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Item No. 17 CFD No. 2006-1 Summerly Issuance of its Special Tax Bonds, Series 2017A
Text File City of Lake Elsinore 130 South Main Street Lake Elsinore, CA 92530 www.lake-elsinore.org File Number: RES 2014-053 Agenda Date: 10/24/2017 Status: BusinessVersion: 1 File Type: ResolutionIn Control: City Council / Successor Agency Agenda Number: 17) Page 1 City of Lake Elsinore Printed on 10/19/2017 Pre REPORT TO CITY COUNCIL To:Honorable Mayor and Members of the City Council From:Grant Yates, City Manager Prepared by: Jason Simpson, Assistant City Manager Date:October 24, 2017 Subject:Community Facilities District No. 2006-1 (Summerly) Issuance of its Special Tax Bonds, Series 2017A (Improvement Area EE) Recommendation adopt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) AUTHORIZING THE ISSUANCE OF ITS SPECIAL TAX BONDS, SERIES 2017A (IMPROVEMENT AREA EE) IN A PRINCIPAL AMOUNT NOT TO EXCEED $5,500,000.00 AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH Background The City of Lake Elsinore (City) formed the Community Facilities District No. 2006-1 (District) in 2006 pursuant to the Mello-Roos Community Facilities District Act of 1982. The District comprises a portion of Summerly, a planned residential community located in the southeast portion of the City. McMillin Summerly, LLC, acquired the partially-developed Summerly project in 2010 and now serves as the Master Developer. At build-out, the Summerly project is expected to include approximately 1,500 single-family detached homes, commercial development, and recreational and open space. The Summerly project will be built in four phases. Improvement Area EE (Improvement Area) includes neighborhoods 9, 10, and 11 and is part of phase 4 of the Summerly development. Improvement Area EE consists of a total of 181 single- family lots. Provided below is a summary of the current development and ownership within the Improvement Area as of September 1, 2017. Summerly October 24, 2017 Page 2 of 3 Construction Stages Total Developed Property Individual Owned 38 Woodside Homes Owned1 25 Beazer Homes Owned2 23 CalAtlantic Homes Owned3 36 Subtotal Developed 122 Approved Property Woodside Homes Owned 13 Beazer Homes Owned 23 CalAtlantic Homes Owned 23 Subtotal Approved 59 Total Units 181 ¹17 Homes Under Construction, 3 Model Homes, 1 Home over 95% Complete, and 4 Finished Lots ²6 Homes Under Construction, 3 Model Homes, 9 Homes over 95% Complete, and 5 Finished Lots ³33 Homes Under Construction and 3 Finished for CalAtlantic Homes which have building permits Discussion The proposed Special Tax Bonds, Series 2017A (2017 Bonds) are expected to be issued in a par amount of approximately $4,985,000 with a final maturity of 2047 (30-year term). Proceeds from the 2017 Bonds will be primarily used to finance public facilities within the Improvement Area. Final interest rates and par amount will be determined when the 2017 Bonds are priced and sold. The pricing date would be targeted for some time in mid-November, assuming that interest rates continue to remain attractive. The table below highlights a few estimated financing statistics of the 2017 Bonds. Summary of Financing Statistics* 2017 Bonds Par Amount $4,985,000 Average Bond Yield 4.25% Estimated Cost to Home Owners FY 2018-19 Assessment**$1,363 Average Annual Assessment**$1,791 *Preliminary; Subject to Change; Based on Current Market Conditions **Annual Assigned Special Tax will increase at approximately 2% per year. Documents to be Approved Approval of the attached resolution will approve and authorize the execution of the following financing documents: Bond Indenture Bond Purchase Agreement Continuing Disclosure Certificate; and Preliminary Official Statement Bond Counsel and the City Attorney have reviewed the attached financing documents on behalf of the District. If this resolution is approved, City staff will continue to work with the financing team to finalize all of the aforementioned documents. As previously mentioned, the pricing date Summerly October 24, 2017 Page 3 of 3 would be targeted for some time in mid-November, assuming that interest rates remain attractive. Fiscal Impact There is no cost to the City; however, the property owners are expected to pay approximately $1,363 per parcel starting in FY 2018-19, increasing at 2% per year through 2047, as illustrated in the table on the previous page. The average assessment over the life of the 2017 Bonds is expected to be approximately $1,791. Exhibits: A. Resolution No. 2017- B. Bond Indenture C. Bond Purchase Agreement D. Disclosure Certificate/Preliminary Official Statement RESOLUTION NO. 2017- _____ RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) AUTHORIZING THE ISSUANCE OF ITS SPECIAL TAX BONDS, SERIES 2017A (IMPROVEMENT AREA EE) IN A PRINCIPAL AMOUNT NOT TO EXCEED $5,500,000.00 AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH Whereas, the City Council (Council) of the City of Lake Elsinore (City), has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (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 (Act); and, Whereas, pursuant to Resolution Nos. 2014-016 and 2014-017 adopted by the legislative body of the District on April 8, 2014, certain bond propositions were submitted to the qualified electors within Improvement Area EE of the District (Improvement Area EE), and were approved by more than two-thirds of the votes cast at the election held on April 8, 2014; and, Whereas, the legislative body of the District desires to issue a first series of bonds for Improvement Area EE at this time, under the Act to finance certain public facilities which the District is authorized to finance; and, Whereas, the District desires to accomplish the financing of certain public facilities through the issuance of bonds in an aggregate principal amount not to exceed $5,500,000.00 designated as the “City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2017A (Improvement Area EE)” (Bonds); and, Whereas, in order to affect the issuance of the Bonds, the District desires to enter into various agreements and approve certain documents in substantially the forms presented herein; and, Whereas, based on the appraisal of real property prepared by Kitty Siino & Associates, Inc. (Appraisal) with respect to the Bonds, the value of the real property in Improvement Area EE subject to the special tax to pay debt service on the Bonds is more than three times the sum of the principal amount of the 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 Improvement Area EE as calculated in the manner set forth in Section 53345.8(a) of the Act; and, Whereas, the Council has determined in accordance with Section 53360.4 of the Act that a negotiated sale of the Bonds to Stifel, Nicolaus & Company, Incorporated (Underwriter) in accordance with the terms of the Bond Purchase Agreement for the Bonds to be entered into by the District and the Underwriter (Bond Purchase Agreement) approved as to form by this Council herein will result in a lower overall cost to the District than a public sale. Whereas, pursuant to Government Code Section 8855, the District is required to adopt a debt management policy; and, CC Reso. No. 2017- Page 2 of 4 Whereas, the District has determined to adopt the City’s Debt Management Policy adopted by the Council of the City on July 11, 2017, as the debt management policy of the District; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. Each of the above recitals is true and correct. Section 2. The issuance of the Bonds is hereby authorized in an aggregate principal amount not to exceed $5,500,000.00, with the exact principal amount to be determined by the official signing the Bond Purchase Agreement in accordance with Section 5 below. The City Council hereby determines that it is prudent in the management of the District’s fiscal affairs to issue the Bonds. The 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 5 hereof. All other provisions of the Bonds shall be governed by the terms and conditions of the Bond Indenture (the “Indenture”), which Indenture shall be substantially in the form on file with the Clerk of the City, with such additions thereto and changes therein as the officer or officers executing the same deem necessary to enhance the security for the Bonds, 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 5 hereof or to conform any provisions therein to the Bond Purchase Agreement or the Official Statement delivered to the Underwriter of the Bonds. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Indenture by one of the following: The Mayor, the City Manager, the Assistant City Manager, or their written designees (each, an “Authorized Officer” and collectively, the “Authorized Officers”), each of whom is authorized to execute the Indenture. Capitalized terms used in this Resolution which are not defined herein have the meanings ascribed to them in the Indenture. Section 3. The Bonds shall be executed on behalf of the District by the manual or facsimile signature of the Mayor of the City or his or her written designee and be attested by the manual or facsimile signature of the Clerk of the City. Wilmington Trust, National Association is hereby appointed to act as trustee, registrar and transfer agent for the Bonds. Section 4. The covenants set forth in the Indenture to be executed in accordance with Section 2 above are hereby approved, shall be deemed to be covenants of the City Council and shall be complied with by the District and its officers. The Indenture shall constitute a contract between the District and the Owners of the Bonds. Section 5. 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, with such additions thereto and changes therein relating to dates and numbers as are necessary to conform the Bond Purchase Agreement to the dates, amounts and interest rates applicable to the 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 by one or more of such Authorized Officers; provided, however, that the Bond Purchase Agreement shall be signed only if the Underwriter’s discount (exclusive of original issue discount) does not exceed 2.00% of the principal amount of the Bonds and only if true interest cost of the Bonds does not exceed 5.00%. Each of the Authorized Officers is authorized to determine the day on which the Bonds are to be priced in order to attempt to produce the lowest borrowing cost for the District and may reject any terms presented by the Underwriter if determined not to be in the best interest of the District. CC Reso. No. 2017- Page 3 of 4 Section 6. The form of the Continuing Disclosure Certificate presented at this meeting is hereby approved and each of the Authorized Officers is hereby authorized and directed to execute the Continuing Disclosure Certificate in the form hereby approved, with such additions therein and changes thereto as the officer or officers executing the same deem necessary to cure any defect or ambiguity therein, with such approval to be conclusively evidenced by the execution and delivery of such agreement. Section 7. The form of the Preliminary Official Statement presented at this meeting is hereby approved and the Underwriter is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the Bonds in the form hereby approved, together with such additions thereto and changes therein as are determined necessary 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. 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 is further authorized to distribute the final Official Statement for the Bonds and any supplement thereto to the purchasers of the Bonds upon the execution of the final Official Statement as described above. Section 8. In accordance with the requirements of Section 53345.8 of the Act, based on the Appraisal, the legislative body of the District hereby determines that the value of the real property in Improvement Area EE subject to the special tax to pay debt service on the Bonds is more than three times the principal amount of the 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 Improvement Area EE, all as calculated in the manner provided in Section 53345.8(a) of the Act. Section 9. Each Authorized Officer is authorized to provide for all services necessary to affect the issuance of the Bonds. Such services shall include, but not be limited to, printing the Bonds, obtaining legal services, paying agent services and any other services deemed appropriate as set forth in a certificate of such Authorized Officer. Each Authorized Officer is authorized to pay for the cost of such services, together with other costs of issuance, from Bond proceeds deposited pursuant to the Indenture. Section 10. The Authorized Officers, the Clerk of the City and the other officers and staff of the City and the District responsible for the fiscal affairs of the District 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 Bonds in accordance with the provisions of this Resolution and the fulfillment of the purposesof the Bonds as described in the Indenture, including the execution of one or more cash or letter of credit depository agreements with the developers owning property within the District and Wilmington Trust, National Association relating to any security provided by such developers with respect to the special taxes to be levied within the District, and providing certificates to the Underwriter as to the accuracy of any information relating to the District which is included within the Official Statement, providing certificates to the Underwriter as to the accuracy of any information relating to the District which is included within the Official Statement. Any document authorized herein to be signed by the Clerk of the City may be signed by a duly appointed Deputy Clerk. Section 11. The District hereby adopts the City’s Debt Management Policy, as amended, supplemented and restated from time to time, as the debt management policy of the District CC Reso. No. 2017- Page 4 of 4 pursuant to California Government Code Section 8855. Section 12.The City Clerk shall certify to the adoption of this Resolution and enter it into the book of original Resolutions. Passed and Adopted on this 24th day of October 2017. _____________________________ Robert E. Magee, Mayor Attest: _____________________________ Susan M. Domen, MMC City Clerk STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF LAKE ELSINORE ) I, Susan M. Domen, MMC, City Clerk of the City of Lake Elsinore, California, do hereby certify that Resolution No. 2017- ______ was adopted by the City Council of the City of Lake Elsinore, California, at the Regular meeting of October 24, 2017 and that the same was adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: ________________________________ Susan M. Domen, MMC City Clerk Stradling Yocca Carlson & Rauth Draft dated October 12, 2017 BOND INDENTURE Between CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) and WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee $__________ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017A (IMPROVEMENT AREA EE) Dated as of November 1, 2017 Table of Contents Page i ARTICLE I DEFINITIONS Section 1.1.Definitions.....................................................................................................................1 ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.1.Amount, Issuance, Purpose and Nature of Bonds and Parity Bonds..........................10 Section 2.2.Type and Nature of Bonds and Parity Bonds..............................................................10 Section 2.3.Equality of Bonds and Parity Bonds and Pledge of Net Taxes...................................11 Section 2.4.Description of Bonds; Interest Rates ..........................................................................11 Section 2.5.Place and Form of Payment........................................................................................12 Section 2.6.Form of Bonds and Parity Bonds................................................................................13 Section 2.7.Execution and Authentication.....................................................................................13 Section 2.8.Bond Register..............................................................................................................14 Section 2.9.Registration of Exchange or Transfer.........................................................................14 Section 2.10.Mutilated, Lost, Destroyed or Stolen Bonds or Parity Bonds.....................................14 Section 2.11.Validity of Bonds and Parity Bonds ...........................................................................15 Section 2.12.Book-Entry System.....................................................................................................15 Section 2.13.Representation Letter..................................................................................................16 Section 2.14.Transfers Outside Book-Entry System .......................................................................16 Section 2.15.Payments to the Nominee...........................................................................................16 Section 2.16.Initial Depository and Nominee..................................................................................16 ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS Section 3.1.Creation of Funds; Application of Proceeds...............................................................16 Section 3.2.Deposits to and Disbursements from Special Tax Fund.............................................17 Section 3.3.Administrative Expense Account of the Special Tax Fund........................................18 Section 3.4.Interest Account and Principal Account of the Special Tax Fund..............................18 Section 3.5.Redemption Account of the Special Tax Fund...........................................................19 Section 3.6.Reserve Account of the Special Tax Fund..................................................................20 Section 3.7.Rebate Fund................................................................................................................21 Section 3.8.Surplus Fund...............................................................................................................24 Section 3.9.Acquisition and Construction Fund............................................................................24 Section 3.10.Investments.................................................................................................................25 ARTICLE IV REDEMPTION OF BONDS AND PARITY BONDS Section 4.1.Redemption of Bonds .................................................................................................27 Table of Contents (continued) Page ii Section 4.2.Selection of Bonds and Parity Bonds for Redemption ...............................................28 Section 4.3.Notice of Redemption.................................................................................................28 Section 4.4.Partial Redemption of Bonds or Parity Bonds............................................................29 Section 4.5.Effect of Notice and Availability of Redemption Money...........................................30 ARTICLE V COVENANTS AND WARRANTY Section 5.1.Warranty .....................................................................................................................30 Section 5.2.Covenants....................................................................................................................30 ARTICLE VI AMENDMENTS TO INDENTURE Section 6.1.Supplemental Indentures or Orders Not Requiring Owner Consent...........................34 Section 6.2.Supplemental Indentures or Orders Requiring Owner Consent..................................34 Section 6.3.Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds..........................................................................................................................35 ARTICLE VII TRUSTEE Section 7.1.Trustee.........................................................................................................................36 Section 7.2.Removal of Trustee.....................................................................................................37 Section 7.3.Resignation of Trustee................................................................................................37 Section 7.4.Liability of Trustee .....................................................................................................37 Section 7.5.Merger or Consolidation.............................................................................................40 ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section 8.1.Events of Default ........................................................................................................40 Section 8.2.Remedies of Owners...................................................................................................41 Section 8.3.Application of Revenues and Other Funds After Default...........................................41 Section 8.4.Power of Trustee to Control Proceedings...................................................................42 Section 8.5.Appointment of Receivers..........................................................................................42 Section 8.6.Non-Waiver.................................................................................................................42 Section 8.7.Limitations on Rights and Remedies of Owners ........................................................43 Section 8.8.Termination of Proceedings........................................................................................43 Table of Contents (continued) Page iii ARTICLE IX DEFEASANCE AND PARITY BONDS Section 9.1.Defeasance..................................................................................................................44 Section 9.2.Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness................................................................................................................45 ARTICLE X MISCELLANEOUS Section 10.1.Cancellation of Bonds and Parity Bonds....................................................................47 Section 10.2.Execution of Documents and Proof of Ownership.....................................................47 Section 10.3.Unclaimed Moneys.....................................................................................................48 Section 10.4.Provisions Constitute Contract....................................................................................48 Section 10.5.Future Contracts..........................................................................................................48 Section 10.6.Further Assurances......................................................................................................48 Section 10.7.Severability.................................................................................................................48 Section 10.8.Notices........................................................................................................................49 EXHIBIT A FORM OF SPECIAL TAX BOND ..........................................................................A-1 EXHIBIT B REQUISITION FOR DISBURSEMENT OF PROJECT COSTS ...........................B-1 BOND INDENTURE THIS BOND INDENTURE dated as of November 1, 2017, by and between CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (the “District”) and WILMINGTON TRUST, NATIONAL ASSOCIATION, as trustee (the “Trustee”), governs the terms of the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2017A (Improvement Area EE) and any Parity Bonds issued in accordance herewith from time to time. RECITALS : A.The City Council of the City of Lake Elsinore, located in the County of Riverside, California (the “City Council”), has 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”). B.Based upon Resolution Nos. 2014-016 and 2014-017 adopted by the City Council on April 8, 2014and an election held on April 8, 2014authorizing the levy of a special tax and the issuance of bonds, the District is authorized to issue bonds in one or more series for Improvement Area EE (as defined herein), pursuant to the Act, in an aggregate principal amount not to exceed $7,500,000. C.The District intends to finance various Project Costs (as defined herein) through the issuance of bonds in an aggregate principal amount of $__________ designated as the “City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2017A (Improvement Area EE)” (the “Bonds”); and D.The District has determined that all requirements of the Act for the issuance of the Bonds have been satisfied. NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the 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 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 Bonds and any Parity Bonds (as defined herein) which may be issued hereunder from time to time, as follows: ARTICLE I DEFINITIONS Section 1.1.Definitions. Unless the context otherwise requires, the following terms shall have the following meanings: Account. The term “Account” means any account created pursuant to this Indenture. Act. The term “Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Section 53311 et seq.of the California Government Code. 2 Acquisition and Construction Fund. The term “Acquisition and Construction Fund” means the fund by that name established pursuant to Section 3.1 hereof. Administrative Expense Account. The term “Administrative Expense Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. Administrative Expenses. The term “Administrative Expenses” means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys’ fees and other costs related thereto, the fees and expenses of the Trustee, any fees and related costs for credit enhancement for the Bonds or any Parity Bonds which are not otherwise paid as Costs of Issuance, any costs related to the District’s compliance with state and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District hereunder. Administrative Expenses Cap. The term “Administrative Expenses Cap” means $20,000 per Bond Year increasing at not more than 2% per year. Alternate Penalty Account. The term “Alternate Penalty Account” means the account by that name created and established in the Rebate Fund pursuant to Section 3.1 hereof. Annual Debt Service. The term “Annual Debt Service” means the principal amount of any Outstanding Bonds or Parity Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds or Parity Bonds in such Bond Year, if the Bonds and any Parity Bonds are retired as scheduled. Authorized Investments. The term “Authorized 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: (1)For all purposes, including defeasance investments in refunding escrow accounts: (a)cash; or (b)obligations of, or obligations guaranteed as to principal and interest by, the U.S. or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the U.S., including U.S. treasury obligations, all direct or fully guaranteed obligations, Farmers Home Administration, General Services Administration, guaranteed Title XI financing, Government National Mortgage Association (GNMA) and State and Local Government Series; or (c)obligations of government-sponsored agencies that are not backed by the full faith and credit of the U.S. Government: Federal Home Loan Mortgage Corporation (FHLMC) debt obligations, Farm Credit System (formerly: Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives), Federal Home Loan Banks (FHL Banks), Federal National Mortgage Association (FNMA) debt obligations, Financing Corp. (FICO) debt obligations, Resolution Funding Corp. (REFCORP) debt obligations and U.S. Agency for International Development (U.S.A.I.D.) guaranteed notes. 3 (2)For all purposes other than defeasance investments in refunding escrow accounts: (a)obligations of any of the following federal agencies, which obligations represent the full faith and credit of the United States of America: Export-Import Bank, Rural Economic Community Development Administration, U.S. Maritime Administration, Small Business Administration, U.S. Department of Housing & Urban Development (PHAs), Federal Housing Administration and Federal Financing Bank; (b)direct obligations of any of the following federal agencies, which obligations are not fully guaranteed by the full faith and credit of the United States of America: senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC), obligations of the Resolution Funding Corporation (REFCORP) and senior debt obligations of the Federal Home Loan Bank System; (c)U.S. dollar denominated deposit accounts, federal funds and bankers’ acceptances with domestic commercial banks (including those of the Trustee and its affiliates) which have a rating on their short term certificates of deposit on the date of purchase of “A-1” or “A-1+” by S&P and “P-1” by Moody’s and maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the bank); (d)commercial paper which is rated at the time of purchase in the single highest classification “A-1+” by S&P and “P-1” by Moody’s and which matures not more than 270 days after the date of purchase; (e)investments in a money market fund rated “AAm,” “AAm-G” or better by S&P, including funds for which the Trustee or its affiliates provide investment advisory or other management services; (f)pre-refunded municipal obligations defined as follows: any bonds or other obligations of any state of the United States of America, or any agency, instrumentality or local governmental unit of any such state, which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice, and (i)which are rated, based on irrevocable escrow account or fund (the “escrow”), in the highest rating category of S&P and Moody’s or any successors thereto; or (ii)(1) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (1)(b) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate; and (2) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate; (g)municipal obligations rated “Aaa/AAA” or general obligations of states with a rating of at least “Aa2/AA” or higher by both Moody’s and S&P; 4 (h)Investment Agreements (supported by appropriate opinions of counsel); and (i)the Local Agency Investment Fund of the State, 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. The value of the above investments shall be determined as follows: (a)for the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued at market value. The Trustee shall determine the market value based on accepted industry standards, including the Trustee’s internal systems, and from accepted industry providers. Accepted industry providers shall include, but are not limited to, pricing services provided by Financial Times Interactive Data Corporation, Bank of America Merrill Lynch or Salomon Smith Barney. Notwithstanding anything to the contrary herein, in making any valuation of investments hereunder, the Trustee may utilize computerized securities pricing services that may be available to it, including those available through its regular accounting system, and rely thereon; (b)as to certificates of deposit and bankers acceptances: the face amount thereof, plus accrued interest thereon; and (c)as to any investment not specified above: the value thereof established by prior agreement between the City and the Trustee. Authorized Representative of the District. The term “Authorized Representative of the District” means the Mayor, City Manager, Assistant City Manager, Finance Manager or City Clerk of the City, or any other officer or employee authorized by the City Council of the City or by an Authorized Representative of the District to undertake the action referenced in this Agreement as required to be undertaken by an Authorized Representative of the District. Bond Counsel. The term “Bond Counsel” means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. Bond Register. The term “Bond Register” means the books which the Trustee shall keep or cause to be kept on which the registration and transfer of the Bonds and any Parity Bonds shall be recorded. Bonds. The term “Bonds” means the District’s Special Tax Bonds, Series 2017A (Improvement Area EE) issued on November __, 2017 in the aggregate principal amount of $__________. Bond Year. The term “Bond Year” means the twelve month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds or an issue of Parity Bonds shall begin on the Delivery Date and end on the first September 1 which is not more than 12 months after the Delivery Date. Business Day. The term “Business Day” means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Trustee is located, are not required or authorized to remain closed. 5 Certificate of an Authorized Representative. The term “Certificate of an Authorized Representative” means a written certificate or warrant request executed by an Authorized Representative of the District. City. The term “City” means the City of Lake Elsinore, County of Riverside, State of California. City Council. The term “City Council” means the City Council of the City. Code. The term “Code” means the Internal Revenue Code of 1986, as amended, and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. Continuing Disclosure Certificate. The term “Continuing Disclosure Certificate” means that certain Continuing Disclosure Certificate dated the Delivery Date, by the District, as originally executed and as it may be from time to time amended or supplemented in accordance with its terms. Costs of Issuance. The term “Costs of Issuance” means the costs and expenses incurred in connection with the formation of the District and the issuance and sale of the Bonds or any Parity Bonds, including the acceptance and initial annual fees and expenses of the Trustee and its counsel, legal fees and expenses, costs of printing the Bonds and Parity Bonds and the preliminary and final official statements for the Bonds and Parity Bonds, fees of financial consultants, costs of the appraisal and all other related fees and expenses, including reimbursement to property owners within the District for design, engineering and legal costs, as set forth in a Certificate of an Authorized Representative of the District. Costs of Issuance Account. The term “Costs of Issuance Account” means the account by that name created and established in the Acquisition and Construction Fund pursuant to Section 3.1 hereof. Delivery Date. The term “Delivery Date” means, with respect to the Bonds and each issue of Parity Bonds, the date on which the bonds of such issue were issued and delivered to the initial purchasers thereof. Depository. The term “Depository” means The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Bonds, or any other securities depository acting as Depository under Article II hereof. District. The term “District” means City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) established pursuant to the Act and the Resolution of Formation. Event of Default. The term “Event of Default” meansan event described in Section 8.1 hereof. Fiscal Year. The term “Fiscal Year” means the period beginning on July 1 of each year and ending on the next following June 30. Gross Taxes. The term “Gross Taxes” means the amount of all Special Taxes received by the District for Improvement Area EE, together with the proceeds collected from the sale of property pursuant to foreclosure for the delinquency of such Special Taxes remaining after the payment of all costs related to such foreclosure actions. 6 Improvement Area EE. The term “Improvement Area EE” means Improvement Area EE of the District, established pursuant to the Resolution of Formation. Indenture. The term “Indenture” means this Bond Indenture, together with any Supplemental Indenture approved pursuant to Article 6 hereof. Independent Financial Consultant. The term “Independent Financial Consultant” means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District, who, or each of whom: (1) is in fact independent and not under the domination of the District or the City; (2) does not have any substantial interest, direct or indirect, in the District or the City; and (3) is not connected with the District or the City as a member, officer or employee of the District or the City, but who may be regularly retained to make annual or other reports to the District or the City. Interest Account. The term “Interest Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. Interest Payment Date. The term “Interest Payment Date” means March 1, 2018 and each March 1 and September 1 thereafter; provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next succeeding such date. Investment Agreement. The term “Investment Agreement” means one or more agreements for the investment of funds of the District complying with the criteria therefor as set forth in subsection (2)(h) of the definition of Authorized Investments herein. Maximum Annual Debt Service. The term “Maximum Annual Debt Service” means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds and any Parity Bonds by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds and Parity Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of all Bonds and Parity Bonds Outstanding in such Bond Year if the Bonds and Parity Bonds are retired as scheduled. Moody’s. The term “Moody’s” means Moody’s Investors Service, Inc., its successors and assigns. Net Taxes. The term “Net Taxes” means Gross Taxes minus amounts set aside to pay Administrative Expenses. Nominee. The term “Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.16 hereof. Ordinance. The term “Ordinance” means Ordinance No. 2014-1325 adopted by the City Council on April 22, 2014, providing for the levying of the Special Tax. Outstanding. The terms “Outstanding” or “Outstanding Bonds and Parity Bonds” means all Bonds and Parity Bonds theretofore issued by the District, except: (i) Bonds and Parity Bonds theretofore cancelled or surrendered for cancellation in accordance with Section 10.1 hereof;(ii)Bonds and Parity Bonds for payment or redemption of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds or Parity Bonds), provided that, if such Bonds or Parity Bonds are to be redeemed prior to the maturity thereof, notice 7 of such redemption shall have been given as provided in this Indenture or any applicable Supplemental Indenture for Parity Bonds; and (iii) Bonds and Parity Bonds which have been surrendered to the Trustee for transfer or exchange pursuant to Section 2.9 hereof or for which a replacement has been issued pursuant to Section 2.10 hereof. Owner. The term “Owner” means the person or persons in whose name or names any Bond or Parity Bond is registered. Parity Bonds. The term “Parity Bonds” means all bonds, notes or other similar evidences of indebtedness hereafter issued, payable out of the Net Taxes and which, as provided in this Indenture or any Supplemental Indenture, rank on a parity with the Bonds. Participants. The term “Participants” means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds or Parity Bonds as securities depository. Person. The term “Person” means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. Prepayments. The term “Prepayments” means any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in Improvement Area EE made in accordance with the RMA. Principal Account. The term “Principal Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. Principal Office of the Trustee. The term “Principal Office of the Trustee” means the office of the Trustee located in Costa Mesa, California, or such other office or offices as the Trustee may designate from time to time, or the office of any successor Trustee where it principally conducts its business of serving as trustee under indentures pursuant to which municipal or governmental obligations are issued. Project. The term “Project” means those public facilities described in the Resolution of Formation which are to be acquired or constructed within and outside of the District, including all engineering, planning and design services and other incidental expenses related to such facilities and other facilities, if any, authorized by the qualified electors within the District from time to time. Project Costs. The term “Project Costs” means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the initial and annual costs associated with the Bonds or any Parity Bonds, including, but not limited to, remarketing, credit enhancement, Trustee and other fees and expenses relating to the issuance of the Bonds or any Parity Bonds and the formation of the District, and to pay any other “incidental expenses” of the District, as such term is defined in the Act. Rating Agency. The term “Rating Agency” means Moody’s or S&P, or both, as the context requires. Rebate Account. The term “Rebate Account” means the account by that name created and established in the Rebate Fund pursuant to Section 3.1 hereof. 8 Rebate Fund. The term “Rebate Fund” means the fund by that name established pursuant to Section 3.1 hereof in which there are established the Accounts described in Section 3.1 hereof. Rebate Regulations. The term “Rebate Regulations” means any final, temporary or proposed Regulations promulgated under Section 148(f) of the Code. Record Date. The term “Record Date” means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. Redemption Account. The term “Redemption Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. Regulations. The term “Regulations” means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. Representation Letter. The term “Representation Letter” means the Blanket Letter of Representations from the District to the Depository as described in Section 2.13 hereof. Reserve Account. The term “Reserve Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. Reserve Requirement. The term “Reserve Requirement” means that amount as of any date of calculation equal to the lesser of: (i) 10% of the initial principal amount of the Bonds and Parity Bonds, if any; (ii) Maximum Annual Debt Service on the then Outstanding Bonds and Parity Bonds, if any; and (iii) 125% of average Annual Debt Service on the then Outstanding Bonds and Parity Bonds. Resolution of Formation. The term “Resolution of Formation” means collectively, Resolution Nos. 2014-016 and 2014-017 adopted by the City Council on April 8, 2014, pursuant to which the City Council undertook certain change proceedings with respect to the District and established Improvement Area EE therein. RMA. The term “RMA” means the Rate and Method of Apportionment of Special Tax for Improvement Area EE approved by the qualified electors of Improvement Area EE at the April 8, 2014 election. Sinking Fund Payment. The term “Sinking Fund Payment” means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedules set forth in Section 4.1(b) hereof and any annual sinking fund payment schedule to retire any Parity Bonds which are designated as Term Bonds. Six-Month Period. The term “Six-Month Period” means the period of time beginning on the Delivery Date of each issue of Bonds or Parity Bonds, as applicable, and ending six consecutive months thereafter, and each six-month period thereafter until the latest maturity date of the Bonds and the Parity Bonds (and any obligations that refund an issue of the Bonds or Parity Bonds). Special Tax Administrator. The term “Special Tax Administrator” means the individual or entity appointed by the City to administer the calculation and collection of the Special Taxes. 9 Special Tax Requirement. The term “Special Tax Requirement” means that amount require in any Fiscal Year for Improvement Area EE of the District to: (i) pay debt service on all Outstanding Bonds and Parity Bonds due in the calendar year commencing in such Fiscal Year; (ii) pay periodic costs on the Bonds and Parity Bonds, including but not limited to, credit enhancement and rebate payments on the Bonds and Parity Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds on all Outstanding Bonds and Parity Bonds; (v) pay for reasonable anticipated Special Tax delinquencies; (vi) pay directly for acquisition or construction of facilities authorized under the Act and the RMA to the extent that the inclusion of such amount does not increase the Special Tax levy on Undeveloped Property (as defined in the RMA); less (vii) a credit for funds available to reduce the annual Special Tax levy, as determined by the District pursuant to this Indenture. Special Tax Fund. The term “Special Tax Fund” means the fund by that name created and established pursuant to Section 3.1 hereof. Special Taxes. The term “Special Taxes” means the taxes authorized to be levied by the District on property within Improvement Area EE in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the April 8, 2014 election in the District, including any scheduled payments and any Prepayments thereof, the net proceeds of the redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount of said lien and penalties and interest thereon; provided that any delinquent Special Tax sold to an independent third-party or to the City for 100% of the delinquent amount shall no longer be pledged hereunder to the payment of the Bonds or Parity Bonds. S&P. The term “S&P” means S&P Global Ratings, a Standard & Poor’s Financial Services LLC business, its successors and assigns. Supplemental Indenture. The term “Supplemental Indenture” means any supplemental indenture amending or supplementing this Indenture. Surplus Fund. The term “Surplus Fund” means the fund by that name created and established pursuant to Section 3.1 hereof. Tax Certificate. The term “Tax Certificate” means the certificate by that name to be executed by the District on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. Tax-Exempt. The term “Tax-Exempt” means, with reference to an Authorized Investment, an Authorized Investment the interest earnings on which are excludable from gross income for federal income tax purposes pursuant to Section 103(a) of the Code, other than one described in Section 57(a)(5)(C) of the Code. Term Bonds. The term “Term Bonds” means the Bonds maturing on September 1, 20__ and September 1, 20__ and any term maturities of an issue of Parity Bonds as specified in a Supplemental Indenture. Trustee. The term “Trustee” means Wilmington Trust, National Association, a national banking association duly organized and existing under the laws of the United States, at its principal corporate trust office in Santa Ana, California, and its successors or assigns, or any other bank or trust 10 company which may at any time be substituted in its place as provided in Sections 7.2 or 7.3, and any successor thereto. Underwriter. The term “Underwriter” means, with respect to the Bonds, Stifel, Nicolaus & Company, Incorporated, and with respect to each issue of Parity Bonds, the institution or institutions, if any, with whom the District enters into a purchase contract for the sale of such issue. ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.1.Amount, Issuance, Purpose and Nature of Bonds and Parity Bonds. Under and pursuant to the Act, the Bonds in the aggregate principal amount of $__________, together with any Parity Bonds authorized by the City Council in accordance with Section 9.2 hereof, shall be issued for the purposes of financing the Project, paying Costs of Issuance, funding the Reserve Account and paying capitalized interest on the Bonds; provided that the aggregate principal amount of the Bonds and any Parity Bonds shall not exceed the total indebtedness presently authorized or subsequently authorized by the qualified electors within Improvement Area EE for the District in accordance with the Act. The Bonds and any Parity Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes and the other amounts in the Special Tax Fund (other than amounts in the Administrative Expense Account of the Special Tax Fund). Section 2.2.Type and Nature of Bonds and Parity Bonds. Neither the faith and credit nor the taxing power of the City, the State of California, or any political subdivision thereof other than the District is pledged to the payment of the Bonds or any Parity Bonds. Except for the Net Taxes, no other taxes are pledged to the payment of the Bonds or any Parity Bonds. The Bonds and any Parity Bonds are not general or special obligations of the City nor general obligations of the District, but are limited obligations of the District payable solely from certain amounts deposited by the District in the Special Tax Fund (exclusive of the Administrative Expense Account), as more fully described herein. The District’s limited obligation to pay the principal of, premium, if any, and interest on the Bonds and any Parity Bonds from amounts in the Special Tax Fund (exclusive of the Administrative Expense Account) is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds or any Parity Bonds may compel the exercise of the taxing power by the District (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and any Parity Bonds and premiums upon the redemption thereof, if any, are not a debt of the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds and any Parity Bonds are not a legal or equitable pledge, charge, lien, or encumbrance upon any of the District’s property, or upon any of its income, receipts or revenues, except the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expense Account) which are, under the terms of this Indenture and the Act, set aside for the payment of the Bonds, any Parity Bonds and interest thereon, and neither the members of the legislative body of the District or the members of the City Council nor any persons executing the Bonds or any Parity Bonds are liable personally on the Bonds or any Parity Bonds, by reason of their issuance. Notwithstanding anything to the contrary contained in this Indenture, the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the payment of the interest on or the principal of the Bonds or any Parity Bonds, or for the performance of 11 any covenants contained herein. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Section 2.3.Equality of Bonds and Parity Bonds and Pledge of Net Taxes. Pursuant to the Act and this Indenture, the Bonds and any Parity Bonds shall be equally payable from and secured by a first pledge of and lien on the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expense Account), without priority for number, date of the Bonds or Parity Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and any Parity Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund (exclusive of the Administrative Expense Account) which are hereby set aside for the payment of the Bonds and any Parity Bonds; provided that any delinquent Special Tax sold to an independent third-party or to the City for 100% of the delinquent amount shall no longer be pledged hereunder to the payment of the Bonds or Parity Bonds. Amounts in the Special Tax Fund (other than the Administrative Expense Account therein) shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and any Parity Bonds and, so long as any of the Bonds and any Parity Bonds or interest thereon remain Outstanding, shall not be used for any other purpose, except as permitted by this Indenture or any Supplemental Indenture. Notwithstanding any provision contained in this Indenture to the contrary, Net Taxes deposited in the Rebate Fund and the Surplus Fund shall no longer be considered to be pledged to the Bonds or any Parity Bonds, and none of the Rebate Fund, the Surplus Fund, the Acquisition and Construction Fund or the Administrative Expense Account of the Special Tax Fund shall be construed as a trust fund held for the benefit of the Owners. Nothing in this Indenture or any Supplemental Indenture shall preclude: (i) subject to the limitations contained hereunder, the redemption prior to maturity of any Bonds or Parity Bonds subject to call and redemption and payment of said Bonds or Parity Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California; or (ii) the issuance, subject to the limitations contained herein, of Parity Bonds which shall be payable from Net Taxes. Section 2.4.Description of Bonds; Interest Rates. The Bonds and any Parity Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Bonds and any Parity Bonds of each issue shall be numbered as desired by the Trustee. The Bonds shall be designated “City of Lake Elsinore Community Facilities District No. 2006- 1 (Summerly) Special Tax Bonds, Series 2017A (Improvement Area EE).” The 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 March 1, 2018 and each Interest Payment Date thereafter: 12 Maturity Date September 1 Principal Amount Interest Rate Interest shall be payable on each Bond and Parity Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of such Bond or Parity Bond has been paid; provided, however, that if at the maturity date of any Bond or Parity Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full, in accordance with the terms of this Indenture, such Bonds and Parity Bonds shall then cease to bear interest. Interest due on the Bonds and Parity Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months. Section 2.5.Place and Form of Payment. The Bonds and Parity Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and Parity Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof at the Principal Office of the Trustee, or at the designated office of any successor Trustee. If the Nominee of the Bonds is registered to Cede & Co., payment of principal and any premiums shall be made without presentment. Interest on any Bond or Parity Bond shall be payable from the Interest Payment Date next preceding the date of authentication of such Bond or Parity 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 Bond or Parity Bond, in which event interest shall be payable from the dated date of such Bond or Parity Bond, as applicable; provided, however, that if at the time of authentication of such Bond or Parity Bond, interest is in 13 default, interest on such Bond or Parity 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 such Bond or Parity Bond, interest on such Bond or Parity Bond shall be payable from its dated date. Interest on any Bond or Parity Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond or Parity Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Trustee mailed by first class mail, postage prepaid, to such Owner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Trustee on or before the applicable Record Date from an Owner of $1,000,000 or more in principal amount of the Bonds or of any issue of Parity Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account within the United States of America designated by such Owner. Section 2.6.Form of Bonds and Parity Bonds. The definitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which form is hereby approved and adopted as the form of such Bonds and of the certificate of authentication. Each issue of Parity Bonds and the certificate of authentication therefor shall be in the form provided in the Supplemental Indenture for such issue of Parity Bonds. Until definitive Bonds or Parity Bonds, as applicable, shall be prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds or Parity Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds or Parity Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds or Parity Bonds, as applicable, any temporary bond shall be entitled and subject to the same benefits and provisions of this Indenture as definitive Bonds and Parity Bonds. If the District issues temporary bonds or Parity Bonds, it shall execute and furnish definitive Bonds or Parity Bonds, as applicable, without unnecessary delay and thereupon any temporary bond or Parity Bond may be surrendered to the Trustee at its office, without expense to the Owner, in exchange for a definitive Bond or Parity Bond of the same issue, maturity, interest rate and principal amount in any authorized denomination. All temporary bonds or Parity Bonds so surrendered shall be cancelled by the Trustee and shall not be reissued. Section 2.7.Execution and Authentication. The Bonds and Parity Bonds shall be signed on behalf of the District by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the Clerk of the City, or any duly appointed Deputy Clerk, in their capacity as officers of the District, and the seal of the City or the District (or a facsimile thereof) may be impressed, imprinted, engraved or otherwise reproduced thereon, and attested by the signature of the Clerk of the City. In case any one or more of the officers who shall have signed or sealed any of the Bonds or Parity Bonds shall cease to be such officer before the Bonds or Parity Bonds so signed and sealed have been authenticated and delivered by the Trustee (including new Bonds or Parity Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or Parity Bonds or lost, stolen, destroyed or mutilated Bonds or Parity Bonds), such Bonds and Parity Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed or sealed such Bonds or Parity Bonds had not ceased to hold such office. Only the Bonds as shall bear thereon such certificate of authentication in the form set forth in Exhibit A attached hereto shall be entitled to any right or benefit under this Indenture, and no Bond 14 shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee. Section 2.8.Bond Register. The Trustee will keep or cause to be kept, at its office, sufficient books for the registration and transfer of the Bonds and any Parity Bonds which shall upon reasonable prior notice be open to inspection by the District during all regular business hours, and, subject to the limitations set forth in Section 2.9 below, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds and any Parity Bonds as herein provided. The District and the Trustee may treat the Owner of any Bond or Parity Bond whose name appears on the Bond Register as the absolute Owner of that Bond or Parity Bond for any and all purposes and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Owner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Owner to give written notice to the Trustee of any change in the Owner’s address so that the Bond Register may be revised accordingly. Section 2.9.Registration of Exchange or Transfer. Subject to the limitations set forth in the following paragraph, the registration of any Bond or Parity Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond or Parity Bond for cancellation at the office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Owner or his or her duly authorized attorney. Bonds or Parity Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds or Parity Bonds for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Bond or Parity Bond issued upon any exchange or transfer, but shall require the Owner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds or Parity Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds or a new Parity Bond or Parity Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make exchanges of: (i) Bonds or Parity Bonds for a period of 15 days next preceding any selection of the Bonds or Parity Bonds to be redeemed; or (ii) any Bonds or Parity Bonds chosen for redemption. Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds or Parity Bonds. If any Bond or Parity Bond shall become mutilated, the District shall execute, and the Trustee shall authenticate and deliver, a new Bond or Parity Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond or Parity Bond so mutilated, but only upon surrender to the Trustee of the Bond or Parity Bond so mutilated. Every mutilated Bond or Parity Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to Section 10.1 hereof. If any Bond or Parity Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Parity Bond, as applicable, of like tenor, maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond or Parity Bond so lost, destroyed or stolen. Any Bond or Parity Bond issued in lieu of any Bond or Parity Bond alleged to be mutilated, lost, destroyed or stolen shall be equally and proportionately entitled to the benefits hereof with all other Bonds and 15 Parity Bonds issued hereunder. The Trustee shall not treat both the original Bond or Parity Bond and any replacement Bond or Parity Bond as being Outstanding for the purpose of determining the principal amount of Bonds or Parity Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds or Parity Bonds Outstanding hereunder, but both the original and replacement Bond or Parity Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond or Parity Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Bonds or Parity Bonds. Section 2.11. Validity of Bonds and Parity Bonds. The validity of the authorization and issuance of the Bonds and any Parity Bonds shall not be affected in any way by any defect in any proceedings taken by the District for the financing of the Project, or by the invalidity, in whole or in part, of any contracts made by the District in connection therewith, and shall not be dependent upon the completion of the financing of the Project or upon the performance by any Person of his obligation with respect to the Project, and the recital contained in the Bonds or any Parity Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance. Section 2.12. Book-Entry System. The Bonds shall be initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for each maturity of the Bonds. Upon initial delivery, the ownership of each such Bond shall be registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the Depository. Except as provided in Section 2.14 hereof, all of the Outstanding Bonds shall be registered in the registration books kept by the Trustee in the name of the Nominee. At the election of the District, any Parity Bonds may also be issued as book-entry bonds registered in the name of the Nominee as provided herein, in which case the references in Sections 2.12 through 2.15 to “Bonds” shall be applicable to such Parity Bonds. With respect to Bonds registered in the registration books kept by the Trustee in the name of the Nominee, the District and the Trustee shall have no responsibility or obligation to any such Participant or to any Person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the District and the Trustee shall have no responsibility or obligation with respect to: (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds; (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any notice with respect to the Bonds, including any notice of redemption; (iii) the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event that the Bonds are redeemed in part; or (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any amount with respect to principal of, premium, if any, or interest due with respect to the Bonds. The District and the Trustee may treat and consider the Person in whose name each Bond is registered in the registration books kept by the Trustee as the holder and absolute owner of such Bond for the purpose of payment of the principal of, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest due on the Bonds only to or upon the order of the respective Owner, as shown in the registration books kept by the Trustee, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the District’s obligations with respect to payment of the principal, premium, if any, and interest due on the Bonds to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the 16 registration books kept by the Trustee, shall receive a Bond evidencing the obligation of the District to make payments of principal, premium, if any, and interest pursuant to this Indenture. Upon delivery by the Depository to the Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Indenture shall refer to such new nominee of the Depository. Section 2.13. Representation Letter. In order to qualify the Bonds and any Parity Bonds which the District elects to register in the name of the Nominee for the Depository’s book-entry system, an authorized representative of the Trustee is hereby authorized to execute from time to time and deliver to such Depository the Representation Letter. The execution and delivery of the Representation Letter shall not in any way limit the provisions of Section 2.12 or in any other way impose upon the District or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Owners, as shown on the registration books kept by the Trustee. The Trustee agrees to take all action necessary to continuously comply with all representations made by it in the Representation Letter. In addition to the execution and delivery of the Representation Letter, the Authorized Representatives of the District are hereby authorized to take any other actions, not inconsistent with this Indenture, to qualify the Bonds for the Depository’s book-entry program. Section 2.14. Transfers Outside Book-Entry System. In the event that: (i) the Depository determines not to continue to act as securities depository for the Bonds; or (ii) the District determines that the Depository shall no longer so act, then the District will discontinue the book-entry system with the Depository. If the District fails to identify another qualified securities depository to replace the Depository then the Bonds so designated shall no longer be restricted to being registered in the registration books kept by the Trustee in the name of the Nominee, but shall be registered in whatever name or names Persons transferring or exchanging Bonds shall designate, in accordance with the provisions of Section 2.9 hereof. Section 2.15. Payments to the Nominee. Notwithstanding any other provisions of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal, premium, if any, and interest due with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository. Section 2.16. Initial Depository and Nominee. The initial Depository under this Indenture shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York. ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS Section 3.1.Creation of Funds; Application of Proceeds. (a)There are hereby created and established and shall be maintained by the Trustee the following funds and accounts: (1)The City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Improvement Area EE Special Tax Fund (the “Special Tax Fund”) (in which there shall 17 be established and created an Interest Account, a Principal Account, a Redemption Account, a Reserve Account, and an Administrative Expense Account). (2)The City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Improvement Area EE Rebate Fund (the “Rebate Fund”) (in which there shall be established a Rebate Account and an Alternate Penalty Account). (3)The City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Improvement Area EE Acquisition and Construction Fund (the “Acquisition and Construction Fund”) (in which there shall be established a Costs of Issuance Account). (4)The City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Improvement Area EE Surplus Fund (the “Surplus Fund”). The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by the Trustee. The Trustee shall invest and disburse the amounts in such funds, accounts and subaccounts in accordance with the provisions of this Article 3 and shall disburse investment earnings thereon in accordance with the provisions of Section 3.10 hereof. In connection with the issuance of any Parity Bonds, which may be issued only for the purpose of refunding the Bonds as described in Section 9.2, the Trustee, at the direction of an Authorized Representative of the District, may create new funds, accounts or subaccounts, or may create additional accounts and subaccounts within any of the foregoing funds and accounts for the purpose of separately accounting for the proceeds of the Bonds and any Parity Bonds. (b)The proceeds of the sale of the Bonds shall be received by the Trustee on behalf of the District and deposited and transferred as follows: (1)$____________ shall be transferred to the Costs of Issuance Account of the Acquisition and Construction Fund to pay the Costs of Issuance of the Bonds; (2)$__________ shall be transferred to the Reserve Account of the Special Tax Fund to fund the Reserve Requirement; (3)[$_________ shall be transferred to the Interest Account to pay a portion of the interest on the Bonds due on September 1, 2018; and] (4)$__________ shall be transferred to the Acquisition and Construction Fund. The Trustee may, in its discretion, establish temporary funds or accounts in its books and records to facilitate such transfers. Section 3.2.Deposits to and Disbursements from Special Tax Fund. (a)Except for Prepayments, which shall be deposited to the Redemption Account of the Special Tax Fund, the Trustee shall, on each date on which the Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be held in trust for the Owners. The Trustee shall transfer the Special Taxes on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections, in the following order of priority, to: 18 (1)the Administrative Expense Account of the Special Tax Fund up to the Administrative Expenses Cap; (2)the Interest Account of the Special Tax Fund; (3)the Principal Account of the Special Tax Fund; (4)the Redemption Account of the Special Tax Fund; (5)the Reserve Account of the Special Tax Fund; (6)the Administrative Expense Account of the Special Tax Fund to the extent that Administrative Expenses exceed or are expected to exceed the Administrative Expense Cap; (7)the Rebate Fund; and (8)the Surplus Fund. (b)At maturity of all of the Bonds and Parity Bonds and, after all principal and interest then due on the Bonds and Parity Bonds then Outstanding have been paid or provided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts therein may be used by the District for any lawful purpose. Section 3.3.Administrative Expense Account of the Special Tax Fund. The Trustee shall transfer from the Special Tax Fund and deposit in the Administrative Expense Account of the Special Tax Fund from time to time amounts necessary to make timely payment of Administrative Expenses as set forth in a Certificate of an Authorized Representative of the District; provided, however, that, except as set forth in the following sentence, the total amount transferred with respect to a Bond Year shall not exceed the Administrative Expenses Cap until such time as there has been deposited to the Interest Account and the Principal Account an amount, together with any amounts already on deposit therein, that is sufficient to pay the interest and principal on all Bonds and Parity Bonds due in such Bond Year and to restore the Reserve Account to the Reserve Requirement. Notwithstanding the foregoing, amounts in excess of the Administrative Expenses Cap may be transferred to the Administrative Expense Account to the extent necessary to collect delinquent Special Taxes. Moneys in the Administrative Expense Account of the Special Tax Fund may be invested in any Authorized Investments as directed in writing by an Authorized Representative of the District and shall be disbursed as directed in a Certificate of an Authorized Representative. Section 3.4.Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds and any Parity Bonds until maturity, other than principal due upon redemption, shall be paid by the Trustee from the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds and any Parity Bonds will be made when due, after making the transfer required by Section 3.3, at least one Business Day prior to each March 1 and September 1, the Trustee shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds or any Parity Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the 19 Special Tax Fund (exclusive of the Reserve Account) are inadequate to make the foregoing transfers, then any deficiency shall be made up by transfers from the Reserve Account: (a)To the Interest Account, an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds and any Parity Bonds as the same become due. (b)To the Principal Account, an amount such that the balance in the Principal Account one Business Day prior to September 1 of each year, commencing September 1, 2018, shall equal the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity. Section 3.5.Redemption Account of the Special Tax Fund. (a)With respect to each September 1 on which a Sinking Fund Payment is due, after the deposits have been made to the Administrative Expense Account, the Interest Account and the Principal Account of the Special Tax Fund as required by Sections 3.3 and 3.4 hereof, the Trustee shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Account one Business Day prior to each September 1 on which a Sinking Fund Payment is due equal to the Sinking Fund Payment due on any Outstanding Bonds and Parity Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account, if funded, pursuant to Section 3.6 below. Moneys so deposited in the Redemption Account shall be used and applied by the Trustee to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedules set forth in Section 4.1(b) hereof, and to redeem Parity Bonds in accordance with any Sinking Fund Payment schedule in the Supplemental Indenture for such Parity Bonds. (b)After making the deposits to the Administrative Expense Account, the Interest Account and the Principal Account of the Special Tax Fund pursuant to Sections 3.3 and 3.4 above and to the Redemption Account for Sinking Fund Payments then due pursuant to subparagraph (a) of this Section, and in accordance with the District’s election to call Bonds for optional redemption as set forth in Section 4.1(a) hereof, or to call Parity Bonds for optional redemption as set forth in any Supplemental Indenture for Parity Bonds, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal and the premiums, if any, payable on the Bonds or Parity Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund (other than the Administrative Expense Account therein) may be applied to optionally redeem Bonds and Parity Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (c)Prepayments deposited to the Redemption Account shall be applied on the redemption date established pursuant to Section 4.1(c) hereof to the payment of the principal of, premium, if any, and interest on the Bonds and Parity Bonds to be redeemed with such Prepayments. 20 (d)Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and Parity Bonds and shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds or Parity Bonds to be redeemed upon presentation and surrender of such Bonds or Parity Bonds, and, in the case of an optional redemption or a special mandatory redemption from Prepayments, to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds or Parity Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds or Parity Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption or a special mandatory redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to Section 4.1(a) or 4.1(c) hereof, as applicable, or in the case of Parity Bonds the premium established in any Supplemental Indenture. Any accrued interest payable upon the purchase of Bonds or Parity Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. Section 3.6.Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The amounts in the Reserve Account shall be applied as follows: (a)Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds and any Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due and for the purpose of making any required transfer to the Rebate Fund pursuant to Section 3.7 hereof upon written direction from the District. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Parity Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the Reserve Account for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund or the Rebate Fund, as applicable, moneys necessary for such purposes. (b)Whenever moneys are withdrawn from the Reserve Account, after making the required transfers referred to in Sections 3.3, 3.4 and 3.5 above, the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the District elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Administrative Expense Account, the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund on or before the next September 1. If amounts in the Special Tax Fund together with any other amounts transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, then the District shall include the amount necessary to restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates. 21 (c)In connection with a redemption of Bonds pursuant to Section 4.1(a) or 4.1(c) or Parity Bonds in accordance with any Supplemental Indenture, or a partial defeasance of Bonds or Parity Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement. The District shall set forth in a Certificate of an Authorized Representative the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to the Indenture to partially defease Bonds or Parity Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding sentence. (d)To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds or an issue of Parity Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds and Parity Bonds, as applicable, in the final Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this Section shall be withdrawn from the Reserve Account on the Business Day before each March 1 and September 1 and shall be transferred to the Acquisition and Construction Fund, as directed by an Authorized Representative of the District, until all amounts have been disbursed from the Acquisition and Construction Fund (or such fund is closed) and thereafter to the Interest Account of the Special Tax Fund. Section 3.7.Rebate Fund. (a)The Trustee shall establish and maintain a fund separate from any other fund established and maintained hereunder designated as the Rebate Fund and shall establish a separate Rebate Account and Alternate Penalty Account therein. All money at any time deposited in the Rebate Account or the Alternate Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. A separate subaccount of the Rebate Account and the Alternate Penalty Account shall be established for the Bonds and each issue of Parity Bonds the interest on which is excluded from gross income for federal income tax purposes. All amounts on deposit in the Rebate Fund with respect to the Bonds or an issue of Parity Bonds shall be governed by this Section 3.7 and the Tax Certificate for such issue, unless the District obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest payments on the Bonds and Parity Bonds will not be adversely affected if such requirements are not satisfied. (1)Rebate Account. The following requirements shall be satisfied with respect to each subaccount of the Rebate Account: (i)Annual Computation. Within 55 days of the end of each Bond Year, the District shall calculate or cause to be calculated the amount of rebatable arbitrage for the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable, 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 in the Tax Certificate for each issue (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 “1½% 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 District shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section. 22 (ii)Annual Transfer. Within 55 days of the end of each Bond Year for which Rebatable Arbitrage must be calculated as required by the Tax Certificate for each issue, upon the written direction of an Authorized Representative of the District, an amount shall be deposited to each subaccount of the Rebate Account by the Trustee from any funds so designated by the District if and to the extent required, so that the balance in the Rebate Account shall equal the amount of Rebatable Arbitrage so calculated by or on behalf of the District in accordance with clause (i) of this subsection (a)(1) with respect to the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable. In the event that immediately following any transfer required by the previous sentence, or the date on which the District determines that no transfer is required for such Bond Year, the amount then on deposit to the credit of the applicable subaccount of the Rebate Account exceeds the amount required to be on deposit therein, upon written instructions from an Authorized Representative of the District, the Trustee shall withdraw the excess from the appropriate subaccount of the Rebate Account and then credit the excess to the Special Tax Fund. (iii)Payment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the District, to the United States Treasury, out of amounts in each subaccount of the Rebate Account: (X)not later than 60 days after the end of: (A) the fifth Bond Year for the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable; and (B) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year for the Bonds and each issue of Parity Bonds, as applicable; and (Y)not later than 60 days after the payment or redemption of all of the Bonds or an issue of Parity Bonds, as applicable, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, 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 the Rebate Account, the amount in the Rebate Account is not sufficient to make such payment when such payment is due, the District shall calculate or cause to be calculated the amount of such deficiency and deposit 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 (a)(1) shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T, or shall be made in such other manner as provided under the Code. (2)Alternate Penalty Account. (i)Six-Month Computation. If the 1½% Penalty has been elected for the Bonds or an issue of Parity Bonds, within 85 days of each particular Six-Month Period, the District shall determine or cause to be determined whether the 1½% Penalty is payable (and the amount of such penalty) as of the close of the applicable Six-Month Period. The District shall obtain expert advice in making such determinations. (ii)Six-Month Transfer. Within 85 days of the close of each Six-Month Period, the Trustee, at the written direction of an Authorized Representative of the District, shall deposit an amount in the appropriate subaccounts of the Alternate Penalty Account from any source of 23 funds held by the Trustee pursuant to this Indenture and designated by the District in such written directions or provided to it by the District, if and to the extent required, so that the balance in each subaccount of the Alternate Penalty Account equals the amount of 1½% Penalty due and payable to the United States Treasury determined as provided in subsection (a)(2)(i) above. In the event that immediately following any transfer provided for in the previous sentence, or the date on which the District determines that no transfer is required for such Bond Year, the amount then on deposit in a subaccount of the Alternate Penalty Account exceeds the amount required to be on deposit therein to make the payments required by subsection (iii) below, the Trustee, at the written direction of an Authorized Representative of the District, may withdraw the excess from the applicable subaccount of the Alternate Penalty Account and credit the excess to the Special Tax Fund. (iii)Payment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the District, to the United States Treasury, out of amounts in a subaccount of the Alternate Penalty Account, not later than 90 days after the close of each Six-Month Period the 1½% Penalty, if applicable and payable, computed with respect to the Bonds and any issue of Parity Bonds 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 a subaccount of the Alternate Penalty Account, the amount in such subaccount is not sufficient to make such payment when such payment is due, the District shall calculate the amount of such deficiency and direct the Trustee, in writing, to deposit an amount equal to such deficiency into such subaccount of the Alternate Penalty Account from any funds held by the Trustee pursuant to this Indenture and designated by the District in such written directions prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a)(2) shall be made to the Internal Revenue Service, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T or shall be made in such other manner as provided under the Code. (b)Disposition of Unexpended Funds. Any funds remaining in the Accounts of the Rebate Fund with respect to the Bonds or an issue of Parity Bonds after redemption and payment of such issue and after making the payments described in subsections (a)(1)(iii) or (a)(2)(iii) (whichever is applicable), may be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District. (c)Survival of Defeasance and Final Payment. Notwithstanding anything in this Section or this Indenture to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance and final payment of the Bonds and any Parity Bonds with respect to which an Account has been created in the Rebate Fund. (d)Amendment Without Consent of Owners. This Section 3.7 may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any issue of Parity Bonds issued on a tax-exempt basis. (e)Trustee. The Trustee shall have no responsibility to monitor or calculate any amounts payable to the U.S. Treasury pursuant to this Section and shall be deemed constructively to have complied with its obligations hereunder if it follows the written instructions of the District given pursuant to this Section. 24 Section 3.8.Surplus Fund. After making the transfers required by Sections 3.3, 3.4, 3.5, 3.6 and 3.7 hereof, as soon as practicable after each September 1, the Trustee shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, unless on or prior to such date, it has received a Certificate of an Authorized Representative directing that certain amounts be retained in the Special Tax Fund because the District has included such amounts as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to Section 5.2(b) hereof. Moneys deposited in the Surplus Fund will be transferred by the Trustee at the direction of an Authorized Representative of the District: (i) to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, premium, if any, and interest on the Bonds and any Parity Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor; (ii) to the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement; (iii) to the Administrative Expense Account of the Special Tax Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense Account of the Special Tax Fund are insufficient to pay Administrative Expenses; (iv) to the Acquisition and Construction Fund to pay Project Costs; or (v) after all Project Costs have been paid, to the District, for any other lawful purpose of the District. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds or the Parity Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds or Parity Bonds, the District shall notify the Trustee in a Certificate of an Authorized Representative and the Trustee shall segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested at the written direction of the District in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds or Parity Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes. Such amounts shall be disbursed as directed by an Authorized Representative. Section 3.9.Acquisition and Construction Fund. (a)The moneys in the Costs of Issuance Account shall be disbursed by the Trustee pursuant to a Certificate of an Authorized Representative of the District, and any balance remaining therein after 180 days shall be transferred by the Trustee to the Acquisition and Construction Fund as directed in writing by an Authorized Representative of the District. Following such transfer to the Administrative Expense Account, the Costs of Issuance Account shall be closed. (b)The moneys in the Acquisition and Construction Fund shall be applied exclusively to pay the Project Costs. Amounts for Project Costs shall be disbursed by the Trustee from the Acquisition and Construction Fund, as specified in a Request for Disbursement of Project Costs, substantially in the form of Exhibit B-1 attached hereto. A properly executed Request for Disbursement of Project Costs must be submitted in connection with each requested disbursement and the Trustee may rely thereon without investigating the accuracy thereof. 25 (c)Upon receipt of a Certificate of an Authorized Representative of the District stating that all or a specified portion of the amount remaining in the Acquisition and Construction Fund is no longer needed to pay Project Costs, the Trustee shall: (i) transfer all or such specified portion, as applicable, of the moneys remaining on deposit in the Acquisition and Construction Fund to the Interest Account, the Principal Account or Redemption Account of the Special Tax Fund, to the Costs of Issuance Account or to the Surplus Fund, as directed in such certificate, provided that in connection with any direction to transfer amounts to the Surplus Fund there shall have been delivered to theTrustee with such certificate an opinion of Bond Counsel to the effect that such transfer to the Surplus Fund will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes; and (ii) thereafter, close the Acquisition and Construction Fund. Section 3.10. Investments. Moneys held in any of the Funds, Accounts and Subaccounts under this Indenture shall be invested at the written direction of the District upon at least two (2) Business Days’ notice in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such Funds, Accounts and Subaccounts. Any loss resulting from such Authorized Investments shall be credited or charged to the Fund, Account or Subaccount from which such investment was made, and any investment earnings on a Fund, Account or Subaccount shall be applied as follows: (i) investment earnings on all amounts deposited in the Acquisition and Construction Fund (including the accounts therein), the Special Tax Fund, the Surplus Fund and the Rebate Fund and each Account therein (other than the Reserve Account of the Special Tax Fund) shall be deposited in those respective Funds, Accounts and Subaccounts; and (ii) investment earnings on all amounts deposited in the Reserve Account shall be deposited therein to be applied as set forth in Section 3.6. Moneys in the Funds, Accounts and Subaccounts held under this Indenture may be invested by the Trustee as directed in writing by the District, from time to time, in Authorized Investments subject to the following restrictions (provided that the Trustee is not required to verify compliance with such restrictions and may rely on the District’s written instructions as evidence of such compliance): (a)Moneys in the Acquisition and Construction Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Acquisition and Construction Fund. Notwithstanding anything herein to the contrary, amounts in the Acquisition and Construction Fund three years after the Delivery Date for the Bonds and the proceeds of each issue of Parity Bonds issued on a tax-exempt basis which are remaining on deposit in the Acquisition and Construction Fund on the date which is three years following the date of issuance of such issue of Parity Bonds shall be invested by the District only in Authorized Investments the interest on which is excluded from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds or Parity Bonds from which such proceeds were derived, unless in the opinion of Bond Counsel such restriction is not necessary to prevent interest on the Bonds or any Parity Bonds which were issued on a tax-exempt basis for federal income tax purposes from being included in gross income for federal income tax purposes. (b)Moneys in the Interest Account, the Principal Account, and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on 26 such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds and any Parity Bonds as the same become due. (c)Moneys in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments (other than the Authorized Investment described in clause (2)(i) of the definition thereof) which, taken together, have a weighted average maturity not in excess of five years; provided that such amounts may be invested in an Investment Agreement to the later of the final maturity of the Bonds or any Parity Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with Section 3.6 hereof; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds or an issue of Parity Bonds shall mature later than the respective final maturity date of the Bonds or the issue of Parity Bonds, as applicable. (d)Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type described in clause (1) of the definition thereof which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to Section 3.7 hereof or in Authorized Investments of the type described in clause (2)(e) of the definition thereof. (e)In the absence of written investment directions from the District, the Trustee shall invest solely in Authorized Investments specified in clause (2)(e) of the definition thereof. If no such written investment direction from the District is received, the funds shall be uninvested. The Trustee shall sell, or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such funds and accounts or from such funds and accounts. Notwithstanding anything herein to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Indenture. Any Authorized Investments that are registrable securities shall be registered in the name of the Trustee. The Trustee may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for making such investment. The Trustee may sell at the best market price obtainable, or present for redemption, any Authorized Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Authorized Investment is credited, and, subject to the provisions of Section 7.4, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or which any one or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for any third person or dealing as principal for its own account. The District acknowledges that, to the extent that regulations of the Comptroller of the Currency or other applicable regulatory entity grant the District the right to receive brokerage confirmations of security transactions as they occur, the District specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the District periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. 27 ARTICLE IV REDEMPTION OF BONDS AND PARITY BONDS Section 4.1.Redemption of Bonds. (a)Optional Redemption. The Bonds may be redeemed at the option of the District from any source of funds on any Interest Payment Date on and after September 1, 20__, in whole or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption: Redemption Date Redemption Price In the event that the District elects to redeem Bonds as provided above, the District shall give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee shall be given at least 30 but no more than 60 days prior to the redemption date, or by such later date as is acceptable to the Trustee. (b)Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20__ (the “20__ Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established by the Indenture, on September 1, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Term Bonds Maturing September 1, 20__ Sinking Fund Redemption Date (September 1)Sinking Fund Payments * _____________ * Maturity. If the District purchases Term Bonds during the Fiscal Year immediately preceding one of the sinking fund redemption dates specified above, the District shall notify the Trustee at least 45 days prior to the redemption date as to the principal amount purchased, and the amount purchased shall be credited at the time of purchase to the next Sinking Fund Payment for the Term Bond so purchased, to 28 the extent of the full principal amount of the purchase. All Bonds purchased pursuant to this subsection shall be cancelled pursuant to Section 10.1 hereof. In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds shall be reduced, as nearly as practicable, on a pro rata basis. (c)Special Mandatory Redemption. The Bonds are subject to special mandatory redemption as a whole or in part on a pro rata basis among maturities and by lot within a maturity, on any Interest Payment Date on and after September 1, 20__, and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account pursuant to Section 3.2, plus amounts transferred from the Reserve Account pursuant to Section 3.6(c), 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 (d)The redemption provisions for Parity Bonds shall be set forth in a Supplemental Indenture. Section 4.2.Selection of Bonds and Parity Bonds for Redemption. If less than all of the Bonds or Parity Bonds Outstanding are to be redeemed, the portion of any Bond or Parity 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 or Parity Bonds for redemption, the Trustee shall treat such Bonds or Parity Bonds, as applicable, as representing that number of Bonds or Parity Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds or Parity Bonds to be redeemed in part by $5,000. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee shall promptly notify the District in writing of the Bonds or Parity Bonds, or portions thereof, selected for redemption. Section 4.3.Notice of Redemption. When Bonds or Parity Bonds are due for redemption under Section 4.1 above or under another redemption provision set forth in a Supplemental Indenture relating to any Parity Bonds, the Trustee shall give notice, in the name of the District, of the redemption of such Bonds or Parity Bonds. Such notice of redemption shall: (i) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds or Parity Bonds selected for redemption, except that where all of the Bonds or all of an issue of Parity Bonds are subject to redemption, or all of the Bonds or Parity Bonds of one maturity are to be redeemed, the bond numbers of such issue need not be specified; (ii) state the date fixed for redemption and surrender of the Bonds or Parity Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds or Parity Bonds are to be redeemed; (v) in the case of Bonds or Parity Bonds to be redeemed only in part, state the portion of such Bond or Parity Bond which is to be redeemed; (vi) state the date of issue of the Bonds or Parity Bonds as originally issued; (vii) state the rate of interest borne by each Bond or Parity Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the Bonds or Parity Bonds being redeemed as shall be specified by the Trustee. 29 Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond, Parity 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 Trustee shall mail a copy of such notice of redemption, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register, and to the original purchaser of any Bonds or Parity Bonds; provided, however, so long as the Bonds and Parity Bonds are registered in the name of the Nominee, such notice shall be given in such manner as complies with the requirements of the Depository. The actual receipt by the Owner of any Bond or Parity 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 Bonds or Parity Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee 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. In addition to the foregoing notice, further notice shall be given by the Trustee as set out below, 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 if notice thereof is given as above prescribed. Each further notice of redemption shall be sent not later than the date that notice of redemption is mailed to the Owners pursuant to the first paragraph of this Section by first class mail or facsimile to the Depository and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds and Parity Bonds as determined by the Trustee and to one or more of the national information services that the Trustee determines are in the business of disseminating notice of redemption of obligations such as the Bonds and Parity Bonds. Upon the payment of the redemption price of any Bonds and Parity 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 and Parity Bonds being redeemed with the proceeds of such check or other transfer. With respect to any notice of optional redemption of Bonds or Parity Bonds, such notice may state that such redemption shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds or Parity Bonds to be redeemed and that, if such moneys shall not have been so received, said notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds or Parity Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption shall not be made, and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. Section 4.4.Partial Redemption of Bonds or Parity Bonds. Upon surrender of any Bond or Parity Bond to be redeemed in part only, the District shall execute and the Trustee shall authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds or a new Parity Bond or Parity Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity or, in the case of surrender of a Parity Bond, a new Parity Bond or Parity Bonds subject to the foregoing limitations. 30 Section 4.5.Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.3 hereof, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (a)the Bonds and Parity Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Indenture or in any Supplemental Indenture with respect to any Parity Bonds, anything in this Indenture or in the Bonds or the Parity Bonds to the contrary notwithstanding; (b)upon presentation and surrender thereof at the office of the Trustee, the redemption price of such Bonds and Parity Bonds shall be paid to the Owners thereof; (c)as of the redemption date the Bonds or the Parity Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds or Parity Bonds, or portions thereof, shall cease to bear further interest; and (d)as of the date fixed for redemption no Owner of any of the Bonds, Parity Bonds or portions thereof so designated for redemption shall be entitled to any of the benefits of this Indenture or any Supplemental Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. ARTICLE V COVENANTS AND WARRANTY Section 5.1.Warranty. The District shall preserve and protect the security pledged hereunder to the Bonds and any Parity Bonds against all claims and demands of all persons. Section 5.2.Covenants. So long as any of the Bonds or Parity Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Owners under the provisions of the Act and this Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and Parity Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: (a)Punctual Payment; Against Encumbrances. The District covenants that it will receive all Special Taxes in trust for the Owners and will deposit all Special Taxes with the Trustee immediately upon their apportionment to the District, and the District shall have no beneficial right or interest in the amounts so deposited except as provided by this Indenture. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth herein, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond and Parity Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and the Parity Bonds and in accordance with this Indenture to the extent that Net Taxes and other amounts pledged hereunder are 31 available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds, any Parity Bonds, and this Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and all Supplemental Indentures and of the Bonds and any Parity Bonds issued hereunder. The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes except as provided in this Indenture, and will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds, other than Parity Bonds. Nothing herein shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds and the Parity Bonds, subject to compliance with the District’s bonded indebtedness limit. (b)Levy of Special Tax. Beginning in Fiscal Year 2019and so long as any Bonds or Parity Bonds issued under this Indenture are Outstanding, the District covenants to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay: (1) the principal of and interest on the Bonds and any Parity Bonds when due; (2) the Administrative Expenses; and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. The District further covenants that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding. (c)Commence Foreclosure Proceedings. The District covenants for the benefit of the Owners of the Bonds and any Parity Bonds that it will: (i) commence judicial foreclosure proceedings against parcels with delinquent Special Taxes in excess of $5,000 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied; and (iii) diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account is at least equal to the Reserve Requirement. The District may, but shall not be obligated to, advance funds from any source of legally available funds in order to maintain the Reserve Account. The District may treat any delinquent Special Tax sold to an independent third-party or to the City for at least 100% of the delinquent amount as having been paid. Proceeds of any such sale up to 100% of the delinquent amount will be deposited in the Special Tax Fund. The District covenants that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. (d)Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Net Taxes or other funds in the Special Tax Fund (other than the Administrative Expense Account therein), or which might impair the security of the Bonds or any Parity Bonds then Outstanding; provided, however, that nothing herein contained shall require the District to make any such payments so long as the District in good faith shall contest the validity of any such claims. 32 (e)Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Trustee or of the Owners or the Owners of any issue of Parity Bonds then Outstanding or their representatives authorized in writing. (f)Federal Tax Covenants. Notwithstanding any other provision of this Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds and any Parity Bonds issued on a tax-exempt basis for federal income tax purposes will not be adversely affected for federal income tax purposes, the District 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: (1)Private Activity. The District will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or any Parity Bonds or of any other monies or property which would cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be “private activity bonds” within the meaning of Section 141 of the Code. (2)Arbitrage. The District will make no use of the proceeds of the Bonds or any Parity Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be “arbitrage bonds” within the meaning of Section 148 of the Code. (3)Federal Guaranty. The District will make no use of the proceeds of the Bonds or any Parity Bonds or take or omit to take any action that would cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be “federally guaranteed” within the meaning of Section 149(b) of the Code. (4)Information Reporting. The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code. (5)Hedge Bonds. The District will make no use of the proceeds of the Bonds or any Parity Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be considered “hedge bonds” within the meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds and any applicable Parity Bonds. (6)Miscellaneous. The District will take no action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed on the Delivery Date by the District in connection with the Bonds and any issue of Parity Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. (7)Other Tax-Exempt Issues. The District will not use proceeds of other tax-exempt securities to redeem any Bonds or Parity Bonds without first obtaining the written opinion of Bond Counsel that doing so will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds issued on a tax-exempt basis. 33 (8)Subsequent Opinions. If the District obtains a subsequent opinion of Bond Counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation, where such opinion is required in connection with a change or amendment to this Indenture or the procedures set forth in the Tax Certificate, it will obtain an opinion substantially to the effect originally delivered by Stradling Yocca Carlson & Rauth, a Professional Corporation, that interest on the Bonds is excluded from gross income for federal income tax purposes. (g)Reduction of Maximum Special Taxes. The District hereby finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the District hereby determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in Improvement Area EE below the levels provided in this Section 5.2(g) would interfere with the timely retirement of the Bonds and Parity Bonds. The District determines it to be necessary in order to preserve the security for the Bonds and Parity Bonds to covenant, and, to the maximum extent that the law permits it to do so, the District hereby does covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for Improvement Area EE, unless, in connection therewith, the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within Improvement Area EE to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds. (h)Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the qualified electors in Improvement Area EE which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(g) above or to limit the power of the District to levy the Special Taxes for the purposes set forth in Section 5.2(b) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (i)Limitation on Right to Tender Bonds. The District hereby covenants that it will not adopt anypolicy pursuant to Section 53344.1 of the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District shall have first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the Bonds and Parity Bonds when due. (j)Continuing Disclosure. The District covenants to comply with the terms of the Continuing Disclosure Certificate and with the terms of any agreement executed by the District with respect to any Parity Bonds to assist the Underwriter in complying with Rule 15c2-12 adopted by the Securities and Exchange Commission; provided, however, that a failure to comply shall not be considered an event of default hereunder and the Owners shall be limited to enforcing the terms thereof in accordance with the terms of the Continuing Disclosure Certificate. (k)Further Assurances. The District shall make, execute and deliver any and all such further agreements, 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 34 unto the Owners of the Bonds and any Parity Bonds of the rights and benefits provided in this Indenture. ARTICLE VI AMENDMENTS TO INDENTURE Section 6.1.Supplemental Indentures or Orders Not Requiring Owner Consent. The District may from time to time, and at any time, without notice to or consent of any of the Owners, adopt Supplemental Indentures for any of the following purposes: (a)to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Indenture or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Owners; (b)to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in this Indenture other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with this Indenture as theretofore in effect or which further secure Bond or Parity Bond payments; (c)to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, subject to and in accordance with the provisions of this Indenture; (d)to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds or any Parity Bonds then Outstanding; (e)to modify, alter or amend the RMA in any manner, so long as the Trustee receives a certificate of an Independent Financial Consultant stating that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within Improvement Area EE to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such amendment; and (ii) based on the current development plan for parcels within Improvement Area EE, do not reduce the maximum Special Taxes which could be levied upon taxable property within Improvement Area EE to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such amendment; or (f)to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the Owners. Section 6.2.Supplemental Indentures or Orders Requiring Owner Consent. Exclusive of the Supplemental Indentures described in Section 6.1, the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding shall have the right to consent 35 to and approve the adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture; provided, however, that nothing herein shall permit, or be construed as permitting: (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond or Parity Bond; (b) a reduction in the principal amount of, or redemption premium on, any Bond or Parity Bond or the rate of interest thereon; (c) a preference or priority of any Bond or Parity Bond over any other Bond or Parity Bond; or (d) a reduction in the aggregate principal amount of the Bonds and Parity Bonds the Owners of which are required to consent to such Supplemental Indenture, without the consent of the Owners of all Bonds and Parity Bonds then Outstanding. If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of this Section shall require the consent of the Owners, the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District, cause notice of the proposed Supplemental Indenture to be mailed, by first class mail, postage prepaid, to all Owners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the office of the Trustee for inspection by all Owners. The failure of any Owners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding as required by this Section. Whenever at any time within one year after the date of the first mailing of such notice, the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds and any Parity Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds and Parity Bonds have consented to the adoption of any Supplemental Indenture, Bonds or Parity Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination. Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds in instances where such consent is required pursuant to the provisions of this Section, this Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the District and all Owners of Outstanding Bonds and Parity Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments. Section 6.3.Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds or any Parity Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date and presentation of such Owner’s Bond or Parity Bond for the purpose at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds or Parity Bonds. If 36 the District shall so determine, new Bonds or Parity Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date such new Bonds or Parity Bonds shall be exchanged at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, without cost to each Owner of Outstanding Bonds or Parity Bonds, upon surrender of such Outstanding Bonds or Parity Bonds. The Trustee shall have the right to require such opinions of counsel as it deems necessary concerning: (i) the lack of material adverse effect of the amendment on Owners; and (ii) the fact that the amendment will not affect the tax status of interest with respect to the Bonds. ARTICLE VII TRUSTEE Section 7.1.Trustee. Wilmington Trust, National Association shall be the Trustee for the Bonds and any Parity Bonds unless and until another Trustee is appointed by the District hereunder. The Trustee represents that it has (or is a member of a bank holding company system whose bank holding company has) a combined capital (exclusive of borrowed capital) and surplus of at least $100,000,000. The District may, at any time, appoint a successor Trustee satisfying the requirements of Section 7.2 below for the purpose of receiving all money which the District is required to deposit with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. The Trustee is hereby authorized to and shall mail by first class mail, postage prepaid, or wire transfer in accordance with Section 2.5 above, interest payments to the Owners, to select Bonds and Parity Bonds for redemption, and to maintain the Bond Register. The Trustee is hereby authorized to pay the principal of and premium, if any, on the Bonds and Parity Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds and Parity Bonds presented to it for such purposes, to provide for the cancellation of Bonds and Parity Bonds all as provided in this Indenture, and to provide for the authentication of Bonds and Parity Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds and Parity Bonds paid, discharged and cancelled by it. The Trustee is hereby authorized to redeem the Bonds and Parity Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds and Parity Bonds upon payment thereof in accordance with the provisions of Section 10.1 hereof. The District shall from time to time, subject to any agreement between the District and the Trustee then in force, timely pay to the Trustee following demand therefor compensation for its services, reimburse the Trustee for all its advances and expenditures, including, but not limited to, advances to and fees and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Trustee, its officers, directors, employees and agents, harmless against costs, claims, expenses and liabilities, including, without limitation, fees and expenses of its attorneys (not arising from its own gross negligence or willful misconduct) which it may incur in the exercise and performance of its powers and duties hereunder. The foregoing obligation of the District to indemnify the Trustee shall survive the removal or resignation of the Trustee or the discharge of the Bonds. 37 Section 7.2.Removal of Trustee. The District may at any time at its sole discretion, upon 30 days’ notice, remove the Trustee initially appointed, and any successor thereto, by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company having (or whose parent bank holding company has) a combined capital (exclusive of borrowed capital) and surplus of at least $100,000,000, and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section 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. Any removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee and notice of the successor Trustee’s identity and address being sent by the successor Trustee to the Owners. Section 7.3.Resignation of Trustee. The Trustee may at any time resign by giving written notice to the District. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee satisfying the criteria in Section 7.2 above by an instrument in writing. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed by the District within thirty (30) days of giving such notice or removal or resignation, then the Trustee, or any Owner may petition, at the expense of the District, a court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint a successor Trustee under the Indenture. Section 7.4.Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds and any Parity Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility or liability for the correctness of the same and makes no representations whatsoever as to the validity or sufficiency of this Indenture, the Bonds or any Parity Bonds, and shall incur no responsibility or liability in respect thereof, other than in connection with its express duties or obligations specifically set forth herein, in the Bonds and any Parity Bonds, or in the certificate of authentication assigned to or imposed upon the Trustee. The Trustee shall not have nor be under any responsibility or duty with respect to the issuance of the Bonds or any Parity Bonds for value. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own gross negligence or willful misconduct. The Trustee shall be conclusively protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond, Parity Bond or other paper or document signed or presented by the proper party or parties as provided hereunder. The Trustee may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection to the Trustee in respect of any action taken or suffered hereunder in good faith. The Trustee shall not be bound to recognize any person as the Owner of a Bond or Parity Bond unless and until such Bond or Parity Bond is submitted for inspection, if required, and his title thereto is satisfactorily established to the Trustee, if disputed. 38 Whenever in the administration of its express obligations under this Indenture the Trustee 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 be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions of this Indenture upon the faith thereof, but in its discretion the Trustee may but shall not be obligated to accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. It is understood and agreed that no such act shall broaden or imply the Trustee’s acceptance of a broadening of the scope of the Trustee’s duties and obligations hereunder unless the Trustee shall provide written acceptance thereof. The Trustee shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it actually receives. No provision in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers. The Trustee shall not be deemed to have knowledge of any default or event of default until an officer at the Trustee’s corporate trust office responsible for the administration of its duties hereunder shall have actual knowledge thereof or the Trustee shall have received written notice thereof at its corporate trust office. The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. Before taking any action under Article VIII hereof the Trustee may require indemnity and security satisfactory to the Trustee be furnished to it for and from any expenses and liabilities and to protect it against any liability it may incur hereunder. The immunities extended to the Trustee also extend to its directors, officers, employees and agents (including its counsel). The Trustee shall not be liable for any action taken or not taken by it in accordance with the direction of the Owners of 25% (or other percentage provided for herein) in aggregate principal amount of Bonds Outstanding relating to the exercise of any right, power or remedy available to the Trustee. In the event of conflicting instructions hereunder, the Trustee shall have the right to decide the appropriate course of action and will be protected in so doing. The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty or in any way expand or impliedly expand the scope of the Trustee’s duties hereunder. The Trustee may execute any of the trusts or powers hereof and perform any of its duties through attorneys, agents and receivers and shall not be answerable for the conduct of the same if appointed by it with reasonable care. 39 The Trustee may become the Owner or pledgee of the Bonds with the same rights it would have if it were not Trustee. The Trustee shall perform such duties and only such duties as are specifically set forth in this Indenture and no implied duties or obligations shall be read into this Indenture against the Trustee. The District shall, to the extent permitted by law, indemnify and save the Trustee and its officers, directors, agents, and employees harmless from and against (whether or not litigated) all claims, losses, costs, expenses, liability and damages, including legal fees and expenses, arising out of: (i) the use, maintenance, condition or management of, or from any work or thing done on, the Project; (ii) any breach or default on the part of the District in the performance of any of its obligations under this Indenture and any other agreement made and entered into for purposes of the Bonds; (iii) any act of the City, the District or of any of its agents, contractors, servants, employees or licensees with respect to the Project; (iv) any act of any assignee of, or purchaser from, the City, the District or of any of its or their agents, contractors, servants, employees or licensees with respect to the Project; (v) the construction or acquisition of the Project or the expenditure of Project Costs; (vi) the exercise and performance by the Trustee of its powers and duties hereunder or any related document; (vii) the sale of the Bonds and the carrying out of any of the transactions contemplated by the Bonds or this Indenture; or (viii) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made in light of the circumstances in which they were made, not misleading in any official statement or other disclosure document utilized in connection with the sale or marketing of the Bonds. The indemnification set forth in this Section shall extend to the Trustee’s officers, agents, employees, successors and assigns. No indemnification will be made under this Section or elsewhere in this Indenture or other agreements for willful misconduct or negligence by the Trustee, its officers, agents, employees, successors or assigns. The District’s obligations hereunder shall remain valid and binding notwithstanding maturity and payment of the Bonds, or the resignation or removal of the Trustee. In accepting the trust hereby created, the Trustee acts solely as Trustee for the Owners and not in its individual capacity, and all persons, including, without limitation, the Owners, the District and the City, having any claim against the Trustee arising from this Indenture shall look only to the funds and accounts held by the Trustee hereunder for payment, except as otherwise provided herein. Under no circumstances shall the Trustee be liable in its individual capacity for the obligations evidenced by the Bonds. THE TRUSTEE MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE DISTRICT OF THE PROJECT, OR ANY PORTION THEREOF. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages, in connection with or arising out of the Project or this Indenture for the existence, furnishing, functioning or use and possession of the Project. The Trustee shall not be liable to the parties hereto or deemed in breach or default hereunder if and to the extent its performance hereunder is prevented by reason of force majeure. The term “force majeure” means an occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care. Force majeure shall include, but not limited to, acts of God, terrorism, war, riots, strikes, fire, floods, earthquakes, epidemics or other similar occurrences. 40 The Trustee shall have the right to accept and act upon directions given pursuant to this Indenture and delivered using Electronic Notice; provided, however, that the District shall provide to the Trustee an incumbency certificate listing Authorized Representative with the authority to provide such directions and containing specimen signatures of such authorized officers, which incumbency certificate shall be amended whenever a person is to be added or deleted from the listing. If the District elects to give the Trustee directions using Electronic Notice and the Trustee in its discretion elects to act upon such directions, the Trustee’s understanding of such directions shall be deemed controlling. The District understand and agree that the Trustee cannot determine the identity of the actual sender of such directions and that the Trustee shall conclusively presume that directions that purport to have been sent by an authorized officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Representative. The District shall be responsible for ensuring that only Authorized Representative transmit such directions to the Trustee and that all Authorized Representatives treat applicable user and authorization codes, passwords and/or authentication keys with extreme care. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and a compliance with such directions, notwithstanding such directions conflict or are inconsistent with a subsequent written direction. The District agrees (i) to assume all risks arising out of the use of Electronic Notice to submit directions to the Trustee, including, without limitation, the risk of the Trustee acting on unauthorized directions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting directions to the Trustee and that there may be more secure methods of transmitting directions than the method(s) selected by the District; and (iii) that the security procedures (if any) to be followed in connection with its transmission of directions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances. Section 7.5.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, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section 8.1.Events of Default. Any one or more of the following events shall constitute an “Event of Default”: (a)default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond or Parity Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b)default in the due and punctual payment of the interest on any Bond or Parity Bond when and as the same shall become due and payable; or (c)except as described in subsections (a) or (b), default by the District in the observance of any of the agreements, conditions or covenants on its part contained in this Indenture, the Bonds or any Parity Bonds, which default continues for a period of 30 days after the District has been given 41 notice in writing of such default by the Trustee or the Owners of twenty-five percent (25%) in aggregate principal amount of the Outstanding Bonds and Parity Bonds. The Trustee agrees to give notice to the Owners as soon as practicable upon the occurrence of an Event of Default under subsections (a) or (b) above and within 30 days of the Trustee’s actual knowledge of an event of default under subsection (c) above. Section 8.2.Remedies of Owners. Upon the occurrence of an Event of Default, any Owner may pursue any available remedy at law or in equity to enforce the payment of the principal of, premium, if any, and interest on the Outstanding Bonds and Parity Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture, including: (a)by mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Indenture; (b)by suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (c)by a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. If an Event of Default shall have occurred and be continuing and if requested and directed so to do by the Owners of at least twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds and Parity Bonds and if indemnified to its satisfaction, the Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Article 8, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Owners of the Bonds and Parity Bonds. No remedy herein conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. Section 8.3.Application of Revenues and Other Funds After Default. All amounts received by the Trustee pursuant to any right given or action taken by the Owners under the provisions of this Indenture relating to the Bonds and Parity Bonds shall be applied by the Trustee in the following order upon presentation of the several Bonds and Parity Bonds: First, to the payment of the costs, fees and expenses of the Trustee in declaring such Event of Default and in performing its duties and obligations hereunder, including reasonable compensation to its agents, attorneys and counsel; Second, to the payment of the fees, costs and expenses of the Owners in declaring such Event of Default and in carrying out the provisions of this Article 8, including reasonable compensation to its agents, attorneys and counsel, and to the payment of all other outstanding fees and expenses of the Trustee; and 42 Third, to the payment of the whole amount of interest on and principal of the Bonds and Parity 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 and Parity Bonds; provided, however, that in the event that such amounts shall be insufficient to pay 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 and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing; (b)second, to the payment of all installments of principal, including Sinking Fund Payments, of the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing; and (c)third, to the payment of interest on overdue installments of principal and interest on the Bonds and Parity Bonds on a pro rata basis based on the total amount then due and owing. Section 8.4.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 obligations hereunder, whether upon its own discretion or upon the request of the Owners of twenty-five percent (25%) in aggregate principal amount of the Bonds and Parity Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds and Parity 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 and Parity Bonds hereunder opposing such discontinuance, withdrawal, compromise, settlement or other such litigation. Any suit, action or proceeding which any Owner of Bonds or Parity 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 and Parity Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the Bonds and Parity 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 and Parity Bonds for the purposes 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 and Parity Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact. Section 8.5.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 and of the Owners of the Bonds and Parity Bonds under this Indenture, the Trustee shall be entitled, as a matter of right to which the District expressly agrees, to the appointment of a receiver or receivers of the Net Taxes and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment shall confer. Section 8.6.Non-Waiver. Nothing in this Article 8 or in any other provision of this Indenture, or in the Bonds or the Parity Bonds, shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds and Parity Bonds to the respective Owners of the Bonds and Parity Bonds at the respective dates of maturity, as herein 43 provided, or to pay the Trustee its fees and expenses as provided in Section 8.3 hereof, out of the Net Taxes and other moneys herein pledged for such payment. A waiver of any default or breach of duty or contract by the Trustee or any Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission of the Trustee or any Owner of any of the Bonds or Parity Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or the Owners by the Act or by this Article 8 may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Owners, as the case may be. Section 8.7.Limitations on Rights and Remedies of Owners. No Owner of any Bond or Parity 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 the Bonds and Parity Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall have tendered to the Trustee indemnity and security reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (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 and security shall have been made to, the Trustee. Such notification, request, tender of indemnity and security and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds and Parity Bonds of any remedy hereunder; it being understood and intended that no one or more Owners of Bonds and Parity 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 and Parity Bonds. The right of any Owner of any Bond and Parity Bond to receive payment of the principal of and interest and premium (if any) on such Bond and Parity 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 or any other provision of this Indenture. Section 8.8.Termination of Proceedings. In case any Owner 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 District, the Trustee and the 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 Owners shall continue as if no such proceedings had been taken. 44 ARTICLE IX DEFEASANCE AND PARITY BONDS Section 9.1.Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond or Parity Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Indenture or any Supplemental Indenture, then the Owner of such Bond or Parity Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond or Parity Bond under this Indenture and any Supplemental Indenture relating to such Parity Bond shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds and Parity Bonds pursuant to this Section, the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the District’s general fund all money or securities held by it pursuant to this Indenture which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds and Parity Bonds. Any Outstanding Bond or Parity Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this Section if such Bond or Parity Bond is paid in any one or more of the following ways: (a)by paying or causing to be paid the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same become due and payable; (b)by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund (exclusive of the Administrative Expense Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable; or (c)by depositing with the Trustee or another escrow bank appointed by the District, in trust, federal securities described in subparagraph (1) of the definition of Authorized Investments, in which the District may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of the Administrative Expense Account) and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable. If paid as provided above, then, at the election of the District, and notwithstanding that any Outstanding Bonds and Parity Bonds shall not have been surrendered for payment, all obligations of the District under this Indenture and any Supplemental Indenture with respect to such Bond or Parity Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond or Parity Bond not so surrendered and paid all sums due thereon, and except for the covenants of the District contained in Section 5.2(f) or any covenants in a Supplemental Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than ten days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Trustee. In connection with a defeasance under (b) or (c) above, there shall be provided to the District a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all 45 Outstanding Bonds and Parity Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds or Parity Bonds being defeased have been legally defeased in accordance with this Indenture and any applicable Supplemental Indenture. Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds and Parity Bonds which have been defeased under this Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds and Parity Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the Bonds and Parity Bonds when due. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Owners whose Bonds or Parity Bonds have been defeased, in the form directed by the District, stating that the defeasance has occurred. Section 9.2.Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness. The District may at any time after the issuance and delivery of the Bonds hereunder issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expense Account therein) and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued hereunder or under any Supplemental Indenture; provided, however, that Parity Bonds may only be issued only for the purposes of refunding all or a portion of the Bonds or Parity Bonds then Outstandingsubject to the following specific conditions, which are hereby made conditions precedent to the issuance of any such Parity Bonds: (a)The District shall be in compliance with all covenants set forth in this Indenture and any Supplemental Indenture then in effect and a certificate of the District to that effect shall have been filed with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants. (b)The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Indenture duly adopted by the District which shall specify the following: (1)the purpose for which such Parity Bonds are to be issued and the fund or funds into which the proceeds thereof are to be deposited; (2)the authorized principal amount of such Parity Bonds; (3)the date and the maturity date or dates of such Parity Bonds; provided that: (i) each maturity date shall fall on a September 1; (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number; (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; and (iv) the maturity of such Parity Bonds shall not exceed the maturity of the Bonds being refunded; 46 (4)the description of the Parity Bonds, the place of payment thereof and the procedure for execution and authentication; (5)the denominations and method of numbering of such Parity Bonds; (6)the amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds; (7)the amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement; (8)the form of such Parity Bonds; and (9)such other provisions as are necessary or appropriate and not inconsistent with this Indenture. (c)The District shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Trustee (unless the Trustee shall be directed by the District to accept any of such documents bearing a prior date): (1)a certified copy of the Supplemental Indenture authorizing the issuance of such Parity Bonds; (2)a written request of the District as to the delivery of such Parity Bonds; (3)an opinion of Bond Counsel and/or general counsel to the District to the effect that: (i) the District has the right and power under the Act to adopt this Indenture and the Supplemental Indentures relating to such Parity Bonds, and this Indenture and all such Supplemental Indentures have been duly and lawfully adopted by the District, are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights); (ii) this Indenture creates the valid pledge which it purports to create of the Net Taxes and other amounts as provided in this Indenture, subject to the application thereof to the purposes and on the conditions permitted by this Indenture; and (iii) such Parity Bonds are valid and binding limited obligations of the District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights) and the terms of this Indenture and all Supplemental Indentures thereto and entitled to the benefits of this Indenture and all such Supplemental Indentures, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and this Indenture and all such Supplemental Indentures; and a further opinion of Bond Counsel to the effect that, assuming compliance by the District with certain tax covenants, the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds theretofore issued on a tax-exempt basis, or the exemption from State of California personal income taxation of interest on any Outstanding Bonds and Parity Bonds theretofore issued; 47 (4)a certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of this Indenture; (5)a certificate of an Independent Financial Consultant certifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds; and (6)such further documents, money and securities as are required by the provisions of this Indenture and the Supplemental Indenture providing for the issuance of such Parity Bonds. ARTICLE X MISCELLANEOUS Section 10.1. Cancellation of Bonds and Parity Bonds. All Bonds and Parity Bonds surrendered to the Trustee for payment upon maturity or for redemption shall be upon payment therefor, and any Bond or Parity Bond purchased by the District as authorized herein and delivered to the Trustee for such purpose shall be, cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds and Parity Bonds, as provided by law, and, upon request of the District, furnish to the District a certificate of such destruction. Section 10.2. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Indenture to be signed or executed by Owners may be in any number of concurrent instruments of similar tenor and may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds or Parity Bonds shall be sufficient for the purposes of this Indenture (except as otherwise herein provided), if made in the following manner: (a)The fact and date of the execution by any Owner or his or her attorney of any such instrument, and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his authority. (b)As to any Bond or Parity Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond or Parity Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond or Parity Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Trustee shall be affected by any notice to the contrary. Nothing contained in this Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the matters herein stated which the Trustee or the District may deem sufficient. Any request or consent of 48 the Owner of any Bond or Parity Bond shall bind every future Owner of the same Bond or Parity Bond in respect of anything done or suffered to be done by the Trustee or the District in pursuance of such request or consent. Section 10.3. Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds and Parity Bonds which remain unclaimed for two years after the date when such Outstanding Bonds or Parity Bonds have become due and payable, if such money was held by the Trustee at such date, or for two years after the date of deposit of such money if deposited with the Trustee after the date when such Outstanding Bonds or Parity Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds or Parity Bonds; provided, however, that, before being required to make any such payment to the District, the Trustee, at the expense of the District, shall cause to be mailed by first-class mail, postage prepaid, to the registered Owners of such Outstanding Bonds or Parity Bonds at their addresses as they appear on the registration books of the Trustee a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than 30 days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. Section 10.4. Provisions Constitute Contract. The provisions of this Indenture shall constitute a contract between the District and the Owners and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Owners or the Trustee, then the District, the Trustee and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds, this Indenture shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Indenture, but to no greater extent and in no other manner. Section 10.5. Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which is subordinate to the pledge hereunder, or which is payable from the general fund of the District or from taxes or any source other than the Net Taxes and other amounts pledged hereunder. Section 10.6. Further Assurances. The District 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 or any Parity Bonds the rights and benefits provided in this Indenture. Section 10.7. Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Indenture and the application of any 49 such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Indenture, the Bonds and any Parity Bonds issued pursuant hereto shall remain valid and the Owners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Section 10.8. Notices. Any notices required to be given to the District with respect to the Bonds or this Indenture shall be mailed, first class, postage prepaid, or personally delivered to the Assistant City Manager of the City of Lake Elsinore, 130 South Main Street, California 92530, all notices to the Trustee in its capacity as Trustee shall be mailed, first class, postage prepaid, or personally delivered to the Trustee, Wilmington Trust, National Association, 650 Town Center Drive, Suite 600 Costa Mesa, California 92626. S-1 IN WITNESS WHEREOF, CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) has caused this Indenture to be signed by an Authorized Representative of the District and Wilmington Trust, National Association in token of its acceptance of the trust created hereunder, has caused this Indenture to be signed in its corporate name by its officers identified below, all as of the day and year first above written. CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) By: Assistant City Manager of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) ATTEST: City Clerk of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee By: Authorized Signatory A-1 EXHIBIT A FORM OF SPECIAL TAX BOND UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE DISTRICT OR 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 DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. R-____$___________ UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BOND, SERIES 2017A (IMPROVEMENT AREA EE) INTEREST RATE:MATURITY DATE:DATED DATE:CUSIP: _____%September 1, 20____November __, 2017 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: __________________ DOLLARS CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (the “District”) which was formed by the City of Lake Elsinore (the “City”) and is situated in the County of Riverside, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter defined), to the 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. A-2 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 1, 2018 and each March 1 and September 1 thereafter (each an “Interest Payment Date”), at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of and premium, if any, on this Bond are payable to the Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of the Trustee (as such term is defined in the Indenture), initially Wilmington Trust, National Association (the “Trustee”). Interest on this Bond shall be paid by check of the Trustee mailed, by first class mail, postage prepaid, or in certain circumstances described in the Indenture by wire transfer to an account within the United States of America, to the Owner hereof as of 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 Owner’s address as it appears on the registration books maintained by the Trustee. This Bond is one of a duly authorized issue of “City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2017A (Improvement Area EE)” (the “Bonds”) issued in the aggregate principal amount of $__________ pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Section 53311 et seq.of the California Government Code (the “Act”) for the purpose of financing public improvements, funding a reserve account 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 October 24, 2017, and a Bond Indenture executed in connection therewith dated as of November 1, 2017 (the “Indenture”), by and between the District and the Trustee, and this reference incorporates the Indenture herein, and by acceptance hereof the Owner of this Bond assents to said terms and conditions. The Indenture 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 Indenture, the principal of, premium, if any, and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within Improvement Area EE (the “Special Taxes”) and certain other amounts pledged to the repayment of the Bonds as set forth in the Indenture. Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund (other than the Administrative Expense Account therein) established under the Indenture, 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 Indenture 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 Interest Payment Date on and after September 1, 20__, in whole or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as A-3 a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption: Redemption Date Redemption Price The Bonds maturing on September 1, 20__ (the “20__ Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established by the Indenture, on September 1, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Term Bonds Maturing September 1, 20__ Sinking Fund Redemption Date (September 1)Sinking Fund Payments * _____________ * Maturity. The Bonds are subject to special mandatory redemption as a whole, or in part on a pro rata basis among maturities and by lot within a maturity, on any Interest Payment Date on and after September 1, 20__, and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account plus amounts transferred from the Reserve Account in connection with such transfers, 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 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; provided, however, so long as the Bonds are registered in the name of the Nominee, such notice shall be given in such manner as complies with the requirements of the Depository. Neither a failure of the Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions A-4 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 Trustee 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 Owner hereof, as to both principal and interest, and the District and the Trustee may treat the 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 Indenture. This Bond is transferable by the Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, 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 Trustee 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. 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 Indenture. THE BONDS DO NOT CONSTITUTE GENERAL OBLIGATIONS OF THE CITY OR OF THE DISTRICT. NEITHER THE CITY NOR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE PORTION OF THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE BUT ARE NOT A DEBT OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN 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 Trustee. 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. 2006-1 (Summerly) has caused this Bond to be dated the Dated Date, to be signed on behalf of the District by the Mayor of the City by his facsimile signature and attested by the facsimile signature of the Clerk of the City Council of the City. A-5 Mayor of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) ATTEST: City Clerk of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) [FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one of the Bonds described in the within-defined Indenture. Dated: ____________WILMINGTON TRUST, NATIONAL ASSOCIATION as Trustee By: Authorized Signatory A-6 [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. Clerk of the City Council of the City [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 Trustee with full power of substitution in the premises. Dated: Signature guaranteed: NOTE: Signature(s) must be guaranteed by an eligible guarantor institution. 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. B-1 EXHIBIT B-1 FORM OF REQUISITION FOR DISBURSEMENT OF PROJECT COSTS $__________ SPECIAL TAX BONDS, SERIES 2017A CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA EE) Wilmington Trust, National Association (the “Trustee”), is hereby requested to pay from the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Improvement Area EE Acquisition and Construction Fund, established by the Bond Indenture, dated as of November 1, 2017, by and between the Trustee and City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”), theamount specified to the payee named below for payment of the Project Costs set forth in Attachment No. 1 hereto. Payee: Address: Purpose: Amount:$ The amount is due and payable under purchase order, contract or other authorization and has not formed the basis of any prior request for payment. The conditions for the release of this amount from the Account, including those conditions in Section 3.9(b) of the Indenture have been satisfied. There has not been filed with nor served upon the District notice of any lien, right to lien or attachment upon, or stop notice or claim affecting the right to receive payment of the amount specified above which has not been released or will not be released simultaneously with the payment of such amount, other than materialmen’s or mechanic’s liens accruing by mere operation of law. Dated: CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) By: Name: Title: _____________________________________ $__________ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) BOND PURCHASE AGREEMENT _____________, 2017 City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) 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 City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “Community Facilities District”) on behalf of Improvement Area EE (the “Improvement Area”), which upon acceptance will be binding upon the Underwriter and the Community Facilities District. The agreement of the Underwriter to purchase the Bonds (as hereinafter defined) is contingent upon the Community Facilities District satisfying all of the obligations imposed upon them under this Purchase Agreement. This offer is made subject to the Community Facilities District’s acceptance by the execution of this Purchase Agreement and its delivery to the Underwriter at or before 11:59 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 Community Facilities District at any time prior to the acceptance hereof by the Community Facilities District. All capitalized terms used herein, which are not otherwise defined, shall have the meaning provided for such terms in the Bond Indenture, dated as of ________ 1, 2017 (the “Indenture”), by and between the Community Facilities District and Wilmington Trust, National Association, as trustee (the “Trustee”). 1.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 Community Facilities District and the Community Facilities District hereby agrees to sell to the Underwriter all (but not less than all) of the $________ aggregate principal amount of the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2017 (Improvement Area EE) (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. The purchase price for the Bonds shall be $_________ (being 100% of the aggregate principal amount thereof, less/plus net original issue discount/premium of $_______ and less an Underwriter’s discount of $________). 2 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 subject to Section 2 hereof, 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 Net Taxes as provided in the Indenture, the Preliminary Official Statement (as hereinafter defined), and the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Community Facilities District Act”). The issuance of the Bonds has been duly authorized by the City Council of the City of Lake Elsinore (the “City”), as the legislative body for the Community Facilities District (for and on behalf of the Improvement Area within the Community Facilities District), pursuant to a resolution (the “Community Facilities District Resolution of Issuance”) adopted on _________, 2017. The net proceeds of the Bonds will be used to (i) finance a portion of certain public facilities eligible to be financed by the District for the Improvement Area; (ii) fund a reserve account for the Bonds; (iii) to fund capitalized interest on a portion of the Bonds through [March 1, 2018]; and (iv) pay costs of issuing the Bonds. The 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 Indenture. A.The Community Facilities District hereby acknowledges that the Underwriter is entering into this Purchase Agreement in reliance on the representations, warranties and agreements made by the Community Facilities District herein, and the Community Facilities District 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 Community Facilities District acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant to this Purchase Agreement is an arm’s-length commercial transaction between 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 Community Facilities District, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of 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 Community Facilities District on other matters) or (b) any other obligations to 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 Community Facilities District and (v) the Community Facilities District has consulted their own legal, financial and other advisors to the extent they have deemed appropriate in connection with this transaction. The Community Facilities District acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the Municipal Securities Rulemaking Board (“MSRB”). The Community Facilities District 3 acknowledges and represents that it has engaged Urban Futures Incorporated as its municipal advisor (the “Municipal Advisor”) (as defined in Securities and Exchange Commission Rule 15Ba1) and will rely solely on the financial advice of Urban Futures Incorporated with respect to the Bonds. B.Pursuant to the authorization of the Community Facilities District, the Underwriter has distributed copies of the Preliminary Official Statement dated ________, 2017, 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 Community Facilities District hereby ratifies the use by the Underwriter of the Preliminary Official Statement, and the Community Facilities District 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, Bond Counsel (“Bond Counsel”), Jones Hall, A Professional Law Corporation, Disclosure Counsel (“Disclosure Counsel”), and the Underwriter, and to provide copies thereof to the Underwriter as set forth herein. The Community Facilities District hereby authorizes and requires 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 Community Facilities District further authorizes the Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Indenture, the Continuing Disclosure Certificate executed by the Community Facilities District in connection with the Bonds (the “Continuing Disclosure Certificate”), this Purchase Agreement and all information contained herein, and all other documents, certificates and statements furnished by or on behalf of the Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement. 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 pursuant to the Continuing Disclosure Certificate, in the form attached to the Official Statement as Appendix E, 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 and the Community Facilities District may otherwise agree, the Community Facilities District will deliver to the Underwriter, at the offices of Bond Counsel in Newport Beach, California, or at such other location as may be mutually agreed upon by the Underwriter and the Community Facilities District, the documents hereinafter mentioned; and the Community Facilities District will deliver to the Underwriter through the facilities of The Depository Trust Company (“DTC”), the Bonds, in definitive form (all Bonds bearing CUSIP numbers), duly executed by the Community Facilities District and authenticated by the Trustee in the manner provided for in the Indenture and the Community Facilities District Act at 8:00 a.m. California time, on ________, 2017 (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. 4 2.Establishment of Issue Price. A.The Underwriter agrees to assist the Community Facilities District in establishing the issue price of the Bonds and shall execute and deliver to the Community Facilities District at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit D, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the Community Facilities District and Bond Counsel (as defined herein), to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds. All actions to be taken by the Community Facilities District under this section to establish the issue price of the Bonds may be taken on behalf of the Community Facilities District by the Municipal Advisor and any notice or report to be provided to the Community Facilities District may be provided to the Community Facilities District’s Municipal Advisor. B.Except as otherwise set forth in Exhibit A attached hereto, the Community Facilities District will treat the first (meaning single) price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the Community Facilities District the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the Community Facilities District the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date (as defined herein) has occurred, until the 10% test has been satisfied as to the Bonds of that maturity or until all Bonds of that maturity have been sold to the public. C.The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Exhibit A attached hereto, except as otherwise set forth therein. Exhibit A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed immediately after the execution of this Bond Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the Community Facilities District and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the Community Facilities District to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following: 1.the close of the fifth (5th) business day after the sale date; or 2.the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public. 5 The Underwriter shall promptly advise the Community Facilities District when it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public, if that occurs prior to the close of the fifth (5th) business day after the sale date. D.The Underwriter confirms that any selling group agreement and any retail distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such retail distribution agreement, as applicable, to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allotted to it until it is notified by the Underwriter that either the 10% test has been satisfied as to the Bonds of that maturity or all Bonds of that maturity have been sold to the public and (B) comply with the hold- the-offering-price rule, if applicable, in each case if and for so long as directed by the Underwriter. The Community Facilities District acknowledges that, in making the representation set forth in this subsection, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the hold-the-offering-price rule, if applicable, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a retail distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the hold-the- offering-price rule, if applicable, as set forth in the retail distribution agreement and the related pricing wires. E.The Underwriter acknowledges that sales of any Bonds to any person that is a related party to the Underwriter shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: 1.“public” means any person other than an underwriter or a related party; 2.“underwriter” means (A) any person that agrees pursuant to a written contract with the Community Facilities District (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Bonds to the public); 3.a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and 4.“sale date” means the date of execution of this Bond Purchase Agreement by all parties. 6 3.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 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” and, 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 on behalf of the Improvement Area. 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 Continuing Disclosure Certificate and the Indenture, and to carry out all transactions contemplated by each of such agreements; (ii) to issue, sell and deliver the Bonds as provided herein; and (iii) to carry out, give effect to and consummate the transactions contemplated by the Formation Documents, the Indenture, the Bonds, the Continuing Disclosure Certificate, this Purchase Agreement and the Official Statement. This Purchase Agreement, the Indenture, the Bonds and the Continuing Disclosure Certificate 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 carry out, give effect to or consummate the transactions contemplated by the foregoing. From and after the date of issuance of the Bonds, the Community Facilities District will continue to comply with the covenants of the Community Facilities District contained in the Community Facilities District Documents. C.The information in the Preliminary Official Statement and in the Official Statement relating to the Community Facilities District 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. 7 D.Up to and including 25 days after the End of the Underwriting Period (as defined below), the Community Facilities District 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 Community Facilities District 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 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.Except as described in the Preliminary Official Statement and 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. F.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. G.The Community Facilities District Documents conform as to form and tenor to the descriptions thereof contained in the Official Statement. H.The Bonds are payable from the Special Tax of the Improvement Area, as set forth in the Indenture, the levy of which has been duly and validly authorized pursuant to the 8 Community Facilities District Act and the Special Taxes within the Improvement Area 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 Bonds when due and payable, all as provided in the Indenture. 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. I.The Indenture creates a valid pledge of, first lien upon and security interest in, the Special Tax revenues of the Improvement Area, and in the moneys in the Special Tax Fund established pursuant to the Indenture, on the terms and conditions set forth in the Indenture. J.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 Improvement Area referred to in paragraph (I) hereof. K.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 under which they were made, not misleading. L.The Preliminary Official Statement was deemed final by a duly authorized officer of the Community Facilities District 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 Community Facilities District 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 Community Facilities District 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. M.At the time of acceptance hereof there is and as of the Closing 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 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 payment or collection of Special Taxes 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 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 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 9 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 basis for any action, suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) of this sentence. N.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 Underwriter on behalf of itself and the Community Facilities District as to the statements made therein. O.At or prior to the Closing the Community Facilities District, will have duly authorized, executed and delivered the Continuing Disclosure Certificate 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 Community Facilities 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 enumerated events in the last five years. P.The Community Facilities District will apply the proceeds of the Bonds in accordance with the Indenture and as described in the Preliminary Official Statement and Official Statement. Q.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 Community Facilities District will faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Indenture. R.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. The Community Facilities District 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 Community Facilities District 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 Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement. The execution and delivery of this Purchase Agreement by the Community Facilities District shall constitute a representation by the Community Facilities District to the Underwriter that the representations and warranties contained in this Section 3 with respect to the Community Facilities District are true as of the date hereof. 10 4.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 Community Facilities District contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the Community Facilities District of their obligations to be performed hereunder at or prior to the Closing Date, and in reliance upon the representations and covenants of Woodside 05S, LP, a California limited partnership (“Woodside”), Beazer Homes Holding, LLC, a Delaware limited liability company (“Beazer”), and CalAtlantic Group, Inc., a Delaware corporation (“CalAtlantic,” and together with Woodside and Beazer, the “Developers”) contained in the certificates delivered as of the Closing Date, and to the following additional conditions: A.At the Closing Date, the Community Facilities District Resolutions, 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 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 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. C.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 the Bonds, the Community Facilities District Resolutions, the Indenture, 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, 11 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 Indenture, the Bonds or the performance of the conditions precedent to be performed by the Community Facilities District hereunder. D.