscal Agent A- .mot It" 'Tarn A...... -].v. t", d -A_ ..Sreeme = =. k=uo i UOL. 1 = =e = =uiucut ), dated as of February 1, 2010, the Second Amendment to Fiscal Agent Agreement (the "Second Amendment, and together with the Original Fiscal Agent Agreement and the First Supplement, the "Amended Fiscal Agent Agreement "), dated as of July 1, 2013, each by and between the District and the Fiscal Agent. The Amended Fiscal Agent Agreement, as further amended by the Third Amendment are hereinafter collectively referred to as the "Fiscal Agent Agreement." RECITALS: WHEREAS, the City Council of the City of Lake Elsinore, located in Riverside County, California (hereinafter sometimes referred to as the "legislative body of the District" or the "City"), has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of the District pursuant to the terms and provisions of the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the "Act "); and WHEREAS, based upon Resolution Nos. and 87 -76 adopted by the legislative body of the District on March 13, 1990, and an election held on March 13, 1990 authorizing the levy of a special tax and the issuance of bonds by the District, the District is authorized to issue bonds in one or more series, pursuant to the Act, in an aggregate principal amount not to exceed $30,000,000; and WHEREAS, pursuant to the Original Fiscal Agent Agreement, the District previously issued its Special Tax Bonds, 2008 Series (the "Series 2008 Bonds ") and its Subordinate Special Tax Bonds, 2008 Series (the "Series 2008 Subordinate Bonds ") in the aggregate principal amounts of $24,670,000 and $7,175,000, respectively, all in connection with the issuance of the Lake Elsinore Public Financing Authority's (the "Authority ") Local Agency Revenue Bonds (CFD 88 -3 Refunding) 2008 Series A; and WHEREAS, pursuant to the Second Amendment, the District has previously issued its Subordinate Special Tax Bonds, 2013 Series (the "Series 2013 Bonds ") in the aggregate principal amount of $4,215,000 in connection with the issuance of the Authority's Local Agency Revenue Bonds (Community Facilities District No. 88 -3), 2013 Series B (the "Prior Authority Bonds "), which Series 2013 Bonds refunded the then outstanding Series 2008 Subordinate Bonds; and WHEREAS, the legislative body of the District intends refund the Series 2008 Bonds through the issuance of bonds in an aggregate principal amount of $ designated as the "City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) Special Tax Refunding Bonds 2015 Series" (the "Series 2015 Bonds ") in connection with the issuance of the Authority's Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3), Series 2015; and NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the Series 2015 Bonds are to be issued, and in consideration of the premises and of the mutual covenants contained herein and of the purchase and acceptance of the Series 2015 Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the District does hereby covenant and agree, for the benefit of the Owners of the Series 2013 Bonds and the Series 2015 Bonds, as follows: ARTICLE I APPLICABILITY Section I.I. Applicability to Series 2015 Bonds Only. The Series 2015 Bonds shall be governed by the terms and provisions of this Third Amendment and the Amended Fiscal Agent Agreement. Where there is a conflict between this Third Amendment and the Amended Fiscal Agent Agreement, this Third Amendment shall control. ARTICLE II DEFINITIONS Section 2.1. Definitions. "Authority Bonds" means the $ Lake Elsinore Public Financing Authority Local Agency Revenue Refunding' Bonds (Community Facilities District No. 88 -3), 2015 Series B. "Authority Indenture" means the Indenture of Trust dated as of 1, 2015, by and between the Authority and MUFG Union Bank, N.A., as trustee thereunder. "Authority Trustee" means MUFG Union Bank, N.A., as trustee under the Authority Indenture, and its successors or assigns, or any other bank, association or trust company which may at any time be substituted in its place as provided in the Authority Indenture. "Bonds" as defined in the Original Fiscal Agent Agreement is hereby amended to mean the Series 2015 Bonds and the Subordinate Bonds. "Costs of Issuance" shall have the meaning set forth in the Authority Indenture. "Escrow Agent" means MUFG Union Bank, N.A., acting as escrow agent pursuant to the Escrow Agreement. "Escrow Agreement" means that Escrow Agreement, dated as of 1, 2015, by and among the Authority, the District and the Escrow Agent relating to the defeasance and refunding of the outstanding Series 2008 Bonds and the Prior Authority Bonds. "Interest Payment Date" means March 1 and September 1 of each year, commencing September 1, 2015. "Reserve Fund" shall have the meaning set forth in the Authority Indenture. "Resolution" means Resolution No. adopted by the Legislative Body on as now in effect or as it may hereafter be amended from time to time. "Series 2015 Bonds" means the City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) Special Tax Refunding Bonds 2015 Series. ARTICLE III GENERAL AUTHORIZATION AND BOND TERMS Section 3.1. Amount, Issuance, Purpose and Nature of Series 2015 Bonds. Under and pursuant to the Fiscal Agent Agreement, the Series 2015 Bonds in the aggregate principal amount of $ shall be issued as Parity Bonds governed by the terns of the Amended Fiscal Agent Agreement, as amended by this Third Amendment, for the purpose of refunding the Series 2008 Bonds, finding a deposit to the Reserve Fund and paying Costs of Issuance. Section 3.2. Description of Series 2015 Bonds; Interest Rates. The Series 2015 Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Series 2015 Bonds shall be numbered as determined by the Fiscal Agent. The Series 2015 Bonds shall be designated "CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 (WEST LAKE ELSINORE) SPECIAL TAX REFUNDING BONDS, 2015 SERIES." The Series 2015 Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on September 1, 2015 and each Interest Payment Date thereafter. Maturity Date (September 1) Principal Amount Interest Rate 2016 2017 2018 2019 2020 Interest shall be payable on each Series 2015 Bond from the date established in accordance with Section 3.3 below on each Interest Payment Date thereafter until the principal sum of that Series 2015 Bond has been paid; provided, however, that if at the maturity date of any Series 2015 Bond funds are available for the payment or redemption thereof in full, in accordance with the terms of this Third Amendment, such Series 2015 Bonds shall then cease to bear interest. Interest due on the Series 2015 Bonds shall be calculated on the basis of a 360 -day year comprised of twelve 30 -day months. Section 3.3. Form of Payment. Interest on any Series 2015 Bond shall be payable from the Interest Payment Date next preceding the date of authentication of that Bond, unless (i) such date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Series 2015 Bond, in which event interest shall be payable from the dated date of such Bond; provided, however, that if at the time of authentication of such Series 2015 Bond, interest is in default, interest on that Series 2015 Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on that Series 2015 Bond, interest on that Bond shall be payable from its dated date. Section 3.4. Form of Bonds; Execution and Authentication. The Series 2015 Bonds and the certificate of authentication shall be substantially in the forms attached hereto as Exhibit A, which forms are hereby approved and adopted as the forms of such Series 2015 Bonds and of the certificate of authentication. Only the Series 2015 Bonds that shall bear thereon such certificate of authentication in the form set forth in Exhibit A hereto shall be entitled to any right or benefit under the Fiscal Agent Agreement, and no Series 2015 Bonds shall be valid or obligatory for any purpose until such certificate of authentication shall have been manually executed by the Fiscal Agent Agreement. ARTICLE IV APPLICATION OF PROCEEDS OF SERIES 2015 BONDS Section 4.1. Application of Proceeds of Sale of Series 2015 Bonds The proceeds of the sale of the Series 2015 Bonds (which amount is net of $ retained by the Authority Trustee as the District's share of the Costs of Issuance, as defined in the Authority Indenture) shall be received by the Fiscal Agent on behalf of the District and transferred to the Escrow Agent for deposit in the escrow fund created under the Escrow Agreement. The Fiscal Agent may, in its discretion, establish a temporary fund or account in its books and records to facilitate such transfers. ARTICLE V REDEMPTION OF SERIES 2015 BONDS Section 5.1. Redemption of Series 2015 Bonds (a) No Optional Redem ration. The Series 2015 Bonds are not subject to optional redemption prior to maturity. (b) Extraordinary Redemption. The Series 2015 Bonds shall be subject to extraordinary redemption as a whole, or in part by lot, from prepayments of Special Taxes, amounts transferred from the Residual Fund and from amounts transferred by the Authority to the District from the Cash Flow Management Fund held under the Authority Indenture, on the following dates and at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Date Redemption Price Section 5.2. Notice of Redemption of Series 2015 Bonds. When Series 2015 Bonds are due for redemption under Section 5.1 above or under another redemption provision set forth in a Supplemental Agreement, the Fiscal Agent shall give notice, in the name of the District, of the redemption of such Bonds; provided, however, that a notice of a redemption to be made from other than from Sinking Fund Payments may be conditioned on there being on deposit on the redemption date sufficient money to pay the redemption price of the Series 2015 Bonds to be redeemed. Such notice of redemption shall (a) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Series 2015 Bonds selected for redemption, except that where all of the Series 2015 Bonds are subject to redemption, or all the Series 2015 Bonds of one maturity, are to be redeemed, the bond numbers of such issue need not be specified; (b) state the date 'fixed for redemption and surrender of the Series 2015 Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the Series 2015 Bonds are to be redeemed; (e) in the case of Series 2015 Bonds to be redeemed only in part, state the portion of such Series 2015 Bond which is to be redeemed; (f) state the date of issue of the Series 2015 Bonds as originally issued; (g) state the rate of interest borne by each Series 2015 Bond being redeemed; and (h) state any other descriptive information needed to identify accurately the Series 2015 Bonds being redeemed as shall be specified by the Fiscal Agent. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Series 2015 Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the Fiscal Agent shall send a copy of such notice to the respective Owners thereof at their addresses appearing on the Bond Register, and to the original purchaser of the Series 2015 Bonds. The actual receipt by the Owner of any Series 2015 Bond or the original purchaser of any Series 2015 Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such Series 2015 Bonds, or the cessation of interest on the redemption date. A certificate by the Fiscal Agent that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. Notwithstanding the foregoing, so long as the Authority or the Authority Trustee on the Authority's behalf is the registered owner of the Series 2015 Bonds, no such notices need be provided. In addition to the foregoing notice, further notice shall be given by the Fiscal Agent as set out below if the Series 2015 Bonds are not owned by the Authority at the time the notice of redemption is given pursuant to this Section 5.2, provided that no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption shall be sent at least two days before notice of redemption is mailed to the Series 2015 Bondowners pursuant to the first paragraph of this Section by registered or certified mail, overnight delivery service or any other means acceptable to the registered securities depository listed below and to any other registered securities depositories then in the business of 5 holding substantial amounts of obligations of types comprising the Series 2015 Bonds as shall be specified by the Fiscal Agent and to any national information services that disseminate notice of redemption of obligations such as the Series 2015 Bonds as determined by the Fiscal Agent: Registered Securities Depositories The Depository Trust Company 55 Water Street New York, New York 10041 Attention: Redemption Area Telecopy: (212) 855 -7232 or (212) 855 -7233 Upon the payment of the redemption price of any Series 2015 Bonds being redeemed, each check or other transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Series 2015 Bonds being redeemed with the proceeds of such check or other transfer. ARTICLE VI COVENANTS Section 6.1. No Senior Obligations. The District covenants not to issue any obligations payable from Special Tax Revenues on a basis senior to the Bonds. ARTICLE VII MISCELLANEOUS Section 7.1. Provisions of Fiscal Agent Agreement in Effect. Except as expressly modified herein, all of the provisions of the Amended Fiscal Agent Agreement shall remain in full force and effect. Section 7.2. Partial Invalidity. If any section, paragraph, sentence, clause or phrase of this Third Amendment shall for any reason be held illegal, invalid or unenforceable, such holding shall not affect the validity of the remaining portions of this Third Amendment. The District hereby declares that it would have entered into this Third Amendment and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Series 2015 Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences. clauses, or phrases of this Third Amendment may be held illegal, invalid or unenforceable. Section 7.3. Execution in Counterparts. This Third Amendment may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 7.4. Governing Law. This Third Amendment shall be construed and governed hi accordance with the laws of the State of California applicable to contracts made and performed in such state. IN WITNESS WHEREOF, CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 (West Lake Elsinore) has caused this Third Amendment to Fiscal Agent Agreement to be signed by an Authorized Representative of the District and MUFG UNION BANK, N.A., in token of its acceptance of the trust created hereunder and has caused this Third Amendment to Fiscal Agent Agreement to be signed in its corporate name by its officer identified below, all as of the day and year first above written. ATTEST: City Clerk of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) COMMUNITY FACILITIES DISTRICT NO. 88 -3 OF THE CITY OF i,AKE ELLSINORE ( "WEST LAKE ELSINORE) By: Mayor of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) MUFG UNION BANK, N.A., as Fiscal Agent By: Authorized Signatory R -1 EXHIBIT A FORM OF SPECIAL TAX REFUNDING BOND, SERIES 2015A UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 (WEST LAKE ELSINORE) SPECIAL TAX REFUNDING BONDS, 2015 SERIES INTEREST RATE: MATURITY DATE: DATED DATE: % September 1, 20 , 2015 REGISTERED OWNER: MUFG UNION BANK, N.A., as Trustee under that certain Indenture of Trust dated as of 1, 2015, by and between the Lake Elsinore Public Financing Authority and MC1FG Union Bank, N.A. PRINCIPAL AMOUNT: DOLLARS CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 (WEST LAKE ELSINORE) (the "District') situated in the County of Riverside, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Fiscal Agent Agreement (as hereinafter defined), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication hereof, unless (i) the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above. Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March I and A -7 September 1 and the final maturity date of the Bonds (each an "Interest Payment Date "), commencing September 1, 2015 at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. Except as otherwise provided in the Fiscal Agent Agreement, the principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of the Fiscal Agent (as such term is defined in the Fiscal Agent Agreement), initially MUFG Union Bank, N.A. (the "Fiscal Agent"). Interest on this Bond shall be paid by check of the Fiscal Agent mailed, by first class mail, postage prepaid, or in certain circumstances described in the Fiscal Agent Agreement by wire transfer to an account within the United States of America, to the Registered Owner hereof as ot" the close of business on the fifteenth 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. This Bond is one of a duly authorized issue of "City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) Special Tax Refunding Bonds, 2015 Series (Senior Bonds)" (the "Bonds ") issued in the aggregate principal amount of $ pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the "Act") for the purpose of refinancing outstanding special tax bonds of the District and paying certain costs related to the issuance of the Bonds. 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, acting in its capacity as the legislative body of the District (the "Legislative Body "), on , 2015, and a Fiscal Agent Agreement dated as of January 1, 2008 (the "Original Fiscal Agent Agreement "), as amended by the First Amendment to Fiscal Agent Agreement (the "First Amendment "), dated as of February 1, 2010, the Second Amendment to Fiscal Agent Agreement (the "Second Amendment "), dated as of July 1, 2013 and the Third Amendment to Fiscal Agent Agreement dated as of , 2015 (the "Third Amendment" and, together with the Original Fiscal Agent Agreement, the First Amendment and the Second Amendment, the "Fiscal Agent Agreement ") each by and between the District and the Fiscal Agent, and this reference incorporates the Fiscal Agent Agreement herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Fiscal Agent Agreement is adopted under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. Pursuant to the Act and the Fiscal Agent Agreement, the principal of, premium, if any, and interest on this Bond are payable solely from the portion (the "Net Special Taxes ") of the annual special taxes authorized under the Act to be levied and collected within the District (the "Special Taxes ") and certain other amounts pledged to the repayment of the Bonds asset forth in the Fiscal Agent Agreement. Any amounts for the payment hereof shall be limited to the Net Special Taxes pledged and collected, which include foreclosure proceeds received 'following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund established under the Fiscal Agent Agreement, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenanted for the benefit of the owners of the Bonds that under certain circumstances described in the Fiscal Agent Agreement it will commence and diligently pursue to completion appropriate foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds. The Bonds may be redeemed, at the option of the District from any source of funds, on any date on or after September 1, 2015, in whole, or in part from such maturities as are selected by the District and by lot within a maturity, at the a redemption price equal to 102% of the principal amount thereof, together with accrued interest to the date of redemption. A -2 The Bonds maturing oil September 1, 20 shall be called before maturity and redeemed, from Sinking Fund Payments deposited into the Principal Account, on September 1, 20 , and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth in the Fiscal Agent Agreement at a redemption price equal to the principal amount thereof, plus accrued interest to the redemption date, without premium. The Bonds are subject to extraordinary redemption as a whole, or in part on a pro rata basis among maturities, on any Interest Payment Date, and shall be redeemed by the Fiscal Agent, from prepayments of Special Taxes, from amounts transferred from the Residual Fund and from amounts transferred by the Authority to the District from the Cash Flow Management Fund held under the Authority Indenture at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date: Redemption Dates Redemption Prices Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than 30 nor more than 45 days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Notwithstanding the foregoing, so long as the Authority or the Authority Trustee on the Authority's behalf is the registered owner of the Bonds, no such notices need be provided. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date; provided that funds for the redemption are on deposit with the Fiscal Agent on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Fiscal Agent may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. The Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Fiscal Agent Agreement. This Bond is transferable by the Registered Owner hereof in person or by his attorney duly authorized in writing, at the Principal Office of the Fiscal Agent, but only in the manner, subject to the limitations and upon payment of the charges provided in the Fiscal Agent Agreement, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor. The Fiscal Agent shall not be required to register transfers or make exchanges of (i) any Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. A -3 The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Fiscal Agent Agreement. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF LAKE ELSINORE OR OF TFIE DISTRICT FOR WHICH THE CITY OF LAKE ELSINORE OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER TIIAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM TFE PORTi ^vii 1 THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE FISCAL AGENT AGREEMENT BUT ARE NOT A DEBT OF THE CITY OF LAKE ELSINORE, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITFIIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by 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 do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. IN WITNESS WHEREOF, City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) has caused this Bond to be dated as of 2015, to be signed on behalf of the District by the Mayor by his facsimile signature and attested by the facsimile signature of the City Clerk. ATTEST: City Clerk of the City of Lake Elsinore A -4 Mayor of the City of Lake Elsinore [FORM OF FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one of the Bonds described in the within - defined Fiscal Agent Agreement. Dated: 2015 MUFG UNION BANK, N.A., as Fiscal Agent By: Its: A -5 Authorized Officer [FORM OF LEGAL OPINION] The following is a true copy of the opinion rendered by Stradling Yocca Carlson & Rauth, a Professional Corporation, in connection with the issuance of and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in my office. City Clerk of the City of Lake Elsinore [FORM OF ASSIGNMENT] For value received the undersigned do(es) hereby sell, assign and transfer unto whose tax identification number is the within - mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s) attorney to transfer the same on the books of the Fiscal Agent with full power of substitution in the premises. Dated: 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 Fiscal Agent. NOTE: The signatures(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. A -6 Stradling Yocea Carlson & Rawh Draft of 416115 LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE BONDS (CFD 88 -3 REFUNDING) 2008 SERIES A ESCROW AGREEMENT This ESCROW AGREEMENT (the "Escrow Agreement "), made and entered into as of 1, 2015, by and among the Lake Elsinore Public Financing Authority (the "Authority "), the City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) (the "District "), and MUFG Union Bank, N.A. (the "Escrow Agent'), a national banking association organized and existing under the laws of the United States of America and being qualified to accept and administer the escrow hereby created. WITNESSETH. WHEREAS, the District has heretofore issued its City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) Special Tax Bonds, 2008 Series (the "Prior District Bonds "), pursuant to the terms of that certain Fiscal Agent Agreement dated as of January 1, 2008 (the "Prior Fiscal Agent Agreement'), by and between the District and MUFG Union Bank, N.A. (formerly known as Union Bank of California, N.A.), as fiscal agent (the "Prior Fiscal Agent'); and WHEREAS, the Authority has heretofore issued its Local Agency Revenue Bonds (CFD 88- 3 Refunding) 2008 Series A (the "Prior Authority Bonds" and, together with the Prior District Bonds, the "Prior Bonds ") pursuant to the terms of that certain Indenture of Trust dated as of January 1, 2008 (the "Prior Indenture ") by and between the Authority and MUFG Union Bank, N.A. (formerly known as Union Bank of California, N.A.), as trustee (the "Prior Trustee "), a portion of the proceeds of which were used to purchase the Prior District Bonds; and WHEREAS, the District has determined to cause the issuance and sale of its Special Tax Refunding Bonds 2015 Series (the "CFD Bonds "), in connection with the issuance of the Authority's Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3), Series 2015B (the "Authority Bonds ") for the purpose of providing moneys to the Escrow Agent, which amount will be sufficient (when combined with moneys to be provided from other sources) to pay the principal and interest due on the Prior Authority Bonds on September 1, 2015, and to redeem on September 1, 2015 (the "Redemption Date ") the Prior Authority Bonds maturing on and after September 1, 2016 at a redemption price equal to 102% of the principal amount to be redeemed (the "Redemption Price "), and to effect a simultaneous redemption of the Prior District Bonds in connection therewith; and WHEREAS, pursuant to Section 2 of this Escrow Agreement, the District will cause a prescribed portion of the proceeds of the CFD Bonds, together with certain funds held by the Prior Fiscal Agent and the Prior Trustee with respect to the Prior Bonds, to be set aside with the Escrow Agent, in order to provide for the payment of the Redemption Price of the Prior Authority Bonds, such proceeds and funds to be deposited in an escrow fund to be created hereunder designated as the "City of Lake Elsinore Community Facilities District No. 88 -3 Escrow Fund" to be maintained by the Escrow Agent (the "Escrow Fund ") to be held uninvested in the Escrow Fund, and such amount has been certified by to be sufficient to pay when and as due the Redemption Price of the Prior Authority Bonds set forth in Schedule 11 hereto; follows: NOW, THEREFORE, the District, the Authority and the Escrow Agent hereby agree as SECTION 1. Establishment and Maintenance of Escrow Fund. The Escrow Agent agrees to establish and maintain, until the Prior Authority Bonds have been paid in full, the Escrow Fund, and to hold the moneys therein at all times as a special and separate escrow fund (wholly segregated from all other securities, investments or moneys on deposit with the Escrow Agent). All moneys in the Escrow Fund are hereby irrevocably pledged, subject to the provisions of Section 2 hereof, to secure the payment when due of the Redemption Price of the Prior Authority Bonds. SECTION 2. Funding of the Escrow Fund. (a) The District agrees that, not later than May _, 2015 (the "Closing Date "), the District will cause to be transferred to the Escrow Agent for deposit in the Escrow Fund: (i) from MUFG Union Bank, N.A., as Fiscal Agent (the "Fiscal Agent') under the Fiscal Agent Agreement (the "Original Fiscal Agent Agreement') dated as of January 1, 2008, as amended by the First Amendment to Fiscal Agent Agreement (the "First Amendment'), dated as of February 1, 2010, the Second Amendment to Fiscal Agent Agreement (the "Second Amendment'), dated as of July 1, 2013, and the Third Amendment to Fiscal Agent Agreement (the "Third Amendment" and, together with the Original Fiscal Agent Agreement, the First Amendment and the Second Amendment, the "Fiscal Agent Agreement') dated as of 1, 2015, each by and between the District and the Fiscal Agent, the amount of $ from the proceeds of sale of the CFD Bonds; and (ii) ` from the Prior Fiscal Agent and the Prior Trustee the sum of $ from amounts held under the Prior Fiscal Agent Agreement and the Prior Indenture on account of the Prior Bonds. (b) The District hereby directs the Escrow Agent to hold such funds uninvested in the Escrow Fund. SECTION 3 -. Payment and Redemption of the Prior Authority Bonds. The District hereby requests and irrevocably instructs the Escrow Agent to pay on September 1, 2015, from the amounts on deposit in the Escrow Fund, the principal and interest due on the Prior Authority Bonds and the Redemption Price. Upon payment in full of the Prior Authority Bonds, the Escrow Agent shall transfer any moneys remaining in the Escrow Fund to the District and, after provision for payment of amounts due the Prior Fiscal Agent, the Prior Trustee and the Escrow Agent pursuant to Section 6 and 11 hereof, this Escrow Agreement shall terminate. The Authority agrees that upon the defeasance and redemption of the Prior Authority Bonds, the Prior District Bonds shall be simultaneously defeased and released. SECTION 4. Notices of Defeasance and Redemption of the Prior Authority Bonds. The Authority hereby instructs the Escrow Agent to mail, first class, postage prepaid, a notice to the owners of the Prior Authority Bonds in the form attached hereto as Schedule I -A stating that the defeasance of the Prior Authority Bonds has occurred. The District further instructs the Escrow Agent to mail, first class, postage prepaid, by not later than 30 days prior to the Redemption Date a notice in substantially the form attached hereto as Schedule I -B of redemption with respect to the Prior Authority Bonds in accordance with the procedures set forth in Section 2.02(d) of the Prior Indenture. SECTION 5. Notice of Possible Deficiencies. If at any time the Escrow Agent has actual knowledge that the moneys in the Escrow Fund will not be sufficient to make all payments required by Section 3 hereof, the Escrow Agent shall notify the District in writing as soon as is reasonably practicable, of such fact, the amount of such deficiency and if known, the reason therefor; provided, however, that the District shall have no liability for any such deficiency. SECTION 6. Fees and Costs. The Escrow Agent shall receive its reasonable fees and expenses as previously agreed to by the Escrow Agent and the District and any other reasonable fees and expenses of the Escrow Agent approved by the District. The parties hereto agree that the duties and obligations of the Escrow Agent shall be as expressly provided herein, and no implied duties or obligations shall be read into this Escrow Agreement against the Escrow Agent. The fees of and the costs incurred by the Escrow Agent shall in no event be deducted or payable from, or constitute a lien against, the Escrow Fund. SECTION 7. Merger or Consolidation. Any company into which the Escrow 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 Escrow Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible under this Escrow Agreement, shall be the successor of such Escrow Agent without the execution or filing of any paper or any further act, notwithstanding anything herein to the contrary. SECTION 8. Severability. If any section, paragraph, sentence, clause or provision of this Escrow Agreement shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, sentence, clause or provisions shall not affect any of the remaining provisions of this Escrow Agreement. SECTION 9. Execution of Counterparts. This Escrow Agreement may be executed in any number of counterparts, each of which shall for all purposes be deemed to be an original and all of which shall together constitute but one and the same instrument. SECTION 10. Applicable Law. This Escrow Agreement shall be governed by and construed in accordance with the laws of the State of California. SECTION 11. Indemnification. The District agrees to indemnify, hold harmless and defend the Escrow Agent, its officers, employees, directors, and agents, to the extent permitted by law from and against any and all losses, damages, claims, actions, liabilities, costs and expenses of whatever nature, kind or character (including, without limitation, attorneys' fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) which may be imposed on, or incurred by or asserted against the Escrow Agent directly or indirectly arising out of or related to any claim, suit, investigation, proceeding or action commenced or threatened as a result the execution by the Escrow Agent of this Escrow Agreement, the performance of its obligations hereunder, or of the payment of the Prior Authority Bonds; provided, however, that this indemnification shall not cover any losses or expenses incurred by the Escrow Agent as a result of its negligence or willful misconduct. The agreements of the District and the Authority hereunder shall survive the discharge of the Prior Indenture and the Prior Fiscal Agent Agreement and the payment of the Redemption Price and the resignation or removal of the Prior Fiscal Agent and the Prior Trustee. SECTION 12. Immunities and Liability of Escrow Agent. (a) The Escrow Agent undertakes to perform only such duties as are expressly and specifically set forth in this Escrow Agreement, and no implied duties or obligations shall be read into this Escrow Agreement against Escrow Agent. 'nl The Escrow , --+ t, 11 - 1......,. r,.t'r._. t-i , Sent shall nv, have any liability iiereurlder except to the extent of its own negligence or willful misconduct. In no event shall the Escrow Agent be liable for any special, indirect or consequential damages, even if the Escrow Agent or the District knows of the possibility of such damages. The Escrow Agent shall have no duty or responsibility under this Escrow Agreement in the case of any default in the performance of the covenants or agreements contained in the resolutions and fiscal agent agreements relating to the Prior Bonds. The Escrow Agent is not required to resolve conflicting demands to money or property in its possession under this Escrow Agreement. (c) The Escrow Agent may consult with counsel of its own choice, and the opinion of such counsel shall be full and complete authorization to take or suffer in good faith any action hereunder in accordance with such opinion of counsel. (d) The Escrow Agent shall not be responsible for any of the recitals or representations contained herein. (e) The Escrow Agent may become the owner of or acquire any interest in, any of the Prior Authority Bonds with the same rights that it would have if it were not the Escrow Agent and may engage or be interested in any financial or other transaction with the District. (f) The Escrow Agent shall not be liable for the accuracy of any calculations provided as to the sufficiency of the moneys deposited with it to pay the prescribed Prior Authority Bonds. (g) The Escrow Agent shall not be liable for any action or omission of the District or the Authority under this Escrow Agreement. (h) Whenever in the administration of this Escrow Agreement the Escrow 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 negligence or willful misconduct on the part of the Escrow Agent, be deemed to be conclusively proved and established by a certificate of any authorized representative of the District, and such certificate shall, in the absence of negligence or willful misconduct on the part of the Escrow Agent, be full warrant to the Escrow Agent for any action taken or suffered in good faith by it under the provisions of this Escrow Agreement. (i) The Escrow Agent may conclusively rely, as to the truth and accuracy of the statements and correctness of the opinions and the calculations provided to it in connection with this Escrow Agreement and shall be protected in acting, or refraining from acting, upon any written notice, instruction, request, certificate, document or opinion furnished to the Escrow Agent in compliance with this Escrow Agreement and reasonably believed by the Escrow Agent to have been signed or presented by the proper party, and it need not investigate any fact or matter stated in such notice, instruction, request, certificate or opinion. 0) The Escrow Agent shall incur no liability for losses arising from any investment made pursuant to this Agreement. (k) No provision of this Agreement shall require the Escrow Agent to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers. (1) The liability of the Escrow Agent to make the payments required by this Agreement shall be limited to the moneys in the Escrow Fund. (m) The Escrow Agent shall furnish the District periodic cash transaction statements which include detail for all investment transactions effected by the Escrow Agent or brokers selected by the District. Upon the District's election, such statements will be delivered via the Escrow Agent's online service and upon electing such service, paper statements will be provided only upon request. The District waives the right to receive brokerage confirmations of security transactions effected by the Escrow Agent as they occur, to the extent permitted by law. The District further understands that trade confirmations for securities transactions effected by the Escrow Agent will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker. SECTION 13. Termination and Modification of Agreement. Upon final payment in full of the principal of and interest on the Prior Authority Bonds pursuant to this Escrow Agreement, all obligations of the Escrow Agent under this Escrow Agreement shall cease and terminate, except for the obligation of the Escrow Agent to pay or cause to be paid to the owners of the Prior Authority Bonds not presented for payment all sums due thereon and the obligation of the District to pay to the Escrow Agent any amounts due and owing to the Escrow Agent hereunder. This Escrow Agreement may not be amended or modified in any manner which is materially adverse to the Owners of the Prior Authority Bonds without the unanimous prior written consent of the Owners of the Prior Authority Bonds. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore), the Lake Elsinore Public Financing Authority and MUFG Union Bank, N.A., as Escrow Agent, have caused this Escrow Agreement to be executed each on its behalf by duly authorized officers as of the day and year first above written. CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88-3 (WEST LAKE ELSINORE) 10 ATTEST: City Clerk of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) Mayor of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) LAKE ELSINORE PUBLIC FINANCING AUTHORITY ATTEST: Secretary of the Lake Elsinore Public Financing Authority Executive Director [SIGNATURES CONTINUED ON NEXT PAGE] S -1 [SIGNATURE PAGE CONTINUED.) MUFG UNION BANK, N.A., as Escrow Agent By: Authorized Officer S -2 SCHEDULE I-A FORM OF NOTICE OF DEFEASANCE NOTICE OF DEFEASANCE OF $22,295,000 LAKE ELSINORE, PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE BONDS (CFD 88 -3 REFUNDING) 2008 SERIES A BASE CUSIP NO. 509632 Maturity CUSIP* (September 1) Amount DR3 2015 $1,790,000 DS 1 2016 1,905,000 DT9 2017 2,025,000 DU6 2018 2,155,000 DV4 2019 2,290,000 DW2 2020 2,520,000 Notice is hereby given to the holders of all of the outstanding $22,295,000 Lake Elsinore Public Financing Authority Local Agency Revenue Bonds (CFD 88 -3 Refunding) 2008 Series A maturing on and after September 1, 2015; as listed above (the "Refunded Bonds ") (i) that there has been deposited with MUFG Union Bank, N.A., as Escrow Agent (the "Escrow Agent "), moneys under the Escrow Agreement, dated as of 1, 2015 (the `Escrow Agreement"), by and among the Lake Elsinore Public Financing Authority (the "Authority "), the City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) (the "District") and the Escrow Agent, which shall be sufficient and available to pay on September 1, 2015, the principal and interest due on the Refunded Bonds and to redeem on September 1, 2015 the Refunded Bonds maturing on and after September 1, 2016, at a redemption price (expressed as a percentage of the principal amount of the Refunded Bonds to be redeemed) equal to 102 %; (ii) that the Escrow Agent has been irrevocably instructed to redeem on September 1, 2015 such Refunded Bonds; and (iii) that the Refunded Bonds are deemed to be paid in accordance with Section 10.03 of the Indenture of Trust by and between the Authority and MUFG Union Bank, N.A. (formerly known as Union Bank of California, N.A.), as Trustee, dated as of January 1, 2008, pursuant to which the Refunded Bonds were issued. * The CUSIP numbers are included solely for the convenience of the Holders of the Refunded Bonds. Neither the Authority nor the Escrow Agent shall be responsible for any error of any nature relating to such numbers. Dated this day of 2015. LAKE ELSINORE PUBLIC FINANCING AUTHORITY MUFG UNION BANK, N.A. as Escrow Agent SCHEDULE I-A SCHEDULE I -B FORM OF NOTICE OF REDEMPTION LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE BONDS (CFD 88 -3 REFUNDING) 2008 SERIES A BASE CUSIP NO. 509632 NOTICE IS HEREBY GIVEN to the owners of the above- captioned Bonds (the "Bonds ") of the Lake Elsinore Public Financing Authority (the "Authority ") issued on January 17, 2008 pursuant to the Indenture of Trust, dated as of January 1, 2008 (the "Indenture "), by and between the Authority and MUFG Union Bank, N.A. (formerly known as Union Bank, N.A.), as trustee (the "Trustee "), that the Bonds in the amount of $10,895,000 have been called for redemption on September 1, 2015 (the "Redemption Date "). The Bonds will be payable on the Redemption Date at a redemption price of 102% of the principal amount (the "Redemption Price "). The Redemption Price of the Bonds will become due and payable on the Redemption Date. Interest with respect to the Bonds to be redeemed will cease to accrue on and after the Redemption Date, and such Bonds will be surrendered to the Trustee. All Bonds are required to be surrendered to the principal corporate trust office of the Trustee, on the Redemption Date at the following location. If the Bonds are mailed, the use of registered, insured mail is recommended: MUFG Union Bank, N.A. Corporate Trust Department 120 South San Pedro St., 4th Floor Los Angeles, California 90012 If the Owner of any Bond subject to optional redemption fails to deliver such Bond to the Trustee on the Redemption Date, such Bond shall nevertheless be deemed redeemed on the Redemption Date and the Owner of such Bond shall have no rights in respect thereof except to receive payment of the Redemption Price from funds held by the Trustee for such payment. A forty) W -9 must be submitted with the Bonds. Failure to provide a completed form W -9 will result in 31% backup withholding pursuant to the Interest and Dividend Tax Compliance Act of 1983. Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, 28% will be withheld if the tax identification number is not properly certified. SCHEDULE I -B Maturity CUSIP* (September I) Rate Amount Price DS1 2016 4.000% $1,905,000 102% DT9 2017 4.000 2,025,000 102 DU6 2018 4.300 2,155,000 102 DV4 2019 4.050 2,290,000 102 DW2 2020 4.000 2,520,000 102 The Bonds will be payable on the Redemption Date at a redemption price of 102% of the principal amount (the "Redemption Price "). The Redemption Price of the Bonds will become due and payable on the Redemption Date. Interest with respect to the Bonds to be redeemed will cease to accrue on and after the Redemption Date, and such Bonds will be surrendered to the Trustee. All Bonds are required to be surrendered to the principal corporate trust office of the Trustee, on the Redemption Date at the following location. If the Bonds are mailed, the use of registered, insured mail is recommended: MUFG Union Bank, N.A. Corporate Trust Department 120 South San Pedro St., 4th Floor Los Angeles, California 90012 If the Owner of any Bond subject to optional redemption fails to deliver such Bond to the Trustee on the Redemption Date, such Bond shall nevertheless be deemed redeemed on the Redemption Date and the Owner of such Bond shall have no rights in respect thereof except to receive payment of the Redemption Price from funds held by the Trustee for such payment. A forty) W -9 must be submitted with the Bonds. Failure to provide a completed form W -9 will result in 31% backup withholding pursuant to the Interest and Dividend Tax Compliance Act of 1983. Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, 28% will be withheld if the tax identification number is not properly certified. SCHEDULE I -B * The CUSIP numbers are included solely for the convenience of the Holders of the Bonds. Neither the Authority nor the Trustee shall be responsible for any error of any nature relating to such numbers. DATED this _ day of , 2015. MUPG UNION BANK, N.A., as Trustec SCHEDULE I -A SCHEDULEII REDEMPTION PRICE OF PRIOR AUTHORITY BONDS Payment Principal Debt Date Redeemed Interest Premium Payment 9/1/2015 $10,895,000 $ $ $ Cash deposited on , 2015 in the Escrow Fund in the amount of $ and held uninvested in the Escrow Fund. SCHEDULEII H � o— a y aG U T U p N O A F �w c 4. ,c o 7 � G o o G 0 w T O C c° `o a— o m � o o w c o � G �o y U F H � v m � m B � � n o 3 0 2 3 y v o m � E a .2 c 7 4 U d U b o w o a o (a 9 U G N U U 3 c w w o U. v � u U vz E° ro cJ U U7 N � y U s c 0 0 � s v w E �N .a F--S� Stradling Yocca Carlson & Rauth Draft of 416115 PRELILMINARY OFFICIAL STATEMENT DATED , 2015 NEW ISSUE -FULL BOOK ENTRY RATING S &P: _ (See `Bating" herein) In the opinion of Stradling Yocca Carlson A Routh, a Professional Corporation, Newport Beach, California ('Bond Counsel), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on to 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 imposed on individuals and corporations. However, Bond Counsel notes that, with respect to corporations, interest (and original issue discount) on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative mininua n tax liability of such corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minim an taxable intone, which may affect the alternative minimum tax liability of such corporations. See 'LEGAL MATTERS — Tax Matters" herein with respect to tax consequences relating to the Bonds. $9,610,000' LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE REFUNDING BONDS (COMMUNITY FACILITIES DISTRICT NO. 88-3),2015 SERIES B Due: September 1 as shown on inside cover Dated: Date of Delivery The Lake Elsinore Public Financing Authority Local Agency Revenue Rebinding Bonds (Community Facilities District 2015 Series B (tire "Bonds ") are being issued by the Lake Elsinore Public Financing Authority (the "Authority") primarily to acquire certain special tax bonds (the "District Bonds ") of City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) (the "District') formed by the City of Lake Elsinore. The District Bonds are being issued to (i) refund the Distr'ict's outstanding Special Tax Bonds 2008 Series; (ii) fund a reserve fund; and (iii) pay costs of issuance of the Bonds. See "FINANCING PLAN." The Bonds are payable solely from Revenues and Redemption Revenues (defined herein) pledged by the Authority pursuant to that certain Indenture of Trust, dated as of 1, 2015 (the "Indenture "), by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee "). Revenues consist primarily of special taxes levied in the District and paid to the Authority as debt service on the Dian'ict Bonds. The District Bonds are payable from Special Taxes on a parity with the District's Subordinate Special Tax Bonds, 2013 Series which are currently outstanding in the aggregate principal amount of $3,510,000. See "SECURITY FOR THE BONDS Revenues; Flow of Funds" and "SECURITY FOR TIIE DISTRICT BONDS — District Parity Bonds" herein. The Authority has applied to certain municipal bond insurers to obtain a municipal bond insurance policy and a debt service reserve fiord surety bond. If a municipal bond insurance policy is obtained, it would guarantee the scheduled payment of the principal of and interest on all or a portion of the Bonds. No assurance can be given as to whether the Authority will purchase a municipal bond insurance policy. See "INTRODUCTION – Bond Insurance" herein. The Bonds will be issued in denominations of $5,000 or any integral multiple thereof. Interest on the Bonds is payable on each March I and September 1, commencing [September 1, 2015]. The Bonds will be initially issued only in book -entry form and registered in the time of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( "DTC "), which will act as securities depository of the Bonds. Principal and interest (and premium, if any) on the Bonds is payable by the Trustee to DTC, which is to remit such payments to its Participants for subsequent distribution to the beneficial owners of the Bonds. See "TILE BONDS — General Provisions" and — Book -Entry Only System" herein. The Bonds are subject to extraordinary redemption prior to maturity as described herein. See "THE BONDS — Redemption." CERTAIN EVENTS COULD AFFECT TILE ABILITY OF THE AUTHORITY 1'O PAY THE PRINCIPAL OF AND INTEREST ON THE BONDS WHEN DUE. THE PURCHASE OF THE BONDS INVOLVES SIGNIFICANT INVESTMENT RISKS, AND THE BONDS MAY NOT BE SUITABLE INVES'T'MENTS FOR MANY INVESTORS. SEE THE SECTION OF THIS OFFICIAL STATEMENT ENTITLED "SPECIAL RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE CONSIDERED, IN ADDITION TO THE OTHER MATTERS SET FORTH HEREIN, IN EVALUATING THE INVESTMENT QIJALITY OF THE BONDS. Preliminary, subject to change. Maturity .Schedule (see inside cover) The Bonds will be of when, as and if issued and received by the Underwriter, subject to the approval of legality by Stradling Yocca Carlson & Routh, a Professional Corporation, Newport Beach, California, Bond Counsel. Certain legal matters will be passed upon for the City and the Authority by the City Attorney and by Sn-adling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel, for the Underwriter Up its counsel, Nossaman LLP, hvine, California and for the Trustee by its counsel. The Bonds, in book -entry form, will be available jor delivery through the faedities of The Depository Trust Company in New York, New York on or about _ , 2015. Stifel Dated: , 2015 MATURITY SCHEDULE, LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE REFUNDING BONDS (COMMUNITY FACILITIES DISTRICT NO. 88-3),2015 SERIES B Maturity (September I) 2016 20ii 2018 2019 2020 Principal Amount Interest Rate Yield CUSIPt No. t CUSIP© is a registered trademark of the American Bankers Association. CUSIP Global Services ( "CGS') is managed on behalf of the American Bankers Association by Sd P Capilnl lQ. Copw ighl0c 2015 CUSIP Global Services. All rights reserved This data is not intended m er'eote o database and does or s'en+e in any way as a substitute fm CGS. CUSIP©nnnrbers are provided for convenience of re(ererme. only None ofthe Authority, the Disn'ict or the Undenmiter ossen es any responsibility for the accuracy of such numbers. LAKE ELSINORE PUBLIC FINANCING AUTHORITY Natasha Johnson, Chair Daryl Hickman, Vice Chair Robert Magee, Board Member Steve Manos, Board Member Brian Tisdale, Board Member CITY AND AUTHORITY OFFICIALS Grant Yates, City Manager /Authority Executive Director Virginia Bloom, City Clerk/Authority Secretary Jason Simpson, City Director of Administrative Services /Authority Treasurer Barbara Leibold, Esq., City Attorney /Authority Counsel CITY OF LAKE ELSINORE, CALIFORNIA CITY COUNCIL, Steve Manes, Mayor Brian Tisdale, Mayor Pro Tem Daryl Hickman, Council Member Natasha Johnson, Council Member Robert Magee, Council Member BOND COUNSEL AND DISCLOSURE COUNSEL Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California FINANCIAL ADVISOR Urban Futures Incorporated Orange, California SPECIAL TAX CONSULTANT Albert A. Webb Associates Riverside, California TRUSTEE MUFG Union Bank, N.A. Los Angeles, California VERIFICATION AGENT [TO COME] Investment in the Bonds involves risks which are not appropriate for certain investors. Therefore, only persons with - substantial financial resources (in net worth or income) who understand those risks should consider such an investment. Except where otherwise indicated, all information contained in this Official Statement has been provided by the Authority, the City and the District. No dealer, broker, salesperson or other person has been authorized by the Authority, the City, the District, the Trustee 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 herein; and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority, the City, the District, the Trustee 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. The information set forth herein which has been obtained from third party sources is believed to he reliable but is not guaranteed as to accuracy or completeness by the District, the City or the Authority. This Official Statement is not to be construed as a contract with the purchasers or Owners of the Braids. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such are not to be construed as representations of fact. '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 a 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 of completeness of such information. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority, the City, the District or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. Certain statements 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. The achievement of certain results or other expectations contained in such forward- looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. The Authority does not plan to issue any updates or revisions to the forward- looking statements set forth in this Official Statement. The District is obligated to provide continuing disclosure for certain historical information only. See the caption "MISCELLANEOUS— Continuing Disclosure" herein. 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 IIAVE 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 Page INTRODUCTION........................................................................................................................... ..............................1 FinancingPurpose ................................................................................................................... ............................... I TheBonds; The District Bonds ................................................................................................ ..............................2 LeealAuthoritv ........................................................................................................................ ..............................2 FINANCINGP LAN ........................................................................................................................ ..............................6 Purposeof Issue ........................................................................................................................ ..............................6 Estimated Sources and Uses of Funds ..................................... ............... ............................................................. ..6 THEBONDS ............................. ....................................................................................................................... ............ 7 GeneralProvisions ................................................................................................................... ..............................7 Redemption.............................................................................................................................. ..............................8 Book-Entry Only System ................................................ ............................................................................. ......... 9 Estimated Debt Service Schedules: Bonds and District Bonds .............................................. .............................10 Debt Service Coverage for the Bonds ..................................................................................... .............................11 SECURITYFOR THE, BONDS ..................................................................................................... .............................13 General.................................................................................................................................... .............................13 Revenues; Flow of Funds ........................................................................................................ .............................13 ReserveFund ........................................................................................................................... .............................15 CashFlow Management Fund ................................................................................................. .............................15 RedemptionFund .................................................................................................................. ............................... 16 NoParity Debt ......................................................................................................................... .............................16 SECURITY FOR THE DISTRICT BONDS .................................................................................. .............................17 General.................................................................................................................................. ............................... 17 Special Tax Revenues and District Redemption Revenues ..................................................... .............................17 NoTeeter Plan ....................................................................................................................... ............................... 20 DistrictParity Bonds ............................................................................................................... .............................20 No Senior District Obligations .............................................................................................. ............................... 21 Priorityof Lien of Special Taxes ............................................................................................. .............................21 Covenantsof the District ......................................................................................................... .............................21 THEDISTRICT.. ...... ....................................... .... .. ............ I ... ..... I ........... I ............................................................. 23 GeneralInformation .............................................................................................................. ............................... 23 Rateand Method of Apportionment ................................ ............ ............................................. ................. ... ....... 23 AssessedValue -to -Lien Ratios ................................................................................................ .............................27 Directand Overlapping Debt ................................................................................................... .............................30 TopTaxpayers ......................................................................................................................... .............................34 DelinquencyHistory .............................................................................................................. ............................... 35 SPECIALRISK FACTORS ........................................................................................................... .............................36 Risks of Real Estate Secured Investments Generally ............................................................ ............................... 36 Risks Related to Housing Market Conditions .............. .................................................................................. 36 The Bonds are Limited Obligations of the Authority .............................................................. .............................37 NoObligation of City .............................................................................................................. .............................37 PropertyValues ..... .. .............................. ............................ ...._........................................................................... 37 HazardousSubstances ............................................................................................................. .............................38 Parity Taxes and Special Assessments .................. ... ._ ............................................ .............................. ......._...... 38 Payment of the Special Tax is not a Personal Obligation of the Owners ............................. ........... ............... 39 Disclosures to Future Purchasers .................. ...._.......................... ........... ............................................................ 39 TABLE OF CONTENTS (continued) Pace SpecialTax Delinquencies ...................................................................................................... .............................39 Insufficiency of Special Taxes- ....... :........ .............................. :..:.:::: ..... .................... :.........:..40- Priority Administrative Expenses ...... ......................... _................ ._... ... .... ......_.... ... ............. ............................... 41 FDIC /Federal Government Interests in Properties .................................................................. .............................41 Bankruptcyand Forecl osure ........ ................................................ _........ .... ............ ..... .._......... .... ......................... 42 NoAcceleration Provision ...................................................................................................... .............................43 Limitationson Remedies ......................................................................................................... .............................43 Lossof Tax Exemption ........................................................................................................... .............................43 LimitedSecondary Market ....................... .................................... .......... ... .... .... ... ...... ....... ... ................................ 44 Proposition 218 ....................... _._..._ ......................................................... Ballot Initiatives and Legislative Matters ................................................................................ ............................... .............................46 LEGALMATTERS ....................................................................................................................... .............................46 TaxMatters .............................................................................................................................. .............................46 Absenceof Litigation .............................................................................................................. .............................48 LegalOpinion .......................................................................................................................... .............................48 RATING....................................................................................................................................... ............................... 49 MISCELLANEOUS— ................................................................. .. .. .. ... ..... ....... .................. ................ 49 Underwriting........................................................................................................................... .............................49 ContinuingDisclosure ............................................................ ...... .......... ... .... ........ ....... ...... ................ .................. 49 PendingLegisl ation ................................................................................................................. .............................50 AdditionalInformation .......................................................................................................... ............................... 50 APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS.. ............ A-I APPENDIX B RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES ... ................................ B -1 APPENDIX C FORM OF BOND COUNSEL OPINION ......................................................... ........................... C -1 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT .... .... ....... ....... ..... . ............................ D -I APPENDIX E DTC AND THE BOOK - ENTRY -ONLY SYS'IEM ..................................... ............................... E -1 REGIONAL MAP /PHOTO OFFICIAL STATEMENT $9,610,000' LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE REFUNDING BONDS (COMMUNITY FACILITIES DISTRICT NO. 88-3),2015 SERIES B INTRODUCTION The purpose of this Official Statement, which includes the cover page and Appendices hereto (the "Official Statement "), is to provide certain information concerning the sale and issuance of the Lake Elsinore Public Financing Authority Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3), 2015 Series B (the "Bonds ") issued under the Indenture (defined below). 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 contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms not defined herein shall have the meaning set forth in Appendix A hereto. See Appendix A — "SUMMARY OE CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS." Financing Purpose Purpose of the Bonds. The Bonds are being issued by the Lake Elsinore Public Financing Authority (the "Authority ") pursuant to an Indenture of Trust dated as of 1, 2015 (the "Indenture "), by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee "). The proceeds of the Bonds will be used to acquire the City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) Special Tax Refunding Bonds, 2015 Series (the "District Bonds "), to fund a reserve fund for the Bonds (the "Reserve Fund ") and to pay the costs of issuing the Bonds. The principal and interest payments on the District Bonds to be received by the Authority are the primary source of repayment for the Bonds. See "FINANCING PLAN" herein. Purpose of the District Bonds. The District Bonds are being issued by City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) (the "District ") to defease and redeem the District's outstanding Special Tax Bonds, 2008 Series (the "Prior District Bonds "). The District Bonds are secured by special taxes (the "Special Taxes ") paid by taxpayers within the District in accordance with the Rate and Method of Apportionment of Special Taxes (the "Rate and Method ") on a parity with the District's Subordinate Special Tax Bonds, 2013 Series (the "2013 Bonds "). The District was formed by the City of Lake Elsinore (the "City ") to finance certain public facilities. See "THE DISTRICT" and Appendix B "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES" herein. Prehnnnaty, subject to change. The net proceeds of the District Bonds, along with other available funds, will be used as follows (see "FINANCING PLAN" herein): 0) to make deposits sufficient to defease the Prior District Bonds and redeem them in whole on September 1, 2015; (ii) to pay the costs of issuing the Bonds; (iii) to fund the Reserve Fund established under the Indenture. The Bonds; The District Bonds The Bonds will be issued and will be secured under the Indenture by a pledge and lien on the Revenues and Redemption Revenues (as defined below). Revenues consist primarily of revenues received by the Authority from the payment of debt service on the District Bonds and amounts held in the funds and accounts established and held for the benefit of the Bonds under the Indenture. Debt service on the District Bonds is paid from the proceeds of Special Taxes levied on the taxable property within the District which remain after the payment of administrative expenses. Redemption Revenues consist of amounts received from the redemption of the District Bonds from amounts constituting prepayments of Special Taxes. Although the District Bonds are secured by a pledge and lien on the Special Taxes on a parity with the 2013 Bonds, the Bonds are not secured by debt service payments on the 2013 Bonds. See "SECURITY FOR THE BONDS" and Appendix B — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES." Legal Authority The Bonds. The Bonds are being issued under Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act') and the Indenture. The District Bonds. The District Bonds are being issued pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the "Mello -Roos Act'). The District Bonds are issued and secured under a fiscal agent agreement dated as of January 1, 2008 (the "Original Fiscal Agent Agreement'), as amended by the First Amendment to Fiscal Agent Agreement (the "First Amendment'), dated as of February 1, 2010, the Second Amendment to Fiscal Agent Agreement (the "Second Amendment'), dated as of July 1, 2013, and as further amended by the Third Amendment to Fiscal Agent Agreement, dated as of , 1, 2015 (the "Third Amendment" and, together with the Original Fiscal Agent Agreement, the First Amendment and the Second Amendment, the "Fiscal Agent Agreement') each by and between the District and the Fiscal Agent. The Fiscal Agent Agreement was approved by the City Council of the City of Lake Elsinore (the "City Council'), acting as the legislative body of the District. Sources of Payment for the Bonds The Bonds. The Bonds are secured by a first lien on and pledge of all of the Revenues and Redemption Revenues and a first lien and pledge of all moneys in the Bond Fund, the Revenue Fund, the Redemption Fund and the Cash Flow Management Fund (subject to the transfers from such Cash Flow Management Fund as authorized by the Indenture). See "SECURITY FOR THE BONDS." Reserve Fund for the Bonds. A Reserve Fund for the Bonds is established pursuant to the Indenture in an amount equal to the Reserve Requirement. The Reserve Requirement for the Bonds an, 6 Q, 'ri... A..�L,_..:a. .v.,.. __i _L. ,.,-- ' - - -_ r ., n , uu ". ." "U u, �y uiay sausiy we rceserve rcegrurement by me deposit or. (a) an initial deposit of $ ; or (b) a surety bond. See "SECURITY FOR THE BONDS— Revenues; Flow of Funds" and"— Reserve Fund" herein The Authority has applied to certain municipal bond insurers to obtain a surety bond to satisfy the Reserve Requirement. No assurance can be given as to whether the Authority will obtain a surety bond to satisfy the Reserve Requirement. The Authority's decision as to deposit a surety bond in the Reserve Fund will be made at or about the time of the pricing of the Bonds and will be based upon, among other things, market conditions at the time of such pricing. If the Authority obtains a surety bond, information regarding the municipal bond insurer will be included in the final Official Statement. Certain Account Not Pledged. Amounts held in the Rebate Account are not pledged to the repayment of the Bonds. See "SECURITY FOR THE BONDS — Revenues; Flow of Funds" herein. Description of the Bonds Payments. Interest on the Bonds is payable on each March 1 and September 1, commencing [September 1, 2015]. Principal of and premium, if any, on the Bonds shall -be- payable by the Trustee. See "THE BONDS — General Provisions" and "— Book -Entry Only System" herein. Denominations. The Bonds will be issued in denominations of $5,000 each or integral multiples thereof. Redemption. The Bonds are subject to extraordinary redemption prior to maturity. See "THE BONDS — Redemption" herein. Registration, transfers and exchanges. The Bonds will be issued as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York ( "DTC "), and will be available to actual purchasers of the Bonds (the `Beneficial Owners ") under the book -entry system maintained by DTC. See "THE BONDS— Book -Entry Only System." Neither the Bonds nor the District Bonds are a debt of the City, and no revenues of the City are pledged to repayment of the Bonds or the District Bonds. Bond Insurance The Authority has applied to certain municipal bond insurers to obtain a municipal bond insurance policy. If a municipal bond insurance policy is obtained, it would guarantee the scheduled payment of the principal of and interest on all or a portion of the Bonds. No assurance can be given as to whether the Authority will purchase a municipal bond insurance policy. The Authority's decision as to the purchase a municipal bond insurance policy will be made at or about the time of the pricing of the Bonds and will be based upon, among other things, market conditions at the time of such pricing. If the Authority purchases a municipal bond insurance policy, information regarding the municipal bond insurer will be included in the final Official Statement. Sources of Payment for the District Bonds The District Bonds will be payable from Special Tax Revenues and any District Redemption Revenues (as defined below). Notwithstanding the foregoing, "Special Tax Revenues" does not include any penalties or interest in excess of the interest payable on the District Bonds collected in connection with delinquent Special Taxes. See "SECURITY FOR THE DISTRICT BONDS — Special Tax Revenues and District Redemption Revenues." In 2013, the District issued the 2013 Bonds in the aggregate principal amount of $4,215,000 and currently outstanding in the principal amount of $3,510,000. The 2013 Bonds were issued pursuant to the Original Fiscal Agent Agreement, as amended by the Second Amendment and are payable from Special Tax Revenues and District Redemption Revenues on a parity with the District Bonds. The District Bonds and the 2013 Bonds constitute "Subordinate Bonds" and are payable front Special Tax Revenues on aparity, however, following the refunding of the Prior District Bonds, there will no longer be any Senior Bonds outstanding under the Fiscal Agent Agreement and the District has covenanted not to issue additional Senior Bonds thereunder. The Authority The Authority is a joint exercise of powers authority organized and existing pursuant to the Act. Its members are the City and the Lake Elsinore Redevelopment Agency (the "Agency "), and its Board of Directors consists of the members of the City Council from time to time. The City Manager serves as the Executive Director and Secretary of the Authority. The City's Director of Administrative Services serves as the Treasurer of the Authority. On June 28, 2011, the Governor of the State of California (the "State ") signed ABXI 26 (the "Dissolution Act ") and on December 29, 2011, the State Supreme Court upheld the Dissolution Act which dissolved all redevelopment agencies in the State. The State Supreme Court decision also extended by four months all deadlines in the Dissolution Act occurring prior to May 2012. Therefore, based on the State Supreme Court's ruling and the Dissolution Act, all redevelopment agencies were dissolved as of February 1, 2012. The Dissolution Act creates successor agencies to continue to satisfy enforceable obligations of each former redevelopment agency. Pursuant to the Dissolution Act, the successor agency (the "Successor Agency ") is the sponsoring community of the redevelopment agency unless it elects not to serve in that capacity. In the case of the former Agency, the City elected to be the Successor Agency. Under the Dissolution Act, agreements contracts or arrangements between a city or county, or city and county that created a redeployment agency and a redevelopment agency are invalid. FIowever, the Dissolution Act provides that notwithstanding the foregoing, certain of such agreements are not invalid, including a joint exercise of power agreement in which a redevelopment agency is a member of the joint powers authority. 