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. E.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 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 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 House to which such legislation had been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department 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, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the 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 on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in 12 force on any such exchange, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction; 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 Community Facilities District, its property, income, securities (or interest thereon), the validity or enforceability of Special Taxes, or the ability of the Community Facilities District to issue the Bonds as contemplated by the Indenture 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; 6.Any national securities exchange, the Comptroller of the Currency, or any other governmental authority, shall impose as to the Bonds, or obligations of the general character of the 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 (1) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war, (2) any other calamity or crisis in the financial markets of the United States or elsewhere, (3) the sovereign debt rating of the United States is downgraded by any major credit rating agency or a payment default occurs on United States Treasury obligations, or (4) a default with respect to the debt obligations of, or the institution of proceedings under any federal bankruptcy laws by or against, any state of the United States or any city, county or other political subdivision located in the United States having a population of over 500,000; or 8.Except as disclosed in or contemplated by the Official Statement, any material adverse change in the affairs of the City or Community Facilities District shall have occurred; or 9.Any event or circumstance shall exist that either makes untrue or incorrect in any material respect any statement or information in the Official Statement (other than any statement provided by the Underwriter) or is not reflected in the Official Statement but should be reflected therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and, in either such event, the Community Facilities District refuses to permit the Official Statement to be supplemented to supply such statement or information, or the effect of the Official Statement as so supplemented is to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriters to enforce contracts for the sale of the Bonds; or 10.A general banking moratorium shall have been declared by federal or State authorities having jurisdiction and be in force; or 13 11.A material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred; or 12.Any new restriction on transactions in securities materially affecting the market for securities (including the imposition of any limitation on interest rates) or the extension of credit by, or a charge to the net capital requirements of, underwriters shall have been established by the New York Stock Exchange, the SEC, any other federal or State agency or the Congress of the United States, or by Executive Order; or 13.A decision by a court of the United States shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the SEC or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Securities, including the underlying obligations as contemplated by this Agreement or by the Official Statement, or any document relating to the issuance, offering or sale of the Securities, is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act, the Exchange Act and the Trust Indenture Act; or 14.Any proceeding shall have been commenced or be threatened in writing by the Securities and Exchange Commission against the City or the Community Facilities District; or 15.The commencement of any Action. F.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 Community Facilities District by an authorized officer; 2.The Indenture, duly executed and delivered by the Community Facilities District and the Trustee; 3.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 true, correct and complete copies of the ones duly adopted by the City Council; 4.The Continuing Disclosure Certificate executed and delivered by the Community Facilities District; 5.An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the Community Facilities District, of Bond Counsel, to the effect that the Bonds are the valid, legal and binding obligations of the Community Facilities District 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 Community Facilities District may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it; 14 6.A supplemental opinion or opinions, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, to the effect that: (i)this Purchase Agreement and the Continuing Disclosure Certificate has been duly authorized, executed and delivered by 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 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 Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended; (iii)the information contained in the Official Statement on the cover and under the captions “THE BONDS” (other than the caption “Debt Service Schedule”), “SOURCES OF PAYMENT FOR THE BONDS,” “TAX EXEMPTION” AND “LEGAL OPINION” and in Appendices C and D to the Official Statement, are accurate insofar as such statements purport to summarize certain provisions of the Bonds, the Indenture, Bond Counsel’s final approving opinion, and the Community Facilities District Act. 7.A letter of Disclosure Counsel, dated the Closing Date and addressed to the Underwriter, 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 City, the City Attorney, Bond Counsel, Kitty Siino & Associates, Inc., SCG – Spicer Consulting Group, 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 the appendices to the Official Statement, 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; 8.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 15 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; 9.An opinion of the City Attorney dated the date of Closing and addressed to the Underwriter and the City, to the effect that: (i)The City is a municipal corporation and general law city, 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, proceeding 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 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 Improvement Area for the repayment of the 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 Improvement Area for the repayment of the Bonds; 16 10.A certificate dated the Closing Date from Kitty Siino & Associates, Inc., addressed to the Community Facilities District and the Underwriter to the effect that the statements in the Official Statement provided by Kitty Siino & Associates, Inc. concerning Special Taxes in the Improvement Area 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 11.A certificate dated the Closing Date from SCG – Spicer Consulting Group addressed to 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 Improvement Area as of the Closing Date would generate at least 110% of the annual debt service payable with respect to the related issue of Bonds plus 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 SCG – Spicer Consulting Group concerning Special Taxes in the Improvement Area 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; 12.Certified copies of the general resolution of the Trustee authorizing the execution and delivery of certain documents by certain officers of the Trustee, which resolution authorizes the execution of the Indenture and the authentication of the Bonds; 13.A certificate of the Trustee, addressed to the Underwriter, and the Community Facilities District dated the Closing Date, to the effect that: (i) the Trustee is authorized to carry out corporate trust powers, and have full power and authority to perform its duties under the Indenture; (ii) the Trustee is duly authorized to execute and deliver the Indenture, to accept the obligations created by the Indenture and to authenticate the Bonds pursuant to the terms of the Indenture; (iii) no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the authentication of the Bonds or the consummation by the Trustee of the other transactions contemplated to be performed by the Trustee in connection with the authentication of the Bonds and the acceptance and performance of the obligations created by the Indenture; and (iv) to the best of its knowledge, compliance with the terms of the Indenture 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 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 or any of its activities or properties; 14.An opinion of counsel to the Trustee dated the Closing Date, addressed to the Underwriter, and the Community Facilities District to the effect that the Trustee 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 that such documents has been duly authorized, executed and delivered by the Trustee, and, assuming due execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Trustee, enforceable in accordance with its terms, subject to bankruptcy, 17 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; 15.A certificate of the Community Facilities District 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; 16.Opinions of counsel to Woodside, Beazer, and CalAtlantic, dated the date of the Closing, addressed to the Underwriter and the Community Facilities District, in form and substance acceptable to the Underwriter and Bond Counsel; 17.A Letter of Representations from each of Woodside, Beazer, and CalAtlantic, each dated the date of printing the Preliminary Official Statement, substantially in the form attached hereto as Exhibit B; 18.A Closing Certificate of Woodside, Beazer, and CalAtlantic, each dated the date of the Closing, substantially in the form attached hereto as Exhibit C or as such Closing Certificate may be modified with the approval of the Underwriter and Disclosure Counsel; 19.The Continuing Disclosure Certificates of Woodside, Beazer, and CalAtlantic (the “Developer Continuing Disclosure Certificates”), substantially in the forms attached to the Preliminary Official Statement as Appendix F; 20.Copies of the Letters of Credit delivered by Beazer and CalAtlantic and a copy of the confirmation of the Cash Deposit delivered by Woodside; 21.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 22.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 Community Facilities District contained herein, and of the statements and information contained in the Official Statement and the due performance or satisfaction by 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 in connection with the transactions contemplated hereby and by the Indenture and the Official Statement. If the Community Facilities District shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the Community Facilities District nor the Underwriter shall be under any further obligation hereunder, except that the respective obligations of the Underwriter and the Community Facilities District set forth in Section 5 hereof shall continue in full force and effect. 18 5.Expenses. Whether or not the transactions contemplated by this Purchase Agreement are consummated, the Underwriter shall be under no obligation to pay, and the Community Facilities District shall pay only from the proceeds of the Bonds, or any other legally available funds of the City, or the Community Facilities District, but only as the Community Facilities District and such other party providing such services may agree, all expenses and costs of the Community Facilities District 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 disbursements of Bond Counsel, Disclosure Counsel and other professional advisors employed by the City, 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 City’s employees which are incidental to implementing this Purchase Agreement, including, but not limited to, meals, 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, including fees and disbursements of Underwriter’s Counsel. Any meals in connection with or adjacent to meetings, rating agency presentations, pricing activities or other transaction-related activities shall be considered an expense of the transaction and included in the expense component of the Underwriter’s discount. 6.Notices. Any notice of other communication to be given to the Community Facilities District or the Community Facilities District 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, Nicolaus & Company, Incorporated, 515 South Figueroa Street, Suite 1800, Los Angeles, California 90071, Attention: John Kim, Managing Director. 7.Parties In Interest. This Purchase Agreement is made solely for the benefit of 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. 8.Survival of Representations and Warranties. The representations and warranties of 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 and regardless of delivery of and payment for the Bonds. 9.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. 10.Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Community Facilities District and shall be valid and enforceable as of the time of such acceptance. 19 11.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 Community Facilities District. 12.Governing Law. This Purchase Agreement shall be governed by the laws of the State of California. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] S-1 13.Effective Date. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the Community Facilities District and shall be valid and enforceable as of the time of such acceptance. Very truly yours, STIFEL, NICOLAUS & COMPANY, INCORPORATED By: Its:Authorized Officer The foregoing is hereby agreed to and accepted as of the date first above written: CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 By: Authorized Officer Time of Execution: _____________ p.m. California time A-1 EXHIBIT A CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) MATURITY SCHEDULE Maturity (September 1) Principal Amount Interest Rate Yield Price 10% Test Satisfied* 10% Test Not Satisfied Subject to Hold-The- Offering- Price Rule 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 20__(T) 20__(T) _________________ (T) Term Bond. (C) Priced to optional call at [par] on September 1, 20__. * At the time of execution of this Bond Purchase Agreement and assuming orders are confirmed immediately after the execution of this Bond Purchase Agreement. B-1 EXHIBIT B CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) LETTER OF REPRESENTATIONS – [CALATLANTIC GROUP, INC.,] [BEAZER HOMES HOLDING, LLC] [WOODSIDE 05S, LP] ___________, 2017 City of Lake Elsinore Community Facilities District No. 2006-1 130 South Main Street Lake Elsinore, California 92530 Stifel, Nicolaus & Company, Incorporated 515 South Figueroa Street, Suite 1800 Los Angeles, California 90071 Ladies and Gentlemen: Reference is made to the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2017 (Improvement Area EE) (the “Bonds”) and to the Bond Purchase Agreement to be entered into in connection therewith (the “Bond Purchase Agreement”). This Letter of Representations (the “Letter of Representations”) is delivered pursuant to and in satisfaction of Section 4(F)(17) of the Bond Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Bond Purchase Agreement. The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of __________ (the “Developer”), and the undersigned, on behalf of the Developer, further certifies as follows: 1.The Developer is duly organized and validly existing under the laws of the State of _______, qualified to transact business in the State of California and has all requisite right, power and authority (i) to execute and deliver this Letter of Representations and execute and deliver the Developer Continuing Disclosure Certificate at Closing and (ii) to complete the development (i.e., construction of homes) on its property in Improvement Area EE (the “Improvement Area”) of the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “Community Facilities District”) as described in the Preliminary Official Statement. 2.As set forth in the Preliminary Official Statement, title to a certain portion of the property within the Improvement Area is held in the name of the Developer (herein, the “Property”). The undersigned, on behalf of the Developer, makes the representations herein with respect to all such Property. Except as otherwise described in the Preliminary Official Statement, the Developer is and the Developer’s current expectations are that the Developer shall remain the party responsible for the development of the Property. The Developer has not entered into an B-2 agreement for development or management of the Property by any other entity, except such subcontracts, consultant agreements and similar agreements for land development activities associated with the Developer’s development plan as are entered into in the ordinary course of business. 3.The Developer agrees to execute at Closing the Developer Continuing Disclosure Certificate substantially in the form attached as an appendix to the Preliminary Official Statement, with such additional changes as may be agreed to by the Developer. 4.Except as set forth in the Preliminary Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, or public board or body is pending against the Developer (with proper service of process to the Developer having been accomplished) or, to the Actual Knowledge of the Undersigned,1 is pending against any current Affiliate2 (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of the Undersigned is threatened in writing against the Developer or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Account of the Special Tax Fund established under the Indenture), (b) to restrain or enjoin the development of the Property as described in the Preliminary Official Statement, (c) in any way contesting or affecting the validity of the Special Taxes, or (d) which is reasonably likely to materially and adversely affect the Developer’s ability to complete the development and sale of the Property as described in the Preliminary Official Statement or to pay the Special Taxes due with respect to the Property. 5.To the Actual Knowledge of the Undersigned, execution and delivery of the Developer Continuing Disclosure Certificate, and the performance by the Developer of its obligations under the Developer Continuing Disclosure Certificate, will not conflict with or 1 “Actual Knowledge of the Undersigned” means the knowledge that the individual signing on behalf of the Developer currently has as of the date of this Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of the Developer and its Affiliates as the undersigned has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in this Letter of Representations, and/or (ii) review of documents that were reasonably available to the undersigned and which the undersigned has reasonably deemed necessary for the undersigned to obtain knowledge of the matters set forth in this Letter of Representations. The undersigned has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of the Developer’s current business and operations. . 2 “Affiliate” means, with respect to the Developer, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Developer, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of the Improvement Area and investment decision regarding the Bonds (i.e., information relevant to (a) the Developer’s development plans with respect to the Property and ability to pay its Special Taxes on the Property prior to delinquency, or (b) such Person’s assets or funds that would materially affect the Developer’s ability to develop the Property as described in the Preliminary Official Statement or to pay its Special Taxes on the Property). “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. B-3 constitute a breach of or default under any loans, lines of credit, agreements, or other contractual or financial obligations of the Developer, or any applicable law, regulation, judgment or decree. 6.As of the date of the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the information contained therein solely with respect to the Developer, its Affiliates, the proposed development of the Property, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates) as set forth under the section of the Preliminary Official Statement captioned “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE – Development by [Woodside][Beazer][CalAtlantic] and “CONTINUING DISLCOSURE”(excluding therefrom in all cases information regarding the Appraisal Report, market value ratios and annual special tax ratios, and information which is identified as having been provided by a source other than the Developer), is true and correct in all material respects and did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 7.Except as described in the Preliminary Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of the Developer or its Affiliates, that are secured by an interest in the Property. Neither the Developer nor, to the Actual Knowledge of the Undersigned, any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect the Developer’s ability to develop the Property as described in the Preliminary Official Statement or to pay the Special Taxes due with respect to the Property prior to delinquency or to perform its obligations under the Developer Continuing Disclosure Certificate. 8.To the Actual Knowledge of the Undersigned, the Developer is not aware that any of the Property has a current liability with respect to the presence of a substance presently classified as hazardous under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 or applicable California law or is adversely affected by the presence of endangered or threatened species or habitat for endangered or threatened species. 9.The Developer covenants that, while the Bonds or any refunding obligations related thereto are outstanding, the Developer and its Affiliates which it controls will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way seeks to challenge or overturn the formation of the Improvement Area, to challenge the adoption of the ordinance of the Community Facilities District levying Special Taxes within the Improvement Area, to invalidate the Improvement Area or any of the Bonds or any refunding bonds related thereto, or to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent the Developer in any way from bringing any other action, suit or proceeding including, without limitation, (a) an action or suit contending that the Special Tax has not been levied in accordance with the methodologies contained in the Rate and Method of Apportionment of Special Taxes pursuant to which Special Taxes are levied, (b) an action or suit with respect to the application or B-4 use of the Special Taxes levied and collected or (c) an action or suit to enforce the obligations of the City and/or the Community Facilities District under the Community Facilities District Resolutions, the Indenture, or any other agreements among the Developer, the City and/or the Community Facilities District or to which the Developer is a beneficiary. 10.The Developer consents to the issuance of the Bonds. The Developer acknowledges and agrees that the proceeds of the Bonds will be used as described in the Preliminary Official Statement. 11.The Developer intends to comply with the provision of the Mello-Roos Community Facilities District Act of 1982, as amended relating to the Notice of Special Tax described in Government Code Section 53341.5 in connection with the sale of the Property, or portions thereof. 12.To the Actual Knowledge of the Undersigned, the Developer is able to pay its bills as they become due and no legal proceedings are pending against the Developer (with proper service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in writing in which the Developer may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 13.To the Actual Knowledge of the Undersigned, Affiliates of the Developer are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of the Developer (with proper service of process having been accomplished) or to the Actual Knowledge of the Undersigned, threatened in writing in which the Affiliates of the Developer may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 14.As a subsidiary of a large, nation-wide developer of residential projects, the Developer cannot represent with assurance that neither it nor any Affiliate has ever been delinquent in the payment of ad valorem property taxes, special taxes or special assessments. However, to the Actual Knowledge of the Undersigned, during the last five years, neither the Developer nor any Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced against the delinquent Developer or Affiliate. 15.The Developer has not filed for the reassessment of the assessed value of portions of the Property, other than in connection with the sale of homes to individual homebuyers. 16.To the Actual Knowledge of the Undersigned, there are no claims, disputes, suits, actions or contingent liabilities by and among the Developer, its Affiliates or any contractors working on the development of the Property which is reasonably likely to materially and adversely affect the development of the Property as described in the Preliminary Official B-5 Statement or the payment of the Special Taxes due with respect to the Property prior to delinquency. 17.Based upon the current development plans, including, without limitation, the current budget and subject to economic conditions and risks generally inherent in the development of real property, including, but not limited to, the risks described in the Preliminary Official Statement under the section entitled “SPECIAL RISK FACTORS,” the Developer presently anticipates that it will have sufficient funds to complete the development of the Property as described in the Preliminary Official Statement and to pay Special Taxes levied against the Property when due and does not anticipate that the City or the Community Facilities District will be required to resort to a draw on the Reserve Account of the Special Tax Fund for payment of principal of or interest on the Bonds due to the Developer’s nonpayment of Special Taxes. However, neither the Developer nor any of its Affiliates are obligated to make any additional capital contribution or loan to the Developer at any time, and the Developer reserves the right to change its respective development plan and financing plan for the Property at any time without notice. 18.An appraisal of the taxable properties within the Improvement Area, dated September 11,, 2017 (the “Appraisal Report”), with a date of value of September 1, 2017 (the “Date of Value”), was prepared by Kitty Siino & Associates, Inc. (the “Appraiser”). The Appraisal Report estimates the market value of the appraised taxable properties within the Improvement Area as of the Date of Value estimates that the market value of the appraised subject property as of the Date of Value was not less than the value estimated in the Appraisal Report. To Actual Knowledge of the Undersigned, all information submitted by, or on behalf of and authorized by, the Developer to the Appraiser and contained in the sections of the Appraisal Report highlighted in yellow or circled in Exhibit B attached hereto, was true and correct in all material respects as of the Date of Value and Updated Date of Value, as applicable. 19.Solely as to the limited information described in Paragraph 6 above concerning the Developer, its Affiliates, the proposed development of the Property, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contract arrangements of the Developer and its Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates), as set forth under the section of the Preliminary Official Statement captioned “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE – Development by [Woodside][Beazer][CalAtlantic]” (excluding therefrom in all cases information regarding the Appraisal Report, market value ratios and annual special tax ratios, and information which is identified as having been provided by a source other than the Developer), the Developer agrees to indemnify and hold harmless, to the extent permitted by law, the City, the Community Facilities District and the Underwriter, and their officials and employees, and each Person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended (each, an “Indemnified Party” and, collectively, the “Indemnified Parties”), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject under any statute or at law or in equity or otherwise and shall reimburse any such Indemnified Party for any reasonable legal or other expense incurred by it in connection with investigating any such claim against it and defending any such action, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission of a material fact B-6 by the Developer in the above-referenced information in the Preliminary Official Statement, as of its date, necessary to make the statements made by the Developer contained therein, in light of the circumstances under which they were made not misleading. This indemnity provision shall not be construed as a limitation on any other liability which the Developer may otherwise have to any Indemnified Party, provided that in no event shall the Developer be obligated for double indemnification, or for the negligence and willful misconduct of an Indemnified Party. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Indemnified Party in respect of which indemnification may be sought pursuant to the above paragraph, such Indemnified Party shall promptly notify the Developer in writing; provided that the failure to notify the Developer shall not relieve it from any liability that it may have hereunder except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Developer shall not relieve it from any liability that it may have to an Indemnified Party otherwise than under the above paragraph. If any such proceeding shall be brought or asserted against an Indemnified Party and it shall have notified the Developer thereof, the Developer shall retain counsel reasonably satisfactory to the Indemnified Party (who shall not, without the consent of the Indemnified Party, be counsel to the Developer) to represent the Indemnified Party in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Developer and the Indemnified Party shall have mutually agreed to the contrary; (ii) the Developer has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Party; (iii) the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Developer; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Developer and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interest between them. It is understood and agreed that the Developer shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Parties, and that all such fees and expenses, to the extent reasonable, shall be paid or reimbursed as they are incurred. Any such separate firm shall be designated in writing by such Indemnified Parties. The Developer shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Developer agrees to indemnify each Indemnified Party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Party shall have requested that the Developer reimburse the Indemnified Party for fees and expenses of counsel as contemplated by this paragraph, the Developer shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by the Developer of such request and (ii) the Developer shall not have reimbursed the Indemnified Party in accordance with such request prior to the date of such settlement (provided that the foregoing shall not be applicable to any failure to reimburse if the Developer is disputing such payment in good faith and shall have paid any amounts not in dispute). The Developer shall not, without the written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnification could have been sought hereunder by such Indemnified Party, unless such settlement (x) includes an unconditional release of such B-7 Indemnified Party, in form and substance reasonably satisfactory to such Indemnified Party, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party. 20.If between the date hereof and the Closing Date any event relating to or affecting the Developer, its Affiliates, the proposed development of the Property, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates) shall occur of which the Developer has actual knowledge which would cause the information under the sections of the Preliminary Official Statement indicated in Paragraph 6 hereof, to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Developer shall notify the City, the Community Facilities District and the Underwriter and if in the opinion of counsel to the City or the Underwriter such event requires the preparation and publication of a supplement or amendment to the Preliminary Official Statement, the Developer shall reasonably cooperate with the City and the Community Facilities District in the preparation of an amendment or supplement to the Preliminary Official Statement in form and substance satisfactory to counsel to the City, the Community Facilities District and to the Underwriter. 21.For the period through 25 days after the “End of the Underwriting Period” as defined in the Bond Purchase Agreement, if any event relating to or affecting the Developer, its Affiliates, the proposed development of the Property, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing plan, other loans of such Affiliates) shall occur as a result of which it is necessary, in the opinion of the Underwriter or counsel to the City or the Community Facilities District, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it was delivered to a purchaser, the Developer shall reasonably cooperate with the City, the Community Facilities District and the Underwriter in the preparation and publication of a supplement or amendment to the Official Statement, in form and substance satisfactory to the Underwriter and counsel to the City and the Community Facilities District which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading. 22.The Developer agrees to deliver a Closing Certificate dated the date of issuance of the Bonds at the time of issuance of the Bonds in substantially the form attached as Exhibit A. B-8 23.On behalf of the Developer, I have reviewed the contents of this Letter of Representations and have met with counsel to the Developer for the purpose of discussing the meaning of the contents of this Letter of Representations. The Developer acknowledges and understands that a variety of state and federal securities laws, including, but not limited to the Securities Act of 1933, as amended, and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended, may apply to the Developer and that under some circumstances, certification as to the matters set forth in this Letter of Representations, without additional disclosures or other action, may not fully discharge all duties and obligations of the Developer under such securities laws. [DEVELOPER] By: Name: Title: [EXECUTION PAGE OF LETTER OF REPRESENTATIONS – [DEVELOPER] ] C-1 EXHIBIT C CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) CLOSING CERTIFICATE – [CALATLANTIC GROUP, INC.,] [BEAZER HOMES HOLDING, LLC] [WOODSIDE 05S, LP] [Closing Date], 2017 City of Lake Elsinore Community Facilities District No. 2006-1 130 South Main Street Lake Elsinore, California 92530 Stifel, Nicolaus & Company, Incorporated 515 South Figueroa Street, Suite 1800 Los Angeles, California 90071 Ladies and Gentlemen: Reference is made to the above-captioned bonds (the “Bonds”) and to the Bond Purchase Agreement, dated _______, 2017 (the “Bond Purchase Agreement”), entered into in connection therewith. This certificate is delivered pursuant to the Bond Purchase Agreement. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Letter of Representations (the “Letter of Representations”), dated ______, 2017, delivered by _____________ (the “Developer”), which is attached hereto as Exhibit A. The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of the Developer, and the undersigned, on behalf of the Developer, further certifies as follows: 1. The Developer has received the Official Statement relating to the Bonds. To the Actual Knowledge of the Undersigned, each statement, representation and warranty made in the Letter of Representations is true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the final Official Statement. 2. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Preliminary Official Statement affecting the statements and information described in Paragraph 6 of the Letter of Representations (and subject to the limitations and exclusions contained in Paragraph 6 of the Letter of Representations) relating to the Developer, its Affiliates, the proposed development of the Property, ownership of the Property, the Developer’s development plan, the Developer’s financing plan, the Developer’s lenders, if any, and contractual arrangements of the Developer or any Affiliates (including, if material to the Developer’s development plan or the Developer’s financing C-2 plan, other loans of such Affiliates), which should be disclosed in the Official Statement for the purposes for which it is to be used in order to make such statements and information contained in the Official Statement not misleading in any material respect. 3.The Developer has duly authorized the execution and delivery of the Developer Continuing Disclosure Certificate, is duly authorized to perform the obligation on its part to be performed thereunder, and assuming due authorization and execution by the other parties thereto, the Developer Continuing Disclosure Certificate constitutes the legal, valid and binding obligations of the Developer, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance and other similar laws affecting the rights of creditors and certain equitable, legal or statutory principles affecting enforcement of contractual rights generally, regardless of whether such enforcement is considered in a proceeding of law or equity. [DEVELOPER] By: Name: Title: [EXECUTION PAGE OF CLOSING CERTIFICATE – [DEVELOPER] D-1 EXHIBIT D S_________ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) FORM OF ISSUE PRICE CERTIFICATE [TO COME AT PRICING] NEW ISSUE—BOOK-ENTRY ONLY NO RATING In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, 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 (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. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION” with respect to tax consequences relating to the Bonds. $5,165,000* CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) Dated: Delivery Date Due: September 1, as shown on inside cover page The City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2017 (Improvement Area EE) (the “Bonds”) are being issued by the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”): (i) to finance a portion of certain public facilities eligible to be financed by the District for Improvement Area EE of the District (“Improvement Area EE”); (ii) to fund a reserve account for the Bonds; (iii) to fund capitalized interest on a portion of the Bonds through September 1, 2018; and (iv) to pay costs of issuing the Bonds. The Bonds are authorized to be issued by the District for Improvement Area EE pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), and pursuant to that certain Bond Indenture, dated as of [______] 1, 2017 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”). The Bonds are payable from Net Taxes (as defined herein) derived from a certain annual Special Tax (as defined herein) to be levied on taxable parcels within Improvement Area EE and from certain other funds held under the Indenture, all as further described in this Official Statement. The Special Tax is to be levied according to the rate and method of apportionment approved by the City Council of the City and the qualified electors within Improvement Area EE. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes” and “Appendix A—RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” The Bonds will be issued in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Individual purchases of the Bonds may be made in principal amounts of $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described herein. Interest on the Bonds will be payable on September 1, 2018 and each September 1 and March 1 thereafter. Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, who will remit such payments to the Beneficial Owners of the Bonds. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF RIVERSIDE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity. See the caption “THE BONDS—Redemption.” Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain risk factors that should be considered, in addition to the other matters set forth in this Official Statement, in evaluating the investment quality of the Bonds. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR GENERAL REFERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF THE SECURITY OR TERMS OF THIS ISSUE. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. MATURITY SCHEDULE (See Inside Cover Page) The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the City and the District by Leibold McClendon, & Mann, Irvine, California, Issuer Counsel, and by Jones Hall, A Professional Law Corporation, Disclosure Counsel, and for the Underwriter by Nossaman LLP, Irvine, California. It is anticipated that the Bonds in book-entry form will be available for delivery on or about [________], 2017. [STIFEL LOGO] Dated: [_________], 2017 ________________________________ * Preliminary; subject to change. This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. $5,165,000* CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) MATURITY SCHEDULE BASE CUSIP®*50963N Maturity Date (September 1) Principal Amount Interest Rate Yield Price CUSIP®† $[_____] [_____]% Term Bonds Due September 1, 20[__] – Price [_____]% Yield [_____]% CUSIP®† [_____] $[_____] [_____]% Term Bonds Due September 1, 20[__] – Price [_____]% Yield [_____]% CUSIP®† [_____] * Preliminary; subject to change. † CUSIP® is a registered trademark of the American Bankers Association. Copyright© 1999-2016 Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business. All rights reserved. CUSIP® data in this Official Statement is provided by Standard & Poor’s CUSIP Service Bureau. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service Bureau. CUSIP® numbers are provided for convenience of reference only. Neither the District nor the Underwriter takes any responsibility for the accuracy of such numbers. CITY OF LAKE ELSINORE COUNTY OF RIVERSIDE, CALIFORNIA CITY COUNCIL Robert Magee, Mayor Natasha Johnson, Mayor Pro Tem Daryl Hickman, Councilmember Steve Manos, Councilmember Brian Tisdale, Councilmember CITY ADMINISTRATORS Grant Yates, City Manager Jason Simpson, Assistant City Manager PROFESSIONAL SERVICES Leibold McClendon & Mann Irvine, California Issuer Counsel Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California Bond Counsel Jones Hall, A Professional Law Corporation San Francisco, California Disclosure Counsel Wilmington Trust, National Association Costa Mesa, California Trustee SCG - Spicer Consulting Group Murrieta, California Special Tax Consultant Urban Futures Incorporated Orange, California Financial Advisor Kitty Siino & Associates, Inc. Tustin, California Appraiser Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the 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 in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the City, the District, the 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. This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described in this Official Statement, are intended solely as such and are not to be construed as representations of fact. 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 or completeness of such information. The information and expressions of opinion in this Official Statement are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City, the District or any other parties described in this Official Statement 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. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. 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 a “plan,” “expect,” “estimate,” “project,” “budget,” or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption “THE COMMUNITY FACILITIES DISTRICT.” 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 DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. The City maintains a website. However, the information presented on such website is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. i TABLE OF CONTENTS Page INTRODUCTION .................................................................................................................................................................................... 1 The Act .............................................................................................................................................................................................. 1 The City, District and Improvement Area EE ..................................................................................................................................... 2 Current and Proposed Development Within Improvement Area EE .................................................................................................. 2 Sources of Payment for the Bonds .................................................................................................................................................... 4 Description of the Bonds ................................................................................................................................................................... 4 Tax Exemption ................................................................................................................................................................................... 5 Appraisal Report ................................................................................................................................................................................ 5 Professionals Involved in the Offering ............................................................................................................................................... 6 Continuing Disclosure ........................................................................................................................................................................ 6 Parity Bonds for Refunding Purposes Only ....................................................................................................................................... 6 Bond Owners’ Risks .......................................................................................................................................................................... 7 Other Information ............................................................................................................................................................................... 7 ESTIMATED SOURCES AND USES OF FUNDS ................................................................................................................................. 8 THE BONDS ........................................................................................................................................................................................... 9 General Provisions ............................................................................................................................................................................ 9 Debt Service Schedule .................................................................................................................................................................... 10 Redemption ..................................................................................................................................................................................... 11 Registration, Transfer and Exchange .............................................................................................................................................. 14 SOURCES OF PAYMENT FOR THE BONDS ..................................................................................................................................... 15 Limited Obligations .......................................................................................................................................................................... 15 Special Taxes .................................................................................................................................................................................. 15 Reserve Account of the Special Tax Fund ...................................................................................................................................... 21 Parity Bonds for Refunding Purposes Only ..................................................................................................................................... 21 CALATLANTIC LETTER OF CREDIT AND WOODSIDE CASH DEPOSIT ......................................................................................... 22 THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE .................................................................................... 24 General Description of the District ................................................................................................................................................... 24 Improvement Area EE ..................................................................................................................................................................... 24 History of the District and Improvement Area EE ............................................................................................................................ 24 Appraisal Report .............................................................................................................................................................................. 25 Direct and Overlapping Indebtedness ............................................................................................................................................. 26 Estimated Appraised Value-To-Lien Ratios ..................................................................................................................................... 28 Estimated Tax Burden on Single-Family Home ............................................................................................................................... 31 Concentration of Taxpayers ............................................................................................................................................................ 32 Property Tax Delinquencies ............................................................................................................................................................ 32 CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE ............................................. 32 Development by Woodside .............................................................................................................................................................. 32 Development by Beazer .................................................................................................................................................................. 37 Development by CalAtlantic ............................................................................................................................................................ 42 SPECIAL RISK FACTORS ................................................................................................................................................................... 48 Risks of Real Estate Secured Investments Generally ..................................................................................................................... 48 Limited Obligations .......................................................................................................................................................................... 48 Insufficiency of Special Taxes ......................................................................................................................................................... 49 Natural Disasters ............................................................................................................................................................................. 49 Concentration of Property Ownership ............................................................................................................................................. 50 Failure to Develop Remaining Homes ............................................................................................................................................. 50 Hazardous Substances ................................................................................................................................................................... 51 Payment of the Special Tax is not a Personal Obligation of the Landowners ................................................................................. 51 Appraised Value .............................................................................................................................................................................. 51 Parity Taxes and Special Assessments .......................................................................................................................................... 52 Disclosures to Future Purchasers ................................................................................................................................................... 52 Special Tax Delinquencies .............................................................................................................................................................. 53 FDIC/Federal Government Interests in Properties .......................................................................................................................... 53 Bankruptcy and Foreclosure ............................................................................................................................................................ 55 No Acceleration Provision ............................................................................................................................................................... 56 Loss of Tax Exemption .................................................................................................................................................................... 56 Limited Secondary Market ............................................................................................................................................................... 56 Proposition 218 ................................................................................................................................................................................ 56 Ballot Initiatives ................................................................................................................................................................................ 58 Limitations on Remedies ................................................................................................................................................................. 58 Recent Case Law Related to the Mello-Roos Act ........................................................................................................................... 58 Potential Early Redemption of Bonds from Prepayments ............................................................................................................... 59 CONTINUING DISCLOSURE .............................................................................................................................................................. 60 District Continuing Disclosure Certificate ........................................................................................................................................ 60 TAX EXEMPTION ................................................................................................................................................................................ 62 ii LEGAL OPINION .................................................................................................................................................................................. 64 ABSENCE OF LITIGATION ................................................................................................................................................................. 