4 The District General The District is located in the City to the northwest of California IHghway 74 and to the south of Interstate 15. The District is bordered by Machado Street to the east, Lakeshore Drive and Mountain Avenue to the north, Alvarado Street to the south and the City's boundaries to the west. The District consists of approximately 610 gross acres of which 449.92 acres are classified Developed Property under the Rate and Method. Development within the District is substantially complete. As of March 30, 2015, there were 2,113 parcels with residential units within the District classified as Developed Property under the Rate and Method. As of such date, within the District, there were 11 parcels and seven parcels classified under the Rate and Method as Approved Undeveloped Property and Raw Undeveloped Property, respectively, consisting of approximately 159 acres. Such Approved Undeveloped Property and Raw Undeveloped Property are located adjacent to and within a mountainous region which borders the western boundary of the City. The City is not aware of any current plans to develop such parcels of Approved Undeveloped Property and Raw Undeveloped Property. Based on development status as of March 30, 2015, 100% of the Special "faxes will be levied on Developed Property for Fiscal Year 2015 -16. See "THE DISTRICT BONDS — Debt Service Coverage for the District Bonds" and "THE DISTRICT." Formation Process. In 1990; the City formed the pursuant to the Mello -Roos Act. See "THE DISTRICT" herein. On March 13, 1990, the qualified electors within the District (i) approved the levy of the Special Tax in accordance with the Rate and Method, (ii) authorized the District to incur bonded indebtedness of up to $30,000,000 in order to finance certain public facilities and various costs related thereto and (iii) approved the levy of a special tax on the taxable property within the District. Professionals Involved in the Offering All proceedings in connection with the issuance of the Bonds are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel. The City Attorney will render a legal opinion on certain matters for the Authority. Certain legal matters will be passed upon for the Authority and the District by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Disclosure Counsel. Urban Futures, Inc. is acting as Financial Advisor to the Authority. Albert A. Webb Associates is acting as Special Tax Consultant to the City. MUFG Union Bank, N.A., Los Angeles, California, will act as the Trustee for the Bonds. Stifel, Nicolaus & Company, Incorporated (the "Underwriter ") is acting as underwriter in connection with the issuance and delivery of the Bonds. Nossaman LLP, Irvine, California, will act as, counsel to the Underwriter ( "Underwriter's Counsel "). Bond Counsel, Disclosure Counsel, the Underwriter and Underwriter's Counsel will receive compensation contingent upon issuance of the Bonds. Continuing Disclosure The District will execute a Continuing Disclosure Agreement and will covenant therein for the benefit of holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District in an annual report (the "Annual Report ") to be filed no later than December 31 of each year commencing with the Annual Report for the year ending December 31, 2015 (the "Annual Report "), and to provide notices of the occurrence of certain enumerated events. The Annual Report shall contain or include by reference the information set forth in the Continuing Disclosure Agreement. The Annual Report and notices of enumerated events will be filed by the Authority with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system at http:Hcmma.msrb.orQ /. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2- 12(b)(5) (the "Rule "). During the last five years, the Authority, the City, the District and certain other community facilities districts of the City failed to comply in certain respects with their continuing disclosure obligations related to outstanding bonded indebtedness. See "MISCELLANEOUS — Continuing Disclosure." See "MISCELLANEOUS — Continuing Disclosure" and APPENDIX D for a description of the specific nature of the annual reports and notices of listed events to be provided by the District. FINANCING PLAN Purpose of Issue The Authority is issuing the Bonds to purchase the District Bonds, to fund the Reserve Fund and to pay the costs of issuing the Bonds. See "— Estimated Sources and Uses of Funds" below. Estimated Sources and Uses of Funds The Bonds. The anticipated sources and uses of funds relating to the Bonds are as follows: Sources: Principal Amount of the Bonds $ Less Net Original Issue Discount Total Sources Uses(u: Bond Purchase Fund Reserve Fund Underwriter's Discount Cost of Issuaneehl Total Uses The Authority will acquire the District Bonds for a total purchase price of $ and in consideration of the purchase, the District and the Authority will agree to the application of the purchase price of the District Bonds as set froth below under the caption' -- District Bonds." (a) Includes Trustee fees, Bond Counsel, Disclosure Counsel, the Special Tax Consultant and other legal fees, printing costs and other related costs. District Bonds. The anticipated sources and uses of funds relating to the District Bonds are as follows: Sources: Principal Amount Bond Purchase Discounttll Total Sources Uses: Improvement Fund Interest Account Total Uses $ (0 Reflects amounts for net original issue discount and Underwriter's discount and amounts deposited in the Reserve Fund and Costs of Issuance Fund under the Indenture. THE BONDS General Provisions The Bonds will be dated their date of delivery, and the Bonds will mature in the amounts and on the dates set forth on the inside front cover hereof. The Bonds will bear interest from their dated date at the rates per annum set 'forth on the inside front cover hereof, payable each March 1 and September 1, commencing September 1, 2015 (each, an "Interest Payment Date "). The Bonds will be issued in fully registered form in denominations of $5,000 each or any integral multiple thereof, so long as no Bond shall have more than one maturity date. Interest on the Bonds shall be payable on each Interest Payment Date to the person whose name appears on the Registration Books as the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check of the Trustee mailed by first -class mail, postage prepaid, on each Interest Payment Date to the Owner at the address of such Owner as it appears on the Registration Books as of the close of business on the fifteenth day of the calendar month preceding the Interest Payment Date (the "Record Date "); 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 Trustee 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 continental United States designated in such written request. Any such written request shall remain in effect until rescinded in writing by the Owner. Principal of and premium (if any) on any Bond shall be paid upon presentation and surrender thereof, at maturity or the prior redemption thereof, at the Corporate Trust Office. The principal of and interest and premium (if any) on the Bonds shall be payable in lawful money of the United States of America. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated on or before the Interest Payment Date and after the close of business on the preceding record date, in which event it shall bear interest from such Interest Payment Date; or (b)_it_is authenticated on or before August 15, 2015, in which event it shall bear interest from the Closing Date; or (c) interest with respect to any outstanding Bond is in default, such Bond shall bear interest from the Interest Payment Date to which interest has previously paid in full or made available for payment thereon payable on each Interest Payment Date. The Bonds will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book - entry form only in denominations of $5,000 and any integral multiple thereof. See the subsection hereof entitled "Book-Entry Only System." Redemption No Optional Redemption. The Bonds are not subject to optional redemption prior to maturity. Special Mandatory Redemption From Prepayment of Special Taxes and Surplus Funds. The Bonds are subject to mandatory redemption prior to maturity on any Interest Payment Date, in whole or in part from such maturities as selected by the Authority and by lot within a maturity, from the redemption of District Bonds from amounts constituting prepayments of Special Taxes and from amounts held in the Delinquency Management Fund under the Fiscal Agent Agreement and from amounts in the Cash Flow Management Fund under the Indenture at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed) together with accrued interest thereon to the redemption date: Redemption Redemption Dates Prices Notice of Redemption. The Trustee on behalf and at the expense of the Authority will mail (by first -class mail) notice of any redemption to the respective Owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, to the Securities Depositories and to one or more Information Services, at least thirty (30) but not more than sixty (60) days prior to the date fixed for redemption. Neither failure to receive any such notice so mailed nor any defect therein will affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice will state the date of the notice, the redemption date, and the redemption price and will designate the CUSIP numbers, the Bond numbers (but only if less than all of the Outstanding Bonds are to be redeemed) and the maturity of the Bonds to be redeemed, and will require that such Bonds be then surrendered at the Corporate Trust Office of the Trustee for redemption at the redemption price, giving notice also that further interest on such Bonds will not accrue from and after the redemption date. The Authority will have the right to rescind any notice of redemption by written notice to the Trustee on or prior to the date fixed for redemption. Any notice of such redemption will be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation will not constitute an event of default under the Indenture. The Authority and the Trustee will have no liability to the Owners or any other party related to or arising from such rescission of redemption. The Trustee will mail notice of such rescission of redemption in the same manner as the original notice of redemption was sent. In addition to the foregoing notice, further notice will be given by the Trustee in said form by first -class mail to any Bond Owner whose Bond has been called for redemption but who has failed to tender his Bond for payment by the date which is sixty days after the redemption date, but no defect in said further notice nor any failure to give all or any portion of such further notice will in any manner defeat the effectiveness of a call for redemption. "- --- upon the payment of the redemption price of Bonds being redeemed, each check or other transfer of fiords 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. Selection of Bonds for Redemption. If less than all of the Bonds Outstanding 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 $5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the Trustee will treat such Bonds as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds to be redeemed in pant by $5,000. The Trustee will promptly notify the Authority in writing of the Bonds, or portions thereof, selected for redemption. Partial Redemption of Bonds. In the event only a portion of any Bond is called for redemption, then, upon surrender of such Bond, the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of the same series and maturity date, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed. Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of and interest (and premium, if any) on the Bonds so called for redemption have been duly provided, such Bonds so called will cease to be entitled to any benefit under this Indenture other than the right to receive payment of the redemption price, and no interest will accrue thereon from and after the redemption date specified in such notice. All Bonds redeemed pursuant to the Indenture shall be canceled and destroyed. Authority Notice. Notwithstanding any provisions in the Indenture to the contrary, upon any optional redemption or mandatory redemption from Special Taxes of District Bonds in part, the Authority will deliver a Written Certificate to the Trustee stating that the remaining payments of principal and interest on the District Bonds, together with other Revenues, will be sufficient on a timely basis to pay debt service on the Bonds. The Authority will certify in such Written Certificate that sufficient moneys for purposes of such redemption are or will be on deposit in the Redemption Fund under the Indenture, and is required to deliver such moneys to the Trustee together with other Revenues, if any, then to be delivered to the Trustee, which moneys are required to be identified to the Trustee in the Written Certificate delivered with the Revenues. Boole -Entry Only System The Bonds will be issued as fully registered bonds, registered in the name of Cede & Co. as nominee of DTC, and will be available to the Beneficial Owners purchasing interests in the Bonds in the Authorized Denominations, under the book -entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participant's (as defined herein) as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. While the Bonds are subject to the book -entry system, the principal, interest and any redemption premium will be paid by the Trustee to DTC, which in turn is obligated to remit such payment to its DTC Participants for subsequent disbursement to Beneficial Owners of the Bonds. The Authority gives no assurance that DTC or the DTC Participants will distribute payments or notices to Beneficial Owners. See Appendix E — "DTC AND THE BOOK -ENTRY ONLY SYSTEM." In the event that the book - entry -only system is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. Estimated Debt Service Schedules: Bonds and District Bonds The table below presents the debt service schedule for the Bonds assuming there is no special mandatory redemption of the Bonds prior to maturity. DEBT SERVICE SCHEDULE FOR THE BONDS Year Ending September 1 Principal Interest Total Debt Service 2015 2016 2017 2018 2019 2020 Total Source: 11te Underwriter. The table below summarizes the anticipated debt service payments to be received by the Authority as the result of its ownership of the District Bonds, assuming there is no default in payment and no special mandatory redemption of District Bonds prior to maturity. DEBT SERVICE SCHEDULE FOR THE DISTRICT BONDS Year Ending September 1 Principal Interest Total Debt Service 2015 2016 2017 2018 2019 2020 Total S t1> Equals the total anticipated debt service on the District Bonds in each Bond Year ending September 1. Somror The Underwriter. 10 Debt Service Coverage for the Bonds The table below sets forth the projected debt service coverage for the Bonds from Revenues assuming timely payment of debt service on the District Bonds while the Bonds are outstanding and no special mandatory redemption of District Bonds prior to maturity. In the event of delinquencies in the payment of the District Bonds, these coverage levels may not be realized and amounts would need to be drawn from the Reserve Fund and the Cash Flow Management Fund, to the extent funds are needed to pay debt service on the Bonds. DEBT SERVICE COVERAGE FOR THE BONDS ° tbelinunary, subject to change. f1 Revenues consist of debt service on the District Bonds. The Bonds are not secured by debt service payments on the 2013 Bonds. a� Calculated by dividing 'total Revenues from District Bonds column by Bonds Debt Service column, expressed as a percentage. Source: The Underwriter. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 11 Bonds Year Total Revenues Debt Ending Bonds Debt from District Service September1 Service' Bonds(o* Coverage(2) 2015 $2,213,610 $2,213,610 1.00 2016 2,057,005 2,057,005 1.00 2017 2,101,000 2,101,000 1.00 2018 2,152,000 2,152,000 1.00 2019 2,195,800 2,195,800 1.00 2020 2,334,800 2,334,800 1.00 ° tbelinunary, subject to change. f1 Revenues consist of debt service on the District Bonds. The Bonds are not secured by debt service payments on the 2013 Bonds. a� Calculated by dividing 'total Revenues from District Bonds column by Bonds Debt Service column, expressed as a percentage. Source: The Underwriter. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 11 The table below sets forth the projected debt service coverage for the District Bonds and the 2013 Bonds from Special Tax Revenues based on a levy at 100% of the Assigned Special Tax on 2,113 parcels of Developed Property. In the event of delinquencies in the payment of the Special Taxes, these coverage levels will not be realized and amounts would need to be drawn from the Delinquency Management Fund established under the Fiscal Agent Agreement, to the extent funds are available therein, to pay the District Bonds. Administrative Expenses are paid prior to the payment of debt service on the District Bonds. The District estimates Administrative Expenses for Fiscal Year 2015 -16 of $65,000. Administrative Expenses are projected to increase a rate of 2% per fiscal year. DEBT SERVICE COVERAGE CAPACITY ON THE DISTRICT BONDS Year Ending Special Tax District Bonds 2013 Bonds Debt Total Debt Debt Service September Revenues(') (')t3) Debt Service` Service Service` Coverage t2)* 2015 $4,753,994 $2,213,610 $773,463 $2,987,073 1.59 2016 4,849,074 2,057,005 724,763 2,781,767 1.74 2017 4,946,055 2,101,000 681,763 2,781763 1.78 2018 5,044,976 2,152,000 626,263 2,778,263 1.82 2019 5,145,816 2,195,800 580,313 2,776,113 1.85 2020 5,248,793 2,334,800 438,813 2,773,613 1.89 Prelhninary, subject to change. ft Special Tax Revenues shown are equal to 100% of the Assigned Special Tax on Developed Property for such fiscal year, escalating at 2% per fiscal year. The District does not expect to levy Special Taxes on Approved Undeveloped Property or Raw Undeveloped Property in Fiscal Year 2015 -16. M Pursuant to Section 53321(d) of the Government Code, the special tax levied against any Assessor's parcel for which an occupancy permit for private residential use has been issued shall not be increased as a consequence of delinquency or default by the owner of any other Assessors parcel within the District 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. As a result, it is likely that the District may not be able to increase the tax levy to the Assigned Special Rate tax in all years and that actual coverage might not exceed 110% of debt service plus Administrative Expenses. r'r Amounts reflect Special Tax revenues, net of Administrative Expenses. For Fiscal Year 2015 -16, the District estimates Administrative Expenses of $65,000. Administrative Expenses for are projected to increase a rate of 2% per fiscal year. Source: Albert A. Webb Associates; the Underwriter. Annual debt service for the District Bonds has been structured so that, assuming no delinquencies, Special Taxes levied at the Assigned Special Tax rates on 2,113 parcels of Developed Property for Fiscal Year 2015 -16 and thereafter, will generate in each Fiscal Year not less than 110% of debt service payable, plus Administrative Expenses, with respect to the District Bonds and the 2013 Bonds in the calendar year that begins in that Fiscal Year. Limitation on Special Tax Levy and Potential Inpact on Coverage. Pursuant to Section 53321(d) of the Mello -Roos Act and the Rate and Method, under no circumstances may Special Taxes levied against any parcel of property used for private residential purposes be increased by more than ten percent (10 %) as a consequence of delinquency or default by the owner of any other parcel. Therefore, it is possible that Special Taxes may not be levied up to 100% of the Assigned Special Tax rates in any particular fiscal year as a consequence of Special Tax delinquencies in the District. 12 SECURITY FOR THE BONDS General As described below, the Bonds are payable from Revenues and Redemption Revenues consisting primarily of amounts received by the Authority from the debt service payments on the District Bonds and amounts on deposit in the Reserve Fund, the Cash Flow Management Fund (subject to the transfers from such fund as authorized by the Indenture) and the Redemption Fund. See "SECURITY FOR TIE BONDS — Reserve Fund," " —Cash Flow Management Fund" and "- Dedempron Fund." 'chi service payments in the District Bonds are paid from the Special Tax Revenues and District Redemption Revenues. Although the District Bonds are secured by a pledge and lien on the Special Taxes on a parity with the 2013 Bonds, the Bonds are not secured by debt service payments on the 2013 Bonds. See "SECURITY FOR THE DISTRICT BONDS — Special Tax Revenues and District Redemption Revenues." The Bonds are special obligations of the Authority payable solely from and secured solely by the Revenues and Redemption Revenues pledged therefor in the Indenture. The Bonds are not a debt or liability of the City, the State of California or any political subdivisions thereof other than the Authority to the limited extent described herein. The faith and credit of the Authority are not pledged to secure the payment of Bonds, nor is any other political subdivision liable therefor, nor in any event shall the Bonds or any interest or redemption premium thereon be payable out of any funds or properties other than those of the Authority as set forth in the Indenture. The Authority has no taxing power. Revenues; Flow of Funds Pledge of Revenues. The Bonds are secured by a first lien on and pledge (which is effected in the manner and to the extent provided, _in the Indenture) of all of the Revenues and Redemption Revenues and a first pledge of all of the moneys in the Bond Fund, the Revenue Fund, the Redemption Fund and the Cash Flow Management Fund of the Indenture, including all amounts derived from the investment of such moneys. The Bonds are equally secured by a pledge, charge and first lien upon the Revenues and Redemption Revenues and such moneys without priority for number, date of Bonds, date of execution or date of delivery; and the payment of the interest on and principal of the Bonds and any premiums upon the redemption of any thereof are secured by an exclusive pledge, charge and first lien upon the Revenues and Redemption Revenues and such moneys. The term "Revenues" is defined in the Indenture as: (a) all amounts received by the Authority from the District as principal of or interest on the District Bonds; (b) all moneys deposited and held from time to time by the Trustee in the funds and accounts established under the Indenture for the Bonds, other than the Rebate Account and the Redemption Fund; and (c) income and gains with respect to the investment of amounts on deposit in the funds and accounts established under the Indenture for the Bonds, other than the Rebate Account and the Redemption Fund. The term "Redemption Revenues" is defined in the Indenture as: (a) amounts received from the redemption of the District Bonds from amounts constituting prepayments of Special 'Faxes, (b) amounts received from the optional redemption of the District Bonds, and (c) amounts received from the special mandatory redemption and mandatory redemption of the District Bonds. 13 So long as any of the Bonds are Outstanding, the Revenues and Redemption Revenues and such other money will not be used for any other purpose except as described in the Indenture for the payment of the Bonds; except that out of the Revenues and Redemption Revenues there may be apportioned such sums, for such purposes, as are expressly permitted by the Indenture. The Authority transfers under the Indenture in trust and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues and all of the right, title and interest of the Authority in the District Bonds. The Trustee is entitled to and will receive all of the Revenues, and any Revenues collected or received by the Authority will be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and will forthwith be paid by the Authority to the Trustee. Deposit and Transfer of Revenues. All Revenues (excluding Redemption Revenues) derived from the District Bonds will be promptly deposited by the Trustee upon receipt thereof in the Revenue Fund. On or before each Interest Payment Date, the Trustee shall transfer from the Revenue Fund for deposit in Bond Fund for application in the order described under the caption "- Application of Revenues" below; provided, however, that all Redemption Revenues will be deposited in the Redemption Fund in the amounts and on the dates required to effect the required redemption of the Bonds as set forth in the Indenture. See "THE BONDS — Redemption" and "SECURITY FOR THE BONDS — Redemption Fund" herein. Application of Revenues. On or before each Interest Payment Date, the Trustee will transfer from the Revenue Fund, and deposit into the Bond Fund and the following respective accounts therein for the Bonds, 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 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: Interest Account. On or before each Interest Payment Date, the Trustee will 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 such Interest Payment Date on all Outstanding Bonds. No deposit need be made into the Interest Account if the amount contained therein is at least equal to the interest becoming due and payable upon all Outstanding Bonds on such Interest Payment Date. All moneys in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it becomes due and payable (including accrued interest on any Bonds redeemed prior to maturity). Principal Account. On or before each date on which the principal of the Bonds are payable, the Trustee will deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the aggregate amount of principal (including sinking fund payments) coming due and payable on such date on the Bonds pursuant to the Indenture. All moneys in the Principal Account will be used and withdrawn by the Trustee solely for the propose of paying the principal of the Bonds (including sinking fund payments). Reserve Fund. All amounts on deposit in the Revenue Fund on or before each Interest Payment Date, to the extent not required to pay any interest on or principal of any 14 Outstanding Bonds then having come due and payable, will be credited to the replenishment of the Reserve Fund in an amount sufficient to maintain the Reserve Requirement therein. All remaining amounts on or as soon as practicable after September 2 (or the next Business Day to the extent September 2 is not a Business Day) of each year, commencing September 2, 2015, on deposit in the Revenue Fund will be transferred to the Cash Flow Management Fund. See "- Cash Flow Management Fund" below. Deposit into Rebate Fund. The Trustee will deposit in the Rebate Fund (which fund shall be e�tyhlu�hed a� a Separati. fund to be iicid by i'ie Tl ustee upon receipt of a Written Request Irom the Authority) from time to time, as set forth in the Indenture, an amount determined by the Authority to be subject to rebate to the United States of America in accordance with the Indenture. Amounts in the Rebate Fund are not pledged to the payment of the Bonds. Reserve Fund A Reserve Fund will be established under the Indenture which account will be held by the Trustee and will be funded in an amount equal to the Reserve Requirement. The initial Reserve Requirement for the Bonds equals $ . The Reserve Requirement on any calculation date will not be greater than the initial Reserve Requirement. The Authority may satisfy the Reserve Requirement by the deposit of: (a) an initial deposit of $ from the proceeds of the Bonds; or (b) a surety bond. Amounts in the Reserve Fund will be used to pay debt service on the Bonds to the extent other moneys (including amounts in the Cash Flow Management Fund) are not available therefor. Earnings on amounts in the Reserve Fund in excess of the Reserve Requirement will be deposited into the Revenue Fund, if and to the extent such earnings are not required to be retained in the Reserve Fund to meet the Reserve Requirement. Upon redemption of the Bonds, amounts on deposit in the Reserve Fund will be reduced (to an amount not less than the Reserve Requirement) and the excess moneys will be transferred to the Redemption Account and used for the redemption of the Bonds. Amounts in the Reserve Fund may be used to pay the final year's debt service on the Bonds. Cash Flow Management Fund A Cash Flow Management Fund will be established under the Indenture which fund will be held by the Trustee. On September 2 of each year, commencing September 2, 2015 (or the next business day to the extent September 2 is not a business day), the Trustee will transfer any amounts on deposit in the Revenue Fund to the Cash Flow Management Fund. The Cash Flow Management Fund may also be funded at the election of the Authority from amounts on deposit in cash flow management funds created with respect to other local agency revenue bonds issued by the Authority and any available surplus revenues with respect to other series of local agency revenue bonds issued by the Authority to the extent such amounts are loaned to replenish the Cash Flow Management Fund to the Cash Flow Management Fund Requirement. The Cash Flow Management Fund Requirement is, as of any calculation date, an amount equal to 15% of the Maximum Annual Debt Service. On the Closing Date, there will not be any amounts deposited in or on deposit in the Cash Flow Management Fund. Amounts, if any, deposited into the Cash Flow Management Fund will be applied for the following purposes in the following order of priority: 15 G) The Trustee will, prior to any draw on the Reserve Fund, pay debt service on the Bonds from amounts in the Cash Flow Management Fund to the extent Revenues are insufficient for such purpose. (ii) Upon the written direction of the Authority, the Trustee will transfer any amounts in the Cash Flow Management Fund to the trustee of any other series of local agency revenue bonds issued by the Authority to the extent any surplus revenues from such other series of local agency revenue bonds were loaned to replenish the Cash Flow Management Fund. (iii) Upon the written direction of the Authority, the Trustee will transfer any amounts in the Cash Flow Management Fund to the trustee of any other series of local agency revenue bonds issued by the Authority in an amount estimated by the Authority to be necessary to prevent a shortfall in the amount required to pay debt service on such other series of local agency revenue bonds or to the fiscal agent of any local agency bonds issued by the City an amount estimated by the Authority necessary to prevent a shortfall in the amount required to pay debt service on such local agency bonds, which all such transfers shall be treated as loaned amounts. (iv) Upon the written direction of the Authority, the Trustee will transfer such amount as may be directed by the Authority for deposit in the Redemption Fund. (v) On or as soon as practicable after September 2 of each year, commencing September 2, 2015, upon the written direction of the Authority, the Trustee shall transfer all remaining amounts in the Cash Flow Management Fund in excess of the Cash Flow Management Fund Requirement to the Fiscal Agent for the District Bonds for deposit in the Delinquency Management Fund held under the Fiscal Agent Agreement. Subject to the foregoing transfers and applications in (ii) through (v) above, amounts in the Cash Flow Management Fund are pledged to the repayment of the Bonds. On the date of issuance of the Bonds, there is approximately $[377,560.27] on deposit in the Cash Flow Management Fund. Redemption Fund There is established under the Indenture the Redemption Fund to be held by the Trustee, to the credit of which the Authority will deposit, immediately upon receipt, all Redemption Revenues. Under the Indenture, "Redemption Revenues" includes (a) amounts received from the redemption of the District Bonds from amounts constituting prepayments of Special Taxes, (b) amounts received from the optional redemption of the District Bonds, and (c) amounts received from the special mandatory redemption and mandatory redemption of the District Bonds. Moneys in the Redemption Fund will be held in trust by the Trustee for the benefit of the Authority and the Owners of the Bonds, and will be used and withdrawn by the Trustee pursuant to any optional redemption, mandatory sinking payment redemption or special mandatory redemption from prepayment of special taxes or surplus funds. No Parity Debt Except for the Bonds, or bonds issued for the purpose of refunding the Bonds, the Authority covenants that no additional bonds, notes or other indebtedness will be issued or incurred which are payable out of the Revenues or the Redemption Revenues in whole or in part. 16 SECURITY FOR THE DISTRICT BONDS General The District Bonds are limited obligations of the District payable solely from Special Tax Revenues (after payment of Administrative Expenses) collected in the District and from amounts on deposit in the Special Tax Receipt Fund and Special Tax Ftmd (after payment Administrative Expenses) established under the Fiscal Agent Agreement on a parity with the 2013 Bonds. The District's limited obligation to pay the principal of, premium, if any, and interest on the District Bornds f.•orn S ^ecizl 7— 11 1, D a ' nu I. Ln9'rI , an' amounts in the opeeiat iax bond (after payment Administrative Expenses) is absolute and unconditional. The District Bonds and the 2013 Bonds constitute "Subordinate Bonds" and are payable from Special Tax Revenues on a parity, however, following the refunding of the Prior District Bonds, there will no longer be any Senior Bonds outstanding under the Fiscal Agent Agreement and the District has covenanted not to issue additional Senior Bonds thereunder. No District Bond issued by the District (and no additional bonds issued for refunding purposes under the Fiscal Agent Agreement relating to a District Bond, each a "District Parity Bond ") is a legal or equitable pledge, charge, lien or encumbrance upon any of such District's property, or upon any of its income, receipts or revenues, except the Special Tax Revenues collected in the District and other amounts in the Special Tax Fund (after payment Administrative Expenses). Except for the Special Tax Revenues, neither the credit nor the taxing power of the District or the City is pledged for the payment of the District Bonds or related interest, and no Owner of the Bonds may compel the exercise of taxing power by the City or the District or the forfeiture of any of its property. The principal of and interest on the District Bonds and premiums upon the redemption thereof, if any, are not a debt of the District or the City, the State of California m, any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. Special Tax Revenues and District Redemption Revenues Special Tax Revenues. The "Special Tax Revenues" are the Special Taxes authorized to be levied and collected by the District according to the Rate and Method. The Special Taxes are collected in the manner and at the same time as ad valorem property taxes are collected and is subject to the same penalties and the same procedure, sale, and lien priority in case of delinquency as is provided for ad valorem property taxes. See "THE DISTRICT" and Appendix B ' "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES." The "Special Tax Revenues" pledged by the District for the District Bonds (and any related District Parity Bonds) is defined in the Fiscal Agent Agreement as (a) the proceeds of the Special Taxes received by the District, (b) income and gains with respect to the investment of amounts on deposit in the funds and accounts established under the Fiscal Agent Agreement, and (c) proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes and (d) the net proceeds of the sale of any Special Tax Receivables equal to the par amount of such Special Tax Receivables. Notwithstanding the foregoing, "Special Tax Revenues" do not include any penalties or interest in excess of the interest payable on the District Bonds collected_ in connection with delinquent Special Taxes. 17 "Special Taxes" means the special taxes levied within the District pursuant to the Mello -Roos Act, the Ordinance and the Fiscal Agent Agreement. The District will covenant in the Fiscal Agent Agreement that it will receive all Special Taxes for the Owners of its District Bonds, and will immediately deposit such amounts with the Fiscal Agent, and the District shall have no beneficial right or interest in the amounts so deposited except as provided by the Fiscal Agent Agreement. The Fiscal Agent, under the Fiscal Agent Agreement will, on each date on which the Special Tax Revenues are received from the District, deposit the Special Tax Revenues in the Special Tax Fund and will deposit in the Delinquency Management Fund all amounts paid to it by the Authority to be held in trust for the Authority as the owner of the District Bonds. The Fiscal Agent will (after payment of Administrative Expenses) transfer the Special Tax Revenues on deposit in the Special Tax Fund on the dates and in the amounts set forth in the Fiscal Agent Agreement, in the following order of priority, to the following funds and accounts held under the Fiscal Agent Agreement: (1) The Interest Account of the Bond Fund, an amount such that the balance in the Interest Account equals the installment of interest due on the District Bonds and the 2013 Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid; (2) The Principal Account of the Bond Fund, an amount such that the balance in the Principal Account shall at least equal the principal payment (including any mandatory sinking fund payments) due on the District Bonds and the 2013 Bonds on said Interest Payment Date and any installment of principal due on a previous Interest Payment Date which remains unpaid. Delinquency Management Fund. The Fiscal Agent Agreement establishes a Delinquency Management Fund held by the Fiscal Agent. On the Closing Date, there will be approximately $[224,314] on deposit in the Delinquency Management Fund. Moneys in the Delinquency Management Fund shall be used solely for the propose of paying the principal of, including any mandatory sinking payments, and interest on any District Bonds or 2013 Bonds when due in the vent that the moneys in the Bond Fund are insufficient therefor. If the amounts in the Bond Fund are insufficient to pay the principal of or interest on any District Bonds or 2013 Bonds when due, the Fiscal Agent shall withdraw from the Delinquency Management Fund for deposit in the Bond Fund moneys necessary for such purposes. In connection with any redemption of the District Bonds or a partial defeasance thereof in accordance with the Fiscal Agent Agreement, amounts in the Delinquency Management Fund may be applied to such redemption or partial defeasance so long as the amount on deposit in the Delinquency Management Fund following such redemption or partial defeasance equals the Delinquency Management Fund Requirement (as defined below). To the extent that the Delinquency Management Fund is at the Delinquency Management Fund Requirement as of the first day of the final bond year of the District Bonds or the 2013 Bonds, amounts in the Delinquency Management Fund may be applied to pay the principal of and interest due on the District Bonds and the 2013 Bonds in the final bond year of such issues. Moneys in the Delinquency Management Fund in excess of the Delinquency Management Fund Requirement not transferred as described in this paragraph shall be withdrawn from the Delinquency Management Fund on September 2 of each year and transferred to the Residual Fund. 18 The Delinquency Management Fund Requirement is defined in the Fiscal Agent Agreement as, an amount, as of any calculation date, equal to 15% of the Maximum Annual Debt Service, Residual Fund. The Fiscal Agent Agreement establishes a Residual Fund held by the Fiscal Agent. On the Closing Date, there not be any amounts on deposit in the Residual Fund. Amounts in the Residual Fund are not pledged to the payment of principal of or interest on the District Bonds or the 2013 Bonds. On September 2 of each year, commencing September 2, 2015, the Fiscal Agent shall transfer any amounts in the Residual Fund for the following purposes in the following order of priority: (1) to the Delinquency Management an amount, if any, required to restore the amount on deposit in the Delinquency Management Fund to the Delinquency Management Fund Requirement; (2) to the Administrative Expense Fund an amount determined by the District to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense Fund are insufficient to pay Administrative Expenses; or (3) to the Special Mandatory Redemption Account for redemption of the District Bonds or the 2013 Bonds unless the Fiscal Agent has received written direction from the District to expend such remaining funds held in the Residual Fund for any lawful purposes of the District including, but not limited to, paying costs of public capital improvements or reducing: the: Special Taxes which are to be levied in the current or the suttee eding Fiscal Year upon the properties -which are subject to the Special Tax, Administrative Expense Fund. The Fiscal Agent Agreement establishes an Administrative Expense Fund held by the District. The District will = deposit =in +the Administrative Expense Fund the amount budgeted and levied for Administrative Expenses. The District estimates Administrative Expenses of $65,000 in Fiscal Year 2015 -16, projected to increase at a rate of 2% annually thereafter. Amounts in the Administrative Expense Fund will be withdrawn by the District to pay Administrative Expenses. Annually, at least five (5) days prior to the last day of each Bond Year, the District will withdraw any amounts then remaining in the Administrative Expense Fund that have not been allocated to pay Administrative Expenses incurred but not yet paid, and which are not otherwise encumbered or expected to be needed for the purposes of such fund, and transfer such amounts to the Fiscal Agent for deposit in the Special Tax Fund. Redemption Fund, District Redemption Revenues. The Fiscal Agent Agreement establishes a Redemption Fund (which fund will consist solely of an "Optional Redemption Account," a "Special Mandatory Redemption Account" and a "Mandatory Redemption Account'), to the credit of which the District or the City, on behalf of the District, shall deposit, immediately upon receipt, all District Redemption Revenues received by the District or the City on behalf of the District. District Redemption Revenues are defined in the Fiscal Agent Agreement to include (a) prepayments of the Special Taxes, (b) any amounts transferred pursuant to the Indenture for the redemption of the District Bonds and 2013 Bonds, (c) amounts transferred from the Residual Fund for the redemption of the District Bonds and the 2013 Bonds, and (d) any amounts deposited for the special mandatory redemption of the District Bonds and 2013 Bonds pursuant to the Fiscal Agent Agreement. 19 Moneys in the Redemption Fund will be held by the Fiscal Agent for the benefit of the District and the Owners of the District Bonds and the 2013 Bonds, will be disbursed as provided below and, pending any disbursement, will be subject to a lien in favor of the Owners of the District Bonds and the 2013 Bonds. Moneys in the Redemption Fund will be applied as follows: (1) All prepayments of Special Taxes and amounts transferred from the Residual Fund for the redemption of District Bonds and 2013 Bonds will be deposited in the Special Mandatory Redemption Account to be used to redeem the District Bonds and the 2013 Bonds on the next date for which notice of redemption can timely be given. (2) Any proceeds from insurance or condemnation proceeds shall be deposited into the Mandatory Redemption Account to be used to redeem District Bonds and 2013 Bonds on the next date for which notice of redemption can timely be given. No Teeter Plan Although the County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan ") which allows each entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, the District is not included in the County Teeter Plan. Consequently, the District may not draw on the County Tax Loss Reserve Fund in the event of delinquencies in Special Tax payments within the District. Certain community facilities districts formed by the City enter into agreements from time to time with the California Statewide Communities Development Authority pursuant to which such community facilities districts receive amounts equal to delinquent installments of special taxes levied by such community facilities districts in exchange for the sale and assignment of the right to receive such delinquent special taxes (the " CSCDA Program "). The District has entered into an agreement to participate in the CSCDA Program and receives delinquent installments of Special Taxes under such program, however, neither the City nor the District can make any assurance that the CSCDA Program or the District's participation therein will not be terminated in the future. The District has covenanted under the Fiscal Agent Agreement to cause judicial foreclosure proceedings to be filed against properties for which the Special Taxes remain delinquent if certain conditions are met. To the extent the ,District enters into the CSCDA Program (or a similar program) and sells delinquent Special Taxes for at least 100% of such delinquent amounts, the District may treat such delinquent amounts as having been paid. See "— Priority of Special Tax Lien — Commence Foreclosure Proceedings" below. District Parity Bonds The District issued its 2013 Bonds in the aggregate principal amount of $4,215,000 which are currently outstanding in the principal amount of $3,510,000. The 2013 Bonds were issued pursuant to the Original Fiscal Agent Agreement, as amended by the Second Amendment and are payable from Special Tax Revenues and District Redemption Revenues on a parity with the District Bonds. The Fiscal Agent Agreement authorizes the District to issue District Parity Bonds secured by Special Taxes on a parity with the District Bonds and the 2013 Bonds but only for the purpose of 20 refunding all or a portion of the District Bonds, the 2013 Bonds or District Parity Bonds. For a description of the conditions established in the Fiscal Agent Agreement for the issuance of District Parity Bonds, see Appendix A — "SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS." No Senior District Obligations The District has covenanted in the Fiscal Agent Agreement not to issue any obligations payable from Special Tax Revenues on a basis senior to the District Bonds and the 2013 Bonds. Priority of Lien of Special Taxes Each installment of the Special Taxes and any interest and penalties thereon, constitutes a lien on the parcel of land on which it was imposed until the same is paid. Such lien is co -equal to and independent of the lien for general taxes and any other community facilities district special taxes. See "THE DISTRICT — Direct and Overlapping Debt" herein. Covenants of the District In the Fiscal Agent Agreement, the District will covenant as follows, among other things Punctual Payment. The District will punctually pay or cause to be paid the principal of, and interest and any premium on, the District Bonds when and as due in strict conformity with the terms of the Fiscal Agent Agreement and any Supplemental Agreement, and it will faithfully observe and perform all of the conditions, covenants and requirements of the Fiscal Agent Agreement and all Supplemental Agreements and of the District Bonds. Against Encumbrance.: The, D 'istrict.will not; encumber, pledge or place any charge: or ,lien upon any of the Special Tax Revenues, or other amounts pledged to the District Bonds superior to or on a parity with the pledge and lien herein created for the benefit of the District Bonds, except as permitted by the Fiscal Agent Agreement. Collection of Special Tax Revenues. The District will comply with all requirements of the Mello -Roos Act so as to assure the timely collection of Special Tax Revenues, including without limitation, the enforcement of delinquent Special Taxes. The Director of Administrative Services will effect the levy of the Special 'faxes each Fiscal Year on the parcels within the District in accordance with the Ordinance, such that the computation of the levy is complete before the final date on which the auditor /tax collector of the County (the "Auditor ") will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next secured tax roll. Upon the completion of the computation of the amounts of the levy, the Director of Administrative Services will prepare or cause to be prepared, and will transmit to the Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the next secured tax roll. The Special Taxes so levied will be payable and be collected 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 time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property, unless otherwise provided by the District. 21 In the event that the Director of Administrative Services determines to levy all or a portion of the Special Taxes by means of direct billing of the property owners of the parcels within the District, the Director of Administrative Services will, not less than forty -five (45) days prior to each Interest Payment Date, send bills to the owners of such real property located within the District subject to the levy of the Special Taxes for Special Taxes in an aggregate amount necessary to meet the financial obligations of the District due on the next Interest Payment Date, said bills to specify that the amounts so levied will be due and payable not less than thirty (30) days prior to such Interest Payment Date and will be delinquent if not paid when due. In any event, the Director of Administrative Services will fix and levy the amount of Special Taxes within the District required (i) for the payment of principal of and interest on any outstanding District Bonds and 2013 Bonds becoming due and payable during the ensuing year (taking into consideration anticipated delinquencies), and (ii) to pay the Administrative Expenses during such year, all in accordance with the applicable Rate and Method and the Ordinance. The Special Taxes so levied will not exceed the authorized amounts as provided in the proceedings pursuant to the Resolution of Formation. The District has covenanted in the Fiscal Agent Agreement, that to the extent there is a draw upon the Reserve Fund pursuant to the Indenture as a result of a delinquency in the collection of Special Taxes, the District will cause the Director of Administrative Services to effect the next annual levy of Special Taxes in an amount sufficient to replenish such delinquency in addition to those required by the Fiscal Agent Agreement and in addition to amounts that would be levied if there were no such delinquency; provided, however, the amount of Special Taxes levied will not exceed the maximum permitted by the Mello -Roos Act, the Ordinance and the Rate and Method. The Director of Administrative Services is authorized to employ consultants to assist in computing the levy of the Special Taxes under the Fiscal Agent Agreement and any reconciliation of amounts levied to amounts received. The fees and expenses of such consultants and the costs and expenses of the Director of Administrative Services (including a charge for City or District staff time) in conducting its duties under the Fiscal Agent Agreement will be an Administrative Expense. Commence Foreclosure Proceedings. The District will review the public records of the County in connection with the collection of the Special Tax not later than July 1 of each year to determine the amount of Special Tax collected in the prior Fiscal Year; and with respect to individual delinquencies, if the District determines that any single property owner subject to the Special Tax is delinquent in the payment of Special Taxes in the aggregate of $2,500 or more or that the delinquent Special Taxes represent more than 5% of the aggregate Special Taxes levied within the District, then the District will send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within forty-five (45) days of such determination, and (if the delinquency remains uncured) the District will cause judicial foreclosure proceedings to be filed in the Superior Court within ninety (90) days of such determination against all properties for which the Special Taxes remain delinquent. The City Attorney is authorized under the Fiscal Agent Agreement to employ counsel to conduct any such foreclosure proceedings. The fees and expenses of any such counsel and costs and expenses of the City Attorney (including a charge for City or District staff time) in conducting foreclosure proceedings is an Administrative Expense. 22 See Appendix A — "SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS" for a more complete description of the District's covenants under the Fiscal Agent Agreement. THE DISTRICT General Information The District was formed in 1990, by the City pursuant to the Act for the financing of public .aur.v,..u.vmo vv ..iw. me need s of new development wnhln fl-le JJINU1Gr. lne rJ1Sd7ct is located in the City to the northwest of California Highway 74 and to the south of Interstate 15. The District is bordered by Machado Street to the east, Lakeshore Drive and Mountain Avenue to the north, Alvarado Street to the south and the City's boundaries to the west. The District consists of approximately 449.92 net acres. Development within; the District is substantially complete. As of March 30, 2015, there were 2,113 parcels with completed residential units within the District classified as Developed Property under the Rate and Method. As of such date, within the District, there were 1 I parcels and seven parcels classified under the Rate and Method as Approved Undeveloped Property and Raw Undeveloped Property, respectively, consisting of approximately 159 acres. Such Approved Undeveloped Property and Raw Undeveloped Property are located adjacent to and within a mountainous region which borders the western boundary of the City. The City is not aware of any current plans to develop such parcels of Approved Undeveloped Property and Raw Undeveloped Property. The District does not expect to levy Special Taxes on such parcels of Approved Undeveloped Property and Raw Undeveloped Property in Fiscal Year 2015 -16. At a special election held on March 13, 1990, the qualified electors within the District (i) authorized the District to incur bonded indebtedness of up to $30;000,000 in order to finance ^ certain public facilities and various costs related thereto, (ii) approved the Rate and Method, and (iii) approved the levy of a Special Tax on the taxable property the District to pay the principal and interest on the bonds issued by the District and annual Administrative Expenses of the District, and to make any replenishments to the reserve account for bonds issued by the District. Rate and Method of Apportionment The Rate and Method is contained in Appendix B — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES." In general, the Rate and Method imposes a different Maximum Special Tax on Taxable Property depending upon whether such Taxable Property is classified as "Developed Property" (in general, Taxable Property as of July 1 of any year for which a foundation building permit has been issued as of March I of the previous Fiscal Year), "Approved Undeveloped Property" (in general, Taxable Property as of July 1 of any year not classified as Developed Property, for which a final tract map has been recorded as of March I of the previous Fiscal Year) or Raw Undeveloped Property (in general, Taxable Property that is not Developed Property or Approved Undeveloped Property). The Maximum Special Tax on Developed Property is the greater of (i) the amount derived by multiplying the square footage of an assessor's parcel times the Base Maximum Special Tax or (ii) the Assigned Special Tax determined by reference to Table I or Table 11 in the Rate and Method. The Maximum Special Tax may exceed the Assigned Special Tax for some assessor's parcels if the 23 Base Maximum Special Tax is applied. The Base Maximum Special Tax is applied under certain conditions as described in the Rate and Method for lots larger than a certain size for each class of single family detached property. The Base Maximum Special Tax for property located in Special Tax Area A and Special Tax Area B is $0.19 and $0.05 per square foot per assessor's parcel, respectively. Pursuant to the Rate and Method the City Council is required to determine the "Special Tax Requirement" (as defined therein) for each Fiscal Year. The Special Tax Requirement (the "Special Tax Requirement ") means the amount, to be determined annually by the City Council, necessary to pay the authorized costs and expenses of the District including those necessary to administer, the bonds, collect and administer the Special Taxes, and administer the District (which total administrative amount shall be separately stated by the City Council in each levy), to pay current debt service on the bonds, to accumulate funds for future debt service (but only in years in which no revenues are collected from Undeveloped Property), to pay amounts delinquent on the bonds (or to become delinquent based upon past Special Tax delinquencies), to replenish the reserve fund to its proper level (including payments to be made from the reserve fund based upon past Special Tax delinquencies), to compensate for anticipated Special Tax delinquencies (based upon past delinquency experience), to pay directly for authorized facilities or to accumulate funds for that purpose, and to pay for all authorized services. The Special Tax shall be levied as follows until the amount levied equals the Special Tax Requirement: First: The Special Tax shall be levied on each parcel of Developed Property, exclusive of property exempt from Special Taxes pursuant to the Rate and Method, in equal percentages (up to 100 %) of the Assigned Special Tax Rate for each class of Developed Properly for such Fiscal Year determined by reference to Table I and Table II of the Rate and Method; Second: If additional monies are needed after the first step has been completed, the Special Tax shall be levied on each parcel of Approved Undeveloped Property, exclusive of Undeveloped Property exempted by law or by the provisions of the Rate and Method, in equal percentages (up to 100 %) of the Assigned Special Tax; Third: If additional monies are needed after the first two steps have been completed, then the Special Tax shall be levied on each parcel of Raw Undeveloped Property in equal percentages (up to 100 %) of the Maximum Assigned Special Tax for Raw Undeveloped Property, exclusive of Undeveloped Property exempted by law or by the provisions of the Rate and Method, up to, for Special Tax Area A, 91.47% of the Special Tax Requirement (i.e. net of revenues collected in the first and second steps above) and, for Special Tax Area B, 8.53% of the Special Tax Requirement (i.e. net of revenues collected in the first and second steps above); Fourth: If additional monies are needed after the first three steps have been completed, the Special Tax shall be levied on each parcel of Approved Undeveloped Property, exclusive of Undeveloped Property exempted by law or by the provisions of the Rate and Method, in equal percentages (up to 100 %) of the Maximum Assigned Special Tax for Approved Undeveloped Property; Fifth: If additional monies are needed after the first four steps have been completed, then the levy of the Special Tax on each parcel of Developed Property whose Maximum Special Tax is 24 determined through the application of the Base Maximum Special Tax Rate shall be increased in equal percentages from the Assigned Special Tax Rate up to the Maximum Special Tax Rate for each such parcel for such Fiscal Year; Sixth: If additional monies are needed after the first five steps have been completed, then the Special Tax shall be levied proportionately on each parcel of Developed or Undeveloped Property owned by a Homeowners' Association which has not been exempted from the Special Tax pursuant to the Rate and Method, up to the Maximum Special Tax for Undeveloped Property; and _.v. fr _.s� 11 I the Special Tax shall be levied rproportionately aonr each tlparcel ofp Developed noroUndeveloped Property conveyed or irrevocably offered to a public agency which has not been exempted from the Special Tax pursuant to the Rate and Method, up to the Maximum Special Tax for Undeveloped Property. For Fiscal Year 2015 -16, the Assigned Special Taxes for Developed Property within the District that is classified as Residential Property range from $1,847 to $3,230, depending upon the size of the residence. The District intends to size the District Bonds so that, assuming no delinquencies, Net Special Taxes, levied in accordance with the Rate and Method, will, generate in each Fiscal Year beginning in Fiscal Year 2015 -16 not less than 110% of debt service payable with respect to the District Bonds in the calendar year that begins in that Fiscal Year. See Table 1 below. 25 nj &) }/ w_ \ \\ \)�) eae® °27 \\ [ « z z 4 - }2$\ { / \)3 \ \ \ \\ \ \ \ \ \ \ \ } \ < ■ ■z �7% ° _ }) )� \ �) \\ \ \\\ \\ d \{ $) a8a3 \\k ! \ \ \\ \) \ ))))) \\ on \ \ \ \ \ \ \ \ } \ < ■ Assessed Value -to -Lien Ratios An independent appraiser has not been engaged to provide an opinion concerning the values of the parcels within the District that comprise the Taxable Property. However, the aggregate assessed value of the Developed Property within the District as shown on the County Assessor's Fiscal Year 2015 -16 preliminary roll, as of March 5, 2015, was $564,523,374. The assessed value of the 11 parcels and seven parcels in the District classified under the Rate and Method as Approved Undeveloped Property and Raw Undeveloped Property, respectively, is approximately $ The City is not aware of any current plans to develop such parcels of Approved Undeveloped Propey and Ra-w Undeveloped Property and the District does not expect to levy Special Taxes on such property in Fiscal Year 2015 -16. The value of the property within the District is significant to an evaluation of the District Bonds, which ultimately secured the Bonds, because, in the event of a delinquency in the payment of Special Taxes, the District may foreclose only against delinquent parcels. Likewise, the ratio of the value of a parcel to its "share" of the applicable District Bonds is important because it provides an indication of the extent of the relative burden imposed on each parcel by the Special Tax. As indicated above, the aggregate assessed value of the Developed Property within the District as shown on the 2015 -16 County Assessor's preliminary roll as of March 5, 2015, was $564,523,374. The ratio of the aggregate assessed value of the Developed Property within the District to the total principal amount of all direct and overlapping general obligation, special tax and assessment bonds for the District ($13,152,257, inclusive of the District Bonds and the 2013 Bonds) is approximately 42.92- to -1.' See "—Direct and Overlapping Debt" below. Table 3 below sets for the stratification of value -to -liens of the parcels of Developed Property within the District based on Fiscal Year 2015 -16 assessed value as shown on the County Assessor's preliminary roll as of March 5, 2015, and such parcels' respective share of the total projected Special Tax levy for Fiscal Year 2015 -16. Assessed values do not necessarily represent market values. Article XIIIA of the California Constitution (Proposition 13) defines "full cash value" to mean "the County assessor's valuation of real property as shown on the 1975/76 roll under `Rill cash value', or, thereafter, the appraised value of real property when purchased or newly constructed or when a change in ownership has occurred after the 1975 assessment," subject to exemptions in certain circumstances of property transfer or reconstruction. The "full cash value" is subject to annual adjustment to reflect increases, not to exceed 2% for any year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors. Because of the general limitation to 2% per year in increases in full cash value of properties which remain in the same ownership, the County tax roll does not reflect values uniformly proportional to actual market values. Moreover, as a result of declines in the market value of properties in recent years, assessed valuations of many properties in the County have experienced similar decline. As a result of the foregoing, there can be no assurance that the assessed valuations of the properties within the District accurately reflect their respective market values, and the future fair market values of those properties may be lower than their current assessed valuations. No assurance can be given that, should a delinquent parcel be foreclosed and sold for the amount of the delinquency, any bid will be received for such parcel, or if a bid is received that such bid will be sufficient to pay such delinquent Special Taxes. The table below sets forth historic 27 assessed values of the parcels of Developed Property within the District from Fiscal Years 2010-11 through 2015 -16. TABLE2 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 HISTORIC ASSESSED VALUES FOR DEVELOPED PROPERTY (') As of January I of each year as shown on the Counry Assessor's Rolls. Total Assessed Value is calculated as the sum of Land Assessed Value and Improvement Assessed Value_ Excludes Approved Undeveloped Property and Raw Undeveloped Property. (2) As shown on the County Assessor's preliminary roll as of March 5, 2015. Sources: Albert A. Webb Associates; County Assessor. 28 Improvement Increase/(Decrease) Fiscal Land Assessed Assessed Total Property is Property Assessed Year Valued) Value(') Assessed Valuelr) Valise 2010 -11 $106,087,126 $274,167,991 $380,255,117 N/A 2011 -12 112,633,977 285,331,262 397,965,239 4.66% 2012 -13 115,146,377 280,323,827 395,470,204 (0.63) 2013 -14 122,565,883 296,888,715 419,454,598 6.06 2014 -15 138,725,937 348,140,301 486,866,238 16.07 2015 -10) 155,237,458 409,285,916 564,523,374 15.95 (') As of January I of each year as shown on the Counry Assessor's Rolls. Total Assessed Value is calculated as the sum of Land Assessed Value and Improvement Assessed Value_ Excludes Approved Undeveloped Property and Raw Undeveloped Property. (2) As shown on the County Assessor's preliminary roll as of March 5, 2015. Sources: Albert A. Webb Associates; County Assessor. 28 O o a 0000a woma_�ioo °1 d RL � 3 a a b .� ti k M 01 ti M O o0 N lD h M l� Q •ti d '� N o 5 O a 0 wq p O P N G� 01 1p a � X W ��• OFD W W a M 'IR Ea�paO v st O O o0 N O M C N O C O OAv, U � W ati h O O N M O W M M n Vt f�l W W Vl r`l ti TJ 4 7 � N y z b c a ro o 0 o i o v C{ rn rn O� O\ rn rn rn m O� O� o� � C4 O� N N 5 d N C % C % % w' N. R tC L' C.� ❑ Bj. -O.. � Az ° ..a 0.l 0.lWW WGIW WC7F O Direct and Overlapping Debt The District is included within the boundaries of numerous overlapping local agencies providing governmental services. Some of these local agencies have outstanding bonds, and /or the authority to issue bonds, payable from taxes or assessments. The existing and authorized indebtedness payable from taxes and assessments that may be levied upon the property within the District shown in Table 4 below. In addition to current debt, new community facilities districts and /or special assessment districts could be formed in the future encompassing all or a portion of the property within the District; and such districts or the agencies that formed them could issue more bonds and levy additional special taxes or assessments. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 30 TABLE 4 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 WEST LAKE ELSINORE DIRECT AND OVERLAPPING DEBT DEVELOPED PROPERTY AS OF MARCH 30,2015 ASSESSED VALUE Parcels in Applicable 2015 -2016 Assessed Valuationl'1 100% 2,113 II. LAND SECURED BONDED Applicable INDEBTEDNESS 100% 2,113 Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding CFD No. 88 -3 West Lake Elsinore CFD $28,765,000 $13,120,000 Total Land Secured Bonded Debt(') Authorized but Unissued Direct and Overlapping Indebtedness Authorized Unissued CFD No 88 -3 West Lake Elsinore w CFD $ 30,000,000 $ 0 Total Unissued Land Secured Iudebtednesst" Total Outstanding and Unissued Land Secured Indebtedness GENERAL OBLIGATION BOND INDEBTEDNESS Outstanding Direct and Overlapping Bonded Debt Issued Outstanding Metropolitan Water Debt Service GO $850,000,000 $132,275,000 Total General Obligation Bonded Debta) Authorized but Unissued Direct and Overlapping Indebtedness Authorizer[ Unissued % Parcels in Applicable CFD No. 88 -3 0.024% 2,113 Applicable Metropolitan Water Debt Service GO $850,000,000 $ 0 0.024% Total Unissued General Obligation Indebtednessoi Total Outstanding and Unissued General Obligation Indebtedness TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT TOTAL, OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING INDEBTEDNESS Ratios to 2015 -16 Assessed Valuation Outstanding Land Secured Bonded Debt 43.031` Total Outstanding Bonded Debt 42.921' * Preliminary, subject to change. of Reflects Fiscal Year 2015 -16 assessed value, as shown on the County Assessor's preliminary roll as of March 5, 2015. al Includes 2013 Bonds currently outstanding in the principal amount of $3,510,000. "i Additional bonds will be issued for refunding only. 2,113 $564,523,374 Amount Applicable $13,120.000 $13,120,000' Applicable 0 $ 0 $13,120,000' Amount of Debt $ 32.257 S 32,257 Applicable $ $0 S 0 S 32,257 $13,152,257- $13,152,257' Annual debt service for the District Bonds has been structured so that, assuming no delinquencies, Special Taxes levied at the Assigned Special Tax rates on 2,133 parcels of Developed Property for Fiscal Year 2015 -16 and thereafter, will generate in each Fiscal Year not less than 110% of debt service payable, plus Administrative Expenses, with respect to the District Bonds and the 2013 Bonds in the calendar year that begins in that Fiscal Year. Based on the District Bond sizing and estimated Fiscal Year 2015 -16 tax rates for all other taxing jurisdictions, the projected average total Fiscal Year 2015 -16 effective tax rate for Developed Property in the District will range from approximately 1.53% to 1.75% of the applicable assessed value, with an average of approximately 1.62 %. 31 Parcels in Applicable CFD No. 88 -3 100% 2,113 % Applicable 100% 2,113 % Parcels in Applicable CFD No. 88 -3 0.024% 2,113 Applicable Metropolitan Water Debt Service GO $850,000,000 $ 0 0.024% Total Unissued General Obligation Indebtednessoi Total Outstanding and Unissued General Obligation Indebtedness TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT TOTAL, OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING INDEBTEDNESS Ratios to 2015 -16 Assessed Valuation Outstanding Land Secured Bonded Debt 43.031` Total Outstanding Bonded Debt 42.921' * Preliminary, subject to change. of Reflects Fiscal Year 2015 -16 assessed value, as shown on the County Assessor's preliminary roll as of March 5, 2015. al Includes 2013 Bonds currently outstanding in the principal amount of $3,510,000. "i Additional bonds will be issued for refunding only. 2,113 $564,523,374 Amount Applicable $13,120.000 $13,120,000' Applicable 0 $ 0 $13,120,000' Amount of Debt $ 32.257 S 32,257 Applicable $ $0 S 0 S 32,257 $13,152,257- $13,152,257' Annual debt service for the District Bonds has been structured so that, assuming no delinquencies, Special Taxes levied at the Assigned Special Tax rates on 2,133 parcels of Developed Property for Fiscal Year 2015 -16 and thereafter, will generate in each Fiscal Year not less than 110% of debt service payable, plus Administrative Expenses, with respect to the District Bonds and the 2013 Bonds in the calendar year that begins in that Fiscal Year. Based on the District Bond sizing and estimated Fiscal Year 2015 -16 tax rates for all other taxing jurisdictions, the projected average total Fiscal Year 2015 -16 effective tax rate for Developed Property in the District will range from approximately 1.53% to 1.75% of the applicable assessed value, with an average of approximately 1.62 %. 31 The following table sets forth the estimated total tax obligation of sample categories of residential properties in the District for Fiscal Year 2015 -16, based on the Fiscal Year 2015 -16 assessed value as shown on the County Assessor's preliminary roll as of March 5. 2015. 32 1^ F W 00 gz M+ F Pai � W O zoa F N F a H W A O Uzwa a 06> U�Q W Q 0 Pik R R N U 7 N Q O W N v " VI vl N O " r n" ry cs f-0 v F r N O O h O N :a .N E O — ��M a�<n � o� meooM O ao o �o rn «cu N 0 N P N L F CD a�<n � o� meooM O ao o �o rn «cu N 0 N P N L F 0 a 0 4 O 0 � y R » w o � u E aa7 rn a N N" of O O 0 2 0 Q w x h F q� Te m 4 a Tic V va °a v 0.l a h Q Q V � 1 y �3 a'aaU v Q d Q 9 O y yry. W vu.wuvz5�u� o C N e M �1 V ti m o � M VI ti N m M ti N in e es re a o e vi me y G1 C ti �o L1 n le M M in � u F R La x aF o y O � E-� W v 00 7 C Q b N d J^ 'R U w' m E h O b 1 L U $ G o � v ° Z a b o 0 a `o " G o y a J� L O O G U � E o a c�R 0 O O � y y N O N � y >wo y m= may N � O _ N vOi y wry era w o o y R GO C wg c y a o E E QQSw M Top Taxpayers Special Taxes for Fiscal Year 2015 -16 are projected to be levied on 2,133 parcels classified as Developed Property, based on development status as of March 30, 2015. As shown in the table below, no property owner within the District is expected to be responsible for more than 0.17% of the projected Fiscal Year 2015 -16 Special Tax levy. TABLE 6 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 FISCAL YEAR 2015 -16 PROJECTED TOP TAXPAYERSO) Projected Percentage of Over lapping Land - Fiscal Year Projected Fiscal Secured Bond Debt 2015 -16 Year 2015 -16 Estimated CFD No. Value-to- Property Owner Special Tae Special Tar. Assessed Valuehl 88 -3 Debt'(a Lien Ratio' M2 Prop West $ 4,877 0.17% $ 835,066 $ 22,479 37.15:1 GAM Resources 408 0.16 686,119 21,236 32.31:1 Borrower 2014 3 4,334 0.15 676,764 19,975 33.88:1 Indigo Group 3,523 0.12 589,308 16,238 36.29:1 CAH 2014 1 Borrower 3,254 0.11 579,937 14,995 38.68:1 ARP 2014 1 Borrower 3,252 0.11 445,710 14,986 29.74:1 Individual Owner 3,252 0.11 681,384 14,986 45.47:1 Individual Owner 3,252 0.11 822,144 14,986 54.86:1 Individual Owner 2,980 0.10 560,526 13,734 40.81:1 Individual Owner 1980 0_10 721 -013 13,734 52.50:1 Subtotal 36,311 7.28 6,597,971 167,349 39.43:1 All Others 2.810.456 98.72 557.925,403 12- 952.651 43.07:1 TOTAL $ 2,846,767 100.00% S 564,523,374 $ 13,120,000 43.03:1 " Preliminary, subject to change. f ) Pursuant to the Rate and Method of Apportionment, Developed Property, in general, is 'Taxable Property as of July 1 of any year for which a foundation building permit has been issued as of Match 1 of the previous Fiscal Year. Parcels of Developed Property shown reflects development status as of March 30, 2015. (2) Reflects assessed values as shown on the County Assessor's preliminary roll for Fiscal Year 2015 -16 as of March 5, 2015. 