64 NO RATING .......................................................................................................................................................................................... 64 UNDERWRITING ................................................................................................................................................................................. 64 FINANCIAL INTERESTS ...................................................................................................................................................................... 65 ADDITIONAL INFORMATION .............................................................................................................................................................. 66 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX .................................................................... A-1 APPENDIX B ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING THE CITY OF LAKE ELSINORE ....................................................................................................................... B-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL ....................................................................................................... C-1 APPENDIX D SUMMARY OF THE INDENTURE ..................................................................................................................... D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE .................................................................................. E-1 APPENDIX F FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE ............................................................ F-1 APPENDIX G BOOK-ENTRY ONLY SYSTEM ......................................................................................................................... G-1 APPENDIX H APPRAISAL REPORT ...................................................................................................................................... H-1 [INSERT MAPS of (i) City, (ii) District and (iii) Improvement Area EE] 1 $5,165,000* CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) INTRODUCTION The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices (collectively, the “Official Statement”), is to provide certain information concerning the issuance by the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”) of its Special Tax Bonds, Series 2017 (Improvement Area EE) (the “Bonds”). The proceeds of the Bonds will be used: (i) to finance a portion of certain public facilities eligible to be financed by the District for Improvement Area EE of the District (“Improvement Area EE”); (ii) to fund a reserve account for the Bonds; (iii) to fund capitalized interest on a portion of the Bonds through September 1, 2018; and (iv) to pay costs of issuing the Bonds. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), and a Bond Indenture, dated as of [______] 1, 2017 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”). The Bonds are secured under the Indenture by a pledge of and lien upon Net Taxes (as such term is defined in this Official Statement) and all moneys in the Special Tax Fund (other than the Administrative Expense Account therein) as described in the Indenture. 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 in this Official Statement. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined have the meanings set forth in Appendix D. The Act The District and Improvement Area EE were formed, and the District is issuing the Bonds, under the Act. The Act was enacted to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. ________________________________ * Preliminary; subject to change. 2 The City, District and Improvement Area EE City. The City is located in the western portion of Riverside County (the “County”), California (the “State”). More information about the City is found in “Appendix B—Economic and Demographic Information Regarding the City of Lake Elsinore.” District. The District comprises a portion of Summerly, a planned residential community located in the southeast portion of the City, to the east of Lake Elsinore. McMillin Summerly, LLC, a Delaware limited liability company (“McMillin”), acquired the partially-developed Summerly project in 2010 and serves as the master developer. At build-out, the Summerly project is expected to include approximately 1,595 single-family detached homes, commercial development, and recreational and open space. The Summerly project will be built in eight phases. See the caption “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE - General Description of the District” for further information with respect to the District. Improvement Area EE. Improvement Area EE consists of Neighborhoods 9, 10 and 11 within phase four of the Summerly project and is entitled for development of 181 single-family homes. See “- Current and Proposed Development Within Improvement Area EE” below. Current and Proposed Ownership and Development Within Improvement Area EE Public Infrastructure. The public infrastructure in Improvement Area EE has been completed by McMillin. Private Development. The single-family residential lots in Improvement Area EE are being developed by three merchant builders: (i) Woodside 05S, LP, a California limited partnership (“Woodside”), is developing a neighborhood called Augusta. Augusta is entitled for 59 single-family homes. A summary of property development and ownership in Augusta as of October 6, 2017, is set forth on the following page (property development and ownership information as of September 1, 2017 is presented elsewhere in this Official Statement): Category Number Completed homes - Conveyed to home buyers 22 Homes over 95% complete- Owned by Woodside 3* Homes under 95% complete - Owned by Woodside 17** Finished lots 17 Total 59 ________________________________ *These homes are model homes **13 of these homes are in escrow. Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. (ii) Beazer Homes Holdings, LLC, a Delaware limited liability company (“Beazer”), is developing a neighborhood called Willows. Willows is entitled for 63 single-family homes. A summary of property development and ownership in Willows as of October 6, 2017, is set forth 3 below (property development and ownership information as of September 1, 2017 is presented elsewhere in this Official Statement): Category Number Completed homes - Conveyed to home buyers 26 Homes over 95% complete- Owned by Beazer 3* Homes under 95% complete - owned by Beazer 6** Finished lots 28*** Total 63 ________________________________ *These homes are model homes. **5 of these homes are in escrow. Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. ***3 of these finished lots are in escrow. Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. (iii) CalAtlantic Group, Inc. (“CalAtlantic”), is developing a neighborhood called Monarch Grove II. Monarch Grove II is entitled for 59 single-family homes. A summary of property development and ownership in Monarch Grove II as of October 6, 2017, is set forth below (property development and ownership information as of September 1, 2017 is presented elsewhere in this Official Statement): Category Number Homes under 95% complete - owned by CalAtlantic 33* Finished lots 26 Total 59 ________________________________ *25 of these homes are in escrow. Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. Concentration of Ownership. As described in greater detail in “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE” and “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE,” there was significant concentration of ownership in Improvement Area EE as of September 1, 2017: • If there were no additional homes conveyed to homebuyers (including the homes currently in escrow), the property owned by Woodside would be responsible for 21.30% of the Special Taxes expected to be levied in fiscal year 2018-19. • If there were no additional homes conveyed to homebuyers (including the homes currently in escrow), the property owned by Beazer would be responsible for 20.80% of the Special Taxes expected to be levied in fiscal year 2018-19. • If there were no additional homes conveyed to homebuyers (including the homes currently in escrow), the property owned by CalAtlantic would be responsible for 35.88% of the Special Taxes expected to be levied in fiscal year 2018-19 See “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE” for more detailed information about the current and proposed development in Improvement Area EE. 4 Sources of Payment for the Bonds Special Taxes. As used in this Official Statement, the term “Special Tax” means the annual Special Tax which has been authorized pursuant to the Act and the Rate and Method to be levied upon taxable property within Improvement Area EE. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes” and “Appendix A—RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” Under the Indenture, the District has pledged to repay the Bonds from the Special Tax revenues remaining after the payment of certain annual Administrative Expenses of the District (the “Net Taxes”) and from other amounts in the Special Tax Fund (other than the Administrative Expense Account therein) established under the Indenture. The Special Taxes are the primary source of security for the repayment of the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein, to the limited extent described in the Indenture. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Reserve Account of the Special Tax Fund.” Foreclosure Proceeds. The District has covenanted for the benefit of the owners of the Bonds to undertake judicial foreclosure in certain instances. See the caption “SOURCES OF PAYMENT FOR THE BONDS - Proceeds of Foreclosure Sales.” EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE INDENTURE, AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. CalAtlantic Letter of Credit and Woodside Cash Deposit As security for their respective obligation to pay Special Taxes for a limited period of time, CalAtlantic has committed to provide the District with an irrevocable letter of credit (the “CalAtlantic Letter of Credit”), and Woodside has agreed to provide a cash deposit (“Woodside Cash Deposit”). The CalAtlantic Letter of Credit and the Woodside Cash Deposit will be held by the Trustee. The CalAtlantic Letter of Credit was issued on October 1, 2017 in the amount of $171,354.88. The Woodside Cash Deposit was issued on October 1, 2017 in the amount of $103,482.71. The CalAtlantic Letter of Credit and the Woodside Cash Deposit are not pledged as security for the Bonds, and the District could instruct the Trustee to release the CalAtlantic Letter of Credit and the Woodside Cash Deposit at any time without the consent of the Owners or Beneficial Owners of the Bonds. See “CALATLANTIC LETTER OF CREDIT AND WOODSIDE CASH DEPOSIT” below. Description of the Bonds The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to actual purchasers of the Bonds (the “Beneficial Owners”) in the denominations of $5,000 or any integral multiple thereof, under the book-entry system 5 maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described in this Official Statement. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry only system described in this Official Statement is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See “Appendix G—BOOK-ENTRY ONLY SYSTEM.” Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. See “Appendix G—BOOK-ENTRY ONLY SYSTEM.” The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity as described in this Official Statement. See the caption “THE BONDS—Redemption.” For a more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see the caption “THE BONDS” and “Appendix D—SUMMARY OF THE INDENTURE.” Tax Exemption In the opinion of Stradling Yocca Carlson & Rauth, 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 in this Official Statement, 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. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION.” Set forth in Appendix C is the form of opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of Bond Counsel’s opinion and certain tax consequences incident to the ownership of the Bonds, see the caption “TAX EXEMPTION.” Appraisal Report Appraisal Report. An MAI appraisal of the land and existing improvements within Improvement Area EE was prepared by Kitty Siino & Associates, Inc., Tustin, California (the “Appraiser”). The appraisal is dated October 5, 2017 and is entitled “Appraisal Report Community Facilities District No. 2006-1 Improvement Area EE of the City of Lake Elsinore” (the “Appraisal Report”). See “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE - Appraisal Report” and “APPENDIX H—APPRAISAL REPORT.” The Appraisal Report provides an estimate of the aggregate market value of the as-is condition of the taxable property within Improvement Area EE as of the date of value, September 1, 2017 (the “Date of Value”). The Appraisal Report reached the following market value conclusions as of September 1, 2017. Please note that the ownership information presented in the following table is current as of September 1, 2017; ownership information as of October 6, 2017 is presented elsewhere in this Official Statement. See “CURRENT PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE.” 6 Neighborhood Number of Lots Market Value Augusta: Woodside Ownership 38 $5,220,784 Individually-Owned Homes 21 7,742,922 Willows: Beazer Ownership 46 6,767,384 Individually-Owned Homes 17 5,752,884 Monarch Grove II: CalAtlantic Ownership 59 7,072,000 Total 181 $32,555,974 Professionals Involved in the Offering Wilmington Trust, National Association, Costa Mesa, California, will act as Trustee under the Indenture. Stifel, Nicolaus & Company, Incorporated (the “Underwriter”) is the Underwriter of the Bonds. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Bond Counsel. Certain legal matters will be passed on for the City and the District by Leibold McClendon & Mann, Irvine, California, Issuer Counsel, and by Jones Hall, A Professional Law Corporation, San Francisco, California, Disclosure Counsel, and for the Underwriter by Nossaman LLP, Irvine, California. Other professional services have been performed by SCG - Spicer Consulting Group, Murrieta, California, as Special Tax Consultant (the “Special Tax Consultant”), Kitty Siino & Associates, Inc., Tustin, California, as Appraiser and Urban Futures Incorporated, Orange, California, as Financial Advisor (the “Financial Advisor”). For information concerning circumstances in which certain of the above-mentioned professionals, advisors, counsel and consultants may have a financial or other interest in the offering of the Bonds, see the caption “FINANCIAL INTERESTS.” Continuing Disclosure The District has agreed to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system (“EMMA”), maintained on the Internet at http://emma.msrb.org, certain annual financial information and operating data and notices of certain enumerated events. These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission (“Rule 15c2-12”). See “Appendix E—FORM OF CONTINUING DISCLOSURE CERTIFICATE.” Woodside, Beazer and CalAtlantic (together, the “Developers”) have each agreed to provide, or cause to be provided, to EMMA certain information relating to itself and the property it owns within Improvement Area EE for a limited period of time. See “Appendix F—FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE.” Parity Bonds for Refunding Purposes Only The District has covenanted not to issue additional indebtedness secured by the Net Taxes on a parity with the Bonds (“Parity Bonds”) other than for refunding all or a portion of the Bonds or any Parity Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS— Parity Bonds for Refunding Purposes Only.” Other taxes and/or special assessments with liens 7 equal in priority to the continuing lien of the Special Taxes may also be levied in the future on the property within Improvement Area EE, which could adversely affect the willingness of the landowners to pay the Special Taxes when due. See the captions “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE—Direct and Overlapping Indebtedness” and “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” Bond Owners’ Risks Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain factors which should be considered, in addition to other matters set forth in this Official Statement, in evaluating an investment in the Bonds. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors. Other Information This Official Statement speaks only as of its date, and the information contained in this Official Statement is subject to change. Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references in this Official Statement to the Indenture, the Bonds and the Constitution and laws of the State, as well as the proceedings of the City Council, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Capitalized terms not otherwise defined in this Official Statement have the meanings set forth in Appendix D. Copies of the Indenture and other documents and information are available for inspection and copies may be obtained from the City, 130 S. Main Street, Lake Elsinore, California, 92530, Attention: City Clerk. 8 ESTIMATED SOURCES AND USES OF FUNDS The District is issuing the Bonds to finance a portion of certain public facilities eligible to be financed by the District, to fund a reserve account for the Bonds, and to pay costs of issuing the Bonds. The following table sets forth the expected sources and uses of Bond proceeds. Sources of Funds Principal Amount of Bonds $[_______] Less Net Original Issue Discount [_______] Total Sources $[_______] Uses of Funds: Costs of Issuance Account(1) $[_______] Capitalized Interest(2) [_______] Acquisition and Construction Fund [_______] Reserve Account of the Special Tax Fund [_______] Underwriter’s Discount [_______] Total Uses $[_______] (1) To pay costs of issuance, including legal fees, printing costs, and Appraiser, Financial Advisor, Special Tax Consultant and Trustee fees. (2) A portion of the interest on the Bonds will be capitalized through September 1, 2018. 9 THE BONDS General Provisions The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semiannually on September 1, 2018 and each September 1 and March 1 thereafter (each, an “Interest Payment Date”), and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. The Bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. Interest on any Bond will 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 will be payable from such date of authentication; (ii) the date of authentication is after the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day (each, a “Record Date”) but prior to the immediately succeeding Interest Payment Date, in which event interest will 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 will be payable from the dated date of the Bonds; provided, however, that if at the time of authentication of a Bond, interest is in default, interest on such Bond will 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 such Bond, interest on such Bond will be payable from its dated date. Interest on any Bond will be paid to the person whose name appears as its owner in the registration books held by the Trustee on the close of business on the Record Date. Interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, to the Bondowner at its address on the registration books kept by the Trustee. Pursuant to a written request prior to the Record Date of a Bondowner of at least $1,000,000 in aggregate principal amount of Bonds, payment will be made by wire transfer in immediately available funds to a designated account in the United States. Principal of, premium, if any, and interest on the Bonds due upon redemption is payable upon presentation and surrender of the Bonds at the principal corporate trust office of the Trustee in Costa Mesa, California. The Bonds are issued as fully registered bonds and will be registered in the name of Cede & Co., as nominee for the 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 “Appendix G—BOOK-ENTRY ONLY SYSTEM.” 10 Debt Service Schedule The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming that there are no optional or special mandatory redemptions. See the caption “—Redemption” below. Date (September 1) Principal Interest Total 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 Total _________________________________ Source: Underwriter. 11 Redemption Optional Redemption. The Bonds may be redeemed at the option of the District from any source of funds on any Interest Payment Date on and after September 1, 20__, in whole or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption: Redemption Date Redemption Price September 1, 20__ and any Interest Payment Date through March 1, 20__ 103% September 1, 20__ and March 1, 20__ 102 September 1, 20__ and March 1, 20__ 101 September 1, 20__ and any Interest Payment Date thereafter 100 In the event that the District elects to redeem Bonds as provided above, the District will give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee will be given at least 30 but no more than 60 days prior to the redemption date, or by such later date as is acceptable to the Trustee. Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20__ and September 1, 20__ (the “Term Bonds”) will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established by the Indenture, on September 1, 20__ and September 1, 20__, respectively, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Term Bonds Maturing September 1, 20__ Sinking Fund Redemption Date (September 1) Sinking Payments † Maturity. 12 Term Bonds Maturing September 1, 20__ Sinking Fund Redemption Date (September 1) Sinking Payments † Maturity. If the District purchases Term Bonds during the fiscal year immediately preceding one of the sinking fund redemption dates specified above, the District will notify the Trustee at least 45 days prior to the redemption date as to the principal amount purchased, and the amount purchased will be credited at the time of purchase to the next Sinking Fund Payment for the Term Bond so purchased, to the extent of the full principal amount of the purchase. All Term Bonds purchased pursuant to the Indenture will be cancelled pursuant to the Indenture. In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis. Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to special mandatory redemption as a whole or in part on a pro rata basis among maturities and by lot within a maturity, on any Interest Payment Date on and after September 1, 20__, and will be redeemed by the Trustee, from any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in Improvement Area EE made in accordance with the Rate and Method (the “Prepayments”) deposited to the Redemption Account pursuant to the Indenture, plus amounts transferred from the Reserve Account pursuant to the 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 Date Redemption Price September 1, 20__ and any Interest Payment Date through March 1, 20__ 103% September 1, 20__ and March 1, 20__ 102 September 1, 20__ and March 1, 20__ 101 September 1, 20__ and any Interest Payment Date thereafter 100 Notice of Redemption. So long as the Bonds are held in book-entry form, notice of redemption will be mailed by the Trustee to DTC and not to the Beneficial Owners of the Bonds under the DTC book-entry only system. Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who are to be notified in accordance with the procedures in effect for the DTC book-entry system. See “Appendix G—BOOK-ENTRY ONLY SYSTEM.” The Trustee will give notice, in the name of the District, of the redemption of 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 Bonds to be redeemed. Such notice of redemption will: (i) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds selected for redemption, except that where all of the Bonds are subject to redemption, or all of the Bonds of one maturity are to be redeemed, the bond numbers of such 13 issue need not be specified; (ii) state the date fixed for redemption and surrender of the Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds are to be redeemed; (v) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed; (vi) state the date of issue of the Bonds as originally issued; (vii) state the rate of interest borne by each Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the Bonds being redeemed as specified by the Trustee. Such notice will further state that on the date fixed for redemption, there will become due and payable on each 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 will cease to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the Trustee will mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register; provided, however, so long as the Bonds and Parity Bonds are registered in the name of the Nominee, such notice shall be given in such manner as complies with the requirements of the Depository. The actual receipt by the Owner of any Bond of notice of such redemption is not a condition precedent to redemption, and neither the failure to receive nor any defect in such notice will affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as provided in the Indenture will be conclusive as against all parties and the Owner is not entitled to show that he or she failed to receive notice of such redemption. In addition to the foregoing notice, further notice will be given by the Trustee as set out below, 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 if notice thereof is given as above prescribed. Each further notice of redemption will be sent not later than the date that notice of redemption is mailed to the Owners pursuant to the Indenture by first class mail or facsimile to the Depository and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds as determined by the Trustee and to one or more of the national information services that the Trustee determines are in the business of disseminating notice of redemption of obligations such as the Bonds. Upon the payment of the redemption price of any Bonds being redeemed, each check or other transfer of funds issued for such purpose will to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. With respect to any notice of optional redemption of Bonds, such notice may state that such redemption is conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds to be redeemed and that, if such moneys have not been so received, said notice will be of no force and effect and the Trustee will not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. 14 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 part by $5,000. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee will promptly notify the District in writing of the Bonds, or portions thereof, selected for redemption. Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District will execute and the Trustee will authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity. Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in the Indenture, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (i) the Bonds, or portions thereof, designated for redemption will, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in the Indenture, anything in the Indenture or in the Bonds to the contrary notwithstanding; (ii) upon presentation and surrender thereof at the office of the Trustee, the redemption price of such Bonds will be paid to the Owners thereof; (iii) as of the redemption date the Bonds, or portions thereof so designated for redemption will be deemed to be no longer Outstanding and such Bonds, or portions thereof, will cease to bear further interest; and (iv) as of the date fixed for redemption no Owner of any of the Bonds, or portions thereof so designated for redemption will be entitled to any of the benefits of the Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. Registration, Transfer and Exchange Registration. The Trustee will keep sufficient books for the registration and transfer of the Bonds. The ownership of the Bonds will be established by the Bond registration books held by the Trustee. Transfer or Exchange. Subject to the limitations set forth in the following paragraph, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond or Parity Bond for cancellation at the office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Owner or his or her duly authorized attorney. Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Trustee may not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but will require the Owner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds are surrendered for registration of transfer or exchange, the District will execute and the Trustee will authenticate and deliver a new Bond or Bonds, as 15 applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee is not required to register transfers or make exchanges of: (i) Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed; or (ii) any Bonds chosen for redemption. SOURCES OF PAYMENT FOR THE BONDS Limited Obligations The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources. The Special Taxes are the primary source of security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues from Improvement Area EE remaining after the payment of the annual Administrative Expenses in an amount not to exceed the Administrative Expenses Cap) and from amounts held in the Special Tax Fund (other than amounts held in the Administrative Expense Account therein). Special Tax revenues include the proceeds of the annual Special Tax levy received by the District, including any scheduled payments and Prepayments thereof, and the net proceeds of the redemption of delinquent Special Taxes or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes to the amount of said lien, and penalties and interest thereon; provided that any delinquent Special Tax sold to an independent third party or to the City for 100% of the delinquent amount shall no longer be pledged hereunder to the payment of the Bonds or Parity Bonds. In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund (other than the Administrative Expense Account therein), including amounts held in the Reserve Account therein, for the exclusive benefit of the Owners of the Bonds. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED IN THIS OFFICIAL STATEMENT. Special Taxes Authorization and Pledge. At a special election held on April 8, 2014, the eligible electors within Improvement Area EE authorized the District to incur indebtedness in an amount not to exceed $7,500,000 in Improvement Area EE and approved the Rate and Method which authorizes the Special Tax to be levied in Improvement Area EE to repay District indebtedness, including the Bonds. The Bonds will be repaid only from annual Net Taxes derived from the levy and collection of Special Taxes in Improvement Area EE pursuant to the Rate and Method. The Rate and Method permits the prepayment of Special Taxes for an Assessor’s Parcel, and any such Prepayments will be applied to redeem Bonds and Parity Bonds, if any. The Net Taxes 16 collected from the annual Special Tax levy and the proceeds of any prepayment of Special Taxes have been pledged under the Indenture to the repayment of the Bonds and Parity Bonds. The Special Taxes levied in any fiscal year may not exceed the maximum rates authorized pursuant to the Rate and Method. See “Appendix A—RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” There is no assurance that the Net Taxes will, in all circumstances, be adequate to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS - Insufficiency of Special Taxes.” CalAtlantic Letter of Credit and Woodside Cash Deposit. CalAtlantic has committed to provide a Letter of Credit to secure payment of Special Taxes levied on the property in Improvement Area EE owned by CalAtlantic, for a limited period of time. Woodside has committed to make a cash deposit to secure payment of Special Taxes levied on the property in Improvement Area EE owned by Woodside, for a limited period of time. The CalAtlantic Letter of Credit and the Woodside Cash Deposit will be held by the Trustee. The CalAtlantic Letter of Credit and the Woodside Cash Deposit are not pledged as security for the Bonds, and the District could instruct the Trustee to release the CalAtlantic Letter of Credit and the Woodside Cash Deposit at any time without the consent of the Owners or Beneficial Owners of the Bonds. See “CALATLANTIC LETTER OF CREDIT AND WOODSIDE CASH DEPOSIT.” Rate and Method of Apportionment of Special Tax. The District is legally authorized to levy the Special Taxes in Improvement Area EE in an amount determined according to the Rate and Method. The Rate and Method apportions the total amount of Special Taxes to be collected among the taxable parcels in Improvement Area EE as more particularly described below. The full text of the Rate and Method is set forth in Appendix A. Property to be taxed pursuant to the Rate and Method of Apportionment is classified as “Taxable Property.” Taxable Property consists of Developed Property, Taxable Public Property, Taxable Property Owner Association Property, Approved Property or Undeveloped Property, all as defined in the Rate and Method. The amount of Special Tax that the District may levy is limited by the Maximum Special Tax rates set forth in the Rate and Method. The Maximum Special Tax for each Assessor’s Parcel of Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Tax for Facilities or (ii) the amount derived by application of the Backup Special Tax for Facilities. Maximum Special Tax Levy by Land Use. The table below presents the Assigned Special Tax for fiscal year 2018-19 for each parcel in Improvement Area EE by land use assuming no additional homes are conveyed to homebuyers, and no additional building permits for additional homes are issued to the Developers. The table demonstrates that based on such assumption approximately 24.6% of the fiscal year 2018-19 levy would be levied on Approved Property. Information is presented about the fiscal year 2018-19 special tax levy because the City levied special taxes in fiscal year 2017-18 on only a handful of parcels for which building permits had been issued as of May 1, 2017 in Improvement Area EE and most of the interest on the Bonds is capitalized from proceeds of the Bonds through September 1, 2018. 17 TABLE 1 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA EE) ASSIGNED SPECIAL TAX BY CLASS Land Use Type Residential Floor Area (sq. ft.) Assigned Special Tax Rate FY 2018-19 Estimated Special Tax Rates FY 2018-19(1) No. of Units No. of Acres Aggregate Estimated Special Taxes FY 2018-19 Percent of Total Residential Property < 1,100 $1,054.49 $1,054.49 0 $0.00 0.0% Residential Property 1,100-1,299 1,113.08 1,113.08 0 0.00 0.0 Residential Property 1,300-1,499 1,171.66 1,171.66 0 0.00 0.0 Residential Property 1,500-1,699 1,230.24 1,230.24 17 20,914.08 8.6 Residential Property 1,700-1,899 1,288.83 1,288.83 16 20,621.28 8.5 Residential Property 1,900-2,099 1,347.41 1,347.41 7 9,431.87 3.9 Residential Property 2,100-2,299 1,405.99 1,405.99 18 25,307.82 10.4 Residential Property 2,300-2,499 1,464.57 1,464.57 0 0.00 0.0 Residential Property 2,500-2,699 1,523.16 1,523.16 24 36,555.84 15.1 Residential Property 2,700-2,899 1,640.33 1,640.33 27 44,288.91 18.3 Residential Property 2,900-3,099 1,757.49 1,757.49 0 0.00 0.0 Residential Property 3,100-3,299 1,991.82 1,991.82 13 25,893.66 10.7 Residential Property 3,300-3,499 2,226.15 2,226.15 0 0.00 0.0 Residential Property > 3,499 2,460.49 2,460.49 0 0.00 0.0 Approved Property N/A 13,547.86 6,137.42 59 9.71 59,594.32 24.6 Total 181 9.71 $242,607.78 100.0% ___________________ (1) Includes estimated Administrative Expenses of $20,000. Source: Special Tax Consultant. For each fiscal year, the City Council will determine the Special Tax Requirement. The Special Tax will be levied pursuant to the Rate and Method on each Assessor’s Parcel of Taxable Property, up to the applicable Maximum Special Tax, to satisfy the Special Tax Requirement. Notwithstanding the foregoing, under no circumstances will the Special Taxes levied against any Assessor’s Parcel used as a private residence be increased as a consequence of delinquency or default by the owner or owners of any other Assessor’s Parcel or Assessor’s Parcels within Improvement Area EE by more than 10% above the amount that would have been levied in such fiscal year had there never been any such delinquencies or defaults. The Rate and Method provides that Special Taxes may be prepaid in whole under the circumstances described in Section G of the Rate and Method. Estimated Debt Service Coverage. In connection with the issuance of the Bonds, the Special Tax Consultant will certify that the Maximum Special Tax that may be levied in each fiscal year on Assessor’s Parcels within Improvement Area EE classified as Taxable Property as of [May 1, 2018] will be at least equal to the sum of: (i) 110% of Maximum Annual Debt Service on the Bonds; plus (ii) the Administrative Expenses Cap (which is defined in the Indenture as $20,000 for fiscal year 2018-19 and escalating 2% annually thereafter. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies. The Rate and Method provides that the Special Tax may not be levied on a parcel of Taxable Property after fiscal year 2054-2055. There are adequate Net Taxes, assuming 100% collection, to pay debt service and provide at least 110% coverage in each year throughout the term of the Bonds. See the caption “SPECIAL RISK FACTORS—Proposition 218” for a discussion of certain provisions of State law that could allow property owners within Improvement Area EE to reduce the maximum amount of Special Taxes that may be levied. 18 Levy, Collection and Application of Special Taxes. The Special Taxes are levied and collected by the Treasurer and Tax Collector of the County in the same manner and at the same time as ad valorem property taxes. The District has covenanted in the Indenture that each year it will levy Special Taxes in Improvement Area EE up to the maximum rates permitted under the Rate and Method in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay the principal of and interest on any Outstanding Bonds and Parity Bonds, to replenish the Reserve Account to the Reserve Requirement and to pay Administrative Expenses. The District has made certain covenants in the Indenture which are intended to ensure that the current maximum Special Tax rates and power of the District to levy the Special Taxes are not altered in a manner that would impair the District’s ability to collect sufficient Special Taxes in Improvement Area EE to pay debt service on the Bonds and Administrative Expenses when due. First, the District has covenanted that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding. Second, the District has covenanted, to the maximum extent that the law permits it to do so, not to initiate proceedings to reduce the maximum Special Tax rates for Improvement Area EE, unless, in connection therewith, the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within Improvement Area EE to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds. Third, the District has covenanted that, in the event that any initiative is adopted by the qualified electors in Improvement Area EE which purports to reduce the maximum Special Tax below the levels specified in the previous sentence or to limit the power of the District to levy the Special Taxes for the purposes set forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. The District can provide no assurance that any such legal action will be successful. See the caption “SPECIAL RISK FACTORS—Proposition 218.” Fourth, the District has covenanted that it will not adopt any policy pursuant to the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Net Taxes from Improvement Area EE to pay the principal of and interest on the Bonds and Parity Bonds when due. Although the Special Taxes constitute liens on taxed parcels within Improvement Area EE, they do not constitute a personal indebtedness of the owners of property within Improvement Area EE. Moreover, other liens for taxes and assessments already exist on the property located within Improvement Area EE and others could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners therein. 19 See the captions “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE —Direct and Overlapping Indebtedness” and “SPECIAL RISK FACTORS—Parity Taxes and Special Assessments.” There is no assurance that property owners in Improvement Area EE will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described under the caption “SPECIAL RISK FACTORS.” Proceeds of Foreclosure Sales. The net proceeds received following a judicial foreclosure sale of property within Improvement Area EE resulting from a property owner’s failure to pay the Special Taxes when due are included within the Net Taxes pledged to the payment of principal of and interest on the Bonds under the Indenture. Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax or receipt by the District of Special Taxes in an amount which is less than the Special Taxes levied, the City Council, as the legislative body of the District, may order that Special Taxes be collected by a Superior Court action to foreclose the lien within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, the District has covenanted for the benefit of the owners of the Bonds and any Parity Bonds that it will: (i) commence judicial foreclosure proceedings against parcels in Improvement Area EE with delinquent Special Taxes in excess of $5,000 by the October 1 following the close of each fiscal year of the District ending June 30 (each, a “Fiscal Year”) in which such Special Taxes were due; (ii) commence judicial foreclosure proceedings against all parcels in Improvement Area EE with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied; and (iii) diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account is at least equal to the Reserve Requirement. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Proceeds of Foreclosure Sales.” There is no assurance that the property within Improvement Area EE can be sold for the appraised values described in this Official Statement, or for a price sufficient to pay the principal of and interest on the Bonds in the event of a default in payment of Special Taxes by the current or future landowners within Improvement Area EE. See the caption “SPECIAL RISK FACTORS—Appraised Value.” The District has further covenanted that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. 20 If foreclosure is necessary and other funds (including amounts in the Reserve Account) have been exhausted, debt service payments on the Bonds could be delayed unless the foreclosure proceedings produce sufficient net foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City and the District. See the caption “SPECIAL RISK FACTORS— Bankruptcy and Foreclosure.” Moreover, no assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the net proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See the caption “SPECIAL RISK FACTORS—Appraised Value.” Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes. Collection of Special Taxes and Flow of Funds. The Special Taxes will be levied and collected by the Treasurer and Tax Collector of the County in the same manner and at the same time as ad valorem property taxes. When the County apportions Special Taxes to the District, the District will transmit the Special Taxes to the Trustee for deposit in the Special Tax Fund established by the Indenture. The Trustee is required to disburse moneys in the Special Tax Fund, first to the Administrative Expense Account of the Special Tax Fund in an amount necessary to pay the Administrative Expenses, up to the amount of the Administrative Expenses Cap. Additionally, on the dates specified in the Indenture and if there are sufficient amounts available in the Special Tax Fund for such purposes, the Trustee is to make the following transfers in the priority described below: First: To the Interest Account, an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date is equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date. Moneys in the Interest Account will be used for the payment of interest on the Bonds and any Parity Bonds as the same become due. Second: To the Principal Account, an amount such that the balance in the Principal Account one Business Day prior to September 1 of each year commencing September 1, 2018, equals the principal payment of the Bonds and any Parity Bonds due on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account will be used for the payment of the principal of the Bonds and any Parity Bonds as the same become due. Third: To the Redemption Account, an amount sufficient to pay the principal of and interest on and any premiums payable on Bonds and any Parity Bonds called for mandatory sinking fund redemption and optional redemption, in such order. Fourth: To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the Reserve Account to the Reserve Requirement. 21 Fifth: To the Administrative Expense Account of the Special Tax Fund the amount of any Administrative Expenses for the current Bond Year in excess of the Administrative Expenses Cap as directed by the City. Sixth: To the Rebate Fund established by the Indenture to the extent directed by the City pursuant to the Indenture. Seventh: To the Surplus Fund established by the Indenture such remaining amounts in the Special Tax Fund after making the foregoing transfers on September 1. Reserve Account of the Special Tax Fund In order to secure further the payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account and thereafter to maintain in the Reserve Account an amount equal to the Reserve Requirement. “Reserve Requirement” is defined in the Indenture to mean, as of any date of calculation, the lesser of: (i) 10% of the initial principal amount of the Bonds and any Parity Bonds; (ii) the Maximum Annual Debt Service on the then Outstanding Bonds and Parity Bonds; or (iii) 125% of average Annual Debt Service on the then Outstanding Bonds and Parity Bonds. Subject to the limits on the maximum annual Special Tax levy set forth in the Rate and Method and in the Indenture, the District has covenanted to levy Special Taxes in an amount sufficient, in light of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Account at the Reserve Requirement. Amounts in the Reserve Account are to be applied: (i) to pay debt service on the Bonds, including Sinking Fund Payments, or any Parity Bonds to the extent that other monies are not available therefor; (ii) to redeem Bonds in accordance with the Indenture and the Rate and Method in the event of prepayment of Special Taxes or to redeem Parity Bonds or in the event of a partial defeasance; and (iii) to the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds or an issue of Parity Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds and Parity Bonds, as applicable, in the final Bond Year for such issue. Parity Bonds for Refunding Purposes Only The District has covenanted not to issue Parity Bonds except as provided in the Indenture and only for the purposes of refunding all or a portion of the Bonds or any Parity Bonds. 22 CALATLANTIC LETTER OF CREDIT AND WOODSIDE CASH DEPOSIT The CalAtlantic Letter of Credit and the Woodside Cash Deposit are not pledged as security for the Bonds, and the District could instruct the Trustee to release the CalAtlantic Letter of Credit and the Woodside Cash Deposit at any time without the consent of the Owners or Beneficial Owners of the Bonds. CalAtlantic Letter of Credit CalAtlantic has committed to provide an irrevocable letter of credit (referred to in this Official Statement as the “CalAtlantic Letter of Credit) to secure payment of Special Taxes levied on the property in Improvement Area EE owned by CalAtlantic. The CalAtlantic Letter of Credit will identify the City as beneficiary and will be held by the Trustee. During each fiscal year in which the CalAtlantic Letter of Credit is in effect, the “Stated Amount” must equal the estimated amount of Special Taxes to be levied on property owned by CalAtlantic or its successors-in-interest (other than individual homeowners) during that fiscal year and the subsequent fiscal year. The initial amount of the CalAtlantic Letter of Credit is $171,354.88, which is equal to two years of the Special Tax levy attributable to parcels owned by CalAtlantic as of the date of issuance of the Bonds. The initial term of the CalAtlantic Letter of Credit is one year from its date of issuance, and CalAtlantic will maintain and cause the issuing bank to annually renew the CalAtlantic Letter of Credit each year prior to its expiration date until CalAtlantic has conveyed 80% or more of the parcels being developed by CalAtlantic in Improvement Area EE. When CalAtlantic has conveyed 80% or more of the residential lots that it is developing within Improvement Area EE, the CalAtlantic Letter of Credit will be released. Notwithstanding the foregoing, the District may release the CalAtlantic Letter of Credit at any time. Woodside Cash Deposit Woodside has committed to deposit $103,482.71 with the Trustee, which is equal to two years of the Special Tax levy attributable to parcels owned by Woodside as of date of issuance of the Bonds. During each fiscal year in which Woodside is obligated to maintain the Woodside Cash Deposit, it must equal the estimated amount of Special Taxes to be levied on property owned by Woodside or its successors-in-interest (other than individual homeowners) during that fiscal year and the subsequent fiscal year. When Woodside has conveyed 80% or more of the residential lots that it is developing within Improvement Area EE, the Woodside Cash Deposit will be released. Notwithstanding the foregoing, the District may release the Woodside Cash Deposit at any time. 23 [INSERT AERIAL PHOTOGRAPH] 24 THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE General Description of the District The District consists of approximately 293 acres of contiguous land located at the east end of Lake Elsinore near the I-15 Freeway. The topography of the District is relatively flat with only gradual sloping down to the south and west. The District is within an area covered by an amended East Lake Specific Plan (the “Specific Plan”) which was originally adopted by the City Council in 1993. The Specific Plan covers a 3,000-acre area that provided for up to 9,000 dwelling units and a combination of commercial, recreational and open space uses. The District comprises 293 of these acres and at build-out, is planned to contain 1,595 single-family detached homes. The District is about 40% built out as of September 1, 2017. Although not part of the District, the Summerly development includes three 1/2-acre neighborhood parks, a larger community park, a community recreation center, open space areas, and a golf course. It is projected that there will be eight phases (each, a “Phase”) with a total of 23 different neighborhoods of homes on lots ranging from 3,525 square feet to 7,200 square feet, with a wide range of home sizes and prices. A map of the District is set forth on the preceding page. Improvement Area EE General. Improvement Area EE includes Neighborhoods 9, 10 and 11 and is part of Phase 4 of the Summerly project. Improvement Area EE consists of a total of 181 single-family lots. Public Infrastructure. All in-tract infrastructure necessary to complete the planned development within Improvement Area EE has been constructed. Utilities. Water and sewer service to the property within Improvement Area EE is currently supplied by the Elsinore Valley Municipal Water District. Electricity is currently supplied by Southern California Edison Company, and telephone services by Southern California Telephone & Energy. Natural Disasters. Although, like all of Southern California, the land within Improvement Area EE is subject to seismic activity, it is not located within an Alquist-Priolo Earthquake Fault Zone. Additionally, per the Federal Emergency Management Agency (“FEMA”) Map Number 06065C2043G Panel 2043 of 3805 dated August 28, 2008, the subject property is located within the special Flood Hazard Area subject to inundation by the one percent annual chance of flood. However, FEMA has issued a Letter of Map Revision based on Fill which removes the subject property from the federal requirement for the lender to require flood insurance. Development of Single-Family Lots. Information about the ownership and planned development of the single-family lots in Improvement Area EE is set forth under the caption “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE.” History of the District and Improvement Area EE The District was formed in 2006 pursuant to the Act. Since then, the District was amended by two sets of change proceedings. 25 Most recently, in 2014, the City completed additional proceedings to amend the District. Pursuant to Resolution No. 2014-10 on February 25, 2014, the City Council, among other things, designated Improvement Area EE, and, pursuant to Resolution No. 2014-011 on February 25, 2014, stated its intention and necessity to incur bonded indebtedness in the amount of not to exceed $7,500,000 for Improvement Area EE for the purpose of financing the purchase, construction, expansion or rehabilitation of certain facilities in Improvement Area EE (the “Facilities”). Subsequent to a noticed public hearing on April 8, 2014, the City Council adopted Resolution No 2014-018 on April 8, 2014, which called an election within Improvement Area EE on the proposition of incurring bonded indebtedness, levying a special tax and setting an appropriations limit On April 8, 2014, an election was held within Improvement Area EE in which the eligible electors within Improvement Area EE approved by more than two-thirds vote the proposition authorizing, among other things, the issuance of bonds in an amount not to exceed $7,500,000, to finance the Facilities. On April 8, 2014, the City Council, acting as the legislative body of the District, introduced Ordinance No. 2014-1325 (the “Ordinance”), which provides for the rate and method of apportionment and levying of the Special Tax (the “Rate and Method”) within Improvement Area EE. The Ordinance was adopted on April 22, 2014. Appraisal Report General. An MAI appraisal of the land and existing improvements within Improvement Area EE was prepared by Kitty Siino & Associates, Inc., Tustin, California (the “Appraiser”). The appraisal is dated October 5, 2017 and is entitled “Appraisal Report Community Facilities District No. 2006-1 Improvement Area “EE” of the City of Lake Elsinore” (the “Appraisal Report”). See “APPENDIX H—APPRAISAL REPORT.” Estimated Market Value. The Appraisal Report provides an estimate of the aggregate market value of the as-is condition of the taxable property within Improvement Area EE as of the date of value, September 1, 2017 (the “Date of Value”). Neighborhood Number of Lots Market Value Augusta Woodside Ownership 38 $5,220,784 Individually-Owned Homes 21 7,742,922 Willows Beazer Ownership 46 6,767,384 Individually-Owned Homes 17 5,752,884 Monarch Grove II CalAtlantic Ownership 59 7,072,000 Total 181 $32,555,974 Method of Valuation. The Appraisal Report utilizes the following methods of valuation of the various properties in Improvement Area EE: Completed-Individually Owned homes: The analysis of the completed- Individually Owned homes is of the aggregate value and on a mass appraisal basis by means of the Sales Comparison Approach. 