03 Includes the 2013 Bonds. Allocation of principal amount of the District Bonds based on the pro rata share of the projected Fiscal Year 2015 -16 Special Tax levy. Source: Albert A Webb Associates. 34 M ate+ x T u C Y C h z a F w a a .-1 z 0 H W z CW7 d a W z d M O N 00 _ O � N '�l � N � o 000�nv v m M 000 M N ..cF aUAx � o av q v�v �wza q �o>" SHAW s�ti U w W o d q v „a m � � v .o w v N v I Orn w W M N D 7 M G O O 3 ro� o mmmmm a�� 0 �^ H M d' in O w m y b 0 0 0 0 0 N N N N N r z a F w a a .-1 z 0 H W z CW7 d a W z d M SPECIAL RISK FACTORS The purchase of the Bonds involves certain investment risks which are discussed throughout this Official Statement. Each prospective investor should make an independent evaluation of all information presented in this Official Statement in order to make an informed investment decision. Particular attention should be given to the factors described below which, among others, could affect the payment of debt service on the Bonds. Risks of Real Estate Secured Investments Generally Because the timely payment of debt service on the Bonds will be dependent upon the timely payment of the District Bonds and the timely payment of the District Bonds will be dependent upon the timely payment of Special Taxes, which are secured ultimately by the Taxable Property within the District, the Bond Owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in and around the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings and /or sites in the event of sale or foreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii) natural disasters (including, without limitation, earthquakes and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions; and (v) increased delinquencies due to rising mortgage costs and other factors. Risks Related to Housing Market Conditions The housing market in southern California experienced significant price appreciation and accelerating demand from approximately 2002 to 2006 but subsequently the housing market weakened substantially, with changes from the prior pattern of price appreciation and a slowdown in demand for new housing and declining prices. Beginning in 2007, home developers, appraisers and market absorption consultants were reporting weak housing market conditions due to factors including but not limited to the following: (i) lower demand for new homes; (ii) significant increase in cancellation rates for homes under contract; (iii) the exit of speculators from the new home market; (iv) increasing mortgage defaults and foreclosures, (v) a growing supply of new and existing homes available for purchase; (vi) increase in competition for new homes orders; (vii) prospective home buyers having a more difficult time selling their existing homes in the more competitive environment; (viii) reduced sales prices and /or higher incentives required to stimulate new home orders or to induce home buyers not to cancel purchase contracts, (ix) more stringent credit qualification requirements by home loan providers and (x) increased unemployment levels. Since Fiscal Year 2007 -08, assessed valuations in the District have stabilized. As shown in Table 2 above, assessed valuations increased by approximately 16.07% in Fiscal Year 2014 -15 from Fiscal Year 2013 -14 amounts and have increased in Fiscal Year 2015 -16 (based on the County Assessor's preliminary roll as of March 5, 2015) by approximately 15.95% from Fiscal Year 2014 -15 amounts. Although assessed values within the District have experienced increases in recent years, one or more of these factors may negatively impact assessed values in the District in the future and affect the willingness or ability of taxpayers to pay their Special Tax payment prior to delinquency. 36 The Bonds are Limited Obligations of the Authority The Bonds are limited obligations of the Authority payable only from amounts pledged under the Indenture, which consist primarily of payments made to the Trustee on the District Bonds and amounts in the Reserve Account, the Cash Flow Management Fund and the Redemption Fund. Funds for the payment of the principal of and the interest on the District ,Bonds are derived only from payments of Special Taxes. The amount of Special Taxes that are collected could be insufficient to pay principal of and interest on the District Bonds due to non - payment of the Special Taxes levied or due to insufficient proceeds received from a judicial foreclosure sale of land within the District following delinquency. A District's legal obligation with respect to any delinquent Special Taxes is limited to the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes is delinquent. The Bonds cannot be accelerated in the event of any default. Failure by owners of the parcels within the District to pay Special Tax installments when due, delay in foreclosure proceedings, or the inability of the District to sell parcels which have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of Special Taxes levied against such parcels may result in the inability of the District to make full or timely payments of debt service on the District Bonds, which may, in turn, result in the depletion of the Reserve Account and the Cash Flow Management Fund, and the inability of the Authority to make full or timely payment on the Bonds. No Obligation of City The District Bonds and the interest thereon, and in turn, the Bonds, are not payable from the general funds of the City. Except with respect to the Special Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the District Bonds or the interest thereon, and except to compel a levy of the Special Taxes securing the District Bonds, 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 property of the City or the District. The Bonds are not a debt of the City or the District 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 Revenues and other amounts pledged under the Indenture. Property Values The value of the Taxable Property within the District is an important factor in evaluating the investment quality of the Bonds. In the event that a property owner defaults in the payment of a Special Tax installment, the District's only remedy is to judicially foreclose on that property. Prospective purchasers of the Bonds should not assume that the property within the District could be sold for the assessed values described herein at a foreclosure sale for delinquent Special Tax installments or for an amount adequate to pay delinquent Special Tax installments. The assessed values set forth in this Official Statement do not represent market values arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by its current owner, increased or decreased annually by an amount determined by the County Assessor's Office based on current market conditions, generally not to exceed an increase of more than 2% per fiscal year from the date of purchase (except in the case of new construction subsequent 37 to such acquisition). No assurance can be given that a parcel could actually be sold for its assessed value. See" Risks Related to Housing Market Conditions" above. The actual market value of the property is subject to future events such as downturn in the economy, occurrences of certain acts of nature and the decisions of various governmental agencies as to land use, all of which could adversely impact the value of the land in the District which is the security for the District Bonds, which secure the Bonds. As discussed herein, many factors could adversely affect property values within the District. Hazardous Substances The value of a parcel may be reduced as a result of the presence of a hazardous substance. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well -known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. Further, it is possible that liabilities may arise in the future with respect to any of the parcels resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of a parcel that is realizable upon a Special Tax delinquency. The value of the taxable property within the District, as set forth in the various tables in the Official Statement, does not reflect the presence of any hazardous substance or the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the property. The District has not independently verified, but is not aware, that any owner (or operator) of any of the parcels within the District has such a current liability with respect to any such parcel. However, it is possible that such liabilities do currently exist and that the District is not aware of them. Parity Taxes and Special Assessments Property within the District is subject to taxes and other charges levied by several other public agencies. See the discussion of direct and overlapping indebtedness under the heading "THE DISTRICT." The Special Taxes and any penalties thereon 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 a parity with the lien of all special taxes and special assessments levied by other agencies and is co -equal to and 38 independent of the lien for general ad valorem 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. See "— Bankruptcy and Foreclosure" below. None of the Authority, the District or the City has control over the ability of other entities and districts to issue indebtedness secured by special taxes, ad valorem taxes or assessments payable from all or a portion of the property within the District. In addition, the property owners within the District may, without the consent or knowledge of the Authority, the District or the City, petition other public agencies to issue public indebtedness secured by special taxes, rd valorem taxes or assessments. Any such special taxes, ad valorem taxes or assessments may have a lien on such property on a parity with the Special Taxes and could reduce the estimated value -to -lien ratios for property within the District described herein. Payment of the Special Tax is not a Personal Obligation of the Owners An owner of a taxable parcel is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the taxable parcel. If the proceeds received from the sale of a taxable parcel following a Special Tax delinquency are not sufficient, taking into account other liens imposed by public agencies, to pay the full amount of the Special Tax delinquency, the District has no recourse against the owner of the parcel. Disclosures to Future Purchasers The willingness or ability of an owner of a parcel to pay the Special Tax may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and the risk of such a levy and, at the time of such a levy, has the ability to pay it as well.as.pay other expenses and obligations. The City has caused -a notice of the Special Tax that may be levied against the taxable parcels in the District to be recorded in the Office of the Recorder for the County. 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 the District or lending of money thereon. The Mello -Roos 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 subject to a Mello -Roos special tax of the existence and maximum amount of such special tax 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 Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. Special Tax Delinquencies Special Taxes are the primary source for the repayment of the District Bonds, which are the only source of Revenues to repay the Bonds. Delinquencies could result in a draw on the 39 Delinquency Management Fund, the Cash Flow Management Fund and the Reserve Account and, if such fiords and accounts were depleted, in a default in payment on the Bonds. Under provisions of the Mello -Roos Act, the Special Taxes, from which funds necessary for the payment of principal of and interest on the District Bonds and, thus, the Bonds are derived, are customarily billed to the properties within the District on the ad valorem property tax bills sent by the County to owners of such properties. The Mello -Roos 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. As described under the heading "THE DISTRICT — Delinquency History," as of February 1, 2015, there were $25,882 in delinquent Special Taxes due for the first installment of Fiscal Year 2014 -15, representing 1.49% of the first installment of the Fiscal Year 2014 -15 Special Tax levy. See "SECURITY FOR THE DISTRICT BONDS — Covenants of the District - Commence Foreclosure Proceedings," for a discussion of the provisions which apply, and procedures which each District is obligated to follow under the Fiscal Agent Agreement, in the event of delinquencies in the payment of Special Taxes. See "— Bankruptcy and Foreclosure" below for a discussion of the policy of the Federal Deposit Insurance Corporation (the "FDIC ") regarding the payment of special taxes and assessment and limitations on the Districts ability to foreclose on the lien of the Special Taxes in certain circumstances. Insufficiency of Special Taxes Notwithstanding that the maximum Special Taxes that may be levied in the District exceeds debt service due on the District Bonds, the Special Taxes collected could be inadequate to make timely payment of debt service either because of nonpayment or because property becomes exempt from taxation. The Rate and Method governing the levy of the Special Taxes within the District expressly exempts up to a specified number of acres of property owned by public entities, homeowner associations, churches and other specified owners. If for any reason property within the District becomes exempt from taxation by reason of ownership by a non - taxable entity such as the federal government, another public agency or other organization determined to be exempt, subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining taxable properties within the District. This could result in certain owners of property paying a greater amount of the Special Tax and could have an adverse impact upon the ability and willingness of the owners of such property to pay the Special Tax when due. The Mello -Roos Act provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Mello -Roos Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Mello -Roos Act have not been tested in the courts. Due to problems of collecting taxes from public agencies, if a substantial portion of land within the District became exempt from the Special Tax because of public ownership, or otherwise, the maximum Special Taxes which could be levied upon 40 the remaining taxable property therein might not be sufficient to pay principal of and interest on the related District Bonds when due and a default could occur with respect to the payment of such principal and interest, and, in turn, a default could occur in the payment of the principal and interest on the Bonds. Priority Administrative Expenses Administrative Expenses are paid prior to the payment of debt service on the District Bonds. For Fiscal Year 2015 -16, the District estimates Administrative Expenses of $65,000. Administrative Expenses are projected to increase a rate of L%o per fiscal year. Administrative Expenses in each fiscal year may be greater than budgeted, which could result in a draw on the Delinquency Management Fund, the Cash Flow Management Fund and the Reserve Account and, if such funds and accounts were depleted, in a default in payment on the Bonds. FDIC /Federal Government Interests in Properties General. The ability of the District to foreclose the lien of delinquent unpaid Special 'Fax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation (the "FDIC "), the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest. The supremacy clause of the United States Constitution reads as follows: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding." This means that, unless Congress has otherwise provided, if a federal governmental entity owns a parcel that is subject to Special Taxes within the District but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes, the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174, the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association ( "FNMA ") is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. The 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 subject to the Special Taxes within the District, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. FDIC. In the event that any financial institution making any loan which is secured by real property within the District is taken over by the FDIC, and prior thereto or thereafter the loan or 41 loans go into default, resulting in ownership of the property by the FDIC, then the ability of the District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement') provides that property owned by the FDIC is subject to stale and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than properly value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC -owned property are secured by a valid lieu (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement states that the FDIC generally will not pay non -ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello -Roos Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello -Roos special taxes. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a parcel within the District in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Delinquency Management Fund, the Reserve Account or the Cash Flow Management Fund, and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the District Bonds and the Bonds. Bankruptcy and Foreclosure In the event of a delinquency in the payment of the Special Taxes, the District, under certain circumstances, is required to commence enforcement proceedings as described under the heading "SECURITY FOR THE DISTRICT BONDS — Covenants of the District." However, prosecution of such proceedings could be delayed due to crowded local court calendars, dilatory legal tactics, or bankruptcy_ It is also possible that the District will be unable to realize proceeds in an amount sufficient to pay the applicable delinquency. Moreover, the ability of the District to commence and prosecute enforcement proceedings may be limited by bankruptcy, insolvency and other laws generally affecting creditors' rights (such as the Soldiers' and Sailors' Relief Act of 1940) and by the laws of the State relating to judicial and non - judicial foreclosure. Although bankruptcy proceedings would not cause the liens of the Special Taxes to become extinguished, bankruptcy of a property 42 owner could result in a delay in the enforcement proceedings because federal bankruptcy laws provide for an automatic stay of foreclosure and tax sale proceedings. Any such delay could increase the likelihood of delay or default in payment of the principal of and interest on the District Bonds. The various legal opinions delivered in connection with the issuance of the Bonds, including Bond Counsel's approving legal opinion, are qualified as to the enforceability of the Bonds, the Indenhue, the District Bonds and the Fiscal Agent Agreement by reference to bankruptcy, reorganization, moratorium, insolvency and other laws affecting the rights of creditors generally or against public corporations such as the District. iv Aeecicra tiun Pi'uvisiuii The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture. Pursuant to the Indenture, an Owner of the Bonds is given the right for the equal benefit and protection of all owners similarly situated to pursue certain remedies described in APPENDIX A — "SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS — SUMMARY OF AUTHORITY INDENTURE EVENTS OF DEFAULT AND REMEDIES OF BOND OWNERS" following the occurrence of an Event of Default. Limitations on Remedies Remedies 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 exclusion from gross income for federal income tax purposes of interest on the Bonds. Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial discretion and by limitations on remedies against public agencies in the State. 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. Loss of Tax Exemption As discussed under the caption "LEGAL MATTERS — Tax Matters" herein, interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued, as a result of future acts or omissions of the Authority, the City or the District in violation of covenants in the Indenture or the Fiscal Agent Agreement, respectively. Legislative changes have been proposed in Congress, which, if enacted, would result in additional federal income tax being imposed on certain owners of tax - exempt state or local obligations, such as the Bonds. The introduction or enactment of any of such changes could adversely affect the market value or liquidity of the Bonds. Should such an event of taxability occur, the Bonds are not subject to a special redemption and will remain outstanding until maturity or until redeemed under one of the other redemption provisions contained in the Indenture. Current or future legislative proposals, if enacted into law, clarification of the Internal Revenue Code of 1986 (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 43 taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. Legislative changes have been proposed in Congress, which, if enacted, would result in additional federal income tax being imposed on certain owners of tax - exempt state or local obligations, such as the Bonds. The introduction or enactment of any of the pending or future legislative proposals, clarification of the Code or court decisions may also affect 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, as to which Bond Counsel expresses no opinion. It is possible that subsequent to the issuance of the Bonds there might be federal, State, or local statutory changes (or judicial or regulatory interpretations of federal, State, or local law) that affect the federal, State, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur. See "LEGAL MATTERS — Tax Matters" below. 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 the Bonds can be sold for any particular price. Although the District has committed to provide certain financial information and operating data on an annual basis, there can be no assurance that such information will be available to Beneficial Owners of the Bonds on a timely basis. The failure to provide the required annual 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, the absence of a credit rating, or adverse history or economic prospects connected with a particular issue, secondary marketing practices in cormection 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 commonly referred to as the "Right to Vote on Taxes Act" (the "Initiative ") was approved by the voters of the State of California at the November 5, 1996 general election. The Initiative added Article XIII C and Article XIII D to the California Constitution. According to the "Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property- related assessments, fees and charges." The provisions of the Initiative continue to be interpreted by the courts. The Initiative could potentially impact the Special Taxes available to the District to pay the principal of and interest on the District Bonds as described below. Among other things, Section 3 of Article XIII 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 Mello -Roos 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 Mello -Roos Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Mello -Roos 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 44 August 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 District Bonds. It may be possible, however, for voters or the City Council, acting as the legislative body of the District, to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the District Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the District Bonds. With respect to the approval of the Special Taxes, on August 1, 2015, the California: Court of Appeal, Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro, et al. (D063997) (the "San Diego Decision "). The case involved a Convention Center Facilities District (the "CCFD ") established by the City of San Diego (the "City "). The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in the entire City. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD. The election authorizing the special tax was limited to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was modeled after 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 shall 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 was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an election be the registered voters within the district. The facts of the San Diego Decision show that there were thousands of registered voters within the CCFD (viz., all of the registered voters in the City). The District had no registered voters residing within its boundaries at the time of the election to authorize the Special Tax. In the San Diego Decision, 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 45 action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. Voters within the District approved the Special Tax and the issuance of bonds on March 13, 1990. Based on Sections 53341 and 53359 of the Act and analysis of existing laws, regulations, rulings and court decisions, Bond Counsel is of the opinion that no successful challenge to the Special Tax being levied in accordance with the Rate and Method may now be brought. 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 "— Limitations on Remedies" above. Ballot Initiatives and Legislative Matters Articles XIII A, XIII B, XIII C and XIII D, all of which placed certain limitations on the power of local agencies to tax, collect and expend revenues, were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State, the City, or the District to increase revenues or to increase appropriations or on the ability of the landowners within the District to complete proposed future development. LEGAL MATTERS Tax Matters In the opinion of Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest on to 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 minmum tax imposed on individuals and corporations. However, Bond Counsel notes that, with respect to corporations, interest (and original issue discount) on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bond of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the Bond Owner will increase the Bond Owner's basis in the Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the Bond is excluded from the gross income of such owner for federal income tax purposes, 46 is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals, and is exempt from State personal income tax. Bond Counsel's opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the Authority, the City, the District and others and is subject to the condition that the Authority, the City and the District comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code "), that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Authority, the City and the District will each covenant to comply with all such requirements. The amount by which a Bond Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Bond Owner's basis in the applicable Bond (and the amount of tax exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Bond Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Bond Owner. Purchasers of the Bonds should - consult -their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. 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 of the Bonds (or by an audit of similar municipal obligations). 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 Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their market value. It is possible that subsequent to the issuance of the Bonds there might be federal, state, of local statutory changes (or judicial or regulatory interpretations of federal, state, or local law) that affect the federal, state, or local tax treatment of the Bonds or the market value of the Bonds. Recently, proposed legislative changes have been introduced in Congress, which, if enacted, could result in additional federal income or state tax being imposed on owners of tax - exempt state or local obligations, such as the Bonds. The introduction or enactment of any of such changes could adversely affect the market value or liquidity of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes (or other changes) will not be introduced or enacted or interpretations will not occur. Before purchasing any of the Bonds, all potential purchasers should consult their tax advisors regarding possible statutory changes or judicial or regulatory changes or interpretations, and their collateral tax consequences relating to the Bonds. Bond Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax 47 Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds. A copy of the proposed form of opinion of Bond Counsel is attached hereto as APPENDIX [a Absence of Litigation The Authority will certify at the time the Bonds are issued that no litigation is pending or threatened concerning the validity of the Bonds or the District Bonds and that no action, suit or proceeding is known by the Authority to be pending that would restrain or enjoin the delivery of the Bonds or the District Bonds, or contest or affect the validity of the Bonds or the District Bonds or any proceedings of the Authority taken with respect to the Bonds or the District Bonds. The District will also certify at the time the Bonds are issued that no litigation is pending or threatened concerning the validity the District Bonds and that no action, suit or proceeding is known by the District to be pending that would restrain or enjoin the delivery of the District Bonds, or contest or affect the validity of the District Bonds or any proceedings of such District taken with respect to the District Bonds. Legal Opinion Certain proceedings in connection with the issuance of the Bonds are subject to the approval as to their legality of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel for the Authority in connection with the issuance of the Bonds. The opinion of Bond Counsel approving the validity of the Bonds substantially in the form attached as Appendix C hereto will be attached to each Bond. Bond Counsel's employment is limited to a review of legal procedures required for the approval of the Bonds and to rendering an opinion as to the validity of the Bonds and the exemption of interest on the Bonds from income taxation. Bond Counsel expresses no opinion to the Owners of the Bonds as to the accuracy, completeness or fairness of this Official Statement or other offering materials relating to the Bonds and expressly disclaims any duty to do so. Payment of the 'fees of Bond Counsel, Disclosure Counsel, Financial Advisor, the Underwriter and Underwriter's Counsel is contingent upon issuance of the Bonds. 48 RATING The Authority expects that Standard and Poor's Ratings Services, a Standard & Poor's Financial Services LLC business ( "S &P ") will assign the Bonds the rating of "_" There is no assurance that any credit rating given to the Bonds will be maintained for any period of time or that the ratings may not be lowered or withdrawn entirely by S &P, in its judgment, circumstances so warrant. Any downward revision or withdrawal of a rating may have an adverse effect on the market price of the Bonds. Such rating reflects only the views of S &P and an explanation of the significance of such ratings may be obtained from S &P. The District has covenanted in a Continuing Disclosure Agreement to file on EMMA, notices of any ratings changes on the Bonds. See the caption "MISCELLANEOUS— Continuing Disclosure" below and Appendix D — "FORM OF CONTINUING DISCLOSURE AGREEMENT." Notwithstanding such covenant, information relating to ratings changes on the Bonds may be publicly available from the rating agencies prior to such information being provided to the District and prior to the date the ,District is obligated to file a notice of rating change on EMMA. Purchasers of the Bonds are directed to the ratings agencies and their respective websites and official media outlets for the most current ratings changes with respect to the Bonds after the initial issuance of the Bonds. MISCELLANEOUS Underwriting The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the "Underwriter ") at a purchase price of $ (representing the par amount of the Bonds, less underwriter's discount of $ and plus /less net original, issue premium /discount of The purchase contract relating to the Bonds between the Authority, the District and the Underwriter provides that all Bonds will be purchased if any are purchased, and that the obligation to make such purchase is subject to certain terms and conditions set forth in said purchase contract, including, but not limited to, the approval of certain legal matters by counsel Continuing Disclosure Pursuant to a Continuing Disclosure Agreement, the District will agree to provide, or cause to be provided, through the Electronic Municipal Market Access system (`EMMA ") maintained by the Municipal Securities Rulemaking Board (or with such other entity as is designated or authorized under Rule 15c2 -12 adopted by the Securities and Exchange Commission) certain annual financial information and operating data. The Annual Report to be filed by the District will include audited financial statements of the District, if any are prepared, and additional financial and operating data concerning the District as set forth in Section 4 of the Continuing Disclosure Agreement attached hereto as Appendix D. The Continuing Disclosure Agreement will inure solely to the benefit of any Dissemination Agent, the Underwriter and Owners or Beneficial Owners from time to time of the Bonds. A default under the Continuing Disclosure Agreement is not a default under the Indenture and the sole remedy 49 following a default is an action to compel specific performance by the District with the terns of the Continuing Disclosure Agreement. During the last five years the Authority, the City and the Agency failed to comply in certain respects with continuing disclosure obligations related to outstanding bonded indebtedness. The failures to comply include late filings with respect to several annual reports and incomplete filings with respect to other annual reports. The incomplete filings omitted one or more of the following items: (1) Comprehensive audited financial statements of the City or the Agency, as applicable; however, such comprehensive audited financial statements not provided for certain issuances of bonded indebtedness were otherwise available on EMMA in connection with the Authority's, the Agency's or the City's other issuances of bonded indebtedness; (2) Updated tabular and other operating information relating to the City, the Agency and community facilities districts; and (3) Material event notices of changes in the ratings of outstanding bonded indebtedness of the Authority and the Agency resulting from changes in the ratings to the bonds or to the bond insurers insuring such bonds. Other than as set forth above, the Authority, the City and the Agency believe in the last five years they have materially complied with their continuing disclosure undertakings. The Authority has made additional filings to provide certain of the previously omitted information; provided that with respect to ratings changes, notice has been provided only of the existing rating or ratings applicable to each outstanding issuance of bonds. The City believes that in several instances annual reports were timely provided to the dissemination agent but the dissemination agent either failed to file such reports or did not file the complete report. In order to promote compliance by the Authority, the City, the Agency and the District with continuing disclosure undertakings in the future, the City has retained Albert A. Webb Associates to serve as the new dissemination agent with respect to issuances of land- secured bonded indebtedness and Urban Futures Incorporated to serve as the new dissemination agent with respect to other types of bonded indebtedness. Additionally, the City has adopted formal policies and procedures with respect to its continuing disclosure practices and has reported the failures to comply with its prior continuing disclosure obligations under the current Municipalities Continuing Disclosure Cooperation Initiative of the U.S. Securities Exchange Commission. Pending Legislation The Authority is not aware of any significant pending legislation which would have material adverse consequences on the Bonds or the ability of the Authority to pay the principal of and interest on the Bonds when due. Additional Information References are made herein to certain documents and reports which are brief summaries thereof which do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. 