26 Over 95% Completed-unsold homes: The analysis considers a discount due to the concentrated ownership with the discount reflecting holding/sales costs, finishing costs, risk and profit in order to sell off the homes. Homes under 95% Complete/Finished Lots: The Appraisal values homes that are under construction but are less than 95% complete as of the Date of Value on the basis of a finished lot, rather than attribute value to partially-completed improvements. The analysis of the vacant lots as if in finished condition is based on the Sales Comparison Approach, considering recent sales of residential land or bulk lots from the general area in comparison to the subject property less remaining fees to be paid. See “APPENDIX H—APPRAISAL REPORT.” Updated Ownership Information. Ownership information as of October 6, 2017 is presented elsewhere in this Official Statement. See “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE.” Direct and Overlapping Indebtedness The ability of an owner of land within Improvement Area EE to pay the Special Taxes could be affected by the existence of other taxes and assessments imposed upon the property. Certain of those taxes and assessments relate to direct and overlapping debt which is set forth in Table 2 below (the “Debt Report”). The Debt Report includes the principal amount of the Bonds. The Debt Report has been derived from data assembled and reported to the District by the Special Tax Consultant as of the Date of Value. Neither the District, the City nor the Underwriter has independently verified the information in the Debt Report or guarantees its completeness or accuracy. The Debt Report sets forth those entities which have issued debt and does not include entities which only levy or assess fees, charges, ad valorem taxes or other special taxes. The Debt Report is included for general information purposes only. 27 TABLE 2 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA EE) DIRECT AND OVERLAPPING DEBT(1) I. Appraisal Value(1) $32,555,974 II. Land Secured Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels in CFD 2006- 1 IA EE(4) Amount Applicable CITY OF LAKE ELSINORE CFD 2006-1 IA EE, 2017 SERIES CFD $5,165,000 $5,165,000 100% 181 $5,165,000 TOTAL OUTSTANDING LAND SECURED BONDED DEBT(2)(3) $5,165,000 Authorized but Unissued Direct & Overlapping Indebtedness Type Authorized Unissued % Applicable Parcels in CFD 2006- 1 IA EE(4) Amount Applicable CITY OF LAKE ELSINORE CFD NO. 2006-1 IA EE, 2017 SERIES CFD $7,500,000 $0 100% 181 $0 LAKE ELSINORE USD CFD NO. 2006-2 IA B CFD $16,000,000 $16,000,000 37% 181 $5,920,000 TOTAL UNISSUED LAND SECURED INDEBTEDNESS(2)(3) $5,920,000 TOTAL OUTSTANDING AND UNISSUED LAND SECURED INDEBTEDNESS(2)(3) $11,085,000 III. General Obligation Bond Indebtedness Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels in CFD 2006- 1 IA EE(4) Amount Applicable METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $110,420,000 0.010% 181 $11,143 MT. SAN JACINTO JR COLLEGE DEBT SERVICE GO $70,000,000 $70,000,000 0.012% 181 $8,106 LAKE ELSINORE USD DEBT SERVICE GO $32,415,000 $32,415,000 0.002% 181 $507 TOTAL OUTSTANDING GENERAL OBLIGATION BONDED DEBT(2) $19,756 Authorized but Unissued Overlapping Indebtedness Type Authorized Unissued % Applicable Parcels in CFD 2006- 1 IA EE(4) Amount Applicable METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $0 0.010% 181 $0 MT. SAN JACINTO JR COLLEGE DEBT SERVICE GO $295,000,000 $225,000,000 0.012% 181 $26,054 LAKE ELSINORE USD DEBT SERVICE GO $105,000,000 $72,585,000 0.002% 181 $1,135 TOTAL UNISSUED GENERAL OBLIGATION INDEBTEDNESS(2) $27,189 TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION INDEBTEDNESS $46,945 TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT $5,184,756 TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING INDEBTEDNESS $11,112,189 IV. Ratios to Appraised Valuation Outstanding Land Secured Bonded Debt 6.30:1 Total Outstanding Bonded Debt 6.28:1 (1) Based on Appraisal Report as of the Date of Value. (2) Spicer Consulting Group is not aware of any additional bonded debt for parcels in CFD No. 2006-1 IA EE for the referenced Fiscal Year 2018-19. Issued, Outstanding and Authorized Amounts are for Improvement Area EE. (3) Amount includes $5,165,000 Special Tax Revenue Bonds Series 2017. (4) All parcels have subdivided into 181 individual parcels for Fiscal Year 2018-19 for Improvement Area EE. As of the Date of Value, 122 parcels are Developed Property and 59 parcels are considered as Approved Property per the Rate and Method of Apportionment. Source: Special Tax Consultant. 28 Estimated Appraised Value-To-Lien Ratios The total appraised value of the property within Improvement Area EE is $32,555,974. The estimated appraised value-to-lien ratio for such property based on the appraised values and the principal amount of the Bonds (there is currently no outstanding overlapping land- secured debt) is 6.28:1. Tables 3 and 4 below set forth the estimated appraised value-to-lien ratios for parcels within Improvement Area EE subject to a projected Special Tax levy based upon each parcel’s share of the Maximum Special Tax and overlapping land-secured debt. Table 3 covers all of the parcels of Taxable Property in Improvement Area EE; Table 4 only covers the parcels of Developed Property. Please note that the ownership information presented in the following tables is current as of September 1, 2017; ownership information as of October 6, 2017 is presented elsewhere in this Official Statement. Information is presented based on a hypothetical fiscal year 2018-19 special tax levy assuming no additional homes are conveyed to homebuyers because the City levied special taxes in fiscal year 2017-18 on only a handful of properties in Improvement Area EE and most of the interest on the Bonds is capitalized from proceeds of the Bonds through September 1, 2018. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 29 TABLE 3 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA EE) ESTIMATED APPRAISED VALUE-TO-LIEN RATIOS ALLOCATED BY PROPERTY TYPE Property Classification No. of Parcels Appraised Property Value(4) % of Appraised Value Maximum Tax % of Maximum Tax Estimated FY 2018-19 Levy(5) % of Estimated FY 2018-19 Levy CFD 2006-1 IA EE Proposed 2017 Bonds*(6) Appraised Value- to- Lien Ratio* Developed Property Individual Owned 38 $13,495,806 41.45% $80,485 20.27% $53,193 21.93% $1,132,461 11.92:1 Woodside Owned(1) 25 3,718,374 11.42 55,167 13.90 38,079 15.70 810,683 4.59:1 Beazer Owned(2) 23 4,407,384 13.54 46,196 11.64 29,409 12.12 626,096 7.04:1 CalAtlantic Owned(3) 36 4,315,119 13.25 83,574 21.05 62,332 25.69 1,327,026 3.25:1 Subtotal Developed 122 $25,936,682 79.67% $265,423 66.86% $183,013 75.44% $3,896,266 6.66:1 Approved Property Woodside Owned 13 $1,502,410 4.61% $30,483 7.68% $13,809 5.69% $293,991 5.11:1 Beazer Owned 23 2,360,000 7.25 46,469 11.71 21,051 8.68 448,173 5.27:1 CalAtlantic Owned 23 2,756,881 8.47 54,598 13.75 24,734 10.19 526,570 5.24:1 Subtotal Approved 59 $6,619,292 20.33% $131,550 33.14% $59,594 24.56% $1,268,734 5.22:1 Total 181 $32,555,974 100.00% $396,973 100.00% $242,608 100.00% $5,165,000 6.30:1 * Preliminary; subject to change. (1) Reflects Appraised Value for 17 Homes Under Construction, 3 Model Homes, 1 Home over 95% Complete, and 4 Finished Lots for Woodside Homes which have building permits issued and are thus considered developed per the RMA. (2) Reflects Appraised Value for 6 Homes Under Construction, 3 Model Homes, 9 Homes over 95% Complete, and 5 Finished Lots for Beazer Homes which have building permits issued and are thus considered developed per the RMA. (3) Reflects Appraised Value for 33 Homes Under Construction and 3 Finished Lots for CalAtlantic which have building permits issued and are thus considered developed per the RMA. (4) Reflects the appraised value based on ownership status as of the Date of Value. (5) Estimated Fiscal Year 2018-19 Special Tax Levy based upon development status as of the Date of Value and preliminary debt service with administration of $20,000. (6) Includes the principal amount of the 2017 Series Bonds. Responsibility for the principal amount of the 2017 Series Bonds has been allocated based on the projected Fiscal Year 2018-19 Special Tax levy based on development status in Improvement Area EE as of the Date of Value. Source: Special Tax Consultant. 30 TABLE 4 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA EE) VALUE-TO-LIEN STRATIFICATION Appraised Value-to-Lien Ratio Range No. of Parcels of Developed Property % of Developed Property Appraised Value(1) % of Appraised Value CFD 2006-1 IA EE Estimated FY 2018-19 Levy % Share of Estimated FY 2018-19 Levy CFD 2006-1 IA EE Proposed 2017 Bonds(2)* % Share of Proposed 2017 Bonds* Aggregate Value-to-Lien* Less than 3.00:1(3) 13 10.66% $1,558,237 6.01% $25,894 14.15% $551,263 14.15% 2.83:1 Between 3.01:1 to 6.00:1 55 45.08 6,312,547 24.34 82,192 44.91 1,749,829 44.91 3.61:1 Between 6.01:1 to 9.00:1 0 0.00 0 0.00 0 0.00 0 0.00 N/A Between 9.01:1 to 12.00:1 37 30.33 12,313,014 47.47 53,369 29.16 1,136,203 29.16 10.84:1 Between 12.01:1 to 15.00:1(4) 17 13.93 5,752,884 22.18 21,559 11.78 458,971 11.78 12.53:1 Total 122 100.00% $25,936,682 100.00% $183,013 100.00% $3,896,266 100.00% 6.66:1 * Preliminary; subject to change. (1) Reflects the appraised value for all developed homes as of the Date of Value. (2) Responsibility of the par amount has been allocated based on the estimated FY 2018-19 Special Tax levy, based on development status as of September 1, 2017 and preliminary bond sizing as provided by the Underwriter. (3) The minimum value to lien in the less than 3.00:1 category is 2.82:1. (4) The maximum value to lien in the between 12.01 to 15.00 :1 category is 12.74 :1. Source: Special Tax Consultant. 31 Estimated Tax Burden on Single-Family Home The following table shows a sample property tax bill for a single parcel of Taxable Property in Improvement Area EE, based on the projected fiscal year 2018-19 Special Tax levy and actual tax rates for fiscal year 2017-18 for overlapping Special Taxes and assessments. Information is presented based on the hypothetical fiscal year 2018-19 special tax levy because the City levied special taxes in fiscal year 2017-18 on only a handful of properties in Improvement Area EE and most of the interest on the Bonds is capitalized from proceeds of the Bonds through September 1, 2018. Table 5 Fiscal Year 2018-19 Sample Property Tax Bill Individually Owned(2) TR31920-9 Augusta - Woodside TR31920-10 Willows -Beazer TR31920-11 Monarch II -CalAtlantic Average Parcel Plan Type A-1 A-2 A-3 W-1 W-2 W-3 1 2 3 CFD Tax Category 2,100 to 2,500 to 2,700 to 2,900 to 2,700 to 1,900 to 2,500 to 2,700 to 3,100 to 2,299 S.F. 2,699 S.F. 2,899 S.F. 3,099 S.F. 2,899 S.F. 2,099 S.F. 2,699 S.F. 2,899 S.F. 3,299 S.F. Home Size 2,109 2,182 2,521 2,742 1,552 1,790 1,974 2,558(4) 2,842(4) 3,184(4) Appraisal Value(1) $355,153 $355,666 $373,108 $383,880 $333,680 $340,100 $351,372 $396,235(5) $407,020(5) $417,805(5) $356,137 Ad Valorem Property Taxes: General Purpose $3,552 $3,557 $3,731 $3,839 $3,337 $3,401 $3,514 $3,962 $4,070 $4,178 $3,561 Metro Water West (0.00350%) $12 $12 $13 $13 $12 $12 $12 $14 $14 $15 $12 Mt. San Jacinto Community College (0.01320%) $47 $47 $49 $51 $44 $45 $46 $52 $54 $55 $47 $67 $68 $71 $73 $63 $65 $67 $75 $77 $79 $68 Total General Property Taxes $3,678 $3,684 $3,864 $3,976 $3,456 $3,522 $3,639 $4,104 $4,216 $4,327 $3,689 Assessment, Special Taxes and Parcel Charges: Flood Control Stormwater/Cleanwater/Santa Ana 4 4 4 4 4 4 4 4 4 4 4 CSA #152 Lake Elsinore Stormwater 14 14 14 14 14 14 14 14 14 14 14 City of Lake Elsinore CFD Public Safety 396 396 396 396 396 396 396 396 396 396 396 City of Lake Elsinore Citywide LLMD 25 25 25 25 25 25 25 25 25 25 25 City of Lake Elsinore LLMD No. 1, Zone 11 130 130 130 130 130 130 130 130 130 130 130 Lake Elsinore USD CFD 2006-2 IA B 907 1,097 1,193 1,193 907 907 907 1,193 1,384 1,480 1,117 Northwest Mosquito & Vector Control 8 8 8 8 8 8 8 8 8 8 8 Metro Water District Standby Charge 9 9 9 9 9 9 9 9 9 9 9 Elsinore Valley Muni Water District Standby 10 10 10 10 10 10 10 10 10 10 10 Elsinore Valley Muni Water District Regional Sewer 10 10 10 10 10 10 10 10 10 10 10 Lake Elsinore CFD 2006-1 Services 307 307 307 307 307 307 307 307 307 307 307 Lake Elsinore CFD 2006-1 IA EE Debt (3) 1,406 1,406 1,523 1,640 1,230 1,289 1,347 1,523 1,640 1,992 1,595 Total Assessments & Taxes $3,226 $3,416 $3,629 $3,746 $3,050 $3,109 $3,167 $3,629 $3,938 $4,385 $3,529 Projected Total Property Tax $6,904 $7,100 $7,493 $7,722 $6,506 $6,631 $6,806 $7,733 $8,153 $8,712 $7,218 Projected Effective Tax Rate 1.94% 2.00% 2.01% 2.01% 1.95% 1.95% 1.94% 1.95% 2.00% 2.09% 2.03% (1) Reflects the appraised value based on ownership status as of the Date of Value. (2) TR 31920-9 and TR 31920-10 contain 38 units sold to individual property owners. The average appraised value and square footage for individually owned units is included. (3) Reflects estimated Fiscal Year 2018-19 Special Tax levy based on development as of September 15, 2017 and includes priority Administrative Expenses in the amount of $20,000. (4) Reflects minimum estimated square footage for each plan type. These plans were not valued as part of the appraisal as they were not complete. (5) Reflects estimated asking price of the various plans offered. These plans were not valued as part of the appraisal as they were not complete. Source: Special Tax Consultant. 32 Concentration of Taxpayers Based on the ownership and development status of the taxable property within Improvement Area EE as of the Date of Value (and assuming no further development or sales to individual homeowners including homes currently in escrow), the estimated Special Tax levy required for fiscal year 2018-19 would result in approximately 22.02% of the Special Taxes securing the Bonds being paid by individual homeowners and approximately 21.30%, 20.80% and 35.88% being paid by Woodside, Beazer and CalAtlantic respectively. Until the construction and sale of all homes to individual homeowners, the receipt of the Special Taxes in an amount sufficient to pay debt service on the Bonds is dependent, in part, on the willingness and the ability of Woodside, Beazer and CalAtlantic, or their successors to pay the Special Taxes when due. See the caption “SPECIAL RISK FACTORS—Concentration of Property Ownership” for a description of the risks associated with a concentration of ownership within. Property Tax Delinquencies There are no property tax delinquencies in Improvement Area EE because property taxes were not levied prior to fiscal year 2017-18[Confirm]. CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE The information about the property in Improvement Area EE contained in this section of the Official Statement has been provided by representatives of Woodside, Beazer and CalAtlantic, and others, and has not been independently confirmed or verified by the Underwriter, the City or the District. The Underwriter, the City, and the District make no representation as to the accuracy or adequacy of the information contained in this section. There may be material adverse changes in this information after the date of this Official Statement. Neither the Bonds nor the Net Taxes securing the Bonds, or any bonds issued to refund the foregoing are personal obligations of Woodside, Beazer and CalAtlantic, or any affiliate thereof or any other property owner and, in the event that any property owner defaults in the payment of its Special Taxes, the District may proceed with judicial foreclosure of the delinquent property but has no direct recourse to the assets of any property owner or any affiliate thereof. The Bonds are secured solely by the Net Taxes collected from the annual Special Tax levy and other amounts pledged under the Indenture. See the captions “SOURCES OF PAYMENT FOR THE BONDS” and “SPECIAL RISK FACTORS.” Development by Woodside Woodside. As previously defined in this Official Statement, “Woodside” refers to Woodside 05S, LP, a California limited partnership. Woodside is wholly owned by Woodside Group, LLC, a Nevada limited liability company (“Woodside Group”), directly or through its wholly owned subsidiaries. Woodside is owned 99% directly by Woodside Group, as a limited partner. The remaining 1% interest is owned by WDS GP, Inc., a California corporation, as its general partner, which is wholly owned by Woodside Homes of California, Inc., a California corporation, which in turn is wholly owned by Woodside Group. The parent of Woodside Group is Woodside Homes Company, LLC, a Delaware limited liability company. 33 Woodside Group and its subsidiaries were reorganized effective December 31, 2009, under Chapter 11 of the U.S. Bankruptcy Code, following the bankruptcy petitions that were filed on or about August 20, 2008, in the United States Bankruptcy Court for the Central District of California (Riverside Division). The bankruptcy cases for the reorganized Woodside Group entities were closed in August 2011. As of that date, pre-bankruptcy liability related to these entities had all been resolved, settled, or discharged in the bankruptcy process. Upon emergence from bankruptcy on December 31, 2009, the parent of Woodside Group became PH Holdings, LLC, a Delaware limited liability company, which later changed its name to Woodside Homes Company, LLC. Woodside Group’s subsidiaries engage in the design, construction and sale of single- family homes under the brand name of “Woodside Homes.” Woodside Homes is one of America's top 30 homebuilders having built more than 40,000 homes across the US, with current operations in Arizona, California, Nevada, Texas and Utah. On February 28, 2017, Sekisui House, Ltd. (“Sekisui House”), acquired all of the membership interests in Woodside Homes Company, LLC pursuant to a Merger Agreement, dated February 27, 2017, by and between Sekisui House and Woodside Homes Company, LLC (the “Merger Agreement”). Pursuant to the Merger Agreement, SH Residential Holdings, LLC, a subsidiary of Sekisui House US Holdings, LLC, which is a wholly owned subsidiary of Sekisui House, completed the merger of Crayon Special Vehicle-I, LLC, a wholly owned subsidiary of SH Residential Holdings, LLC and Woodside Homes Company, LLC (the “Merger”), with Woodside Homes Company, LLC being the surviving entity. Immediately following the Merger, Woodside Homes Company, LLC became a wholly owned subsidiary of SH Residential Holdings, LLC. In addition, North America Sekisui House, LLC, a wholly owned subsidiary of Sekisui House, became a wholly owned subsidiary of Sekisui House US Holdings, LLC. General Description of Development. Woodside acquired 59 residential lots within Improvement Area EE from McMillin on January 8, 2016, for $3,234,000. Woodside’s planned development within Improvement Area EE is the construction of 59 single-family detached homes in a neighborhood called “Augusta,” and the sale of such homes to individual homebuyers. A summary of property development and ownership in Augusta as of October 6, 2017, is set forth below: Category Number Completed homes - Conveyed to home buyers 22 Homes over 95% complete- Owned by Woodside 3* Homes under 95% complete - Owned by Woodside 17** Finished lots 17 Total _________________________ 59 *These homes are model homes **13 of these homes are in escrow. Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. As of October 6, 2017, Woodside owned 3 completed model homes, 17 homes under construction (13 of which are in escrow) and 17 finished lots. Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. Woodside expects to complete 34 construction of the [37] remaining homes proposed to be constructed by Woodside within the Augusta neighborhood by the _____ quarter of 20__, and convey all such homes to individual homeowners shortly thereafter. Woodside’s proposed product mix within Improvement Area EE includes three floor plans ranging in size from approximately 2,128 square feet to approximately 2,742 square feet, with estimated base sales prices as of August 11, 2017 ranging from approximately $364,990 to approximately $393,990. Base sales prices exclude options, upgrades, lot premiums and any incentives being offered. There can be no assurance that actual base sales prices of the remaining homes will equal or exceed the base sales prices set forth above. There can be no assurance that Woodside’s development plan described in this Official Statement will be completed or that the development plan will not be modified in the future. Additionally, there can be no assurances of the absorption rate of the homes remaining to be built and sold. In changing market conditions, builders will often revise their product lines and prices and the rate of sales can fluctuate. Woodside continuously evaluates its product lines and prices in light of the then current market conditions. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors. Financing Plan. All infrastructure facilities serving Woodside’s Augusta project in Improvement Area EE have been completed. As of the Date of Value, within the Augusta project, Woodside expects to spend approximately $358,340 in additional site development costs (inclusive of the payment of impact and permit fees totaling approximately $106,970 and site improvement costs totaling approximately $251,370) and approximately $_________ in additional direct home construction costs until full build-out of the homes proposed to be constructed therein (exclusive of internal financing repayment, sales and marketing, corporate overhead and other carrying costs). To date, Woodside has financed its land acquisition costs ($3,234,000) and various site development and home construction costs related to its property in Improvement Area EE through internal funding, including cash generated from its homebuilding operations and advances from affiliates of its ultimate parent, Woodside Homes Company, LLC. Woodside Homes Company, LLC has a $330 million unsecured term loan (the “Woodside Term Loan”). Woodside Homes Company, LLC also has an unsecured revolving credit facility with current borrowing capacity as of June 1, 2017 of $120 million, subject to a borrowing base (the “Woodside Credit Facility”). Woodside intends to use these same sources to finance the remaining site development costs, home construction costs, and carrying costs for its development in Improvement Area EE (including property taxes and the Special Taxes) until full sell-out of its planned single-family detached homes in Improvement Area EE. Although Woodside expects to have sufficient funds available to complete its development activities in Improvement Area EE in accordance with the development schedule described in this Official Statement, there can be no assurance that amounts necessary to finance the remaining site development and home construction costs will be available from Woodside or any other source when needed. While affiliates of Woodside have made such internal financing available in the past, there can be no assurance whatsoever of their willingness or ability to do so in the future. Neither Woodside nor any of its affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. 35 If and to the extent that internal funding, including but not limited to home sales revenues, and borrowings under the Revolving Facility are inadequate to pay the costs to complete the planned development by Woodside within Improvement Area EE and other financing by Woodside is not put into place, there could be a shortfall in the funds required to complete the proposed development by Woodside in Improvement Area EE or to pay ad valorem property taxes or Special Taxes related to Woodside’s property in Improvement Area EE and portions of the project may not be developed. Many factors beyond Woodside’s control, or a decision by Woodside to alter its current plans, may cause the actual sources and uses to differ from the projections. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors. [Woodside is current on its payment of ad valorem property taxes and the Special Taxes for the property that it owns in Improvement Area EE.][CONFIRM] Based on the ownership information and development status as of the Date of Value within Improvement Area EE, the Special Tax Consultant reports that Woodside would be responsible for approximately 21.30% of the projected fiscal year 2018-19 levy of Special Taxes within Improvement Area EE. History of Woodside’s Property Tax Payments; Loan Defaults; Litigation; Bankruptcy. In connection with the issuance of the Bonds, an officer or authorized representative of Woodside will execute a certificate on behalf of such entity containing the following representations, among others (capitalized terms used in the following summary but not previously defined have the meanings given them below): 1. Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of Woodside or its Affiliates (defined below), that are secured by an interest in the Property (defined below). Neither Woodside nor, to the Actual Knowledge of Woodside (defined below), any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect Woodside’s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property prior to delinquency [or to perform its obligations under its Developer Continuing Disclosure Certificate]. 2. Except as described in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, or public board or body is pending against Woodside (with proper service of process to Woodside having been accomplished) or, to the Actual Knowledge of Woodside, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of Woodside is threatened in writing against Woodside or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Account of the Special Tax Fund established under the Indenture), (b) [to restrain or enjoin the execution by Woodside of its Developer Continuing Disclosure Certificate and performance by Woodside of its obligations thereunder, (c)] to restrain or enjoin the development of the Property as described in this Official Statement, (d) in any way contesting or affecting the validity of the Special Taxes, or (e) which is reasonably likely to materially and adversely affect Woodside’s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property. 36 3. As a subsidiary of a large, nation-wide developer of residential projects, Woodside cannot represent with assurance that neither it nor any Affiliate has ever been delinquent in the payment of ad valorem property taxes, special takes or special assessments or special taxes. However, to the Actual Knowledge of Woodside, during the last five years, neither Woodside nor any Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced against the delinquent Woodside or Affiliate. 4. To the Actual Knowledge of Woodside, Woodside is able to pay its bills as they become due and no legal proceedings are pending against Woodside (with proper service of process having been accomplished) or, to the Actual Knowledge of Woodside, threatened in writing in which Woodside may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 5. To the Actual Knowledge of Woodside, Affiliates of Woodside are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of Woodside (with proper service of process having been accomplished) or to the Actual Knowledge of Woodside, threatened in writing in which the Affiliates of Woodside may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. As used in the above representations of Woodside, the following defined terms and phrases have the following meanings: “Actual Knowledge of Woodside” shall mean the knowledge that the authorized officer or representative of Woodside (the “Authorized Officer”) signing the certificate containing the above representations (the “Woodside Letter of Representations”) currently has as of the date of the Woodside Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of Woodside and its Affiliates as such Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Woodside Letter of Representations, and/or (ii) review of documents that were reasonably available to such Authorized Officer and which such Authorized Officer has reasonably deemed necessary for such Authorized Officer to obtain knowledge of the matters set forth in the Woodside Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of Woodside’s current business and operations. “Affiliate” means, with respect to Woodside, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with Woodside, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of Improvement Area EE and investment decision regarding the Bonds (i.e., information relevant to (a) Woodside’s development plans with respect to the Property and ability to pay its Special 37 Taxes on the Property prior to delinquency, or (b) such Person’s assets or funds that would materially affect Woodside’s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the Property [or (c) such Person’s compliance with continuing disclosure undertakings under Rule 15c2-12 that would materially affect Woodside’s ability to comply with its obligations under its Developer Continuing Disclosure Certificate]. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. “Control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. “Property” means the property within Improvement Area EE held in the name of Woodside. Development by Beazer Beazer. As previously defined in this Official Statement, “Beazer” refers to Beazer Homes Holdings, LLC, a Delaware limited liability company. Beazer is a wholly owned subsidiary of Beazer Homes USA, Inc., a Delaware corporation (“Beazer USA”), a publicly traded company listed on the New York Stock Exchange under the symbol “BZH.” Founded in 1985, Beazer USA is a geographically diversified homebuilder with active operations in 13 states within three geographic regions in the United States: the West, East, and Southeast. Beazer USA is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of Beazer USA and its subsidiaries (e.g. See Beazer USA’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016, as filed with the SEC on November 15, 2016 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, as filed with the SEC on August 1, 2017) as of the dates described therein. Such files can also be accessed over the Internet at the SEC’s website at www.sec.gov. Copies of Beazer USA’s Annual Report and related financial statements, prepared in accordance with generally accepted accounting standards, are available from Beazer USA’s website at www.beazer.com. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including Beazer USA. The address of such Internet web site is www.sec.gov. All documents subsequently filed by Beazer USA pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of Beazer USA’s annual report, quarterly reports and current reports, including any amendments, will be available from Beazer USA’s website at www.beazer.com. These Internet addresses are included for reference only, and the information on these Internet sites is not a part of this Official Statement and is not incorporated by reference into this Official Statement. No representation is made in this Official Statement as to the accuracy or adequacy of the information contained on these Internet sites. 38 General Description of Development. Beazer acquired 63 residential lots within Improvement Area EE from McMillin on July 27, 2016 for $3,300,000. Beazer’s planned development within Improvement Area EE is the construction of 63 single-family detached homes in a neighborhood called “Willows” and the sale of such homes to individual homebuyers. A summary of property development and ownership in Willows as of October 6, 2017, is set forth below: Category Number Completed homes - Conveyed to home buyers 26 Homes over 95% complete- Owned by Beazer 3* Homes under 95% complete - Owned by Beazer 6** Finished lots 28*** Total 63 ______________________________________ *These homes are model homes. **5 of these homes are in escrow. Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. ***3 of these finished lots are in escrow. Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. As of October 6, 2017, Beazer owned 3 model homes, 6 homes under construction (5 of which are in escrow) and 28 finished lots (3 of which are in escrow). Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. Beazer expects to complete construction of the [37] remaining homes proposed to be constructed by Beazer within the Willows neighborhood by August 2018 and convey all such homes to individual homeowners shortly thereafter. Beazer’s proposed product mix within Improvement Area EE includes 3 floor plans ranging in size from approximately 1,552 square feet to approximately 1,974 square feet, with estimated base sales prices as of August 30, 2017 ranging from approximately $347,990 to approximately $364,990. Base sales prices exclude options, upgrades, lot premiums and any incentives being offered. There can be no assurance that actual base sales prices of the remaining homes will equal or exceed the base sales prices set forth above. There can be no assurance that Beazer’s development plan described in this Official Statement will be completed or that the development plan will not be modified in the future. Additionally, there can be no assurances of the absorption rate of the homes remaining to be built and sold. In changing market conditions, builders will often revise the product lines and prices and the rate of sales can fluctuate. Beazer will continuously evaluate its product lines and prices in light of the then current market conditions. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors. Financing Plan. All infrastructure facilities serving the Willows project in Improvement Area EE have been completed. As of the Date of Value, within the Willows project, Beazer expects to spend approximately $800,000 in additional site development costs (inclusive of the payment of impact and permit fees totaling approximately $_____ and site improvement costs totaling approximately $________) and approximately $2,200,000 in additional direct home construction costs until full build-out of the homes proposed to be constructed therein marketing 39 and sales costs (exclusive of internal financing repayment, sales and marketing, corporate overhead and other carrying costs). To date, Beazer has financed its land acquisition costs ($3,300,000) and various site development costs and home construction costs related to its property in Improvement Area EE through internally generated funds, which may include cash from operations, proceeds from notes and other bank borrowings, including borrowings under the credit facility described below, as well as issuance of equity securities. Beazer expects to use these sources of funds to complete development of its property within Improvement Area EE. Beazer believes that it will have sufficient funds available to complete the proposed development of its property as described in this Official Statement commensurate with the development timing described in this Official Statement. As of June 30, 2017, Beazer USA was a party to a $180 million secured revolving credit facility that provides for working capital and letter of credit capacity (the “Credit Facility”). The Credit Facility is with three lenders and matures on February 15, 2019. Subject to Beazer USA’s option to cash collateralize its obligations under the Credit Facility upon certain conditions, Beazer USA’s obligations under the Credit Facility are secured by liens on substantially all of its personal property and a significant portion of its owned real properties. Although the Credit Facility is not currently secured by the property owned by Beazer within Improvement Area EE [CONFIRM], such property may be pledged as security under the Credit Facility in the near future. The Credit Facility contains certain covenants, including negative covenants and financial maintenance covenants, with which Beazer USA is required to comply and which may limit the amount Beazer USA may borrow or have outstanding at any time. As of June 30, 2017, Beazer USA was in compliance with all such covenants and had $140.1 million of available borrowings under the Credit Facility. [CORPORATE TO REVIEW AND REVISE AS NECESSARY: Beazer USA has elected to cash collateralize all letters of credit; however, as of June 30, 2017, Beazer USA has also pledged approximately $______ of inventory assets to the Credit Facility to collateralize potential future borrowings or letters of credit.] There were no borrowings under the Credit Facility as of June 30, 2017 or its prior fiscal year ended September 30, 2016. Beazer USA’s ability to renew the Credit Facility in the future is dependent upon a number of factors including the state of the commercial lending environment, the willingness of banks to lend to homebuilders and Beazer USA’s financial condition and strength. Notwithstanding the current belief of Beazer that it will have sufficient funds to complete its planned development in Improvement Area EE, no assurance can be given that sources of financing available to Beazer will be sufficient to complete the property development and home construction as currently anticipated. While Beazer has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neither Beazer, Beazer USA, nor any of their affiliates has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of Beazer to provide internal financing in the past, Beazer has not represented in any way that it will do so in the future. If and to the extent that internal financing or sales revenues are inadequate to pay the costs to complete Beazer’s planned development within Improvement Area EE and other financing by Beazer or its affiliates is not put into place, there could be a shortfall in the funds required to complete the remaining development by Beazer or to pay ad valorem property taxes or Special Taxes related to Beazer’s property in Improvement Area EE and portions of the project may not be developed. Many factors beyond Beazer’s control, or a decision by Beazer 40 to alter its current plans, may cause the actual sources and uses to differ from the projections. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors. [Beazer is current on its payment of ad valorem property taxes and the Special Taxes for the property that it owns in Improvement Area EE][Confirm]. Based on the ownership information and development status as of the Date of Value within Improvement Area EE, the Special Tax Consultant reports that Beazer would be responsible for approximately 20.80% of the projected fiscal year 2018-19 levy of Special Taxes within Improvement Area EE. History of Beazer’s Property Tax Payments; Loan Defaults; Litigation; Bankruptcy. In connection with the issuance of the Bonds, an officer or authorized representative of Woodside will execute a certificate on behalf of such entity containing the following representations, among others (capitalized terms used in the following summary but not previously defined have the meanings given them below): 1. Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of Beazer or its Affiliates (defined below), that are secured by an interest in the Property (defined below). Neither Beazer nor, to the Actual Knowledge of Beazer (defined below), any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect Beazer’s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property prior to delinquency [or to perform its obligations under its Developer Continuing Disclosure Certificate]. 2. Except as described in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, or public board or body is pending against Beazer (with proper service of process to Beazer having been accomplished) or, to the Actual Knowledge of Beazer, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of Beazer is threatened in writing against Beazer or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Account of the Special Tax Fund established under the Indenture), (b) [to restrain or enjoin the execution by Beazer of its Developer Continuing Disclosure Certificate and performance by Beazer of its obligations thereunder, (c)] to restrain or enjoin the development of the Property as described in this Official Statement, (d) in any way contesting or affecting the validity of the Special Taxes, or (e) which is reasonably likely to materially and adversely affect Beazer’s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property. 3. To the Actual Knowledge of Beazer, during the last five years, neither Beazer nor any Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities district financing or (b) resulted in a foreclosure action being commenced, against the delinquent Beazer or Affiliate. 41 4. As a subsidiary of a large, nation-wide developer of residential projects, Beazer cannot represent with assurance that neither it nor any Affiliate has ever been delinquent in the payment of ad valorem property taxes, special taxes or special assessments. However, to the Actual Knowledge of Beazer, Beazer is able to pay its bills as they become due and no legal proceedings are pending against Beazer (with proper service of process having been accomplished) or, to the Actual Knowledge of Beazer, threatened in writing in which Beazer may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 5. To the Actual Knowledge of Beazer, Affiliates of Beazer are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of Beazer (with proper service of process having been accomplished) or to the Actual Knowledge of Beazer, threatened in writing in which the Affiliates of Beazer may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. As used in the above representations of Beazer, the following defined terms and phrases have the following meanings: “Actual Knowledge of Beazer” shall mean the knowledge that the authorized officer or representative of Beazer (the “Authorized Officer”) signing the certificate containing the above representations (the “Beazer Letter of Representations”) currently has as of the date of the Beazer Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of Beazer and its Affiliates as such Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Beazer Letter of Representations, and/or (ii) review of documents that were reasonably available to such Authorized Officer and which such Authorized Officer has reasonably deemed necessary for such Authorized Officer to obtain knowledge of the matters set forth in the Beazer Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of Beazer’s current business and operations. “Affiliate” means, with respect to Beazer, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with Beazer, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of Improvement Area EE and investment decision regarding the Bonds (i.e., information relevant to (a) Beazer’s development plans with respect to the Property and ability to pay its Special Taxes on the Property prior to delinquency, or (b) such Person’s assets or funds that would materially affect Beazer’s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the Property [or (c) such Person’s compliance with continuing disclosure undertakings under Rule 15c2-12 that would materially affect Beazer’s ability to comply with its obligations under its Developer Continuing Disclosure Certificate]. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. 42 “Control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. “Actual Knowledge of Beazer” means the knowledge that the authorized officer or representative of Beazer (the “Authorized Officer”) signing the certificate containing the above representations (the “Beazer Letter of Representations”) currently has as of the date of the Beazer Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of Beazer and its Affiliates as such Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the Beazer Letter of Representations, and/or (ii) review of documents that were reasonably available to such Authorized Officer and which such Authorized Officer has reasonably deemed necessary for such Authorized Officer to obtain knowledge of the matters set forth in the Beazer Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of Beazer’s current business and operations. Individuals who are no longer employees of Beazer and its Affiliates have not been contacted. “Property” means the property within Improvement Area EE held in the name of Beazer. Development by CalAtlantic CalAtlantic. As previously defined in this Official Statement, “CalAtlantic” refers to CalAtlantic Group, Inc., a Delaware Corporation, which is a homebuilder incorporated in Delaware in 1991 with principal executive offices located in Irvine, California. CalAtlantic is a publicly traded company with its stock listed on the New York Stock Exchange under the symbol “CAA.” The development of the Monarch Grove II project within Improvement Area EE is currently being undertaken by the Inland Empire Division of CalAtlantic. CalAtlantic is subject to the informational requirements of the Exchange Act, and in accordance therewith is obligated to file reports, proxy statements, and other information, including financial statements, with the SEC. Such filings, including CalAtlantic’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC on February 28, 2017 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, as filed with the SEC on October __, 2017, set forth certain data relative to the consolidated results of operations and financial position of CalAtlantic and its subsidiaries as of such dates. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including CalAtlantic. The address of such Internet web site is www.sec.gov. All documents subsequently filed by CalAtlantic pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes. Copies of CalAtlantic’s annual report, quarterly reports and current reports, including any amendments, are also available from CalAtlantic’s website at www.calatlantichomes.com. The foregoing Internet addresses and references to filings with the SEC are included for reference only, and the information on such Internet sites and on file with the SEC are not a part of this Official Statement and are not incorporated by reference into this Official Statement. No 43 representation is made in this Official Statement as to the accuracy or adequacy of the information contained on such internet sites. General Description of Development. CalAtlantic acquired 59 residential lots within Improvement Area EE from McMillin on September 2, 2016 for $3,000,000. CalAtlantic’s planned development within Improvement Area EE is the construction of 59 single family detached homes in a neighborhood called “Monarch Grove II,” and the sale of such homes to individual homebuyers. A summary of property development and ownership in Monarch Grove II as of October 6, 2017, is set forth below: Category Number Homes under 95% complete - Owned by CalAtlantic 33* Finished lots 26 Total 59 _________________________ *25 of these homes are in escrow. Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. As of October 6, 2017, CalAtlantic had not conveyed any of the 59 proposed homes within the Monarch Grove II neighborhood to individual homeowners. However, of the 33 homes under construction as of the Date of value, 25 were in escrow, with the first home closings expected to occur in October 2017. Homes in escrow may not result in closed escrows as sales contracts are subject to cancellation. CalAtlantic expects to complete construction of the 59 homes proposed to be constructed by CalAtlantic within the Monarch Grove II neighborhood by the ______ quarter of 20__, and convey all such homes to individual homeowners shortly thereafter. CalAtlantic’s proposed product mix within Improvement Area EE includes three floor plans ranging in size from approximately 2,558 square feet to approximately 3,402 square feet, with estimated base sales prices as of September 1, 2017 ranging from approximately $396,235 to approximately $417,805. Base sales prices exclude options, upgrades, lot premiums and any incentives being offered. There can be no assurance that actual base sales prices of the homes will equal or exceed the base sales prices set forth above. There can be no assurance that CalAtlantic’s development plan described in this Official Statement will be completed or that the development plan will not be modified in the future. Additionally, there can be no assurances of the absorption rate of the homes to be built and sold. In changing market conditions, builders will often revise their product lines and prices and the rate of sales can fluctuate. CalAtlantic continuously evaluates its product lines and prices in light of the then current market conditions. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors. Financing Plan. All infrastructure facilities serving CalAtlantic’s Monarch Grove II project in Improvement Area EE have been completed. As of the Date of Value, within the Monarch Grove II project, CalAtlantic expects to spend approximately $480,000 in additional site development costs (inclusive of the payment of impact and permit fees totaling approximately $_____ and site improvement costs totaling approximately $________) and approximately $_________ in additional direct home construction costs until full build-out of the 44 homes proposed to be constructed therein (exclusive of internal financing repayment, sales and marketing, corporate overhead and other carrying costs). To date, CalAtlantic has financed its land acquisition costs ($3,000,000) and various site development and home construction costs related to its property in Improvement Area EE through internally generated funds. CalAtlantic expects to use home sales, internal funding and funding under CalAtlantic’s revolving credit facility (described below) to complete its development activities in Improvement Area EE. However, home sales revenue from CalAtlantic’s project in Improvement Area EE will not be segregated and set aside for the payment of costs required to complete its activities in Improvement Area EE. Home sales revenue from all projects is accumulated and used to pay costs of operations for CalAtlantic and its subsidiaries, to pay debt service on outstanding debt and for other corporate purposes, and may be diverted to pay costs other than the costs of completing CalAtlantic’s activities in Improvement Area EE at the discretion of CalAtlantic’s management. Notwithstanding the foregoing, CalAtlantic believes that it will have sufficient funds available to complete its proposed development activities in Improvement Area EE, commensurate with the development timing described in this Official Statement. As of June 30, 2017, CalAtlantic was party to a $750 million unsecured revolving credit facility (the “Revolving Facility”), which matures in October 2019. The Revolving Facility is not secured by CalAtlantic’s property in Improvement Area EE. The Revolving Facility has an accordion feature under which the aggregate commitment may be increased up to $1.2 billion, subject to the availability of additional bank commitments and certain other conditions. The Revolving Facility contains certain covenants and conditions that may limit the amount that CalAtlantic may borrow or have outstanding at any time. As of June 30, 2017, CalAtlantic had no amounts outstanding under the Revolving Facility and had outstanding letters of credit issued under the Revolving Facility totaling $94.7 million, leaving $655.3 million available under the Revolving Facility to be drawn as of such date. CalAtlantic’s ability to renew the Revolving Facility in the future is dependent upon a number of factors including the state of the commercial lending environment, the willingness of banks to lend to homebuilders and CalAtlantic’s financial condition and strength. Although CalAtlantic expects to have sufficient funds available to complete its development activities in Improvement Area EE in accordance with the development timing described in this Official Statement, there can be no assurance, however, that amounts necessary to finance the remaining development and home construction costs will be available from CalAtlantic or any other source when needed. For example, borrowings under the Revolving Facility may not be available, and home sales revenue, which is accumulated daily for use in operations by CalAtlantic, including to fund costs of other direct and indirect subsidiaries, to pay debt service on outstanding debt and for other corporate purposes, may be diverted to pay costs other than the costs of completing CalAtlantic’s activities in Improvement Area EE at the discretion of CalAtlantic’s management. CalAtlantic, its lenders, or any of their related entities are not under any legal obligation of any kind to expend funds for the development of and construction of homes on CalAtlantic’s property in Improvement Area EE. Any contributions by CalAtlantic to fund the costs of such development and home construction are entirely voluntary. If and to the extent that internal funding, including but not limited to home sales revenues, and borrowings under the Revolving Facility are inadequate to pay the costs to complete the planned development by CalAtlantic within Improvement Area EE and other financing by CalAtlantic is not put into place, there could be a shortfall in the funds required to 45 complete the proposed development by CalAtlantic in Improvement Area EE and the remaining portions of the development may not be developed. CalAtlantic is current on its payment of ad valorem property taxes and the Special Taxes for the property that it owns in Improvement Area EE. Based on the ownership information and development status as of the Date of Value within Improvement Area EE, the Special Tax Consultant reports that CalAtlantic would be responsible for approximately 35.88% of the projected fiscal year 2018-19 levy of Special Taxes within Improvement Area EE. History of CalAtlantic’s Property Tax Payments; Loan Defaults; Litigation; Bankruptcy. In connection with the issuance of the Bonds, an officer or authorized representative of CalAtlantic will execute a certificate on behalf of such entity containing the following representations, among others (capitalized terms used in the following summary but not previously defined have the meanings given them below): 1. Except as described in this Official Statement, there are no material loans outstanding and unpaid and no material lines of credit of CalAtlantic or its Affiliates (defined below), that are secured by an interest in the Property (defined below). Neither CalAtlantic nor, to the Actual Knowledge of CalAtlantic (defined below), any of its Affiliates is currently in material default on any loans, lines of credit or other obligation related to the development of the Property or any other project which default is reasonably likely to materially and adversely affect CalAtlantic’s ability to develop the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property prior to delinquency or to perform its obligations under its Developer Continuing Disclosure Certificate. 2. Except as described in this Official Statement, no action, suit, proceeding, inquiry or investigation at law or in equity, before or by any court, regulatory agency, or public board or body is pending against CalAtlantic (with proper service of process to CalAtlantic having been accomplished) or, to the Actual Knowledge of CalAtlantic, is pending against any current Affiliate (with proper service of process to such Affiliate having been accomplished) or to the Actual Knowledge of CalAtlantic is threatened in writing against CalAtlantic or any such Affiliate (a) to restrain or enjoin the collection of Special Taxes or other sums pledged or to be pledged to pay the principal of and interest on the Bonds (e.g., the Reserve Account of the Special Tax Fund established under the Indenture), (b) to restrain or enjoin the execution by CalAtlantic of its Developer Continuing Disclosure Certificate and performance by CalAtlantic of its obligations thereunder, (c) to restrain or enjoin the development of the Property as described in this Official Statement, (d) in any way contesting or affecting the validity of the Special Taxes, or (e) which is reasonably likely to materially and adversely affect CalAtlantic’s ability to complete the development and sale of the Property as described in this Official Statement or to pay the Special Taxes due with respect to the Property. 3. As a large, nation-wide developer of residential projects, CalAtlantic cannot represent with assurance that neither it nor any Affiliate has ever been delinquent in the payment of ad valorem property taxes, special taxes or special assessments. However, to the Actual Knowledge of CalAtlantic, during the last five years, neither CalAtlantic nor any Affiliate has, during the period of its ownership, been delinquent to any material extent in the payment of any ad valorem property tax, special assessment or special tax on property included within the boundaries of a community facilities district or an assessment district in California that (a) caused a draw on a reserve fund relating to such assessment district or community facilities 46 district financing or (b) resulted in a foreclosure action being commenced, against the delinquent CalAtlantic or Affiliate. 4. To the Actual Knowledge of CalAtlantic, CalAtlantic is able to pay its bills as they become due and no legal proceedings are pending against CalAtlantic (with proper service of process having been accomplished) or, to the Actual Knowledge of CalAtlantic, threatened in writing in which CalAtlantic may be adjudicated as bankrupt or discharged from any and all of its debts or obligations, or granted an extension of time to pay its debts or obligations, or be allowed to reorganize or readjust its debts, or be subject to control or supervision of the Federal Deposit Insurance Corporation. 5. To the Actual Knowledge of CalAtlantic, Affiliates of CalAtlantic are able to pay their bills as they become due and no legal proceedings are pending against any Affiliate of CalAtlantic (with proper service of process having been accomplished) or to the Actual Knowledge of CalAtlantic, threatened in writing in which the Affiliates of CalAtlantic may be adjudicated as bankrupt or discharged from any or all of their debts or obligations, or granted an extension of time to pay their debt or obligations, or be allowed to reorganize or readjust their debts or obligations, or be subject to control or supervision of the Federal Deposit Insurance Corporation. As used in the above representations of CalAtlantic, the following defined terms and phrases have the following meanings: “Actual Knowledge of CalAtlantic” shall mean the knowledge that the authorized officer or representative of CalAtlantic (the “Authorized Officer”) signing the certificate containing the above representations (the “CalAtlantic Letter of Representations”) currently has as of the date of the CalAtlantic Letter of Representations or has obtained through (i) interviews with such current officers and responsible employees of CalAtlantic and its Affiliates as such Authorized Officer has determined are reasonably likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in the CalAtlantic Letter of Representations, and/or (ii) review of documents that were reasonably available to such Authorized Officer and which such Authorized Officer has reasonably deemed necessary for such Authorized Officer to obtain knowledge of the matters set forth in the CalAtlantic Letter of Representations. The Authorized Officer has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of CalAtlantic’s current business and operations. CalAtlantic notes that it underwent a restructuring in 2011, which included new personnel, office closures and employee layoffs at all levels of management and staff. Individuals who are no longer employees of CalAtlantic have not been contacted. CalAtlantic further notes that on October 1, 2015, it completed a merger with The Ryland Group, Inc., a Maryland corporation (“Ryland Group”), pursuant to which Ryland Group merged with and into CalAtlantic, with CalAtlantic being the surviving entity. Individuals who were employees and officers of Ryland Group and its subsidiaries prior to the merger have not been consulted or contacted (and are not expected to be responsible for CalAtlantic’s development of the Property or payment of its Special Taxes) and documents entered into by Ryland and its subsidiaries or related to their properties and projects have not been reviewed. “Affiliate” means, with respect to CalAtlantic, any other Person (i) who directly, or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with CalAtlantic, and (ii) for whom information, including financial information or operating data, concerning such Person is material to potential investors in their evaluation of 47 Improvement Area EE and investment decision regarding the Bonds (i.e., information relevant to (a) CalAtlantic’s development plans with respect to the Property and ability to pay its Special Taxes on the Property prior to delinquency, or (b) such Person’s assets or funds that would materially affect CalAtlantic’s ability to develop the Property as described in this Official Statement or to pay its Special Taxes on the Property or (c) such Person’s compliance with continuing disclosure undertakings under Rule 15c2-12 that would materially affect CalAtlantic’s ability to comply with its obligations under its Developer Continuing Disclosure Certificate. For purposes hereof, Affiliates shall exclude MP CA Homes, LLC and its Affiliates (other than CalAtlantic and its direct or indirect subsidiaries). “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. “Control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. “Property” means the property within Improvement Area EE held in the name of CalAtlantic. 48 SPECIAL RISK FACTORS The purchase of the Bonds involves significant risks and, therefore, the Bonds are not suitable investments for many investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth in this Official Statement, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. The occurrence of one or more of the events discussed in this Official Statement could adversely affect the ability or willingness of property owners in Improvement Area EE to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events discussed in this Official Statement could adversely affect the value of the property in Improvement Area EE. See the caption “— Appraised Value.” Risks of Real Estate Secured Investments Generally 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 the vicinity of the District, the supply of or demand for competitive properties in such area and the market value of property 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; and (iii) natural disasters (including, without limitation, wildfire, earthquakes and floods), which may result in uninsured losses. See the caption “—Natural Disasters.” No assurance can be given that the individual landowners will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption “— Bankruptcy and Foreclosure” for a discussion of certain limitations on the District’s ability to pursue judicial proceedings with respect to delinquent parcels. Limited Obligations The Bonds and interest thereon are not payable from the general funds of the City. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City’s or the District’s property or upon any of the City’s or the District’s income, receipts or revenues, except the Net Taxes and other amounts pledged under the Indenture. The District’s legal obligations with respect to any delinquent Special Taxes are limited to: (i) payments from the Reserve Account to the extent of funds on deposit therein; and (ii) the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See the caption “SOURCES OF PAYMENT 49 FOR THE BONDS—Special Taxes—Proceeds of Foreclosure Sales.” The Bonds cannot be accelerated in the event of any default. The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. See the caption “—Payment of the Special Tax is Not a Personal Obligation of the Landowners.” Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the Superior Court of California, County of Riverside. There is no assurance that any current or subsequent owner of a parcel subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so. Failure by owners of the parcels to pay Special Tax installments when due, delay in foreclosure proceedings, or the inability of the District to sell parcels that 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 Bonds, which may in turn result in the depletion of the Reserve Account. See the caption “—Bankruptcy and Foreclosure.” Insufficiency of Special Taxes The Rate and Method governing the levy of the Special Tax provides that Property Owner Association Property and/or Public Property are not subject to the Special Tax. The Rate and Method also provides for prepayment of Special Taxes. The Act provides that, if any property within Improvement Area EE 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 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 to be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts. Due to problems of collecting taxes from public agencies, if a substantial portion of land within Improvement Area EE were to become owned by public agencies, collection of the Special Tax might become more difficult and could result in collections of the Special Tax which might not be sufficient to pay principal of and interest on the Bonds when due, and a default could occur with respect to the payment of such principal and interest. In the event of significant delinquencies causing a default in payment of debt service on the Bonds and depletion of all amounts on deposit in the Reserve Account, there would not be sufficient Special Taxes to pay the full amount of annual debt service on the Bonds until the delinquent Special Taxes were collected through foreclosure action or otherwise. See the caption “—Bankruptcy and Foreclosure” for a discussion of potential delays in foreclosure actions. Natural Disasters The land within Improvement Area EE, like all California communities, may be subject to unpredictable seismic activity, fires, floods or other natural disasters. The occurrence of one of the foregoing natural disasters in Improvement Area EE could result in substantial damage to properties in Improvement Area EE, which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their Special 50 Taxes. Any major damage to structures as a result of natural disasters could result in a greater reliance on undeveloped property in the payment of Special Taxes. See “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE - Improvement Area EE - Natural Disasters” for a discussion of specific natural disaster risks. Concentration of Property Ownership Based on the ownership and development status of the taxable property within Improvement Area EE as of the Date of Value (and assuming no further development or sales to individual homeowners including the homes currently in escrow), the estimated Special Tax levy required for fiscal year 2018-19 would result in approximately 22.02% of the Special Taxes securing the Bonds being paid by individual homeowners and approximately 21.30%, 20.80% and 35.88% being paid by Beazer, Woodside, and CalAtlantic, respectively. Until the construction and sale of all homes to individual homeowners, the receipt of the Special Taxes in an amount sufficient to pay debt service on the Bonds is dependent, in part, on the willingness and the ability of Beazer, Woodside, and CalAtlantic, or their successors to pay the Special Taxes when due. Failure of Beazer, Woodside, CalAtlantic or their successors to pay the annual Special Taxes prior to delinquency could be a material factor in a default in payments of the principal of, and interest on, the Bonds, when due. See the caption “—Failure to Develop Remaining Homes.” No assurance can be given that Beazer, Woodside, CalAtlantic, or their successors will complete the remaining construction and development in Improvement Area EE in the timeframe or for estimated costs predicted in this Official Statement or that they will complete it at all. See the caption “—Failure to Develop Remaining Homes.” No assurance can be given that the individual homeowners, Beazer, Woodside, and CalAtlantic or their successors will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption “—Bankruptcy and Foreclosure” for a discussion of certain limitations on the District’s ability to pursue judicial proceedings with respect to delinquent parcels. Failure to Develop Remaining Homes Development of property within Improvement Area EE may be subject to unexpected delays, disruptions and changes which may affect the willingness and ability of Beazer, Woodside, CalAtlantic, or any property owner to pay the Special Taxes when due. See the caption “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE” for a discussion of the remaining homes to be completed and sold within Improvement Area EE. No assurance can be given that the remaining proposed residential development will be partially or fully completed, and for purposes of evaluating the investment quality of the Bonds, prospective purchasers should consider the possibility that such parcels will remain vacant and only partially improved. See the caption “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE.” There can be no assurance that property development within Improvement Area EE will not be adversely affected by a future deterioration of the real estate market and economic conditions or future local, State and federal governmental policies relating to real estate development, an increase in mortgage interest rates, the income tax treatment of real property 51 ownership, or the national economy. In that event, there could be a default in the payment of principal of, and interest on, the Bonds, when due. Hazardous Substances The presence of hazardous substances on a parcel may result in a significant reduction in the value of a parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but State laws with regard to hazardous substances are also stringent and similar in effect. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The Appraiser, in its Appraisal Report, assumes that there are no hazardous substances in Improvement Area EE. The District has not independently verified, but is not aware of, the presence of any hazardous substances within Improvement Area EE. Hazardous substance liabilities may arise in the future with respect to any of the parcels within Improvement Area EE resulting from the existence, currently, of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Additionally, such liabilities may arise from the method of handling such substance. These possibilities could significantly affect the value of a parcel and could result in substantial delays in completing planned development on parcels that are currently undeveloped. Payment of the Special Tax is not a Personal Obligation of the Landowners 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 value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully the Special Tax, the District has no recourse against the owner and its only remedy is to pursue judicial foreclosure on the delinquent parcel. Appraised Value The Appraisal Report estimates the market value of the taxable property within Improvement Area EE. This market value is merely the present opinion of the Appraiser, and is subject to the assumptions and limiting conditions stated in the Appraisal Report. The City has not sought the present opinion of any other appraiser of the value of the taxable parcels. A different present opinion of value might be rendered by a different appraiser. The opinion of value relates to sale by a willing seller to a willing buyer, each having similar information and neither being forced by other circumstances to sell or to buy. 52 Consequently, the opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer may not have the benefit of full information. In addition, the opinion is a present opinion, based upon present facts and circumstances. Differing facts and circumstances may lead to differing opinions of value. The appraised value is not evidence of future value because future facts and circumstances may differ significantly from the present. No assurance can be given that any of the taxable property in Improvement Area EE could be sold for the estimated market value contained in the Appraisal Report if that property should become delinquent in the payment of Special Taxes and be foreclosed upon. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes— Proceeds of Foreclosure Sales” and “APPENDIX H—APPRAISAL REPORT.” Parity Taxes and Special Assessments Property within Improvement Area EE is subject to taxes, charges and assessments imposed by public agencies other than the District that also have jurisdiction over the land within Improvement Area EE. See the caption “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE—Direct and Overlapping Indebtedness.” 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 all special taxes and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes, regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future private liens imposed on the property except, possibly, for liens or security interests held by the Federal Deposit Insurance Corporation (the “FDIC”). See the captions “—Bankruptcy and Foreclosure” and “—FDIC/Federal Government Interests in Properties” below. Neither the District nor the City has control over the ability of other entities and districts to issue indebtedness secured by special taxes, ad valorem taxes, or assessments levied on all or a portion of the property within Improvement Area EE. In addition, the landowners within Improvement Area EE may, without the consent or knowledge of the District or the City, petition other public agencies to issue public indebtedness secured by special taxes, ad valorem taxes or assessments. Any such special 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 the property within Improvement Area EE described in this Official Statement. See the captions “SOURCES OF PAYMENT FOR THE BONDS,” “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE—Estimated Assessed Value-To-Lien Ratios” and “THE COMMUNITY FACILITIES DISTRICT AND IMPROVEMENT AREA EE—Direct and Overlapping Indebtedness.” Disclosures to Future Purchasers The willingness or ability of an owner of a parcel to pay the Special Tax regardless of the value of such parcel 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, whether or not the owner was informed of the amount of the Special Tax on the parcel should the Special Tax be levied at the maximum tax rate and whether or not the owner, at the time of such a levy, has the ability to 53 pay it as well as other expenses and obligations. The City has caused notices of the Special Tax to be recorded in the Office of the Recorder for the County against each parcel in Improvement Area EE. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within Improvement Area EE or lending of money thereon. California Civil Code Section 1102.6b requires that, in the case of transfers, the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. Special Tax Delinquencies Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of and interest on the Bonds are derived, are customarily billed to the properties within Improvement Area EE on the ad valorem property tax bills sent to owners of such properties. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes— Proceeds of Foreclosure Sales,” for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See the captions “—Bankruptcy and Foreclosure” and “— FDIC/Federal Government Interests in Properties” below for a discussion of limitations on the District’s ability to foreclosure on the lien of the Special Taxes in certain circumstances and the policy of the FDIC regarding the payment of special taxes and assessments. FDIC/Federal Government Interests in Properties General. The ability of the District to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation (the “FDIC”), the Drug Enforcement Agency, the Internal Revenue Service, or other federal agency has or obtains an interest. Federal courts have held that, based on the supremacy clause of the United States Constitution, in the absence of Congressional intent to the contrary, a state or local agency cannot foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. The supremacy clause of the United States Constitution reads as follows: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, 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 Improvement Area EE but does not 54 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 Improvement Area EE, 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 Improvement Area EE is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the property by the FDIC, then the ability of the 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 state and local real property taxes only if those taxes are assessed according to the property’s value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution’s affairs, unless abandonment of the FDIC’s interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC’s consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC’s consent. The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Law 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 55 and therefore covered by the FDIC’s federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from special taxes levied pursuant to the Law. 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 Improvement Area EE 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 Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the Bonds. Bankruptcy and Foreclosure Bankruptcy, insolvency and other laws generally affecting creditors’ rights could adversely impact the interests of owners of the Bonds in at least two ways. First, the payment of property owners’ taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Proceeds of Foreclosure Sales.” In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. Second, the United States Bankruptcy Code might prevent moneys on deposit in the Special Tax Fund from being applied to pay interest on the Bonds and/or to redeem Bonds if bankruptcy proceedings were brought by or against a landowner and if the court found that any of such landowner had an interest in such moneys within the meaning of Section 541(a)(1) of the Bankruptcy Code. Although a bankruptcy proceeding would not cause the lien of the Special Taxes to become extinguished, the amount and priority of any Special Tax lien could be modified if the value of the property falls below the value of the lien. If the value of the property is less than the lien, such excess amount could be treated as an unsecured claim by the bankruptcy court. In addition, bankruptcy of a property owner could result in a delay in procuring Superior Court foreclosure proceedings. If enough parcels were involved in bankruptcy proceedings, court delays would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Bonds and the possibility of delinquent tax installments not being paid in full. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel’s approving legal opinion) will be qualified as to the enforceability of the various legal instruments, including the Bonds, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Other laws generally affecting creditors’ rights or relating to judicial foreclosure may affect the ability to enforce payment of Special Taxes or the timing of enforcement of Special Taxes. For example, the Soldiers and Sailors Civil Relief Act of 1940 affords protections such as a stay in enforcement of the foreclosure covenant, a six-month period after termination of military service to redeem property sold to enforce the collection of a tax or assessment and a limitation on the interest rate on the delinquent tax or assessment to persons in military service 56 if a court concludes that the ability to pay such taxes or assessments is materially affected by reason of such service. No Acceleration Provision Neither the Bonds, the Indenture nor the Act 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 or in the event that interest on the Bonds becomes included in gross income for federal income tax purposes. Pursuant to the Indenture and further subject to the prior lien of owners of Bonds, an owner is given the right for the equal benefit and protection of all owners of a series similarly situated to pursue certain remedies described in Appendix D under the caption “EVENTS OF DEFAULT; REMEDIES.” Loss of Tax Exemption As discussed under the caption “TAX EXEMPTION,” in order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the District has covenanted in the Indenture, not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Bonds under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”). Interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date that the Bonds were issued, as a result of acts or omissions of the City or the District in violation of the Code. Should such an event of taxability occur, the Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional or mandatory sinking fund redemption provisions of the Indenture. Limited Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain statutorily required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. See the caption “CONTINUING DISCLOSURE.” Any failure to provide annual financial information, if required, 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 for the Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Proposition 218 Proposition 218, an initiative measure entitled the “Right to Vote on Taxes Act” (the “Initiative”), was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Articles XIIIC and XIIID to the State Constitution. According to the “Title and Summary” of the Initiative prepared by the California Attorney General, the Initiative limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” Provisions of the Initiative have been and will continue to be interpreted by the courts. The Initiative could potentially impact the Special Taxes otherwise available to the District to pay the principal of and interest on the Bonds as described below. 57 Among other things, Section 3 of Article XIIIC states that “…the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.” The Act provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, 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 Article XIIIC has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds. The provisions of the Initiative relating to the exercise of the initiative power have not been interpreted by the courts and no assurance can be given as to the outcome of any such litigation. It may be possible, however, for voters of Improvement Area EE 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 Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so, the District has covenanted that it will not initiate proceedings under the Act to reduce the Maximum Special Tax rates on parcels of Taxable Property within Improvement Area EE to less than an amount projected to equal 110% of annual debt service each year on the Outstanding Bonds and Parity Bonds plus the Administrative Expenses Cap. In connection with the foregoing covenant, the District has made a legislative finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District has also covenanted that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. See the caption “SOURCES OF PAYMENT FOR THE BONDS—Special Taxes.” However, no assurance can be given as to the enforceability of the foregoing covenants or as to the outcome of any legal action taken by the District. The interpretation and application of Article XIIIC and Article XIIID will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See the caption “—Limitations on Remedies.” 58 Ballot Initiatives Articles XIIIC and XIIID of the State Constitution were adopted pursuant to measures that qualified for the ballot pursuant to the State’s Constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995 in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by voters or legislation enacted by the State Legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State, the City, or local districts to increase revenues or to increase appropriations. Limitations on Remedies Remedies available to the Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of 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 others similar laws affecting generally the enforcement of creditors’ rights, by equitable principles, by the exercise of judicial discretion and by limitations or remedies against public agencies in the State. Additionally, the Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Indenture. 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. Enforceability of the rights and remedies of the Owners of the Bonds, and the obligations incurred by the District, may become subject to the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or later in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the federal Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on remedies against governmental entities in the State. See the captions “—Bankruptcy and Foreclosure Delays,” and “—FDIC/Federal Government Interests in Properties.” Recent Case Law Related to the Mello-Roos Act On August 1, 2014, the California Court of Appeal, Fourth Appellate District, issued its opinion in City of San Diego v. Melvin Shapiro, et al. (D063997). The case involved a Convention Center Facilities District (the "CCFD") established by the City of San Diego. The CCFD is a financing district established under the City’s charter (the "Charter") and was intended to function much like a community facilities district established under the Mello-Roos Act. The CCFD was comprised of all of the real property in the entire City. However, the CCFD special tax was to be levied only on properties in the CCFD that were improved with a hotel. 59 At the election to authorize the CCFD special tax, the CCFD proceedings limited the electorate to owners of hotel properties and lessees of real property owned by a governmental entity on which a hotel was located. Registered voters in the City of San Diego were not permitted to vote. This definition of the qualified electors of the CCFD was based on Section 53326(c) of the Mello-Roos 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 community facilities district whose property would be subject to the special tax. The San Diego Court held that the CCFD special tax election did not comply with the City’s Charter and with applicable provisions of the California Constitution -- specifically Article XIIIA, section 4 ("Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district….") and Article XIIIC, section 2(d) ("No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote.") -- because the electors in the CCFD election should have been the registered voters residing within the CCFD (the boundaries of which were coterminous with the boundaries of the City of San Diego). As to the District, there were no registered voters within Improvement Area EE at the time of the election to authorize the Special Taxes. Significantly, the San Diego Court expressly stated that it was not addressing the validity of a landowner election to impose special taxes on residential property pursuant to the Mello-Roos Act in situations where there are fewer than 12 registered voters. Therefore, by its terms, the San Diego Court’s holding does not apply to the special tax election in Improvement Area EE. Moreover, Sections 53341 and 53359 of the Act establish a limited period of time in which special taxes levied under the Mello-Roos Act may be challenged by a third party: 53341. Any action or proceeding to attack, review, set aside, void, or annul the levy of a special tax or an increase in a special tax pursuant to [the Mello-Roos Act] shall be commenced within 30 days after the special tax is approved by the voters…. 53359. An action to determine the validity of bonds issued pursuant to [the Mello-Roos Act] or the validity of any special taxes levied pursuant to [the Mello-Roos Act] … shall …. be commenced within 30 days after the voters approve the issuance of the bonds or the special tax … Landowner voters approved the Special Taxes and the issuance of bonds for Improvement Area EE of the District in compliance with all applicable requirements of the Mello- Roos Act on April 16, 2014. Therefore, pursuant to Sections 53341 and 53359 of the Mello- Roos Act, the statute of limitations period to challenge the validity of the special tax has expired. Because the San Diego Court expressly stated that it did not consider the facts presented by the District and because the period for challenging the Special Taxes has passed, the City believes the Special Taxes are valid and cannot be challenged. Potential Early Redemption of Bonds from Prepayments Property owners within Improvement Area EE are permitted to prepay their Special Taxes at any time. Such prepayments will result in a redemption of the Bonds on the Interest Payment Date following the receipt of the prepayment. 60 CONTINUING DISCLOSURE District Continuing Disclosure Certificate General. Pursuant to a Continuing Disclosure Certificate, dated as of [______] 1, 2017 (the “District Continuing Disclosure Certificate”), executed by the District, the District has covenanted for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District by December 31 of each year (the “Annual Report”), commencing December 31, 2017 for the report for the fiscal year ended June 30, 2017, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the City with EMMA. The specific nature of the information to be contained in the Annual Report and the notice of enumerated events is set forth in “Appendix E—FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 (“Rule 15c2-12”). The requirement that the District file its audited financial statements, which constitute a part of the audited financial statements of the City, as a part of the Annual Report has been included in the District Continuing Disclosure Certificate solely to satisfy the provisions of Rule 15c2-12. The inclusion of such information does not mean that the Bonds are secured by any resources or property of the City or any entity other than the District or that the Bonds are payable from any source other than Net Taxes and the other funds pledged under the Indenture. See the captions “SOURCES OF PAYMENT FOR THE BONDS” and “SPECIAL RISK FACTORS—Limited Obligations.” Five-Year Compliance History. During the past five years, the District (with respect to a different improvement area than Improvement Area EE) failed to file its fiscal year 2012-13 audited financial statements (182 days) and annual financial information (76 days) on a timely basis, and failed to file a notice of its failure to file. The District also failed to include two required items of information in its fiscal year 2013-14 annual report, specifically, information pertaining to tax prepayments and improvement fund balances. [UPDATE] In addition, although the City and its affiliated entities other than the District (such as the Lake Elsinore Public Financing Authority, the City’s former redevelopment agency and its successor agency, and other community facilities districts formed by the City) are not obligated persons pursuant to Rule 15c2-12 with respect to the Bonds, during the last five years the City and such affiliated entities 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, incomplete filings with respect to other annual reports, and failure to provide notice of late annual financial information. The incomplete filings omitted one or more of the following items: (1) Comprehensive audited financial statements, including the audited financial statements for fiscal years 2011-12 through 2012-13, which were not linked on EMMA to all required CUSIPs until July 1, 2014, and for fiscal year 2015; (2) Updated tabular and other operating information; and (3) Material event notices of changes in bond ratings. 61 The City and its affiliated entities have made additional filings to provide certain of the previously omitted information (including the existing ratings of the outstanding bonds). [UPDATE] In order to promote compliance by the District with its obligations under the District Continuing Disclosure Certificate, the City has retained SCG - Spicer Consulting Group to serve as the dissemination agent for the Bonds. Additionally, the City had 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. Developer Continuing Disclosure Certificates Although the Underwriter has concluded that the Developers are not obligated persons under Rule 15c2-12, the Developers will each execute a Continuing Disclosure Certificate (each, a “Developer Continuing Disclosure Certificate”), pursuant to which the Developers have agreed to provide, or cause to be provided, on a semi-annual and annual basis, to EMMA, certain financial information and operating data concerning each Developer’s development within Improvement Area EE as well as notice of certain listed events until such time as the Developer is no longer responsible for more than 20% of the Special Tax levy. A default under either Developer Continuing Disclosure Certificate will not, in itself, constitute an Event of Default under the Indenture, and the sole remedy under the Developer Continuing Disclosure Certificates in the event of any failure of the Developers or the dissemination agent, as applicable, to comply with the Developer Continuing Disclosure Certificates will be an action to compel performance. See “Appendix F—FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE.” The District has no obligation to enforce the continuing disclosure undertakings of the Developers. Prior Disclosure Compliance by Woodside. Except as disclosed in the next paragraph, to the Actual Knowledge of Woodside (as defined in “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA EE”), Woodside has not failed in any material respect to comply with any previous undertaking by it to provide periodic continuing disclosure reports or notices of material events with respect to community facilities districts or assessment districts in Southern California within the past five years. In the last five years, Woodside (i) failed to include annual financial statements with certain annual reports dating back to 2011, although such financial statements were subsequently filed in 2014, and (ii) failed to file semin-annual reports for 2012 with respect to a continuing disclosure obligation, although subsequent reports and a notice of termination of obligation were filed in 2013. Identification of the above-described events does not constitute a representation by Woodside that any such events were material. Prior Disclosure Compliance by Beazer. [NEED UPDATE] Prior Disclosure Compliance by CalAtlantic. The Inland Empire division of CalAtlantic will be responsible for CalAtlantic’s compliance with its Developer Continuing Disclosure Certificate. Except as disclosed in the next paragraph, to the Actual Knowledge of CalAtlantic (as defined in “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY IN IMPROVEMENT AREA EE”), CalAtlantic has not failed in any material respect to comply with 62 any previous undertaking by it to provide periodic continuing disclosure reports or notices of material events with respect to community facilities districts or assessment districts in Southern California within the past five years. On September 30, 2013, CalAtlantic filed a Semi-Annual Report pursuant to the Major Developer Continuing Disclosure Agreement, dated June 1, 2006 (the “2006 Disclosure Agreement”), in connection with the issuance of the Poway Unified School District Community Facilities District No. 14 (Del Sur) Improvement Area A 2006 Special Tax Bonds (the “2006 Bonds”). Pursuant to the terms of the 2006 Disclosure Agreement, CalAtlantic was not required to file a Semi-Annual Report once property it owned was no longer responsible for payment of 15% or more of the special taxes securing the 2006 Bonds. Pursuant to the terms of the 2006 Disclosure Agreement, CalAtlantic should have filed a Notice to Repositories of Termination of Reporting Obligations (the “Notice”) rather than a Semi-Annual Report. CalAtlantic failed to file a Semi-Annual Report or Notice prior to the April 1, 2014 Report Date. On May 22, 2014, CalAtlantic filed the Notice and CalAtlantic has no further obligations under the 2006 Disclosure Agreement. Identification of the above-described event does not constitute a representation by CalAtlantic that such event was material TAX EXEMPTION 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 (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. In the further opinion of Bond Counsel, interest (and original issue discount) 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 Bonds of a 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 a 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, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State personal income tax. 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 Owner for an amount equal to or less (under certain circumstances) than the 63 original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium. Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the District and others and is subject to the condition that the District complies with all requirements of 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 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 District has covenanted to comply with all such requirements. 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 (and original issue discount) on the Bonds or their market value. 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. Bond Counsel’s engagement with respect to the Bonds terminates upon their issuance and Bond Counsel disclaims any obligation to update the matters set forth in its opinion. The Indenture, the Resolution of Issuance and the Tax 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 for federal income tax purposes of interest (and original issue discount) with respect to any Bond as to which any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. 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. 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. 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 64 INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS. 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 C. LEGAL OPINION The legal opinion of Bond Counsel approving the validity of the Bonds, in substantially the form set forth as Appendix C hereto, will be made available to purchasers of the Bonds at the time of original delivery of the Bonds. Certain legal matters will be passed upon for the City and the District by Liebold McClendon & Mann, Irvine, California, Issuer Counsel, and by Jones Hall, A Professional Law Corporation, San Francisco, California, Disclosure Counsel, for the Underwriter by Nossaman LLP, Irvine, California, and for the Trustee by its counsel. Bond Counsel undertakes no responsibility to the purchasers of the Bonds for the accuracy, completeness or fairness of this Official Statement. ABSENCE OF LITIGATION No litigation is pending or threatened concerning the validity of the Bonds, and a certificate of the District to that effect will be furnished to the Underwriter at the time of the original delivery of the Bonds. Neither the City nor the District is aware of any litigation pending or threatened which questions the existence of the District or the City or contests the authority of the District to levy and collect the Special Taxes or to issue and retire the Bonds.[CONFIRM] NO RATING The District has not made and does not contemplate making an application to any rating agency for the assignment of a rating on the Bonds. UNDERWRITING The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the “Underwriter”), pursuant to a Bond Purchase Agreement, dated [_____], 2017 (the “Bond Purchase Agreement”), by and between the District and the Underwriter. The Underwriter has agreed to purchase the Bonds at a price of $[_______] (being the $[_______] aggregate principal amount of the Bonds, less an Underwriter’s discount of $[_______] and less net original issue discount of $[_______]. The Bond Purchase Agreement provides that the Underwriter will 65 purchase all of the Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering price stated on the cover page thereof. The offering price may be changed from time to time by the Underwriter. FINANCIAL INTERESTS The fees being paid to the Underwriter and its counsel, Bond Counsel, Disclosure Counsel and the Trustee are contingent upon the issuance and delivery of the Bonds. From time to time, Bond Counsel and Disclosure Counsel represent the Underwriter on matters unrelated to the Bonds. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 66 ADDITIONAL INFORMATION The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations, summaries and explanations of the Bonds and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents for full and complete statements and their provisions. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representatives of fact. The execution and delivery of this Official Statement by the City Manager of the City has been duly authorized by the City Council of the City acting in its capacity as the legislative body of the District. CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA EE) By: City Manager of the City of Lake Elsinore A-1 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) (IMPROVEMENT AREA EE) B-1 APPENDIX B ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING THE CITY OF LAKE ELSINORE The following information relating to the City of Lake Elsinore (the “City”) and the County of Riverside (the “County”), California (the “State”) is supplied solely for purposes of information. Neither the City nor the County is obligated in any manner to pay principal of or interest on the Bonds or to cure any delinquency or default on the Bonds. The Bonds are payable solely from the sources described in the Official Statement. General Description The City was founded in 1883 and incorporated as a general law city effective April 23, 1888 in San Diego County. In 1893, the Elsinore Valley, previously located in San Diego County, became part of the new County of Riverside. The City encompasses approximately 43 square miles, with over 10 miles of lakeshore, and is located at the southwestern end of the County, 73 miles east of downtown Los Angeles and 74 miles north of downtown San Diego. As of January 1, 2017 the City’s population was approximately 62,092 people. Population The population of the City, the County and the State is shown below for 2013 through 2017. City of Lake Elsinore, County of Riverside and State of California Population Estimates Source: California Department of Finance estimates (as of January 1). Year (January 1) City of Lake Elsinore County of Riverside State of California 2013 56,039 2,266,549 38,239,207 2014 57,368 2,291,093 38,567,459 2015 59,142 2,317,924 38,907,642 2016 61,006 2,347,828 39,255,883 2017 62,092 2,384,783 39,523,613 B-2 Employment and Industry The County is a part of the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (the “MSA”). The unemployment rate in the MSA was 6.2% in August 2017, up from a revised 6.1% in July 2017, and below the year-ago estimate of 6.4%. This compares with an unadjusted unemployment rate of 5.4% for the State and 4.5% for the nation during the same period. The unemployment rate was 6.5% in the County and 5.8% percent in San Bernardino County. The following table summarizes the civilian labor force, employment and unemployment in the County for the calendar years 2012 through 2016. These figures are county-wide statistics and may not necessarily accurately reflect employment trends in the City. RIVERSIDE-SAN BERNARDINO-ONTARIO METROPLITAN STATISTICA AREA (Riverside and San Bernardino Counties) Civilian Labor Force, Employment and Unemployment (Annual Averages) March 2016 Benchmark 2012 2013 2014 2015 2016 Civilian Labor Force(1) 1,882,200 1,897,700 1,927,600 1,961,800 1,987,400 Employment 1,665,100 1,711,000 1,771,700 1,832,300 1,870,200 Unemployment 217,100 186,700 155,900 129,500 117,200 Unemployment Rate 11.5% 9.8% 8.1% 6.6% 5.9% Wage and Salary Employment(2) Agriculture 15,000 14,500 14,400 15,100 14,700 Mining and Logging 1,200 1,200 1,300 1,300 900 Construction 62,600 70,000 77,600 85,200 92,500 Manufacturing 86,700 87,300 91,300 95,600 98,900 Wholesale Trade 52,200 56,400 58,900 61,700 62,900 Retail Trade 162,400 164,800 169,400 173,500 179,000 Transportation, Warehousing & Utilities 73,000 78,400 86,600 97,300 104,400 Information 11,700 11,500 11,300 11,300 11,600 Finance & Insurance 25,400 25,700 26,000 26,100 27,300 Real Estate & Rental & Leasing 14,900 15,600 16,300 17,100 18,000 Professional & Business Services 10,800 11,400 11,900 12,200 145,800 Educational & Health Services 127,500 132,400 139,300 144,400 214,300 Leisure & Hospitality 173,600 187,600 194,800 205,000 159,700 Other Services 129,400 135,900 144,800 151,500 45,100 Federal Government 40,100 41,100 43,000 44,000 20,500 State Government 20,600 20,300 20,200 20,300 29,700 Local Government 28,200 27,800 28,200 28,700 190,400 Total, All Industries(3) 1,200,200 1,247,800 1,303,700 1,362,400 1,415,400 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike. (3) Totals may not add due to rounding. Source: State of California Employment Development Department. B-3 Major Employers The following table sets forth the top twenty-five employers located in the County: COUNTY OF RIVERSIDE Largest Employers (Listed Alphabetically) As of September 2017 Employer Name Location Industry Amazon Fulfillment Ctr Moreno Valley Distribution Centers (whls) Corrections Dept Norco Government Offices-State Desert Regional Medical Ctr Palm Springs Hospitals Eisenhower Medical Ctr Rancho Mirage Hospitals Fantasy Springs Resort Casino Indio Casinos Handsome Rewards Perris Internet & Catalog Shopping Hemet Valley Medical Ctr Hemet Hospitals Hotel At Fantasy Springs Indio Casinos Inland Valley Medical Ctr Wildomar Hospitals J W Marriott Desert Spgs Resrt Palm Desert Convention & Meeting Facilities & Svc La Quinta Golf Course La Quinta Golf Courses La Quinta Resrt-Club A Waldorf La Quinta Resorts Morongo Resort & Spa Cabazon Casinos Morongo Tribal Gaming Ent Banning Business Management Consultants Parkview Community Hospital Riverside Hospitals Pechanga Resort & Casino Temecula Casinos Riverside Community Hospital Riverside Hospitals Riverside University Health Moreno Valley Hospitals Robertson's Ready Mix Corona Concrete-Ready Mixed Southwest Healthcare System Murrieta Hospitals Starcrest of California Perris Internet & Catalog Shopping Starcrest Products Perris Gift Shops Sun World Intl LLC Coachella Fruits & Vegetables-Wholesale Universal Protection Svc Palm Desert Security Guard & Patrol Service US Air Force Dept March Arb Military Bases Source: State of California Employment Development Department; America’s Labor Market Information System (ALMIS) Employer Database, 2017 2nd Edition. B-4 Effective Buying Income “Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance). Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.” The following table summarizes the total effective buying income for the City, the County, the State and the United States for the period 2012 through 2016. CITY OF LAKE ELSINORE COUNTY OF RIVERSIDE Effective Buying Income As of January 1, 2012 through 2016 Year Area Total Effective Buying Income (000’s Omitted) Median Household Effective Buying Income 2012 City of Lake Elsinore $846,888 $45,195 County of Riverside 40,157,310 43,860 California 864,088,828 47,307 United States 6,737,867,730 41,358 2013 City of Lake Elsinore $852,698 $45,712 County of Riverside 40,293,518 44,784 California 858,676,636 48,340 United States 6,982,757,379 43,715 2014 City of Lake Elsinore $907,205 $48,563 County of Riverside 41,199,300 45,576 California 901,189,699 50,072 United States 7,357,153,421 45,448 2015 City of Lake Elsinore $977,758 $51,040 County of Riverside 45,407,058 48,674 California 981,231,666 53,589 United States 7,757,960,399 46,738 2016 City of Lake Elsinore $1,092,865 $56,003 County of Riverside 47,509,909 50,287 California 1,036,142,723 55,681 United States 8,132,748,136 48,043 Source: The Nielsen Company (US), Inc. B-5 Commercial Activity A summary of historic taxable sales within the County during the past five years in which data is available is shown in the following table. The following table shows total taxable retail sales, total taxable sales from all outlets and related number of permits in the County on an annual basis for calendar years 2011 through 2015. Annual figures for calendar year 2016 are not yet available. COUNTY OF RIVERSIDE Taxable Transactions Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Retail Stores Total All Outlets Number of Permits on August 1 Taxable Transactions Number of Permits on August 1 Taxable Transactions 2011 33,398 $18,576,285 46,886 $25,641,497 2012 34,683 20,016,668 48,316 28,096,009 2013 33,391 21,306,774 46,805 30,065,467 2014 34,910 22,646,343 48,453 32,035,687 2015(1) 18,662 23,281,724 56,846 32,910,910 (1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part-time are now tabulated with store retailers. Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). A summary of historic taxable sales within the City during the past five years in which data is available is shown in the following table. The following table shows total taxable retail sales, total taxable sales from all outlets and related number of permits in the City on an annual basis for calendar years 2011 through 2015. Annual figures for calendar year 2016 are not yet available. CITY OF LAKE ELSINORE Taxable Transactions Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands) Retail Stores Total All Outlets Number of Permits on August 1 Taxable Transactions Number of Permits on August 1 Taxable Transactions 2011 897 $578,301 1,248 $634,553 2012 923 604,846 1,274 665,409 2013 828 620,558 1,176 688,483 2014 809 647,941 1,176 728,088 2015(1) 900 673,669 1,420 765,716 (1) Permit figures for calendar year 2015 are not comparable to that of prior years due to outlet counts in these reports including the number of outlets that were active during the reporting period. Retailers that operate part-time are now tabulated with store retailers. Source: California State Board of Equalization, Taxable Sales in California (Sales & Use Tax). B-6 Construction Activity Provided below are the building permits and valuations for the County and the City for calendar years 2012 through 2016. COUNTY OF RIVERSIDE Total Building Permit Valuations (Valuations in Thousands) 2012 2013 2014 2015 2016 Permit Valuation New Single-family $904,156.2 $1,138,738.1 $1,296,552.8 $1,313,084.2 $1,526,767.8 New Multi-family 87,878.6 138,636.0 178,116.7 110,458.4 106,291.8 Res. Alterations/Additions 87,370.5 98,219.3 147,081.2 113,200.0 126,475.0 Total Residential 1,079,405.3 1,375,593.4 1,621,750.7 1,536,742.6 1,759,534.6 New Commercial 508,192.8 263,837.7 197,674.9 211,785.1 540,447.1 New Industrial 26,432.5 141,184.4 161,321.1 180,521.3 59,439.2 New Other 11,115.5 109,795.2 128,666.9 204,554.1 374,917.0 Com. Alterations/Additions 171,263.2 369,502.4 327,327.1 314,604.2 371,216.4 Total Nonresidential 717,004.0 884,319.7 814,990.0 911,464.7 1,346,019.7 New Dwelling Units Single Family 3,720 4,716 5,007 5,007 5,662 Multiple Family 909 1,427 1,931 1,189 1,039 TOTAL 4,629 6,143 6,938 6,196 6,701 Source: Construction Industry Research Board, Building Permit Summary. CITY OF LAKE ELSINORE Total Building Permit Valuations (Valuations in Thousands) 2012 2013 2014 2015 2016 Permit Valuation New Single-family $17,061.9 $113,359.4 $79,497.9 $75,724.5 $120,449.1 New Multi-family 0.0 0.0 0.0 0.0 0.0 Res. Alterations/Additions 858.0 502.0 661.4 254.5 762.7 Total Residential 71,919.9 113,861.4 80,159.3 75,979.0 121,211.8 New Commercial 4,701.2 2,520.7 260.2 229.1 2,392.4 New Industrial 0.0 0.0 0.0 0.0 11,625.7 New Other 40.0 440.8 3,319.0 2,829.3 5,111.1 Com. Alterations/Additions 3,300.5 1,301.5 1,811.0 2,821.3 1,725.1 Total Nonresidential 8,041.7 4,272.0 5,390.2 5,879.7 20,854.3 New Dwelling Units Single Family 401 685 429 372 457 Multiple Family 0 0 0 0 0 TOTAL 401 685 429 372 457 Source: Construction Industry Research Board, Building Permit Summary. B-7 Transportation Easy access to job opportunities in the County and nearby Los Angeles, Orange and San Diego Counties is important to the County’s employment figures. Several major freeways and highways provide access between the County and all parts of Southern California. The Riverside Freeway (State Route 91) extends southwest through Corona and connects with the Orange County freeway network in Fullerton. Interstate 10 traverses the width of the County, the western-most portion of which links up with major cities and freeways in the eastern part of Los Angeles County and the southern part of San Bernardino County. Interstate 15 and 215 extend north and then east to Las Vegas, and south to San Diego. The Moreno Valley Freeway (U.S. 60) provides an alternative (to interstate 10) east-west link to Los Angeles County. The County seat, located in the City of Riverside, is within 20 miles of the Ontario International Airport in neighboring San Bernardino County. This airport is operated by the Los Angeles Department of Airports. Four major airlines schedule commercial flight service at Palm Springs Regional Airport. County-operated general aviation airports include those in Thermal, Hemet, Blythe, and French Valley. The cities of Riverside, Corona and Banning also operate general aviation airports. Education There are four elementary school districts, one high school district, eighteen unified (K- 12) school districts and four community college districts in the County. Ninety-five percent of all K-12 students attend schools in the unified school districts. The three largest unified districts are Riverside Unified School District, Moreno Valley Unified School District and Corona-Norco Unified School District. There are eight two-year community college campuses located in the communities of Riverside, Moreno Valley, Norco, San Jacinto, Menifee, Coachella Valley and Palo Verde Valley. There are also two universities and a four-year college located in the City of Riverside -- the University of California, Riverside, La Sierra University and California Baptist College. C-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL Upon issuance of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form: D-1 APPENDIX D SUMMARY OF THE INDENTURE The following is a summary of certain provisions of the Indenture which are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the Indenture for a full and complete statement of the provisions thereof. E-1 FORM OF CONTINUING DISCLOSURE CERTIFICATE THIS CONTINUING DISCLOSURE CERTIFICATE (this “Disclosure Certificate”), dated [______], 2017, is executed and delivered by City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (the “District”) in connection with the issuance of the City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2017 (Improvement Area EE) (the “Bonds”). The Bonds are being issued pursuant to a Resolution of Issuance adopted by the City Council of the City of Lake Elsinore, acting as the legislative body of the District on [_____], 2017 and a Bond Indenture by and between the District and Wilmington Trust, National Association, as Trustee, dated as of [______] 1, 2017 (the “Indenture”). The District 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 District 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 a person 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 Director of Administrative Services of the City, or such other officer or employee as the District shall designate in writing to the Dissemination Agent from time to time. “Dissemination Agent” shall mean, initially, SCG - Spicer Consulting Group, or any successor Dissemination Agent designed in writing by the District. “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. “Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. “Official Statement” shall mean the District’s official statement with respect to the Bonds. E-2 “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 pursuant to which the City Council undertook certain change proceedings with respect to the District and established Improvement Area EE therein. “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 Annual Reports. (a) Not later than December 31 of each year commencing December 31, 2017, the District 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 District, then not later than 15 business days prior to the date referred to in the prior sentence hereof, the District 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 District 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. Once posted, the Official Statement will serve as the first Annual Report. (b) In the event that the Dissemination Agent is an entity other than the District, 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 District shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to the due date for an Annual Report the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District will be filing the Annual Report in compliance with subsection (a). The District 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 furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report. (c) If the Dissemination Agent is other than the District 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 in a timely manner to EMMA, in the form required by EMMA. If the District acts as its own Dissemination Agent, it E-3 shall file a notice with EMMA no later than the date specified in subsection (a) for filing an Annual Report if the District fails to file the Annual Report by that date. (d) If the Dissemination Agent is other than the District, the Dissemination Agent shall: (i) 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 District 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 District’s Annual Report shall contain or include by reference: (a) Financial Statements. The audited financial statements of the District, 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 District’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 aggregate assessed valuation of the Taxable Property within Improvement Area EE; (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 Improvement Area EE 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 Improvement Area EE; E-4 (vii) if Special Taxes are levied on Undeveloped Property, the amount of Special Taxes levied on Undeveloped Property and the amount of Special Taxes levied on Developed Property (as such terms are defined in the Rate and Method of Apportionment); (viii) an update of Table 3 and Table 4 of the Official Statement based upon the outstanding principal amount of bonds issued by the District for Improvement Area EE, the most recent Special Tax levy preceding the date of the Annual Report and the estimated assessed value of taxable property within Improvement Area EE; the tables should include such information about the owners of taxable property that are responsible for 5% or more of the most recent Special Tax levy; the tables do not need to reflect Overlapping Land Secured Bonded Debt. (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 District 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 District 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 District shall give, or cause the Dissemination Agent to give, notice to EMMA in a timely manner not in excess of 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 District shall give or cause the Dissemination Agent to give notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds, if material: E-5 1. 