50 Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or Owners of any of the Bonds. The execution and delivery of this Official Statement has been duly authorized by the Authority. LAKE ELSINORE PUBLIC FINANCING AU InUnlI f By: Executive Director 51 APPENDIX A SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS The following is a brief summary of certain provisions of the Indenture governing the terms of the Bonds and the Fiscal Agent Agreement which is being separately executed by the District governing the terms of the District Bonds. This summary includes only the provisions of the documents not already summarized in the Of Statement and does notpurportto be complete and is qualified in its entirety by reference to said documents. [TO COME] A -1 SUMMARY OF THE FISCAL AGENT AGREEMENT The District Bonds issued by the District will be issued pursuant to the Fiscal Agent Agreement substantially in the form summarized below. A -2 APPENDIX B RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES RATE AND ME'T'HOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 88 -3 OF THE CITY OF LAKE ELSINORE (WEST LAKE ELSINORE) A Special Tax (the "Special Tax ") shall be levied on and collected from each parcel in Special Tax Area A and Special Tax Area B of Community Facilities District No. 88 -3 in each Fiscal Year, commencing July 1, 1990, in an amount determined by the City Council of the City of Lake Elsinore through the application of the appropriate Special Tax for "Developed Property" and "Undeveloped Property" as described below. All of the property in CFD No. 88 -3, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. Definitions. The terms hereinafter set forth have the following meanings: "Act" means the Mello -Roos Community Facilities Act of 1962, being Chapter 2.5, Division 2 of Title 5 of the Government Code of the State of California. "Approved Undeveloped Property" means all Taxable Property in CFD No. 88 -3 as of July I of any year not classified as Developed Property, for which a final tract map has been recorded as of March 1 of the previous Fiscal Year. "Assigned Special Tax" means the Special Tax for each Land Use Class, as determined by reference to Table I and Table II of Section C below. "Base Maximum Special Tax" means an amount equal to $0.19 per square foot of Assessor's Parcel applicable to each parcel of Developed, Approved Undeveloped and Raw Undeveloped Property within Special Tax Area A in Fiscal Year 1990 -91, and an amount equal to $0.05 per square foot of Assessor's Parcel applicable to each parcel of Developed, Approved Undeveloped and Raw Undeveloped Property within Special Tax Area B in Fiscal Year 1990 -91. "City" means the City of Lake Elsinore. "Council" means the City Council of the City of Lake Elsinore. "Developed Property" means all Taxable Property in CFD No. 88 -3 as of July 1 of any year for which a foundation building permit has been issued as of March 1 of the previous Fiscal Year. "Facilities" means any improvements or facilities designated by the Council with an estimated useful life of five years or longer which are eligible for financing under the provisions of the Act. "Fiscal Year" means the period starting July 1 and ending the following June 30. "Land Use Class" means any of the categories listed in Table I or Table II in Section C below to which a parcel is assigned consistent with the provisions hereof. B -1 "Maximum Assigned Special Tax" for Approved Undeveloped Property and Raw Undeveloped Property in Fiscal Year 1990 -91 means an amount equal to $9,207 per acre in Special Tax Area A and $2,353 per acre in Special Tax Area B. "Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C, that can be levied by the council in any Fiscal Year for each class of Developed Property and for Approved and Raw Undeveloped Property, as applicable. "Raw Undeveloped Property" means all Taxable Property in CFD No. 88 -3 not classified as Developed Property or Approved Undeveloped Property. "Special Tax" means the Special Tax for each Land Use Class, determined in accordance with Section C below, that can be levied by the Council in any Fiscal Year. "Special Tax Requirement" means the amount, to be determined annually by the Council, necessary to pay the authorized costs and expenses of CFD No. 88 -3 including those necessary to administer, the bonds, collect and administer the Special Taxes, and administer CFD No. 88 -3 (which total administrative amount shall be separately stated by the Council in each levy), to pay current debt service on the bonds, to accumulate funds for future debt service (but only in years in which no revenues are collected from Undeveloped Property), to pay amounts delinquent on the bonds (or to become delinquent based upon past Special Tax delinquencies), to replenish the reserve fund to its proper level (including payments to be made from the reserve fund based upon past Special Tax delinquencies), to compensate for anticipated Special Tax delinquencies (based upon past delinquency experience), to pay directly for Facilities or to accumulate funds for that purpose, and to pay for all authorized services. "Taxable Property" means all of the Assessor's Parcels within the boundaries of CFD No. 88 -3 which are not exempt from the Special Tax pursuant to law or Section E below. B. Assignment to Land Use Categories. On July 1 of each year, all Taxable Property within CFD No. 88 -3 shall be categorized either as Developed Property, Approved Undeveloped Property or Raw Undeveloped Property, and shall be subject to tax in accordance with the rate and method of apportionment determined pursuant to Sections C and D below. For purposes of determining the applicable Maximum Special Tax pursuant to Section C and depending on its location in Special Tax Area A or B, Developed Property shall be assigned to one of the classes designated in Table I or Table II below. Single Family Detached Residential Developed Property shall be assigned to Classes 1 through 4 based on the square footage of the dwelling unit, exclusive of garages or other structures not used as living space, to be constructed on an Assessor's Parcel as set forth in the original building permit issued for such property. Attached Residential Developed Property shall be assigned to Class 5. Commercial /Industrial Developed Properties shall be assigned to Class 6. The square footage of a Commercial/Industrial building shall be computed from the gross square footage for the building(s) as reflected in the building plans upon which the building permit(s) for such parcel was issued. The acreage of a Commercial /Industrial parcel shall be determined by reference to the then current Assessor's Parcel Map and, if appropriate, to the most current parcel map or other subdivision tract map recorded with the office of the Recorder for Riverside County. B -2 C. Maximum Special Tax Rate Developed Property The Maximum special 'Fax for an Assessor's Parcel classified as Developed Property in Classes 1 through 6 shall be the greater of (i) the amount derived by multiplying the square footage of such Assessor's Parcel times the Base Maximum Special Tax or (ii) the Assigned Special Tax determined by reference to Table I or Table II below. For purposes of this Section C, the acreage or square footage of an Assessor's parcel shall be determined by reference to the then current Assessor's Parcel Map and, if appropriate, to the most current parcel map or other subdivision tract map recorded with the office of the Recorder for Riverside County. Notwithstanding the above, for Attached Residential Developed Property, a portion of the acreage in a recorded tract map shall be taxed as Undeveloped Property if building permits for one or more, but not all, of the units in the approved condominium or site plan for that map have been issued. The acreage in a recorded tract map to be taxed as Undeveloped Property shall equal the proportion of the associated condominium or site plan's approved units for which building permits have not been issued, multiplied by the total acreage within that tract map. Notwithstanding Section E below, for purposes of computing the Base Maximum Special Tax for each dwelling unit located on parcels of Attached Residential Developed Property that are owned by a homeowner's or property owner's association, the square footage of the entire Assessor's Parcel shall be included to determine the Base Maximum Special Tax. In making the computations set forth in this Section C (1) and in determining the Maximum Special Tax which may be levied in any Fiscal Year, on July 1, 1991 and on each July 1 thereafter, the Base Maximum Special Tax and the Assigned Special Tax for each class set forth in Table I and Table II shall be increased by an amount equal to 2.0% of the amount in effect for the previous Fiscal Year TABLE I ASSIGNED SPECIAL TAXES ON DEVELOPED PROPERTY IN SPECIAL TAX AREA A OF COMMUNITY FACILITIES DISTRICT NO. 88 -3 (FISCAL YEAR 1990 -91) PER UNIT (RESIDENTIAL) AND PER ACRE (COMMERCIAL /INDUSTRIAL) (ALL SPECIAL TAX AREA A PROPERTIES ARE IDENTIFIED ON ATTACHED MAP AND IN THE "NOTICE OF SPECIAL TAX LIEN" TO BE RECORDED IN CONJUNCTION WITH THIS DISTRICT) Land Use Density or Assigned Special Tax Class Description Square Footage (Fiscal Year 1990 -91) 1 Single Family Detached 2,800 or more $1,969 per unit 2 Single Family Detached 2,300 - 2,799 SF $1,688 per unit 3 Single Family Detached 1,700 - 2,299 SF $1,406 per unit 4 Single Family Detached Less than 1,700 SF $1,126 per unit 5 Attached Homes Not Applicable $901 per unit 6 Commercial /Industrial Not Applicable $8,277 per acre The Maximum Special tax may exceed the Assigned Special Tax for some Assessor's Parcels within each class if the Base Maximum Special Tax alternative is used ($0.19 per square foot of Assessor's Parcel). The Base Maximum Special Tax would be applied under the Fourth step of Section D (below) to lots larger than a certain size for each class of Single Family Detached Property. Single Family Detached lots, larger than the following minimum sizes, would be taxed at the Base Maximum Special Tax: B -3 Class 1: 10,363 Sq. Ft. Class 3: 7,400 Sq. Ft, Class 2: 8,884 Sq. Ft. Class 4: 5,926 Sq. Ft, The Base Maximum Special Tax would also apply to Class 5 if units are built at densities less than 9.18 units per acre and to all Class 6 parcels. TABLE II ASSIGNED SPECIAL TAXES ON DEVELOPED PROPERTY IN SPECIAL TAX AREA B OF COMMUNITY FACILITIES DISTRICT NO. 88 -3 (FISCAL YEAR 1990 -91) PER UNIT (RESIDENTIAL) AND PER ACRE (COMMERCIAL /INDUSTRIAL) (ALL SPECIAL TAX AREA B PROPERTIES ARE IDENTIFIED ON ATTACHED MAP AND IN THE "NOTICE OF SPECIAL TAX LIEN" TO BE RECORDED IN CONJUNCTION WITH THIS DISTRICT) Land Use Density or Assigned Special Tax Class Description Square Footage (Fiscal Year 1990 -91) 1 Single Family Detached 2,800 or more $1,969 per unit 2 Single Family Detached 2,300 - 2,799 SF $1,688 per unit 3 Single Family Detached 1,700 - 2,299 SF $1,406 per unit 4 Single Family Detached Less than 1,700 SF $1,126 per unit 5 Attached Homes Not Applicable $901 per unit 6 Commercial /Industrial Not Applicable $2,178 per acre The Maximum Special Tax may exceed the Assigned Special Tax for some Assessor's Parcels within each class if the Base Maximum Special Tax alternative is used ($0.05 per square foot of Assessor's Parcel). The Base Maximum Special Tax would be applied under the Fourth step of Section D (below) to lots larger than a certain size for each class of Single Family Detached Property. Single Family Detached lots, larger than the following minimum sizes, would be taxed at the Base Maximum Special Tax: Class 1: 39,380 Sq. Ft. Class 3: 28,120 Sq. Ft. Class 2: 33,760 Sq. Ft. Class 4: 22,520 Sq. Ft. The Base Maximum Special Tax would also apply to Class 5 if traits are built at densities less than 2.41 traits per acre and to all Class 6 parcels. 2. Undeveloped Property The Maximum Special Tax for an Assessor's Parcel classified as Raw Undeveloped Property or Approved Undeveloped Property shall be the greater of (i) the amount derived by multiplying the square footage of such Assessor's Parcel by the Base Maximum Special Tax (as applicable for each Special Tax Area) or (ii) the Maximum Assigned Special Tax Rate. The Assigned Special Tax for Approved Undeveloped Property shall be $990 per lot in both Special Tax Area A and Special Tax Area B except for recorded lots over 20,000 square feet, for which the Assigned Special Tax shall be $2,157 per acre. The Maximum Assigned Special Tax for Approved Undeveloped Property and Raw Undeveloped Property shall be $9,207 per acre in special Tax Area A and $2,353 per acre in Special Tax Area B. In malting the computation set forth in Section C (2) and in determining the Assigned Special Tax for Approved Undeveloped Property and the Maximum Assigned Special Tax on Raw and Approved Undeveloped Property which may be levied in any Fiscal Year, on July 1, 1991 and on any July 1 B -4 thereafter, the Assigned Special Tax for Approved Undeveloped Property and the Maximum Assigned Special Tax for Raw and Approved Undeveloped Property shall be increased by an amount equal to 2.0% of the amount in effect for the previous Fiscal Year. D. Method of Apportionment of the Special Tax to Developed Property and Undeveloped Property. Starting in Fiscal Year 1990 -91 and for each following Fiscal Year, the Council shall determine the amount of money to be collected from Taxable Property in CFD No. 88 -3 in the Fiscal Year (the Special Tax Requirement). The Council shall levy the Special Tax as follows until the amount of the levy equals the Special Tax Requirement: First: The Special Tax shall be levied on each parcel of Developed Property, exclusive of property exempt from Special Taxes pursuant to Section E below, in equal percentages (up to 100 %) of the Assigned Special Tax Rate for each class of Developed Property for such Fiscal Year determined by reference to Table I and Table II; Second: If additional monies are needed after the first step has been completed, the Special Tax shall be levied on each parcel of Approved Undeveloped Property, exclusive of Undeveloped Property exempted by law or by the provisions of Section E (below), in equal percentages (up to 100 %) of the Assigned Special Tax; Third: If additional monies are needed after the first two steps have been completed, then the Special Tax shall be levied on each parcel of Raw Undeveloped Property in equal percentages (up to 100 %) of the Maximum Assigned Special Tax for Raw Undeveloped Property, exclusive of Undeveloped Property exempted by law or by the provisions of Section E below, up to, for Special Tax Area A, 91.47% of the Special Tax Requirement (i.e. net of revenues collected in the fast and second steps above) and, for Special Tax Area B, 8.53% of the Special Tax Requirement (i.e. net of revenues collected in the fast and second steps above); Fourth: If additional monies are needed after the first three steps have been completed, the Special Tax shall be levied on each parcel of Approved Undeveloped Property, exclusive of Undeveloped Property exempted by law or by the provisions of Section E (below), in equal percentages (up to 100 %) of the Maximum Assigned Special Tax for Approved Undeveloped Property; Fifth: If additional monies are needed after the first four steps have been completed, then the levy of the Special Tax on each parcel of Developed Property whose Maximum Special "Tax is determined through the application of the Base Maximum Special Tax Rats shall be increased in equal percentages from the Assigned Special Tax Rate up to the Maximum Special Tax Rate for each such parcel for such Fiscal Year; Sixth: If additional monies are needed after the first five steps have been completed, then the Special Tax shall be levied proportionately on each parcel of Developed or Undeveloped Property owned by a Homeowners' Association which has not been exempted from the Special Tax pursuant to Section E, up to the Maximum Special Tax for Undeveloped Property; and Seventh: If additional monies are needed after the first six steps have been completed, then the Special Tax shall be levied proportionately on each parcel of Developed or Undeveloped Property conveyed or irrevocably offered to a public agency which has not been exempted from the Special "Tax pursuant to Section E, up to the Maximum Special Tax for Undeveloped Property. B -5 E. Exemptions. Special Tax Area A A Special Tax shall not be imposed on up to 156.50 acres of Undeveloped Property conveyed or irrevocably offered to a public agency or conveyed to a Homeowners' Association. The acres exceeding such total of 156.50 acres shall be taxed consistent with Developed or Undeveloped Property to the extent set forth in Steps Six and Seven of Section D above. Under no circumstances shall the Council impose a Special Tax on land which is a public right of way or which is an unmanned utility property utilized for the provision of services to the public or a property encumbered with public or utility easements making impractical its utilization for other than the purposes set forth in the easement. 2. Special Tax Area B A Special Tax shall not be imposed on up to 486 acres of Undeveloped Property conveyed or irrevocably offered to a public agency or conveyed to a Homeowners' Association. The acres exceeding such total of 486 acres shall be taxed consistent with Developed or Undeveloped Property to the extent set forth in Steps Six and Seven of Section D above. Under no circumstances shall the Council impose a Special Tax on land which is a public right of way or which is an unmanned utility property utilized for the provision of services to the public or a property encumbered with public or utility easements making impractical its utilization for other than the purposes set forth in the easement. F. Review /AppealCommittee. The Council shall establish as part of the proceedings and administration of CFD No. 88 -3 a special three - member Review /Appeal Committee. Any landowner or resident who feels that the amount of the Special Tax, as to their parcel, is in error may file a notice with the Review /Appeal Committee appealing the amount of the Special Tax levied on such parcel. The Review /Appeal Committee shall interpret this Rate and Method of Apportionment of the Special Tax and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals, as herein specified. The decision of the Review /Appeal Committee shall be final and binding as to all persons. G. Manner of Collection. The special taxes for CFD No. 88 -3 will be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 88 -3 may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations. In the event of a delinquency, CFD No. 88- 3 will pursue foreclosure in a timely manner. B -6 APPENDIX C FORM OF BOND COUNSEL OPINION [Closing Date] Lake Elsinore Public Financing Authority Lake Elsinore, California Re: $ Lake Elsinore Public Financing Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3) 2015 Series B Ladies and Gentlemen: We have examined the Constitution and the laws of the State of California, a certified record of the proceedings of the Lake Elsinore Public Financing Authority (the "Authority ") taken in connection with the issuance by the Authority of its Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3) 2015 Series B (the "Bonds ") and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations and certifications of fact made by the Authority, the City of Lake Elsinore (the "City "), the District, the initial purchaser of the Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. The Bonds have been issued pursuant to the Marks Roos Local Bond Pooling Act of 1985, as amended (Article 4 of Chapter 5 of Division 7 of Title I of the California Government Code) (the "Act "), that certain Indenture of Trust dated 1, 2015 (the "Indenture "), by and between the Authority and MUFG Union Bank, N.A., as Trustee, approving the Indenture. The Bonds are dated as of their date of delivery and mature on the dates and in the amounts set forth in the Indenture. Interest on the Bonds is payable on the dates and at the rates per annum set forth in the Indenture. The Bonds are registered Bonds in the forms set forth in the Indenture and are redeemable in the amounts, at the times and in the manner set forth in the Indenture. Capitalized terms not defined herein shall have the meaning set forth in the Indenture. Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that: (1) The Bonds have been duly and validly authorized by the Authority and are legal, valid and binding limited obligations of the Authority, enforceable in accordance with their terms and the terms of the Indenture, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California. (2) The Indenture has been duly executed and delivered by the Authority. The Indenture creates a valid pledge of the Revenues and Redemption Revenues to secure the Bonds and the amounts on deposit in certain funds and accounts established under the Indenture to secure the Bonds, as and to the extent provided in the Indenture. The Indenture is enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California; provided, however, that we express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum or waiver provisions contained in the Indenture. (3) Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) 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 imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest (and original issue discount) may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. (4) Interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. (5) The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such Bond. constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond owner will increase the Bond owner's basis in the applicable Bond. Original issue discount that accrues to the Bond owner is excluded from the gross income of such owner for federal income -tax- purposes, is not -an -item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations (as described in paragraph 3 above), and is exempt from State of California personal income tax. (6) The amount by which a Bond owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Internal Revenue Code of 1986, as amended (the "Code "); such amortizable Bond premium reduces the Bond owner's basis in the applicable Bond (and the amount of tax - exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the owner. The opinions expressed in paragraphs (3) and (5) above as to the exclusion from gross income for federal income tax purposes of interest and original issue discount on the Bonds is subject to the condition that the Authority, the City and the District comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might - cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The Authority, the City and the District each has covenanted to C -2 comply with all such requirements. Except as set forth in paragraphs (3) through (6) above, we express no opinion as to any tax consequences related to the Bonds. Certain requirements and procedures contained or referred to in the Indenture, the Tax Certificate and the Fiscal Agent Agreement may be changed, and certain actions may be taken, under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of counsel nationally recognized in the area of tax- exempt obligations. We express no opinion as to the exclusion of interest (and original issue discount) on the Bonds from gross income for federal income tax purposes on and after the date on which any such change occurs or action is taken upon the advice or approval of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Our engagement as Bond Counsel terminates upon the issuance of the Bonds and we have not undertaken to determine, or to inform any person, whether any such actions or events are taken (or not taken) or do occur (or do not occur). The opinions expressed herein are based upon our analysis and interpretation of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement relating to the Bonds or other offering material relating to the Bonds and expressly disclaim any duty to advise the owners of the Bonds with respect to matters contained it) the Official Statement. Respectfully submitted C -3 APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT D -1 APPENDIX E DTC AND THE BOOK -ENTRY -ONLY SYSTEM The information in this section concerning DTC and DTC's book -entry only system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no 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 ofprincipal, 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. 1. The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository for the Bonds (the "Securities "). The Securities will be issued as frilly- registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully- registered Security certificate will be issued for each maturity of the Securities in the aggregate principal amount of such maturity, and will be deposited with DTC. 2. DTC, the world's largest securities depository, is a limited- purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ( "Direct Participants ") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust. & Clearing Corporation ( "DTCC "). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC 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. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security (`Beneficial Owner ") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations E -1 providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book -entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 6.., -: Redemption notices shall be sent to DTC. If less than all of the Securities within 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. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Principal, redemption price and interest payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC'a receipt of funds and corresponding detail information from the District or the Trustee, 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 Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest 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 Trustee, disbursement of E -2 such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. If applicable, a Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to tender /remarketing agent. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book -entry credit of tendered Securities to tender /remarketing agent's DTC account. 10. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 11. The Authority may decide to discontinue use of the system of book -enby -only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. E -3 LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE REFUNDING BONDS (COMMUNITY FACILITIES DISTRICT NO. 88 -3), 2015 SERIES B BOND PURCHASE AGREEMENT ,2015 Lake Elsinore Public Financing Authority 130 South Main Street Lake Elsinore, California 92530 City of Lake Elsinore Community Facilities District No. 88 -3 130 South Main Street Lake Elsinore, California 92530 Ladies and Gentlemen Stifel, Nicolaus & Company, Incorporated, as underwriter (the "Underwriter "), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (this "Purchase Agreement ") with the Lake Elsinore Public Financing Authority (the "Authority") and the City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore) (the "Community Facilities District'), which upon acceptance will be binding upon the Underwriter, the Authority and the Community Facilities District. The agreement of the Underwriter to purchase the Bonds (as hereinafter defined) is contingent upon the Authority purchasing the Special Tax Bonds (as hereinafter defined) from the Community Facilities District, and upon the Authority and the Community Facilities District satisfying all of the obligations imposed upon them under this Purchase Agreement. This offer is made subject to the Authority's and the Community Facilities District's acceptance by the execution of this Purchase Agreement and its delivery to the Underwriter at or before 8:00 P.M., local time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the Authority and the Community Facilities District at any time prior to the acceptance hereof by the Authority and the Community Facilities District. All capitalized terms used herein, which are not otherwise defined, shall have the meaning provided for such terms in the Indenture of Trust, dated as of 1, 2015 (the "Indenture "), by and between the Authority and MUFG Union Bank, N.A., as trustee (the "Trustee "). Purchase, Sale and Delivery of the Bonds. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein: (i) the Underwriter hereby agrees to purchase from the Authority and the Authority hereby agrees to sell to the Underwriter all (but not less than all) of the $ aggregate principal amount of the Lake Elsinore Public Financing Authority Local Agency Revenue Refunding Bonds, (Community Facilities District No. 88 -3) 2015 Series B (the "Bonds "), dated the Closing Date (as hereinafter defined), bearing interest at the rates and maturing on the dates and in the principal amounts set forth in Exhibit A hereto; and (ii) the Authority hereby agrees to purchase from the Community Facilities District special tax refunding bonds (the "Special Tax Bonds ") in the amounts listed on Exhibit B hereto, and the Community Facilities District hereby agrees to sell all (but not less than all) of the Special Tax Bonds to the Authority, bearing interest at the rates and maturing on the dates and in the principal amounts set forth in Exhibit B hereto. The purchase price for the Bonds shall be $ (being 100% of the aggregate principal amount thereof less net original issue discount of $ and less an Underwriter's discount of $ . The purchase price for the Special Tax Bonds shall be $ (being 100% of the aggregate principal amount thereof less an original purchaser's discount of $�. The Underwriter agrees to make a bona fide public offering of all of the Bonds initially at the public offering prices (or yields) set forth in Exhibit A attached hereto and incorporated herein by reference. Subsequent to the initial public offering, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds, provided that the Underwriter shall not change the interest rates set forth in Exhibit A. The Bonds will be offered and sold to certain dealers at prices lower than such initial offering prices. The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from the Revenues and Redemption Revenues as provided in the Indenture, the Preliminary Official Statement (as hereinafter defined), and the Marks -Roos Local Bond Pooling Act of 1985, as amended, being Article 4, Chapter 5, Division 7, Title 1 of the Government Code of the State of California (the "Bond Law "). The issuance of the Bonds has been duly authorized by the Authority pursuant to a resolution (the "Authority Resolution ") adopted by the Board of Directors of the Authority on April _, 2015. The net proceeds of the Bonds will be used to purchase the Special Tax Bonds. The Special Tax Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from special taxes pledged thereto as provided in the fiscal agent agreement dated as of January 1, 2008 (the "Original Fiscal Agent Agreement "), as amended by the First Amendment to ,Fiscal Agent Agreement (the "First Amendment "), dated as of February 1, 2010, the Second Amendment to Fiscal Agent Agreement (the "Second Amendment'), dated as of July 1, 2013, and as further amended by the Third Amendment to Fiscal Agent Agreement, dated as of , 1, 2015 (the "Third Amendment" and, together with the Original Fiscal Agent Agreement, the First Amendment and the Second Amendment, the "Special Tax Bonds Fiscal Agent Agreement "). The Special Tax Bonds are issued under the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the "Community Facilities District Act "). The issuance of the Special Tax Bonds has been duly authorized by the City Council of the City of Lake Elsinore (the "City Council ") as the legislative body for the Community Facilities District, pursuant to a resolution (the "Community Facilities District Resolution of Issuance ") adopted by the City Council on April , 2015. The net proceeds of the Special Tax Bonds will be used, as indicated in the Special Tax Bonds Fiscal Agent Agreement, for the following purposes: (1) refund the District's outstanding Special Tax Bonds 2008 Series (the "Prior Bonds "); (2) paying costs of issuance of the Bonds and the Special Tax Bonds; and (3) fund a reserve fund. A. The Authority and the Community Facilities District hereby acknowledge that the Underwriter is entering into this Purchase Agreement in reliance on the representations, warranties and agreements made by the Authority and the Community Facilities District herein, and 2 the Authority shall take all action necessary to enforce its rights hereunder for the benefit of the Underwriter and shall immediately notify the Underwriter if it becomes aware that any representation, warranty or agreement made by the Community Facilities District herein is incorrect in any material respect. The Authority and the Community Facilities District acknowledge and agree that (i) the purchase and sale of the Bonds pursuant to this Purchase Agreement is an arm's- length commercial transaction among the Authority, the Community Facilities 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 Authority or the Community Facilities District, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Authority or the Community Facilities 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 Authority or the Community Facilities District on other matters) or (b) any other obligations to the Authority or the Community Facilities District with respect to the offering contemplated hereby, except the obligations expressly set forth in this Purchase Agreement or otherwise imposed by law, (iv) the Underwriter has financial interests that differ from those of the Authority and the Community Facilities District and (v) the Authority and the Community Facilities District have consulted their own legal, financial and other advisors to the extent they have deemed appropriate in connection with this transaction. The Authority and the Community Facilities District, acknowledge that each 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 ( "NISR13"). The Authority acknowledges and represents that it has engaged Urban Futures Incorporated as its municipal advisor (as defined in Securities and Exchange Commission Rule 1513al) and will rely solely on the financial advice of Urban Futures Incorporated with respect to the Bonds. B. Pursuant -to -the authorization of the Authority, the Underwriter has distributed copies of the Preliminary Official Statement dated , 2015, relating to the 'Bonds, which, together with the cover page, inside cover page and appendices thereto is herein called the "Preliminary Official Statement." By its acceptance of this Purchase Agreement, the Authority and the Community Facilities District hereby ratify the use by the Underwriter of the Preliminary Official Statement, and the Authority agrees to execute a final official statement relating to the Bonds (the "Official Statement ") which will consist of the Preliminary Official Statement with such changes as may be made thereto, with the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, the Community Facilities District's and the Authority's Bond Counsel (`Bond Counsel "), Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel (`Disclosure Counsel "), and the Underwriter, and to provide copies thereof to the Underwriter as set forth in Section 2(0) hereof. The Authority and the Community Facilities District hereby authorize and require the Underwriter to use and promptly distribute, in connection with the offer and sale of the Bonds, the Preliminary Official Statement, the Official Statement and any supplement or amendment thereto. The Authority and the Community Facilities District further authorize the Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Indenttrre, the Special Tax Bonds Fiscal Agent Agreement, this Purchase Agreement and all information contained herein, and all other documents, certificates and statements furnished by or on behalf of the Authority or the Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement. -- 3 C. To assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2- 12(b)(5) (the "Rule "), the Community Facilities District will undertake for and on behalf of the Authority pursuant to the Continuing Disclosure Agreement, in the form attached to the Official Statement as Appendix D (the "Continuing Disclosure Agreement'), to provide annual reports and notices of certain enumerated events. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement. D. Except as the Underwriter, the Community Facilities District and the Authority may otherwise agree, the Authority will deliver to the Underwriter, at the offices of Bond Counsel in Los Angeles, California, or at such other location as may be mutually agreed upon by the Underwriter, the Community Facilities District and the Authority, the documents hereinafter mentioned; and the Authority will deliver to the Underwriter through the facilities of The Depository Trust Company ( "DTC ") in New York, New York, the Bonds, in definitive form (all Bonds bearing CUSIP numbers), duly executed by the Authority and authenticated by the Trustee in the manner provided for in the Indenture and the Bond Law at 8:00 a.m. California time, on , 2015 (the "Closing Date "), and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in paragraph (A) of this Section by wire transfer, payable in federal or other immediately available funds (such delivery and payment being herein referred to as the "Closing "). The Bonds shall be in fully registered book -entry form (which may be typewritten) and shall be registered in the name of Cede & Co., as nominee of DTC. E. Except as the Authority and the Underwriter may otherwise agree, the Community Facilities District will deliver to the Authority and the Underwriter, at the offices of Bond Counsel in Los Angeles, California, or at such other location as may be mutually agreed upon by the Underwriter, the Community Facilities District and the Authority, the documents hereinafter mentioned and the Community Facilities District will deliver to the Authority, at a location to be designated by the Authority, the Special Tax Bonds, in definitive form, duly executed by the Community Facilities District and authenticated by the Fiscal Agent in the manner provided for in the Special Tax Bonds Fiscal Agent Agreement and the Community Facilities District Act, no later than 8:00 a.m., California time, on the Closing Date, and the Authority will accept such delivery and pay or cause to be paid the purchase price of the Special Tax Bonds as set forth in paragraph (A) above by wire transfer or by other means acceptable to the Underwriter, in any case payable in federal or other immediately available funds (such delivery and payment being herein referred to as the "Closing "). The Special Tax Bonds shall be in fully registered form and shall be registered in the name of the Fiscal Agent. 2. Representations Warranties and Covenants of the Authority. The Authority represents, warrants and covenants to the Underwriter that: A. The Authority is a joint exercise of powers authority, duly organized and existing under the Constitution and laws of the State of California (the "State "), and formed pursuant to Articles I through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of tine Government Code (the "JPA Act'), with full right, power and authority: (i) to enter into this Purchase Agreement; (ii) to enter into the Indenture and the Escrow Agreement, dated as of 1, 2015 (the "Escrow Agreement'), by and among the Authority, the Community Facilities District and MUFG Union Bank, N.A., as escrow agent (the "Escrow Agent'); (iii) to adopt the Authority Resolution authorizing the issuance of the Bonds and entry into this Purchase Agreement, the Escrow Agreement and the Indenture and to take all other actions on the part of the Authority relating thereto (the "Authority Proceedings "); (iv) to issue, sell and deliver the Bonds to the Underwriter as 4 provided herein; (v) to purchase the Special Tax Bonds; and (vi) to carry out and consummate the transactions on its part contemplated by this Purchase Agreement, the Escrow Agreement, the Indenture, and the Official Statement. The Indenture, the Bonds, the Escrow Agreement and this Purchase Agreement are collectively referred to herein as the "Authority Documents." B. By all necessary official action of the Authority, the Authority has duly authorized and approved the execution and delivery by the Authority of, and the performance by the u:^ rty of the obligafions on : ts pal i coritaiiied irl, the Authoriry Documents, and 'has approved the use by the Underwriter of the Preliminary Official Statement and 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 Authority Documents will constitute the legally valid and binding obligations of the Authority enforceable upon the Authority 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. To the best of the Authority's knowledge, the Authority has complied, and will at the Closing Date be in compliance in all respects, with the terms of the Authority Documents that are applicable to the Authority. C. The information in the Preliminary Official Statement and in the Official Statement relating to the Authority and the Bonds (other than statements pertaining to the book -entry system, as to which no view is expressed), is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and, upon delivery and up to and including 25 days after the End of the Underwriting Period (as defined in paragraph (D) below), the Official Statement will be amended and supplemented so as to contain no .misstatement of any material fact or omission of any statement necessary to make the statements contained therein, in the light of the circumstances in which such statements were made, not misleading. D. Up to and including 25 days after the End of the Underwriting Period (as defined below), the Authority will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement and will not effect or consent to any such amendment or supplement without the consent of the Underwriter, which consent will not be unreasonably withheld. The Authority will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise materially affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. As used herein, the term "End of the Underwriting Period" means the later of such time as: (i) the Bonds are delivered to the Underwriter; or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives notice to the contrary, the End of the Underwriting Period shall be deemed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the Authority and the Community Facilities District at or prior to the Closing Date, and shall specify a date (other than the Closing Date) to be deemed the "End of the Underwriting Period." E. As of the time of acceptance hereof and as of the Closing Date, except as otherwise disclosed in the Official Statement, the Authority is not, and as of the Closing Date, will not be, in breach of or in default under any applicable constitutional provision, law or administrative 5 rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority is a party or is otherwise subject; and, to the Authority's knowledge, 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 an adverse effect on the Authority's ability to perform its obligations under the Authority Documents; and, as of such times, except as disclosed in the Official Statement, the authorization, execution and delivery of the Authority Documents and compliance by the Authority with the provisions of 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 United States, or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the Authority (or any of its officers in their respective capacities as such) is subject, or by which it or any of its properties is bound; 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 terns of any such law, regulation or instrument, except as may be provided by the Authority Documents. F. At the time of acceptance hereof there is, and as of the Closing Date, there will be 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 (notice of which has been served on the Authority) or to the best knowledge of the Authority threatened, in which any such Action: (i) in any way questions the corporate existence of the Authority or the titles of the officers of the Authority to their respective offices; (ii) affects, contests or seeks to prohibit, restrain or enjoin the issuance or delivery of any of the Bonds, or the payment or collection of Revenues (as defined in the Indenture) or 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 Authority Documents or the consummation of the transactions on the part of the Authority contemplated thereby; (iii) contests the exclusion of the interest on the Bonds from federal or state income taxation or contests the powers of the Authority which may result in any material adverse change relating to the financial condition of the Authority; or (iv) 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 required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and, as of the time of acceptance hereof, there is, and as of the Closing Date, there will be no known basis for any action, suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) of this sentence. G. The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter and at the expense of the Underwriter as the Underwriter may reasonably request in order: (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate; and (ii) to 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 required for the distribution of the Bonds, provided; however, that the Authority 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. 6 H. The Authority Documents conform as to form and tenor to the descriptions thereof contained in the Official Statement. The Authority represents that the Bonds, when issued, executed and delivered in accordance with the Indenture and sold to the Underwriter as provided herein, will be validly issued and outstanding obligations of the Authority, entitled to the benefits of the Indenture. The Indenture creates a valid pledge of the moneys in certain funds and accounts established pursuant to the Indenture, subject in all cases to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. [Reserved.] J. The Authority has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the Authority is a bond issuer whose arbitrage certifications may not be relied upon. K. Any certificate signed by any authorized officer of the Authority 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 Authority to the Underwriter as to the statements made therein. L. The Authority will apply the proceeds of the Bonds in accordance with the Indenture and as described in the Preliminary Official Statement and Official Statement. M. Between the date of this Authority will not offer or issue any bonds, no previously disclosed to the Underwriter. Purchase Agreement and the Closing Date, the es or other obligations for borrowed money not N. Until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or, to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon and premium, if any, to maturity or to the date of redemption if redeemed prior to maturity, the Authority will faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Indenture. O. The Preliminary Official Statement was deemed final by a duly authorized officer of the Authority prior to its delivery to the Underwriter, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of the Rule. The Authority hereby covenants and agrees that, within seven (7) business days from the date hereof, or upon reasonable written notice from the Underwriter within sufficient time to accompany any confirmation requesting payment from any customers of the Underwriter, the Authority shall cause a final printed form of the Official Statement to be delivered to the Underwriter in sufficient quantity to comply with paragraph (b)(4) of the Rule and Rules G -12, G -15, G -32 and G -36 of the Municipal Securities Rulemaking Board. The Authority hereby approves the preparation and distribution of the Official Statement, consisting of the Preliminary Official Statement with such changes as are noted thereon and as may be made thereto, with the approval of Bond Counsel, Disclosure Counsel and the Underwriter, from time to time prior to the Closing Date. The Authority hereby ratifies any prior use of and authorizes the future use by the Underwriter, in connection with the offering and sale of the Bonds, of the Preliminary Official Statement, the Official Statement, this Purchase Agreement and all information contained herein, and all other documents, certificates and written statements furnished by the Authority to the Underwriter in connection with the transactions contemplated by this Purchase Agreement. The execution and delivery of this Purchase Agreement by the Authority shall constitute a representation to the Underwriter that the representations and warranties contained in this Section 2 are true as of the date hereof. 3. [Reserved]. 4. Representations, Warranties and Covenants of the Community Facilities District. The Community Facilities District represents, warrants and covenants to the Underwriter on behalf of itself and the City of Lake Elsinore (the "City ") that: A. The City is duly organized and validly existing as a general law city under the Constitution and laws of the State of California and has duly authorized the formation of the Community Facilities District pursuant to resolutions duly adopted by the City Council (the "Community Facilities District Formation Resolution" arid, together with the Community Facilities District Resolution of Issuance, the "Community Facilities District Resolutions ") and the Community Facilities District Act. The City Council, as the legislative body of the City and the Community Facilities District, has duly adopted the Community Facilities District Formation Resolution, and has caused to be recorded in the real property records of the County of Riverside, notices of special tax lien, and any required amendments thereof (collectively, the "Notice of Special Tax Lien ") (the Community Facilities District Formation Resolution and Notice of Special Tax Lien being collectively referred to herein as the "Formation Documents "), and has duly adopted a Community Facilities District Resolution of Issuance. Each of its Formation Documents remains in full force and effect as of the date hereof and has not been amended. The Community Facilities District is duly organized and validly existing as a Community Facilities District under the laws of the State of California. The Community Facilities District has, and at the Closing Date will have, as the case may be, full legal right, power and authority: (i) to execute, deliver and perform its obligations under this Purchase Agreement, the Escrow Agreement and the Special Tax Bonds Fiscal Agent Agreement, and to carry out all transactions contemplated by each of such agreements; (ii) to issue, sell and deliver its Special Tax Bonds to the Authority as provided herein; (iii) to enter into the Continuing Disclosure Agreement; and (iv) to carry out, give effect to and consummate the transactions contemplated by the Formation Documents, the Special Tax Bonds Fiscal Agent Agreement, Special Tax Bonds, the Escrow Agreement, this Purchase Agreement and the Official Statement. This Purchase Agreement, the Special Tax Bonds Fiscal Agent Agreement, the Special Tax Bonds, the Escrow Agreement and the Continuing Disclosure Agreement are collectively referred to herein as the "Community Facilities District Documents." B. The Community Facilities District and the City, as applicable, have each complied, and will at the Closing Date be in compliance in all material respects, with the Formation Documents and the Community Facilities District Documents, and any immaterial noncompliance by the Community Facilities District and the City, if any, will not impair the ability of the Community Facilities District and the City, as applicable, to cagy out, give effect to or consummate the transactions contemplated by the foregoing. From and after the date of issuance of its Special Tax, 8 the Community Facilities District will continue to comply with the covenants of the Community Facilities District contained in the Community Facilities District Documents. C. Except as described in the Preliminary Official Statement, the Community Facilities District is not, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, and the performance of its obligations under the Community Facilities District Documents and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed by the Community Facilities District pursuant to this Purchase Agreement, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the Community Facilities District of its obligations under the Community Facilities District Documents or the performance of the conditions precedent to be performed by the Community Facilities District pursuant to this Purchase Agreement. D. Except as may be required under the "blue sky" or other securities laws of any jurisdiction, 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, the performance by the Community Facilities District of its obligations under the Community Facilities District Documents, and the performance of the conditions precedent to be- performed -by the Community Facilities District pursuant to this Purchase Agreement, have been or will be obtained at the Closing Date and are or will be in full force and effect at the Closing Date. E. The Community Facilities District Documents conform as to form and tenor to the descriptions thereof contained in the Official Statement. F. The Special Tax Bonds are payable from the Special Tax Revenues and Redemption Revenues of the Community Facilities District, as set forth in the Special Tax Bonds Fiscal Agent Agreement, the levy of which has been duly and validly authorized pursuant to the Community Facilities District Act and the Special Taxes within the Community Facilities District will be fixed and levied in an amount which, together with other available funds, is required for the payment of the principal of, and interest on, the Special Tax Bonds when due and payable, all as provided in the Special Tax Bonds Fiscal Agent Agreement. The Community Facilities District has covenanted to cause the Special Taxes to be levied and collected at the same time and in the same manner as ordinary ad valorem property taxes. G. The Special Tax Bonds Fiscal Agent Agreement creates a valid pledge of, first lien upon and security interest in, the Special Tax Revenues and Redemption Revenues of the Community Facilities District, and in the moneys in the Special Tax Fund established pursuant to the Special Tax Bonds Fiscal Agent Agreement, on the terms and conditions set forth in the Special Tax Bonds Fiscal Agent Agreement. 9 11. Except as disclosed in the Preliminary Official Statement, there are, to the best of the Community Facilities District's knowledge, no entities with outstanding assessment liens against any of the properties within the Community Facilities District or which are senior to or on a parity with the Special Taxes of the Community Facilities District referred to in paragraph (G) hereof. I. The information contained in the Preliminary Official Statement and in the Official Statement (other than statements therein pertaining to the DTC and its book -entry system, as to which no view is expressed) is true and correct in all material respects and such information does not and shall not contain any untrue or misleading statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances corder which they were made, not misleading. J. At the time of acceptance hereof there is and as of the Closing there will be no Action pending (notice of which has been served on the Community Facilities District) or to the best knowledge of the Community Facilities District or the City threatened, in which any such Action: (i) in any way questions the existence of the Community Facilities District or the titles of the officers of the Community Facilities District to their respective offices; (ii) affects, contests or seeks to prohibit, restrain or enjoin the issuance or delivery of the Bonds or the Special Tax Bonds or the payment or collection of Special Taxes or any amounts pledged or to be pledged to pay the principal of and interest on the Special Tax Bonds or the Bonds, or in any way contests or affects the validity of the Community Facilities District Documents or the consummation of the transactions on the part of the Community Facilities District contemplated thereby; (iii) contests the exemption of interest on the Special Tax Bonds from federal or State income taxation or contests the powers of the Community Facilities District which may result in any material adverse change relating to the financial condition of the Community Facilities District; or (iv) 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 required to be stated therein or necessary to make the statements therehr, in the light of the circumstances under which they were made, not misleading; and as of the time of acceptance hereof there is and, as of the Closing Date, there will be no basis for any action, suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) of this sentence. K. Any certificate signed on behalf of the Community Facilities District by any officer or employee of the Community Facilities District authorized to do so shall be deemed a representation and warranty by the Community Facilities District to the Authority and the Underwriter on behalf of itself and the Community Facilities District as to the statements made therein. L. At or prior to the Closing the Community Facilities District, will have duly authorized, executed and delivered the Continuing Disclosure Agreement in substantially the form attached as Appendix E to the Official Statement. Based upon a review of its previous undertakings, and except as disclosed in the Preliminary Official Statement, the District has not failed to comply in all respects with any previous undertakings with regard to the Rule to provide annual reports or notices of material events in the last five years. 10 M. The Community Facilities District will apply the proceeds of its Special Tax Bonds in accordance with the Special Tax Bonds Fiscal Agent Agreement and as described in the Preliminary Official Statement and Official Statement. N. Between the date of this Purchase Agreement and the date of Closing, the Community Facilities District will not offer or issue any bonds, notes or other obligations for borrowed money not previously disclosed to the Underwriter. O. The total interest cost to maturity on the Special Tax Bonds related to the refund;, The Prtor Bo.:us bus A r ,_ n___i_ - - -g L'r 'y' u,, priiieipai an'iuriiit 01 Lo opcutai Tax Bonds 15 less than the total remaining interest cost to maturity on the Prior Bonds plus the outstanding principal amount of the Prior Bonds The execution and delivery of this Purchase Agreement by the Community Facilities District shall constitute a representation by the Community Facilities District to the Authority and the Underwriter that the representations and warranties contained in this Section 4 with respect to the Community Facilities District are true as of the date hereof. 5. Conditions to the Obligations of the Underwriter. The obligation of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the Authority and the Community Facilities District contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the Authority and the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Authority and the Community Facilities District of their obligations to be performed hereunder at or prior to the Closing Date, and to the following additional conditions: A. At the Closing Date, the Authority Resolution, the Cormmunity Facilities District Resolutions, the Authority Documents and the Community Facilities District Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds and with the Special Tax Bonds, and with the transactions contemplated thereby, and by this Purchase Agreement, all such actions as, in the opinion of Bond Counsel, shall be necessary and appropriate. B. At the Closing Date, except as was described in the Preliminary Official Statement, the Authority shall not be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Authority is a party or is otherwise subject or bound, and the performance by the Authority of its obligations under the Bonds, the Authority Documents, the Authority Resolution, this Purchase Agreement and any other instruments contemplated by any of such documents, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Authority is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the Authority of its obligations under the Authority Documents, the Bonds or the Authority Resolution. C. At the Closing Date, except as described in the Preliminary Official Statement, the City shall not be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, and the performance of the conditions precedent to be performed hereunder will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance of the conditions precedent to be performed by the City hereunder. D. At the Closing Date, except as described in the Preliminary Official Statement, the Community Facilities District shall not be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, and the performance by the Community Facilities District of its obligations under its Special Tax Bonds, the Community Facilities District Resolutions, the Special Tax Bonds Fiscal Agent Agreement, and any other instruments contemplated by any of such documents, and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed hereunder, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Community Facilities District is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the Community Facilities District of its obligations under the Special Tax Bonds Fiscal Agent Agreement, the Special Tax Bonds issued by the Community Facilities District or the performance of the conditions precedent to be performed by the Community Facilities District hereunder. E. The information contained in the Official Statement is, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant hereto, true and correct in all material respects and does not, as of the Closing Date or as of the date of any supplement or amendment thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. F. Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth on the cover page of the Official Statement, of the 12 Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall not have been materially adversely affected, in the judgment of the Underwriter (evidenced by a written notice to the Authority and the Community Facilities District terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following: 1. Legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either House of Congress by any committee of such T ouse to wl;ich suci7 legislation had been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department of the United States of America or the Internal Revenue Service, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon such interest as would be received by any owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof, 2. Legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter,. to the effect that obligations of the general character of the Bonds or the Special Tax Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Indenture or the Special Tax Bonds Fiscal Agent Agreement are not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character ofthe Bonds or the Special Tax Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise is or would be in violation of the federal securities laws as amended and then in effect; 3. A general suspension of trading in securities on the New York Stock Exchange, or a general banking moratorium declared by Federal, State of New York or State of California officials authorized to do so; 4. The introduction, proposal or enactment of any amendment to the Federal or California Constitution or any action by any Federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Authority or the Community Facilities District, their property, income, securities (or interest thereon), the validity or enforceability of Special Taxes, or the ability of the Authority to purchase any Special Tax Bonds as contemplated by the Special Tax Bonds Fiscal Agent Agreement and the Official Statement; 5. Any event occurring, or information becoming known which, in the judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Preliminary Official Statement or in the Official Statement, or has the effect that the Preliminary Official Statement or the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 13 6. Any national securities exchange, the Comptroller of the Currency, or any other governmental authority, shall impose as to the Bonds, the Special Tax Bonds or obligations of the general character of the Bonds or the Special Tax Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; 7. There shall have occurred any material outbreak or escalation of hostilities or other calamity or crisis the effect of which on the financial markets of the United States is such as to make it impracticable, in the judgment of the Underwriter, following consultation with the Authority, to sell the Bonds; or S. Any proceeding shall have been commenced or be threatened in writing by the Securities and Exchange Commission against the City or the Authority. The commencement of any Action described in Sections 2(F) or 4(J). G. At or prior to the Closing Date, the Underwriter shall have received a counterpart original or certified copy of the following documents, in each case satisfactory in form and substance to the Underwriter: 1. The Official Statement, executed on behalf of the Authority by its Executive Director or other authorized officer; 2. The Indenture, duly executed and delivered by the Authority and the Trustee, and the Special Tax Bonds Fiscal Agent Agreement, duly executed and delivered by the Community Facilities District and the Fiscal Agent; 3. The Authority Resolution, together with a certificate of the Secretary of the Authority, dated as of the Closing Date, to the effect that such resolution is a true, correct and complete copy of the resolution duly adopted by the Board of Directors of the Authority; 4. The Community Facilities District Resolution, the Community Facilities District Documents and the Formation Documents, together with a certificate dated as of the Closing Date of the City Clerk to the effect that the Community Facilities District Resolutions are hue, correct and complete copies of the ones duly adopted by the City Council; 5. The Continuing Disclosure Agreement executed and delivered by the Community Facilities District; 6. An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the Authority and the Community Facilities District, of Bond Counsel, to the effect that the Bonds are the valid, legal and binding obligations of the Authority and that the interest thereon is excluded from gross income for federal income tax purposes and exempt from personal income taxes of the State of California, in substantially the form included as Appendix C to the Official Statement, together with a letter of Bond Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such opinion addressed to the Authority and the Community Facilities District may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it; 14 7. A supplemental opinion or opinions, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, to the effect that: 0) this Purchase Agreement has been duly authorized, executed and delivered by the Authority and the Community Facilities District and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding agreement of the Authority and the Community Facilities District and is enforceable in accordance with its terms, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting creditors' rights generally or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on legal remedies against public agencies in the State; (ii) the Continuing Disclosure Agreement has been duly authorized, executed and delivered by the Community Facilities District and, assuming due authorization, execution and delivery by the other party thereto, constitutes the legal, valid and binding agreement of the Community Facilities District by and is enforceable in accordance with its terms, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting creditors' rights generally or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases; (iii) the Bonds and the Special Tax Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture and the Special Tax Bonds Fiscal Agent Agreement are exempt from qualification under the Trust Indenture Act of 1939, as amended; (iv) the information contained in the Official Statement on the cover and under the captions "TBE_BONDS" (other than the captions "Estimated Debt Service Schedules; Bonds and District Bonds" and "Debt Service Coverage for the Bonds "), "SECURITY FOR THE BONDS," "LEGAL MATTERS —Tax Matters," " —Legal Opinion" and in Appendices A, C and D to the Official Statement, are accurate insofar as such statements purport to summarize certain provisions of the Bonds, the Special Tax Bonds, the Indenture, the Special Tax Bonds Fiscal Agent Agreement, Bond Counsel's final approving opinion, the Community Facilities District Act, the JPA Act and the Bond Law; (v) The Special Tax Bonds have been duly and validly authorized by the Community Facilities District, and are legal, valid and binding obligations of the Community Facilities District, enforceable in accordance with their terms and the terms of the Special Tax Bonds Fiscal Agent Agreement, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting creditors' rights generally or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases; (vi) the Community Facilities District Documents have been duly and validly authorized, executed and delivered by the Community Facilities District and constitute the legal, valid and binding obligations of the Community Facilities District, enforceable in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting enforcement of creditors' rights and by the application of equitable principles if equitable remedies are sought. 15 8. A letter, dated the Closing Date and addressed to the Underwriter, of Disclosure Counsel, to the effect that such counsel is not passing upon and has not undertaken to determine independently or to verify the accuracy or completeness of the statements contained in the Official Statement, and is, therefore, unable to make any representation to the Underwriter in that regard, but on the basis of its participation in conferences with representatives of the Authority, the City, the City Attorney, Bond Counsel, Stephen G. White, MAI, Albert A. Webb Associates, Urban Futures Incorporated, representatives of the Underwriter and others, during which conferences the content of the Official Statement and related matters were discussed, and its examination of certain documents, and, in reliance thereon and based on the information made available to it in its role as Disclosure Counsel and its understanding of applicable law, Disclosure Counsel advises the Underwriter as a matter of fact, but not opinion, that no information has come to the attention of the attorneys in the firm working on such matter which has led them to believe that the Official Statement (excluding therefrom the financial and statistical data, forecasts, charts, numbers, estimates, projections, assumptions and expressions of opinion included in the Official Statement, information regarding DTC and its book entry system and the information set forth in Appendices A, B, C, and E, as to all of which no opinion is expressed) as of its date and as of the Closing Date contained any untrue statement of a material fact or omitted 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, and advising the Underwriter that, other than reviewing the various certificates and opinions required by this Purchase Agreement regarding the Official Statement, Disclosure Counsel has not taken any steps since the date of the Official Statement to verify the accuracy of the statements contained in the Official Statement; 9. A certificate, dated the Closing Date and signed by the Executive Director of the Authority or other authorized officer, to the effect that: (i) the representations and warranties of the Authority contained herein are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best knowledge of such officer, no event has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect; and (iii) the Authority has complied with all the agreements and satisfied all the conditions OD its part to be performed or satisfied under the Authority Documents and the Authority Resolution at or prior to the Closing Date; 10. A certificate dated the Closing Date and signed by an authorized representative of the Community Facilities District or an authorized designee, on behalf of the Community Facilities District to the effect that: (i) the representations and warranties made by the Community Facilities District contained herein are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best knowledge of such officer, no event has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect; (iii) the Community Facilities District has complied with all the agreements and satisfied all the conditions on its part to be satisfied under this Purchase Agreement, the Community Facilities District Resolutions, the Community Facilities District Documents and the Official Statement at or prior to the Closing Date; and (iv) all information in the Official Statement relating to the Community Facilities District (other than information therein provided by the Special Tax Consultant) is true and correct in all material respects as of the date of the Official Statement and as of the Closing Date; 16 if A defeasance opinion of Bond Counsel, dated the Closing Date and addressed to the Underwriter, in a form satisfactory to the Escrow Agent and the Underwriter, with respect to the Prior Bonds; 12. An opinion of the City Attorney of the City, as counsel to the Authority, dated the date of Closing and addressed to the Underwriter, the Authority and the Community Facilities District, to the effect that: (i) The Authority is a public body, corporate and politic, duly organized and validly existing as a joint powers authority under the laws of the State of California; (iii) The Authority Resolution was duly adopted at a meeting of the governing body of the Authority, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Authority Resolution is in full force and effect and has not been modified, amended, rescinded or repealed since the date of its adoption; (iv) The Authority Documents have been duly authorized, executed and delivered by the Authority and constitute the legal, valid and binding obligations of the Authority enforceable against the Authority in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, to the application of equitable principles where equitable remedies are sought and to the exercise of judicial discretion in appropriate cases; (v) To the best knowledge of such counsel, the execution and delivery of the Authority Documents and the Official Statement and compliance with the provisions thereof under the circumstances contemplated thereby: (a) do not in any material respect conflict with or constitute on the part of the Authority a breach of or default under any agreement or other instrument to which the Authority is a party or by which it is bound; and (b) do not and will not in any material respect or constitute on the part of the Authority a violation, breach of or default under any court order or consent decree to which the Authority is subject; (vi) The Authority Documents and the Official Statement have been duly authorized by the Board of Directors of the Authority and executed on its behalf by an authorized officer of the Authority; (vii) Except as may be stated in the Official Statement, there is no action, suit, proceeding or investigation before or by any court, public board or body pending (notice of which has been served on the Authority) or, to the City Attorney's knowledge, threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation, organization, existence or powers of the Authority, or the titles of its members and officers to their respective offices; (b) enjoin or restrain the issuance, sale and delivery of the Bonds, the collection of the Revenues and the Redemption Revenues or the pledge thereof, (c) in any way question or affect any of the rights, powers, duties or obligations of the Authority with respect to the Revenues or the moneys and assets pledged or to be pledged to pay the principal of, premium, if any, or interest on the Bonds; (d) in any 17 (ii) The Authority has full legal power and lawful authority to enter into the Authority Documents and to carry out the transactions contemplated under the Authority Documents; (iii) The Authority Resolution was duly adopted at a meeting of the governing body of the Authority, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Authority Resolution is in full force and effect and has not been modified, amended, rescinded or repealed since the date of its adoption; (iv) The Authority Documents have been duly authorized, executed and delivered by the Authority and constitute the legal, valid and binding obligations of the Authority enforceable against the Authority in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, to the application of equitable principles where equitable remedies are sought and to the exercise of judicial discretion in appropriate cases; (v) To the best knowledge of such counsel, the execution and delivery of the Authority Documents and the Official Statement and compliance with the provisions thereof under the circumstances contemplated thereby: (a) do not in any material respect conflict with or constitute on the part of the Authority a breach of or default under any agreement or other instrument to which the Authority is a party or by which it is bound; and (b) do not and will not in any material respect or constitute on the part of the Authority a violation, breach of or default under any court order or consent decree to which the Authority is subject; (vi) The Authority Documents and the Official Statement have been duly authorized by the Board of Directors of the Authority and executed on its behalf by an authorized officer of the Authority; (vii) Except as may be stated in the Official Statement, there is no action, suit, proceeding or investigation before or by any court, public board or body pending (notice of which has been served on the Authority) or, to the City Attorney's knowledge, threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation, organization, existence or powers of the Authority, or the titles of its members and officers to their respective offices; (b) enjoin or restrain the issuance, sale and delivery of the Bonds, the collection of the Revenues and the Redemption Revenues or the pledge thereof, (c) in any way question or affect any of the rights, powers, duties or obligations of the Authority with respect to the Revenues or the moneys and assets pledged or to be pledged to pay the principal of, premium, if any, or interest on the Bonds; (d) in any 17 way question or affect any authority for the issuance of the Bonds, or the validity or enforceability of the Bonds; or (e) in any way question or affect the Authority Documents or the transactions contemplated by the Authority Documents, the Official Statement, or any activity regarding the Bonds; 13. An opinion of the City Attorney of the City, dated the date of Closing and addressed to the Underwriter, the Authority and the City, to the effect that: (i) The City is a general law city, corporate and politic, duly organized and existing under the Constitution and laws of the State of California; (ii) The Community Facilities District Resolutions have been duly adopted at meetings of the City Council, which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Community Facilities District Resolutions are in full force and effect and have not been modified, amended, rescinded or repealed since the respective dates of their adoption; (iii) The Community Facilities District Documents and the Official Statement have been duly authorized, executed and delivered by the City and constitute the legal, valid and binding obligations of the Community Facilities District enforceable against the Community Facilities District in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights, to the application of equitable principles where equitable remedies are sought and to the exercise of judicial discretion in appropriate cases; (iv) Except as may be stated in the Official Statement, there is no action, suit, proceedhrg or investigation before or by any court, public board or body pending (notice of which has been served on the City or the Community Facilities District) or, to such counsel's knowledge, threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation, organization, existence or powers of the City, or the titles of its members and officers to their respective offices; or (b) affect the validity of the Community Facilities District Documents or restrain or enjoin the repayment of the Special Tax Bonds or in any way contest or affect the validity of the Community Facilities District Documents or contest the authority of the City to enter into or perform its obligations under any of the Community Facilities District Documents or under which a determination adverse to the City would have a material adverse effect upon the financial condition or the revenues of the City, questions the right of the Community Facilities District to use Special Taxes levied within the Community Facilities District for the repayment of the Special Tax Bonds or affects in any manner the right or ability of the Community Facilities District to collect or pledge the Special Taxes levied within the Community Facilities District for the repayment of the Special Tax Bonds; 14. Written confirmation from Urban Futures Incorporated in a form acceptable to the Underwriter that, other than as disclosed in the Official Statement, the Authority and the City and its community facilities districts have timely filed materially complete continuing disclosure reports with respect to the Authority's and the City's and its community facilities districts continuing disclosure requirements relating to Rule 15c2 -12 in each of the last five fiscal years; 15. A certificate of the Escrow Agent and an opinion of counsel to the Escrow Agent dated the Closing Date and addressed to the Community Facilities District and the is Underwriter to the effect that it has duly authorized the execution and delivery of the Escrow - Agreement and that the Escrow Agreement is a valid and binding obligation of the Escrow Agent enforceable in accordance with its terms; 16. A certificate dated the Closing Date from Albert A. Webb Associates addressed to the Authority, the Community Facilities District and the Underwriter to the effect that: (i) the Special Tax if collected in the maximum amounts permitted pursuant to the Rate and Method of Apportionment of Special Taxes of the Community Facilities District as of the Closing Date would generate at least 110% of the annual debt service payable with respect to the related issue of Special Tax Bonds pins budgeted administrative expenses in each year, based on such assumptions and qualifications as shall be acceptable to the Underwriter; and (ii) the statements in the Official Statement provided by Albert A. Webb Associates concerning Special Taxes in the Community Facilities District and all information supplied by it for use in the Official Statement were as of the date of the Official Statement and are as of the Closing Date true and correct, and do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; 17. Certified copies of the general resolution of the Trustee and Fiscal Agent authorizing the execution and delivery of certain documents by certain officers of the Trustee and Fiscal Agent, which resolution authorizes the execution of the Indenture, the Special Tax Bonds Fiscal Agent Agreement and the authentication of the Bonds and the Special Tax Bonds; 18. A certificate of the Trustee and the Fiscal Agent, addressed to the Underwriter, the Authority and the Community Facilities District dated the Closing Date, to the effect that: (i) the Trustee and the Fiscal Agent are authorized to carry out corporate trust powers, and have full power and authority to perform their respective duties under the Indenture, and the Special Tax Bonds Fiscal Agent Agreement; (ii) the Trustee and the Fiscal Agent are duly authorized to execute and deliver the Indenture, and the Special Tax Bonds Fiscal Agent Agreement, to accept the obligations created by the Indenture, and the Special Tax Bonds Fiscal Agent Agreement and to authenticate the Bonds and the Special Tax Bonds pursuant to the terms of the hrdenture and the Special Tax Bonds Fiscal Agent Agreement, respectively; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee and the Fiscal Agent that has not been obtained is or will be required for the authentication of the Bonds or the Special Tax Bonds or the consummation by the Trustee and the Fiscal Agent of the other transactions contemplated to be performed by the Trustee and the Fiscal Agent in connection with the authentication of the Bonds and the Special Tax Bonds and the acceptance and performance of the obligations created by the Indenture and the Special Tax Bonds Fiscal Agent Agreement; and (iv) to the best of its knowledge, compliance with the terms of the Indenture, and the Special Tax Bonds Fiscal Agent Agreement will not conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the Trustee and 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 Trustee and Fiscal Agent or any of its activities or properties; 19. An opinion of counsel to the Trustee and the Fiscal Agent dated the Closing Date, addressed to the Underwriter, the Authority and the Community Facilities District to the effect that each of the Trustee and the Fiscal Agent is a national banking association duly organized and validly existing under the laws of the United States having full power and being qualified to enter into, accept and agree to the provisions of the Indenture and the Special Tax Bonds 19 Fiscal Agent Agreement, and that each of such documents has been duly authorized, executed and delivered by the Trustee or the Fiscal Agent, as applicable, and, assuming due execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Trustee or the Fiscal Agent, as applicable, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by the application of equitable principles if equitable remedies are sought; 20. A certificate of the Authority dated the Closing Date, in a form acceptable to Bond Counsel and the Underwriter, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended; 21. . A letter addressed to the School District, the Underwriter, and Bond Counsel, dated the Closing Date, from Causey Demgen & Moore P.C., verifying the accuracy of the mathematical computations concerning the adequacy of moneys to be deposited with the Escrow Agent with respect to the Prior Bonds, to pay when due on September 1, 2015, the principal of, redemption premium, if any, and interest on the Prior Bonds; ; 22. A copy of the letter from Standard & Poor's Ratings Services, a division of the McGraw -Hill Companies, Inc., assigning the Bonds the rating as described in the Official Statement; 23. [Evidence satisfactory to the Underwriter that the Bonds shall have received a policy of municipal bond insurance (the "Bond Insurance Policy ") and a reserve fund surety policy (the "Reserve Fund Surety ") by (the "Insurer ") that unconditionally guarantees the timely payments of all debt service on the Bonds]; 24. [An opinion of counsel to the Insurer, dated as of the date of Closing, addressed to the Underwriter and the Authority 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 Bond Insurance Policy and the Reserve Fund Surety 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]; 25. An opinion of Nossaman LLP, counsel to the Underwriter ( "Underwriter's Counsel "), dated the date of Closing and addressed to the Underwriter in form and substance acceptable to the Underwriter; and 26. Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the material representations and warranties of the Authority and the Community Facilities District contained herein, and of the statements and information contained in the Official Statement and the due performance or satisfaction by the 20 Authority and the Community Facilities District at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the Community Facilities District and the Authority in connection with the transactions contemplated hereby and by the Special Tax Bonds Fiscal Agent Agreement, the Indenture and the Official Statement. If the Authority shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall termmate and neither the Authority nor the Underwriter shall be under any further obligation hereunder, except that the respective obligations of the Underwriter and the Authority set forth in Section 6 hereof shall continue in full force and effect. 6. Conditions to the Obligations of the Authority. A. The obligation of the Authority to accept delivery of and pay for the Special Tax Bonds on the Closing Date shall be subject, at the option of the Authority, to the sale of the Bonds, to the accuracy in all material respects of the representations and warranties on the part of the Community Facilities District contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the City, and the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof and to the performance by the Community Facilities District of its obligations to be performed hereunder and the conditions precedent to be performed by the Community Facilities District pursuant hereto at or prior to the Closing Date. The obligations of the Authority shall be further subject to the satisfaction of the conditions contained in Section 5 of this Purchase Agreement. B. If the Community Facilities District or the Authority shall be unable to satisfy the conditions to the obligations of the Authority to purchase, accept delivery of and pay for the Special Tax Bonds contained in this Purchase Agreement, or if the obligations of the Authority to purchase, accept delivery of and pay for the Special Tax Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Authority nor the Community Facilities District shall be under any further obligation hereunder, except that the respective obligations of the City, the Community Facilities District and the Authority set forth in Section 7 hereof shall continue in full force and effect. 7. Expenses. Whether or not the transactions contemplated by this Purchase Agreement are consummated, the Underwriter shall be under no obligation to pay, and the Authority shall pay only from the proceeds of the Bonds, or cause the City and the Community Facilities District to pay out of the proceeds of the Special Tax Bonds or any other legally available funds of the City, the Community Facilities District or the Authority, but only as the Authority and such other party providing such services may agree, all expenses and costs of the Authority incident to the performance of its obligations in connection with the authorization, execution, sale and delivery of the Bonds to the Underwriter, including, without limitation, printing costs, rating agency fees and charges, initial fees of the Trustee, including fees and disbursements of their counsel, if any, fees and disbursement's of Bond Counsel, Disclosure Counsel [and counsel to the Underwriter] and other professional advisors employed by the Authority, costs of preparation, printing, signing, transportation, delivery and safekeeping of the Bonds and for expenses (included in the expense component of the spread) incurred by the Underwriter on behalf of the Authority's employees which are incidental to implementing this Purchase Agreement, including, but not limited to, meals, 21 transportation, lodging, and entertainment of those employees. The Underwriter shall pay all out -of- pocket expenses of the Underwriter, including, without limitation, advertising expenses, the California Debt and Investment Advisory Commission fee, CUSIP Services Bureau charges, regulatory fees imposed on new securities issuers and any and all other expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds. 8. Undertakings of the Authority. The Authority agrees: (a) to inform the Underwriter, from time to time, upon the reasonable request of the Underwriter, of the amount then on deposit in Reserve Account, the Cash Flow Management Fund and the Delinquency Management Funds (as defined in the Official Statement); and (b) to make available to the Underwriter, upon reasonable request of the Underwriter, at the expense of the Authority or the City, sufficient copies of its audited financial statements, if any, and any resolutions of its legislative body with respect to the Authority Resolution, the Bonds, the Special Tax Bonds, the Indenture, the Official Statement, any amendments or supplements thereto, and other documents relating to the Bonds or the Special Tax Bonds and pertaining to the City, the Authority or the Community Facilities District adopted or executed, as the case may be, after the Closing Date, to the extent that such documents are publicly available. 9. Notices. Any notice of other communication to be given to the Community Facilities District or the Authority under this Purchase Agreement may be given by delivering the same in writing to the City of Lake Elsinore, 130 South Main Street, Lake Elsinore, California 92530, Attention: Director of Administrative Services; 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, Nieolaus & Company, Incorporated, 515 South Figueroa Street, Suite 1800, Los Angeles, California 90071, Attention: John Kim. 10. Parties In Interest. This Purchase Agreement is made solely for the benefit of the Authority, the Community Facilities District and Underwriter (including any successors or assignees of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. IL Survival of Representations and Warranties. The representations and warranties of the Authority and the Community Facilities District under this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the Community Facilities District or the Authority and regardless of delivery of and payment for the Bonds. 12. Execution in Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 13. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Authority and the Community Facilities District and shall be valid and enforceable as of the time of such acceptance. 14. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understanding among the parties hereto in relation to the sale of the Bonds by the Authority and the sale of the Special Tax Bonds to the Authority. 22 15. Governing Law. This Purchase Agreement shall be governed by the laws of the State of California. 23 16. Effective Date. This Purchase Agreement shalt become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Authority and the Community Facilities District and shall be valid and enforceable as of the time of such acceptance. Very truly yours, STIFEL, NICOLAUS & COMPANY, 1NCOPORATED Bv: Its: Authorized Officer ACCEPTED AS OF , 2015 at .m.: LAKE ELSINORE PUBLIC FINANCING AUTHORITY Bv: Its: Executive Director CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88 -3 MM City Manager 24 EXHIBIT A LAKE ELSINOI2E PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE REFUNDING BONDS (COMMUNITY FACILITIES DISTRICT NO. 88-3),2015 SERIES B Schedule of Braid Maturities, Principal Amounts and Interest Rates Maturity Date Septapiihi'i' ai'"ri.se P-11— i €Oun, - bluer. —I date Yield A -1 EXHIBIT B LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE REFUNDING BONDS (COMMUNITY FACILITIES DISTRICT NO. 88-3),2015 SERIES B List of Special Tax Bonds principal Special Tax Bonds Amount City of Lake Elsinore Community Facilities District 88 -3 (West Lake Elsinore) Special Tax Refunding Bonds, 2015 Series $ B -1 EXHIBIT B -I CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 88-3 (WEST LAKE ELSINORE) SPECIAL TAX REFUNDING BONDS, 2015 SERIES Schedule of Braid Maturities, Principal Amounts and Interest Rates Maturity Date (September I) Principal Amount Interest Rate Yield B -1 -1 D-1 Stradling Yocca Carlson & Routh Draft of 4 15115 CONTINUING DISCLOSURE CERTIFICATE THIS CONTINUING DISCLOSURE CERTIFICATE (this "Disclosure Certificate "), dated as of _ 1, 2015, is executed and delivered by the Lake Elsinore Public Financing Authority (the "Issuer ") in connection with the issuance by the Issuer of its Lake Elsinore Public Financing Authority Local Agency Revenue Refunding Bonds (Community Facilities District No. 88 -3), 2015 Series B (the "Bonds"), The Bonds are being issued pursuant to a Resolution of Issuance adopted by the Board of Directors of the Issuer on 2015 and an Indenture of Trust by and berveen tnC Issuer and 1vIUFG 1- 1i,oir Bank, N.A., as Trustee, dated as of 1, 2015 (the "Indenture "). The Issuer covenants as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered, 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 Indenture and the Rate and Method of Apportionment, 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. "Beneficial Owner" shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of any Bond_(including aperson holding Bond through a nominee, depository or other intermediary), or (b) is treated as the owner of any Bond for federal income purposes. "City" shall mean the City of Lake Elsinore, County of Riverside, California. "Disclosure Representative" shall mean the Treasurer or Executive Director of the Issuer or such other officer or employee as the Issuer shall designate in writing to the Dissemination Agent from time to time. "Dissemination Agent" shall mean, initially, Albert A. Webb Associates, or any successor Dissemination Agent designed in writing by the Issuer. "EMMA" shall mean the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www.emma.msrb.org, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission in the future. "District" means City of Lake Elsinore Community Facilities District No. 88 -3 (West Lake Elsinore). "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "Official Statement" shall inean the Issuer's official statement with respect to the Bonds. "Participating Underwriter" shall mean Stifel, Nicolaus & Company, Incorporated. "Rate and Method of Apportionment" means that certain Rate and Method of Apportionment of Special Tax approved pursuant to the Resolution of Formation, as amended in accordance with the Act. "Resolution of Formation" means the Resolution adopted by the City Council of the City on March 13, 1990, pursuant to which City formed the District. "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. "Tax- exempt" shall mean that interest on the Bonds is excluded from gross income for federal income tax purposes, whether or not such interest is includable as an item of tax preferences or otherwise includable directly or indirectly for purposes of calculating any other tax liability, including any alternative minimum tax or environmental tax. SECTION 3. Provision of Amoral Reports. (a) Not later than December 31 of each year commencing December 31, 2015, the Issuer shall, or shall cause the Dissemination Agent to, provide to EMMA and the Participating Underwriter an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. If the Dissemination Agent is other than the Issuer, then not later than 15 business days prior to the date referred to in the prior sentence hereof, the Issuer shall provide the Annual Report (in a form suitable for filing with EMMA) to the Dissemination Agent. 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. (b) In the event that the Dissemination Agent is an entity other than the Issuer, then the provisions of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report, the Issuer shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to the due date for an Amoral Report the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the Issuer to determine if the Issuer will be filing the Annual Report in compliance with subsection (a). The Issuer shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be burnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Issuer and shall have no duty or obligation to review such Annual Report. (c) If the Dissemination Agent is other than the Issuer and if the Dissemination Agent is unable to verify that an Annual Report has been provided to EMMA by the date required in subsection (a), the Dissemination Agent shall send a notice to EMMA, in the form required by EMMA. 2 (d) If the Dissemination Agent is other than the Issuer, the Dissemination Agent shall: 0) determine each year prior to the date for providing the Annual Report the name and address of the repository if other than the MSRB through EMMA; and (ii) promptly after receipt of the Annual Report, file a report with the Issuer certifying that the Annual Report has been provided to EMMA and the date it was provided. (e) Notwithstanding any other provision of this Disclosure Certificate, all filings shall be .made in accordance with the MSRB's EMMA system or in another manner approved under the Rule. SECTION 4. Content of Annual Reports. The Issuer's Annual Report shall contain or include by reference: (a) Financial Statements. The audited financial statements of the Issuer, if any, for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the Issuer's audited financial statements, if any are prepared, are not available by the time the Annual Report is required to be filed pursuant to Section 3, the Annual Report shall contain unaudited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they come available. (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 Indenture as of the September 2 preceding the filing of the Annual Report; (iii) the assessed valuation of the Taxable Property within the District; (iv) any changes to the Rate and Method of Apportionment of the Special Tax approved or submitted to the qualified electors for approval prior to the filing of the Annual Report; (v) a table setting forth the annual Special Tax delinquency rate within the District at June 30 for each fiscal year on which a delinquency exists, listing for each fiscal year the total Special Tax levy, the amount delinquent and the percent delinquent; (vi) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes within the District; (c) Any or all of the items listed in (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 EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB through EMMA. 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 the Dissemination Agent to give, notice not less than ten (10) business days after the occurrence of any of the following events with respect to the Bonds: 1. principal and interest payment delinquencies; 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers, or their failure to perform; 5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 -TEB) or other material notices or determinations with respect to the tax status of the Bonds; 6. defeasances; 7. tender offers; 8. bankruptcy, insolvency, receivership or similar proceedings; and 9. ratings changes. (b) Additionally, the Issuer shall give or cause the Dissemination Agent to give notice to EMMA of the occurrence of any of the following events with respect to the Bonds, if material: I . mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the obligated persons or their termination; 2. appointment of a successor or additional fiscal agent or the change of the name of a fiscal agent; 3. nonpayment related defaults; 4. modifications to the rights of Bondholders; 5. notices of prepayment; and 6. release, substitution or sale of property securing repayment of the Bonds. (c) In the event that the Issuer's fiscal year changes, the Issuer shall report or shall instruct the Dissemination Agent to report such change in the same manner and to the same parties as Listed Event would be reported pursuant to this Section. (d) The Issuer hereby agrees that the undertaking set forth in this Disclosure Certificate is the responsibility of the Issuer, and the Dissemination Agent, if other than the Issuer, shall not be responsible for determining whether the Issuer's instructions to the Dissemination Agent under this Section comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. The obligations of the Issuer and the Dissemination Agent 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. 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 the Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Albert A. Webb Associates. The Dissemination Agent may resign by providing (i) thirty days written notice to the Issuer, and (ii) upon appointment of a new Dissemination Agent hereunder. SECTION 8. Amendment. (a) This Disclosure Certificate may be amended, by written agreement of the parties, without the consent of the Owners, and any provision of this Disclosure Certificate may be waived, if all of the following conditions are satisfied: (1) such amendment or waiver is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the Issuer or the type of business conducted thereby, (2) the undertakings in this Disclosure Certificate as so amended or waived would, in the opinion of a nationally recognized bond counsel, 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 (3) the amendment,or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners or (ii) does not, in the determination of the Issuer, materially impair the interests of the Owners or Beneficial Owners of the Bonds. (b) 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 in the type of operating data or financial information being provided. (c) 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 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 of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the Issuer or the Dissemination Agent 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 and /or the Dissemination Agent to comply with their respective obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance. SECTION 11. Duties, hnmunities and Liabilities of Dissemination Agent. Where an entity other than the Issuer is acting as the Dissemination Agent, the Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Issuer agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their 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. Any Dissemination Agent shall be paid (i) compensation by the Issuer for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to; and (ii) all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Issuer pursuant to this Disclosure Certificate. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Certificate. SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds; and it shall create no rights in any other person or entity. SECTION 13. Merger. Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. This Disclosure Certificate is executed as of the date and year first set forth above. 6 LAKE ELSINORE PUBLIC FINANCING AUTHORITY By: Disclosure Representative 7 Bulletin 504 Rev. I Model A CD Dry Pilot Line Actuator Instructions for For Use With Installation, Operation, ModDelu els A, a Valves s BX es Listed by Underwriters Laboratories, Inc. Care and Maintenance Approved by Factory M Research Corporation, and other fire insurance and government agencies in the United States and foreign countries. The Reliable Automatic Sprinkler Co., Inc., 103 Fairview Park Drive, Elmsford, New York 10523 Installation Refer to Deluge Valve Bulletins 501 and 503. Operation The Reliable Model A Pilot Line Actuator is the device that separates the water pressure, used in a deluge valve, from the air pressure used in a dry pilot line. The Pilot Line Actua- tor is a quick opening valve that is held closed by the air pressure in the dry pilot line. When the Actuator is in the closed position, the deluge valve is held closed by the wa- ter pressure contained in the top chamber or pushrod chamber of the deluge valve. (See separate bulletins for deluge valve operation). When heat fuses one or more of the automatic pilot line detector installed on the dry pilot, the air press) ire drops allowing the Pilot Line Actuator to open. When the Actuator opens, the deluge valve immediately opens. Testing Without Operating Deluge Valve 1. Close the valve controlling water supply to the deluge valve, and open main drain valve. 2. Open the 1/" (6.35 mm) valve in the deluge trim that al- lows water to flow into the deluge valve holding cham- ber. 3. Decrease pressure in the dry pilot line until the Pilot Line Actuator operates. This will be indicated by a sudden drop of water pressure in the deluge valve. 4. To reset, increase pressure in the dry pilot line until it con- forms to Table 1. 5. Open slightly the valve controlling water supply to the deluge valve, closing the drain valvewhen waterflows. 6. Confirm that the deluge valve holding chamber is pres- surized and that all valves are in the correct position in accordance with the appropriate deluge valve bulletin. Table 1 Supply Water Air Pressure to be. Pumped into Dr Pilot L ne Maximum Not Less Than Not More Than o si _ _bar, psi bar psi _ _ bar 20 1.38_ 10 94106906 20 1.38 _.3_ 96006904 15 _0.69 1.03 25 1.72 Diaphragm 20 1.38 30 2.06 r17 96906311 25 1.72 35 2.41 1 Facing Plate Nut 1 30 2.06 40 2.75 95606305 35 2.41 45 3.10 12.06 40 2.75 50 3.44 Maintenance When performing annual trip tests of deluge and preaction system valves in accordance with NFPA 25, the diaphragm assembly of the Pilot Line Actuator should also be exam- ined. Any cracking or tearing of the diaphragm or signifi- cant compression set in the rubber on the facing plate requires replacement of these components. If water constantly flows through the closed Pilot Line Actu- ator there is a leak at the seat, proceed as follows: 1. Perform "Testing Without Operating Deluge Valve." As explains above. This will allow water to flow through the Pilot Line Actuator and may flush dirt, scale, etc. If leak- age still occurs, proceed as follows. 2. Close the valve controlling water supply water supply to the deluge valve, and open drain valve. 3. Drop pressure in the dry pilot line, and remove the Pilot Line Actuator from the system. 4. Remove 6 Bolts (9) holding the Actuator together. Clean or replace Facing Plate Assembly (5) and Brass Seat (3). When reassembling, tighten the Facing Plate Nut (7) to a torque of 8ft. Ibs (10.84 Nmi) and the 6 Bolts (9) to torque of 12 h. lbs. (16.27 Nirn) using a or tightening IL pattern. 5. Return the Pilot Line Acutator to the trimming arrange- ment, and follow the "Resetting Deluge Valve" proce- dure in either Bulletin 501 or Bulletin 503 I -igure 1 Pilot Line Actuator Bill of materials Item _ NO' IN o. Part No. Description Re d 1 94106905 Upper Flousi� 1 _ ____2__ 94106906 Lower I lousing _ 1 __ _.3_ 96006904 Seat 4 922_06311 Diaphragm 5 _95106911 Facing Plate Assembly _ -- 1 ti 96906311 j DiaPhragimm washer _ 1 7 1 94906406 1 Facing Plate Nut 1 8 95406901 Seat O Ring 1 95606305 _ Bolts The equipment presented in this bulletin Is to be installed in accordance with the latest published Standards of the National Fire Protection Association, Factory Mutual Re- search Corporation, or other similar organizations and also with the provisions of governmental codes or ordiances whenever applicable. Products manufactured and distributed by Reliable have been protecting life and propery for over 80 years, and are installed and serviced by the most highly qualified and reputable sprinkler contracote located throcou hout,the United States, Canada and foreign countims, P P g Manufactured by The Reliable Automatic Sprinkler Co., Inc. ������ � (800) 431 -1588 Corp rateO (800) 848 -6051 Sales Fax (914) 82 &2042 Corporate radices hitp, /Mv✓w reliablesprinklercom Internet Address WRP.p.rtl Paper Revision lines indicate updated or new data. E G. Printer) nr USA 01101 . PM 9999970056