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. bond calls; and 6. release, substitution or sale of property securing repayment of the Bonds. (c) In the event that the District’s fiscal year changes, the District shall report or shall instruct the Dissemination Agent to report such change in the same manner and to the same parties as Listed Events would be reported pursuant to this Section. (d) The District hereby agrees that the undertaking set forth in this Disclosure Certificate is the responsibility of the District, and the Dissemination Agent, if other than the District, shall not be responsible for determining whether the District’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 District 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 District shall give notice of such termination in the same manner as for a Listed Event under Section 5. SECTION 7. Dissemination Agent. The District 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 SCG - Spicer Consulting Group. The Dissemination Agent may resign by providing (i) thirty days written notice to the District, 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 District 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 District, materially impair the interests of the Owners or Beneficial Owners of the Bonds. E-6 (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 District 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 District 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 District 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 District 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 District 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 District or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance. SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. Where an entity other than the District 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 District 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 District 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 District pursuant to this Disclosure Certificate. The obligations of the District 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 E-7 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 District, 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. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] E-8 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. CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) By: _______________________ Disclosure Representative F-1 APPENDIX F [Woodside] FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE CONTINUING DISCLOSURE CERTIFICATE (Property Owner) $[_______] CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) This Continuing Disclosure Certificate (Property Owner) (this “Disclosure Certificate”), dated [______], 2017, is executed and delivered by [Woodside 05S, LP, a CalAtlantic Group, Inc., a California limited partnership] (the “Property Owner”) and SCG - Spicer Consulting Group as dissemination agent (the “Dissemination Agent”) in connection with the issuance by the City of Lake Elsinore (the "City") of the bonds captioned above (the “Bonds”) with respect to Community Facilities District No. 2006-1 (Summerly) (Improvement Area EE), City of Lake Elsinore, County of Riverside, State of California (the “District”). The Bonds are being issued pursuant to a Resolution of Issuance adopted by the City Council of the City, acting as legislative body of the District on [______], 2017, and a Bond Indenture, dated as of [______] 1, 2017, (the “Indenture”), by and between the District and Wilmington Trust, N.A., as trustee (the “Trustee”). The Property Owner covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds. Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, 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: “Affiliate” means any person presently directly (or indirectly through one or more intermediaries) currently under managerial control of the Property Owner, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or the Property Owner’s ability to pay the Special Taxes related to the Property prior to delinquency. “Assumption Agreement” means an undertaking of a Major Owner, or an Affiliate thereof, for the benefit of the holders and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to Improvement Area EE of the District), whereby such Major Owner or Affiliate agrees to provide periodic reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in Improvement Area EE of the District owned by such Major Owner and F-2 its Affiliates and, at the option of the Property Owner or such Major Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 11 hereof. “Dissemination Agent” means SCG - Spicer Consulting Group, or any successor Dissemination Agent designated in writing by the Property Owner, and which has filed with the Property Owner, the City and the Trustee a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate. “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Owner” means, as of any Report Date, an owner of land in Improvement Area EE of the District that is responsible in the aggregate for 20% or more of the Special Taxes in Improvement Area EE of the District anticipated to be levied at any time during the then-current fiscal year. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the final official statement executed by the City in connection with the issuance of the Bonds. “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original Underwriter of the Bonds. “Periodic Report” means any Periodic Report provided by the Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. “Property” means the property owned by the Property Owner in Improvement Area EE of the District. “Report Date” means March 31 and September 30 of any fiscal year. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “Special Taxes” means the special taxes of the District levied on taxable property within Improvement Area EE of the District. Section 3. Provision of Periodic Reports. (a) The Property Owner shall, or, upon written direction of the Property Owner the Dissemination Agent shall, not later than the Report Date, commencing March 31, 2018, file F-3 with the MSRB a Periodic Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Trustee (if different from the Dissemination Agent), the Participating Underwriter and the City. Not later than 15 calendar days prior to the Report Date, the Property Owner shall provide the Periodic Report to the Dissemination Agent (if different from the Property Owner). The Property Owner shall provide a written certification with (or included as a part of) each Periodic Report furnished to the Dissemination Agent (if different from the Property Owner), the Trustee (if different from the Dissemination Agent), the Participating Underwriter and the City to the effect that such Periodic Report constitutes the Periodic Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Trustee, the Participating Underwriter and the City may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Periodic Report. The Periodic Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the Dissemination Agent does not receive a Periodic Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the Periodic Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Periodic Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination Agent shall send a notice to the MSRB in substantially the form attached hereto as Exhibit A, with a copy to the Trustee (if other than the Dissemination Agent), the City, the Participating Underwriter and the Property Owner. (c) With respect to the Periodic Report, the Dissemination Agent shall, to the extent the Periodic Report has been furnished to it, file the Periodic Report with the MSRB and file a report with the Property Owner (if the Dissemination Agent is other than the Property Owner), the City and the Participating Underwriter certifying that the Periodic Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to and filed with the MSRB. Section 4. Content of Periodic Reports. The Property Owner’s Periodic Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Property Owner shall clearly identify each such other document so included by reference. In addition to any of the information expressly required to be provided in Exhibit B, the Property Owner’s Periodic Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. F-4 Section 5. Reporting of Significant Events. (a) The Property Owner shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material: (i) bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (ii) failure to pay any property taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property on or prior to the delinquency date to the extent that such failure is not promptly cured by the Property Owner upon discovery thereof; (iii) filing of a lawsuit of which the Property Owner is aware against the Property Owner or an Affiliate of the Property Owner seeking damages, which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (iv) material damage to or destruction of any of the improvements on the Property; and (v) any payment default or other material default by the Property Owner on any loan with respect to the construction of improvements on the Property. (b) Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the Property Owner determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, with a copy to the Trustee, the City and the Participating Underwriter. Section 6. Duration of Reporting Obligation. (a) All of the Property Owner’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 11) on the earliest to occur of the following: (i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or (ii) at such time as property owned by the Property Owner is no longer responsible for payment of 20% or more of the Special Taxes, or (iii) the date on which the Property Owner prepays in full all of the Special Taxes attributable to the Property. F-5 The Property Owner shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. (b) If a portion of the Property owned by the Property Owner, or any Affiliate of the Property Owner, is conveyed to a Person that, upon such conveyance, will be a Major Owner, the obligations of the Property Owner hereunder with respect to the property in Improvement Area EE of the District owned by such Major Owner and its Affiliates may be assumed by such Major Owner or by an Affiliate thereof, and the Property Owner’s obligations hereunder with respect to such property will be terminated. In order to effect such assumption, such Major Owner or Affiliate shall enter into an Assumption Agreement in form and substance reasonably satisfactory to the City and the Participating Underwriter. Section 7. Dissemination Agent. The Property Owner may, from time to time, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be SCG - Spicer Consulting Group. The Dissemination Agent may resign by providing thirty days’ written notice to the City, the Property Owner and the Trustee. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Property Owner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto): (a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; and (b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Property Owner 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 Periodic Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Property Owner chooses to include any information in any Periodic Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Periodic Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the Property Owner to comply with any provision of this Disclosure Certificate, the Trustee shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking F-6 mandate or specific performance by court order, to cause the Property Owner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole and exclusive remedy under this Disclosure Certificate in the event of any failure of the Property Owner to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liability which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding losses, liabilities, costs and expenses due to an Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Account of the Special Tax Fund established under the Indenture in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable 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 hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Property Owner, the Trustee, the Bond owners, or any other party. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows: To the Issuer: City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92530 Attention: Director of Administrative Services To the Trustee: Wilmington Trust, N.A. 650 Town Center Drive, Suite 600 Costa Mesa, California 92626 Attn: Corporate Trust Department Phone: (714) 384-4153 To the Participating Underwriter: Stifel, Nicolaus & Company, Incorporated 515 South Figueroa Street, Suite 1800 Los Angeles, California 90071 Attention: Public Finance To the Dissemination Agent: SCG - Spicer Consulting Group 25220 Hancock Avenue, Suite 300 Murrieta, California 92562 Attention: Managing Director F-7 To the Property Owner: Woodside Homes [To Come] provided, however, that all such notices, requests or communication may be made by telephone and promptly confirmed by writing. Any person may, by notice given as aforesaid to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Property Owner (its successors and assigns), the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization. F-8 Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument. Date: [_______], 2017 WOODSIDE 05S, LP, a California limited partnership [To Come] ACCEPTED AND AGREED TO: SCG - SPICER CONSULTING GROUP, as Dissemination Agent By: Authorized Signatory F-9 EXHIBIT A NOTICE OF FAILURE TO FILE PERIODIC REPORT Name of Issuer: City of Lake Elsinore with respect to its Community Facilities District No. 2006-1 (Summerly) (Improvement Area EE), City of Lake Elsinore, County of Riverside, State of California Name of Bond Issue: City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) Special Tax Bonds, Series 2017 (Improvement Area EE) Date of Issuance: [_________], 2017 NOTICE IS HEREBY GIVEN that Woodside 05S, LP (the “Major Owner”) has not provided a Periodic Report with respect to the above-named bonds as required by that certain Continuing Disclosure Certificate (Property Owner), dated [_________], 2017. The Major Owner anticipates that the Periodic Report will be filed by _____________. Dated: SCG - Spicer Consulting Group, as Dissemination Agent By: Its: cc: Trustee City Participating Underwriter Property Owner/Major Owner F-10 EXHIBIT B PERIODIC REPORT ([MARCH 31, 20__/SEPTEMBER 30, 20__]) $[_______] CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) This Periodic Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (the “Disclosure Certificate”) dated [_________], 2017 executed by the undersigned (the “Property Owner”) in connection with the issuance of the above-captioned bonds by the City of Lake Elsinore (the "City") with respect to its Community Facilities District No. 2006-1 (Summerly), City of Lake Elsinore, County of Riverside, State of California (the “District”). Capitalized terms used in this Periodic Report but not otherwise defined have the meanings given to them in the Disclosure Certificate. I. Property Ownership and Development The information in this section is provided as of ____________________ (this date must be not more than 60 days before the date of this Periodic Report). A. Property currently owned by the Property Owner in Improvement Area EE of the District (the “Property”): Development name: Number of lots (or acreage): B. Status of land development or construction activities with respect to the Property: ______________________________________________________________________ ______________________________________________________________________ C. Status of building permits and any significant amendments to land use or development entitlements for the Property: ______________________________________________________________________ ______________________________________________________________________ F-11 D. Aggregate property in Improvement Area EE of the District sold (closed escrows), optioned or leased by the Property Owner to end users or merchant builders: Since the Date of Issuance of the Bonds Since the Last Periodic Report Acres* ____ Lots ____ Bldg. Sq. Ft. ____ Acres* ____ Lots ____ Bldg. Sq. Ft. ____ * For bulk land sales only (excluding sales of finished lots or completed buildings). E. Status of any land purchase contracts with regard to the Property, whether acquisition of land in Improvement Area EE of the District by the Property Owner or sales (closed escrows) of land in Improvement Area EE of the District to other property owners, distinguishing between (i) end users (e.g., condominiums), (ii) Property Owners and (iii) merchant builders. ______________________________________________________________________ ______________________________________________________________________ II. Legal and Financial Status of Property Owner Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any change in the legal structure of the Property Owner or the financial condition and financing plan of the Property Owner that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ III. Change in Development or Financing Plans Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ IV. Official Statement Updates Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any other significant changes in the information relating to the Property Owner or the Property contained in the Official Statement under the headings “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE - Development by Woodside” that would materially and adversely interfere with the Property Owner’s ability to develop and sell the Property as described in the Official Statement. F-12 ________________________________________________________________________ ________________________________________________________________________ V. Other Material Information In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. ________________________________________________________________________ ________________________________________________________________________ Certification The undersigned Property Owner hereby certifies that this Periodic Report constitutes the Periodic Report required to be furnished by the Property Owner under the Disclosure Certificate. ANY STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS. THE PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS PERIODIC REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE. Dated: Woodside 05S, LP, a California limited partnership [To Come] F-13 [Beazer] CONTINUING DISCLOSURE CERTIFICATE (Property Owner) $[_______] CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) This Continuing Disclosure Certificate (Property Owner) (this “Disclosure Certificate”), dated [______], 2017, is executed and delivered by the undersigned (the “Property Owner”) and SCG - Spicer Consulting Group as dissemination agent (the “Dissemination Agent”) in connection with the issuance by the City of Lake Elsinore (the "City") of the bonds captioned above (the “Bonds”) with respect to Community Facilities District No. 2006-1 (Summerly) (Improvement Area EE), City of Lake Elsinore, County of Riverside, State of California (the “District”). The Bonds are being issued pursuant to a Resolution of Issuance adopted by the City Council of the City, acting as legislative body of the District on [_______], 2017, and a Bond Indenture, dated as of [_______] 1, 2017, (the “Indenture”), by and between the District and Wilmington Trust, N.A., as trustee (the “Trustee”). The Property Owner covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds. Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, 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: “Affiliate” means any person presently directly (or indirectly through one or more intermediaries) currently under managerial control of the Property Owner, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or the Property Owner’s ability to pay the Special Taxes related to the Property prior to delinquency. “Assumption Agreement” means an undertaking of a Major Owner, or an Affiliate thereof, for the benefit of the holders and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to Improvement Area EE of the District), whereby such Major Owner or Affiliate agrees to provide periodic reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in Improvement Area EE of the District owned by such Major Owner and its Affiliates and, at the option of the Property Owner or such Major Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 11 hereof. F-14 “Dissemination Agent” means SCG - Spicer Consulting Group, or any successor Dissemination Agent designated in writing by the Property Owner, and which has filed with the Property Owner, the City and the Trustee a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate. “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Owner” means, as of any Report Date, an owner of land in Improvement Area EE of the District that is responsible in the aggregate for 20% or more of the Special Taxes in Improvement Area EE of the District anticipated to be levied at any time during the then-current fiscal year. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the final official statement executed by the City in connection with the issuance of the Bonds. “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original Underwriter of the Bonds. “Periodic Report” means any Periodic Report provided by the Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. “Property” means the property owned by the Property Owner in Improvement Area EE of the District. “Report Date” means March 31 and September 30 of any fiscal year. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “Special Taxes” means the special taxes of the District levied on taxable property within Improvement Area EE of the District. Section 3. Provision of Periodic Reports. (a) The Property Owner shall, or, upon written direction of the Property Owner the Dissemination Agent shall, not later than the Report Date, commencing March 31, 2018, file with the MSRB a Periodic Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Trustee (if different from the Dissemination Agent), the Participating Underwriter and the City. Not later than 15 calendar days prior to the Report Date, F-15 the Property Owner shall provide the Periodic Report to the Dissemination Agent (if different from the Property Owner). The Property Owner shall provide a written certification with (or included as a part of) each Periodic Report furnished to the Dissemination Agent (if different from the Property Owner), the Trustee (if different from the Dissemination Agent), the Participating Underwriter and the City to the effect that such Periodic Report constitutes the Periodic Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Trustee, the Participating Underwriter and the City may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Periodic Report. The Periodic Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the Dissemination Agent does not receive a Periodic Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the Periodic Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Periodic Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination Agent shall send a notice to the MSRB in substantially the form attached hereto as Exhibit A, with a copy to the Trustee (if other than the Dissemination Agent), the City, the Participating Underwriter and the Property Owner. (c) With respect to the Periodic Report, the Dissemination Agent shall, to the extent the Periodic Report has been furnished to it, file the Periodic Report with the MSRB and file a report with the Property Owner (if the Dissemination Agent is other than the Property Owner), the City and the Participating Underwriter certifying that the Periodic Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to and filed with the MSRB. Section 4. Content of Periodic Reports. The Property Owner’s Periodic Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Property Owner shall clearly identify each such other document so included by reference. In addition to any of the information expressly required to be provided in Exhibit B, the Property Owner’s Periodic Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Significant Events. (a) The Property Owner shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material: F-16 (i) bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (ii) failure to pay any property taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property on or prior to the delinquency date to the extent that such failure is not promptly cured by the Property Owner upon discovery thereof; (iii) filing of a lawsuit of which the Property Owner is aware against the Property Owner or an Affiliate of the Property Owner seeking damages, which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (iv) material damage to or destruction of any of the improvements on the Property; and (v) any payment default or other material default by the Property Owner on any loan with respect to the construction of improvements on the Property. (b) Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the Property Owner determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, with a copy to the Trustee, the City and the Participating Underwriter. Section 6. Duration of Reporting Obligation. (a) All of the Property Owner’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 11) on the earliest to occur of the following: (i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or (ii) at such time as property owned by the Property Owner is no longer responsible for payment of 20% or more of the Special Taxes, or (iii) the date on which the Property Owner prepays in full all of the Special Taxes attributable to the Property. The Property Owner shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. (b) If a portion of the Property owned by the Property Owner, or any Affiliate of the Property Owner, is conveyed to a Person that, upon such conveyance, will be a Major Owner, F-17 the obligations of the Property Owner hereunder with respect to the property in Improvement Area EE of the District owned by such Major Owner and its Affiliates may be assumed by such Major Owner or by an Affiliate thereof, and the Property Owner’s obligations hereunder with respect to such property will be terminated. In order to effect such assumption, such Major Owner or Affiliate shall enter into an Assumption Agreement in form and substance reasonably satisfactory to the City and the Participating Underwriter. Section 7. Dissemination Agent. The Property Owner may, from time to time, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be SCG - Spicer Consulting Group. The Dissemination Agent may resign by providing thirty days’ written notice to the City, the Property Owner and the Trustee. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Property Owner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto): (a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; and (b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Property Owner 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 Periodic Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Property Owner chooses to include any information in any Periodic Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Periodic Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the Property Owner to comply with any provision of this Disclosure Certificate, the Trustee shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Property Owner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole and exclusive remedy under this Disclosure Certificate in the event of any failure of the Property Owner to comply with this Disclosure Certificate shall be an action to compel performance. F-18 Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liability which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding losses, liabilities, costs and expenses due to an Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Account of the Special Tax Fund established under the Indenture in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable 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 hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Property Owner, the Trustee, the Bond owners, or any other party. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows: To the Issuer: City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92530 Attention: Director of Administrative Services To the Trustee: Wilmington Trust, N.A. 650 Town Center Drive, Suite 600 Costa Mesa, California 92626 Attn: Corporate Trust Department Phone: (714) 384-4153 To the Participating Underwriter: Stifel, Nicolaus & Company, Incorporated 515 South Figueroa Street, Suite 1800 Los Angeles, California 90071 Attention: Public Finance To the Dissemination Agent: SCG - Spicer Consulting Group 25220 Hancock Avenue, Suite 300 Murrieta, California 92562 Attention: Managing Director To the Property Owner: Beazer Homes Holdings, LLC [To Come] provided, however, that all such notices, requests or communication may be made by telephone and promptly confirmed by writing. Any person may, by notice given as aforesaid to F-19 the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Property Owner (its successors and assigns), the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization. F-20 Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument. Date: [_______], 2017 BEAZER HOMES HOLDINGS, LLC, a Delaware limited liability company [To Come] ACCEPTED AND AGREED TO: SCG - SPICER CONSULTING GROUP, as Dissemination Agent By: Authorized Signatory A-1 EXHIBIT A NOTICE OF FAILURE TO FILE PERIODIC REPORT Name of Issuer: City of Lake Elsinore with respect to its Community Facilities District No. 2006-1 (Summerly) (Improvement Area EE), City of Lake Elsinore, County of Riverside, State of California Name of Bond Issue: City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (Improvement Area EE) Special Tax Bonds, Series 2017 Date of Issuance: [_______], 2017 NOTICE IS HEREBY GIVEN that Beazer Homes Holdings, LLC (the “Major Owner”) has not provided a Periodic Report with respect to the above-named bonds as required by that certain Continuing Disclosure Certificate (Property Owner), dated [_______], 2017. The Major Owner anticipates that the Periodic Report will be filed by _____________. Dated: SCG - Spicer Consulting Group, as Dissemination Agent By: Its: cc: Trustee City Participating Underwriter Property Owner/Major Owner F-22 EXHIBIT B PERIODIC REPORT ([MARCH 31, 20__/SEPTEMBER 30, 20__]) $[_______] CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) This Periodic Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (the “Disclosure Certificate”) dated [_______], 2017 executed by the undersigned (the “Property Owner”) in connection with the issuance of the above-captioned bonds by the City of Lake Elsinore (the "City") with respect to its Community Facilities District No. 2006-1 (Summerly), City of Lake Elsinore, County of Riverside, State of California (the “District”). Capitalized terms used in this Periodic Report but not otherwise defined have the meanings given to them in the Disclosure Certificate. I. Property Ownership and Development The information in this section is provided as of ____________________ (this date must be not more than 60 days before the date of this Periodic Report). A. Property currently owned by the Property Owner in Improvement Area EE of the District (the “Property”): Development name: Number of lots (or acreage): B. Status of land development or construction activities with respect to the Property: ______________________________________________________________________ ______________________________________________________________________ C. Status of building permits and any significant amendments to land use or development entitlements for the Property: ______________________________________________________________________ ______________________________________________________________________ F-23 D. Aggregate property in Improvement Area EE of the District sold (closed escrows), optioned or leased by the Property Owner to end users or merchant builders: Since the Date of Issuance of the Bonds Since the Last Periodic Report Acres* ____ Lots ____ Bldg. Sq. Ft. ____ Acres* ____ Lots ____ Bldg. Sq. Ft. ____ * For bulk land sales only (excluding sales of finished lots or completed buildings). E. Status of any land purchase contracts with regard to the Property, whether acquisition of land in Improvement Area EE of the District by the Property Owner or sales (closed escrows) of land in Improvement Area EE of the District to other property owners, distinguishing between (i) end users (e.g., condominiums), (ii) Property Owners and (iii) merchant builders. ______________________________________________________________________ ______________________________________________________________________ II. Legal and Financial Status of Property Owner Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any change in the legal structure of the Property Owner or the financial condition and financing plan of the Property Owner that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ III. Change in Development or Financing Plans Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ IV. Official Statement Updates Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any other significant changes in the information relating to the Property Owner or the Property contained in the Official Statement under the heading “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE - Development by Beazer” that would materially and adversely interfere with the Property Owner’s ability to develop and sell the Property as described in the Official Statement. F-24 ________________________________________________________________________ ________________________________________________________________________ V. Other Material Information In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. ________________________________________________________________________ ________________________________________________________________________ Certification The undersigned Property Owner hereby certifies that this Periodic Report constitutes the Periodic Report required to be furnished by the Property Owner under the Disclosure Certificate. ANY STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS. THE PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS PERIODIC REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE. Dated: BEAZER HOMES HOLDINGS, LLC, a Delaware limited liability company [To Come] F-25 [CalAtlantic] CONTINUING DISCLOSURE CERTIFICATE (Property Owner) $[_______] CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) This Continuing Disclosure Certificate (Property Owner) (this “Disclosure Certificate”), dated [_____], 2017, is executed and delivered by the undersigned (the “Property Owner”) and SCG - Spicer Consulting Group as dissemination agent (the “Dissemination Agent”) in connection with the issuance by the City of Lake Elsinore (the "City") of the bonds captioned above (the “Bonds”) with respect to Community Facilities District No. 2006-1 (Summerly) (Improvement Area EE), City of Lake Elsinore, County of Riverside, State of California (the “District”). The Bonds are being issued pursuant to a Resolution of Issuance adopted by the City Council of the City, acting as legislative body of the District on [_____], 2017, and a Bond Indenture, dated as of [_______], 2017, (the “Indenture”), by and between the District and Wilmington Trust, N.A., as trustee (the “Trustee”). The Property Owner covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Property Owner for the benefit of the holders and beneficial owners of the Bonds. Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, 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: “Affiliate” means any person presently directly (or indirectly through one or more intermediaries) currently under managerial control of the Property Owner, and about whom information could be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or the Property Owner’s ability to pay the Special Taxes related to the Property prior to delinquency. “Assumption Agreement” means an undertaking of a Major Owner, or an Affiliate thereof, for the benefit of the holders and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to Improvement Area EE of the District), whereby such Major Owner or Affiliate agrees to provide periodic reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in Improvement Area EE of the District owned by such Major Owner and its Affiliates and, at the option of the Property Owner or such Major Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 11 hereof. F-26 “Dissemination Agent” means SCG - Spicer Consulting Group, or any successor Dissemination Agent designated in writing by the Property Owner, and which has filed with the Property Owner, the City and the Trustee a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate. “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate. “Major Owner” means, as of any Report Date, an owner of land in Improvement Area EE of the District that is responsible in the aggregate for 20% or more of the Special Taxes in Improvement Area EE of the District anticipated to be levied at any time during the then-current fiscal year. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. “Official Statement” means the final official statement executed by the City in connection with the issuance of the Bonds. “Participating Underwriter” means Stifel, Nicolaus & Company, Incorporated, the original Underwriter of the Bonds. “Periodic Report” means any Periodic Report provided by the Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. “Property” means the property owned by the Property Owner in Improvement Area EE of the District. “Report Date” means March 31 and September 30 of any fiscal year. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “Special Taxes” means the special taxes of the District levied on taxable property within Improvement Area EE of the District. Section 3. Provision of Periodic Reports. (a) The Property Owner shall, or, upon written direction of the Property Owner the Dissemination Agent shall, not later than the Report Date, commencing March 31, 2018, file with the MSRB a Periodic Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Trustee (if different from the Dissemination Agent), the Participating Underwriter and the City. Not later than 15 calendar days prior to the Report Date, F-27 the Property Owner shall provide the Periodic Report to the Dissemination Agent (if different from the Property Owner). The Property Owner shall provide a written certification with (or included as a part of) each Periodic Report furnished to the Dissemination Agent (if different from the Property Owner), the Trustee (if different from the Dissemination Agent), the Participating Underwriter and the City to the effect that such Periodic Report constitutes the Periodic Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Trustee, the Participating Underwriter and the City may conclusively rely upon such certification of the Property Owner and shall have no duty or obligation to review the Periodic Report. The Periodic Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the Dissemination Agent does not receive a Periodic Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property Owner that the Periodic Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Periodic Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination Agent shall send a notice to the MSRB in substantially the form attached hereto as Exhibit A, with a copy to the Trustee (if other than the Dissemination Agent), the City, the Participating Underwriter and the Property Owner. (c) With respect to the Periodic Report, the Dissemination Agent shall, to the extent the Periodic Report has been furnished to it, file the Periodic Report with the MSRB and file a report with the Property Owner (if the Dissemination Agent is other than the Property Owner), the City and the Participating Underwriter certifying that the Periodic Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to and filed with the MSRB. Section 4. Content of Periodic Reports. The Property Owner’s Periodic Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Property Owner shall clearly identify each such other document so included by reference. In addition to any of the information expressly required to be provided in Exhibit B, the Property Owner’s Periodic Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. Section 5. Reporting of Significant Events. (a) The Property Owner shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material: F-28 (i) bankruptcy or insolvency proceedings commenced by or against the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (ii) failure to pay any property taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property on or prior to the delinquency date to the extent that such failure is not promptly cured by the Property Owner upon discovery thereof; (iii) filing of a lawsuit of which the Property Owner is aware against the Property Owner or an Affiliate of the Property Owner seeking damages, which is reasonably likely to have a significant impact on the Property Owner’s ability to pay Special Taxes or to sell or develop the Property; (iv) material damage to or destruction of any of the improvements on the Property; and (v) any payment default or other material default by the Property Owner on any loan with respect to the construction of improvements on the Property. (b) Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event would be material under applicable Federal securities law. (c) If the Property Owner determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, with a copy to the Trustee, the City and the Participating Underwriter. Section 6. Duration of Reporting Obligation. (a) All of the Property Owner’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 11) on the earliest to occur of the following: (i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or (ii) at such time as property owned by the Property Owner is no longer responsible for payment of 20% or more of the Special Taxes, or (iii) the date on which the Property Owner prepays in full all of the Special Taxes attributable to the Property. The Property Owner shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. (b) If a portion of the Property owned by the Property Owner, or any Affiliate of the Property Owner, is conveyed to a Person that, upon such conveyance, will be a Major Owner, F-29 the obligations of the Property Owner hereunder with respect to the property in Improvement Area EE of the District owned by such Major Owner and its Affiliates may be assumed by such Major Owner or by an Affiliate thereof, and the Property Owner’s obligations hereunder with respect to such property will be terminated. In order to effect such assumption, such Major Owner or Affiliate shall enter into an Assumption Agreement in form and substance reasonably satisfactory to the City and the Participating Underwriter. Section 7. Dissemination Agent. The Property Owner may, from time to time, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be SCG - Spicer Consulting Group. The Dissemination Agent may resign by providing thirty days’ written notice to the City, the Property Owner and the Trustee. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Property Owner may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto): (a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; and (b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Property Owner 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 Periodic Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Property Owner chooses to include any information in any Periodic Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Property Owner shall have no obligation under this Disclosure Certificate to update such information or include it in any future Periodic Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the Property Owner to comply with any provision of this Disclosure Certificate, the Trustee shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Property Owner to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole and exclusive remedy under this Disclosure Certificate in the event of any failure of the Property Owner to comply with this Disclosure Certificate shall be an action to compel performance. F-30 Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liability which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding losses, liabilities, costs and expenses due to an Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall be paid compensation for its services provided hereunder from the Administrative Expense Account of the Special Tax Fund established under the Indenture in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable 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 hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Property Owner, the Trustee, the Bond owners, or any other party. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given as follows: To the Issuer: City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92530 Attention: Director of Administrative Services To the Trustee: Wilmington Trust, N.A. 650 Town Center Drive, Suite 600 Costa Mesa, California 92626 Attn: Corporate Trust Department Phone: (714) 384-4153 To the Participating Underwriter: Stifel, Nicolaus & Company, Incorporated 515 South Figueroa Street, Suite 1800 Los Angeles, California 90071 Attention: Public Finance To the Dissemination Agent: SCG - Spicer Consulting Group 25220 Hancock Avenue, Suite 300 Murrieta, California 92562 Attention: Managing Director To the Property Owner: CalAtlantic Group, Inc. [To Come] provided, however, that all such notices, requests or communication may be made by telephone and promptly confirmed by writing. Any person may, by notice given as aforesaid to F-31 the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Property Owner (its successors and assigns), the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization. F-32 Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument. Date: [_______], 2017 CALATLANTIC GROUP, INC., a Delaware corporation [To Come] ACCEPTED AND AGREED TO: SCG - SPICER CONSULTING GROUP, as Dissemination Agent By: Authorized Signatory A-1 EXHIBIT A NOTICE OF FAILURE TO FILE PERIODIC REPORT Name of Issuer: City of Lake Elsinore with respect to its Community Facilities District No. 2006-1 (Summerly) (Improvement Area EE), City of Lake Elsinore, County of Riverside, State of California Name of Bond Issue: City of Lake Elsinore Community Facilities District No. 2006-1 (Summerly) (Improvement Area EE) Special Tax Bonds, Series 2017 Date of Issuance: [_______], 2017 NOTICE IS HEREBY GIVEN that CalAtlantic Group, Inc. (the “Major Owner”) has not provided a Periodic Report with respect to the above-named bonds as required by that certain Continuing Disclosure Certificate (Property Owner), dated [_______], 2017. The Major Owner anticipates that the Periodic Report will be filed by _____________. Dated: SCG - Spicer Consulting Group, as Dissemination Agent By: Its: cc: Trustee City Participating Underwriter Property Owner/Major Owner B-1 EXHIBIT B PERIODIC REPORT ([MARCH 31, 20__/SEPTEMBER 30, 20__]) $[_______] CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-1 (SUMMERLY) SPECIAL TAX BONDS, SERIES 2017 (IMPROVEMENT AREA EE) This Periodic Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (the “Disclosure Certificate”) dated [_______], 2017 executed by the undersigned (the “Property Owner”) in connection with the issuance of the above-captioned bonds by the City of Lake Elsinore (the "City") with respect to its Community Facilities District No. 2006-1 (Summerly), City of Lake Elsinore, County of Riverside, State of California (the “District”). Capitalized terms used in this Periodic Report but not otherwise defined have the meanings given to them in the Disclosure Certificate. I. Property Ownership and Development The information in this section is provided as of ____________________ (this date must be not more than 60 days before the date of this Periodic Report). A. Property currently owned by the Property Owner in Improvement Area EE of the District (the “Property”): Development name: Number of lots (or acreage): B. Status of land development or construction activities with respect to the Property: ______________________________________________________________________ ______________________________________________________________________ C. Status of building permits and any significant amendments to land use or development entitlements for the Property: ______________________________________________________________________ ______________________________________________________________________ B-2 D. Aggregate property in Improvement Area EE of the District sold (closed escrows), optioned or leased by the Property Owner to end users or merchant builders: Since the Date of Issuance of the Bonds Since the Last Periodic Report Acres* ____ Lots ____ Bldg. Sq. Ft. ____ Acres* ____ Lots ____ Bldg. Sq. Ft. ____ * For bulk land sales only (excluding sales of finished lots or completed buildings). E. Status of any land purchase contracts with regard to the Property, whether acquisition of land in Improvement Area EE of the District by the Property Owner or sales (closed escrows) of land in Improvement Area EE of the District to other property owners, distinguishing between (i) end users (e.g., condominiums), (ii) Property Owners and (iii) merchant builders. ______________________________________________________________________ ______________________________________________________________________ II. Legal and Financial Status of Property Owner Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any change in the legal structure of the Property Owner or the financial condition and financing plan of the Property Owner that would materially and adversely interfere with its ability to complete its development plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ III. Change in Development or Financing Plans Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Official Statement. ________________________________________________________________________ ________________________________________________________________________ IV. Official Statement Updates Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any other significant changes in the information relating to the Property Owner or the Property contained in the Official Statement under the headings “CURRENT AND PROPOSED DEVELOPMENT OF PROPERTY WITHIN IMPROVEMENT AREA EE - Development by CalAtlantic” that would materially and adversely interfere with the Property Owner’s ability to develop and sell the Property as described in the Official Statement. B-3 ________________________________________________________________________ ________________________________________________________________________ V. Other Material Information In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. ________________________________________________________________________ ________________________________________________________________________ Certification The undersigned Property Owner hereby certifies that this Periodic Report constitutes the Periodic Report required to be furnished by the Property Owner under the Disclosure Certificate. ANY STATEMENTS REGARDING THE PROPERTY OWNER, THE DEVELOPMENT OF THE PROPERTY, THE PROPERTY OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS, OTHER THAN STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFICIAL RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS. THE PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS PERIODIC REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE. Dated: CALATLANTIC GROUP, INC., a Delaware limited liability company [To Come] G-1 APPENDIX G BOOK-ENTRY ONLY SYSTEM The information in this Appendix concerning DTC and DTC’s book-entry only system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into G-2 the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the 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 redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. G-3 A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered Bonds to the Trustee’s DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. H-1 APPENDIX H APPRAISAL REPORT